PUBLIC COMPANY CAN ISSUE SHARE AT DISCOUNT FOR M&A

05/01/2005

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To facilitate M&A activities, on 1 February 2005 the Financial Supervisory Commission issued an order stating that when a public-issuing company (1) issues new shares in accordance with the provisions of the Criteria Governing the Offering and Issuance of Securities by Issuers, in order to execute a merger, or acquire shares in another company, or acquire another company in ac-cordance with relevant legislation; or (2) issues new shares to sponsor an issuance of overseas depositary receipts in accordance with the Crite-ria Governing the Offering and Issuance of Overseas Securities by Issuers, in order to merge with a foreign company, or acquire shares in a foreign company, or acquire a foreign company in accordance with relevant legislation, the company may issue the new shares at a dis-counted price, without being subject to the rele-vant restrictions of the Company Act.

The company must also comply with the fol-lowing requirements:

Before convening a board meeting to vote on a resolution to proceed with the merger or ac-quisition, it must commission a certified pub-lic accountant or other experts to give an opinion on whether the proposed discounting of the new share issuance is necessary and reasonable, and whether it will adversely af-fect shareholders' interests. If the board meeting approves the resolution, the company must disclose related information on the Market Observation Post System.

Except in cases where a resolution of a shareholders' meeting is not required, the company should send the above expert opin-ion to shareholders together with the notice convening the shareholders' meeting, for shareholders' reference when deciding whether to support the M&A proposal.