Post on 23-Aug-2020
Stock Code: 2312
Kinpo Electronics, Inc.
2018 Annual Meeting of Shareholders
Meeting Handbook
June 11, 2017
Table of Contents
I. Meeting Procedure .............................................................................................. 1
II. Meeting Agenda .................................................................................................. 2
(I) Report Items ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 3
(II) Ratification Items ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 22
(III) Discussion Items ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 25
(IV) Incidental Motions ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 29
(V) Adjournment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 30
III. Annex
(I) Rules of Procedures for the Meetings of Board of Directors: Articles Before and After Amendment ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 31
(II) 2017 Standalone Financial Statements and Consolidated Financial Statements ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 35
(III) Overview of Other Key Positions Concurrently Held by Directors ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 43
IV. APPENDIX
(I) Articles of Incorporation ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 45
(II) The Rules of Procedures for Shareholders’ Meeting ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 53
(III) Rules of Procedures for the Meetings of the Board of Directors ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 56
(IV) Shareholding Facts by All Directors of the Company ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 64
(V) The impact by the present issuance of bonus shares upon the Company’s business performance, earnings per share (EPS) and rate of investment return to shareholders ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 65
(VI) Information relevant to proposals by a shareholder (s) holding over 1% of the aggregate total outstanding shares ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 66
Meeting Procedure
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Kinpo Electronics, Inc. Procedure for the 2018 Annual Meeting of Shareholders
1. Call the Meeting to Order
2. Chairman’s Remarks
3. Report Items
4. Ratification Items
5. Discussion Items
6. Incidental Motions
7. Adjournment
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Meeting Agenda
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Kinpo Electronics, Inc. Agenda of 2018 Annual Meeting of Shareholders
Time: June 11, 2018 (Monday), 9:00 AM
Place: No. 147, Beishen Rd. Sec. 3, Shenkeng District, New Taipei City
Report attending shares and call the meeting to order.
1. Chairman’s Remarks
2. Report Items
(1) 2017 Business Report
(2) Audit Committee’s Review Report
(3) Report on 2017 Distribution of Renumerations to Employees and Directors
(4) Report on Amendments to the Rules of Procedures for the Meetings of Board of
Directors
(5) Report on the Execution of Company Stock Buybacks
3. Ratification Items
(1) 2017 Business Report and financial Statements of the Company
(2) 2017 Earnings Distribution Proposal of the Company
4. Discussion Items
(1) Proposal for an Initial Public Offering of Shares in Kinpo Subsidiary Cal‐Comp
Technology (Philippine), Inc., Denominated in Philippine Pesos and Listed on the
Philippine Stock Exchange
(2) Proposal for Release of the Prohibition on Directors from Participating in
Competitive Business
5. Incidental Motions
6. Adjournment
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Report Items
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Report Item 1 Proposed by the Board
Subject: 2017 Business Report
Explanation:
Kinpo Electronics, Inc.
2017 Business Report Dear shareholders: First of all, Kinpo Electronics would like to extend appreciation to all our shareholders for the support. Looking back to the year of 2017, Kinpo Electronics spared no efforts in achieving product innovation and quality enhancement for its new business lines. At the same time, we constantly conducted precise tuning product positioning while pursuing our new endeavors in the fields of intelligent robots, 3D printing and beauty electronics. In 2017, Kinpo received numerous recognitions for its innovative products from those renowned international players including HP, Western Digital, Texas Instruments, Ricoh, Konica Minolta and Toshiba. Kinpo's subsidiaries won two Innovation Awards in the 2018 CES, the consumer technology show held in Las Vegas, USA. XYZprinting won the Innovation Award by Da Vinci Color AiO, its latest full color desk‐top 3D printer, in the 2018 CES yet again, brining one more award to its five‐year consecutive winning record in this prestigious industry exhibition. HiMirror Mini, a smart beauty mirror that analyzes user's skin condition, won the Innovation Award at CES in 2018, for Kinpo as well. Even with these recognitions from the international communities, Kinpo Electronics understands it still needs to address the tough challenges that require all hi‐tech companies to seek total transformation so as to capture the newest technological trend. Despite the external challenges, the entire management team and all the employees at Kinpo possess the courage and spirit to work in solidarity. We believe we will fight our way out and head into the bright future to come. At the moment, the international politics and global economy have stopped being hugely volatile. According to the IMF's most recent forecast on the economy outlook for 2018, the global economy is expected to grow by 3.9%, much higher than the 3.6% growth in 2017, while in 2017 the US grew by 2.3%, the Euro Zone 2.1%, Japan 1.5%, China 6.8%, and Taiwan by 2.58%. Kinpo's consolidated revenues for 2017 reached NT$ 119,200 million, a slight decline if compared to the revenues of previous year at NT$ 123,000 million; the consolidated net income after tax was NT$ 686 million.
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For the year of 2017, Kinpo's revenues in the lines of imaging products and storage devices saw slight increase. The same results also revealed that Kinpo's efforts in developing and investing smart appliances have been reaping clear effects, and these new business lines will become the growth momentum for Kinpo in 2018. The market scale of hard disk drive is still shrinking, while the business lines in SSD which Kinpo started to build two years ago are gaining stronger sales on a stable basis. It is expected that SSD will become a significant source for Kinpo's revenues in storage product lines. With its efforts in product restructuring and acquisition of new customers, Kino expects that the sales of Netcom products will recover to the reasonable level as in the past after it weathered the record low in the year of 2017. Furthermore, Kinpo will pick up the speed moving the manufacturing of consumer electronics to its Philippine factories. Kinpo is also planning to adopt a dual policy by developing own‐brand products and ODM model in light of its first successful endeavor in the beauty industry in 2017. In order to capture the trends of the IOT and AI, Kinpo injected substantial resources in the AI industry. The service robot XYZrobot has been launched to hospitals, banks, and hotels to provide services to retail customers. HiMirror, world's first smart beauty mirror created by Kinpo, has been launched in the US, Europe, Japan and Taiwan since 2017. Kinpo will continue to develop its owned technology and products in semantic analysis, human face recognition and medical beauty. Overall, Kinpo has been harvesting gratifying results in its newly invested business lines including service robots, 3D printing and beauty electronics. Kinpo will keep its own pace dealing with the changes arising in the industry and actively tackle with the challenges and trials coming forward. In the prospect of 2018, the trend of technology revolution that has been stirring up our world can be interpreted as a crisis but an opportunity at the same time. In order to adapt itself to the ever‐changing environment of the industry and global market, Kinpo will proceed at a firm and sound pace continuingly with a focus on its operational philosophy "innovation, harmony and surpassing." Meanwhile, Kinpo will do its best to optimize its technology, products, brands, distribution channels and after‐sale services, expecting itself to establish the new business model combining the development of own brand products and ODM with technology highly concentrated. Last but not least, we sincerely appreciate the support and recognition provided by our customers, suppliers and the general public. Once again, we would like to express our thanks to all the shareholders who have kindly shown their support along the years. The support from our shareholders not only means a great deal to us, but also gives us the motivation to achieve greater! Please join us moving forward with Kinpo Electronics altogether and embracing the bright future of success.
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Kinpo Electronics, Inc. Chairman: Hsu, Sheng‐Hsiung President: Shen, Shyh‐Yong Chief Accountant: Yu Chien‐Hui
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Report Item 2 Proposed by the Board Subject: 2017 Audit Committee’s Review Report Explanations: The 2017 standalone and consolidated financial statements of the
Company have been audited by CPAs who have issued the independent auditors’ report thereon. We, as the audit committee of the Company, have completed the review of these financial statements, business reports and earrings distribution proposal, and therefore issue our review report as detailed in pages 7‐18.
The CPA is requested for reading: Independent Auditors’ Report The convener of the audit committee is requested for reading: Audit Committee’s Review Report
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INDEPENDENT AUDITORS’ REPORT
English Translation of a Report Originally Issued in Chinese To: Kinpo Electronics, Inc. Opinion We have audited the accompanying parent company only balance sheets of Kinpo Electronics, Inc. (the “Company”) as of December 31, 2017 and 2016, and the related parent company only statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2017 and 2016, and notes to the financial statements including a summary of significant accounting policies. In our opinion, based on our audits and the reports of other auditors (please refer to the Other Matter – Making Reference to the Audits of Component Auditors section of our report), the parent company only financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and financial performance and its cash flows for the years ended December 31, 2017 and 2016, in conformity with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers. Basis for Opinion We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China (the “Norm”), and we have fulfilled our other ethical responsibilities in accordance with the Norm. Based on our audits and the reports of other auditors, 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 2017 financial statements. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Revenue Recognition The operating revenue of the Company in 2017 was recognized at NTD 9,014,746 thousand. As the Company had a large number of customers and engaged in sales involving a variety of commercial terms, we have therefore considered the correctness and revenue recognition timing significant and is one of the key audit matters.
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For the revenue recognition, we have conducted audit procedures including but not limited to evaluating and testing the internal controls with respect to the revenue cycle, selecting representative samples to test the operation of the designed controls and to examine supporting documents for actual sales transactions, and conducting analytical processes such as gross margin analysis and analysis of changes in the top-ten sales customers list. In addition, we reviewed credit notes the Company issued after the period end in confirmation of the timing and correctness of revenue recognition. We also considered the appropriateness of the disclosure in respect of operating revenue in Note 6 of the parent company only financial statement. Investments accounted for using equity method
As of December 31, 2017, the investment accounted for under the equity method amounted to NTD 19,531,884 thousand, which accounted for 65% of the total assets, which is deemed significant to the parent company only financial statements. We reviewed whether the Company had substantive control over its investees. For those investees that the Company had substantive control over, we then reviewed if the investee had been deemed as a consolidated entity. For the long-term equity investments that the Company made significant impact on such investees, we reviewed if the investment was accounted for under the equity method. The appropriateness of the accounting treatment mentioned above had significant impact to the parent company only financial statements, and thus we considered this a key audit matter. We have conduct audit procedures including but not limited to, obtaining the most recent group investment structure chart of the Company; reviewing the changes in group structure and understanding the recognition basis and classification of investments accounted for under the equity method; analyzing the composition of the board of directors and management and the investment contracts to determine whether the investments of the Company were accounted for according to IFRS; verifying whether the Company had obtained audited financial statements when recognizing investment income and other comprehensive income under the equity method. In addition to understanding the impact the investees’ significant events made on the Company’s individual financial statements, we further evaluated whether the measurement of the investment accounted for under the equity method complied with IFRS and IAS. Meanwhile, we verified the existence and ownership of the investment by confirmation or physical count procedures. We also considered the appropriateness of the investments accounted for under the equity method disclosed in Note 6 of the parent company only financial statement. Other Matter – Making Reference to the Audits of Component Auditors We did not audit the financial statements of certain investments accounted for using equity method whose statements are based solely on the reports of other auditors. These investments accounted for using equity method amounted to NTD 3,915,168 thousand and NTD 4,662,351 thousand, representing 13% and 15% of the total assets as of December 31, 2017 and 2016, respectively. The related share of profit (loss) of subsidiaries, associates and joint ventures accounted for using equity method amounted to NTD (130,889) thousand and NTD 375,667
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thousand, representing (25)% and 25% of the net income before tax for the years ended December 31, 2017 and 2016, respectively, and the related shares of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method amounted to NTD (122,797) thousand and NTD (189,470) thousand, representing (32)% and 14% of the other comprehensive income for the years ended December 31, 2017 and 2016, respectively. 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 requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the parent company only financial statements, management is responsible for assessing the ability to continue as a going concern of the Company, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance, including audit committee or supervisors, are responsible for overseeing the financial reporting process of the Company. 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 auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company only financial statements. As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
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1. Identify and assess the risks of material misstatement of the parent company only financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the Company.
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 ability to continue as a going concern of the Company. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the parent company only financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and its subsidiaries 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 accompanying notes, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the 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.
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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of 2017 the parent company only financial statements 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. Ernst & Young March 20, 2018 Taipei, Taiwan Republic of China
Notice to Readers
The accompanying financial statements are intended only to present the financial position, results of operations
and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China
and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements
are those generally accepted and applied in the Republic of China.
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INDEPENDENT AUDITORS’ REPORT
English Translation of a Report Originally Issued in Chinese
To: Kinpo Electronics, Inc.
Opinion
We have audited the accompanying consolidated balance sheets of Kinpo Electronics, Inc. (the
“Company”) and its subsidiaries as of December 31, 2017 and 2016, and the related
consolidated statements of comprehensive income, changes in equity and cash flows for the
years ended December 31, 2017 and 2016, and notes to the consolidated financial statements
including the summary of significant accounting policies (collectively referred to “the
consolidated financial statements”).
In our opinion, based on our audits and the reports of other auditors (please refer to the Other
Matter – Making Reference to the Audits of Component Auditors section of our report), the
consolidated financial statements referred to above present fairly, in all material respects, the
consolidated financial position of the Company and its subsidiaries as of December 31, 2017
and 2016, and their consolidated financial performance and cash flows for the years ended
December 31, 2017 and 2016, in conformity with the requirements of the Regulations
Governing the Preparation of Financial Reports by Securities Issuers and International
Financial Reporting Standards, International Accounting Standards, Interpretations developed
by the International Financial Reporting Interpretations Committee or the former Standing
Interpretations Committee as endorsed by Financial Supervisory Commission of the Republic
of China.
Basis for Opinion
We conducted our audits in accordance with the Regulations Governing Auditing and
Attestation of Financial Statements by Certified Public Accountants and auditing standards
generally accepted in the Republic of China. Our responsibilities under those standards are
further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Company and its subsidiaries in
accordance with the Norm of Professional Ethics for Certified Public Accountant of the
Republic of China (the “Norm”), and we have fulfilled our other ethical responsibilities in
accordance with the Norm. Based on our audits and the reports of other auditors, we believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
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Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of 2017 consolidated financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Revenue Recognition The operating revenue of the Company and its subsidiaries in 2017 was recognized at NTD 119,204,764 thousand. As the Company and its subsidiaries had a large number of customers and engaged in sales involving a variety of commercial terms, we have therefore considered the correctness and revenue recognition timing significant and is one of the key audit matters. For the revenue recognition, we have conducted audit procedures including but not limited to evaluating and testing the internal controls with respect to the revenue cycle, selecting representative samples to test the operation of the designed controls and to examine supporting documents for actual sales transactions, and conducting analytical processes such as gross margin analysis and analysis of changes in the top-ten sales customers list. In addition, we reviewed credit notes the Company issued after the period end in confirmation of the timing and correctness of revenue recognition. We also considered the appropriateness of the disclosure in respect of operating revenue in Note 6 of the consolidated financial statement. Impairment of Trade Receivables As at December 31, 2017, the net trade receivables of the Company and its subsidiaries was NTD 25,732,509 thousand, accounted 29% of the consolidated total assets. To determine the allowance for doubtful accounts in respect of trade receivables on account, the management needed to make judgement upon aging profile of outstanding debts, past collection history and the financial condition of the clients. Therefore, we consider the reasonableness of the impairment assessment as one of the key audit matters. We have conducted audit procedures including but not limited to understanding the internal control in respect of determining allowance for trade receivables through inquiring, assessing the rationality of the assumptions and basis applied by management in determining such allowance for doubtful accounts. In addition, we conducted analytical procedures on collection periods and debtors movements. We further selected samples from the aging analysis provided by the management to test the correctness of the account and to identify and analyze the reason for occurrence of overdue. To assess the possibility of collecting receivables, we sent out confirmations and tested the subsequent collection for selected samples. We also considered the appropriateness of the disclosure in respect of trade receivables and relevant risk in Note 5 and Note 6 of the consolidated financial statement.
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Business Combination
According to IFRS 10, regardless of the nature of the investment, it is necessary for the investor to re-assess whether or not it controls an investee when deciding whether the investor is the parent company. Since the Group holds less than 50% of the shares of some consolidated entities, whether the Company has substantive control over the consolidated entities would directly affect the consolidated financial statements. Therefore, we consider business combination as one of the key audit matters. We have conducted audit procedures including but not limited to obtaining the Company’s latest organizational chart of the affiliates and review the related changes. In addition, we reviewed the overall shareholding percentage of each consolidated entity and analyzed the composition of the board of directors and management, the holding percentages of the top ten shareholders, the level of ownership dispersion, attendance rate in shareholders’ meetings, and the related investment contracts to confirm the appropriateness of the Company’s evaluation of the substative control over its consolidated entities. We also considered the appropriateness of the disclosure in respect of business combination in Notes 4 and 5 of the consolidated financial statement. Other Matter – Making Reference to the Audits of Component Auditors We did not audit the financial statements of certain consolidated subsidiaries, which statements reflect total assets of NTD 5,679,625 thousand and NTD 4,917,615 thousand, constituting 6% and 6% of consolidated total assets as of December 31, 2017 and 2016, respectively, and total operating revenues of NTD 4,150,827 thousand and NTD 2,788,752 thousand, constituting 3% and 2% of consolidated operating revenues for the years ended December 31, 2017 and 2016, respectively. Those financial statements were audited by other auditors, whose reports thereon have been furnished to us, and our opinions expressed herein are based solely on the audit reports of the other auditors. We did not audit the financial statements of certain associates and joint ventures accounted for using equity method whose statements are based solely on the reports of other auditors. These associates and joint ventures for using equity method to NTD 3,296,385 thousand and NTD 3,468,495 thousand, representing 4% and 4% of consolidated total assets as of December 31, 2017 and 2016, respectively. The related shares of profits from the associates and joint ventures for using equity method amounted to NTD 103,068 thousand and NTD 309,571 thousand, representing 11% and 13% of the consolidated net income before tax for the years ended December 31, 2017 and 2016, respectively, and the related shares of other comprehensive income from the associates and joint ventures for using equity method amounted to NTD (94,526) thousand and NTD (174,231) thousand, representing (18)% and 10% of the consolidated other comprehensive income for the years ended December 31, 2017 and 2016, respectively.
‐ 15 ‐
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 requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by Financial Supervisory Commission of the Republic of China and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the ability to continue as a going concern of the Company and its subsidiaries, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and its subsidiaries 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 the financial reporting process of the Company and its subsidiaries. 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 auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 1. Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement 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.
‐ 16 ‐
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 internal control of the Company and its subsidiaries.
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 ability to continue as a going concern of the Company and its subsidiaries. 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 evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and its subsidiaries to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the accompanying notes, 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 Company and its subsidiaries 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 2017 consolidated financial statements 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.
‐ 17 ‐
Others We have audited and expressed an unqualified opinion on the parent company only financial statements of the Company as of and for the years ended December 31, 2017 and 2016. Ernst & Young March 20, 2018 Taipei, Taiwan Republic of China Notice to Readers The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.
‐ 18 ‐
Audit Committee’s Revew Report
The 2017 standalone and consolidated financial statements of the Company prepared
by the Board have been audited by CPAs Hsiao Tsui‐Hui and Lin Su‐Wen of Ernst &
Young, who have issued the independent auditors’ report. These financial statements, along with the business report and earnings distribution proposal, have been reviewed by us, as the audit committee of the Company. We deem no discrepancy. Therefore,
this report is presented in accordance with Article 14‐4 of the Securities and Exchange Act and Article 219 of the Company Act for approval. To: Kinpo Electronics Inc. 2018 Annual Shareholders’ Meeting
Convener of Audit Committee: Chiang Ping‐kun
March 20, 2018
‐ 19 ‐
Report Item 3 Proposed by the Board
Subject: Report on 2017 Distribution of Remunerations to Employees and Directors
Explanations:
(1) The 2017 remunerations to employees and directors were adopted by the
resolution in the first 2018 board meeting on March 20, 2018. The 7.5%
remunerations to employees amounting to NT$ 43,329,000 will be
provided, as will the 1.5% remunerations to directors amounting to NT$
8,665,800.
(2) The remunerations will be paid by cash, and the chairman is authorized to
conduct the payment with full powers to the extent of the remuneration
amount so resolved.
‐ 20 ‐
Report Item 4 Proposed by the Board Subject: Report on amendments to the Rules of Procedures for the Meetings of Board of Directors. Explanations:
(1) Pursuant to the Financial Supervisory Commission’s order number Jin‐guan‐zheng‐fa‐zi #1060027112 dated July 28, 2017, the Company amended some provisions of the “Rules of Procedures for the Meetings of Board of Directors” in response.
(2) For a comparison table of the provisions of the Rules of Procedures for the Meetings of Board of Directors before and after amendment, please refer to Annex 1 on pages 31~34.
‐ 21 ‐
Report Item 5 Proposed by the Board of Directors Subject: Report on the Execution of Company Stock Buybacks
Explanation:
(1) This buyback has been conducted in accordance with Article 28‐2 of the
Securities and Exchange Act.
(2) Information related to this buyback is presented below.
Buyback Number 8
Board Approval Date March 20, 2018
Purpose of Buyback Transfer to employees
Result Buybacks in progress
Reason Not Completed N/A
Buyback Period March 21, 2018 to May 18, 2018
Buyback Price Range NT$7.3 to NT$15.5
Type and Quantity of Stocks Bought Back
Common stocks 29,912,000 shares
Value of Stocks Bought Back NT$ 309,527,673
Number of Shares Cancelled and Transferred
0 shares
Accumulated Company Shares Held and Percentage of Issued Shares
33,488,000 shares 2.30%
‐ 22 ‐
Ratification Items
‐ 22 ‐
Ratification Items
Item 1 Proposed by the Board
Subject: The Company’s 2017 business report and financial statements are submitted
for ratification.
Explanations:
(1) The 2017 business report and financial statements (including
consolidated and standalone financial statements) of the Company have
been prepared and adopted by resolution of the Board, then submitted
to and reviewed by the audit committee (the earnings distribution
proposal is itemized as Ratification Item 2).
(2) The business report and consolidated financial statements (including
standalone financial statements) as detailed in Report Item 1 (pages 3‐5) and Annex 2 (pages 35‐42) are attached for ratification.
(For details of notes to financial statements in Annex 2, please go to the
website http://mops.twse.com.tw/mops/web/index “Market Observation
Post System” → basic information → electronic book → financial
statements → company code: 2312, year: 2017 → search → year of
information: Q4 of 2017, detailed explanation of information: IFRSs
consolidated financial statements, IFRSs standalone financial statement →
inquiry)
Resolution:
‐ 23 ‐
Item 2 Proposed by the Board
Subject: The 2017 earnings distribution proposal of the Company is submitted for
ratification.
Explanations:
(1) For distributing 2017 earnings, The Board has prepared the following
earnings distribution table in accordance with relevant laws and
regulations and the Company’s articles of incorporation.
(2) It is proposed that NT$435,624,364 be appropriated from the
distributable earnings for the year of 2016 to distribute as dividends, all
of which is to be paid in cash. Each share will receive NT$0.3, and every
thousand shares will receive NT$300 in cash dividends without
consideration. After the proposal is adopted at the annual shareholders’
meeting, the shareholders’ meeting is requested to authorize the Board
to set the ex‐dividend date. The distribution will be made according to
the number of shares held by shareholders entered in the shareholders’
registry on the ex‐dividend date.
(3) If there subsequently occurs any change of laws, any change approved
by the competent authority, or any change of common shares of the
Company (e.g. transfer or cancellation of the Company’s shares
repurchased, domestic capital increase in cash, exercise of employees’
stock warrants etc.) or other factors would affect the number of
outstanding shares and, in turn, cause a change in dividend distribution
ratio approved by the annual shareholders’ meeting requiring a
correction, it is proposed that the shareholders’ meeting authorize the
Board of Directors with full powers to make adjustment depending on
the actual number of outstanding shares.
(4) The cash dividend distributed to each shareholder will be rounded down
to the nearest whole number; all numbers after the decimal will be
truncated. The total of the truncated NTD amounts will be recognized in
“other income.”
The below is proposed for ratification:
‐ 24 ‐
Kinpo Electronics, Inc.
Earnings Distribution Proposal for the Year 2017
Item Amount
Unappropriated retained earning of previous years 1,384,680,110 元
Add: Net income of 2017 382,629,176 元
Add: Confirmed Acturial Gains and Losses from Benefits Plan in 2017 ‐25,826,883 元
Appropriated items:
Less: 10% legal reserve 38,262,918 元
Retained earnings available for distribution in 2017 1,703,219,485 元
Distributable items:
Less: Dividend to shareholders (NT$0.3 cash per share) 435,624,364 元
Unappropriated retained earnings of 2017 1,267,595,121 元
Chairman: General Manager: Accounting Manager:
Resolution:
‐ 25 ‐
Discussion Items
‐ 25 ‐
Discussion Items
Item 1 Proposed by the Board
Subject: The proposal for an initial public offering of shares in Kinpo subsidiary Cal‐
Comp Technology (Philippine), Inc., denominated in Philippine pesos and
listed on the Philippine stock exchange, is submitted for discussion and
resolution.
Explanation: I. Purpose of Public Offering:
An application to the Philippine stock exchange will be made for the
public offering and listing of shares in Cl‐Comp Technology
(Philippine), Inc. (CCPH), a Kinpo subsidiary in the Philippines. This is
in response to the rapid economic growth of the Philippines and
ASEAN countries. The offering will increase the visibility of the Kinpo
group in the Philippines, expand the group’s presence in the Philippine
market, and help attract and motivate local professional talent,
helping Kinpo become more competitive in the global market.
II. Effects on Kinpo’s Finances and Business:
1. Effects on Finances:
(1) Once the CCPH offering is fully funded, the company’s
production capacity in southeast Asia can be increased. This will
provide a source of higher income and profit for the Company
and Group, as we can better serve the global strategic
considerations of international clients.
(2) A successful public offering in the Philippines will provide an
additional channel for raising capital, helping improve
fundraising to meet the Company’s future operational funding
and capital expenditure needs.
(3) A successful public offering for CCPH in the Philippines will
significantly increase the Company and Group’s total assets and
net assets, providing more capital for the Company and Group
to pursue shareholder interests.
2. Effects on Business:
The development of the Company and Group’s business in the
Philippines will effectively reduce the trade barriers Kinpo faces in
the ASEAN trade region, allowing us to reap the benefits of
participating in the region’s economic development. In addition,
‐ 26 ‐
the Philippines has a young and large workforce that is beneficial to
the Company and Group’s global manufacturing strategy. Public
listing and fundraising on the Philippine stock market will help the
Company and Group increase manufacturing capacity in the
Philippines in response to growing business in the country, as well
as increase name recognition for the Group to further expand its
presence in the Philippines. This will become another source of
growth momentum for the Company and Group.
III. Distribution of Equity:
An initial public offering of CCPH shares is planned, to be denominated
in the Philippine peso and listed on the Philippine stock exchange. The
face value of a single share will be 1 peso. Approximately 25%
(provisional) of total CCPH shares will be made available in this initial
offering. It is proposed for the board to authorize the CCPH board or
its authorized agents to determine the final number of shares to be
issued, in conjunction with the lead underwriter, in accordance with
Philippine laws and regulations, funding needs, and communications
with Philippine regulators.
IV. Use of funds raised in the offering:
The funds raised in this offering will mainly be invested in the
following ways:
1. Expanding manufacturing plants and purchasing machinery and
equipment, increasing production capacity to respond to growing
orders
2. Repaying bank loans
3. Providing additional liquidity
V. Basis for Equity Distribution Price:
The price of CCPH’s offering on the stock exchange will be determined
based on inquiries in accordance with Philippine laws and regulations,
or based on other means approved by the Philippine securities
regulator.
VI. Equity Assignees:
The shares will be assigned to eligible inquirers, natural and legal
persons required by Philippine laws and regulations, and other
investors (except those prohibited by Philippine laws and regulations).
‐ 27 ‐
VII. Effect on continued public trading in Taiwan:
As CCPH’s public offering in Philippines complies with all relevant
laws and regulations, and CCPH remains an important subsidiary of
Kinpo, the continued public trading of Kinpo shares in Taiwan will be
unaffected.
VIII. In support of the initial public offering of CCPH shares on the
Philippine market, and the application for listing on the Philippine
stock exchange, it is proposed that the Board authorize the
Chairman or an authorized agent, and/or authorize the CCPH board
or an authorized agent (as applicable) to act with full discretion in
matters relevant to this public offering, making adjustments based
on the progress of the plan, the opinions of relevant government
agencies, market conditions, or other factors applicable to the
situation. Relevant matters include but are not limited to the
appointment of professional consultants, decisions on the terms,
time, amount, target investor, issuance method, pricing method,
issuance price (including the price range and final price), issuance
date, whether to employ strategic allotment, use of raised funds,
issuance of commitment letters, and all other matters related to this
public offering.
Resolution:
‐ 28 ‐
Item 2 Proposed by the Board
Subject: The proposal for release of the prohibition on directors from participation in
competitive business is submitted for discussion and resolution.
Explanations:
(1) For Directors of the Company who invest in or operate other companies
engaging in the same or a similar business to Kinpo, we propose to
release the prohibition on them from participation in competitive
business in accordance with Article 209 of the Company Act, with the
precondition that the interest of Kinpo should not be undermined.
(2) For an overview of positions at other companies held concurrently by the
existing directors of the Company, please refer to Annex 3, page 43 of
this handbook. The proposal is submitted for discussion and resolution.
Resolution:
‐ 29 ‐
Incidental Motions
‐ 30 ‐
Adjournment
‐ 31 ‐
ANNEX
‐ 31 ‐
Rules of Procedures for the Meetings of the Board of Directors
of
Kinpo Electronics, Inc.
Article Before and After Amendment (Draft)
Article No. Article After Amendment Article Before Amendment Remarks
Article 12 The following matters shall be submitted to the Company's Board meetings for discussion: 1. The business plan of the Company 2. Annual and semi-annual financial reports, with the exception of semi-annual financial reports which, under relevant laws and regulations, do not require to be audited and attested by a certified public accountant with the exception of semi-annual financial reports which, under relevant laws and regulations, do not require to be audited and attested by a certified public accountant 3. The establishment or amendment of an internal control system pursuant to the Article 14-1 of the Securities and Exchange Act (the "SEA"), and the assessment of the effectiveness of the internal control system. 4. The establishment or amendment, pursuant to the Article 36-1 of the SEA, of the handling procedures for significant financial and business activities including the acquisition or disposal of assets, trading of derivatives, loans of funds to others, and endorsement or guarantee to others 5. The offering, issuance or private placement of equity securities
The following matters shall be submitted to the Company's Board meetings for discussion: 1. The business plan of the Company 2. Annual and semi-annual financial reports, with the exception of semi-annual financial reports which, under relevant laws and regulations, do not require to be audited and attested by a certified public accountant 3. The establishment or amendment of an internal control system pursuant to the Article 14-1 of the Securities and Exchange Act (the "SEA") 4. The establishment or amendment, pursuant to the Article 36-1 of the SEA, of the handling procedures for significant financial and business activities including the acquisition or disposal of assets, trading of derivatives, loans of funds to others, and endorsement or guarantee to others 5. The offering, issuance or private placement of equity securities 6. The appointment and dismissal of financial, accounting or internal auditing officers 7. Donation to a related party or significant donation to a non-related party; provided, however, that a charitable donation to the
Amendment
done in
compliant with
statutory
regulations,
and slight
wording
editing.
ANNEX I
‐ 32 ‐
Article No. Article After Amendment Article Before Amendment Remarks 6. The appointment and dismissal of financial, accounting or internal auditing officers 7. Donation to a related party or significant donation to a non-related party; provided, however, that a charitable donation to the cause of natural disaster relief may be submitted to the next Board meeting for ratification 8. Matters to be resolved by a shareholders' meeting or a Board meeting pursuant to the Article 14-3 of the SEA, other applicable laws or regulations or the Articles of Incorporation, or matters as required by the competent authority concerned The "related party," as afore-mentioned in the seventh subparagraph in the preceding paragraph, refers to the related party as defined in the Regulations Governing the Preparation of Financial Reports by Securities Issuers; the "significant donation to a non-related party" refers to any donation or a series of donations to a single recipient within the period of one year, on an individual basis or cumulatively, reaching or exceeding the amount of one hundred million New Taiwan Dollars, or the amount of one percent of the Company's net operating revenue or the amount of five percent of the Company's paid-in capital as stated in the CPA-attested financial report of the most recent year. As stated in the preceding paragraph, the term "within the period of one year" shall
cause of natural disaster relief may be submitted to the next Board meeting for ratification 8. Matters to be resolved by a shareholders' meeting or a Board meeting pursuant to the Article 14-3 of the SEA, other applicable laws or regulations or the Articles of Incorporation, or matters as required by the competent authority concerned The "related party," as afore-mentioned in the seventh subparagraph in the preceding paragraph, refers to the related party as defined in the Regulations Governing the Preparation of Financial Reports by Securities Issuers; the "significant donation to a non-related party" refers to any donation or a series of donations to a single recipient within the period of one year, on an individual basis or cumulatively, reaching or exceeding the amount of one hundred million New Taiwan Dollars, or the amount of one percent of the Company's net operating revenue or the amount of five percent of the Company's paid-in capital as stated in the CPA-attested financial report of the most recent year. As stated in the preceding paragraph, the term "within the period of one year" shall refer to a period of one year calculated retroactively from the date of current Board meeting convened. The portion of the donations that has been submitted and
‐ 33 ‐
Article No. Article After Amendment Article Before Amendment Remarks refer to a period of one year calculated retroactively from the date of current Board meeting convened. The portion of the donations that has been submitted and approved by the Board of Directors shall be exempted from the calculation. If the Company appoints independent directors in the Board, at least one of the independent directors shall attend the Board meeting in person when the meeting is convened. With respect to the matters which shall be resolved in the Board meeting as aforementioned in the first paragraph, all of the independent directors shall attend the Board meeting. The independent director who is unavailable to attend the meeting in person shall authorize another independent director to do so on his or her behalf. Any objection or reservation expressed by an independent director shall be recorded in the minutes of a Board meeting. In the situation where an independent director wishing to express objection or reservation is unable to attend a Board meeting in person, such director shall present his or her view regarding the relevant matters in written form in advance and such statement shall be recorded in the meeting minutes, unless there is legitimate reason to do otherwise.
approved by the Board of Directors shall be exempted from the calculation.
With respect to the matters
which shall be resolved at a
Board meeting pursuant to
the Article 14-3 of the SEA,
the independent directors, if
appointed by the Company,
shall attend a Board meeting
in person or authorize
another independent director
to attend the meeting on his
or her behalf. Any objection
or reservation expressed by
an independent director shall
be recorded in the minutes
of a Board meeting. In the
situation where an
independent director wishing
to express objection or
reservation is unable to
attend a Board meeting in
person, such director shall
present his or her view
regarding the relevant
matters in written form in
advance and such statement
shall be recorded in the
meeting minutes, unless
there is legitimate reason to
do otherwise.
A r t i c le19 The establishment and amendment of these Rules shall be approved by the Board of Directors of the
These Rules of Procedures
were taken into effect on
January 1, 2007. The
Dates for
admendments
added.
‐ 34 ‐
Article No. Article After Amendment Article Before Amendment Remarks Company. These Rules of Procedures were taken into effect on January 1, 2007, and amended for the first time on April 20, 2007, amended for the second time on March 24, 2008, amended for the third time on October 31, 2012,
and amended for the fourth
time on March 20, 2018.
establishment and
amendment of these Rules
shall be approved by the
Board of Directors of the
Company.
‐ 35 ‐
2017 % 2016 % 2017 % 2016 %Current assets Current liabilities
Cash and cash equivalents 4,6 $629,066 2 $920,076 3 Short-term borrowings 4,6 $3,105,000 11 $3,435,000 12Current financial assets at fair value through profit or loss 4,6 - - 4,372 - Short-term notes and bills payable 6 1,109,119 4 1,603,388 5Current avalable-for-sale financial assets, net 4,6 208,850 1 195,376 1 Current financial liabilities at fair value through profit or loss 4,6 - - 2,330 - Current investments in debt instrument without active market 4,6 150,000 1 150,000 - Notes payable 52 - 52 - Notes receivable, net 4 - - 729 - Accounts payable 76 - 57 - Accounts receivable, net 4,6 1,064,960 3 807,428 3 Accounts payable to related parties 7 985,403 3 898,840 3Accounts receivable due from related parties, net 4,6,7 349,584 1 832,316 3 Other payables 6 237,838 1 480,794 2Other receivables, net 4 7,210 - 5,694 - Other payables to related parties 7 41,823 - 39,065 - Other receivables due from related parties, net 4,7 92,871 - 546,703 2 Current tax liabilities 4,5 62,034 - 73,932 - Current tax assets 4 - - 1,708 - Current provisions 4,6 12,838 - 14,509 - Inventories 4 1,591 - 2,335 - Long-term liabilities, current portion 4,6 390,000 1 75,000 - Prepayments 4 18,280 - 23,410 - Other current liabilities, others 60,091 - 59,862 - Other current assets 4 8,480 - 7,583 - Total current liabilities 6,004,274 20 6,682,829 22
Total current assets 2,530,892 8 3,497,730 12Non-current liabilities
Non-current assets Long-term borrowings 4,6 4,685,000 15 4,945,000 16Non-current available-for-sale financial assets, net 4,6 4,331,751 15 3,917,398 13 Deferred tax liabilities 4,6 1,742,172 6 1,678,202 6Non-current financial assets at cost, net 4,6 27,240 - 32,552 - Net defined benefit liability, non-current 4,6 558,715 2 549,689 2Non-current investments in debt instrument without active market 4,6 150,000 1 300,000 1 Other non-current liabilities, others 161 - 211 - Investments accounted for using equity method, net 4,6 19,531,884 65 19,104,243 63 Total non-current liabilities 6,986,048 23 7,173,102 24Property, plant and equipment 4,6 1,199,155 4 1,233,334 4 Total liabilities 12,990,322 43 13,855,931 46Intangible assets 4,6 27,087 - 2,571 - Deferred tax assets 4,6 2,076,591 7 2,084,604 7 EquityOther non-current assets 8,169 - 169 - Share capital 4,6
Total non-current assets 27,351,877 92 26,674,871 88 Ordinary share 14,556,572 49 14,556,572 48Capital surplus 6 668,917 2 600,097 2Retained earnings 6
Legal reserve 251,551 1 133,902 - Special reserve 255,058 1 255,058 1Unappropriated reatained earnings 1,741,483 6 1,932,699 7
Total retained earnings 2,248,092 8 2,321,659 8Total other equity interest 533,051 2 118,933 - Treasury shares 4,6 (1,114,185) (4) (1,280,591) (4)Total equity 16,892,447 57 16,316,670 54
Total assets $29,882,769 100 $30,172,601 100 Total liabilities and equity $29,882,769 100 $30,172,601 100
KINPO ELECTRONICS, INC.PARENT COMPANY ONLY BALANCE SHEETS
December 31, 2017 and 2016(Expressed in Thousands of New Taiwan Dollars)
The accompanying notes are an integral part of financial statements.
Liabilities and Equity NotesAs of December 31,
NotesAssetsAs of December 31,
ANNEX II
‐ 36 ‐
Item Notes
Operating revenue 4,6,7 $9,014,746 100 $12,036,018 100
Operating costs 6,7 (8,369,188) (93) (11,285,897) (94)
Gross profit from operations 645,558 7 750,121 6
Operating expenses 6
Selling expenses (153,672) (2) (199,105) (2)
Administrative expenses (266,203) (3) (318,090) (2)
Research and development expenses (194,488) (2) (207,790) (2)
Total operating expenses (614,363) (7) (724,985) (6)
Net operating income 31,195 - 25,136 -
Non-operating income and expenses 6,7
Other income 227,202 3 1,894,347 16
Other gains and losses, net (86,829) (1) (713,635) (6)
Finance costs, net (126,511) (1) (129,280) (1)
Share of profit (loss) of subsidiaries, associates and joint ventures accounted 480,668 5 436,058 4
for using equity method, net
Total non-operating income and expenses 494,530 6 1,487,490 13
Profit before tax 525,725 6 1,512,626 13
Total tax expense 4,6 (143,096) (2) (336,132) (3)
Profit 382,629 4 1,176,494 10
Other comprehensive income, net 6
Components of other comprehensive income that will not be reclassified to profit or loss
Gains (losses) on remeasurements of defined benefit plans (21,577) - 3,192 -
Share of other comprehensive income of subsidiaries, associates and joint ventures (8,967) - 3,163 -
accounted for using equity method, components of other comprehensive income
that will not be reclassified to profit or loss
Income tax related to components of other comprehensive income that will not 4,717 - (2,141) -
be reclassified to profit or loss
Components of other comprehensive income that will be reclassified to profit or loss:
Unrealised gains (losses) on valuation of available-for-sale financial assets 434,866 4 56,024 -
Share of other comprehensive income of subsidiaries, associates and joint ventures (29,345) - (1,652,416) (14)
accounted for using equity method, components of other comprehensive income
that will be reclassified to profit or loss
Income tax related to components of other comprehensive income that will 430 - 277,857 3
be reclassified to profit or loss
Other comprehensive income, net 380,124 4 (1,314,321) (11)
Total comprehensive income $762,753 8 $(137,827) (1)
Earnings per share 6
Basic earnings per share $0.28 $0.87
The accompanying notes are an integral part of financial statements.
KINPO ELECTRONICS, INC.
PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2017 and 2016
(Expressed in Thousands of New Taiwan Dollars, Except for Earnings per Share)
2017 % 2016 %
‐ 37 ‐
Retained earnings
Balance on January 1, 2016 $14,581,132 $426,996 $- $255,058 $1,310,262 $588,932 $885,539 $(37,003) $(1,312,714) $16,698,202
Appropriation and distribution of 2015 retained earnings:
Legal reserve appropriated - - 133,902 - (133,902) - - - - -
Cash dividends - - - - (424,369) - - - - (424,369)
Other changes in capital surplus:
Changes in equity of associates and joint ventures accounted - (10,908) - - - - - - - (10,908)
for using equity method
Profit for the year ended December 31, 2016 - - - - 1,176,494 - - - - 1,176,494
Other comprehensive income for the year ended December 31, 2016 - - - - 4,214 (1,294,087) (40,660) 16,212 - (1,314,321)
Total comprehensive income for the year ended December 31, 2016 - - - - 1,180,708 (1,294,087) (40,660) 16,212 - (137,827)
Purchase of treasury share - - - - - - - - (172,700) (172,700)
Retirement of treasury share (24,560) 6,911 - - - - - - 17,649 -
Adjustments of capital surplus for company's cash dividends - 18,883 - - - - - - - 18,883
received by subsudiaries
Changes in ownership interests in subsidiaries - 48,200 - - - - - - - 48,200
Share-based payments - 110,015 - - - - - - 187,174 297,189
Balance on December 31, 2016 $14,556,572 $600,097 $133,902 $255,058 $1,932,699 $(705,155) $844,879 $(20,791) $(1,280,591) $16,316,670
Balance on January 1, 2017 $14,556,572 $600,097 $133,902 $255,058 $1,932,699 $(705,155) $844,879 $(20,791) $(1,280,591) $16,316,670
Appropriation and distribution of 2016 retained earnings:
Legal reserve appropriated - - 117,649 - (117,649) - - - - -
Cash dividends - - - - (430,369) - - - - (430,369)
Other changes in capital surplus:
Changes in equity of associates and joint ventures accounted - (5,534) - - - - - - - (5,534)
for using equity method
Profit for the year ended December 31, 2017 - - - - 382,629 - - - - 382,629
Other comprehensive income for the year ended December 31, 2017 - - - - (25,827) (35,220) 441,276 (105) - 380,124
Total comprehensive income for the year ended December 31, 2017 - - - - 356,802 (35,220) 441,276 (105) - 762,753
Adjustments of capital surplus for company's cash dividends - 18,883 - - - - - - - 18,883
received by subsudiaries
Changes in ownership interests in subsidiaries - (15,511) - - - - - - - (15,511)
Share-based payments - 70,705 - - - - - - 166,406 237,111
Others - 277 - - - - - 8,167 - 8,444
Balance on December 31, 2017 $14,556,572 $668,917 $251,551 $255,058 $1,741,483 $(740,375) $1,286,155 $(12,729) $(1,114,185) $16,892,447
KINPO ELECTRONICS, INC.
PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY
(Expressed in Thousands of New Taiwan Dollars)
For the years ended December 31, 2017 and 2016
Treasuryshares
Total equity
Other equity
The accompanying notes are an integral part of financial statements.
Unrealized gain(loss) on
available-for-salefinancial assets
Item
Exchangedifferences ontranslation of
foreign financialstatements
Share capital Capital surplus Legal reserve Special reserveUnappropriated
retainedearnings
Others
‐ 38 ‐
KINPO ELECTRONICS, INC.PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
For the years ended December 31, 2017 and 2016(Expressed in Thousands of New Taiwan Dollars)
$525,725 $1,512,626
Adjustments to reconcile profit:Depreciation expense 34,231 37,287Amortization expense 10,174 2,174Net loss (gain) on financial assets or liabilities at fair value through profit or loss 2,042 (2,383)Interest expense 120,290 122,806Interest income (25,676) (23,345)Dividend income (184,408) (186,031)Share-based payments 57,933 97,343Share of loss (profit) of subsidiaries, associates and joint ventures accounted for using equity (480,668) (436,058)Property, plant and equipment transferred to expenses - 53Loss (gain) on disposal of investments (1,143) - Loss (gain) on disposal of investments accounted for using equity method - 724,270Impairment loss on finacial assets 511 9,490Reversal of impairment loss on financial assets - (5,728)Gain on bargain purchase - (1,677,832)
Changes in operating assets and liabilities:Decrease (increase) in notes receivable 729 (729)Decrease (increase) in notes receivable due from related parties - 36Decrease (increase) in accounts receivable (257,532) 87,842Decrease (increase) in accounts receivable due from related parties 482,732 264,239Decrease (increase) in other receivable (1,712) 4,593Decrease (increase) in other receivable due from related parties 453,832 (63,260)Decrease (increase) in inventories 744 (2,335)Decrease (increase) in prepayments 5,130 (14,143)Decrease (increase) in other current assets (831) 620Increase (decrease) in notes payable - (1,319)Increase (decrease) in accounts payable 19 (148)Increase (decrease) in accounts payable to related parties 86,563 (1,764,531)Increase (decrease) in other payable (243,148) 209,108Increase (decrease) in other payable to related parties 2,758 9,051Increase (decrease) in provisions (1,671) 4,970Increase (decrease) in other current liabilities 229 43,405Increase (decrease) in net defined benefit liability (12,551) (11,145)
574,302 (1,059,074)Interest received 25,872 23,188Interest paid (119,090) (123,174)Income taxes refund (paid) (76,155) (243)
Net cash flows from (used in) operating activities 404,929 (1,159,303)
Proceeds from disposal of available-for-sale financial assets 7,671 5,728Proceeds from repayments of investments in debt instrument without active market 150,000 150,000Proceeds from capital reduction of financial assets at cost 5,312 2,034Acquisition of investments accounted for using equity method (359,348) (2,201,526)Increase in prepayments for investments (8,000) - Acquisition of property, plant and equipment (832) (6,805)Proceeds from disposal of property, plant and equipment 780 - Acquisition of intangible assets (34,690) (2,504)Increase in other non-current assets - 21Dividends received 577,680 2,538,710
Net cash flows from (used in) investing activities 338,573 485,658
Increase in short-term loans - 165,875Decrease in short-term loans (330,000) - Increase in short-term notes and bills payable - 280,000Decrease in short-term notes and bills payable (495,000) - Proceeds from long-term debt 9,850,000 6,370,000Repayments of long-term debt (9,795,000) (6,150,000)Decrease in other non-current liabilities (50) (90)Cash dividends paid (430,369) (424,369)Payments to acquire treasury shares - (172,700)Treasury shares sold to employees 165,907 186,639
Net cash flows from (used in) financing activities (1,034,512) 255,355
(291,010) (418,290)920,076 1,338,366
$629,066 $920,076
The accompanying notes are an integral part of financial statements.
Cash flows from (used in) financing activities:
Net increase (decrease) in cash and cash equivalentsCash and cash equivalents at the beginning of periodCash and cash equivalents at the end of period
Adjustments:
Cash inflow (outflow) generated from operations:
2017
Cash flows from (used in) investing activities:
2016Cash flows from operating activities:
Profit before tax
Item
equity method
‐39‐
KINPO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2017 and 2016
(Expressed in Thousands of New Taiwan Dollars)
Assets Notes 2017 % 2016 % Liabilities and Equity Notes 2017 % 2016 %
Current assets Current liabilities
Cash and cash equivalents 4,6 $7,475,163 8 $6,441,055 8 Short-term borrowings 4,6 $21,379,200 24 $14,285,990 17
Current financial assets at fair value through profit or loss 4,6 - - 8,612 - Short-term notes and bills payable 6 1,175,071 1 1,799,813 2
Current avalable-for-sale financial assets, net 4,6 262,272 - 245,352 - Current financial liabilities at fair value through profit or loss 4,6 6,872 - 63,056 -
Current investments in debt instrument without active market 4,6 202,211 - 182,241 - Notes payable 3,963 - 11,588 -
Notes receivable, net 4,6 86,048 - 22,960 - Accounts payable 21,663,136 24 22,475,433 27
Accounts receivable, net 4,6 25,732,509 29 23,000,909 28 Accounts payable to related parties 7 54,947 - 104,051 -
Accounts receivable due from related parties, net 4,6,7 242,037 - 272,770 - Other payables 6 2,684,471 3 3,456,869 4
Other receivables, net 4 1,854,796 2 987,128 1 Other payables to related parties 7 704 - 526 -
Other receivables due from related parties, net 4,7 258 - 9 - Current tax liabilities 4,5 310,768 - 391,838 1
Current tax assets 4 4,893 - 4,474 - Current provisions 4,6 30,911 - 63,570 -
Inventories 4,6 15,051,086 17 14,806,803 18 Long-term liabilities, current portion 4,6 476,436 1 2,396,310 3
Prepayments 473,278 1 499,498 1 Other current liabilities 502,249 1 708,021 1
Other current assets 4,6 736,443 1 967,486 1 Total current liabilities 48,288,728 54 45,757,065 55
Total current assets 52,120,994 58 47,439,297 57
Non-current liabilities
Non-current assets Long-term borrowings 4,6 10,284,859 12 8,476,965 10
Non-current available-for-sale financial assets, net 4,6 4,363,451 5 4,109,663 5 Deferred tax liabilities 4,6 1,805,903 2 1,725,104 2
Non-current financial assets at cost, net 4,6 549,998 1 488,995 1 Net defined benefit liability, non-current 4,6 771,443 1 709,206 1
Non-current investments in debt instrument without active market 4,6 150,000 - 300,000 - Other non-current liabilities 418,426 - 2,399 0
Investments accounted for using equity method, net 4,6 3,296,385 4 3,468,495 4 Total non-current liabilities 13,280,631 15 10,913,674 13
Property, plant and equipment 4,6 23,831,631 27 23,261,744 28 Total liabilities 61,569,359 69 56,670,739 68
Investment property, net 4,6 187,976 - 160,386 -
Intangible assets 4,6 358,914 - 299,404 - Equity attributable to owners of parent
Deferred tax assets 4,6 2,351,332 3 2,321,471 3 Share capital 4,6
Other non-current assets 6 2,128,556 2 1,837,613 2 Ordinary share 14,556,572 16 14,556,572 17
Total non-current assets 37,218,243 42 36,247,771 43 Capital surplus 6 668,917 1 600,097 1
Retained earnings 6
Legal reserve 251,551 - 133,902 -
Special reserve 255,058 - 255,058 -
Unappropriated reatained earnings 1,741,483 2 1,932,699 2
Total retained earnings 2,248,092 2 2,321,659 2
Total other equity interest 6 533,051 1 118,933 -
Treasury shares 4,6 (1,114,185) (1) (1,280,591) (1)
Total equity attributable to owners of the parent 16,892,447 19 16,316,670 19
Non-controlling interest 6 10,877,431 12 10,699,659 13
Total equity 27,769,878 31 27,016,329 32
Total asset $89,339,237 100 $83,687,068 100 Total liabilities and equity $89,339,237 100 $83,687,068 100
The accompanying notes are an integral part of financial statements.
‐ 40 ‐
KINPO ELECTRONICS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2017 and 2016(Expressed in Thousands of New Taiwan Dollars except for earnings per share)
Item Notes 2017 % 2016 %Operating revenue 4,6,7 $119,204,764 100 $122,970,192 100Operating costs 6,7 (111,767,255) (94) (115,314,278) (94)Gross profit from operations 7,437,509 6 7,655,914 6Operating expenses 6,7
Selling expenses (1,143,195) (1) (1,180,492) (1)Administrative expenses (2,418,015) (2) (2,856,027) (2)Research and development expenses (2,646,432) (2) (2,484,058) (2) Total operating expenses (6,207,642) (5) (6,520,577) (5)
Net operating income 1,229,867 1 1,135,337 1
Non-operating income and expenses 6,7 Other income 722,940 1 2,477,601 2
Other gains and losses, net (355,797) - (903,309) (1)Finance costs, net (778,172) (1) (665,378) (1)Share of profit (loss) of associates and joint ventures 103,068 - 309,571 -
accounted for using equity method, net Total non-operating income and expenses (307,961) - 1,218,485 -
Profit before tax 921,906 1 2,353,822 1Total tax expense 4,6 (235,629) - (633,628) - Profit 686,277 1 1,720,194 1Other comprehensive income, net 6
Components of other comprehensive income that will not be reclassified to profit or loss:
Gains (losses) on remeasurements of defined benefit plans (34,817) - 23,774 -
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
(2,278) - (6,293) -
Income tax related to components of other comprehensive income that will not be reclassified to profit or loss
4,717 - (2,141) -
Components of other comprehensive income that will be reclassified to profit or loss:
Exchange differences on translation 266,323 - (2,024,568) (1)
Unrealised gains (losses) on valuation of available-for-sale financial assets 384,640 - 94,890 -
Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will be reclassified to profit or loss
(92,248) - (167,938) -
Other components of other comprehensive income that will be reclassified to profit or loss
(281) - 9,905 -
Income tax related to components of other comprehensive income that will be reclassified to profit or loss
430 - 277,857 -
Other comprehensive income, net 526,486 - (1,794,514) (1)Total comprehensive income $1,212,763 1 $(74,320) -
Profit, attributable to:Profit, attributable to owners of parent $382,629 1 $1,176,494 1Profit, attributable to non-controlling interests 303,648 - 543,700 - Total $686,277 1 $1,720,194 1
Comprehensive income attributable to:Comprehensive income, attributable to owners of parent $762,753 1 $(137,827) - Comprehensive income, attributable to non-controlling interests 450,010 - 63,507 - Total $1,212,763 1 $(74,320) -
Earnings per share 6Basic earnings per share $0.28 $0.87
The accompanying notes are an integral part of financial statements.
‐ 41 ‐
KINPO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2017 and 2016
(Expressed in Thousands of New Taiwan Dollars)
Equity attributable to owners of the parent
Retained earnings
Item
Balance on January 1, 2016 $14,581,132 $426,996 $- $255,058 $1,310,262 $588,932 $885,539 $(37,003) $(1,312,714) $16,698,202 $530,357 $17,228,559
Appropriation and distribution of 2015 retained earnings
Legal reserve appropriated - - 133,902 - (133,902) - - - - - - -
Cash dividends - - - - (424,369) - - - - (424,369) - (424,369)Other changes in capital surplus:
Changes in equity of associates and joint ventures accounted for using equity method
- (10,908) - - - - - - - (10,908) - (10,908)
Profit for the year ended December 31, 2016 - - - - 1,176,494 - - - - 1,176,494 543,700 1,720,194
Other comprehensive income for the year ended December 31, 2016
- - - - 4,214 (1,294,087) (40,660) 16,212 - (1,314,321) (480,193) (1,794,514)
Total comprehensive income for the year ended December 31, 2016
- - - - 1,180,708 (1,294,087) (40,660) 16,212 - (137,827) 63,507 (74,320)
Purchase of treasury share - - - - - - - - (172,700) (172,700) (172,700)
Retirement of treasury share (24,560) 6,911 - - - - - - 17,649 - - -
Adjustments of capital surplus for company's cash dividends received by subsudiaries
- 18,883 - - - - - - - 18,883 - 18,883
Changes in ownership interests in subsidiaries - 48,200 - - - - - - - 48,200 36,621 84,821
Share-based payments - 110,015 - - - - - - 187,174 297,189 12,932 310,121
Others - - - - - - - - - - 10,056,242 10,056,242
Balance on December 31, 2016 $14,556,572 $600,097 $133,902 $255,058 $1,932,699 $(705,155) $844,879 $(20,791) $(1,280,591) $16,316,670 $10,699,659 $27,016,329
Balance on January 1, 2017 $14,556,572 $600,097 $133,902 $255,058 $1,932,699 $(705,155) $844,879 $(20,791) $(1,280,591) $16,316,670 $10,699,659 $27,016,329
Appropriation and distribution of 2016 retained earnings:
Legal reserve appropriated - - 117,649 - (117,649) - - - - - - -
Cash dividends - - - - (430,369) - - - - (430,369) - (430,369)
Other changes in capital surplus:
Changes in equity of associates and joint ventures accounted for using equity method
- (5,534) - - - - - - - (5,534) - (5,534)
Profit for the year ended December 31, 2017 - - - - 382,629 - - - - 382,629 303,648 686,277
Other comprehensive income for the year ended December 31, 2017
- - - - (25,827) (35,220) 441,276 (105) - 380,124 146,362 526,486
Total comprehensive income for the year ended December 31, 2017
- - - - 356,802 (35,220) 441,276 (105) - 762,753 450,010 1,212,763
Adjustments of capital surplus for company's cash dividends received by subsudiaries
- 18,883 - - - - - - - 18,883 - 18,883
Changes in ownership interests in subsidiaries - (15,511) - - - - - - - (15,511) 33,751 18,240
Share-based payments - 70,705 - - - - - - 166,406 237,111 12,956 250,067
Others - 277 - - - - - 8,167 - 8,444 (318,945) (310,501)
Balance on December 31, 2017 $14,556,572 $668,917 $251,551 $255,058 $1,741,483 $(740,375) $1,286,155 $(12,729) $(1,114,185) $16,892,447 $10,877,431 $27,769,878
The accompanying notes are an integral part of financial statements.
Non-controllinginterests
Total equity
Other equity
Share capital Capital surplus Legal reserve Special reserveUnappropriated
retainedearnings
Exchange differenceson translation offoreign financial
statements
Unrealized gain(loss) on available-for-sale financial
assets
Others Treasury shares
Total equityattributable toowners of the
parent
‐ 42 ‐
KINPO ELECTRONICS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2017 and 2016(Expressed in Thousands of New Taiwan Dollars)
Cash flows from operating activities:Profit before tax $921,906 $2,353,822Adjustments:
Adjustments to reconcile profit:Depreciation expense 2,790,942 2,875,668Amortization expense 84,181 37,787Net loss (gain) on financial assets or liabilities at fair value through profit or loss (51,812) 119,652Interest expense 616,485 511,510Interest income (54,933) (101,819)Dividend income (196,813) (200,290)Share-based payments 92,016 176,681Share of loss (profit) of associates and joint ventures accounted for using equity method (103,068) (309,571)Loss (gain) on disposal of property, plant and equipment 7,796 (83,064)Loss (gain) on disposal of investments (12,004) 1,245Loss (gain) on disposal of investments accounted for using equity method - 866,972Impairment loss on finacial assets 511 24,095Reversal of provision for loss on financial assets - (5,728)Impairment loss on non-finacial assets 23,153 258,925Gain on bargain purchase - (1,929,831)
Changes in operating assets and liabilities:Decrease (increase) in notes receivable (63,088) 7,228Decrease (increase) in accounts receivable (2,731,600) 7,354,672Decrease (increase) in accounts receivable due from related parties 30,733 (2,001)Decrease (increase) in other receivable (858,053) 957,573Decrease (increase) in other receivable due from related parties (249) 383,802Decrease (increase) in inventories (244,283) 780,690Decrease (increase) in prepayments 26,220 (322,745)Decrease (increase) in other current assets 231,120 258,558Decrease (increase) in other financial assets (11) 53,091Increase (decrease) in notes payable (7,625) 8,549Increase (decrease) in accounts payable (812,297) (2,250,059)Increase (decrease) in accounts payable to related parties (49,104) (128,967)Increase (decrease) in other payable (781,048) 365,413Increase (decrease) in other payable to related parties 178 (73,793)Increase (decrease) in provisions (32,659) 42,978Increase (decrease) in other current liabilities (205,772) (424,315)Increase (decrease) in net defined benefit liability 27,420 28,605
Cash inflow (outflow) generated from operations: (1,351,758) 11,635,333Interest received 44,263 94,615Interest paid (627,365) (466,715)Income taxes paid (268,845) (121,766)
Net cash flows from (used in) operating activities (2,203,705) 11,141,467
Cash flows from (used in) investing activities: Proceeds from disposal of financial assets at fair value through profit or loss, designated as upon initial recognition 2,833 - Proceeds from disposal of available-for-sale financial assets 127,836 116,618Acquisition of investments in debt instrument without active market (14,857) (31,685)Proceeds from repayments of investments in debt instrument without active market 150,000 150,000Acquisition of financial assets at cost (69,226) - Proceeds from capital reduction of financial assets at cost 5,312 2,034Acquisition of investments accounted for using equity method (38,305) (263,026)Proceeds from disposal of investments accounted for using equity method - 2,283Proceeds from capital reduction of investments accounted for using equity method (10,000) - Acquisition of property, plant and equipment (3,214,257) (3,731,090)Proceeds from disposal of property, plant and equipment 454,678 573,292Acquisition of intangible assets (147,916) (71,423)Net cash inflows from business combination - 3,766,471Acquisition of investment properties (70,976) - Increase in other financial assets - (25,412)Decrease in other financial assets 20,274 - Increase in other non-current assets (351,647) - Decrease in other non-current assets - 27,295Increase in prepayments for business facilities (153,015) (552,531)Dividends received 430,198 410,500
Net cash flows from (used in) investing activities (2,879,068) 373,326
Cash flows from (used in) financing activities:Increase in short-term loans 9,704,974 2,454,184Decrease in short-term loans (2,766,123) (7,461,419)Increase in short-term notes and bills payable - 330,000Decrease in short-term notes and bills payable (625,500) (44,000)Proceeds from long-term debt 15,612,440 8,289,995Repayments of long-term debt (15,213,413) (10,143,241)Increase in other non-current liabilities - 1,582Decrease in other non-current liabilities (7,479) - Cash dividends paid (411,486) (405,486)Exercise of employee share options 7,675 - Payments to acquire treasury shares - (172,700)Treasury shares sold to employees 165,908 186,639Change in non-controlling interests (316,303) (22,737)
Net cash flows from (used in) financing activities 6,150,693 (6,987,183)Effect of exchange rate changes on cash and cash equivalents (33,812) (1,461,342)Net increase (decrease) in cash and cash equivalents 1,034,108 3,066,268Cash and cash equivalents at the beginning of period 6,441,055 3,374,787Cash and cash equivalents at the end of period $7,475,163 $6,441,055
The accompanying notes are an integral part of financial statements.
Item 2017 2016
‐ 43 ‐
Kinpo Electronics, Inc.
Overview of Other Key Positions Concurrently Held by Directors
Position Name Key Positions Held in Other Companies
Chairman Hsu, Sheng‐
Hsiung
NTNU Innovation Investment Holding Company
Chairman
Compal Smart Device (Chongqing) Co., Ltd.
Chairman
Kinpo International (Singapore) Pte. Ltd.
Director
Director Shen, Shyh‐Yong New Era AI Robotic Limited Chairman
iHELPER Inc. Chairman
Ruten Singapore Pte. Ltd. Director
Kinpo International (Singapore) Pte. Ltd.
Director
Cal‐Comp Big Data International Ltd. Director
New Era AI Robotic Limited Chairman
Cal‐Com (India) Private Limited Director
Nexa3D Inc. Director
Director Chen, Jui‐Tsung Ruihe Biotech Ltd. Chairman
Raycore Biotech Co., Ltd. Director
Director Hsu, Chieh‐Li AcTel Electronic(Dong Guan) Co., Ltd. Director
AcBel Electronic(Dong Guan) Co., Ltd. Director
AcBel Electronic (Wuhan) Co., Ltd. Director
AcBel Electronic (Wuhan) Co., Ltd. General Manager
Acbel (USA) Polytech Inc. Director
AcBel Polytech (SAMOA) Investment Inc.
Director
Acbel Polytech (Singapore) Pte Ltd. Director
Acbel Polytech (UK) Limited Director
AcBel Polytech Japan Inc. Director
Power Station Holdings Ltd. Director
The Eslite Spectrum Corporation Director
A N N E X I I I
‐ 44 ‐
APPENDIX
‐ 44 ‐
Articles of Incorporation
of
Kinpo Electronics, Inc.
Chapter One General Provisions
Article 1
The Company is incorporated as a company limited by shares under the provisions set forth in the
Company Act in the full name of Kinpo Electronics, Inc (the “Company”).
Article 2
The lines of business of the Company shall include the following:
1. CB01020 Office Machine Manufacturing
2. CB01990 Other Machinery Manufacturing Not Elsewhere Classified
3. CC01030 Electric Appliance and Audiovisual Electric Products Manufacturing
4. CC01060 Wired Communication Equipment and Apparatus Manufacturing
5. CC01070 Telecommunication Equipment and Apparatus Manufacturing
6. CC01080 Electronic Parts and Components Manufacturing
7. CC01110 Computers and Computing Peripheral Equipment Manufacturing
8. CF01011 Medical Materials and Equipment Manufacturing
9. E601020 Electric Appliance Installation
10. E603050 Cybernation Equipment Construction
11. E604010 Machinery Installation Construction
12. E605010 Computing Equipment Installation
13. F111090 Wholesale of Building Materials
14. F113010 Wholesale of Machinery
15. F113020 Wholesale of Household Appliance
16. F113030 Wholesale of Precision Instruments
17. F113050 Wholesale of Computing and Business Machinery Equipment
18. F113070 Wholesale of Telecom Instruments
19. F113110 Wholesale of Batteries
20. F113990 Wholesale of Other Machinery and Equipment
21. F118010 Wholesale of Computer Software
22. F119010 Wholesale of Electronic Materials
23. F211010 Retail Sale of Building Materials
24. F213010 Retail Sale of Household Appliance
25. F213030 Retail Sale of Computing and Business Machinery Equipment
26. F213040 Retail Sale of Precision Instruments
27. F213060 Retail Sale of Telecom Instruments
28. F213080 Retail Sale of Machinery and Equipment
APPENDIX I
‐ 45 ‐
29. F213110 Retail Sale of Batteries
30. F218010 Retail Sale of Computer Software
31. F219010 Retail Sale of Electronic Materials
32. F213990 Retail Sale of Other Machinery and Equipment
33. F401010 International Trade
34. I199990 Other Consultancy
35. I301010 Software Design Services
36. I301020 Data Processing Services
37. I301030 Digital Information Supply Services
38. IG02010 Research Development Service
39. JA02010 Electric Appliance and Audiovisual Electric Products Repair Shops
40. H703100 Real Estate Rental and Leasing
41. F108031 Wholesale of Drugs, Medical Goods
42. F208031 Retail Sale of Medical Equipment
43. CC01101 Retrained Telecom Radio Frequency Equipment and Materials Manufacturing
44. F401021 Retrained Telecom Radio Frequency Equipment and Materials Import
45. ZZ99999 All business items that are not prohibited or restricted by law, except those are subject
to special approval
Article 3
The Company may, in line with its business needs, provide guarantees externally.
The total amount of the Company's reinvestment may exceed 40% of the Company's paid‐in capital.
Article 4
The head office of the Company is located in Taipei, Taiwan. The Company may, as approved by the
resolution of the Board of Directors, set up branch offices or factories in compliance with applicable
laws and regulations in Taiwan or abroad when necessary.
Article 5
(Deleted.)
Chapter Two Shares
Article 6
The total amount of the Company's authorized capital shall be two billion New Taiwan Dollars (NT$
2,000,000,000) divided into two billion shares with a par value of ten New Taiwan Dollars (NT$ 10)
per share, to be issued in installments, including one hundred fifty million shares retained for the
exercise of share subscriptions from the rights of stock warrants or bonds attached with warrants .
‐ 46 ‐
Article 7
The share certificates of the Company shall be serial numbered, signed by or affixed with the seals
of no less than three Directors of the Company, and be validated pursuant to the law before they
are issued.
The Company may issue shares without printing share certificates, but shall have the shares
registered with Taiwan Depository and Clearing Corporation.
Article 8
Shareholders shall provide their real names and residential addresses to the Company or the agent
of the Company's shareholder services, and they should also provide the specimens of their
signatures or seals to the Company or the agent of the Company's shareholder services for
documentation.
Article 9
The shareholder services of the Company, including the transferring, inheritance, and gifting of
shares, reporting of loss of share certificates, pledging of stock rights, and other matters such as
reporting of loss or change of signatures or seals, change of address, and collection of dividends or
other interests, shall be conducted in accordance with the Regulations Governing the
Administration of Shareholder Services of Public Companies unless otherwise prescribed by other
applicable laws and regulations.
Article 10
Registration for transfer of shares shall be suspended for a period of sixty days before the
convention of an annual general meeting of shareholders, thirty days before an extraordinary
general meeting of shareholders, or within five days before the base date on which the dividends,
bonuses, or other interests to be paid out by the Company.
Chapter Three Shareholders' Meeting
Article 11
Shareholders' meeting shall be of two types, namely the annual and extraordinary general meeting
of shareholders, with the former convened by the Board of Directors, in accordance with the law,
regularly once a year within six months after the close of each fiscal year, and the later convened,
in accordance with the law, when necessary.
Article 12
In case a shareholder is unable to attend a shareholders' meeting for any cause, such shareholder
may issue a proxy, specifying the scope of authorization for a representative to be present on the
shareholder's behalf, in accordance with the Regulations Governing the Use of Proxies for
Attendance at Shareholder Meeting of Public Companies.
‐ 47 ‐
Article 13
A shareholders' meeting shall be presided over by the Chairman of the Company. In case the
Chairman is on leave or unable to perform his or her duty and power for any cause, the Chairman
shall designate one director to act as the chairperson for the meeting; if no such designation is made,
the directors of the Board shall elect one among themselves.
Article 14
A shareholder of the Company shall have one vote for each share held.
Article 15
Unless otherwise provided for under the Company Act, a resolution shall be made at a shareholders'
meeting by the shareholders holding and representing a majority of the total number the
outstanding shares issued and at which meeting a majority of the shareholders present shall vote in
favor of it.
Chapter Four Directors and Functional Committees
Article 16
The Company shall have eleven to sixteen directors whom shall be elected by shareholders through
candidate nomination system from the list of nominees. The number of independent directors shall
not be less than three and shall not be less than one fifth of the seats in the Board of Directors.
The professional qualifications, shareholding, restrictions on concurrent positions held, method of
nomination and election, and other compliance matters with respect to independent directors shall
be conducted in accordance with applicable laws and regulations.
The total number of registered shares owned by all directors of the Board of Directors of the
Company shall be in compliance with the Rules and Review Procedures for Director and Supervisor
Share Ownership Ratios at Public Companies as promulgated by the Securities and Futures Bureau
of the Financial Supervisory Commission.
Article 17
A director shall be elected for a term of three years and may be re‐elected for consecutive terms. In
the situation when a director's term of office has reached expiration but the next election has not
yet to take place, such director's service shall be extended till the following term of directors assume
office.
The Company may purchase liability insurance for the directors during their term of office to cover
the indemnity which may arise from within the scope of their business duty and responsibilities in
accordance with laws.
‐ 48 ‐
Article 18
In the situation when the vacancy in the Board of Directors has reached one third of the number of
total members, or when all independent directors are dismissed, the Board of Directors shall
convene an extraordinary shareholders' meeting within sixty days to elect succeeding directors
whose term of office shall be limited to fulfill the remaining period of their predecessors.
Article 19
The Board of Directors is organized by directors. The Chairman of the Board of Directors shall be
elected from among the attending directors by a majority vote and with the attendance over two
thirds of the seats in a meeting of the Board of Directors. The Chairman shall execute all business
matters in accordance with applicable laws and regulations, and the resolutions made at the
meetings of shareholders and the Board of Directors.
Directors shall attend the meetings of the Board of Directors in person. A director, when unavailable
to attend the meeting in person, may issue a proxy specifying the scope of authorization with
respect to the subject of the meeting to authorize another director to attend the meeting on his or
her behalf. Nevertheless, a director is limited to receive such authorization from only one other
director each time.
At the time when a meeting of the Board of the Directors is conducted in the form of a video
conference, a director shall be deemed as attending in person if attending the meeting through
video conferencing system.
Article 20
The duty and power of the Board of Directors are specified as below:
1. To appoint, dismiss, and approve the compensations of managerial officers and to approve the
non‐competition clause on managerial officers
2. To decide and amend the Company's business policy
3. To review the Company's budgetary plan and financial statement
4. To determine the distribution of earnings or the loss offsetting proposal
5. Upon the amount of endorsement, guarantee, and acceptance provided to the related parties in
excess of the limit prescribed by the Board of Directors, any excess shall be submitted to the
Board of Directors for approval.
6. Upon the amount of borrowing from external sources and credits offered to external parties in
excess of the limit prescribed by the Board of Directors, any excess shall be submitted to the
Board of Directors for approval.
7. To establish, adjust and remove any important internal body of the Company and to formulate
and amend the content of the Articles of Incorporation.
8. To decide the prices of securities for private equity placement and the method for selecting
specific placees
9. To exercise other duties and powers granted in accordance with laws and regulations and by the
shareholders' meetings
‐ 49 ‐
Article 21
In order to ensure its performance in monitoring and strengthen its management, the Board of
Directors may set up various functional committees with their organizational charters be separately
formulated in accordance with applicable laws and regulations and the Company's guidelines.
The Company shall set up the Audit Committee organized by all of the independent directors in
accordance with the Article 14‐4 of the Securities and Exchange Act.
The Audit Committee shall be responsible of exercising a supervisor's duty and power as provided
in the Company Act, the Securities and Exchange Act and other applicable laws and regulations.
Article 22
Regardless whether the Company makes profits or suffers losses, the Company shall pay the
directors remunerations for their services for the Company. The aforesaid remunerations of all the
directors shall be determined based on the extent of their participation in the Company's operation
and their contribution, at the same time with reference to the general level in the industry, by the
Company's Remuneration Committee and submitted to the Board of Directors for discussion and
approval.
Article 23
Prior to the convention of a meeting of the Board of Directors, a meeting notice in which specifies
the subject shall be sent to directors seven days in advance. However, a meeting may be called at
anytime under urgent circumstances.
The afore‐mentioned meeting notice may be sent via fax or email.
Chapter Five Managerial Officer
Article 24
The Company may appoint a multiple number of managerial officers whose appointment, dismissal
and compensations shall be conducted in accordance with the Article 29 of the Company Act.
Chapter Six Distribution of Earnings after Closing
Article 25
The Company's fiscal year is determined as the dates of solar calendar. After the close of each fiscal
year, the Board of Directors shall provide and submit the following reports to the shareholders'
meeting for acceptance in accordance with the legal procedures.
1. Business Report
2. Financial Statement
3. Proposals regarding earning distribution or loss offsetting
‐ 50 ‐
Article 26
The Company, if profitable in the year, shall set aside no less than 2% of the profit as compensation
for the employees and no higher than 2% as remuneration for the directors. However, the Company,
when accumulated losses remain on the account, shall reserve a portion of its earnings to offset the
losses first.
The afore‐mentioned profit of the year refers to the earnings before tax excluding the deduction of
compensations for the employees and remunerations for the directors.
The proposals with respect to the distribution percentages of the employees' compensation and the
directors' remunerations and the employees' compensation to be paid in cash or by stock shall be
consented by a majority of the attending directors with the attendance of over two thirds of the
seats in a meeting of the Board of Directors. The resolutions made by the Board shall then be
reported to the shareholders' meeting.
Employees' compensation in the form of cash or stock shall only be paid to the Company's
employees who meet certain qualifications.
Article 26‐1
The Company's earnings of the year, if any, shall be allocated to pay taxes and offset the
accumulated losses from previous years first, and then set aside 10% as legal reserve. The Company
shall then appropriate or reverse a certain amount as special reserve in compliance with applicable
laws or regulatory requirements. The remaining earnings, if any, may be put together with the
retained earnings from previous years and the adjustment amount of the undistributed earnings of
the year; the sum of the above may be appropriated as dividends and bonuses according to the
distribution proposal prescribed by the Board of Directors based on the actual needs after the
proposal is submitted to and approved at the shareholders' meeting.
With respect to the afore‐mentioned distribution of dividends, the earnings distributable of the year
may be paid out in full in consideration of the Company's financial, business and management
arrangements. The cash dividends shall not be less than 10% of the total of the cash and stock
dividends distributed of the year.
Chapter Seven Supplementary Provisions
Article 27
With regard to the matters not provided for in these Articles of Incorporations, the Company Act,
the Securities and Exchange Act and other applicable laws and regulations shall govern.
Article 28
The Company's internal organizational charter and operational procedures shall be additionally
determined by the resolutions of the Board of Directors.
‐ 51 ‐
Article 29
These Articles of Incorporation were enacted on March 29, 1973, and
amended on June 30, 1975 for the first time,
amended on August 2, 1975 for the second time,
amended on July 25, 1976 for the third time,
amended on June 6, 1977 for the fourth time,
amended on July 25, 1978 for the fifth time,
amended on November 26, 1979 for the sixth time,
amended on June 1, 1980 for the seventh time,
amended on January 25, 1981 for the eighth time,
amended on February 26, 1981 for the ninth time,
amended on November 18, 1981 for the tenth time,
amended on December 13, 1981 for the eleventh time,
amended on March 24, 1982 for the twelfth time,
amended on December 27, 1982 for the thirteenth time,
amended on January 3, 1983 for the fourteenth time,
amended on November 30, 1983 for the fifteenth time,
amended on February 20, 1984 for the sixteenth time,
amended on April 6, 1986 for the seventeenth time,
amended on May 7, 1987 for the eighteenth time,
amended on February 1, 1988 for the nineteenth time,
amended on November 26, 1988 for the twentieth time,
amended on April 2, 1989 for the twenty‐first time,
amended on April 23, 1989 for the twenty‐second time,
amended on April 16, 1990 for the twenty‐third time,
amended on April 9, 1991 for the twenty‐forth time,
amended on April 15, 1992 for the twenty‐fifth time,
amended on April 16, 1993 for the twenty‐sixth time,
amended on March 31, 1994 for the twenty‐seventh time,
amended on April 8, 1995 for the twenty‐eighth time,
amended on April 11, 1996 for the twenty‐ninth time,
amended on June 6, 1997 for the thirtieth time,
amended on April 15, 1998 for the thirty‐first time,
amended on May 25, 1999 for the thirty‐second time,
amended on April 18, 2000 for the thirty‐third time,
amended on April 10, 2001 for the thirty‐forth time,
amended on April 10, 2001 for the thirty‐fifth time,
amended on May 28, 2002 for the thirty‐sixth time,
amended on May 27, 2003 for the thirty‐seventh time,
amended on May 27, 2004 for the thirty‐eighth time,
‐ 52 ‐
amended on May 31, 2005 for the thirty‐ninth time,
amended on June 14, 2006 for the fortieth time,
amended on June 12, 2007 for the forty‐first time,
amended on June 16, 2008 for the forty‐second time,
amended on June 10, 2009 for the forty‐third time,
amended on June 15, 2010 for the forty‐fourth time,
amended on June 15, 2011 for the forty‐fifth time,
amended on June 19, 2012 for the forty‐sixth time,
amended on June 13, 2013 for the forty‐seventh time,
amended on June 24, 2014 for the forty‐eighth time,
amended on June 22, 2015 for the forty‐ninth time,
and on June 22, 2016 for the fiftieth time.
‐ 53 ‐
The Rules of Procedures for the Shareholders’ Meeting
of
Kinpo Electronics, INC.
Effective by the resolution of the Annual General Meeting of Shareholders
on May 28, 2002
1. Kinpo Electronics, Inc. (the “Company”) shall convene the shareholders’ meeting in accordance
with these Rules of Procedures (the “Rules”) unless otherwise prescribed by other applicable laws
and regulations.
2. The Company shall provide a signature book for the attending shareholders to sign in, or instead
the attending shareholders shall submit sign‐in cards to complete the registration process to be
admitted to the shareholders’ meeting.
3. The attendance and the voting shall be calculated based on the number of shares represented by
the shareholders attending the shareholders’ meeting.
4. A shareholders’ meeting shall be convened at a venue where the Company is located or a venue
convenient for shareholders’ attendance and suitable for the convention. A shareholders’
meeting shall not begin earlier than 9:00 a.m. or later than 3:00 p.m.
5. The Chairman of the Company shall preside as the chairperson at a shareholders’ meeting if the
meeting is convened by the Board of the Directors of the Company. In the situation where the
Chairman is on leave or unavailable to perform his or her duty and power for any cause, the Vice
Chairman of the Company shall act as the chairperson for the meeting. In the situation where
there is no vice chairman or the Vice Chairman of the Company is on leave or unavailable to
perform his or her duty and power for any cause, the Chairman shall designate a Managing
Director to act as the chairperson on his or her behalf. In the situation where there is no managing
director, the Chairman shall designate one Director from the Board of Directors to act as the
chairperson for the meeting. In the absence of such designation, the Managing Directors or
Directors of the Board shall elect one from among themselves an acting chairperson for the
shareholders’ meeting.
Where the shareholders’ meeting is convened by a person who is entitled to convene the meeting
but is not a member of the Board of Directors, such person shall perform the duty as the
chairperson for the shareholders’ meeting. In the situation where there are two or more people
who are entitled to convene the meeting, a chairperson shall be elected from among themselves.
6. The Company may appoint its lawyers, accountants or any other people relevant to the meeting
to be present at the shareholders’ meeting.
The supporting staff for the proceeding of a shareholders’ meeting shall wear an identification
badge or armband.
7. The Company shall video‐tape or audio‐tape the entire proceeding of a shareholders’ meeting,
and the recording shall be kept for at least one year.
APPENDIX II
‐ 54 ‐
8. The chairperson of a shareholders’ meeting shall call the meeting to order at the time when the
meeting is scheduled to commence. If the number of shares represented by the attending
shareholders has not yet constituted more than an aggregate of one‐half of the total outstanding
shares issued, the chairperson may postpone the time for the meeting. The postponements shall
only reach two times at most, and the meeting shall not be postponed for more than one hour in
total. If after two postponements the shares represented by attending shareholders has not
reached the quorum but has constituted more than one third of the total of outstanding shares
issued, a tentative resolution may be passed in accordance with the Article 175‐1 of the Company
Act. Before the end of such meeting, if the shares represented by the attending shareholders has
constituted more than one half of the total of outstanding shares issued, the chairperson may
bring the already passed resolution for voting again in accordance with the Article 174 of the
Company Act.
9. The agenda of a shareholders’ meeting shall be established by the Board of Directors if the
meeting is convened by the Board of Directors of the Company. Unless otherwise approved in the
shareholders’ meeting, the meeting shall proceed in accordance with the pre‐arranged agenda.
The preceding paragraph applies in the situation where a shareholders’ meeting is convened by
a person, other than a member of the Board of Directors, entitled to convene such a meeting.
Unless otherwise resolved at the shareholders’ meeting, the chairperson shall not announce
adjournment until the agenda prescribed in the preceding two paragraphs (including
extraordinary motions) are resolved.
After the meeting is adjourned, shareholders shall not elect a chairperson and resume the
meeting at the same or another venue.
In the situation where the chairperson adjourns the meeting in violation of the Rules, a new
chairperson may be elected by more than half of the votes from the shares represented by the
attending shareholders so that the meeting is able to be continued.
10. When a shareholder attending a shareholders’ meeting wishes to speak, he or she should fill out
a speech note with a summary of the speech, shareholder’s account number (or the number of
attendance card) and the account name of the shareholder in advance. The sequence of
speeches shall be determined by the chairperson.
If any attending shareholder at the shareholders’ meeting submits a speech note but does not
speak, no speech shall be deemed to have been made by such shareholder. In case content of
the speech of a shareholder are inconsistent with the content of the speech note, the content
of actual speech shall be taken into account.
The speech of a shareholder shall remain concrete, clear, and relevant to the agenda otherwise
the chairperson may stop the speech of such shareholder.
Unless otherwise permitted by the chairperson and the speaking shareholder, no shareholder
shall interrupt the speech of other shareholders. The chairperson shall stop such interruption.
11. No shareholder shall speak more than twice regarding the same item without the chairperson’s
consent, and the time of each speech shall not exceed five minutes. Nevertheless, the speech
may extend for three minutes if permitted by the chairperson.
In case the speech of any shareholder violates the preceding paragraph or exceeds the scope of
the agenda item, the chairperson may stop the speech of such shareholder
‐ 55 ‐
12. A corporate shareholder should only appoint one person as its representative to attend a shareholders’ meeting.
In the situation where a corporate shareholder has appointed two or more representatives to
attend the shareholders’ meeting, an appointment letter shall be provided and only one
representative can speak for each agenda item.
13. After the speech of a shareholder, the chairperson may make responses by him or herself or
appoint an appropriate person to respond.
14. The chairperson may announce end of discussion of an item listed in the agenda and submit the
item for voting if the chairperson deems that the item is ready for voting.
15. With respect to the voting of each proposal, the people who conduct ballot examination and
counting shall be designated by the chairperson. At the same time, the ballot examiners also
have to be shareholders.
The result of each vote shall be announced at the meeting immediately and shall be recorded
into the minute.
16. The chairperson may, at his or her own discretion, set time for intermission during the course of
a shareholders’ meeting.
17. Unless otherwise provided for under the Company Act, the Articles of Incorporation and other
applicable laws and regulations, a proposal put to vote shall be approved by consent of a
majority of shares represented by attending shareholders at the meeting. During the voting
process, a proposal which proves to meet no objection from the attending shareholders after
the inquiry made by the chairperson shall be deemed passed in the validity same as a proposal
resolved through balloting process.
In the situation when a person who acts as the proxy for two or more shareholders concurrently,
the number of votes represented by such person shall not exceed three percent of the total
number of votes of the Company and the portion of excessive votes represented by such proxy
shall not be counted. Any shareholder who bears a personal interest that may conflict with and
impair the interest of the Company in respect of any proposed matter shall abstain from voting
and shall not act as a proxy for other shareholders to exercise voting with respect to the said
matter.
18. In the case of an amendment or alternative to an original proposal, the chairperson shall decide
on the order of voting together with the original proposal. However, if one of such proposals has
been approved, the others shall be deemed overruled and no further vote is required.
19. The chairperson may request picketers (or security guards) to assist in maintaining the order at
the meeting venue. Members of the picket (or security guards) shall wear armbands with the
word "Picket" when maintaining the order at the meeting venue.
20. Any matters which are not adequately provided for herein shall be subject to the Company Act,
the Securities and Exchange Act, the Articles of Incorporation or other applicable laws and
regulations.
21. The Rules and any amendment shall take effect after being approved at the shareholders’
meeting.
‐ 56 ‐
Rules of Procedures for the Meetings of the Board of Directors
of
Kinpo Electronics, Inc.
Effective as approved by the meeting of the Board of Directors on December 28, 2006,
amended as approved by the meeting of the Board of Directors on April 20, 2007,
amended as approved by the meeting of the Board of Directors on March 24, 2008,
and amended as approved by the meeting of the Board of Directors on October 31, 2012.
Article 1
Basis of the Establishment
To establish a strong governance system and sound supervisory capabilities for the Board of
Directors of Kinpo Electronics, Inc. (the "Company") and to strengthen management capabilities,
these Rules of Procedures for the Meetings of the Board of Directors (the "Rules") are established
pursuant to the Article 2 of the Regulations Governing Procedure for Board of Directors Meetings
of Public Companies.
Article 2
Scope
With respect to the Board of Directors' meetings (the "Board meetings") of the Company, the main
agenda items, working procedures, required content of meeting minutes, public announcements,
and other compliance requirements shall be handled in accordance with these Rules unless
otherwise prescribed in other applicable laws or regulations.
Article 3
Convention and Notice of Board Meetings
The Board of Directors of the Company shall meet at least once every quarter.
Prior to the convention of a Board meeting, a meeting notice in which specifies the subject shall be
sent to directors and supervisors seven days in advance; provided, however, a meeting may be
called at anytime under urgent circumstances.
All of the matters set forth in the Article 12 of these Rules shall be specified in the meeting notice,
and none shall be raised as an extraordinary motion in a Board meeting unless in an emergency or
based on a legitimate reason.
Article 4
Meeting Notice and Meeting Materials
The Company’s Executive Secretary of the Board of Directors is designated to handle the
administrative matters relating to the Company’s Board meetings.
APPENDIX III
‐ 57 ‐
The unit handling the Board meeting matters is responsible of drafting the agenda, proposals, or
discussion items for a Board meeting and preparing sufficient meeting materials to be sent with the
meeting notice altogether.
A meeting notice and meeting materials may be produced and sent out in electronic form.
Where a director finds the meeting materials as mentioned in the preceding paragraph insufficient,
he or she may request the Executive Secretary to provide additional information. If a director
believes the materials for the agenda are incomplete, the discussion of the matters may be
postponed upon approval of the Board.
Article 5
Preparation of Signature Book and Other Document and Director's attendance by Proxy
When the Company’s Board meeting is convened, a signature book shall be prepared for attending
directors to sign in to the meeting as record.
A director shall attend a Board meeting in person. In the event where a director is unable to attend
in person, he or she may authorize another director to attend as proxy in accordance with the
Articles of Incorporation of the Company. Attendance via video‐conferencing is deemed as
attendance in person.
In the situation where a director authorizes another director to attend a Board meeting as proxy,
he or she shall, each time, issue a proxy in which specifies the scope of authorization with respect
to the meeting subject.
The proxy as mentioned in the second paragraph is limited to act as the proxy of only one other
director.
Article 6
Venue and Time of Board Meeting
The Company's Board meeting shall be convened at a venue where the Company is located and at
a time within business hours or at the venue and time convenient for directors' attendance and
suitable for the convention of a Board meeting.
Article 7
Chairperson of the Board of Directors and Acting Chairperson
The Company's Board meetings shall be convened and chaired by the Chairman of the Company.
The first Board meeting of each term, however, shall be convened by the director who received the
votes representing the largest portion of voting right at a general meeting of shareholders in which
the election of directors was held, and shall be chaired by the person who is entitled to the
convention of the meeting. In the situation where there are two or more people entitled to such
right, they shall elect from among themselves to act as the chairperson for the meeting.
In the situation where the Chairman is on leave or unavailable to perform his or her duty and power
for any cause, the Vice Chairman of the Company shall act as the chairperson for the meeting. In
the situation where there is no vice chairman or the Vice Chairman of the Company is on leave or
unavailable to perform his or her duty and power for any cause, the Chairman shall designate a
Managing Director to act as the chairperson on his or her behalf. In the situation where there is no
‐ 58 ‐
managing director, the Chairman shall designate one Director from the Board of Directors to act as
the chairperson for the meeting. In the absence of such designation, the Managing Directors or
Directors of the Board shall elect one from among themselves an acting chairperson for the
shareholders' meeting.
Article 8
Reference Materials, Non‐voting Participants and the Convention of a Board Meeting
At the time when the Company's Board meeting is convened, the management or the unit
responsible for the Board meetings shall prepare relevant information ready for the attending
directors' reference.
At the time when a Board meeting is convened, personnel from relevant departments or
subsidiaries may be informed to be present depending on the content of meeting
agenda. Accountants, lawyers or other types of professionals may also be invited to be present to
provide explanations when necessary, provided, however, that they shall leave the meeting when
deliberation and voting take place.
The chairperson of a Board meeting shall call the meeting to order at the time when the meeting is
scheduled to commence and the majority of directors are present. In the situation where fewer than
half of all directors are present, the chairperson may announce postponement of the meeting not
more than twice. If a quorum has not been reached after the second postponement, the chairperson
may convene a new meeting in accordance with the procedure prescribed under the Article 3‐2 of
the Rules.
"All directors" as mentioned in the preceding paragraph shall refer to those actually in the office at
the time.
Article 9
Documentation of a Board Meeting by Audio or Video Taping
The Company shall video‐tape or audio‐tape the entire proceeding of a Board meeting, and the
recording shall be kept for at least five years; the recording may be preserved in electronic form.
If any litigation with respect to a resolution of a Board meeting arises before the end of the retention
period mentioned in the preceding paragraph, the relevant audio or video recordings shall be kept
until the conclusion of the litigation.
Where a Board meeting is convened by videoconference, the audio and video documentation shall
constitute as part of meeting minutes and shall be properly retained for the duration of the
Company.
Article 10
Meeting Agenda
The agenda of the Company's regular Board meetings shall include at least the following:
1. Matters to be reported:
(1) Minutes of the last meeting and action taken
(2) Important financial and business reports
(3) Internal audit reports
‐ 59 ‐
(4) Other important reports
2. Matters for discussion:
(1) Items carried from the previous meeting
(2) Items to be discussed in the current meeting
3. Extraordinary motions
Article 11 Discussion of Agenda
The Company's Board meeting shall proceed in accordance with the meeting procedures set forth
in the meeting notice but is subject to change upon the consent of the majority of the attending
directors.
Unless otherwise consented by the majority of the attending directors, the chairperson shall not
announce adjournment.
At anytime during the course of a Board meeting, if the number of directors sitting at the meeting
does not constitute the majority of the attending directors, the chairperson shall announce
suspension of the meeting upon the motion made by any sitting director, in which case the Article
8‐3 shall apply.
Articles 12
Matters Requiring Discussion at Board Meeting
The following matters shall be submitted to the Company's Board meetings for discussion:
1. The business plan of the Company
2. Annual and semi‐annual financial reports, with the exception of semi‐annual financial reports
which, under relevant laws and regulations, do not require to be audited and attested by a
certified public accountant
3. The establishment or amendment of an internal control system pursuant to the Article 14‐1 of
the Securities and Exchange Act (the "SEA")
4. The establishment or amendment, pursuant to the Article 36‐1 of the SEA, of the handling
procedures for significant financial and business activities including the acquisition or disposal of
assets, trading of derivatives, loans of funds to others, and endorsement or guarantee to others
5. The offering, issuance or private placement of equity securities
6. The appointment and dismissal of financial, accounting or internal auditing officers
7. Donation to a related party or significant donation to a non‐related party; provided, however,
that a charitable donation to the cause of natural disaster relief may be submitted to the next
Board meeting for ratification
8. Matters to be resolved by a shareholders' meeting or a Board meeting pursuant to the Article 14‐
3 of the SEA, other applicable laws or regulations or the Articles of Incorporation, or matters as
required by the competent authority concerned
The "related party," as afore‐mentioned in the seventh subparagraph in the preceding paragraph,
refers to the related party as defined in the Regulations Governing the Preparation of Financial
Reports by Securities Issuers; the "significant donation to a non‐related party" refers to any
donation or a series of donations to a single recipient within the period of one year, on an individual
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basis or cumulatively, reaching or exceeding the amount of one hundred million New Taiwan Dollars,
or the amount of one percent of the Company's net operating revenue or the amount of five percent
of the Company's paid‐in capital as stated in the CPA‐attested financial report of the most recent
year.
As stated in the preceding paragraph, the term "within the period of one year" shall refer to a period
of one year calculated retroactively from the date of current Board meeting convened. The portion
of the donations that has been submitted and approved by the Board of Directors shall be exempted
from the calculation.
With respect to the matters which shall be resolved at a Board meeting pursuant to the Article 14‐
3 of the SEA, the independent directors, if appointed by the Company, shall attend a Board meeting
in person or authorize another independent director to attend the meeting on his or her behalf. Any
objection or reservation expressed by an independent director shall be recorded in the minutes of
a Board meeting. In the situation where an independent director wishing to express objection or
reservation is unable to attend a Board meeting in person, such director shall present his or her view
regarding the relevant matters in written form in advance and such statement shall be recorded in
the meeting minutes, unless there is legitimate reason to do otherwise.
Article 13
Voting (1)
The chairperson may announce end of discussion of a proposal listed in the agenda and submit the
proposal for voting if the chairperson deems that it is ready for voting.
When a proposal comes to a vote at a Board meeting, a proposal which proves to meet no objection
from all of the attending directors after the inquiry made by the chairperson shall be deemed
approved. If there is an objection following an inquiry by the chairperson, the proposal shall be
brought to vote.
The term "all of the attending directors" mentioned in the preceding paragraph does not include
the directors who shall not exercise voting right in accordance with the Article 15‐1 of these Rules.
The chairperson shall select one of the voting methods from the following listed below, provided
that, however, when an attending director voices objection the chairperson shall seek the opinion
of the majority and make a decision accordingly:
1. A show of hands or a vote by voting machine
2. A roll‐call vote
3. A vote by ballots
4. Any other voting method selected by the Company
Article 14
Voting (2) Ballot Examination and Counting Method
Unless otherwise provided for under the SEA and the Company Act, a proposal to be resolved at the
Company's Board meeting shall be approved by the consent of a majority of the directors present
at the meeting which is attended by a majority of all directors.
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In the case of an amendment or alternative to an original proposal, the chairperson shall decide on
the order of voting together with the original proposal. However, if one of these proposals has been
approved, the others shall be deemed overruled and no further vote is required.
If a vote on a proposal requires ballot examination and counting, the people who conduct ballot
examination and counting shall be designated by the chairperson, providing that the ballot
examiners have to be directors.
The result of each vote shall be announced at the meeting immediately and shall be recorded in
writing.
Article 15
Director's Avoidance of Conflict of Interest
With respect to any proposal in which a director or the legal person he or she represents is an
interested party, the director shall explain the important aspects of his or her interest at the Board
meeting where the said proposal is brought up in the agenda. In the situation where his or her
interest is likely to compromise the interest of the Company, the director shall not participate in the
discussion and the voting regarding the proposal. The director shall avoid from the session of
discussion and voting and shall not exercise voting right on behalf of another director.
As stated in the preceding paragraph where a director is prohibited from exercising his or her voting
right with respect to a resolution at a Board meeting, the Article 180‐2 of the Company Act shall
apply in accordance with the Article 206‐3 of the same Act.
Article 16
Meeting Minutes and Signatures
The proceedings of the Company's Board meetings shall be recorded in the meeting minutes which
shall fully and accurately include the following items:
1. Year, time and venue of the meeting
2. Name of the chairperson
3. The attendance of directors, including the names and number of the directors who are present,
present under proxy, excused, and absent
4. Names and titles of those attending the meeting as non‐voting participants
5. Name of minutes taker
6. Matters to be reported
7. Matters for discussion, including the method how each proposal is resolved and their results,
summary of the speeches from directors, supervisors, experts and other attendees, the name of
the director who is an interested party as referred to in paragraph one in the preceding article,
an explanation regarding such director's relationship of interest, the reason that such director is
required to abstain or not, the actual situation whether such director has abstained, any
director's opinion expressing objection or reservation that is recorded or issued in writing, and
the opinion issued in writing by any independent director pursuant to the Article 12‐4 of these
Rules.
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8. Extraordinary motions, including the name of a person submitting a proposal, the method how
each proposal is resolved and their results, summary of the speeches from directors, supervisors,
experts and other attendees, the name of the director who is an interested party as referred to
in paragraph one in the preceding article, an explanation regarding such director's relationship
of interest, the reason that such director is required to abstain or not, the actual situation
whether such director has abstained, and any director's opinion expressing objection or
reservation that is recorded or issued in writing.
9. Other matters to be included
In the situation where either of the following occurs to the resolutions made at a Board meeting,
the fact of such event shall be stated in the meeting minutes and be publicly announced on the
information reporting website designated by the competent authority within two days since the
date of the Board meeting:
1. An independent director expresses objection or reservation on a certain subject and such opinion
has been recorded or issued in a written statement.
2. A resolution is adopted with the approval of more than two thirds of all directors, without having
been passed by the audit committee which is established by a company.
The signature book of a Board meeting constitutes part of the meeting minutes and should be
properly kept for the duration of the Company.
The meeting minutes shall be signed or sealed by the chairperson and the minutes taker and a copy
shall be distributed to each director and supervisor within twenty days after the meeting. The
meeting minutes shall be deemed as important document of the Company and properly kept for
the duration of the Company.
The production and distribution of the meeting minutes as mentioned in the first paragraph may be
done electronically.
Article 17
The Principles of Authorization by the Board
Except for the matters that should be submitted to the Company's Board meeting for discussion
pursuant to the Article 12 of these Rules, the following matters are to be executed by the Chairman
of the Company during the recess period as fully authorized by the Board of Directors:
1. The establishment, adjustment and removal of any important internal body of the Company and
the formulation and amendment of the content of the Articles of Incorporation
2. The approval for the base dates of the Company's capital injection or capital reduction, cash
dividend payout, stock allotment or stock option
Article 18
The Board of Managing Directors
The provisions set forth under the Article 2, the Article 3‐2, the Articles 4 to 6, the Articles 8 to 11,
and the Articles 13 to 16 shall apply to the meetings of the Board of Managing Directors of the
Company.
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Article 19
Supplementary Provisions
These Rules of Procedures were taken into effect on January 1, 2007. The establishment and
amendment of these Rules shall be approved by the Board of Directors of the Company.
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Shareholding Facts by All Directors of the Company
1. Requirements as expressly provided for in Article 26 of Securities and Exchange Act and Rules and
Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies:
Here at the Company, other than independent directors, the minimum shareholding by all directors shall be 34, 935, 773 shares. As of April 25, 2017, their actual shareholding was in total number of 82, 110, 952 shares.
2. As of the date to discontinue share transfer registration on April 13, 2018, the shareholding facts
as shown through the shareholders register are:
Position title Name
Number of shares held when elected
Number of shares held currently
Aggregate total shares
held
Shareholding ratio
Aggregate total shares
held
Shareholding ratio
Chairman Hsu, Sheng‐Hsiung 27,183,942 1.86% 13,683,942 0.94%
Director Hsu, Sheng‐Chieh 4,498,985 0.31% 4,498,985 0.31%
Director Shen, Shyh‐Yong 14,253,000 0.98% 21,253,000 1.46%
Director Ko, Charng‐Chyi 4,707,915 0.32% 4,707,915 0.32%
Director Chen, Jui‐Tsung 2,143,952 0.15% 2,143,952 0.15%
Director Hsu, Chieh‐Li 1,456,230 0.10% 3,106,230 0.21%
Director Chou, Yen‐Chia 4,240,289 0.29% 4,240,289 0.29%
Director Chen, Yi‐Chang 2,432,592 0.17% 2,432,592 0.17%
Director Hsu, Wei‐Yang 999,804 0.07% 999,804 0.07%
Director Chen, Pei‐Yuan 2,238,372 0.15% 2,238,372 0.15%
Director Huang, Yu‐Hui 2,847,382 0.20% 3,447,382 0.24%
Director Peng Pao Technology
Co., Ltd. 23,172,489 1.59% 23,172,489 1.59%
Independent director
Chiang, Ping‐Kun 0 0.00% 0 0.00%
Independent director
Ho, Mei‐Yueh 0 0.00% 0 0.00%
Independent director
Huang, Chih‐Peng 0 0.00% 0 0.00%
The number and percentage of shares held by all directors
90,174,952 6.19% 85,924,952 5.90%
Note 1: Date when elected June 22, 2016. Note 2: Upon the date when elected, the aggregate total outstanding shares came to 1,458,113,211
shares. Note 3: As of April 13, 2018, the aggregate total outstanding shares came to 1,455,657,211 shares
in number.
APPENDIX IV
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The impact by the present issuance of bonus shares upon the Company’s
business performance, earnings per share (EPS) and rate of investment return to shareholders
Not applicable. No issuance of bonus shares by the Company in the present shareholders’ meeting.
APPENDIX V
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Information relevant to proposals by a shareholder (s) holding over 1% of the aggregate total outstanding shares
I. Pursuant to Article 172~1 of the Company Act, proposals posed by shareholders for the
regular shareholders' meeting were accepted from March 30 to April 9, 2018.
II. During the aforementioned period, no shareholder holding over 1% of the aggregate total
outstanding shares submitted a proposal.
APPENDIX VI