hannstar display corporation · 2019. 7. 11. · hannspree uk ltd. invested company in which over...

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Stock Code: 6116

HannStar Display Corporation

Minutes for 2019 Annual

Shareholders’ Meeting 9 AM, June 5, 2019 Location: HannStar Display Corporation Neihu Office (1F., No. 15, Lane 168, Xingshan Rd., Neihu District, Taipei City)

------Disclaimer------ THIS IS A TRANSLATION OF THE MINUTES FOR 2019 ANNUAL SHAREHOLDERS’ MEETING (“THE MINUTED”) OF HANNSTAR DISPLAY CORPORATION (“THE COMPANY”). THE TRANSLATION IS INTENDED FOR REFERENCE ONLY AND NO OTHER PURPOSE. THE COMPANY HEREBY DISCLAIMS ANY AND ALL LIABILITIES WHATSOEVER FOR THE TRANSLATION. THE CHINESE TEXT OF THE AGENDA SHALL GOVERN ANY AND ALL MATTERS RELATED TO THE INTERPRETATION OF THE SUBECT MATTER STATED HEREIN.

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The total outstanding eligible number of shares is 1,987,371,785 shares (604,806,341 shares were

voted electronically). Of those shares, 63.41％ or 3,133,933,851 shares were represented at the

meeting either in person or by a representative for the respective shareholders.

Attendance of directors:

Dirctor: Hui-Jong Jiang, Hsin Cheh Chao, Lu-yun Sun, Te Cheng Wen, Wei-Hsin Ma

CFO: Chung-Han Lin

Chen, Ching-Chang for and on behalf of Pricewaterhouse Coopers, Taiwan

Lawrence Liang for and on behalf of Giantera International Law Office

Chairman of the Board of Directors：Yu-Chi, Chiao,

Recorder: Po-Hsin Chiu

Chairman of the Meeting announced that the shareholding of shareholders present has met the regulatory requirement (1,987,371,785 shares) so that the Meeting begins.

Opening speech of the Chairman (Omitted)

I. The reporting subjects

[Report Items]

I. Information on investments in Mainland China.

For the Company’s implementation of investments in Mainland China as of December 31,

2018, please refer to attachment

Shareholders were acknowledged.

II. Impairment loss on assets recognized in the financial statements of the Company for 2018.

The Company has recognized impairment loss of NT$644,528 thousand in its 2018 financial

statements, hereby reported in accordance with IAS 36: “Impairment of Assets” and IFRS 3:

“Business Combinations”.


III. 2018 Compensation for the employees and Directors.

2018 Compensation for the employees and Directors of the Company is as follows:

1. Conducted in accordance with Article 235-1 of the Company Act and Article 23-1 of the

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Company’s Articles of Association.

2. In accordance with Article 23-1 of the Company’s Articles of Association, if there is the

profit for the year (that is, deducting the bonuses to Directors and employee compensation

from the current year’s pre-tax income, and there still has earnings after covering

accumulated deficits), the profit shall be allocated to no higher than 2% as directors’

compensation as well as 0.001%～15% as employee compensation.

3. In year 2018, the directors’ compensation was NT$33,114 thousand; employee

compensation was NT$165,572 thousand the aforementioned amount was distributed in cash

and resolved by the Compensation Committee and the Board of Directors of the Company.


IV. Other Matters.

(I) On June 8, 2018, the Company’s Annual Meeting of the Shareholders resolved that the

Company was to issue common shares for cash capital increase through private placement

and/or public issuance, under the limit of 500 million common shares, so as to respond to

the capital demands of strategic alliance development and enrich operating capital, and so

on. Due to the consideration of timing of the issuance, the application has not been

submitted to the competent authority so far. To allow the Company to have the flexibility

to respond to changes in the industry and the economy, as well as to cooperate with

competent authority’s audit for convention of cash capital increase, the Company will

propose alternative capital increase proposal as a replacement proposal.


(II) The Company’s Board of Director’ resolution to repurchase the Company’s common

shares and status report of its actual implementation.

1. To maintain the Company’s credit standing and shareholders’ equity, it was resolved at

the 4th meeting of the Board of Directors of the 8th term, which took place on

November 7, 2018, to undertake the fourth repurchase of the Company’s common

shares from the Stock Exchange Market, with subsequent cancellation of the shares.

2. For the aforementioned Company share repurchase and its actual implementation,

please refer to the attachment on this handbook.


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(III) The Company's loaning of funds and making endorsements/guarantees as of March 31,

2019, are as follows:

Unit: NT Thousands; %

Name Nature of Relationship

Loaning of funds Making endorsements/

guarantees

Credit limits approved by the Board of

Directors

Ratio of the latest financial statements to

net value

Credit limits approved by the Board of

Directors

Ratio of the latest financial statements to

net value

Hannstar Display (Nanjing) Corp.

Invested company in which over 50% of common stock was held directly/indirectly by HannStar Display Corporation and subsidiaries.

- - 2,249,860 5.44

HannSpree Display (Nanjing) Inc.


- - - -

Hannspree Technology (Shanghai) Inc.


- - - -

Hauli Investment Corporation


600,000 1.45 - -

Yue-ma No. 1 Investment Corp.


2,500,000 6.05 - -

HANNSpree Europe Holding B.V.


207,660 0.50 523,940 1.27

HannSpree UK Ltd.


- - 92,460 0.22


(IV) For this 2019 Annual Meeting of Shareholders, there were no shareholders who submitted

written proposal to the Company during the proposal submission period (from March 23,

2019 to April 1, 2019) pursuant to Article 172-1 of the Company Act.


Shareholder comments:

Shareholder number 833438 expressed that the amount of investment in Mainland China is

considered high, and the operational performance is not ideal, may the Company provide an

explanation. Concerning this comment, the Chairman instructed CFO Chung-Han Lin to

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provide a response that the amount recorded in the annual report is the accumulated amount,

however, the Mainland subsidiary has successively reduced the capital back to the parent

company over the years, so the investment in Mainland China is actually lower than as

stated. Furthermore, the module factory plant in Mainland China is at a surplus for the first

quarter of this year, results are already apparent.

Shareholder comments:

Shareholder number 170041 expressed that she hopes the Company will improve its

operational performance. In addition, the Company’s operating performance in the first

quarter is already second within the industry, she encourages the Company to continue its

efforts and continue to take care of its employees. Concering this comment, the Chairman

instructed CFO Chung-Han Lin and gave a response.

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[Matters for Discussion and Approval]

Proposal 1 proposed by the Board

Proposal: To adopt the 2018 Business Report and Financial Statements.

Explanation: I. The 2018 Company’s Business Report, Financial Statements and other accounting

books, please refer to the attachment.

II. The aforementioned accounting books were approved by the 5th meeting Board of

Directors of the 8th term on March 15, 2019. The financial statements were

approved by CPAs Chin-Chang, Chen and Chun-Yao, Lin of

PricewaterhouseCoopers, and audit report was issued. The abovementioned

financial statements and audit report were submitted to the Audit Committee of

the Company along with the business report. (Please refer to attachment of this

handbook.)

III. Shareholder comments:

Shareholder number 238849 expressed that he believes that the Company’s research and

development costs are huge, and the actual results are insignificant; he hopes that the

Company will enhance its core competitiveness where the Company’s market value will

increase naturally, and additionally expressed his opposition to this proposal. Concering

this comment, the Chairman instructed CFO Chung-Han Lin and gave a response.

IV. Shareholder comments:

Shareholder number 833438 suggested that the Company should raise its dividend out

ratio, which will effectively increase the stock price. Concering this comment, the

Chairman instructed CFO Chung-Han Lin to provide a response that the Company’s

dividend distribution ratio is the highest within the industry, and it needs to retain a

portion of its surpluse to respond to changes in the industry.

V. Shareholder comments:

Shareholder number 553084 expressed that he hopes the Company will face its

operational difficulties in good faith and communicate honestly with the shareholders.

Concerning this comment, the Chairman gave a response.

Voting Results: The total outstanding eligible number of shares is 2,001,508,779 shares

(604,806,341 shares were voted electronically).

Approval votes: 1,918,181,169 / 95.83%

Disapproval votes: 365,180

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Invalid votes: 0

Abstention votes/no votes: 82,962,430

RESOLVED, that the above proposal be and hereby was approved as proposed.


Proposal: To adopt the proposal for the profit distribution of 2018.

Explanation: I. For the Company’s 2018 profit distribution table, please refer to the attachment.

II. The proposal was resolved at the 5th meeting of the Board of Directors of the 8th

term on March 15, 2019, and submitted to the Company’s Audit Committee for

review.

III. After the proposal is approved by the Annual Meeting, the Board of Directors

propose to authorize the Chairman to decide on the allocation base date and

payment date; if the dividend payout ratio has altered due to the change of

outstanding shares, the Chairman shall also be authorized to adjust the dividend

payout ratio based on the actual number of outstanding shares on ex-dividend

date.



Approval votes: 1,923,280,287 / 96.09%


Invalid votes: 0




Proposal: To issue common shares for cash capital increase through private placement and/or

public issuance.

Explanation: I. To respond to the demand for funds for strategic alliance development and enrich

operating capital, the Company proposed to issue common shares for cash capital

increase by private placement and/or public issuance, with the face value per share

of NT$10 dollars under the limit of 500 million shares. For the plans on the

application of funds and the expected benefits of this capital increase, see

attachment on this handbook for the tentative version.

II. It is proposed that the 2019 Annual Meeting authorize the Board of Directors to

raise funds through one or more of the following methods and principles:

(I) Issuance of new shares for cash capital increase by private placement:

In accordance with Article 43-6 of the Securities and Exchange Act, a private

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placement of common shares is conducted once a year from the date of the

resolution of the annual meeting.

1. Necessary reasons for private placement

(1) Reasons for not making public issuance:

Considering that private placement is characterized by expediency and

convenience, which aligns with the goal of recruiting strategic investors,

and the restriction on transference of private security within the first

three years, which will insure the long term cooperation between the

Company and strategic investors. Furthermore, by authorizing the Board

of Directors to conduct the private placement based on the Company’s

actual operational needs, such will also effectively improve the mobility

and flexibility of the Company’s fundraising.

(2) The limit of private placement: No more than 300 million common

shares.

(3) Use of funds from private placement and expected benefits:

(A) Use of funds from private placement: For matters related to the

development of strategic alliances.

(B) Expected benefits: To respond to rapid changes within the industry,

we will strengthen the Company’s technologies necessary for its

operations, businesses or key components by introducing strategic

investors at appropriate times in order to enhance the Company’s

competitiveness.

2. Basis and reasonableness of price-setting:

For setting the issuance price of the common shares, considering the

restrictions on its transference, it is proposed that the price of the common

shares shall not be less than 80% of the higher of the following two bases of

price calculations:

(1) The simple average closing price of the common shares of the Company

as listed on TWSE for either 1, 3, or 5 business days before the price

determination date, after adjustment for any distribution of stock

dividends, cash dividends or capital reduction.

(2) The simple average closing price of the common shares of the Company

as listed on TWSE for the 30 business days before the price


dividends, cash dividends, or capital reduction.

However, it is proposed that the Annual Meeting give authorization to the

Board of Directors to set the actual price determination date and the actual

issue price based on the current market conditions and in accordance with

the foregoing standards, without violating the above principles. Calculated

based on recent closing price of the Company’s common shares, the issue

price may be lower than the face value. However, the actual issue price is

calculated based on the above formula instead of any particular reasons.

Therefore, the price is reasonable and does not affect the shareholders’

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equity.

3. The means of selecting the specified persons: In accordance with Article

43-6 of the Securities and Exchange Act and related regulations.

To recruit qualified strategic investors who are also able to strengthen the

Company’s technologies, businesses or key components necessary for its

operations. The Board of Directors are to be authorized to review and

approve the relevant qualification certificates.

The purpose, necessity and expected benefits of the strategic investors who

meet the aforementioned criteria of the specific persons are in response to

the Company’s long term developmental needs and to help the Company

enhance its technology, improve quality, reduce cost, stabilize the source of

supply of key components, enhance efficiency, and enlarge market share by

using the strategic investors’ skills, know-how, brand or distribution

channels.

4. In principle, the rights and obligations of the common shares of this private

placement are the same as the Company’s common shares that are already

outstanding. However, pursuant to the Securities and Exchange Act, the

common shares of this private placement shall not be sold within three

years after the issuance of the private placement, except transferred in

accordance with Article 43-8 of the Securities and Exchange Act. After

three years of issuance, the Company intends to apply to the competent

authority for public offering and listing of common shares of this private

placement in accordance with the relevant provisions of the Securities and

Exchange Act.

(II) Issuance of new shares for cash capital increase by public issuance:

It is proposed that the 2019 Annual Meeting authorize the Board of Directors

to select one or both of the following fundraising methods and principles, and

issue one or several times based on the Company’s needs:

1. Domestic issuance of new shares for cash capital increase:

It is proposed for the Annual Meeting to authorize the Board of Directors to

pass a resolution of adopting book building or subscription method.

(1) Book building:

In accordance with the Article 267 of the Company Act, there shall be

10 to 15 % of new shares reserved for subscription by employees of the

Company. The remaining 85 to 90 % of new shares shall, pursuant to

the Article 28-1 of the Securities and Exchange Act, be publicly

underwritten by book building. If subscription by employees are

insufficient, the Chairman is authorized to negotiate with specific

party(ies) for subscription based on issued price. Under Taiwan

Securities Association Self-regulatory Rules Governing the Provision of

Advisory Services by Underwriter Members to Issuing Companies

Offering and Issuing Securities (herein referred to as the Self-regulatory

Rules), the issue price shall be calculated not less than the simple

average closing price of the common shares of the Company as listed

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on TWSE for either 1, 3, or 5 business days before the price


dividends, cash dividends or capital reduction, and the 90% of average

share price after ex-dividend. The Chairman is authorized to determine

the actual issued price with underwriter after the book building period,

with reference to the collective purchase and issuance of the market

conditions.

(2) Subscription:

In accordance with the Article 267 of the Company Act, there shall be

10 to 15% of new shares reserved for subscription by employees of the

Company and shall be allocated according to public underwriting ratio

as 10% new shares pursuant to the Article 28-1 of Securities and

Exchange Act. The remained 75 to 80% of new shares shall be

purchased by original shareholder based on shareholding ratio from the

register of shareholders. If the subscriptions are insufficient or less than

one share, Chairman will be authorized to negotiate subscriptions with

specific party based on issued price. According to the Self-Regulatory

Rules, the issue price shall be calculated by not less than the simple

average closing price of the common shares of the Company as listed

on TWSE for either 1, 3, or 5 business days before the price


dividends, cash dividends or capital reduction, and the 70% of average

share price after ex-dividend. The actual issue price and conditions of

issuance are determined by the Chairman by considering the market

conditions and discussions with the lead underwriter.

2. Capital raising through issuance of common shares for cash capital increase

to participate in the Global Depositary Receipts (hereinafter referred to as

the “GDR”):

It is proposed that the Annual Meeting authorize the Board of Directors to

conduct the issuance of common stock for cash capital increase to

participate in GDR in accordance with market conditions and the

Company’s capital demand at the appropriate timing based on the Articles

of Association and the relevant laws and regulations. In accordance with

the Article 267 of Company Act, there shall be 10 to 15% of new shares

reserved for subscription by employees of the Company. After the original

shareholders waive subscription rights, the remained shares, pursuant to the

Article 28-1 of Securities and Exchange Act, all shares shall be allocated to

public offering as marketable securities for the issuance of GDR. The part

waived by employees are authorized to Chairman to find specific party for

subscription or join the issuance of GDR based on market demands.

According to the Self-Regulatory Rules, the issue price shall be calculated

not less than the simple average closing price of the common shares of the

Company as listed on TWSE for either 1, 3, or 5 business days before the

price determination date, after adjustment for any distribution of stock

dividends, cash dividends or capital reduction (or ex-rights trading in

connection with capital reduction), and the 90% of average share price after

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ex-dividend. The Chairman is authorized to determine the actual issue price

and conditions of issuance by considering the market conditions and

discussions with the lead underwriter.

To cooperate with the issuance of GDR, the Chairman or his/her

representative shall be authorized to sign all the relevant agreements and

documents of GDR, as well as to conduct other related matters.

3. It is proposed that the Annual Meeting authorize the Board of Directors to

process, at is sole discretion, the issuance of common shares for capital

increase by the cash, or the issuance of the GDR, issuing conditions,

quantity, price, amount, the use of the capital, the expected time frame,

expected benefits, and other related matters, including the competent

authority’s instructions or changes in market conditions, and relevant

matters.

III. Where it is necessary for the issue price to be lower than the face value in

response to market changes, such is to consider the Company’s stable operations

and security of financial structure. Hence, it is reasonable to not adopt other

liability based methods of fund raising. If the issue price is less than the face

value, the Company will set the issue price in accordance with the regulations of

the competent authority. After the upsides of the capital increase appear, the

financial structure of the Company will substantially improve, the Company will

have a stable and long-term development, and there are no adverse impact on

shareholders’ equity.

IV. If the newly issued common shares are calculated based on the maximum limit of

500 million shares and calculated by the Company’s common shares outstanding

as of March 14, 2019, the highest dilution ratio to the original shareholders’

equity is 13.76%. Considering that the raised funds are expected to be used for

strategic alliance development or the enrichment of operating capital, the benefits

of the proposed capital will be injected to the shareholders’ equity. Therefore, the

proposed new shares will not cause significant dilution to the shareholders’

equity.

V. Where changes to issue price (other than price-fixing ratio), conditions for

issuance, method of issuance, and other matters are necessary due to changes in

regulations, opinions from the competent authority or market conditions, it is

proposed to authorize the Board of Directors to handle the matters with sole

discretion.



Approval votes: 1,914,322,928 / 95.64%

Disapproval votes: 9,322,278

Invalid votes: 0



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Proposal: To amend certain articles of the Company’s “Procedures for Acquisition or Disposal of

Assets”.

Explanation: In accordance with Financial-Supervisory-Commission Letter No. 1070341072 on

November 26, 2018, the Company proposed to amend certain articles of the

Company’s “Procedures for Acquisition or Disposal of Assets”, please refer to the

attachment. Please discuss.



Approval votes: 1,923,180,516 / 96.08%


Invalid votes: 0




Proposal: To amend certain articles of the Company’s “Regulations Governing Loaning of Funds

and Making of Endorsements/Guarantees”.

Explanation: In accordance with the Financial-Supervisory-Commission Letter No. 1080304826 on

March 7, 2018, the Company proposed to amend certain articles of the Company’s

“Regulations Governing Loaning of Funds and Making of

Endorsements/Guarantees”, please refer to the attachment. Please discuss.



Approval votes: 1,923,136,158 / 96.08%


Invalid votes: 0




Proposal: To lift the non-compete restrictions on directors.

Explanation: I. In accordance with Article 209-1 of the Company Act “A director who does

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anything for on behalf of him/herself or another person that is within the scope of

the Company's business, the essential contents of such a behavior shall be

explained to the shareholders' meeting and obtain approval.”

II. The directors of the Company that are engaged in the same or similar business of

the Company and to take on director positions there, please refer to attachment

p.65 of this handbook for detail.

III. In accordance with Article 209-1 of the Company Act, it is proposed to lift

directors’ non-compete restrictions on conducting businesses similar to those of

the Company’s.

(1) Voting Results: 6-1 WALSIN LIHWA CORPORATION (WALSIN)

The total outstanding eligible number of shares is 1,764,216,599 shares

Approval votes: 1,674,293,369 / 94.9%


Invalid votes: 0



Voting Results: 6-2 Te Cheng, Wen


Approval votes: 1,674,216,599 / 94.9%


Invalid votes: 0



Voting Results: 6-3 Hui-Jong ,Jiang


Approval votes: 1,911,564,020 / 95.5%


Invalid votes: 0



Voting Results: 6-4 , Hsin Cheh, Chao


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Approval votes: 2,001,508,779 / 95.5%


Invalid votes: 0



Special Motions： None

Adjournment： June 5, 2019 at 10:16 a.m.

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Attachment

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2018 Business Report (I) Implementation results of business plan

The TFT-LCD panel industry has been affected by the worldwide oversupply of TFT-LCD in

2018. Due to the US-China trade war, the global economy is uncertain, resulting in a drop in

average selling price (ASP) in panel in the second half of the year. The Company's net profit

after tax for 2018 was NT$1.02 billion. In 2018, in addition to adjusting product portfolio and

integrating the upstream and downstream supply chains to build a technique platform, the

Company established the 5.3th generation fab as the most economical medium- to small-size

panel factories, so as to reduce the risks from panel quotation price fluctuations.

Strengthening product portfolio: The Company focused on the 5.3th generation fab advantages

in economic cutting in the small to medium-sized market in 2018, and mainly focused on the

applications in smart phones, automotive and industrial control, and improved small to

medium-sized consumer applications, including smart phones, tablet and automotive products.

As of the fourth quarter of 2018, the product portfolio was: the proportion of smaller-sized

products smaller than 6'' accounted for 42% of the operating revenue; medium-sized products

from 6'' to 10.4'' accounted for 44% of the total revenue; large-sized products over 11'' was

14%.

Integrating the upstream and downstream supply chains: The Company has integrated full-

screen mobile phone panel production line in Southern Taiwan Science Park, and has

continuously developed the IOT, wearable products, technical products for automotive and

comprehensive touch screen solutions.

Enhancing operational management performance: Production by order was adopted to reduce

inventory of raw materials, products in progress and finished goods. Furthermore, the

Company has strengthened its cash flow management, which led to only -9.18 % of net

liabilities ratio as of the end of 2018. The financial structure has been sound.

(II) Financial structure and profit ability analysis Unit: NT Thousands

Item 2018 2017 Increase

(Decrease) %

Financial structure

Net operating income 16,866,328 23,744,460 (29)

Sales costs 14,049,752 15,097,747 (7)

Gross profit 2,816,576 8,646,713 (67)

Realized (unrealized) gains 1 445 (100)

Net gross profit 2,816,577 8,647,158 (67)

Operating expenses 1,903,751 2,426,981 (22)

Net profit (loss) from operations 912,826 6,220,177 (85)

Non-operating income and expenses 542,026 615,637 (12)

Net profit (loss) before taxes 1,454,852 6,835,814 (79)

Income tax expense (433,688) (127,111) 241

Net profit 1,021,164 6,708,703 (85)

Attributable to parent company 1,023,559 6,708,703 -

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Item 2018 2017 Increase

(Decrease) %

Non-controlling interest (2,395) 0 -

Profit ability analysis

Return on total assets 2.15 14.36 -

Return on shareholders’ equity 2.44 16.91 -

After-tax net profit (loss) ratio 6.05 28.25 -

After-tax earnings per share- basic (NT$)

0.32 2.07 -

After-tax earnings per share- diluted (NT$)

0.31 2.01 -

(Note) IFRSs consolidated financial information is adopted

2018 net sales revenue decreased by approximately 29 % from 2017. Due to the overall

decrease in average selling price (ASP) of panels, the net profit decreased in 2018. Net

operating profit was approximately NT$910 million, and net profit after tax was NT$1.02

billion.

(III) Overview of Technology and R&D

1. Research and development expenditure for the past two years Unit: NT Thousands

2018 2017

Net amount of sales revenue 16,866,328 23,744,460

R&D Expenses 868,498 952,339

R&D Expenses / Net amount of sales revenue (%) 5.15% 4.01%

To strengthen the R&D capability of the Company, the R&D Department has actively

developed various interfaces and module designs to reach the goals of creating low-

emissivity, thin and energy-saving, and reliable TFT-LCD panels in order to provide

customers with comprehensive services. In 2018, the total amount of R&D expenditures was

NT$868,498 thousand, accounting for 5.15% of net amount of sales revenue.

2. Technology and R&D overview

(1) Technical level

The Company is devoted to the development and innovation of TFT-LCD process and

products, actively responding to market demand by continuously developing new

products and new technologies. The Company's 5.3th generation fab is the most efficient

medium-to-small-size panel plant. Due to the strong demand of medium-to-small-size

panel products such as smart phones, panels for automotive, tablet panels, and industrial

control, the Company has established the touch panel module base in Nanjing, which

integrated LCD module, the process of touch panel module technique, and purchased

automated production line to meet the customers' requirements by enhancing product

quality as well as lowering production cost. This is to ensure the Company competitive

advantage of medium-to-small-size panel technology. In addition, the Company regards

G5.3 touch panel fab as the production base of On cell products, which could avoid

reduction in production capacity of LCD plant due to the production of On cell products.

At the same time, other touch panel products can be produced, such as OSG, GG, PI

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sensor, PET Sensor. All-round production line can be expanded to meet the needs of

different markets and customers.

(2) Research and development

In response to the Company’s rapid transformation into the medium-to-small-size panel

fab and producing products that meet the special requirements of portable products, the

Company has actively developed a number of unique technologies. In terms of wide

viewing angle technology, the Company successfully developed HS-IPS Pro mode wide

viewing angel technology and high-resolution technology, which feature the full view,

low color cast, high-contrast ratio, high-definition and non-fingerprint chromatic

aberration, applicable to the application of smart phones and tablets. In terms of touch

panel technology, the Company has successfully developed the projected capacitive

touch technology and the optical bonding technology, they have been shifted to the mass

production of new product design. In addition, in order to simplify production process

and meet the needs of slim and thin features in products, On cell touch along with the

0.25 t glass direct injection has become the best technology of price–performance ratio in

the mobile phone market.

(3) Technology development and current status of patent application

A. Product development

The Company aims to produce products that are high in quality and reliability in order

to stay customer-oriented and for the products to become competitive. Through

control, verification and discussions of the "Development Procedures for New

Products," the development schedule is becoming more efficient. The Company has

completed the development of small-sized smart phone panel such as 5.34”~5.99”

FWVGA+/HD+, industrial panel such as 2”~3.5” QVGA~4.3” WVGA, 14”FHD

notebook panel, as well as automobile panel such as 7”WVGA~12.3”SXGA.

In 2018, in response to the demand for big screen size smart phones, one-handed grip

and high screen-to-ratio, 18:9 full screen has come to the market. Meanwhile, iPhone

X brought on the Notch display trend, resulting in flexible adjustment of the

Company`s R&D path. Therefore, the Company has become the first supplier in

Taiwan to mass produce 18:9 full screen mobile phone panel and to supply Notch-

designed panel.

B. Technological development

In order to strengthen R&D ability, the product development center of the Company

actively developed a variety of different panel technologies, electronic system

technologies, mechanism module technologies on the applications of medium-to-

small and large-size products in accordance with market trend and customer`s needs.

The primary R&D results are summarized as follows:

b. Panel technology: Continuously develop and enhance product features as well as

lower the cost in response to the trend of products. In terms of specifications

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upgrade, the Group successfully developed the fast response liquid crystal modes

and polarizer for wide temperature, the LCD driven by low voltage in order to save

electricity, wide viewing angel technique of low-cost, high aperture ratio

techniques, color resists for high color saturation, narrow frame panel design, the

techniques of eliminating LCD mura production controlling. In 2018, the Company

also introduced photo-alignment technologies to enhance overall products

performance in optics and image definition. Based on the photo-alignment

technologies and processing development verification of negative liquid crystal, the

rate of penetration was enhanced to reduce the usage and squandering of backlight

materials. Furthermore, the goals of environment-friendly and green energy were

obtained.

In 2018, the transflective technology was also developed in order to strengthen the

visibility under strong outdoor lighting. In addition to energy saving and reducing

overall power consumption, the transflective technology can also reduce the

damage to the users' eyes in comparison to traditional LED backlight designed

products.

c. Electronic system technology: Continuously develop low-power consumption

electronic drivers and low-voltage driven panel techniques for power saving. Other

than that, COG cascade, Dual Gate and the design of IGD were created to produce

slim and narrow-frame panel. These had effectively lowered the costs of modules

and realized the goals of low cost, narrow frame, flexible design, etc.

d. Mechanism module technology: Mainly focuses on simplicity, slim type and high

luminance, high reliable mechanism design, backlight modules, etc.

e. Test technology: Such as TFT components testing and analytical technologies,

measuring techniques for any kind of cell optical characteristics, qualitative

analysis of module optical image and measuring techniques, system circuit

characteristics testing, mechanical characteristics testing, reliability testing,

firmware functions, etc.

f. Touch panel technology: The main product technology is projected capacitive

touch, along with various bonding techniques (hydrogel、OCA、PET) touch panel

module production line, which have provided customers with one-stop shopping

service. Moreover, the Company continues to develop new touch panel

technologies and phase in OLS On Cell low-cost touch panel plan, SITO On Cell

high level products touch panel plan, One Glass touch panel, and in Cell, which

allow the customers to be more competitive in product applications.

C. Patent

In 2018, the Company obtained a total of 41 patents (including three cases in Taiwan

R.O.C, 12 cases in the U.S., and 26 cases in China). The foregoing patents include

key technologies such as IPS/IPS-Pro (2 cases), Touch Panel (16 cases), IGD (6

cases), OLED (2 cases), IGZO (1 case). As of December 31, 2018, there are 1,126

cases of valid patents (including 369 cases in Taiwan R.O.C., 277 cases in China, the

426 cases in the U.S., 27 cases in the EU, and 27 cases in other countries.)

- 14 -

Chairman: Yu-Chi Chiao

Manager: Yu-Chi Chiao

Accounting Manager: Chung-Han Lin

- 15 -

HANNSTAR DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

December 31, 2018 December 31, 2017 Assets AMOUNT % AMOUNT %

Current assets 1100 Cash and cash equivalents $ 4,478,818 9 $ 4,891,172 10 1110 Current financial assets at fair value through

profit or loss 1,102 - 125,004 - 1136 Current financial assets at amortised cost 12,686,395 26 - - 1150 Notes receivable, net 5,751 - 8,094 - 1170 Accounts receivable, net 946,603 2 2,134,331 4 1180 Accounts receivable - related parties 19,008 - 12,657 - 1200 Other receivables 217,284 1 340,324 1 1210 Other receivables - related parties 7,317 - 515,458 1 130X Inventory 1,137,177 2 1,099,215 2 1476 Other current financial assets 50,866 - 14,293,229 29 1479 Other current assets, others 413,616 1 304,787 1 11XX Current Assets 19,963,937 41 23,724,271 48 Non-current assets 1510 Non-current financial assets at fair value

through profit or loss 11,392 - - - 1517 Non-current financial assets at fair value

through other comprehensive income 971,068 2 - - 1523 Non-current available-for-sale financial assets - - 525,378 1 1535 Non-current Financial assets at amortised cost,

net 1,500,000 3 - - 1543 Non-current financial assets at cost - - 298,861 - 1546 Bond investments without active markets -

non-current - - 3,433,462 7 1550 Investments accounted for under equity

method 3,889,660 8 3,920,158 8 1600 Property, plant and equipment 17,597,456 36 15,586,698 31 1760 Investment property, net 4,058,824 9 1,413,380 3 1780 Intangible assets 397,727 1 367,948 1 1840 Deferred tax assets 15,530 - 11,000 - 1915 Prepayments for business facilities 85,284 - 510,612 1 1975 Non-current prepaid pension cost 44,529 - 62,348 - 1990 Other non-current assets, others 88,492 - 62,813 - 15XX Non-current assets 28,659,962 59 26,192,658 52 1XXX Total assets $ 48,623,899 100 $ 49,916,929 100

(Continued)

- 16 -


CONSOLIDATED BALANCE SHEETS



December 31, 2018 December 31, 2017 Liabilities and Equity AMOUNT % AMOUNT %

Current liabilities 2100 Short-term borrowings $ 687,974 1 $ 1,048,603 2 2120 Current financial liabilities at fair value

through profit or loss 4,252 - 3,529 - 2130 Current contract liabilities 102,978 - - - 2150 Notes payable 53,118 - 53,245 - 2170 Accounts payable 1,871,054 4 2,238,509 5 2180 Accounts payable to related parties 11 - - - 2213 Payable on machinery and equipment 1,225,868 3 862,802 2 2219 Other payables, others 1,993,478 4 2,557,741 5 2220 Other payables to related parties 276,131 1 158,183 - 2230 Current income tax liabilities 560,629 1 241,887 - 2250 Provisions for liabilities - current 322,120 1 317,315 1 2399 Other current liabilities, others 53,895 - 175,924 - 21XX Current Liabilities 7,151,508 15 7,657,738 15 Non-current liabilities 2570 Deferred tax liabilities 20,229 - 9,752 - 2600 Other non-current liabilities 125,794 - 9,471 - 25XX Non-current liabilities 146,023 - 19,223 - 2XXX Total Liabilities 7,297,531 15 7,676,961 15 Share capital 3110 Share capital - common stock 32,339,339 66 32,339,339 65 Capital surplus 3200 Capital surplus 842,099 2 842,099 2 Retained earnings 3310 Legal reserve 1,609,021 3 938,151 2 3320 Special reserve 72,442 - 147,053 - 3350 Total unappropriated retained earnings 7,774,470 16 8,045,768 16 Other equity interest 3400 Other equity interest ( 736,271) ( 1) ( 72,442) - 3500 Treasury shares ( 605,126) ( 1) - - 31XX Total equity attributable to owners of parent 41,295,974 85 42,239,968 85 36XX Non-controlling interests 30,394 - - - 3XXX Total equity 41,326,368 85 42,239,968 85 Significant contingent liabilities and

unrecognised contract commitments Significant events after the balance sheet date 3X2X Total liabilities and equity $ 48,623,899 100 $ 49,916,929 100

The accompanying notes are an integral part of these consolidated financial statements.

- 17 -


CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31


Year ended December 31

2018 2017

Items AMOUNT % AMOUNT %

4000 Sales revenue $ 16,866,328 100 $ 23,744,460 100

5000 Operating costs ( 14,049,752) ( 83) ( 15,097,747) ( 64)

5900 Net operating margin 2,816,576 17 8,646,713 36

5910 Unrealized loss from sales 1 - 445 -


Operating expenses

6100 Selling expenses ( 362,324) ( 2) ( 600,351) ( 2)

6200 General & administrative expenses ( 681,766) ( 4) ( 874,291) ( 4)

6300 Research and development expenses ( 868,498) ( 5) ( 952,339) ( 4)

6450 Impairment loss (impairment gain and reversal of

impairment loss) determined in accordance with IFRS 9 8,837 - - -

6000 Total operating expenses ( 1,903,751) ( 11) ( 2,426,981) ( 10)

6900 Operating profit 912,826 6 6,220,177 26

Non-operating income and expenses

7010 Other income 471,934 3 735,049 3

7020 Other gains and losses ( 54,097) ( 1) ( 70,412) -

7050 Finance costs ( 45,462) - ( 87,776) -

7060 Share of profit of associates and joint ventures accounted

for under equity method 169,651 1 38,776 -

7000 Total non-operating income and expenses 542,026 3 615,637 3

7900 Profit before income tax 1,454,852 9 6,835,814 29

7950 Income tax expense ( 433,688) ( 3) ( 127,111) ( 1)

8200 Profit for the year $ 1,021,164 6 $ 6,708,703 28

(Continued)

- 18 -


CONSOLIDATED STATEMENTS OF INCOME




2018 2017


Other comprehensive income

Components of other comprehensive income that will not

be reclassified to profit or loss

8311 Losses on remeasurements of defined benefit plans ( $ 18,832) - ( $ 14,410) -

8316 Unrealised gains from investments in equity instruments

measured at fair value through other comprehensive

income 8,586 - - -

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 ( 102,668) ( 1) ( 80) -

8349 Income tax related to components of other comprehensive

income that will not be reclassified to profit or loss 3,767 - 2,449 -

8310 Components of other comprehensive income that will

not be reclassified to profit or loss ( 109,147) ( 1) ( 12,041) -

Components of other comprehensive income that will be

reclassified to profit or loss

8361 Financial statements translation differences of foreign

operations 87,037 1 ( 92,918) -

8362 Unrealised gains on valuation of available-for-sale

financial assets - - 4,762 -

8370 Share of other comprehensive income of associates and

joint ventures accounted for under equity method ( 5,386) - 162,767 1

8360 Components of other comprehensive income that will

be reclassified to profit or loss 81,651 1 74,611 1

8300 Total other comprehensive income for the year ( $ 27,496) - $ 62,570 1

8500 Total comprehensive income for the year $ 993,668 6 $ 6,771,273 29

Profit (loss), attributable to:

8610 Owners of the parent $ 1,023,559 6 $ 6,708,703 28

8620 Non-controlling interest ( 2,395) - - -

$ 1,021,164 6 $ 6,708,703 28

Comprehensive income attributable to:

8710 Owners of the parent $ 996,063 6 $ 6,771,273 29

8720 Non-controlling interest ( 2,395) - - -

$ 993,668 6 $ 6,771,273 29

Basic earnings per share

9750 Total basic earnings per share $ 0.32 $ 2.07

9850 Total diluted earnings per share $ 0.31 $ 2.01


- 19 -

- 20 -


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017


Equity attributable to owners of the parent

Retained Earnings Other equity interest

Share capital -

common stock

Total capital

surplus, additional

paid-in capital

Legal reserve

Special reserve

Total

unappropriated

retained earnings

Financial

statements

translation

differences of

foreign operations

Total Unrealised

gains (losses)

from financial

assets measured at

fair value through

other

comprehensive

income

Unrealized gain or

loss on

available-for-sale

financial assets

Hedging

instrument gain

(loss) on effective

hedge of foreign

operations’ net

investment hedges

Treasury shares

Total

Non-controlling

interests

Total equity

For a year period ended December 31, 2017

Balance at January 1, 2017 $ 32,339,339 $ 842,099 $ 621,594 $ 264,111 $ 3,165,572 $ 18,788 $ - $ 3,826 ($ 169,667) $ - $ 37,085,662 $ - $ 37,085,662

Profit for the year - - - - 6,708,703 - - - - - 6,708,703 - 6,708,703

Other comprehensive income(loss) - - - - ( 12,041) ( 103,666) - 178,277 - - 62,570 - 62,570

Total comprehensive income - - - - 6,696,662 ( 103,666) - 178,277 - - 6,771,273 - 6,771,273

Distribution of 2016 earnings

Legal reserve - - 316,557 - ( 316,557) - - - - - - - -

Reversal of special reserve - - - ( 117,058) 117,058 - - - - - - - -

Cash dividend paid - - - - ( 1,616,967) - - - - - ( 1,616,967) - ( 1,616,967)

Balance at December 31, 2017 $ 32,339,339 $ 842,099 $ 938,151 $ 147,053 $ 8,045,768 ($ 84,878) $ - $ 182,103 ($ 169,667) $ - $ 42,239,968 $ - $ 42,239,968

For a year period ended December 31, 2018

Balance at January 1, 2018 $ 32,339,339 $ 842,099 $ 938,151 $ 147,053 $ 8,045,768 ($ 84,878) $ - $ 182,103 ($ 169,667) $ - $ 42,239,968 $ - $ 42,239,968

Retroactive application and retrospective

restatement effect - - - - 933,042 - ( 469,295) ( 182,103) - - 281,644 - 281,644

Balance at January 1 after adjustments 32,339,339 842,099 938,151 147,053 8,978,810 ( 84,878) ( 469,295) - ( 169,667) - 42,521,612 - 42,521,612

Profit for the year - - - - 1,023,559 - - - - - 1,023,559 ( 2,395) 1,021,164

Other comprehensive income(loss) - - - - ( 15,065) 81,651 ( 94,082) - - - ( 27,496) - ( 27,496)

Total comprehensive income - - - - 1,008,494 81,651 ( 94,082) - - - 996,063 ( 2,395) 993,668

Distribution of 2017 earnings

Legal reserve - - 670,870 - ( 670,870) - - - - - - - -

Reversal of special reserve - - - ( 74,611) 74,611 - - - - - - - -

Cash dividend paid - - - - ( 1,616,967) - - - - - ( 1,616,967) - ( 1,616,967)

Changes in equity of associates and joint

ventures accounted for using equity method - - - - 392 - - - - - 392 - 392

Aquisition of treasury share - - - - - - - - - ( 605,126) ( 605,126) - ( 605,126)

Increase in non-controlling interests - - - - - - - - - - - 32,789 32,789

Balance at December 31, 2018 $ 32,339,339 $ 842,099 $ 1,609,021 $ 72,442 $ 7,774,470 ($ 3,227) ($ 563,377) $ - ($ 169,667) ($ 605,126) $ 41,295,974 $ 30,394 $ 41,326,368


- 21 -


CONSOLIDATED STATEMENTS OF CASH FLOWS



2018 2017

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax $ 1,454,852 $ 6,835,814

Adjustments

Adjustments to reconcile profit (loss)

Provision for doubtful accounts (reversal of allowance) - ( 193 )

(Reversal) loss of allowance for doubtful accounts ( 8,837 ) -

Depreciation 1,897,260 2,317,254

Amortisation 29,935 165,401

Interest expense 45,462 87,776

Interest income ( 248,375 ) ( 221,922 )

Dividend income ( 28,512 ) ( 19,959 )

Gain from bargain purchase 5,736 -

Gain on disposal of investments ( 62,763 ) -

Net loss on disposal of property, plant and equipment 4,389 31,136

Net gain on disposal of non-current assets held for sale - ( 315,333 )

Impairment loss on non-financial assets 644,528 672,734

Share of profit of associates and joint ventures accounted for under equity

method ( 169,651 ) ( 38,776 )

(Realised) unrealised loss (gain) - intercompany ( 1 ) ( 445 )

Changes in operating assets and liabilities

Changes in operating assets

Financial assets at fair value through profit or loss - current 123,902 ( 119,851 )

Financial assets at fair value through profit or loss - non-current 12,907 -

Notes receivable 2,343 ( 2,659 )

Accounts receivable 1,190,590 283,274

Accounts receivable from related parties ( 52 ) 28,643

Other receivable 166,792 546,088

Other receivables from related parties 25,974 ( 43,586 )

Inventories ( 37,962 ) 14,813

Other current assets ( 105,799 ) ( 52,085 )

Other financial assets – current 116,791 ( 8,267,619 )

Prepaid pension cost ( 1,013 ) ( 791 )

Changes in operating liabilities

Current financial liabilities at fair value through profit or loss 723 ( 15,997 )

Decrease in contract liabilities ( 29,615 ) -

Notes payable ( 127 ) ( 1,076 )

Accounts payable ( 367,455 ) ( 19,441 )

Accounts payable from related parties 11 ( 612 )

Other payables ( 433,956 ) 376,914

Other payables from related parties ( 163,081 ) 84,448

Increase in provisions 154,341 148,357

Other current liabilities ( 145,007 ) ( 77,976 )

Other non-current liabilities ( 4,381 ) ( 436 )

Cash inflow generated from operations 4,069,949 2,393,895

Income tax paid ( 112,959 ) ( 3,205 )

Net cash flows from operating activities 3,956,990 2,390,690

(Continued)

- 22 -


CONSOLIDATED STATEMENTS OF CASH FLOWS



2018 2017

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposal of non-current assets held for sale $ - $ 864,516

Acquisition of financial assets at fair value through other comprehensive income

- non-current ( 25,594 ) -

Proceeds from disposal of investments accounted for under equity method 249,345 -

Acquisition of investments in debt instruments without active market - ( 2,202,308 )

Proceeds from disposal of investments in debt instrument without active market - 1,800,000

Acquisition of investments accounted for under equity method ( 200,000 ) -

Acquisition of property, plant and equipment ( 3,708,959 ) ( 1,973,902 )

Proceeds from disposal of property, plant and equipment 2,261 32,525

Acquisition of intangible assets ( 171,270 ) ( 24,823 )

Other non-current assets 929 ( 10,732 )

Decrease in current financial assets at amortised cost, net 1,749,577 -

Interest received 233,223 143,546

Dividends received 28,512 19,959

Net cash flow from acquisition of subsidiaries 6,525 -

Net cash flows used in investing activities ( 1,835,451 ) ( 1,351,219 )

CASH FLOWS FROM FINANCING ACTIVITIES

Decrease in short-term loans ( 289,261 ) ( 537,977 )

Repayment of long-term debt - ( 100,000 )

Payments to acquire treasury shares ( 605,126 ) -

Interest paid ( 116,830 ) ( 93,374 )

Cash dividends paid ( 1,616,967 ) ( 1,616,967 )

Net cash flows used in financing activities ( 2,628,184 ) ( 2,348,318 )

Effects of changes in exchange rates 94,291 ( 9,958 )

Net decrease in cash and cash equivalents ( 412,354 ) ( 1,318,805 )

Cash and cash equivalents at beginning of year 4,891,172 6,209,977

Cash and cash equivalents at end of year $ 4,478,818 $ 4,891,172


- 23 -

HANNSTAR DISPLAY CORPORATION

PARENT COMPANY ONLY BALANCE SHEETS



December 31, 2018 December 31, 2017

Assets AMOUNT % AMOUNT %

Current assets

1100 Cash and cash equivalents $ 2,734,637 6 $ 3,063,507 6

1110 Current financial assets at fair value through profit

or loss 1,102 - 70,350 -

1136 Current financial assets at amortised cost 11,776,480 25 - -

1150 Notes receivable, net 5,751 - 8,094 -

1170 Accounts receivable, net 684,113 1 1,628,782 3

1180 Accounts receivable - related parties 18,549 - 9,195 -

1200 Other receivables 68,258 - 82,946 -

1210 Other receivables - related parties 555,497 1 710,794 2

130X Inventory 729,417 2 665,021 1

1476 Other current financial assets 50,866 - 14,202,457 30

1479 Other current assets, others 358,870 1 268,875 1

11XX Current Assets 16,983,540 36 20,710,021 43

Non-current assets

1510 Non-current financial assets at fair value through

profit or loss 11,392 - - -

1517 Non-current financial assets at fair value through

other comprehensive income 72,207 - - -

1523 Non-current available-for-sale financial assets - - 23,076 -

1535 Non-current financial assets at amortised cost 1,500,000 3 - -

1543 Non-current financial assets at cost - - 19,361 -

1546 Bond investments without active markets - non-

current - - 1,800,000 4

1550 Investments accounted for under equity method 10,455,909 23 9,387,028 20

1600 Property, plant and equipment 16,251,955 35 14,187,946 30

1760 Investment property, net 1,167,933 3 1,173,299 2

1780 Intangible assets 48,399 - 29,422 -

1840 Deferred tax assets 11,000 - 11,000 -

1915 Prepayments for business facilities 85,284 - 510,612 1

1920 Guarantee deposits paid 2,512 - 2,546 -

1975 Non-current prepaid pension cost 44,529 - 62,348 -

15XX Non-current assets 29,651,120 64 27,206,638 57

1XXX Total assets $ 46,634,660 100 $ 47,916,659 100

(Continued)

- 24 -


PARENT COMPANY ONLY BALANCE SHEETS



December 31, 2018 December 31, 2017 Liabilities and Equity AMOUNT % AMOUNT %

Current liabilities 2100 Short-term borrowings $ - - $ 34,114 - 2120 Current financial liabilities at fair value through

profit or loss 4,252 - 3,529 - 2130 Current contract liabilities 43,062 - - - 2150 Notes payable 53,118 - 53,245 - 2170 Accounts payable 1,320,338 3 1,507,053 3 2180 Accounts payable - related parties 257 - 444 - 2213 Payable on machinery and equipment 1,184,957 2 836,932 2 2219 Other payables, others 1,735,833 4 2,351,787 5 2220 Other payables - related parties 175,168 - 302,080 1 2230 Current income tax liabilities 448,344 1 127,615 - 2250 Provisions for liabilities - current 322,121 1 317,315 1 2399 Other current liabilities, others 45,251 - 132,825 - 21XX Current Liabilities 5,332,701 11 5,666,939 12 Non-current liabilities 2570 Deferred tax liabilities 5,985 - 9,752 - 25XX Non-current liabilities 5,985 - 9,752 - 2XXX Total Liabilities 5,338,686 11 5,676,691 12 Equity Share capital 3110 Share capital - common stock 32,339,339 69 32,339,339 67 Capital surplus 3200 Capital surplus 842,099 2 842,099 2 Retained earnings 3310 Legal reserve 1,609,021 3 938,151 2 3320 Special reserve 72,442 - 147,053 - 3350 Total unappropriated retained earnings 7,774,470 17 8,045,768 17 3400 Other equity interest ( 736,271 ) ( 1 ) ( 72,442) - 3500 Treasury shares ( 605,126 ) ( 1 ) - - 3XXX Total equity 41,295,974 89 42,239,968 88 Significant contingent liabilities and unrecognized

contractual commitments Significant events after the balance sheet date 3X2X Total liabilities and equity $ 46,634,660 100 $ 47,916,659 100

The accompanying notes are an integral part of these parent company only financial statements.

- 25 -


PARENT COMPANY ONLY STATEMENTS OF INCOME




2018 2017


4000 Sales revenue $ 13,768,285 100 $ 20,676,672 100

5000 Operating costs ( 11,234,587) ( 82) ( 12,498,760) ( 61)


5910 Unrealized profit from sales 8,128 - 3,290 -


Operating expenses

6100 Selling expenses ( 212,263) ( 2) ( 336,749) ( 2)

6200 General & administrative expenses ( 408,729) ( 3) ( 638,195) ( 3)

6300 Research and development expenses ( 862,584) ( 6) ( 944,175) ( 4)

6450 Impairment loss (impairment gain and reversal of impairment loss) determined

in accordance with IFRS 9 8,837 - - -

6000 Total operating expenses ( 1,474,739) ( 11) ( 1,919,119) ( 9)

6900 Operating profit 1,067,087 7 6,262,083 30

Non-operating income and expenses

7010 Other income 330,294 2 630,007 3

7020 Other gains and losses ( 18,653) - ( 361,396) ( 2)

7050 Finance costs ( 260) - ( 306) -

7070 Share of profit of associates and joint ventures accounted for under equity

method 78,570 1 305,930 2

7000 Total non-operating revenue and expenses 389,951 3 574,235 3

7900 Profit before income tax 1,457,038 10 6,836,318 33

7950 Income tax expense ( 433,479) ( 3) ( 127,615) -

8200 Profit for the year $ 1,023,559 7 $ 6,708,703 33

Other comprehensive income

Components of other comprehensive income that will not be reclassified to

profit or loss

8311 Losses on remeasurements of defined benefit plans ( $ 18,832) - ( $ 14,410) -

8316 Unrealised gains from investments in equity instruments measured at fair value

through other comprehensive income 8,586 - - -

8330 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 ( 102,668) ( 1) ( 80) -

8349 Income tax related to components of other comprehensive income that will not

be reclassified to profit or loss 3,767 - 2,449 -

8310 Components of other comprehensive income that will not be reclassified

to profit or loss ( 109,147) ( 1) ( 12,041) -

Components of other comprehensive income that will be reclassified to profit

or loss

8361 Financial statements translation differences of foreign operations 87,037 1 ( 92,918) ( 1)

8362 Unrealised gains on valuation of available-for-sale financial assets - - 4,762 -

8380 Share of other comprehensive income of associates and joint ventures

accounted for under equity method ( 5,386) - 162,767 1

8360 Components of other comprehensive income that will be reclassified to

profit or loss 81,651 1 74,611 -

8300 Total other comprehensive income for the year ( $ 27,496) - $ 62,570 -

8500 Total comprehensive income for the year $ 996,063 7 $ 6,771,273 33

Basic earnings per share

9750 Total basic earnings per share $ 0.32 $ 2.07

9850 Total diluted earnings per share $ 0.31 $ 2.01


- 26 -

- 27 -


PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017


Retained Earnings Other equity interest

Share capital -

common stock

Total capital

surplus, additional

paid-in capital

Legal reserve

Special reserve

Total

unappropriated

retained earnings

(accumulated

deficit)

Financial

statements

translation

differences of

foreign operations

Total Unrealised

gains (losses)

from financial

assets measured at

fair value through

other

comprehensive

income

Unrealized gain or

loss on

available-for-sale

financial assets

Hedging

instrument gain

(loss) on effective

hedge of foreign

operations’ net

investment hedges

Treasury shares

Total equity

For a year period ended December 31, 2017 Balance at January 1, 2017 $ 32,339,339 $ 842,099 $ 621,594 $ 264,111 $ 3,165,572 $ 18,788 $ - $ 3,826 ($ 169,667 ) $ - $ 37,085,662

Profit for the year - - - - 6,708,703 - - - - - 6,708,703

Other comprehensive income(loss) - - - - ( 12,041 ) ( 103,666 ) - 178,277 - - 62,570

Total comprehensive income - - - - 6,696,662 ( 103,666 ) - 178,277 - - 6,771,273

Distribution of 2016 earnings Legal reserve - - 316,557 - ( 316,557 ) - - - - - -

Reversal of special reserve - - - ( 117,058 ) 117,058 - - - - - -

Cash dividend paid - - - - ( 1,616,967 ) - - - - - ( 1,616,967 )

Balance at December 31, 2017 $ 32,339,339 $ 842,099 $ 938,151 $ 147,053 $ 8,045,768 ($ 84,878 ) $ - $ 182,103 ($ 169,667 ) $ - $ 42,239,968

For a year period ended December 31, 2018 Balance at January 1, 2018 $ 32,339,339 $ 842,099 $ 938,151 $ 147,053 $ 8,045,768 ($ 84,878 ) $ - $ 182,103 ($ 169,667 ) $ - $ 42,239,968

Retroactive application and

retrospective restatement effect - - - - 933,042 - ( 469,295 ) ( 182,103 ) - - 281,644

Balance at 1 January after adjustments 32,339,339 842,099 938,151 147,053 8,978,810 ( 84,878 ) ( 469,295 ) - ( 169,667 ) - 42,521,612

Profit for the year - - - - 1,023,559 - - - - - 1,023,559

Other comprehensive income(loss) - - - - ( 15,065 ) 81,651 ( 94,082 ) - - - ( 27,496 )

Total comprehensive income - - - - 1,008,494 81,651 ( 94,082 ) - - - 996,063

Distribution of 2017 earnings Legal reserve - - 670,870 - ( 670,870 ) - - - - - -

Reversal of special reserve - - - ( 74,611 ) 74,611 - - - - - -

Cash dividend paid - - - - ( 1,616,967 ) - - - - - ( 1,616,967 )

Changes in equity of associates and joint

ventures accounted for under equity

method - - - - 392 - - - - - 392

Aquisition of treasury share - - - - - - - - - ( 605,126 ) ( 605,126 )

Balance at December 31, 2018 $ 32,339,339 $ 842,099 $ 1,609,021 $ 72,442 $ 7,774,470 ($ 3,227 ) ($ 563,377 ) $ - ($ 169,667 ) ($ 605,126 ) $ 41,295,974


- 28 -


PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS



2018 2017

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax $ 1,457,038 $ 6,836,318

Adjustments

Adjustments to reconcile profit (loss)

Provision for doubtful accounts (reversal of allowance) - ( 193 )

Reversal of allowance for doubtful accounts ( 8,837 ) -

Depreciation 1,754,807 2,147,403

Amortization 29,011 163,214

Interest expense 260 306

Intereat income ( 179,608 ) ( 166,639 )

Net gain on disposal of property, plan and equipment ( 152 ) ( 1,614 )

Impairment loss on non-financial assets 576,723 672,734

Share of profit of associates and joint ventures accounted for under equity

method ( 78,570 ) ( 305,930 )

(Realised) unrealised loss (gain) from inter-affiliate accounts ( 8,128 ) ( 3,291 )

Changes in operating assets and liabilities

Changes in operating assets

Current financial assets at fair value through profit or loss 93,547 ( 65,197 )

Notes receivable 2,343 ( 2,659 )

Accounts receivable 947,164 673,218

Accounts receivable from related parties ( 2,688 ) 31,877

Other receivable 12,117 601,552

Other receivable from related parties 155,297 11,857

Inventories ( 64,396 ) 82,881

Other financial assets 116,791 ( 8,218,825 )

Other current assets, others ( 89,995 ) ( 48,220 )

Non-current financial assets at fair value through profit or loss ( 11,392 ) -

Prepaid pension cost ( 1,013 ) ( 791 )

Changes in operating liabilities

Current financial liabilities at fair value through profit or loss 723 ( 15,997 )

Decrease in contract liabilities ( 50,024 ) -

Notes payable ( 127 ) ( 1,076 )

Accounts payable ( 186,715 ) ( 150,378 )

Accounts payable - related parties ( 187 ) ( 134,936 )

Increase (decrease) in other payable ( 490,019 ) 371,601

Other payables - related parties ( 126,912 ) 57,620

Increase in provisions 154,343 148,357

Decrease in other financial liabilities ( 144,027 ) ( 8,946 )

Cash inflow generated from operations 3,857,374 2,674,246

Income taxes refund (paid) ( 112,750 ) -

Net cash flows from operating activities 3,744,624 2,674,246

(Continued)

- 29 -


PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS



2018 2017

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of financial assets at fair value through other comprehensive

income - non-current ( $ 25,594 ) $ -

Acquisition of investments in debt instrument without active market - ( 1,800,000 )

Proceeds from disposal of investments in debt instrument without active

market - 1,800,000

Decrease in current financial assets at amortised cost, net 2,558,320 -

Acquisition of investments accounted for under equity method ( 793,073 ) ( 1,544,880 )

Other receivable from related parties - ( 53,485 )

Acquisition of property, plant and equipment ( 3,618,090 ) ( 1,915,131 )

Proceeds from disposal of property, plant and equipment 1,422 16,533

Acquisition of intangible assets ( 171,109 ) ( 22,255 )

Interest received 182,179 127,501

Dividends reveived 52,165 -

Decrease in guarantee deposits paid 34 123

Net cash flows used in investing activities ( 1,813,746 ) ( 3,391,594 )

CASH FLOWS FROM FINANCING ACTIVITIES

Increase (decrease) in short-term loans ( 34,114 ) 34,114

Repayments of long-term debt - ( 100,000 )

Interest paid ( 3,541 ) ( 352 )

Cash dividends paid ( 1,616,967 ) ( 1,616,967 )

Payments to acquire treasury shares ( 605,126 ) -

Net cash flows used in financing activities ( 2,259,748 ) ( 1,683,205 )

Net decrease in cash and cash equivalents ( 328,870 ) ( 2,400,553 )

Cash and cash equivalents at beginning of year 3,063,507 5,464,060

Cash and cash equivalents at end of year $ 2,734,637 $ 3,063,507


- 30 -

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of HANNSTAR DISPLAY CORPORATION

Opinion

We have audited the accompanying consolidated balance sheets of HANNSTAR DISPLAY

CORPORATION and subsidiaries (the “Group”) as at December 31, 2018 and 2017, and the related

consolidated statements of comprehensive income, of changes in equity and of cash flows for the

years then ended, and notes to the consolidated financial statements, including a summary of

significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all

material respects, the consolidated financial position of the Group as at December 31, 2018 and

2017, and its consolidated financial performance and its consolidated cash flows for the years then

ended in accordance with the “Regulations Governing the Preparation of Financial Reports by

Securities Issuers” and the International Financial Reporting Standards, International Accounting

Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory

Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and

Attestation of Financial Statements by Certified Public Accountants” and generally accepted

auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those

standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated

Financial Statements section of our report. We are independent of the Group in accordance with the

Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”),

and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that

the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most

significance in our audit of the consolidated financial statements 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.

Key audit matters for the Group’s consolidated financial statements of the current period are

stated as follows:

Reasonableness of allowance for inventory valuation losses

Description

Please refer to Note 4(14) for the description of accounting policy, Note 5(2) for critical

accounting estimates and sources of assumption, and Note 6(6) details of allowance for valuation

losses.

Hannstar Display Corporation are facing selling outdated products in the market and the

possibility of input during manufactured due to technology evolution in panel, this may lead to a

higher risk of incurring inventory valuation losses or having obsolete inventory. Therefore, the

production and sales personnel provide the specified recognition lists and storage ists which are

used as basis for recognizing allowance for inventory valuation losses by historical information of

inventory quality and discount rate permitted by the management hierarchy.

- 31 -

As the inventory valuation losses is subject to critical accounting judgement by management,

consider the appropriateness of recognition of inventory valuation losses, we consider allowance for

inventory valuation loss a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

1. Understanding the factors affecting obsolescence and the planned way to deal with inventory

valuation losses;

2. Verifying whether the systematic logic used in the Group’s inventory aging report is appropriate

and in accordance with the Group’s accounting policy; and

3. Gathering all the documents provided by related personnel and permitted by the management

hierarchy as mentioned above, and sampling individual inventory part number which is

recognized as valuation losses from the specified recognition lists and storage lists.

Property, Plant and Equipment - the appropriateness of impairment assessment of construction

in progress.

Description

Please refer to Note 4(16) for description of accounting policy on Property, Plant and

Equipment, Note 4(20) for description of accounting policy on non-financial assets impairment,

Note 5(2) for accounting estimates and assumption in relation to impairment valuation, Note 6(8)

for and details of impairment loss.

The Group has hired a real estate appraisal company to appraise fourth thin-film transistor

LCD plant at Southern Taiwan Science Park in cost method, and calculated the recoverable amount

as basis of evaluating the impairment of construction in progress.

The above cost method is used to estimate the expected construction accumulated cost, and

less the expected construction accumulated depreciation under current percentage of completion to

calculate the recoverable amount. As the estimation involves critical accounting judgement and

uncertainty, the recoverable amount may be significantly affected. Thus, we consider impairment

assessment of construction in progress a key audit matter.



1. Obtaining an understanding of cost method, and evaluating the valuation method, which is one of

the general real estate appraisal methods.

2. Verifying the matters following:

a) Expected construction accumulated cost;

b) Expected construction accumulated depreciation;

c) Supporting document of percentage of completion

d) Cross validation with external evidence and assessing whether the assumption and predictions

made by management in the past are reasonable.

Other matter – Parent company only financial reports

We have audited and expressed an unmodified opinion on the parent company only financial

- 32 -

statements of Hannstar Co., Ltd. as at and for the years ended December 31, 2018 and 2017.

Responsibilities of management and those charged with governance for the consolidated

financial statements

Management is responsible for the preparation and fair presentation of the consolidated

financial statements in accordance with the “Regulations Governing the Preparation of Financial

Reports by Securities Issuers” and the International Financial Reporting Standards, International

Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial

Supervisory Commission, and for such internal control as management determines is necessary to

enable the preparation of consolidated financial statements that are free from material misstatement,

whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the

Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless management either intends to

liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the audit committee [or supervisors], are

responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial

statements as a whole are free from material misstatement, whether due to fraud or error, and to

issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of

assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will

always detect a material misstatement when it exists. Misstatements can arise from fraud or error

and are considered material if, individually or in the aggregate, they could reasonably be expected

to influence the economic decisions of users taken on the basis of these consolidated financial

statements.

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

maintain professional skepticism throughout the audit. We also:

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 the 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 the Group’s ability to continue as a going

concern. If we conclude that a material uncertainty exists, we are required to draw attention in

our auditor’s report to the related disclosures in the consolidated financial statements or, if such

disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit

- 33 -

evidence obtained up to the date of our auditor’s report. However, future events or conditions

may cause the Group to cease to continue as a going concern.

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 the Group to express an opinion on the consolidated financial

statements. We are responsible for the direction, supervision and performance of the group audit.

We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the

planned scope and timing of the audit and significant audit findings, including any significant

deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with

relevant ethical requirements regarding independence, and to communicate with them all

relationships and other matters that may reasonably be thought to bear on our independence, and

where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those

matters that were of most significance in the audit of the consolidated financial statements of the

current 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.

Chen, Ching-Chang

Lin, Chun-Yao

For and on behalf of Pricewaterhouse Coopers, Taiwan

March 15, 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.

- 34 -

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of HANNSTAR DISPLAY CORPORATION

Opinion

We have audited the accompanying parent company only balance sheets of HANNSTAR

DISPLAY CORPORATION 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, the accompanying parent company only financial statements present fairly, in

all material respects, the parent company only financial position of HANNSTAR DISPLAY

CORPORATION 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” and the

International Financial Reporting Standards, International Accounting Standards, IFRIC

Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and

Attestation of Financial Statements by Certified Public Accountants” and generally accepted

auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those

standards are further described in the Auditor’s Responsibilities for the Audit of the parent company

only Financial Statements section of our report. We are independent of HANNSTAR DISPLAY

CORPORATION in accordance with the Code of Professional Ethics for Certified Public

Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical

responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most

significance in our audit of the parent company only financial statements 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.

Key audit matters for HANNSTAR DISPLAY CORPORATION parent company only

financial statements of the current period are stated as follows:

Reasonableness of allowance for inventory valuation losses

Description

Please refer to Note 4(13) for the description of accounting policy, Note 5(2) for critical

accounting estimates and sources of assumption, and Note 6(6) details of allowance for valuation

losses.

Hannstar Display Corporation are facing selling outdated products in the market and the

possibility of input during manufactured due to technology evolution in panel, this may lead to a

higher risk of incurring inventory valuation losses or having obsolete inventory. Therefore, the

- 35 -

production and sales personnel provide the specified recognition lists and storage ists which are

used as basis for recognizing allowance for inventory valuation losses by historical information of

inventory quality and discount rate permitted by the management hierarchy.

As the inventory valuation losses is subject to critical accounting judgement by management,

consider the appropriateness of recognition of inventory valuation losses, we consider allowance for

inventory valuation loss a key audit matter.



1. Understanding the factors affecting obsolescence and the planned way to deal with inventory

valuation losses;

2. Verifying whether the systematic logic used in the Group’s inventory aging report is appropriate

and in accordance with the Group’s accounting policy; and

3. Gathering all the documents provided by related personnel and permitted by the management

hierarchy as mentioned above, and sampling individual inventory part number which is

recognized as valuation losses from the specified recognition lists and storage lists.

Property, Plant and Equipment - the appropriateness of impairment assessment of construction

in progress.

Description

Please refer to Note 4(15) for description of accounting policy on Property, Plant and

Equipment, Note 4(19) for description of accounting policy on non-financial assets impairment,

Note 5(2) for accounting estimates and assumption in relation to impairment valuation, Note 6(8)

for and details of impairment loss.

The Group has hired a real estate appraisal company to appraise fourth thin-film transistor

LCD plant at Southern Taiwan Science Park in cost method, and calculated the recoverable amount

as basis of evaluating the impairment of construction in progress.

The above cost method is used to estimate the expected construction accumulated cost, and

less the expected construction accumulated depreciation under current percentage of completion to

calculate the recoverable amount. As the estimation involves critical accounting judgement and

uncertainty, the recoverable amount may be significantly affected. Thus, we consider impairment

assessment of construction in progress a key audit matter.



1. Obtaining an understanding of cost method, and evaluating the valuation method, which is one of

the general real estate appraisal methods.

2. Verifying the matters following:

a) Expected construction accumulated cost;

b) Expected construction accumulated depreciation;

c) Supporting document of percentage of completion

- 36 -

d) Cross validation with external evidence and assessing whether the assumption and predictions

made by management in the past are reasonable.

- 37 -

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 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 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 HANNSTAR DISPLAY CORPORATION 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 HANNSTAR DISPLAY CORPORATION

or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee [or supervisors], are responsible

for overseeing HANNSTAR DISPLAY CORPORATION financial reporting process.

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

Our objectives are to obtain reasonable assurance about whether the parent company only

financial statements as a whole are free from material misstatement, whether due to fraud or error,

and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of

assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will

always detect a material misstatement when it exists. Misstatements can arise from fraud or error

and are considered material if, individually or in the aggregate, they could reasonably be expected

to influence the economic decisions of users taken on the basis of these parent company only

financial statements.

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

maintain professional skepticism throughout the audit. We also:

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 HANNSTAR DISPLAY CORPORATION 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 HANNSTAR DISPLAY CORPORATION 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

- 38 -

financial statements or, if such disclosures are inadequate, to modify our opinion. Our

conclusions are based on the audit evidence obtained up to the date of our auditor’s report.

However, future events or conditions may cause the Group to cease to continue as a going

concern.

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 HANNSTAR DISPLAY CORPORATION to express an opinion on the

parent company only financial statements. We are responsible for the direction, supervision and

performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the

planned scope and timing of the audit and significant audit findings, including any significant

deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with

relevant ethical requirements regarding independence, and to communicate with them all

relationships and other matters that may reasonably be thought to bear on our independence, and

where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those

matters that were of most significance in the audit of the 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.

Chen, Ching Chang

Lin, Chun-Yao

For and on behalf of PricewaterhouseCoopers, Taiwan

March 15, 2019

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

- 39 -

liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

- 40 -


Audit Committee Audit Report

The Board of Directors has submitted the 2018 business report, financial statements and profit

distribution, of which the financial statements were certified by CPAs Chin-Chang Chen and

Chun-Yao Lin of Pricewaterhouse Coopers, Taiwan, and the audit report is as issued. The

foregoing business report, financial statements and profit distribution were certified by the

Audit Committee and were considered to be in compliance with relevant regulations of the

Company Act. This report, which has been prepared in accordance with Article 14-4 of the

Securities and Exchange Act and Article 219 of the Company Act, is hereby submitted for

review.

Yours faithfully,

The Company 2019 Annual Meeting of Shareholders


Convener of the Audit Committee: Hui-Chung Chiang

March 15, 2019

- 41 -


Profit distribution table

2018

Unit: NTD

Item Amount

Beginning balance of undistributed earnings

5,832,542,074

Change in capital surplus from investments in associates under

equity method

393,023

IFRS 9 Retrospective application adjustment

933,042,925

Actuarial gains and losses for recognition of retained earnings

(15,065,067)

Adjusted undistributed earnings

6,750,912,955

Net income for the year

1,023,558,758

Legal reserve (10%)

(102,355,876)

Special reserve

(663,830,746)

Special reserve reverses to undistributed retained earnings

0

Distributable surplus available for the year

7,008,285,091

Distribution Item

Stock dividends NT$0/ per share

-

Cash bonus NT$0.3/ per share

940,180,155

Ending balance of undistributed earnings

6,068,104,936

Note 1: The number of common shares issued by the Company so far is 3,133,933,851 shares.

Note 2: The smallest unit of the cash dividend is NT$1. Amounts smaller than NT$1 will not be

calculated; the Company will categorize it as other income.


Manager: Yu-Chi Chiao

Accounting Manager: Chung-Han Lin

- 42 -


The status of capital increase by cash:

Capital allocation, scheduled progress, and expected benefits

(I) Capital allocation and capital requirements.

The Company needs approximately NT$5 billion in response to the development of strategic

alliances, enriching operating capital, etc.

(II) Source of capital.

The Company proposes to raise capital through public issuance and/or private offering within

the limit of 500 million shares. Approximately NT$5 billion of capital is expected to be raised.

(III) Implementation of capital allocation schedule.

Unit: NT$ million

Estimated completion time Total amount

Estimated schedule of capital allocation

2019 2020

4th Quarter 1st Quarter

1st Quarter, 2020 5,000 2,500 2,500

(IV) Expected benefits

The expected annual savings on interest expense will be approximately NT$90,000,000 based

on the 1.8% of average loan interest rate of the Company.

- 43 -


Comparison Table of revisions of article for

"Procedures for Acquisition or Disposal of Assets"

Article Before amendment After amendment Note

3.0 Definition

I. Derivatives:

Forward contracts, options

contracts, futures contracts,

leverage contracts, or swap

contracts, whose value is derived

from an asset, interest rate,

foreign exchange rate, index, or

other interests; or hybrid contracts

combining the above contracts.

The term "forward contracts" does

not include insurance contracts,

performance contracts, after-sales

service contracts, long-term

leasing contracts, or long-term

purchase (sales) contracts.

II. Assets acquired or disposed of

through mergers, demergers,

acquisitions, or transfer of shares

in accordance with law:

Refers to assets acquired or

disposed through mergers,

demergers, or acquisitions

conducted under the Business

Mergers and Acquisitions Act,

Financial Holding Company Act,

Financial Institution Merger Act

and other acts, or to transfer of

shares from another company

through issuance of new shares of

its own as the consideration

therefor (hereinafter "transfer of

shares") under Article 156-6 of

the Company Act.

Definition

I. Derivatives:

Forward contracts, options

contracts, futures contracts,

leverage contracts, or swap

contracts, whose value is derived

from a specified interest rate,

price of financial instrument,

commodity price, foreign

exchange rate, index of prices or

rates, credit rating or credit index,

or other variables; or hybrid

contracts combining the above

contracts, or hybrid contracts or

structured products containing

embedded derivatives. The term

"forward contracts" does not

include insurance contracts,

performance contracts, after-sales

service contracts, long-term

leasing contracts, or long-term

purchase (sales) contracts.

II. Assets acquired or disposed of

through mergers, demergers,

acquisitions, or transfer of shares

in accordance with law:

Refers to assets acquired or

disposed through mergers,

demergers, or acquisitions

conducted under the Business

Mergers and Acquisitions Act,

Financial Holding Company Act,

Financial Institution Merger Act

and other acts, or to transfer of

shares from another company

through issuance of new shares of

its own as the consideration

therefor (hereinafter "transfer of

shares") under Article 156-3 of

the Company Act.

Revision in

accordance

with the

law

- 44 -


III. Related party or subsidiary:

As defined in the Regulations

Governing the Preparation of

Financial Reports by Securities

Issuers.

IV. Professional appraiser:

Refers to a real property appraiser

or other person duly authorized

by law to engage in the value

appraisal of real property or

equipment.

V. Date of occurrence:

Refers to the date of contract

signing, date of payment, date of

consignment trade, date of

transfer, dates of the Boards of

Directors resolutions, or other

date that can confirm the

counterpart and monetary amount

of the transaction, whichever date

is earlier. Provided, for

investment for which approval of

the competent authority is

required, the earlier of the above

date or the date of receipt of

approval by the competent

authority shall apply.

VI. Mainland China area investment:

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.

VII. The "Most Recent Financial

Statements" as stated in this

Regulations refers to the

financial statements of the

Company that have been

publicly certified or audited by a


As defined in the Regulations

Governing the Preparation of

Financial Reports by Securities

Issuers.


Refers to a real property appraiser

or other person duly authorized

by law to engage in the value

appraisal of real property or

equipment.


Refers to the date of contract


consignment trade, date of

transfer, dates of the Boards of



counterpart and monetary amount

of the transaction, whichever date

is earlier. Provided, for

investment for which approval of

the competent authority is

required, the earlier of the above

date or the date of receipt of

approval by the competent

authority shall apply.


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.

VII. Investment professional: Refers

to financial holding companies,

banks, insurance companies, bill

finance companies, trust

enterprises, securities firms

operating proprietary trading or

- 45 -


CPA before the acquisition or

disposal of assets.

underwriting business, futures

commission merchants operating

proprietary trading business,

securities investment trust

enterprises, securities investment

consulting enterprises, and fund

management companies, that are

lawfully incorporated and are

regulated by the competent

financial authorities of the

jurisdiction where they are

located.

VIII. Securities exchange: "Domestic

securities exchange" refers to

the Taiwan Stock Exchange

Corporation; "foreign securities

exchange" refers to any

organized securities exchange

market that is regulated by the

competent securities authorities

of the jurisdiction where it is

located.

IX. Over-the-counter market ("OTC

market", "OTC"): "Domestic

OTC market "refers to a market

for OTC trading provided by a

securities firm in accordance

with the Regulations Governing

Securities Trading on the Taipei

Exchange; "foreign OTC

market" refers to a market at a

financial institution that is

regulated by the foreign

competent authority and that is

permitted to conduct securities

business.

X. The "Most Recent Financial

Statements" as stated in this

program refers to the financial

statements of the Company that

have been publicly certified or

audited by a CPA before the

acquisition or disposal of assets.

5.0 Reference Reference Amend the

- 46 -


“Regulations Governing the

Acquisition or Disposal of Assets by

Public Companies” are promulgated

pursuant to Article 36-1 of the

Securities and Exchange Act and

amended Regulations Governing the

Acquisition and Disposal of Assets

by Public Companies per Order No.

Financial-Supervisory-Securities-

10600012965 issued on February 9,

2017, and per Order No. Financial-

Supervisory-Securities-10600045233

issued on February 13, 2017 of the

Financial Supervisory Commission,

Executive Yuan (herein referred to as

securities competent authority).

“Regulations Governing the

Acquisition or Disposal of Assets by

Public Companies” are promulgated


Securities and Exchange Act and

amended Regulations Governing the


by Public Companies per Order No.


1070341072 issued on November 26,

2018 of the Financial Supervisory

Commission, Executive Yuan (herein

referred to as securities competent

authority).

source of

the law

8.1 The term "scope of assets" as used in

these Procedures includes the

following:

(I) Long and short-term investments

in stocks, government bonds,

corporate bonds, financial

bonds, securities representing

interest in a fund, depositary

receipts, call (put) warrants,

beneficial interest securities,

and asset-backed securities.

(II) Real property (including land,

houses and buildings,

investment property, and

construction enterprise

inventory) and equipment.

(III) Memberships.

(IV) Patents, copyrights, trademarks,

franchise rights, and other

intangible assets.

(V) Claims of financial institutions

(including receivables, bills

purchased and discounted,

loans, and overdue

receivables).

(VI) Derivatives.

(VII) Assets acquired or disposed of

The term "scope of assets" as used

in these Procedures includes the

following:

(I) Long and short-term investments

in stocks, government bonds,

corporate bonds, financial

bonds, securities representing

interest in a fund, depositary

receipts, call (put) warrants,

beneficial interest securities,

and asset-backed securities.

(II) Real property (including land,

houses and buildings,

investment property, and

construction enterprise

inventory) and equipment.

(III) Memberships.

(IV) Patents, copyrights, trademarks,

franchise rights, and other

intangible assets.

(V) Right-of-use assets.

(VI) Claims of financial institutions

(including receivables, bills

purchased and discounted,

loans, and overdue

receivables).

(VII) Derivatives.

(VIII) Assets acquired or disposed of

Revision in

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with the

law

- 47 -


in connection with mergers,

demergers, acquisitions, or

transfer of shares in

accordance with law.

(VIII) Other major assets.

in connection with mergers,

demergers, acquisitions, or

transfer of shares in

accordance with law.

(IX) Other major assets.

8.2 Professional appraisers and their

officers, certified public accounts,

attorneys, and securities underwriters

that provide public companies with

appraisal reports, certified public

accountant's opinions, attorney's

opinions, or underwriter's opinions

may not be a related party of any

party to the transaction. For sections

that shall be set forth in appraisal

reports, please refer to the attachment

of "Regulations Governing the


by Public Companies" published by

the securities competent authority.

Professional appraisers and their

officers, certified public accounts,

attorneys, and securities underwriters

that provide public companies with

appraisal reports, certified public

accountant's opinions, attorney's

opinions, or underwriter's opinions

shall meet the following

requirements:

I. May not have previously received

a final and unappealable sentence

to imprisonment for one year or

longer for a violation of the Act,

the Company Act, the Banking

Act of the Republic of China, the

Insurance Act, the Financial

Holding Company Act, or the

Business Entity Accounting Act,

or for fraud, breach of trust,

embezzlement, forgery of

documents, or occupational

crime. However, this provision

does not apply if three years have

already passed since completion

of service of the sentence, since

expiration of the period of a

suspended sentence, or since a

pardon was received.

II. May not be a related party or de

facto related party of any party to

the transaction.

III. If the company is required to

obtain appraisal reports from two

or more professional appraisers,

the different professional

appraisers or appraisal officers

may not be related parties or de

facto related parties of each other.

When issuing an appraisal report or

Revision in

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with the

law

- 48 -


opinion, the personnel referred to in

the preceding paragraph shall comply

with the following:

I. Prior to accepting a case, they

shall prudently assess their own

professional capabilities,

practical experience, and

independence.

II. When examining a case, they

shall appropriately plan and

execute adequate working

procedures, in order to produce a

conclusion and use the

conclusion as the basis for

issuing the report or opinion. The

related working procedures, data

collected, and conclusion shall be

fully and accurately specified in

the case working papers.

III. They shall undertake an item-by-

item evaluation of the

comprehensiveness, accuracy,

and reasonableness of the sources

of data used, the parameters, and

the information, as the basis for

issuance of the appraisal report or

the opinion.

IV. They shall issue a statement

attesting to the professional

competence and independence of

the personnel who prepared the

report or opinion, and that they

have evaluated and found that the

information used is reasonable

and accurate, and that they have

complied with applicable laws

and regulations.

For sections that shall be set forth in

appraisal reports, please refer to the

attachment of "Regulations

Governing the Acquisition and

Disposal of Assets by Public

Companies" published by the

securities competent authority.

- 49 -


8.6.3 Appraisal report

In acquiring or disposing of real

property, factory buildings and

equipment where the transaction

amount reaches 20 percent of the

Company's paid-in capital or

NT$300 million or more, the

company, unless transacting with a

government agency, engaging others

to build on its own land, engaging

others to build on rented land, or

acquiring or disposing of equipment

thereof held for business use, shall

obtain an appraisal report prior to the

date of occurrence of the event from

a professional appraiser and shall

further comply with the following

provisions:

(I) Where due to special

circumstances it is necessary to

give a limited price, specified

price, or special price as a

reference basis for the transaction

price, the transaction shall be

submitted for approval in

advance by the board of directors;

the same procedure shall also be

followed whenever there is any

later change to the terms and

conditions of the transaction.

(Remaining text omitted)

Appraisal report

In acquiring or disposing of real

property, equipment, or right-of-use

assets thereof where the transaction

amount reaches 20 percent of the

Company's paid-in capital or

NT$300 million or more, the

Company, unless transacting with a

domestic government agency,

engaging others to build on its own

land, engaging others to build on

rented land, or acquiring or disposing

of equipment or right-of-use assets

thereof held for business use, shall

obtain an appraisal report prior to the

date of occurrence of the event from

a professional appraiser and shall

further comply with the following

provisions:

(I) Where due to special

circumstances it is necessary to

give a limited price, specified

price, or special price as a

reference basis for the transaction

price, the transaction shall be

submitted for approval in

advance by the board of directors;

the same procedure shall apply

whenever there is any subsequent

change to the terms and

conditions of the transaction.


Revision in

accordance

with the

law

8.8 The Procedures of Acquisitions or

Disposals of Memberships or

Intangible Assets

8.8.1 Evaluation and operating

procedures

Where the Company acquires

or disposes of intangible assets

such as memberships, patents,

copyrights, trademark rights,

franchise, etc., shall be

complied with the Company's

related regulations of Internal

The Procedures of Acquisitions or

Disposals of Intangible Assets,

Memberships or Its Right-of-use Assets

8.8.1 Evaluation and operating

procedures



such as memberships, patents,

copyrights, trademark rights,

franchise, etc., shall be

complied with the Company's

related regulations of Internal

Revision in

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with the

law

- 50 -


Control Systems. When the

Company intends to acquire or

dispose of memberships, it

shall make analysis report

based on actual business needs

and report to the Chairman, and

determine payment terms as

well as price in accordance

with fair market value. If the

transaction amount reaches

NT$5 million (inclusive) or

less, it shall be approved and

implemented by the Chairman;

if the transaction amount

reaches NT$5 million or more,

it shall be reported to the Board

of the Directors for approval.

When the Company intends to

acquire or dispose of intangible

assets, it shall make analysis

report based on evaluation

report made by expert and

submit it to the Chairman, or






less, it shall be approved by the

Chairman; if the transaction

amount reaches NT$50 million

or more, it shall be reported to

the Board of Directors for

approval.

8.8.2 Implementation unit


acquire or dispose of

memberships or intangible

assets, execution unit shall

submit pursuant to the

preceding article to level of

authority for approval, and

executed by Legal Affairs,

Financial Department or

Administration.

Control Systems. When the


dispose of memberships, it


based on actual business needs

and report to the Chairman, and






less, it shall be approved and

implemented by the Chairman;

if the transaction amount


it shall be reported to the Board

of Directors. When the


dispose of intangible assets, it


based on evaluation report

made by expert and submit it to

the Chairman, or determine

payment terms as well as price

in accordance with fair market

value. If the transaction amount

reaches NT$50 million

(inclusive) or less, it shall be

approved by chairman; if the


NT$50 million or more, it shall

be reported to the Board of

Directors.



acquire or dispose of intangible

assets, its right-of-use assets

thereof or memberships,

execution unit shall submit

pursuant to the preceding

article to level of authority for

approval, and executed by

Legal Affairs, Financial

Department or Administration.

- 51 -


8.8.3 Expert opinion


or disposes of memberships or

intangible assets and the

transaction amount reaches 20

percent or more of paid-in

capital or NT$300 million or

more, except in transactions

with a government agency, the

Company shall engage a

certified public accountant

prior to the date of occurrence

of the event to render an

opinion on the reasonableness

of the transaction price; the

CPA shall comply with the

provisions of Statement of

Auditing Standards No. 20

published by the ARDF.




or its right-of-use assets thereof

or memberships and the



capital or NT$300 million or

more, except in transactions

with a domestic government

agency, the Company shall

engage a certified public

accountant prior to the date of

occurrence of the event to

render an opinion on the

reasonableness of the transaction

price; the CPA shall comply

with the provisions of Statement

of Auditing Standards No. 20

published by the ARDF.

8.9.1 Resolution and content of proposals


acquire or dispose of real property

from a related party, or when it

intends to acquire or dispose of

assets other than real property from a

related party, and the transaction

amount reaches 20 percent or more

of paid-in capital, 10 percent or more

of the company's total assets, or

NT$300 million or more, except in

trading of government bonds or

bonds under repurchase and resale

agreements, or subscription or

redemption of money market funds

issued by domestic securities

investment trust enterprises, the

company may not proceed to enter

into a transaction contract or make a

payment until the following matters

have been recognized by the Audit

committee and approved by the

board of directors:

(I) The purpose, necessity and

Resolution and content of proposals


acquire or dispose of real property or

its right-of-use assets from a related

party, or when it intends to acquire or

dispose of assets other than real

property or its right-of-use assets

from a related party, and the


percent or more of paid-in capital, 10

percent or more of the company's

total assets, or NT$300 million or

more, except in trading of domestic

government bonds or bonds under

repurchase and resale agreements, or

subscription or redemption of money

market funds issued by domestic

securities investment trust enterprises,

the company may not proceed to

enter into a transaction contract or

make a payment until the following

matters have been recognized by the

Audit committee and approved by the

board of directors:

(I) The purpose, necessity and

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- 52 -


anticipated benefit of the

acquisition or disposal of

assets.

(II) The reason for choosing the

related party as a transaction

counterparty.

(III) With respect to the acquisition of

real property from a related

party, information regarding

appraisal of the reasonableness

of the preliminary transaction

terms in accordance with the

Article of 8.9.2 and 8.9.3

(IV) The date and price at which the

related party originally

acquired the real property, the

original transaction

counterparty, and that

transaction counterparty's

relationship to the company

and the related party.

(V) Monthly cash flow forecasts for

the year commencing from the

anticipated month of signing of

the contract, and evaluation of

the necessity of the transaction,

and reasonableness of the funds

utilization.

(VI) An appraisal report from a

professional appraiser or a

CPA's opinion obtained in

compliance with the Article

8.9.

(VII) Restrictive covenants and other

important stipulations

associated with the transaction.

The calculation of the transaction

amounts referred to in the preceding

paragraph shall be made in

accordance with Paragraph 2 of of

Article 8.13.1, and "within the

preceding year" as used herein refers

to the year preceding the date of

occurrence of the current transaction.

anticipated benefit of the

acquisition or disposal of

assets.

(II) The reason for choosing the

related party as a transaction

counterparty.

(III) With respect to the acquisition of

real property or its right-of-use

assets from a related party,

information regarding appraisal

of the reasonableness of the

preliminary transaction terms in

accordance with the Articles

8.9.2 and 8.9.3

(IV) The date and price at which the

related party originally

acquired the real property, the

original transaction

counterparty, and that

transaction counterparty's

relationship to the company

and the related party.

(V) Monthly cash flow forecasts for

the year commencing from the

anticipated month of signing of

the contract, and evaluation of

the necessity of the transaction,

and reasonableness of the funds

utilization.

(VI) An appraisal report from a

professional appraiser or a

CPA's opinion obtained in

compliance with the Article

8.9.

(VII) Restrictive covenants and other

important stipulations

associated with the transaction.

The calculation of the transaction

amounts referred to in the preceding

paragraph shall be made in

accordance with Paragraph 2 of

Article 8.13.1, and "within the

preceding year" as used herein refers

to the year preceding the date of


- 53 -


Items for which an appraisal report

from a professional appraiser or a

CPA's opinion has been obtained

need not be counted toward the

transaction amount.


acquire or dispose of machinery and

equipment for business use between

parent company or subsidiaries, the

Company's Board of Directors may

pursuant to the Article 8.6 of the

Procedures authorize the Chairman

of the Board to decide such matters

when the transaction is within a

certain amount and have the

decisions subsequently submitted to

and ratified by the next Board of

Directors meeting.


Items for which an appraisal report

from a professional appraiser or a

CPA's opinion has been obtained

need not be counted toward the

transaction amount.

Where the Company conducts the

following transactions with parent

company, subsidiaries, or

subsidiaries which directly or

indirectly hold 100 percent of the

issued shares or authorized capital,

the Company's Board of Directors

may pursuant to the Article 8.6 of the

Procedures authorize the Chairman

of the Board to decide such matters

when the transaction is within a

certain amount and have the

decisions subsequently submitted to

and ratified by the next Board of

Directors meeting:

I. Acquisition or disposal of

equipment for business use or its

right-of-use assets.

II. Acquisition or disposal of real

property right-of-use assets for

business use.


8.9.2 Evaluate the reasonableness of the

transaction costs.

(I) The Company that acquires real

property from a related party

shall evaluate the

reasonableness of the

transaction costs by the

following means:

1. Based upon the related party's

transaction price plus

necessary interest on funding

and the costs to be duly borne

by the buyer. "Necessary

interest on funding" is

imputed as the weighted

average interest rate on

borrowing in the year the

company purchases the

Evaluate the reasonableness of the

transaction costs.

(I) The Company that acquires real

property or its right-of-use

assets from a related party shall

evaluate the reasonableness of

the transaction costs by the

following means:

1. Based upon the related party's

transaction price plus

necessary interest on funding

and the costs to be duly borne

by the buyer. "Necessary

interest on funding" is

imputed as the weighted

average interest rate on

borrowing in the year the

company purchases the

Revision in

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law

- 54 -


property; provided, it may not

be higher than the maximum

non-financial industry lending

rate announced by the

Ministry of Finance.

2. Total loan value appraisal

from a financial institution

where the related party has

previously created a mortgage

on the property as security for

a loan; provided, the actual

cumulative amount loaned by

the financial institution shall

have been 70 percent or more

of the financial institution's

appraised loan value of the

property and the period of the

loan shall have been 1 year or

more. However, this shall not

apply where the financial

institution is a related party of

one of the transaction

counterparties.

(II) Where land and structures

thereupon are combined as a

single property purchased in one

transaction, the transaction costs

for the land and the structures

may be separately appraised in

accordance with either of the

means listed in the preceding

paragraph.

(III) The Company that acquires real

property from a related party

and appraises the cost of the real

property in accordance with the

Subparagraph 1 and 2 of the

Article 8.9.2and shall also

engage a CPA to check the

appraisal and render a specific

opinion.

(IV) Where the Company acquires

property; provided, it may not

be higher than the maximum

non-financial industry lending

rate announced by the

Ministry of Finance.

2. Total loan value appraisal

from a financial institution

where the related party has

previously created a mortgage

on the property as security for

a loan; provided, the actual

cumulative amount loaned by

the financial institution shall

have been 70 percent or more

of the financial institution's

appraised loan value of the

property and the period of the

loan shall have been 1 year or

more. However, this shall not

apply where the financial

institution is a related party of

one of the transaction

counterparties.

(II) Where land and structures

thereupon are combined as a

single property purchased or

leased in one transaction, the

transaction costs for the land

and the structures may be

separately appraised in

accordance with either of the

means listed in the preceding

paragraph.

(III) The Company that acquires real


assets from a related party and

appraises the cost of the real

property and its right-of-use

assets in accordance with the

Subparagraph 1 and 2 of the

Article 8.9.2 and shall also

engage a CPA to check the

appraisal and render a specific

opinion.

(IV) Where the Company acquires

- 55 -


real property from a related

party and one of the following

circumstances exists, the

acquisition shall be conducted in

accordance with Article 8.9.1,

and the Subparagraph1, 2, and

3do not apply.

1. The related party acquired the

real property through

inheritance or as a gift.

2. More than five years will

have elapsed from the time

the related party signed the

contract to obtain the real

property to the signing date

for the current transaction.

3. The real property is acquired

through signing of a joint

development 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.


assets from a related party and

one of the following

circumstances exists, the

acquisition shall be conducted in

accordance with Article 8.9.1,

and Subparagraphs 1, 2, and 3

do not apply.

1. The related party acquired the

real property or its right-of-

use assets through inheritance

or as a gift.

2. More than five years will

have elapsed from the time

the related party signed the

contract to obtain the real


assets to the signing date for

the current transaction.

3. The real property is acquired

through signing of a joint

development 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 real property right-of-use

assets for business use are

acquired by the Company

with its parent company or

subsidiaries, or by its

subsidiaries which directly or

indirectly holds 100 percent

of the issued shares or

authorized capital.

8.9.3 The Company that acquires real

property from a related party, when

the results of the Company's

appraisal conducted in accordance

with the Article 8.9.2 are uniformly

lower than the transaction price, the

matter shall be handled in

compliance with the Article 8.9.4.

However, where the following

The Company that acquires real

property from a related party, when

the results of the Company's

appraisal conducted in accordance

with the Article 8.9.2 are uniformly

lower than the transaction price, the

matter shall be handled in

compliance with the Article 8.9.4.

However, where the following

Revision in

accordance

with the

law

- 56 -


circumstances exist, objective

evidence has been submitted and

specific opinions on reasonableness

have been obtained from a

professional real property appraiser

and a CPA have been obtained, this

restriction shall not apply:

(I) Where the related party acquired

undeveloped land or leased land

for development, it may submit

proof of compliance with one of

the following conditions:

1. Where undeveloped land is

appraised in accordance with

the means in the preceding

Article, and structures

according to the related party's

construction cost plus

reasonable construction profit

are valued in excess of the

actual transaction price. The

"Reasonable construction

profit" shall be deemed the

average gross operating profit

margin of the related party's

construction division over the

most recent 3 years or the

gross profit margin for the

construction industry for the

most recent period as

announced by the Ministry of

Finance, whichever is lower.

2. Completed transactions by

unrelated parties within the

preceding year involving other

floors of the same property or

neighboring or closely valued

parcels of land, where the land

area and transaction terms are

similar after calculation of

reasonable price discrepancies

in floor or area land prices in

accordance with standard

property market sale.


circumstances exist, objective

evidence has been submitted and

specific opinions on reasonableness

have been obtained from a

professional real property appraiser

and a CPA have been obtained, this

restriction shall not apply:

(I) Where the related party acquired

undeveloped land or leased land

for development, it may submit

proof of compliance with one of

the following conditions:

1. Where undeveloped land is

appraised in accordance with

the means in the preceding

Article, and structures

according to the related party's

construction cost plus

reasonable construction profit

are valued in excess of the

actual transaction price. The

"Reasonable construction

profit" shall be deemed the

average gross operating profit

margin of the related party's

construction division over the

most recent 3 years or the

gross profit margin for the

construction industry for the

most recent period as

announced by the Ministry of

Finance, whichever is lower.




floors of the same property or


parcels of land, where the land

area and transaction terms are

similar after calculation of

reasonable price discrepancies

in floor or area land prices in


property market sale or leasing

practices.

- 57 -




floors of the same property,

where the land area and

transaction terms are similar

after calculation of reasonable

price discrepancies in floor in


property market sale.

(II) Where the Company acquiring

real property from a related party

provides evidence that the terms

of the transaction are similar to

the terms of completed

transactions involving


parcels of land of a similar size

by unrelated parties within the

preceding year. Completed



parcels of land in the preceding

paragraph in principle refers to

parcels on the same or an

adjacent block and within a

distance of no more than 500

meters or parcels close in

publicly announced current

value; transactions involving

similarly sized parcels in

principle refers to transactions

completed by unrelated parties

for parcels with a land area of no

less than 50 percent of the

property in the planned

transaction; within the preceding

year refers to the year preceding

the date of occurrence of the

acquisition of the real property.

(II) Where the Company acquiring


assets by leasing from a related

party provides evidence that the

terms of the transaction are

similar to the terms of completed



parcels of land of a similar size

by unrelated parties within the

preceding year. Completed



parcels of land in the preceding

paragraph in principle refers to

parcels on the same or an

adjacent block and within a

distance of no more than 500

meters or parcels close in

publicly announced current

value; transactions involving

similarly sized parcels in

principle refers to transactions

completed by unrelated parties

for parcels with a land area of no

less than 50 percent of the

property in the planned

transaction; within the preceding

year refers to the year preceding

the date of occurrence of the

acquisition of the real property or

its right-of-use assets.

8.9.4 Where the Company acquires real

property from a related party and the

results of appraisals conducted in

accordance with Article 8.9.2 and

Where the Company acquires real


from a related party and the results of

appraisals conducted in accordance

Revision in

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law

- 58 -


8.9.3 are uniformly lower than the

transaction price, the following steps

shall be taken:

(I) A special reserve shall be set

aside in accordance with Article

41, Paragraph 1 of the Securities

and Exchange Act against the

difference between the real

property transaction price and

the appraised cost, and may not

be distributed or used for capital

increase or issuance of bonus

shares. Where a public company

uses the equity method to

account for its investment in the

Company, then the special

reserve called for under Article


and Exchange Act shall be set

aside pro rata in a proportion

consistent with the share of

public company's equity stake in

the Company.

(II) Actions taken pursuant to the

Subparagraph 1 shall be reported

to a shareholders’ meeting, and

the details of the transaction shall

be disclosed in the annual report

and any investment prospectus.

with Articles 8.9.2 and 8.9.3 are

uniformly lower than the transaction

price, the following steps shall be

taken:

(I) A special reserve shall be set

aside in accordance with Article

41, paragraph 1 of the Securities

and Exchange Act against the

difference between the real


assets transaction price and the

appraised cost, and may not be

distributed or used for capital

increase or issuance of bonus

shares. Where a public company

uses the equity method to

account for its investment in the

Company, then the special

reserve called for under Article


and Exchange Act shall be set

aside pro rata in a proportion

consistent with the share of

public company's equity stake in

the Company.

(II) Where an audit committee has

been established, the preceding

part of this subparagraph shall

apply mutatis mutandis to the

Independent Directors of the

Audit Committee.

(III) Actions taken pursuant to the

preceding two subparagraphs

shall be reported to a

shareholders meeting, and the

details of the transaction shall be

disclosed in the annual report

and any investment prospectus.

8.9.5 The Company that has set aside a

special reserve under Article 8.9.4

Subparagraph 1 may not utilize the

special reserve until it has recognized

a loss on decline in market value of

the assets it purchased, or they have

been disposed of, or adequate

The company that has set aside a

special reserve under the Article

8.9.4 Subparagraph 1 may not utilize

the special reserve until it has

recognized a loss on decline in

market value of the assets it

purchased or leased at a premium, or

Revision in

accordance

with the

law

- 59 -


compensation has been made, or the

status quo ante has been restored, or

there is other evidence confirming

that there was nothing unreasonable

about the transaction, and the

securities competent authority has

given its consent.

they have been disposed of, or the

leasing contract has been terminated,

or adequate compensation has been

made, or the status quo ante has been

restored, or there is other evidence

confirming that there was nothing

unreasonable about the transaction,

and the securities competent

authority has given its consent.

8.9.6 When a public company obtains real

property from a related party, it shall

also comply with the Article 8.9.4

and 8.9.5 if there is other evidence

indicating that the acquisition was

not an arm’s length transaction.

When a public company obtains real


from a related party, it shall also

comply with the Article 8.9.4 and

8.9.5 if there is other evidence

indicating that the acquisition was

not an arm’s length transaction.

Revision in

accordance

with the

law

8.10.3 Regular evaluation methods and the

handling of irregular circumstances.

(I) Derivatives trading positions held

shall be evaluated at least once

per week; however, positions for

hedge trades required by business

shall be evaluated at least twice

per month. Evaluation reports

shall be submitted to senior

management personnel authorized

by the Board of Directors.

Regular evaluation methods and the

handling of irregular circumstances.

(I) Derivatives trading positions held

shall be evaluated at least once

per week; however, positions for

hedge trades required by business

shall be evaluated at least twice

per month. Evaluation reports

shall be sent to senior

management personnel authorized

by the Board of Directors.

Text

revision

8.11.4 The date of Board of Directors

meeting and shareholders’ meeting

(Omitted)

Where any of the companies

participating in a merger, demerger,

acquisition, or transfer of another

company's shares is neither listed on

an exchange nor has its shares traded

on an OTC market, the company(s)

so listed or traded shall sign an

agreement with such a company

whereby the latter is required to

abide by the provisions of paragraphs

3 and 4.

The date of Board of Directors

meeting and shareholders’ meeting

(Omitted)

Where any of the companies

participating in a merger, demerger,

acquisition, or transfer of another

company's shares is neither listed on

an exchange nor has its shares traded

on an OTC market, the company(s)

so listed or traded shall sign an

agreement with such a company

whereby the latter is required to

abide by the provisions of the

preceding two paragraphs.

Text

revision

8.13.1 Items to declare and Standards

Under any of the following

circumstances, a public company

Items to declare and Standards

Under any of the following

circumstances, a public company

Revision in

accordance

with the

- 60 -


acquiring or disposing of assets shall

publicly announce and report the

relevant information on the securities

competent authority 's designated

website in the appropriate format as

prescribed by regulations within two

days counting inclusively from the

date of occurrence of the event:

(I) Acquisition or disposal of real

property from or to a related

party, or acquisition or disposal

of assets other than real property

from or to a related party where

the transaction amount reaches

20 percent or more of paid-in

capital, 10 percent or more of

the company's total assets, or

NT$300 million or more.

Provided, this shall not apply to

trading of government bonds or

bonds under repurchase and

resale agreements, or

subscription or redemption of

money market funds issued by

domestic securities investment

trust enterprises.

(II) Mergers and Consolidations,

Splits, Acquisitions, and

Assignment of Shares

(III) Losses from derivatives trading

reaching the limits on aggregate

losses or losses on individual

contracts set out in the

procedures adopted by the

company.

(IV) The type of acquisition or

disposal of assets is equipment

for business use, and the

transaction counterparty is not a


amount meets any of the

following criteria:

acquiring or disposing of assets shall

publicly announce and report the

relevant information on the securities

competent authority's designated

website in the appropriate format as

prescribed by regulations within two

days counting inclusively from the

date of occurrence of the event:

(I) Acquisition or disposal of real


assets from or to a related party,

or acquisition or disposal of

assets other than real property or

its right-of-use assets from or to

a related party where the



capital, 10 percent or more of

the Company's total assets, or


Provided, this shall not apply to

trading of domestic government

bonds or bonds under

repurchase and resale

agreements, or subscription or

redemption of money market

funds issued by domestic

securities investment trust

enterprises.

(II) Mergers and Consolidations,

Splits, Acquisitions, and

Assignment of Shares

(III) Losses from derivatives trading

reaching the limits on aggregate

losses or losses on individual

contracts set out in the

procedures adopted by the

company.

(IV) Acquisition or disposal of

equipment for business use or its

the right-of-use asset, and its

transaction counterparty is not a


amount meets one of the

following criteria:

law

- 61 -


1. Where paid-in capital is less

than NT$10 billion, the



2. Where paid-in capital is

NT$10 billion or more, the


NT$1 billion or more.

(V) Acquisition or disposal by a

public company in the

construction business of real

property or right-of-use assets

thereof for construction use,

and furthermore the transaction

counterparty is not a related

party, and the transaction

amount reaches NT$500

million.

(VI) Where land is acquired under an

arrangement on engaging

others to build on the

company's own land, engaging

others to build on rented land,

joint construction and

allocation of housing units,


allocation of ownership

percentages, or joint

construction and separate sale,

and the amount the Company

expects to invest in the

transaction reaches NT$500

million.

1. Where paid-in capital is less

than NT$10 billion, the



2. Where paid-in capital is

NT$10 billion or more, the


NT$1 billion or more.

(V) Acquisition or disposal by a

public company in the

construction business of real

property or right-of-use assets

thereof for construction use,



party, and the transaction

amount reaches NT$500

million; among such cases, if

the public company has paid-in

capital of NT$10 billion or

more, and it is disposing of real

property from a completed

construction project that it

constructed itself, and

furthermore the transaction


party, then the threshold shall

be a transaction amount

reaching NT$1 billion or more.

(VI) Where land is acquired under an

arrangement on engaging

others to build on the

Company's own land, engaging

others to build on rented land,


allocation of housing units,


allocation of ownership

percentages, or joint

construction and separate sale,



party, and the amount the

company expects to invest in

the transaction reaches NT$500

- 62 -


(VII) Where an asset transaction

other than any of those referred

to in the preceding six

subparagraphs, a disposal of

receivables by a financial

institution, or an investment in

the mainland China area

reaches 20 percent or more of

paid-in capital or NT$300

million. Provided, this shall not

apply to the following

circumstances:

1. Trading of government

bonds.

2. Where done by professional

investors—securities trading

on securities exchanges or

domestic or overseas OTC

markets, or subscription of

ordinary corporate bonds or

general bank debentures

without equity characteristics

that are offered and issued in

the domestic primary market,

or subscription by a

securities firm of securities

as necessitated by its

undertaking business or as an

advisory recommending

securities firm for an

emerging stock company, in

accordance with the rules of

the Taipei Exchange.

3. Trading of bonds under


agreements, or subscription

or redemption of money

market funds issued by

domestic securities

investment trust enterprises.

The amount of transactions above

million.

(VII) Where an asset transaction

other than any of those referred

to in the preceding six

subparagraphs, a disposal of

receivables by a financial

institution, or an investment in

the mainland China area

reaches 20 percent or more of

paid-in capital or NT$300

million. Provided, this shall not

apply to the following

circumstances:

1. Trading of domestic

government bonds

2. Where done by professional

investors—securities trading

on securities exchanges or

OTC markets, or subscription

of ordinary corporate bonds

or general bank debentures

without equity characteristics

(excluding subordinated

debt) that are offered and

issued in the primary market,

or subscription or redemption

of securities investment trust

funds or futures trust funds,

or subscription by a

securities firm of securities

as necessitated by its

undertaking business or as an

advisory recommending

securities firm for an

emerging stock company, in

accordance with the rules of

the Taipei Exchange.

3. Trading of bonds under


agreements, or subscription

or redemption of money

market funds issued by

domestic securities


The amount of transactions above

- 63 -


shall be calculated as follows:

(I) The amount of any individual

transaction.

(II) The cumulative transaction

amount of acquisitions and

disposals of the same type of

underlying asset with the same

transaction counterparty within

the preceding year.

(III) The cumulative transaction


disposals (cumulative

acquisitions and disposals,

respectively) of real property

within the same development

project within the preceding

year.

(IV) The cumulative transaction




respectively) of the same

security within the preceding

year.

"Within the preceding year" as used

in the preceding paragraph refers to

the year preceding the date of


Items duly announced in accordance

with these Regulations need not be

counted toward the transaction

amount.

shall be calculated as follows:

(I) The amount of any individual

transaction.

(II) The cumulative transaction


disposals of the same type of

underlying asset with the same

transaction counterparty within

the preceding year.

(III) The cumulative transaction

amount of acquisitions or



respectively) of real property or

its right-of-use assets within the

same development project

within the preceding year.

(IV) The cumulative transaction




respectively) of the same

security within the preceding

year.

"Within the preceding year" as used

in the preceding paragraph refers to

the year preceding the date of


Items duly announced in accordance

with these Regulations need not be

counted toward the transaction

amount.

8.14 (III) Information required to be

publicly announced and reported

in accordance with the

provisions of “Regulations

Governing the Acquisition or


Companies” on acquisitions and

disposals of assets by the

Company's subsidiary that is not

itself a public company shall be

reported by the Company. The

20 percent of paid-in capital or

10 percent of total assets

(III) Information required to be

publicly announced and reported

in accordance with the

provisions of “Regulations

Governing the Acquisition and


Companies” on acquisitions and

disposals of assets by the

Company's subsidiary that is not

itself a public company shall be

reported by the Company. The

paid-in capital or total assets

referred to in “Information

Revision in

accordance

with the

law

- 64 -


referred to in “Information

Disclosure” in the “Regulations



Companies” shall be the paid-in

capital or total assets of the

(parent) Company.

Disclosure” of “Regulations



Companies” shall be the paid-in

capital or total assets of the

(parent) Company.

8.16 Implementation and Amendment

The Company shall establish its

procedures for the acquisition or

disposal of assets in accordance with

the provisions of these Regulations.

After these procedures have been

approved by Audit committee and

the board of directors, they shall be

submitted to a shareholders' meeting

for approval; the same applies when

the procedures are amended.

When the Procedures for the


are submitted for discussion by the

Board of Directors pursuant to the

preceding paragraph, the Board of

Directors shall take into full

consideration each independent

director's opinions. If an independent

director objects to or expresses

reservations about any matter, it shall

be recorded in the minutes of the

Board of Directors meeting.

when the Procedures for the


are adopted or amended they shall be

approved by more than half of all

Audit Committee members and

submitted to the Board of Directors

for a resolution.

If approval of more than half of all

Audit Committee members as

required in the preceding paragraph

is not obtained, the Procedures may

be implemented if approved by more

than two-thirds of all directors, and

the resolution of the Audit

Committee shall be recorded in the

Implementation and Amendment

The Company shall establish its

procedures for the acquisition or

disposal of assets in accordance with

the provisions of these Regulations.

After these procedures have been

approved by Audit Committee and

the board of directors, they shall be

submitted to a shareholders' meeting

for approval; the same applies when

the procedures are amended.


Acquisition or Disposal of Assets are

submitted for discussion by the





director's opinions. If an independent

director objects to or expresses

reservations about any matter, it shall

be recorded in the minutes of the



Acquisition or Disposal of Assets are

adopted or amended, they shall be

approved by more than half of all

Audit Committee members and

submitted to the Board of Directors

for a resolution.




is not obtained, the Procedures may





Text

revision

- 65 -


minutes of the Board of Directors

meeting.

The terms "all Audit Committee

members" in Paragraph 3 and "all

directors" in the preceding paragraph

shall be counted as the actual number

of persons currently holding those

positions.

Article 8.16 Paragraph 1, Article 8.4

Paragraph 1, Article 8.10.4

Paragraph 2 are applied to the Audit

Committee.

Article 8.9.4 Paragraph 1,

Subparagraph 2, is applied to the

Independent Directors of the Audit

Committee.


meeting.






positions.

- 66 -


Comparison Table of revisions of article for "Regulations Governing Loaning

of Funds and Making of Endorsements/Guarantees"


3.0 Definition

V. Date of occurrence refers to the

date of transaction contract


Boards of Directors resolutions,

or other date that can confirm the

counterparty and transaction

amount, whichever date is earlier.

Definition

V. Date of occurrence refers to the

date of contract signing, date of

payment, date of Boards of



endorsements or guarantees

counterparty and transaction

amount, whichever date is earlier.

Revision in

accordance

with the

law

5.0 Reference

Article 15 of the Company Act.

These Regulations are promulgated


Securities and Exchange Act and the

Regulations Governing Loaning of

Funds and Making of

Endorsements/Guarantees by Public

Companies pursuant to Order No.


1010029874 of the Financial

Supervisory Commission, Executive

Yuan.

Reference

Article 15 of the Company Act.

These Regulations are promulgated


Securities and Exchange Act and the

Regulations Governing Loaning of

Funds and Making of

Endorsements/Guarantees by Public

Companies pursuant to Order No.


1080304826 of the Financial

Supervisory Commission, Executive

Yuan.

Revision in

accordance

with the

law

8.1.2 Maximum amount of loans permitted

to a single borrower.

1. Where there is an ongoing

business, the amount of individual

financing must not exceed the total

amount of trading within the most

recent 6 months. The “total

amount of trading” is the higher of

the amount of goods purchased or

the amount of goods sold.

2. Where short-term financing

facility is necessary, and the

corporate entity is controlled by

the Company or the investment

ratio by the Company is over 20%,

provided that such financing

amount shall not exceed 40 percent

of the lender's net worth.

Maximum amount of loans permitted

to a single borrower.

1. Where there is an ongoing

business, the amount of individual

financing must not exceed the total

amount of trading within the most

recent 6 months. The “total

amount of trading” is the higher of

the amount of goods purchased or

the amount of goods sold.

2. Where short-term financing

facility is necessary, and the

corporate entity is controlled by

the Company or the investment

ratio by the Company is over 20%,

provided that such financing

amount shall not exceed 40 percent

of the lender's net worth.

Revision in

accordance

with the

law

- 67 -


The restriction in Paragraph 1,

Subparagraph 2 shall not apply to

inter-company loans of funds

between overseas companies in

which the Company holds, directly

or indirectly, 100% of the voting

shares. However, the provisions of

Article 8.1.3, and 8.2 of the

Regulations concerning the setting of

the amount limits and the durations

of loans shall still apply.

The restriction in Paragraph 1,

Subparagraph 2 shall not apply to

inter-company loans of funds

between overseas companies in

which the Company holds, directly

or indirectly, 100 percent of the

voting shares, or the loan of funds to

the Company from overseas

companies in which the Company

holds, directly or indirectly, 100

percent of the voting shares.

However, the provisions of Articles

8.1.3, and 8.2 of the Regulations

concerning the setting of the amount

limits and the durations of loans shall

still apply.

8.16 Information Disclosure Regulations

II. The Company whose loans of

funds reach one of the following

levels shall announce and report such

event within two days commencing

immediately from the date of

occurrence:

1. The aggregate balance of

endorsements/guarantees by the

Company and its subsidiaries

reaches 50 percent or more of the

Company's net worth as stated in

its latest financial statement.

2. The balance of endorsements/

guarantees by the Company and its

subsidiaries for a single enterprise







reaches NT$10 million or more

and the aggregate amount of all

endorsements/guarantees for,

investment of a long-term nature

in, and balance of loans to, such

Information Disclosure Regulations

II. The Company whose loans of

funds reach one of the following

levels shall announce and report such

event within two days commencing

immediately from the date of

occurrence:

1. The aggregate balance of


Company and its subsidiaries




2. The balance of


Company and its subsidiaries for a

single enterprise reaches 20

percent or more of the Company's

net worth as stated in its latest

financial statement.




reaches NT$10 million or more

and the aggregate amount of all

endorsements/guarantees for, book

value of investment using equity

method, and balance of loans to,

Revision in

accordance

with the

law

- 68 -


enterprise reaches 30 percent or

more of public company's net

worth as stated in its latest


4. The amount of new

endorsements/guarantees made by

the Company or its subsidiaries


and reaches 5 percent or more of

the Company's net worth as stated

in its latest financial statement.

Company shall announce and report

on behalf of any subsidiary thereof

that is not a public company of the

Republic of China any matters that

such subsidiary is required to

announce and report pursuant to

Subparagraph 4 of the preceding

paragraph.

such enterprise reaches 30 percent

or more of public company's net

worth as stated in its latest


4. The amount of new

endorsements/guarantees made by

the Company or its subsidiaries


and reaches 5 percent or more of

the Company's net worth as stated

in its latest financial statement.

Company shall announce and report

on behalf of any subsidiary thereof

that is not a public company of the

Republic of China any matters that

such subsidiary is required to

announce and report pursuant to

Subparagraph 4 of the preceding

paragraph.


After this Regulation is resolved by

the audit committee and the Board of

Directors, it shall be presented to the

shareholders’ meeting for approval.

Where there is any director expresses

dissent and it is contained in the

minutes or a written statement, the

company shall submit the dissenting

opinions to each independent director

and for discussion by the

shareholders' meeting. The same

shall apply to any amendments to

these Regulation.

When the Company submits these

Regulations for discussion by the





director's opinions; the independent

directors' opinions specifically

expressing assent or dissent and the

reasons for dissent shall be included

Implementation and Amendment

After this Regulation is resolved by

the audit committee and the Board of

Directors, it shall be presented to the

shareholders’ meeting for approval.

Where there is any director expresses

dissent and it is contained in the

minutes or a written statement, the

Company shall submit the dissenting

opinions to each independent director

and for discussion by the

shareholders' meeting. The same

shall apply to any amendments to

these Regulation.

When the Company submits these

Regulations for discussion by the





director's opinions; the independent

directors' dissenting opinion or

reservations shall be included in the

minutes of the Board of Directors'

Revision in

accordance

with the

law

- 69 -


in the minutes of the board of

directors' meeting. When the

Company submits the matter on the

loaning of funds or

endorsements/guarantees for

discussion by the Board of Directors

pursuant to the preceding paragraph,

the Board of Directors shall take into

full consideration each independent

director's opinion; independent

directors' opinions specifically

expressing assent or dissent and their

reasons for dissent shall be included

in the minutes of the Board of

Directors' meeting.

meeting.

When the Regulations Governing

Loaning of Funds and Making of

Endorsement/Guarantee are adopted

or amended, it shall be approved by

more than half of all Audit

Committee members and submitted

to the Board of Directors for a

resolution.




is not obtained, the procedures may






meeting.






positions.

- 70 -


Director who does anything for him/herself or on behalf of another person that

is within the scope of the Company's business, shall clearly explain such

conduct.

(1) WALSIN LIHWA CORPORATION (WALSIN)

Name of the affiliated companies Title Business items the same or similar

to the Company

WA TUO Green Source Corp. Director International Trade.

(2) Representative of Corporate Director: Mr. Te Cheng, Wen


to the Company

Min Maw Precision Industry Corp. (Min Maw)

Chairman Wholesale of electronic materials, international trade, and wholesale of household appliances.

WA TUO Green Source Corp. Chairman International Trade.

Walsin Info-Electric Corp. (Walsin Info-Electric)

Chairman

Electronic parts and components manufacturing, wholesale of electronic materials, retail sale of electronic materials, international trade, electric appliance and audiovisual electric products manufacturing, wholesale of household appliances, retail sale of household appliances, wholesale of computer software, retail sale of computer software.

COM2B CORP. Representative of Corporate

Director

Wholesale of computer software, retail sale of computer software.

Chin-Cherng Construction Co. (Chin-Cherng)

Representative of Corporate

Director

Residence and buildings lease construction and development.

(3) Director: Mr. Hui Chung, Chiang

Name of the affiliated companies Position Business items the same or similar

to the Company

UPC Technology Corporation Representative of Corporate

Director International trade.

(4) Director: Mr. Hsin Che, Chao


to the Company

Taiwan Synthetic Rubber Corp. Independent

Director International trade.

- 71 -

Information on Investments in Mainland China of HannStar Display Corporation

As of December 31, 2018

Investee company name in Mainland

China

Main operation

items

Paid-in Capital (In Thousands

of US$)

Investment method (Note 1)

Investment Amount

(In Thousands of US$)

Shareholding ratio (%)

Hannstar Display (Nanjing) Corp.

Electronic parts and components manufacturing

161,500 (II) 142,450 100

HannSpree Display (Nanjing) Inc.


106,500 (III) 132,360 100

Hannspree Technology (Shanghai) Inc.


16,000 (V) 10,266 100

Hannstar Technology Services (Shenzhen) Inc.

Technical labor services

13,000 (III) 13,000 100

Unit: Amounts are stated in thousands of NT$, except otherwise specified.

Accumulated Investment remitted from Taiwan to Mainland China as

of the end of the term

(Note 3 and 4)

Investment Amounts Authorized by Investment

Commission, MOEA (Note 3 and 4)

Upper Limit on Investment in Mainland China Authorized by Investment Commission,

MOEA.

$10,389,494 $11,068,066 $24,795,821

Note 1:

(I) Investment in Mainland China company through remittance via third-party region.

(II) Investment in Mainland China company through company invested and established by third-party region.

(III) Investment in Mainland China company through reinvestment in existing company in third-party region.

(IV) Direct investment in Mainland China company.

(V) Other methods. (Note 2)

Note 2: Including the Mainland China investment that was obtained indirectly through HannSpirit’s acquisition of the equity of HANNSpree China Holdings Limited. Before the acquisition of equity, the relevant investment amount in Mainland China has been remitted according to regulations.

Note 3: The amount of NTD converted at the historical exchange rate actually remitted.

Note 4: Include the amount of outward remittance and approved investments of the investee company in Mainland China from the years before the sale.

- 72 -


The Board of Directors resolved to repurchase shares and

actual implementation details

Repurchase frequency The fourth time

Date of the Board of Directors’ resolution November 7, 2018

Purpose of Repurchase To maintain the Company’s creditability

and shareholders’ equity

Repurchase period November 8, 2018 to January 7, 2019

Estimated type and number of shares repurchased

100,000,000 common shares

Price range of repurchasing NT$6.00 to NT$10.00 per share

Actual repurchase period November 12, 2018 to January 7, 2019

Actual type and number of shares repurchased 100,000,000 common shares

Actual repurchase amount NT$719,507,338

Reasons for not-wholly repurchased Not applicable

(shares were repurchased in full)

Number of shares cancelled and transferred 100,000,000 shares cancelled

Accumulated number of shares held 0 share

Ratio of accumulated number of shares held to total issued shares (%)

0

- 73 -

Appendix

- 68 -


Shareholdings by all Directors of the 8th Term

I. In accordance with Article 26 of the Securities and Exchange Act and amendment of Order No.

Financial-Supervisory-Securities-III-0970022995 of the FSC issued on May 20, 2008 (the

implementation rules on and audit of the percentage of shareholdings of directors and

supervisors of public companies), the total registered shares owned by all directors shall not be

less than three percent of the total issued shares; the total registered shares owned by all

supervisors shall not be less than 0.3 percent of the total issued shares. The Company has elected

three independent directors and an Audit Committee has been established in accordance with the

Act; thus, the provisions on the minimum percentage requirements for the shareholding of all

supervisors, regulated in Article 26 of the Securities and Exchange Act and the implementation

rules on and audit of the percentage of shareholdings of directors and supervisors of public

companies, shall not apply.

II. As of the book closure date for the 2019 Annual Meeting of Shareholders, all directors'

shareholdings in the Company's shareholders registry are as follows:

April 7, 2019

Position Name Number of shares held on book closure date

Percentage of total issued shares (percent)

Chairman Yu-Chi Chiao 20,533,753 0.66%

Director WALSIN LIHWA CORPORATION (WALSIN)

237,292,180 7.57%

Director Wei-Shin Ma 14,135,970 0.45%

Director Yung-Tai Chen 0 0%

Independent Director

Hui-Chung Chiang 0 0%


Lu-Yun Sun 0 0%


Hsin-Che Chao 0 0%

Shareholdings of All Directors (not including Independent Directors)

271,961,903 8.68%

Shareholdings of All Directors (not including Independent Directors)

271,961,903 8.68%

Note: Total shares issued as of April 7, 2019: 3,133,933,851 common shares.

- 69 -


Procedures for the Acquisition or Disposal of Assets (before revision) 1.0 Purpose

To strengthen asset management and comply with the regulations of public disclosure of

information pursuant to the Company's policies, and for the sake of utilizing adequate resources

and engaging in the most efficient ways of acquisition and disposal of assets, these procedures

are made accordingly.

2.0 Scope of application

The procedures are adopted in accordance with business and financial actual status.

3.0 Definition

I. Derivatives:

Forward contracts, options contracts, futures contracts, leverage contracts, or swap

contracts, whose value is derived from a specified interest rate, financial instrument price,

commodity price, foreign exchange rate, index of prices or rates, credit rating or credit

index, or other variable; or hybrid contracts combining the above contracts; or hybrid

contracts or structured products containing embedded derivatives. The term "forward

contracts" does not include insurance contracts, performance contracts, after-sales service

contracts, long-term leasing contracts, or long-term purchase (sales) contracts.

II. Assets acquired or disposed through mergers, demergers, acquisitions, or transfer of shares

in accordance with the law:

Refers to assets acquired or disposed through mergers, demergers, or acquisitions

conducted under the Business Mergers and Acquisitions Act, Financial Holding Company

Act, Financial Institution Merger Act and other acts, or transfer of shares from another

company through issuance of new shares of its own as the consideration therefor

(hereinafter "transfer of shares") under Article 156-6 of the Company Act.


As defined in the Regulations Governing the Preparation of Financial Reports by Securities

Issuers.


Refers to a real property appraiser or other person duly authorized by law to engage in the

value appraisal of real property or equipment.


Refers to the date of contract signing, date of payment, date of consignment trade, date of

transfer, dates of Board of Directors resolutions, or other date that can confirm the

counterpart and monetary amount of the transaction, whichever date is earlier. Provided,

for investment for which approval of the competent authority is required, the earlier of the

above date or the date of receipt of approval by the competent authority shall apply.


Refers to investments in the mainland China area approved by the Investment Commission

of the Ministry of Economic Affairs or conducted in accordance with the provisions of the

Regulations Governing Permission for Investment or Technical Cooperation in the

Mainland Area.

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VII. The "Most Recent Financial Statements" as stated in this program refers to the financial

statements of the Company that have been publicly certified by a CPA before the

acquisition or disposal of assets.

4.0 Obligation

Each business unit of the Company stands as the competent authority with responsibility for the

rules in this section.

5.0 Reference

These Regulations are promulgated pursuant to Article 36-1 of the Securities and Exchange Act

and amended Regulations Governing the Acquisition and Disposal of Assets by Public

Companies per Order No. Financial-Supervisory-Securities-10600012965 issued on February 9,

2017, and per Order No. Financial-Supervisory-Securities-10600045233 issued on February 13,

2017 of the Financial Supervisory Commission, Executive Yuan (herein referred to as securities

competent authority).

6.0 Notices

None

7.0 Operation process chart

None

8.0 Operation process explanation

8.1 The term "scope of assets" as used in these Procedures includes the following:

(I) Long and short-term investments in stocks, government bonds, corporate bonds,

financial bonds, securities representing interest in a fund, depositary receipts, call

(put) warrants, beneficial interest securities, and asset-backed securities.

(II) Real property (including land, houses and buildings, investment property, and

construction enterprise inventory) and equipment.

(III) Memberships.

(IV) Patents, copyrights, trademarks, franchise rights, and other intangible assets.

(V) Claims of financial institutions (including receivables, bills purchased and

discounted, loans, and overdue receivables).

(VI) Derivatives.

(VII) Assets acquired or disposed of in connection with mergers, demergers, acquisitions,

or transfer of shares in accordance with the law.

(VIII) Other major assets.

8.2 Professional appraisers and their officers, certified public accounts, attorneys, and securities

underwriters that provide public companies with appraisal reports, certified public

accountant's opinions, attorney's opinions, or underwriter's opinions may not be a related

party or de facto related party of any party to the transaction. The sections shall be set forth

in appraisal reports, please refer to the attachment of " Regulations Governing the

Acquisition and Disposal of Assets by Public Companies" published by the securities

competent authority.

8.3 Where a public company acquires or disposes of assets through court auction procedures,

the evidentiary documentation issued by the court may be substituted for the appraisal

report or CPA opinion.

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8.4 When it submits the Operational Procedures for the Acquisition and Disposal of Assets for

discussion by the Board of Directors pursuant to the regulation, the Board of Directors shall

take into full consideration each independent director's opinions; the independent directors'

opinions specifically expressing assent or dissent and the reasons for dissent shall be

included in the minutes of the Board of Directors' meeting.

Where an Audit Committee has been established in accordance with the provisions of the

Act, when major assets and derivatives transactions occur, they shall be approved by more

than half of all Audit Committee members and submitted to the Board of Directors for a

resolution.

If approval of more than half of all Audit Committee members as required in the preceding

paragraph is not obtained, the procedures may be implemented if approved by more than

two-thirds of all directors, and the resolution of the Audit Committee shall be recorded in

the minutes of the Board of Directors meeting.

The terms "all audit committee members" in paragraph 3 and "all directors" in the

preceding paragraph shall be counted as the actual number of persons currently holding

those positions.

8.5 Total amounts of real property and/or securities invested by the Company not for business

use, and limits on securities.

For the Company and its subsidiaries, the individual amounts of real property and or

securities invested by the Company not for business use, and limits on securities, the

regulations are respectively listed as follows:

(I) The total amount of the acquisition for non-business use of property shall not be

greater than 25 percent of stockholders' equity in the latest financial statements of the

Company or its subsidiary respectively.

(II) The total amount of investing securities shall not be over 60 percent of stockholders'

equity in the latest financial statements of the Company or its subsidiary respectively.

(III) The total amount of investing individual securities shall not be over 30 percent of

stockholders' equity in the latest financial statements of the Company or its subsidiary

respectively.

8.6 Disposition Procedures of acquisition or disposal of property, plant and equipment.

8.6.1 Evaluation and operating procedures

The Company shall refer to the publicly announced present value, assessed present

value, and actual transaction prices for real estate in the neighborhood to resolve

trading prices and terms. Either price comparison, bargain process, or tender process

shall be performed for acquisition or disposal of plant or equipment. The reasons for

the acquisition or disposal, the subject matter, counterparts, payment terms, transfer

price, and reference price shall all be reported in accordance with the relevant

operational procedures of the internal control systems of the Company. If the

transaction amount is less than NT$100 million, the Chairman shall decide. If the

amount of a single transaction exceeds NT$100 million, the matter shall be submitted

to the Board of Directors for a resolution. The acquisition or disposal of plant and

equipment shall be conducted in accordance with the Company's “Hierarchical

Responsibility Guidelines.”


When the Company acquires or disposes of property, plant and equipment, the

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Company shall handle in accordance with the aforementioned resolution. The

department which uses that property, plant and equipment and the management

department shall be responsible for implementation.

8.6.3 Appraisal report

In acquiring or disposing of real property, plant and equipment, or where the

transaction amount reaches 20 percent of the Company's paid-in capital or NT$300

million or more, the Company, unless transacting with a domestic government

agency, engaging others to build on its own land, engaging others to build on rented

land, or acquiring or disposing of equipment thereof held for business use, shall

obtain an appraisal report prior to the date of occurrence of the event from a

professional appraiser and shall further comply with the following provisions:

(I) Where due to special circumstances it is necessary to give a limited price,

specified price, or special price as a reference basis for the transaction price, the

transaction shall be submitted for approval in advance by the Board of Directors;

the same procedure shall also be followed whenever there is any subsequent

change to the terms and conditions of the transaction.

(II) Where the transaction amount is NT$1 billion or more, appraisals from two or

more professional appraisers shall be obtained.

(III) Where any one of the following circumstances applies with respect to the

professional appraiser's appraisal results, unless all the appraisal results for the

assets to be acquired are higher than the transaction amount, or all the appraisal

results for the assets to be disposed of are lower than the transaction amount, a

certified public accountant shall be engaged to perform the appraisal in

accordance with the provisions of Statement of Auditing Standards No. 20

published by the ROC Accounting Research and Development Foundation

(ARDF) and render a specific opinion regarding the reason for the discrepancy

and the appropriateness of the transaction price:

1. The discrepancy between the appraisal result and the transaction amount is 20

percent or more of the transaction amount.

2. The discrepancy between the appraisal results of two or more professional

appraisers is 10 percent or more of the transaction amount.

(IV) No more than three months may elapse between the date of the appraisal report

issued by a professional appraiser and the contract execution date. Provided,

where the publicly announced current value for the same period is used and not

more than six months have elapsed, an opinion may still be issued by the original

professional appraiser.

The calculation of the transaction amounts referred to in the preceding paragraph

shall be made in accordance with paragraph 2 herein of the procedure, and

"within the preceding year" as used herein refers to the year preceding the date of

occurrence of the current transaction. Items that have been approved by the

Board of Directors and recognized by the supervisors need not be counted

toward the transaction amount.8.13.1

8.7 Disposition Procedures of acquisition or disposal of securities.


The acquisition or disposal of the Company's securities shall be conducted in

accordance with the relevant operating rules of the Company's internal control

- 73 -

system. The acquisition or disposal of securities that have been traded by the

securities exchange or dealer shall be determined based on the prevailing market

price. For acquisition or disposal of securities that are not traded by the securities

exchange or dealers, such cases shall consider the net worth per share, the

profitability and the future development potential or the market interest rate, bond

coupon and debtor credit, etc., and refer to the securities expert opinion and the

current transaction price.

The authorized limits and levels of the Company’s securities acquisition or disposal

are as follows:

(I) Securities for capital movement and application:

1. The Finance Department shall be authorized to handle government bonds,

short-term promissory notes and bonds with trading terms within one year.

2. The domestic and foreign bond funds and domestic and foreign currency funds,

which shall be reported by the Finance Department to the head of the financial

center.

(II) Other securities which are not for capital movement and application, including

government bonds, financial bonds, corporate bonds, depositary receipts, call

(put) warrants, beneficiary securities, and asset-backed securities, and other

securities with equity, shall be reported to the Board of Directors for approval.

However, the Finance Department shall submit a report to the Chairman for

approval under the permission of the Board of Directors within the range of total

investment amount for the whole year. In line with business needs and

compliance with laws and regulations, if the transaction amount is NT$1.5 billion

or less it may be approved by the Chairman and then submitted to the Board of

Directors for retroactive recognition.


The Company's acquisition or disposal of securities shall be approved in accordance with the preceding paragraph about authorizing credit and level regulations first, then implemented by the Finance Department.


Where the Company acquires or disposes of securities, it shall obtain the financial

statements of issuing company that have been publicly certified by a CPA before the

date of occurrence for reference of transaction price, and when the transaction amount

reaches 20 percent or more of paid-in capital or NT$300 million or more, except in

transactions with a domestic government agency, the Company shall engage a

certified public accountant prior to the date of occurrence of the event to render an

opinion on the reasonableness of the transaction price. The CPA shall comply with

the provisions of Statement of Auditing Standards No. 20 published by the ARDF.

This requirement does not apply, however, to publicly quoted prices of securities that

have an active market, or fulfill any of the provided regulations of the Financial

Supervisory Commission (FSC) listed below:

(I) Securities acquired through cash contribution in an incorporation by promotion

or by public offering.

(II) Participation in subscription to an issue of securities issued at face value by an

issuing company.

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(III) Participation in subscription to securities issued by a 100 percent owned

subsidiary that is carrying out a cash capital increase.

(IV) Securities listed and traded on the Taiwan Stock Exchange or the Taipei

Exchange or emerging stocks.

(V) Government bonds, or bonds under repurchase or reverse purchase agreements.

(VI) Onshore or offshore funds.

(VII) TWSE or TPEx listed stocks acquired or disposed of in accordance with the

TWSE or TPEx rules governing the purchase of listed securities by reverse

auction or rules governing the auction of listed securities.

(VIII) Participation in subscription to shares issued by a public company for a cash

capital increase or domestic subscription to corporate bonds (including

financial debentures), with the further requirement that the securities acquired

are not privately placed securities.

(IX) Subscription to a fund before the establishment of the fund in accordance with

Article 11, paragraph 1 of the Securities Investment Trust and Consulting Act

and the 2004 Order No. Financial-Supervisory-Securities-IV-0930005429 of

the FSC.

(X) Subscription to or redemption of a domestic privately placed fund, provided

that the trust agreement for the fund specifies an investment strategy in which,

aside from securities margin transactions and open positions held in securities-

related products, the investment scope of the remaining portion is the same as

that of a publicly offered fund.


shall be made in accordance with paragraph 2 herein of the procedure, and "within the

preceding year" as used herein refers to the year preceding the date of occurrence of

the current transaction. Items that have been approved by the Board of Directors and

recognized by the supervisors need not be counted toward the transaction amount.

8.8 The Procedures of Acquisitions or Disposals of Memberships or Intangible Assets


Where the Company acquires or disposes of intangible assets such as memberships,

patents, copyrights, trademark rights, franchises, etc., they shall be complied with the

Company's related regulations of Internal Control Systems. When the Company

intends to acquire or dispose of memberships, it shall make an analysis report based

on actual business needs, and determine payment terms as well as price in accordance

with fair market value. If the transaction is NT$5 million or less, it shall be subject to

approval by the Chairman; if the transaction amount is NT$5 million (inclusive) or

more, it shall be reported to the Board of Directors. When the Company intends to

acquire or dispose of Intangible assets, it shall make an analysis report based on

evaluation report made by experts, or determine payment terms as well as price in

accordance with fair market value. If the transaction amount is NT$50 million

(inclusive) or less, it shall be approved by the Chairman; if the transaction amount

reaches NT$50 million or more, it shall be reported to the Board of Directors.


When the Company intends to acquire or dispose of memberships or intangible

assets, the execution unit shall submit to the preceding level of authority for approval,

- 75 -

and it shall be executed by Legal Affairs, the Financial Department, or the

Administrative Department.


Where the Company acquires or disposes of memberships or intangible assets and the

transaction amount reaches 20 percent or more of paid-in capital or NT$300 million

or more, except in transactions with a domestic government agency, the Company

shall engage a certified public accountant prior to the date of occurrence of the event

to render an opinion on the reasonableness of the transaction price; the CPA shall

comply with the provisions of Statement of Auditing Standards No. 20 published by

the ARDF.


shall be made in accordance with paragraph 2 herein of the procedure, and "within the

preceding year" as used herein refers to the year preceding the date of occurrence of

the current transaction. Items that have been approved by the Board of Directors and

recognized by the supervisors need not be counted toward the transaction

amount.8.13.1

8.9 Disposition Procedures of Related Party Transactions.

When a public company engages in any acquisition or disposal of assets from or to a related

party, in addition to ensuring that the necessary resolutions are adopted and the

reasonableness of the transaction terms is appraised in compliance with Articles 8.6, 8.7,

and 8.8, it still needs to conduct the preceding items in accordance with the regulations

listed below: If the transaction amount reaches 10 percent or more of the Company's total

assets, the Company shall also obtain an appraisal report from a professional appraiser or a

CPA's opinion in compliance with the regulations stipulated in 8.7.3 and 8.8.3.8.6.3

The calculation of the transaction amounts referred to in the preceding paragraph shall be

made in accordance with paragraph 2 herein of the procedure, and "within the preceding

year" as used herein refers to the year preceding the date of occurrence of the current

transaction. Items that have been approved by the Board of Directors and recognized by the

supervisors need not be counted toward the transaction amount.8.13.1

When judging whether a transaction counterparty is a related party, in addition to legal

formalities, the substance of the relationship shall also be considered.

8.9.1 Resolution and content of proposals

When the Company intends to acquire or dispose of real property from a related

party, or when it intends to acquire or dispose of assets other than real property from

a related party, and the transaction amount reaches 20 percent or more of paid-in

capital, 10 percent or more of the Company's total assets, or NT$300 million or more,

except in trading of domestic government bonds or bonds under repurchase and resale

agreements, or subscription or redemption of money market funds issued by domestic

securities investment trust enterprises, the Company may not proceed to enter into a

transaction contract or make a payment until the following matters have been

recognized by the Audit Committee and approved by the Board of Directors:

(I) The purpose, necessity and anticipated benefit of the acquisition or disposal of

assets.

(II) The reason for choosing the related party as a transaction counterparty.

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(III) With respect to the acquisition of real property from a related party, information

regarding appraisal of the reasonableness of the preliminary transaction terms

in accordance with the Article 8.9.2 and 8.9.3.

(IV) The date and price at which the related party originally acquired the real

property, the original transaction counterparty, and that transaction

counterparty's relationship to the Company and the related party.

(V) Monthly cash flow forecasts for the year commencing from the anticipated

month of signing of the contract, and evaluation of the necessity of the

transaction, and reasonableness of the funds utilization.

(VI) An appraisal report from a professional appraiser or a CPA's opinion obtained

in compliance with the regulation stipulated in 8.9.

(VII) Restrictive covenants and other important stipulations associated with the

transaction.

(VIII) The calculation of the transaction amounts referred to in the preceding

paragraph shall be made in accordance with paragraph 2 herein of the

procedure, and "within the preceding year" as used herein refers to the year

preceding the date of occurrence of the current transaction. Items that have

been approved by the Board of Directors and recognized by the supervisors

need not be counted toward the transaction amount.

When the Company intends to acquire or dispose of machinery and equipment for

business use between parent company or subsidiaries, the Company's Board of

Directors may pursuant to the Article 8.6of the Procedures authorize Chairman of the

Board to decide such matters when the transaction is within a certain amount and

have the decisions subsequently submitted to and ratified by the next Board of

Directors meeting.

When a matter is submitted for discussion by the Board of Directors pursuant to

Article 1 of the Company, the Board of Directors shall take into full consideration

each independent director's opinions. If an independent director objects to or

expresses reservations about any matter, it shall be recorded in the minutes of the


When the Company acquires or disposes property, or other assets outside of property

from a related party, this shall first be approved by more than half of all Audit

Committee members and then submitted to the Board of Directors for a resolution.

If approval of more than half of all Audit Committee members as required in the

preceding paragraph is not obtained, the procedures may be implemented if approved

by more than two-thirds of all directors, and the resolution of the Audit Committee

shall be recorded in the minutes of the Board of Directors meeting.

The terms "all Audit Committee members" in paragraph 5 and "all directors" in the

preceding paragraph shall be counted as the actual number of persons currently

holding those positions.

8.9.2 Evaluate the reasonableness of the transaction costs.

(I) The Company that acquires real property from a related party shall evaluate the

reasonableness of the transaction costs by the following means:

1. Based upon the related party's transaction price plus necessary interest on

funding and the costs to be duly borne by the buyer. "Necessary interest on

- 77 -

funding" is imputed as the weighted average interest rate on borrowing in the

year the Company purchases the property; provided, it may not be higher than

the maximum non-financial industry lending rate announced by the Ministry

of Finance.

2. Total loan value appraisal from a financial institution where the related party

has previously created a mortgage on the property as security for a loan;

provided, the actual cumulative amount loaned by the financial institution

shall have been 70 percent or more of the financial institution's appraised loan

value of the property and the period of the loan shall have been one year or

more. However, this shall not apply where the financial institution is a related

party of one of the transaction counterparties.

(II) Where land and structures thereupon are combined as a single property

purchased in one transaction, the transaction costs for the land and the structures

may be separately appraised in accordance with either of the means listed in the

preceding paragraph.

(III) The Company that acquires real property from a related party and appraises the

cost of the real property in accordance with Subparagraph 1 and 2 of the Article

8.9.2 and shall also engage a CPA to check the appraisal and render a specific

opinion.

(IV) Where the Company acquires real property from a related party and one of the

following circumstances exists, the acquisition shall be conducted in accordance

with Article 8.9.1, and the Subparagraph1, 2, and 3 do not apply.:

1. The related party acquired the real property through inheritance or as a gift.

2. More than five years will have elapsed from the time the related party signed

the contract to obtain the real property to the signing date for the current

transaction.

3. The real property is acquired through the signing of a joint development

contract with a related party, or through engaging a related party to build the

real property, either on the Company's own land or on rented land.

8.9.3 The Company that acquires real property from a related party, when the results of the

Company's appraisal conducted in accordance with the Article 8.9.2 are uniformly

lower than the transaction price, the matter shall be handled in compliance with the

Article 8.9.4. However, where the following circumstances exist, objective evidence

has been submitted and specific opinions on reasonableness have been obtained from

a professional real property appraiser and a CPA have been obtained, this restriction

shall not apply:

(I) Where the related party acquired undeveloped land or leased land for

development, it may submit proof of compliance with one of the following

conditions:

1. Where undeveloped land is appraised in accordance with the means in the

preceding Article, and structures according to the related party's construction

cost plus reasonable construction profit are valued in excess of the actual

transaction price. "Reasonable construction profit" shall be deemed the

average gross operating profit margin of the related party's construction

division over the most recent three years or the gross profit margin for the

construction industry for the most recent period as announced by the Ministry

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of Finance, whichever is lower.

2. Completed transactions by unrelated parties within the preceding year

involving other floors of the same property or neighboring or closely valued

parcels of land, where the land area and transaction terms are similar after

calculation of reasonable price discrepancies in floor or area land prices in

accordance with standard property market sale.

3. Completed transactions by unrelated parties within the preceding year

involving other floors of the same property, where the land area and

transaction terms are similar after calculation of reasonable price discrepancies

in floors in accordance with standard property market sales.

(II) Where the Company acquiring real property from a related party provides

evidence that the terms of the transaction are similar to the terms of completed

transactions involving neighboring or closely valued parcels of land of a similar

size by unrelated parties within the preceding year. Completed transactions

involving neighboring or closely valued parcels of land in the preceding

paragraph in principle refers to parcels on the same or an adjacent block and

within a distance of no more than 500 meters or parcels close in publicly

announced current value. Transactions involving similarly sized parcels in

principle refers to transactions completed by unrelated parties for parcels with a

land area of no less than 50 percent of the property in the planned transaction.

Within the preceding year refers to the year preceding the date of occurrence of

the acquisition of the real property.

8.9.4 Where a public company acquires real property from a related party and the results of

appraisals conducted in accordance with the Article 8.9.2 and 8.9.3 are uniformly

lower than the transaction price, the following steps shall be taken:

(I) A special reserve shall be set aside in accordance with Article 41, paragraph 1 of

the Securities and Exchange Act against the difference between the real property

transaction price and the appraised cost, and may not be distributed or used for

capital increase or issuance of bonus shares. Where a public company uses the

equity method to account for its investment in the Company, then the special

reserve called for under Article 41, paragraph 1 of the Securities and Exchange

Act shall be set aside pro rata in a proportion consistent with the share of the

public company's equity stake in the Company.

(II) Actions taken pursuant to the preceding subparagraph shall be reported to a

shareholders’ meeting, and the details of the transaction shall be disclosed in the

annual report and any investment prospectus.

8.9.5 The Company that has set aside a special reserve under the Article 8.9.4

Subparagraph 1 such that it may not utilize the special reserve until it has recognized

a loss on a decline in market value of the assets it purchased, or they have been

disposed of, or adequate compensation has been made, or the status quo ante has been

restored, or there is other evidence confirming that there was nothing unreasonable

about the transaction, and the FSC has given its consent.

8.9.6 When a public company obtains real property from a related party, it shall also

comply with the Article 8.9.4 and 8.9.5 if there is other evidence indicating that the

acquisition was not an arm’s length transaction.

8.10 Disposition Procedures of acquisition or disposal of derivative products.

8.10.1 Trading principles and policies

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(I) Trading products

The scope of the Company's acquisition or disposal of derivatives is limited to

delivery forwards, currency options, and interest rate or exchange rate swaps.

If it is necessary to obtain or dispose of other derivatives, this shall first be

approved by the Chairman before the trade.

(II) Hedging strategies

The acquisition or disposal of derivative products of the Company are mainly

used for hedging purposes to limit the Company’s net exposure after internal

netting of income against expense, and assets against liabilities in terms of

timing, amount and currency type. Transactions involving financial

derivatives need to be assured as for hedging purpose. In addition, we shall

choose the companies which have frequent business relationships with the

Company as transaction counterparties to avoid credit risk. The transactions

must be clearly defined as hedging or financial transactions as a basis for

accounting purposes.

(III) Transaction Type

1. Hedging transactions:

The purpose of hedging transactions is for the Company to avoid exchange

risk arising from its business or assets/liabilities, as well as interest rate

risk.

2. Financial transactions:

Except for the above-mentioned hedging transactions, the purpose of

financial transactions is to earn a profit.

(IV) Division of Responsibilities

For the Company's acquisition or disposal of derivative products, the division

of responsibilities of each department is as follows:

1. Trading personnel:

As derivative trading execution personnel, they shall be responsible for the

information and collection of derivative products and relevant laws, and the

design and risk disclosure of the hedging strategy, and provide hedging

proposals based on the Company's operations strategies. Trading personnel

shall be assigned by the financial center supervisor. Assignment and

dismissal of trading personnel shall be notified to transaction counterparties

before the effective date to maintain the Company's corporate interests.

2. Personnel who confirm the transaction:

Responsible for handling transactions with transaction counterparties and

inform Finance Department to process accounting affairs.

3. Settlement personnel:

Responsible for derivatives trading transactions and regularly reviews cash

flow status to ensure that the transaction contract can be settled on

schedule.

4. Account personnel:

Derivative transactions shall be in compliance with IAS 14. Other

derivative transactions without specific regulations to follow shall comply

with the opinion of the Company's CPA. Further, related transactions and

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income/loss should be on the fair presentation of the Company's financial

reports. Finally, public announcement shall be made with reporting of the

relevant information in the appropriate format as prescribed by the

regulations.

(V) Authorized amount and management level:

The table of authorized amount limits is set to be approved by the Chairman

and submitted to the Board of Directors for approval based on the changes in

the Company's growth and risk positions. If there is any amendment, the

Chairman must approve first. To enable the transaction counterparties to

coordinate with the Company’s supervision and management, the table of

authorized amounts and management levels shall be communicated to the

transaction counterparties.

1. The authorized amount limit (equivalent to US$) and levels of the hedging

transaction are as follows:

Authorized management level

Single Transaction Amount

Accumulated Transaction Amount Weekly

Head of Financial Center

US$30 million Positions in foreign currency assets or liabilities that are not held at the time of trading

Finance Director US$10 million

Positions in foreign currency assets or liabilities that are not held over two-thirds at the time of trading.

Trading personnel US$5 million

Positions in foreign currency assets or liabilities that are not held over half at the time of trading.

2. The authorized amount and levels of financial transactions are as follows:

Authorized management level

Single Transaction Amount

Net position

Head of Financial Center

US$20 million US$20 million

Finance Director US$10 million US$10 million

Trading personnel US$5 million US$5 million

(VI) Total amount of derivatives contracts and the maximum loss limit

The dollar amount of total contracts outstanding shall not exceed the position

of accounts receivable/ payable or foreign currency assets/ liabilities for the

next six months. The total amount of financial transactions for financial

transactions shall not exceed US$20 million. Once it is over US$20 million, it

shall be submitted to the Board of Directors for approval. However,

substantial positions or financial transaction contracts are exceptions. The

transaction loss limit on the Company's acquisition or disposal of derivative

products is set out below:

1. For hedging transactions established in connection with the Company's

operations, stop-loss points need not be established. However, if there is a

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negative price difference of over 5 percent compared with the market price,

this shall be reported to the head of the financial center to assess whether a

stop-loss point should be established based on the needs of the operating

unit and the expected financial market conditions.

2. Financial transactions shall be set up with a maximum loss limit for each

transaction at 3 percent of the transaction amount. If the maximum loss

limit is reached, the position shall be settled immediately in order to

effectively control the risks, unless approval is given by the head of the

financial center. However, the net loss shall not be more than US$200,000

in the month. If the loss is exceeded, the transactions shall not proceed. If

the net loss of the year reaches US$1 million, the financial transaction shall

be immediately settled.

8.10.2 Risk management

(I) Credit Risk: Credit risk is controlled by restricting the counterparties that the

Company deals with to those who either have banking relationships with the

Company or are internationally renowned and can provide sufficient

information, as well as avoiding the risk of excessive concentration of

trading objects.

(II) Market Price Risk: Market price risk arising from the fluctuations of interest

rates and foreign exchange rates or from other factors shall be closely

monitored and controlled.

(III) Liquidity Risk: Liquidity risk should be controlled by restricting

counterparties to those who have adequate facilities, sufficient information,

and sizable trading capacity and capability to enter into transactions in any

markets around the world.

(IV) Delegation systems and operating procedures set forth herein are employed

to control operating risk.

(V) Legal Risk: Any legal documents in respect to financial derivative

transactions shall first be reviewed by in-house and/or outside legal counsel

before being executed to control legal risk.

(VI) Product risk: Internal trading personnel shall have comprehensive and

accurate professional knowledge for financial products and require

transaction counterparties to fully disclose the risks and avoid the misuse of

financial products.

(VII) Delivery Risk: Authorized traders shall pay attention to the Company's cash

flow and ensure that the cash flow is sufficient for delivery. In addition,

caution should be exercised toward the credit situations of the

corresponding transaction counterparties (banks) at all times.

(VIII) The respective functions of trading, confirmation and settlement should be

performed by different personnel.

(IX) Risk measurement, monitoring, and control personnel shall be assigned to a

different department than the personnel in the preceding subparagraph and

shall report to the Board of Directors or senior executives or supervisors

who are not responsible for trading or hedging position policy-making.

8.10.3 Regular assessment methods and abnormalities solvent

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(I) Derivatives trading positions held shall be evaluated at least once per week.

However, positions for hedge trades required by business shall be evaluated

at least twice per month. Evaluation reports shall be submitted to senior

management personnel authorized by the Board of Directors.

(II) The Board of Directors holds senior executives accountable for the

evaluation, monitoring, and control of risks arising from financial derivative

transactions. The Board of Directors is itself responsible for evaluating the

Finance Department's hedging performance and result on a regular basis to

oversee how well they fit in the Company's overall business and operating

strategies and to review if the associated risks thereof have exceeded the

Company's risk tolerance. Furthermore, it shall regularly evaluate whether

current risk management has been adopted and it shall firmly execute it in

accordance with the transaction procedures formulated by the Company.

(III) Senior executives shall also be involved in the course of supervising trading

and profit-loss circumstances. Once an abnormal situation occurs (such as a

held position has exceeded its loss limit), the senior executives must

immediately report the matter to the Chairman and the Board of Directors and

undertake any actions deemed necessary to correct the situation. Where the

Company has independent directors, an independent director shall be present

at the meeting and express an opinion.

8.10.4 Internal Audit

(I) Internal audit personnel are required to evaluate the suitability of the internal

control system in connection with financial derivative transactions on a

regular basis, to conduct auditing on how well the related departments follow

the Procedures, and to produce reports with trading cycle analysis on a

monthly basis. Should any violation be found, a written report is needed to

notify all independent directors.

(II) Internal audit personnel shall file the auditing report of the preceding

paragraph and the implementing status of annual auditing plans of internal

audits to the SEC before the end of February of next year and also shall report

the improvement situation for any abnormal affairs to the SEC before the end

of May of next year.

8.10.5 The principles of the Board of Directors to supervise and manage

(I) The Board of Directors shall observe the following principles to supervise and

manage matters:

1. Assign senior executives to oversee the supervision and the control of the

risk of derivative transactions at all times.

2. Periodically evaluate whether the results of the derivative transactions

conform to the formulated operational policies and whether the attendant

risk of these transactions is within the capability of the Company.

(II) The senior executive authorized by the Board of Directors shall observe the

following principles to manage the transaction of derivative products:

1. Periodically evaluate whether the risk management procedures currently

being used are suitable and whether they conform with the "Handling

Procedure to Engage in the Transaction of Derivative Products" formulated

by the Company.

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2. Senior executives shall also be involved in the course of supervising trading

and profit-loss circumstances. Once an abnormal situation arises, the senior

executives must immediately report the matter to the Chairman and the

Board of Directors and undertake any actions deemed necessary to correct

the situation. Where the Company has independent directors, an

independent director shall be present at the meeting and express an opinion.

(III) The Company shall report to the soonest meeting of the Board of Directors

after it authorizes the relevant personnel to handle derivatives trading in

accordance with its Procedures for Engaging in Derivatives Trading.

8.10.6 Set up log book

The Company engaging in derivatives trading shall establish a log book in which

details of the types and amounts of derivatives trading engaged in, Board of

Directors approval dates, and the matters required to be carefully evaluated under

paragraph 4 and subparagraph 2 of paragraph 1 of Article 8.10.5, and

subparagraph 1 of paragraph 2 of Article 8.10.5 shall be recorded in detail in the

log book.8.10.3

8.11 Disposition Procedures of Mergers and Consolidations, Splits, Acquisitions, and

Assignment of Shares.


(I) The company that conducts a merger, demerger, acquisition, or transfer of

shares, shall engage a lawyer, a CPA, attorney, or securities underwriter to

cooperatively make an estimated schedule of legal procedure, and organize a

project team to conduct in accordance with legal procedures. Moreover, prior

to convening the Board of Directors to resolve on the matter, it shall engage a

CPA, attorney, or securities underwriter to give an opinion on the

reasonableness of the share exchange ratio, acquisition price, or distribution

of cash or other property to shareholders, and submit it to the Board of

Directors for deliberation and passage. However, the requirement of obtaining

an aforesaid opinion on reasonableness issued by an expert may be exempted

in the case of a merger by a public company of a subsidiary in which it

directly or indirectly holds 100 percent of the issued shares or authorized

capital, and in the case of a merger between subsidiaries in which the public

company directly or indirectly holds 100 percent of the respective

subsidiaries’ issued shares or authorized capital.

(II) The Company participating in a merger, demerger, acquisition, or transfer of

shares shall prepare a public report to shareholders detailing important

contractual content and matters relevant to the merger, demerger, or

acquisition prior to the shareholders’ meeting and include it along with the

expert opinion referred to in Article 1 of the preceding Article when sending

shareholders’ notification of the shareholders’ meeting for reference in

deciding whether to approve the merger, demerger, or acquisition. Provided,

where a provision of another act exempts a company from convening a

shareholders’ meeting to approve the merger, demerger, or acquisition, this

restriction shall not apply. In addition, where the shareholders’ meeting of any

one of the companies participating in a merger, demerger, or acquisition fails

to convene or pass a resolution due to lack of a quorum, insufficient votes, or

other legal restriction, or the proposal is rejected by the shareholders’

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meeting, the companies participating in the merger, demerger or acquisition

shall immediately publicly explain the reason, the follow-up measures, and

the preliminary date of the next shareholders’ meeting.8.11.1

8.11.2 Establishment and alteration of Share exchange ratio or acquisition price:

The Company that conducts a merger, demerger, acquisition, or transfer of shares,

prior to convening the Board of Directors to resolve on the matter, shall engage a

CPA, attorney, or securities underwriter to give an opinion on the reasonableness

of the share exchange ratio, acquisition price, or distribution of cash or other

property to shareholders, and submit it to the shareholders’ meeting. Generally, the

companies participating in a merger, demerger, acquisition, or transfer of shares

may not arbitrarily alter the share exchange ratio or acquisition price unless the

conditions of shares-altering in the contract has been established and disclosed.

The companies participating in a merger, demerger, acquisition, or transfer of

shares alter the share exchange ratio or acquisition price under the below-listed

circumstances:

(I) Cash capital increase, issuance of convertible corporate bonds, or the issuance

of bonus shares, issuance of corporate bonds with warrants, preferred shares

with warrants, stock warrants, or other equity based securities.

(II) An action, such as a disposal of major assets, that affects the Company's

financial operations.

(III) An event, such as a major disaster or major change in technology, that affects

shareholder equity or share price.

(IV) An adjustment where any of the companies participating in the merger,

demerger, acquisition, or transfer of shares from another company buys back

treasury stock.

(V) An increase or decrease in the number of entities or companies participating

in the merger, demerger, acquisition, or transfer of shares.

(VI) Other terms/conditions that the contract stipulates may be altered and that

have been publicly disclosed.

8.11.3 Content of the contract shall be recorded:

The contract for participation by the Company in a merger, demerger, acquisition,

or transfer of shares shall comply with Article 317-1 of the Company Act as well

as Article 22 of the Enterprises Mergers and Acquisitions Act. Furthermore, it

shall also record the following:

(I) Handling of breach of contract.

(II) Principles for the handling of equity-type securities previously issued or

treasury stock previously bought back by any company that is extinguished in

a merger or that is demerged.

(III) The amount of treasury stock participating companies are permitted under law

to buy back after the record date of calculation of the share exchange ratio,

and the principles for handling thereof.

(IV) The manner of handling changes in the number of participating entities or

companies.

(V) Preliminary progress schedule for plan execution, and anticipated completion

date.

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(VI) Scheduled date for convening the legally mandated shareholders’ meeting if

the plan exceeds the deadline without completion, and relevant procedures.

8.11.4 The date of the Board of Directors meeting and shareholders’ meeting:

A company participating in a merger, demerger, or acquisition shall convene a

Board of Directors meeting and shareholders’ meeting on the day of the

transaction to resolve matters relevant to the merger, demerger, or acquisition,

unless another act provides otherwise or the FSC is notified in advance of

extraordinary circumstances and grants consent.

A company participating in a transfer of shares shall call a Board of Directors

meeting on the day of the transaction, unless another act provides otherwise or the

FSC is notified in advance of extraordinary circumstances and grants consent.

When participating in a merger, demerger, acquisition, or transfer of another

company's shares, a company that is listed on an exchange or has its shares traded

on an OTC market shall prepare a full written record of the following information

and retain it for five years for reference:

(I) Basic identification data for personnel:

Including the occupational titles, names, and national ID numbers (or passport

numbers in the case of foreign nationals) of all persons involved in the

planning or implementation of any merger, demerger, acquisition, or transfer

of another company's shares prior to disclosure of the information.

(II) Dates of material events:

Including the signing of any letter of intent or memorandum of understanding,

the hiring of a financial or legal advisor, the execution of a contract, and the

convening of a Board of Directors meeting.

(III) Important documents and minutes:

Including mergers, demergers, acquisitions, and share transfer plans, any

letter of intent or memorandum of understanding, material contracts, and

minutes of Board of Directors meetings.

When participating in a merger, demerger, acquisition, or transfer of another

company's shares, a company that is listed on an exchange or has its shares

traded on an OTC market shall, within two days counting inclusively from the

date of passage of a resolution by the Board of Directors, report (in the

prescribed format and via the Internet-based information system) the

information set out in subparagraphs 1 and 2 of the preceding paragraph to the

FSC for recordation.

Where any of the companies participating in a merger, demerger, acquisition,

or transfer of another company's shares is neither listed on an exchange nor

has its shares traded on an OTC market, the company(s) so listed or traded

shall sign an agreement with such a company whereby the latter is required to

abide by the regulations stipulated in paragraphs 3 and 4.

8.11.5 A written undertaking of confidentiality:

Every person participating in or privy to the plan for merger, demerger,

acquisition, or transfer of shares shall issue a written undertaking of

confidentiality and may not disclose the content of the plan prior to public

disclosure of the information and may not trade, in their own name or under the

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name of another person, in any stock or other equity security of any company

related to the plan for merger, demerger, acquisition, or transfer of shares.

8.11.6 When there are changes in the number of participating companies or main topic:

After public disclosure of the information, if any company participating in the

merger, demerger, acquisition, or share transfer intends further to carry out a

merger, demerger, acquisition, or share transfer with another company, all of the

participating companies shall carry out anew the procedures or legal actions that

had originally been completed toward the merger, demerger, acquisition, or share

transfer. An exception is made where the number of participating companies is

decreased and a participating company's shareholders’ meeting has adopted a

resolution authorizing the Board of Directors to alter the limits of authority; such a

participating company may be exempted from calling another shareholders’

meeting to resolve on the matter anew.

8.11.7 Where any of the companies participating in a merger, demerger, acquisition, or

transfer of shares is not a public company, the public company(s) shall sign an

agreement with the non-public company whereby the latter is required to abide by

the provisions of Article 8.11.4, 8.11.5, and 8.11.6.

8.12 Disposition Procedures of acquisition or disposal of claims of financial institutions.

The Company does not engage in acquisition or disposal of claims of financial

institutions. Afterward, if the Company intends to engage in such activities, it shall

establish its evaluation and operating procedures and report to the Board of Directors for

resolution.

8.13 Public Disclosure of Information Procedure.

8.13.1 Items to declare and standards

Under any of the following circumstances, a public company acquiring or

disposing of assets shall publicly announce and report the relevant information on

the FSC's designated website in the appropriate format as prescribed by

regulations within two days counting inclusively from the date of occurrence of

the event:

(I) Acquisition or disposal of real property from or to a related party, or acquisition

or disposal of assets other than real property from or to a related party where

the transaction amount reaches 20 percent or more of paid-in capital, 10

percent or more of the Company's total assets, or NT$300 million or more.

Provided, this shall not apply to trading of government bonds or bonds under

repurchase and resale agreements, or subscription or redemption of money

market funds issued by domestic securities investment trust enterprises.

(II) Mergers and Consolidations, Splits, Acquisitions, and Assignment of Shares

(III) Losses from derivatives trading reaching the limits on aggregate losses or

losses on individual contracts set out in the procedures adopted by the

Company.

(IV) The type of acquisition or disposal of assets is equipment for business use,

and furthermore the transaction counterparty is not a related party, and the

transaction amount meets any of the following criteria:

1. For a public company whose paid-in capital is less than NT$10 billion, the

transaction amount reaches NT$500 million or more.

2. For a public company whose paid-in capital is NT$10 billion or more, the

- 87 -

transaction amount reaches NT$1 billion or more.

(V) Acquisition or disposal by a public company in the construction business of

real property or right-of-use assets thereof for construction use, and

furthermore the transaction counterparty is not a related party, and the

transaction amount reaches NT$500 million.

(VI) Where land is acquired under an arrangement on engaging others to build on

the Company's own land, engaging others to build on rented land, joint

construction and allocation of housing units, joint construction and allocation

of ownership percentages, or joint construction and separate sale, and the

amount the Company expects to invest in the transaction reaches NT$500

million.

(VII) Where there is an asset transaction other than any of those referred to in the

preceding six subparagraphs, a disposal of receivables by a financial

institution, or an investment in the mainland China area reaches 20 percent

or more of paid-in capital or NT$300 million. Provided, this shall not apply

to the following circumstances:

1. Trading of government bonds.

2. Where done by professional investors, i.e., securities trading on securities

exchanges or domestic or overseas OTC markets, or subscription of

ordinary corporate bonds or general bank debentures without equity

characteristics that are offered and issued in the primary market, or a

subscription by a securities firm of securities as necessitated by its

undertaking business or as an advisory recommending securities firm for

an emerging stock company, in accordance with the rules of the Taipei

Exchange.

3. Trading of bonds under repurchase and resale agreements, or subscription

or redemption of money market funds issued by domestic securities


The amount of transactions above shall be calculated as follows:

(I) The amount of any individual transaction.

(II) The cumulative transaction amount of acquisitions and disposals of the same

type of underlying asset with the same transaction counterparty within the

preceding year.

(III) The cumulative transaction amount of acquisitions and disposals (cumulative

acquisitions and disposals, respectively) of real property within the same

development project within the preceding year.

(IV) The cumulative transaction amount of acquisitions and disposals (cumulative

acquisitions and disposals, respectively) of the same security within the

preceding year.

"Within the preceding year" as used in the preceding paragraph refers to the year

preceding the date of occurrence of the current transaction. Items duly announced

in accordance with these Regulations need not be counted toward the transaction

amount.

8.13.2 The following conditions for public announcement completion and reporting

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transactions which need to be re-announced:

Where any of the following circumstances occurs with respect to a transaction that

the Company has already publicly announced and reported in accordance with the

preceding article, a public report of relevant information shall be made on the

information reporting website designated by the FSC within two days counting

inclusively from the date of occurrence of the event:8.13.1

(I) Change, termination, or rescission of a contract signed in regard to the original

transaction.

(II) The merger, demerger, acquisition, or transfer of shares is not completed by

the scheduled date set forth in the contract.

(III) Change to the originally publicly announced and reported information.

8.13.3 Derivatives trading transactions of the Company shall be publicly announced and

report monthly:

The Company shall compile monthly reports on the status of derivatives trading

engaged in up to the end of the preceding month by the Company and any

subsidiaries that are not domestic public companies and enter the information in

the prescribed format into the information reporting website designated by the FSC

by the 10th day of each month.

8.13.4 When the Company at the time of public announcement makes an error or

omission in an item required by regulations to be publicly announced and so is

required to correct it, all the items shall be again publicly announced and reported

in their entirety within two days counting inclusively from the date of knowing of

such an error or omission.

8.13.5 The Company acquiring or disposing of assets shall keep all relevant contracts,

meeting minutes, log books, appraisal reports and CPA, attorney, and securities

underwriter opinions at the Company, where they shall be retained for five years

except where another act provides otherwise.

8.13.6 According to the information disclosure procedures above, the format of the public

company's transaction is announced according to the "Regulations Governing the

Acquisition and Disposal of Assets by Public Companies" by the competent

authority, or the format prescribed by the securities competent authority to be

reported by the securities competent authority.

8.14 Control procedures of the acquisition or disposal of assets by the subsidiary company and

regulations of information disclosure:

(I) A subsidiary of the Company shall establish its procedures for the acquisition or

disposal of assets in accordance with the provisions of these Regulations. After the

procedures have been approved by the Board of Directors, they shall be submitted to

each supervisor, and then to a shareholders' meeting for approval; the same applies

when the procedures are amended.

(II) If a subsidiary of the Company is a non-public company, it shall establish its

procedures for the acquisition or disposal of assets in accordance with the provisions

of these Regulations. After the procedures have been approved by the Board of

Directors, they shall be submitted to each supervisor; the same applies when the

procedures are amended.

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(III) Information required to be publicly announced and reported in accordance with the

provisions of Regulations Governing the Acquisition or Disposal of Assets by Public

Companies on acquisitions and disposals of assets by the Company's subsidiary that

is not itself a public company shall be reported by the Company. The 20 percent of

paid-in capital or 10 percent of total assets referred to in Regulations Governing the

Acquisition or Disposal of Assets by Public Companies should be paid-in capital or

total assets of the parent company

8.15 Penalties

If the employees of the Company violate the Procedures, the responsible unit shall report

the personnel's unit to the HR Department and be punished based on the severity of the

relevant regulations.


The Company shall establish its procedures for the acquisition or disposal of assets in

accordance with the provisions of these Procedures. After the procedures have been

approved by the Audit Committee and the Board of Directors, they shall be submitted to a

shareholders' meeting for approval; the same applies when the procedures are amended.

Where the position of independent director has been created in accordance with the

provisions of the Act, when the procedures for the acquisition and disposal of assets are

submitted for discussion by the Board of Directors pursuant to the preceding paragraph,

the Board of Directors shall take into full consideration each independent director's

opinions. If an independent director objects to or expresses reservations about any matter,

it shall be recorded in the minutes of the Board of Directors meeting.

Where an Audit Committee has been established in accordance with the provisions of the

Act, when the procedures for the acquisition and disposal of assets are adopted or

amended they shall be approved by more than half of all Audit Committee members and

submitted to the Board of Directors for a resolution.

If approval of more than half of all Audit Committee members as required in the

preceding paragraph is not obtained, the procedures may be implemented if approved by

more than two-thirds of all directors, and the resolution of the Audit Committee shall be

recorded in the minutes of the Board of Directors meeting.

The terms "all audit committee members" in Paragraph 3 and "all directors" in the

preceding paragraph shall be counted as the actual number of persons currently holding

those positions.

The Article 8.16 Paragraph 1, Article 8.4 paragraph 1, and Article 8.10.4 paragraph 2 are

applied to the Audit Committee.

The Article 8.9.4 Paragraph 1, Subparagraph 2, is applied to the Independent Directors of

the Audit Committee.

9.0 Appendix

Any matter not provided in these Rules and Procedures shall be handled in accordance with

relevant laws and regulations.

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Regulations Governing Loaning of Funds and Making of

Endorsements/Guarantees (before revision)

1.0 Purpose

The purpose of the establishment of these procedures is to set principles for the Company to

comply with, and to strengthen the management of the Company's loans to other parties and

endorsements/guarantees, in order to ensure the Company's corporate interests.

2.0 Scope of application

The procedures are adopted in accordance with business and financial actual status.

3.0 Definition

I. "Subsidiary" and "parent company" as referred to in these Regulations shall be as

determined under the Regulations Governing the Preparation of Financial Reports by

Securities Issuers.

Where a public company’s financial reports are prepared according to the International

Financial Reporting Standards, "net worth" in these Regulations means the balance sheet

equity attributable to the owners of the parent company under the Regulations Governing

the Preparation of Financial Reports by Securities Issuers.

II. The "Most Recent Financial Statements" as stated in this program refers to the financial

statements of the Company that have been publicly certified by a CPA before the loaning

of company funds as well as endorsements and guarantees.

III. The term "announce and report" as used in these Regulations means the process of

entering data into the information reporting website designated by the Financial

Supervisory Commission (FSC).

IV. "Professional appraiser" in these Regulations means a real property appraiser or other

person duly authorized by law to engage in the value appraisal of real property or

equipment.

V. "Date of occurrence" refers to the date of contract signing, date of payment, dates of Board

of Directors resolutions, or other date that can confirm the counterparty and monetary

amount of the transaction, whichever date is earlier.

4.0 Obligation

The relevant companies and personnel are the basic units regulated by the Regulations

5.0 Reference

Article 15 of the Company Act

These Regulations are promulgated pursuant to Article 36-1 of the Securities and Exchange

Act and the Regulations Governing Loaning of Funds and Making of

Endorsements/Guarantees pursuant to Order No. Financial-Supervisory-Securities-

1010029874 of the Financial Supervisory Commission of the Executive Yuan.

6.0 Notices

None

7.0 Operation process chart

None

8.0 Operation process explanation

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8.1 Limit on funds lent to any other person

8.1.1 The Company shall not loan funds to any of its shareholders or any other person

except under the following circumstances:

1. Where an inter-company business transaction calls for a loan arrangement.

2. Where an inter-company short-term financing facility is necessary. Further,

financing amount shall not exceed 20 percent or more of the enterprise which is

reinvested by the Company.

The term "short-term" as used in the preceding paragraph 2 means one year or less

than one year. But where the Company's operating cycle exceeds one year, one

operating cycle.

8.1.2 Limit on funds loans to any other person

1. Where an inter-company or inter-firm business transaction calls for a loan

arrangement.

2. Where an inter-company or inter-firm short-term financing facility is necessary,

over investment ratio is over 20 percent, provided that such financing amount

shall not exceed 40 percent of the lender's net worth.

The restriction in Paragraph 1, Subparagraph 2 shall not apply to inter-company

loans of funds between overseas companies in which the public company holds,

directly or indirectly, 100 percent of the voting shares. However, the provisions of

Article 8.1.3 and 8.2 of the Regulations concerning the setting of the amount limits

and the durations of loans shall still apply.

8.1.3 Total limit amount of loans

The Company's funds and the amount of financing shall not exceed 30 percent of the

Company's net worth, and the limits of its financing and the nature of their various

loans are as below:

1. Where an inter-company business transaction calls for a loan arrangement, the

financing amount shall not exceed 10 percent of the lender's net worth.

2. Where an inter-company short-term financing facility is necessary, the financing

amount shall not exceed 20 percent of the lender's net worth.

The above-mentioned and 8.1.3 "Net Worth" means the balance of total assets less

total liabilities (i.e., shareholders' equity). The term "financing amount" refers to the

accumulated balance of short-term financing.8.1.2

8.2 Durations of loans and calculation of interest

The Company’s capital lending is based on a short-term financing basis, and the duration

of the loan is one year or one business cycle, whichever is higher. Interest calculation is on

the basis of daily interest rates, and is calculated as 365 days a year, over the accumulation

of the daily lending balance. The interest rate is calculated by reference to the prevailing

market interest rate or the appropriate level of the Company’s cost of funds, and shall pay

interest once a month except for additional agreements.

8.3 Detailed review procedures and procedures for handling loans of funds

I. Borrowers should provide registration or change registration form, business

registration certificate, the copies of personal identification, etc., from the Ministry of

Economic Affairs and other necessary financial information. Applications shall be

made and submitted to the Finance Department of the Company.

- 92 -

II. Before making a loan of funds for others, the Company shall carefully evaluate

whether it is in compliance with these Regulations and the Company's Operational

Procedures. If there is a necessity for short-term financing, it shall list the reasons and

situation for the loaning of the funds. The Finance Department shall submit a report

giving the necessity and reasonableness of loaning of funds, and process of credit

investigation and evaluating risk, as well as an explanation of amount of loan,

duration, interest rate, duration, interest rate, capacity, sources of capital, collateral,

and guarantors. Also, it shall evaluate how this loaning of funds impacts the

Company’s operational risk, financial status, and stockholders' equity. This shall then

be reported to the Chairman for authorization or for a resolution to be made by the

Board of Directors. Others shall not be authorized for the decision.

III. The Finance Department shall promptly notify the borrower of the resolution made

by the Company and explain the Company's loan terms, including amount, duration,

interest rate, collateral and guarantor. The borrower shall complete the identity

verification before the deadline.

IV. The content of contract signing shall correspond with the terms made by the Board of

Directors, and audited by the Legal Department or Legal Consultant When

proceeding with identity verification, the Company shall be aware of the borrower,

guarantor, and relevant borrower signing on the contract personally.

V. The Company shall conduct pledges or mortgages if needed to acquire collateral to

ensure the claims of the Company. Further, its value should be in reference to an

appraisal report or expert opinion from a professional appraiser. Excluding land and

securities, collateral shall bear fire insurance and other necessary insurance. The

Company shall be designated as the beneficiary and the insurance policy shall

correspond with loan terms of the Company.

VI. The tracking and retrieval of the loaning of funds shall be implemented in accordance

with the following procedures:

1. After the loan is appropriated, the Company shall pay attention to the financial,

business, and credit status of the borrower and the guarantor. If collateral is

provided, the Company shall pay attention to its changes of value and immediately

report large changes to the Chairman to undertake emergency credit protection

measures.

2. The Company shall inform the repayment of principal and interest by written

notice prior to one month before the due date and five working days before interest

payment date.

3. Confirm that the borrower has completed repayment of principal and interest on

schedule, report to Chairman for authorization, then proceed in cancellation of the

promissory note, certificate of indebtedness, etc.

VII. Loans of funds between the Company and subsidiaries, or between its subsidiaries,

shall be submitted for a resolution by the Board of Directors pursuant to the

preceding paragraph, and the Chairman may be authorized, for a specific borrowing

counterparty, within a certain monetary limit resolved by the Board of Directors, and

within a period not to exceed one year, to give loans in installments or to make a

revolving credit line available for the counterparty to draw down.

The "certain monetary limit" mentioned above on authorization for loans extended by the

public company or any of its subsidiaries to any single entity shall not exceed 10 percent

- 93 -

of the net worth in the most current financial statements of the lending company, except in

cases where the Company directly or indirectly holds 100 percent of voting shares of a

foreign company.

8.4 Procedures for handling delinquent creditor's rights.

Situations for delinquent repayment of the loaning of funds shall be conducted as in below

procedures:

1. Understand reasons for delinquency and report the situation to the Chairman.

2. Check if the Company still had accounts payable of the borrower and immediately

inform the Finance Department to freeze payments to the borrower.

3. Cooperate with the Legal Department to deal with the borrower, guarantor, collateral for

the recovery and adopt necessary security measures.

4. Evaluate the necessity of recovery of claims as well as the maximum possible loss. If an

instance of unlikely recovery of claims occurs, this shall be recognized as a bad debt

loss after a resolution approved by the Board of Directors.

8.5 The Company shall prepare a memorandum book for its loan activities and record in detail

the following information for the record: the entity to which the loan is made, the amount,

the date of passage by the Board of Directors or of authorization by the Chairman of the

Board, the date the loan is made, and the matters to be carefully evaluated under the

preceding article.

8.6 If, as a result of a change in circumstances, a borrower does not meet the requirements of

these Regulations or the loan balance exceeds the limit, a public company shall adopt

rectification plans and submit the rectification plans to all independent directors, and shall

complete the rectification according to the timeframe set out in the plan.

8.7 The term "endorsements/guarantees" as used in these Regulations refers to the following:

(I) Financing endorsements/guarantees, including:

1. Bill discount financing.

2. Endorsement or guarantee made to meet the financing needs of another company.

3. Issuance of a separate negotiable instrument to a non-financial enterprise as

security to meet the financing needs of the Company itself.

(II) Customs duty endorsement/guarantee, meaning an endorsement or guarantee for the

Company itself or another company with respect to customs duty matters.

(III) Other endorsements/guarantees, meaning endorsements or guarantees beyond the

scope of the above two subparagraphs.

Any creation by the Company of a pledge or mortgage on its chattel or real property as

security for the loans of another company shall also comply with these Regulations.

8.8 The items and the ceilings on the amounts to make in endorsements/guarantees.

8.8.1 The Company may make endorsements/guarantees for the following companies:

1. A company with which it does business.

2. A company in which the Company directly and indirectly holds more than 50

percent of the voting shares.

3. A company that directly and indirectly holds more than 50 percent of the voting

shares in the Company.

Companies in which the Company holds, directly or indirectly, 90 percent or more

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of the voting shares may make endorsements/guarantees for each other, and the

amount of endorsements/guarantees may not exceed 10 percent of the net worth of

the Company.

Where the Company fulfills its contractual obligations by providing mutual

endorsements/guarantees for another company in the same industry or for joint

builders for purposes of undertaking a construction project, or where all capital

contributing shareholders make endorsements/guarantees for their jointly invested

company in proportion to their shareholding percentages, or where companies in the

same industry provide among themselves joint and several security for a

performance guarantee of a sales contract for pre-construction homes pursuant to the

Consumer Protection Act for one another, such endorsements/guarantees may be

made free of the restriction of the preceding two paragraphs.

Capital contribution referred to in the preceding paragraph shall mean capital

contribution directly by the Company, or through a company in which the Company

holds 100 percent of the voting shares.

8.8.2 The individual item and the ceilings on the amounts to make in endorsements/

guarantees.

The Company's regulations of individual counterparties and the ceilings on the

amounts to make in endorsements/guarantees are as follows. However, the aggregate

amount of endorsements/guarantees that are set as the ceiling for the Company as a

whole is 10 percent or less of the net worth of the latest financial statements.

1. Where an endorsement/guarantee is made due to needs arising from business

dealings, the amount of an endorsement/guarantee may not exceed the total

amount of trading between the two companies in the most recent six months. The

phrase "total amount of trading between the two companies" means the amount of

purchase or sales, whichever is higher.

2. For a parent company that directly and indirectly holds more than 50 percent of

the voting shares, or a company that directly and indirectly holds more than 50

percent of the voting shares in a subsidiary, the ceilings shall be no higher than the

net worth of the parent company or subsidiary. However, if the

endorsements/guarantees made between companies in which the Company holds,

directly or indirectly, 100 percent of the voting shares, the ceiling is no higher

than 10 percent of net worth of the latest financial statements.

8.8.3 The aggregate balance of endorsements/guarantees by the Company may not be

higher than 30 percent of the Company's net worth as stated in its latest financial

statements.

The aggregate balance of endorsements/guarantees by the Company and its

subsidiaries may not be higher than 30 percent of the Company's net worth as stated

in its latest financial statement. The balance of endorsements/guarantees by the

Company and its subsidiaries for a single enterprise shall not be higher than 10

percent of the Company's net worth as stated in its latest financial statements.

8.9 Hierarchy of decision-making authority and delegation thereof

The Company intending to make endorsements or guarantees for others shall be approved

by the Board of Directors. However, if the endorsements/guarantees of a subsidiary made

in which the Company holds, directly or indirectly, 100 percent of the voting shares, and

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the individual amount is no higher than 5 percent of net worth of the latest financial

statements, this could be approved by the Chairman of the Board first and submitted for

subsequent submission to and ratification by the next Board of Directors meeting.

Before making any endorsement/guarantee pursuant to Article 5, paragraph 2, a subsidiary

in which the Company holds, directly or indirectly, 90 percent or more of the voting

shares shall submit the proposed endorsement/guarantee to the Company’s Board of

Directors for a resolution. Provided that this restriction shall not apply to

endorsements/guarantees made between companies in which the public company holds,

directly or indirectly, 100 percent of the voting shares.8.8.1

8.10 Detailed review procedures of endorsements/guarantees

I. Guarantees should provide registration or change of registration form, business

registration certificate, copies of personal identification, etc., from the Ministry of

Economic Affairs and other necessary financial information. Applications shall be

made and submitted to the Finance Department of the Company.

II. Before making an endorsement/guarantee for others, the Company shall carefully

evaluate whether the endorsement/guarantee is in compliance with these

Regulations and the Company's Operational Procedures for

Endorsements/Guarantees for Others. The Finance Department shall submit a report

giving the necessity and reasonableness of the endorsement/guarantee, and process

a credit investigation and evaluate risk, as well as evaluating the impact on the

Company’s operational risk, financial status, and stockholders' equity. Also, it shall

evaluate the necessity of collateral acquisition and refer to an appraisal report or

expert opinion from a professional appraiser. In accordance with Article 8.9 of the

procedures, it shall be reported to the Chairman for authorization or resolution by

the Board of Directors.

III. The Finance Department shall notify the guarantee recipient of the resolution made

by the Company promptly, and explain the Company's trading terms. The guarantee

recipient shall complete the relevant procedures before the deadline.

IV. The Company shall conduct pledges or mortgages if needed to acquire collateral to

ensure the claims of the Company. Excluding land and securities, collateral shall

bear fire insurance and other necessary insurance. The Company shall be designated

as the beneficiary and the insurance policy shall correspond with trading terms of

the Company.

V. The Finance Department shall evaluate the finance, business, and credit status of the

guarantee. If collateral is provided, the Company shall monitor whether any

changes occur in its value. Any serious changes shall be reported immediately to the

Chairman.

VI. When the settlement of guarantee or the due date of the endorsement/guarantee

comes, the guarantee recipient shall notify the Company with relevant information

to lift endorsement guarantee obligation.

VII. Guarantee shall apply for extension prior to one month before the due date, and re-

conduct relevant audit and procedures in accordance with the Company's

regulations.

VIII. The Company shall use the corporate chop registered with the Ministry of

Economic Affairs as the dedicated chop for endorsements/guarantees. The chop

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shall be kept in the custody of a designated person approved by the Board of

Directors and may be used to seal or issue negotiable instruments only according to

the prescribed procedures. When making a guarantee for an overseas company, the

Company shall have the Guarantee Agreement signed by a person authorized by the

Board of Directors.

8.11 The Company shall prepare a memorandum book for its endorsement/guarantee activities

and record in detail the following information for the record: the entity for which the

endorsement/guarantee is made, the amount, the date of passage by the Board of

Directors or of authorization by the Chairman of the Board, the date the

endorsement/guarantee is made, and the matters to be carefully evaluated under the

preceding article.

8.12 For circumstances in which an entity for which the Company and subsidiary make any

endorsement/guarantee and it is a subsidiary whose net worth is lower than half of its

paid-in capital, relevant follow-up monitoring and control measures shall be expressly

undertaken:

I. Shall set improvement plan and submit to the Company Finance Department. Also

complete improvement accordingly.

II. Shall report the usage of endorsement/guarantee amount as well as financial

statements monthly, and submit improvement plan implementation situation quarterly

to the Finance Department.

III. The above monitoring and control measures shall be reported to the Board of

Directors quarterly until improvement is completed or at the end of the due date of

endorsement/guarantee.

In the case of a subsidiary with shares having no par value or a par value other than

NT$10, for the paid-in capital in the calculation under the preceding paragraph, the sum

of the share capital plus paid-in capital in excess of par shall be substituted.

8.13 If, as a result of a change in circumstances, an entity for which an endorsement/guarantee

is made does not meet the requirements of these Regulations or the loan balance exceeds

the limit, a public company shall adopt rectification plans and submit the rectification

plans to all independent directors, and shall complete the rectification according to the

timeframe set out in the plan.

8.14 Where the Company needs to exceed the limits set out in the Operational Procedures for

Endorsements/Guarantees to satisfy its business requirements, and where the conditions

set out in the Operational Procedures for Endorsements/Guarantees are complied with, it

shall obtain approval from the Board of Directors and half or more of the directors shall

act as joint guarantors for any loss that may be caused to the Company by the excess

endorsement/guarantee. It shall also amend the Operational Procedures for

Endorsements/Guarantees accordingly and submit the same to the shareholders' meeting

for ratification after the fact. If the shareholders' meeting does not give consent, the

Company shall adopt a plan to discharge the amount in excess within a given time limit.

8.15 The Company's internal auditors shall audit the Operational Procedures for

Endorsements/Guarantees for Others and the implementation thereof no less frequently

than quarterly and prepare written records accordingly. All independent directors shall be

promptly notified in writing of any material violations found.

8.16 Information disclosure regulations

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I. The Company whose loans of funds reach one of the following levels shall announce

and report such events within two days commencing immediately from the date of

occurrence:

1. The aggregate balance of loans to others by the Company and its subsidiaries

reaches 20 percent or more of the Company's net worth as stated in its latest

financial statements.

2. The balance of endorsements/guarantees by the Company and its subsidiaries to a

single enterprise reaches 10 percent or more of the Company's net worth as stated

in its latest financial statements.

3. The amount of new loans of funds by the Company or its subsidiaries reaches

NT$10 million or more, and reaches 2 percent or more of the Company's net worth

as stated in its latest financial statements.

The Company shall announce and report on behalf of any subsidiary thereof that is

not a public company of the Republic of China any matters that such subsidiary is

required to announce and report pursuant to subparagraph 3 of the preceding

paragraph.

II. The company whose balance of endorsements/guarantees reaches one of the

following levels shall announce and report such events within two days commencing

immediately from the date of occurrence:

1. The aggregate balance of endorsements/guarantees by the Company and its

subsidiaries reaches 50 percent or more of the Company's net worth as stated in its

latest financial statements.

2. The balance of endorsements/guarantees by the Company and its subsidiaries for a

single enterprise reaches 20 percent or more of the Company's net worth as stated

in its latest financial statements.

3. The balance of endorsements/guarantees by the Company and its subsidiaries for a

single enterprise reaches NT$10 million or more and the aggregate amount of all

endorsements/guarantees for, investment of a long-term nature in, and balance of

loans to, such enterprise reaches 30 percent or more of the Company's net worth as

stated in its latest financial statement.

4. The amount of new endorsements/guarantees made by the Company or its

subsidiaries reaches NT$30 million or more, and reaches 5 percent or more of the

Company's net worth as stated in its latest financial statements.

The Company shall announce and report on behalf of any subsidiary thereof that is

not a public company of the Republic of China any matters that such subsidiary is

required to announce and report pursuant to Subparagraph 4 of the preceding

paragraph.

III. The Company shall announce and report the previous month's loan balances as well

as endorsements/guarantees of its head office and subsidiaries by the 10th day of

each month.

IV. The Accounting Dept. shall evaluate the status of its loans of funds and reserve

sufficient allowance for bad debts, and shall adequately disclose relevant information

in its financial reports and provide certified public accountants with relevant

information for implementation of necessary auditing procedures.

V. The Accounting Dept. shall evaluate or record the contingent loss for

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endorsements/guarantees, and shall adequately disclose information on

endorsements/guarantees in its financial reports and provide certified public

accountants with relevant information for implementation of necessary audit

procedures.

9.0 Procedures for controlling and managing loans as well as endorsements/guarantees by

subsidiaries.

Where a subsidiary of the Company intends to make loans to others or

endorsements/guarantees for others, a subsidiary shall instruct it to formulate its own

Operational Procedures for Endorsements/Guarantees in compliance with Regulations

Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies,

and it shall comply with the Regulations when making endorsements/guarantees.

10.0 Penalties

If the employees of the Company violate the Procedures, the responsible unit shall report the

personnel's unit to the HR Department and be punished based on the severity of the relevant

regulations.


The Company intending to make endorsements or guarantees for others shall formulate its

Operational Procedures for Endorsements/Guarantees in compliance with these Regulations,

and, after passage by the Board of Directors, and after being submitted for approval by the

shareholders' meeting. Where any director expresses dissent and it is contained in the minutes

or a written statement, the company shall submit the dissenting opinions to each supervisor

and submit for discussion by the shareholders' meeting. The same shall apply to any

amendments to the Procedures.

When it submits the Operational Procedures for Endorsements/Guarantees for discussion by

the Board of Directors pursuant to the preceding paragraph, the Board of Directors shall take

into full consideration each independent director's opinions; the independent directors'

opinions specifically expressing assent or dissent and the reasons for dissent shall be included

in the minutes of the Board of Directors' meeting. When it submits its Operational Procedures

for Loaning Funds to Others or the Operational Procedures for Endorsements/Guarantees for

discussion by the Board of Directors under the preceding paragraph, the Board of Directors

shall take into full consideration each independent director's opinion; independent directors'

opinions specifically expressing assent or dissent and their reasons for dissent shall be

included in the minutes of the Board of Directors' meeting.

12.0 Appendix

Any matter not provided in these Rules and Procedures shall be handled in accordance with

relevant laws and regulations.

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Rules of Procedure for Shareholders’ Meetings of HannStar Display Corporation.

Formulated on May 3, 2000 Amendment made on June 26, 2002 Amendment made on June 15, 2006 Amendment made on June 15, 2012 Amendment made on June 7, 2013 Amendment made on June 10, 2015

I. The shareholders’ meeting of the Company shall proceed in accordance with these Rules,

unless the law provides otherwise.

II. The shareholders that are mentioned in these Rules and Procedures means shareholders

themselves and agents commissioned by shareholders in accordance with the Act.

III. Shareholders may vote via documentary evidence or an electronic voting system, and those

who do shall be deemed as attending the Meeting in person. Electronic voting shall be

conducted in accordance with the relevant laws and regulations. Shareholders voting via

documentary evidence or an electronic voting system are regarded as attending the meeting

in person; however, in terms of other business and special motions and revision of original

articles, they are regarded as abstention votes.

Shareholders attending the Meeting (or their agents) shall wear identification cards and

submit the attendance card for the purpose of signing in. Shareholders and agents attending

the Meeting shall submit the attendance card, which is regarded as attending the Meeting in

person. Agents with letters of proxy shall offer identification cards and documents for check.

The Company shall offer a handbook, annual report, attendance card, speech notes, voting

forms and other meeting documents to shareholders who attend the meeting; with the

election of directors, voting forms shall be offered.

IV. The presence of shareholders in a shareholders’ meeting and their voting thereof shall be

calculated in accordance with the number of shares.

V. The number of shares representing shareholders present in the meeting shall be calculated in

accordance with those indicated in the attendance book or on the attendance cards plus

documentary evidence or an electronic voting system.

VI. The place for convening a shareholders’ meeting for the Company shall be held inside the

premises of the Company, or any other place convenient for the presence of shareholders,

and suitable for holding of the said meeting. The time for commencing the said meeting shall

not be earlier than 9 o'clock in the morning or later than 3 o'clock in the afternoon.

VII. If a shareholders’ meeting is called by the Board of Directors, the Chairman of the Board shall

preside at the said shareholders’ meeting. In case the Chairman is on leave of absence, or

cannot exercise his or her powers and authority, the vice Chairman shall act in lieu of

him/her. If there is no vice Chairman, or the vice Chairman is also on leave of absence, or

cannot exercise his or her powers and authority, the Chairman shall designate a managing

director to act in lieu of him/her. If there is no managing director, the Chairman shall

designate a director to act in lieu of him/her. If the Chairman does not designate a director,

the managing directors or directors shall elect one from among themselves to act in lieu of

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the Chairman.

Outside of the Board of Directors, if a shareholders’ meeting is called by any other person

having that right, then that person shall preside at that meeting. If two or more people

exercise that right, they shall choose from among themselves to designate who shall preside

at the meeting.

VIII. The Company may designate its lawyer, certified public accountant or other relevant persons

to attend the shareholders’ meeting.

Those handling the business of a shareholders’ meeting shall wear an identification card or a

badge.

IX. The Chairman may direct disciplinary personnel (or security personnel) to maintain the order

of the meeting. For doing so they shall wear a badge bearing the words "disciplinary

personnel."

X. The person who attends the Meeting may not carry objects that might endanger other people’s

lives, bodies, freedom or cause damage to property.

XI. The Chairman may direct the police to help maintain order at the meeting place.

XII. The Company shall record with an audio or video tape the whole proceedings of the

shareholders’ meeting, and said video tape or audio tape shall be kept for at least one year.

If, however, a shareholder files a lawsuit pursuant to Article 189 of the Company Act, the

recording shall be retained until the conclusion of the litigation.

XIII. When it is time to convene a shareholders’ meeting, the Chairman shall immediately convene

the meeting. However, in the event that shareholders present do not represent a majority of

the total amount of issued shares, the Chairman may postpone the meeting. Such

postponements shall be limited to two times, and the total postponement time shall not

exceed one hour. If the meeting has been postponed two times but the shareholders present

still do not represent a majority of the total amount of issued shares, a tentative resolution

may be adopted in accordance with Paragraph 1 of Article 175 of the Company Act by

shareholders representing one-third of the total amount of issued shares.

Before the close of the said meeting, if the shareholders present represent a majority of the

total amount of issued shares, the Chairman may present the tentative resolution so adopted

to the meeting for resolution in accordance with the provisions of Article 174 of the

Company Act.

XIV. If a shareholders’ meeting is called by the Board of Directors, the proceedings of the meeting

shall be formulated by the Board of Directors, and the meeting shall proceed in accordance

with the said proceedings. The proceedings shall not be changed without a resolution made

by the shareholders’ meeting.

If a shareholders’ meeting shall be called by any other person than the Board of Directors,

the preceding provisions shall apply mutatis mutandis to the said meeting.

The Chairman shall not adjourn a meeting without a resolution adopted by shareholders if

the motions (including extraordinary motions) covered in the proceedings so arranged in the

above two Paragraphs have been resolved.

After close of the said meeting, shareholders shall not elect another Chairman to hold

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another meeting at the same place or at any other place. However, in the event that the

Chairman adjourns the meeting in violation of these Rules and Procedures, the shareholders

may designate, by a majority of votes represented by shareholders attending the meeting, one

person as Chairman to continue the meeting.

XV. A shareholder wishing to speak in a shareholders’ meeting shall first fill out a slip, specifying

therein the major points of his or her speech, his or her serial number as a shareholder (or

number of attendance) and his or her name, and the Chairman shall determine his or her

order of giving a speech.

A shareholder who submits his or her slip for a speech but does not actually speak shall be

considered as not having given a speech. If the contents of his or her speech are different

from those specified on the slip, the contents of his or her speech shall prevail. The

spokesperson shall be based on the proxy statement, the public tender form and the

advertisement. The agreement of shareholders shall be based on the contents of his or her

speech or votes unless new regulations have been established.

When a shareholder is giving a speech, the other shareholders shall not interrupt unless they

have obtained the prior consent from the Chairman and the said shareholder; the Chairman

may prevent others from interrupting.

XVI. A shareholder shall not speak more than two times for one motion, unless he has obtained

prior consent from the Chairman, and each speech shall not exceed 3 minutes. However,

with permission of the Chairman, this restriction shall not apply.

If a shareholder violates the above provisions or his or her speech exceeds the scope of the

motion, the Chairman may prevent him/her from doing so.

XVII. A corporate shareholder being entrusted to attend a shareholders’ meeting may designate

only one representative to represent it in the meeting.

If a corporate shareholder designates two or more representatives to represent it at the

shareholders’ meeting, only one of the representatives so designated may speak on any one

motion, and its agent votes for the motion.

XVIII. After a shareholder has given a speech, the Chairman may personally respond or designate a

relevant person to respond.

XIX. When the Chairman considers that the discussion for a motion has reached the extent for

making a resolution, he may announce discontinuance of the discussion and submit the

motion for resolution.

XX. Unless otherwise specifically provided for in the Company Act or the Articles of Incorporation

of the Company, resolutions shall be adopted by a majority vote at a meeting attended by the

shareholders. Voting rights of shareholders shall be calculated according to the provisions of

the law or the Company’s Articles.

The voting may be adopted by a poll, or by the Chairman’s consultation with all the

shareholders present at the meeting on the spot. The effect of the meeting is deemed as

passed, and its effect is the same as that of a vote.

If the Company exercises voting rights in a written or electronic form in a shareholders’

meeting, it shall be advised in the case of a proposal that is required by the law, and the

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voting right is conducted by the Company Act, the "Guidelines for Handling of Shareholder

Services," and relevant regulations of the competent authority.

If an amendment is found to be inconsistent with an original motion or forms an alternative

to a motion, the Chairman may combine the amendment or alternative into the original

motion, and determine their order for resolution. In addition, in accordance with Article 10-1

of the Company Act, if a shareholder's motion is not consistent with a Board of Director’s

motion, or forms an alternative motion to that submitted by the Board of Directors, the

Chairman may combine the shareholder's motion or the Board's motion and determine their

orders for resolution. Any one of the above shall be resolved; the others shall be considered

as rejected, upon which no further resolution shall be required.

XXI. Persons for supervising the casting of votes for resolutions shall be designated by the

shareholders who attend the meeting. Other persons for the polling and counting shall be

designated by the Chairman to conduct their duties.

Before voting, the supervising personnel shall open the ballot box for checking on the spot.

After voting, the persons responsible for supervising shall monitor the process of polling on

the spot. Further, the results of resolution(s) shall be announced in the meeting, including

statistical weight, and recorded in the meeting minutes.

XXII. During the proceedings of a meeting, the Chairman may consider the schedule and announce

a break.

XXIII. In case of an incident of force majeure such as an air raid alert, earthquake, etc., during the

Meeting, the Chairman may decide to temporarily suspend the Meeting and announce,

depending on the situation, when and whether the Meeting shall resume.

XXIV. Any matter not provided in these Rules and Procedures shall be handled in accordance with

the Company Act and relevant regulations as well as the Articles of the Company.

XXV. These Rules and Procedures shall be effective from the date they are approved by the

Shareholders' Meeting. The same applies in case of revision.

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ARTICLES OF INCORPORATION

CHAPTER ONE - GENERAL PROVISIONS

Article 1

The Company is incorporated in accordance with the Company Law of the Republic of China and is

named HannStar Display Corporation. The English name of the Company is HannStar Display

Corporation

Article 2

The business scope of the Company is as follows:

(1) CC01080 Electronic Parts and Components Manufacturing.

(2) F119010 Wholesale of Electronic Materials.

(3) F219010 Retail sale of Electronic Materials.

(4) JA02990 Other Repair Shops. (Repair of different kind of flat panel display and flat panel

monitor and it's components.)

(5) F401010 International Trade.

(6) CC01030 Electric Appliance and Audiovisual Electric Products Manufacturing.

(7) F113020 Wholesale of Household Appliance.

(8) F213010 Retail Sale of Household Appliance.

(9) CC01110 Computers and Computing Peripheral Equipment Manufacturing.

(10) CC01120 Data Storage Media Manufacturing and Duplicating.

(11) F118010 Wholesale of Computer Software.

(12) F218010 Retail Sale of Computer Software.

(13) CC01070 Telecommunication Equipment and Apparatus Manufacturing.

(14) F109070 Wholesale of Stationery Articles, Musical Instruments and Educational

Entertainment Articles.

(15) F209060 Retail sale of Stationery Articles, Musical Instruments and Educational

Entertainment Articles.

(16) F399990 Retail sale of Others.

(17) F401021 Restrained Telecom Radio Frequency Equipment and Materials Import.

(18) H701010 Residence and Buildings Lease Construction and Development.

(19) ZZ99999 Other business that are not prohibited or restricted by law except for business that

require governmental approval.

Article 3

With the resolution of the board of directors, the Company may provide guarantees to others when

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necessary for its business.

Article 4

The total amount of the reinvestment by the Company is not subject to the limit of 40% of the

Company's paid-in capital. The reinvestment matters shall be handled according to the resolution

of the board of directors.

Article 5

The Company shall have its head office in Taipei City. As necessary, the Company may set up

branch offices within or outside the Republic of China after being resolved by the board of directors.

Article 6

Public announcements of the Company shall be made pursuant to Article 28 of the Company Law.

CHAPTER TWO - CAPITAL STOCK

Article 7

The total authorized capital of the Company shall be in the amount of NT$ 90,000,000,000 divided

into 9,000,000,000 shares, at a par value of NT$10 each and shall be issued in installments. The

remaining of the un-issued shares may be issued thereafter upon the resolution of the board of

directors when necessary. Within the capital 500,000,000 shares are reserved for employee stock

option.

Article 8

The share certificates of the Company shall be issued in registered form after being signed or

affixed with the seals of at least three directors and authenticated by the competent authorities or

any agency approved by the competent authority. Upon the issuance of new shares, the Company

may issue one master share certificate representing the total number of newly issued shares.

Alternatively, upon the issuance of new shares, the Company may elect not to issue any share

certificate. Such issued shares shall be delivered to a centralized securities deposit company for

custody or registration.

Article 8-1

In order to meet the need of administration of share certificates, the Company may issue share

certificates in larger denomination upon the request of Taiwan Securities Central Depositary Co.,

Ltd.

Article 9

If there is transfer, loss or destroy of any share certificate, it shall be handled in accordance with the

Company Law or relevant laws and regulations.

CHAPTER THREE - SHAREHOLDERS' MEETINGS

Article 10

Shareholders' meetings are classified into general meetings and special meetings. The general

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meeting shall be annually convened by the board of directors within six months after the end of

each fiscal year pursuant to the applicable laws. The special meeting shall be convened pursuant

to the applicable laws when necessary.

Article 10-1

Shareholder(s) holding one percent (1%) or more of the total number of outstanding shares of the

Company may propose a writing proposal for discussion at a general shareholders’ meeting during

the period and place announced by the Company. All relevant affairs shall be subject to the

Company Law and other related laws and regulations.

Article 11

Where a shareholder is unable to attend the shareholders' meeting, such shareholder may, in

accordance with the Company Law, the Regulations Governing the Use of Proxies for Attendance

at Shareholder Meetings of Public Companies, and other relevant laws and regulations, appoint a

proxy to attend a shareholders' meeting in his/her/its behalf by executing a power of attorney

printed by the Company stating therein the scope of power authorized to the proxy.

Article 12

Unless otherwise provided for in the Company Law or other relevant laws and regulations, each

shareholder shall have one voting power in respect of each share in his/her/its possession.

Article 12-1

The voting power at a shareholders' meeting may be exercised in writing or by way of electronic

transmission with resolution of the board of directors. The subject which the voting power at the

shareholders’ meeting could be exercised in writing or by way of electronic transmission as well as

the methods of exercising shall be described in the shareholders’ meeting notice to be given to the

shareholders if the board of directors resolves that the voting power in a specific shareholders’

meeting may be exercised in writing or by way of electronic transmission. All the relevant

operations shall be subject to the Company Law and other relevant rules.

Article 13

Unless otherwise provided for in the Company Law, a shareholders' meeting resolution shall be

adopted by a majority vote in a shareholders' meeting attended by shareholders in person or proxies

representing a majority of the Company's issued shares.

CHAPTER FOUR - DIRECTORS AND AUDIT COMMITTEE

Article 14

The Company shall have five to nine directors, including three independent directors at least, and

the independent directors shall be one fifth of the directors. Commencing from the election of 7th

Board of Directors, the independent directors shall be at least three persons in number and the

number of directors shall be determined by the Board of Directors.

Directors elected by the nomination system shall be adopted by the Company. Unless otherwise

provided by laws or regulations, all directors shall be eligible for re-election.

Nomination and election of independent directors, non-independent directors shall be subject to the

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Company Law, Securities and Exchange Act, and other relevant laws and regulations.

The total shareholding of the directors shall be subject to rules prescribed by the relevant securities

regulatory authority.

Article 14-1

The nomination system for the election of independent directors adopted by the Company shall

come into force on January 1, 2007.

The nomination system for the election of non-independent directors adopted by the Company shall

come into effect on June 16, 2012.

The directors of the Company shall be elected in accordance with Article 198 of the Company Act,

with independent and non-independent directors elected at the same time, but in separately

calculated numbers

Article 14-2

Commencing from the election of 7th Board of Directors, an Audit Committee shall be established

in accordance with Article 14-4 of the Securities and Exchange Act. The Audit Committee shall be

composed of the entire number of independent directors. It shall be composed of at least three

members, one of whom shall be the convener, and at least one of whom shall have accounting or

financial expertise.

The provisions related to supervisors under the Company Act, Securities and Exchange Act and

other applicable laws shall apply mutatis mutandis to the Audit Committee.

An audit committee charter adopted by the Company shall provide for number and term of office of

Audit committee members, powers thereof, rules of procedure for meetings thereof and resources to

be provided by the Company when the Audit committee exercises its powers.

Article 15

The chairman of the board shall be elected from among directors by a majority vote at a board

meeting attended by more than two-thirds of the directors. The chairman shall be the

representative of the Company; the vice chairman may be elected from among directors by the same

way in order to assist the chairman.

Article 16

Unless otherwise provided for in the Company Law, meetings of the board of directors shall be

convened by the chairman. Notices for convening the meetings of the board of directors, setting

forth the purposes of the meetings, shall be delivered to each director no later than seven days prior

to the meeting. However, in the event of emergency, the meeting can be convened anytime

without prior written notice. Unless otherwise provided for in the laws, any resolution at a board

meeting shall be adopted if voted in favor by the majority present at a board meeting at which more

than one half of the directors are present.

Unless otherwise provided for in the Company Law or these Articles of Incorporation, each director

shall attend meetings of the board of directors in person. In case a meeting of the board of

directors is proceeded via visual communication network, then the directors taking part in such a

visual communication meeting shall be deemed to have attended the meeting in person.

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In case the director is unable to attend a meeting of board of directors, he may appoint one of the

other directors as his proxy to attend the meeting. A director may only act as the proxy of one

other director.

Article 17

In the event that the chairman of the board of directors is on leave or cannot exercise his powers and

authorities for any cause, he shall designate a person to act on his behalf pursuant to Article 208 of

the Company Law.

Article 18

The remuneration of the directors is authorized to be decided by a Board of Director’s meeting

depending on their involvement in the Company's operation and value of contribution to the

Company, with the standard generally adopted by other local or foreign enterprises in the same

industry, and shall be paid regardless whether the Company has profits or suffers losses.

Article 18-1

In order to reduce and decentralize the risk arising from serious damages of the Company and the

shareholders, the Company may purchase the liability insurance for the directors to cover their

liabilities arising from conducting the business operation of the Company during their terms of

office. The board of directors is authorized to determine the insured amount with the consideration

of the standard generally adopted by other local or foreign enterprises in the same industry.

Article 19

The Board of Directors shall be composed of directors. The powers and authorities of the Board

of Directors shall include:

(1) Convening the shareholders' meeting and enforcing its resolutions.

(2) Framing the business plan.

(3) Reviewing regulation and rules and major contracts of the Company.

(4) Approval of purchase and disposal of material assets of the Company, provided, however, the

items prescribed in Article 185 of the Company Law are not included.

(5) Deciding important structure and important managerial officers of the Company.

(6) Setting up and winding up branches.

(7) Formulating budgets and final accounts and the report of business operation.

(8) Other powers and authorities vested by the Company Law or by a resolution of a shareholders'

meeting.

Regarding the aforesaid items, the chairman can approve or execute in advance, then propose to the

board of directors if there are needs in fact and in line with relevant laws and regulations.

Article 20 (Repealed)

CHAPTER FIVE - MANAGERIAL OFFICERS

Article 21

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The Company shall have managerial officers, and the appointment, discharge and remuneration of

the managerial officers shall be decided in accordance with Article 29 of the Company Law.

CHAPTER SIX – ACCOUNTING

Article 22

The fiscal year of the Company is from January 1 each year to December 31 of the same year.

The Company shall close the accounts at the end of each fiscal year.

Article 23

At the close of each fiscal year, the following reports shall be prepared by the meeting of the board

of directors and shall be submitted to the general shareholders' meeting for acceptance:

(1) report of business operation;

(2) financial statements, and

(3) proposal for distribution of earnings or covering of loss.

Article 23-1

If the Company has a profit at the end of the year, it shall appropriate 0.01 percent to 15 percent for

employees’ compensation, and no higher than 2 percent for directors’ compensation. The above

matter shall be reported to a shareholders’ meeting. However, if the Company still posts a

cumulative loss, its profit shall first be used to make up the loss.

Employees’ compensation in the preceding paragraph may be distributed in stocks or cash, and

directors' compensation is restricted to cash.

For employees' compensation in the preceding paragraph, it includes employees from affiliated

companies who meet certain conditions. The distribution terms and methods are delegated to the

Board of Directors.

Article 24

The Company's Divided Policy shall be as follows:

The business that the Company engages in is an emergent industry growing rapidly, and the

Company is in the steadily growing stage in the life cycle of an enterprise. In order to maintain

competitive, the Company will keep investing for future expansion. In consideration of the capital

expenditure and a long-term financial planning for continently expanding its capital in the future,

the Company adopts a remainder dividend policy. The dividend policy may be made according to

the future investment environment, competitive conditions inside and outside of the R.O.C., capital

budget, the shareholders' interest and maintenance of a balanced divided policy. The dividend for

holders of common stocks may be distributed in the forms of cash as well as stock, among which,

the portion of cash dividend to be distributed shall not be less than 10% of the total amount of

distributed cash and stock dividend in that fiscal year.

If the Company has any earnings after annual settlement, the earning shall be first used to recover

past losses and pay taxes. Then, 10% of the remaining balance of the earnings shall be provided as

legal reserve, and beginning undistributed earnings shall be added on the earnings to become the

accumulated undistributed earnings. After the accumulated undistributed earnings are adjusted by

the special reserve provided or reserved for the needs of the Company’s operation or as required by

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law, the board of directors shall make a proposed earnings distribution to allot the remaining

balance in accordance with the following principle if so resolved by the shareholders' meeting:

0.001% to 15% as the employees' bonuses;

up to 2% as the remuneration of directors; and

the residual amount to be distributed as shareholders' dividends.

CHAPTER SEVEN – SUPPLEMENTARY PROVISIONS

Article 25

Any matters not provided for in these Articles of Incorporation shall be handled in accordance with

the Company Law.

Article 26

Internal regulations detailed rules for the business operation of the Company shall be made

separately.

Article 27

These Articles of Incorporation were entered into on May 26, 1998, and were amended the first

time on June 24, 1999, the second time on May 3, 2000, the third time on May 25, 2001, the fourth

time on November 9, 2001, the fifth time on June 26, 2002, the sixth time on December 20, 2002,

the seventh time on June 12, 2003, the eighth time on June 12, 2003, the ninth time on November

20, 2003, the tenth time on November 20, 2003, the eleventh time on June 10, 2004, the twelfth

time on June 10, 2004, the thirteen time on May 26, 2005, the fourteenth time on June 15, 2006, the

fifteenth time on June 15, 2007, the sixteenth time on June 13, 2008 , the seventeenth time on June

10, 2009, the eighteenth time on June 18, 2010, the nineteenth time on June 10, 2011, the twentieth

time on June 15, 2012, the twenty-first time on June 7, 2013, the twenty-second time on June 12,

2014, and the twenty-third time on June 10, 2015. The twenty-fourth Amendment on June 14, 2016.

The twenty-fifth Amendment on June 8, 2018.



hannstar display corporation · 2019. 7. 11. · hannspree uk ltd. invested company in which over...

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