omniture

SPIL Issues Letter To Shareholders For 2016 AGM

TAICHUNG, , April 15, 2016 /PRNewswire/ -- Siliconware Precision Industries Co., Ltd. ("SPIL", TWSE: 2325.TT) (NASDAQ: SPIL) today issued the following letter to shareholders:

Dear Shareholders,

Siliconware Precision Industries Co., Ltd. ("we", "SPIL" or "the Company") has always strived to provide high-value added solutions for our clients through our unique talent and advanced technology in IC packaging and testing. We firmly believe our consistent focus on improving our business and operations will continue to create shareholder value in this ever-changing industry.

In 2015, the global semiconductor industry faced an overall slowdown driven by higher competition combined with a saturated computer and mobile devices market. Additionally, lower-than-expected growths in developing countries led by the slowdown in China added further headwinds. Despite these challenges, SPIL still managed to outperform the OSAT industry in this past year. To further reflect our commitment in maximizing shareholder value, the board is proposing an increased dividend payout ratio of nearly 100% plus an additional distribution of NT$1 per share from capital reserves, marking a dividend totaling NT$3.8 per share.

For 2016 and beyond, our aim is to become a world-class benchmark in the semiconductor assembly and testing industry by continuously upgrading quality of service and competitiveness to meet customers' satisfaction. We plan to centralize our manufacturing capacity and capabilities to our ZhongKe site, which will help to shorten lead time for product delivery and allow greater flexibility in raw material procurement. In addition, we plan to focus our ZhongKe facility on high-value added services like bumping, flip chip, testing, turn-key solutions and invest in advanced Fan-out technology, 2.5/3D IC, etc. For our business in China, we plan to build a wafer bumping and Flip Chip line at SPIL's China subsidiary in Suzhou to capture customer's rapidly growing market. SPIL's presence in China remains strong as the Company captured more market share and increased its revenue contribution from Chinese clients in 2015. To be ready for the next wave of growth drivers, we also plan to progress towards miniaturization IC level advanced SiP (system-in-package) to capture the IoT (Internet of Things) market.

Over the past year, while there have been distractions of hostile interest in acquiring the Company, we firmly believe that with your support, we are in a good position to grow our business the way we have strived to do in the past and do not need to be merged with our competitors. In fact, a merger out of hostile interest will result in the loss of overlapping clients and will drain our talent - one of our key competitive advantages. Though we understand the uncertainty associated with the outcome of such matters, our focus on growing the Company and generating shareholder value has never wavered. With that in mind, we seek your support at the upcoming annual general meeting for the below proposed items, in addition to routine business matters:

  1. Update the Company's Articles of Incorporation (AOIs) to be in line with the latest regulatory environment and operational requirements
  2. Additional cash payout of NT$1 per share from capital reserves
  3. Amendments to certain articles of the Procedure for the Acquisition and Disposal of Assets

These proposals will allow us to focus our efforts on the organic growth of the business and will provide the much needed operational flexibility required to support our growth aspirations.

Headroom of top 20 Taiwan tech peers
Headroom of top 20 Taiwan tech peers

AGM Proposals to Seek Shareholder Support

1.       Amendments to certain articles of the Company's Articles of Incorporation (AOIs)

a. Proposal to update the business scope: To comply with the Company Act and business
    codes published by the Ministry of Economic Affairs ("MOEA"). 

b. Proposal to increase the authorized share capital: As it is crucial to maintain
    financing flexibility required to adapt to the fast-changing environment, we propose to
    increase the authorized share capital from 3,600mm shares to 3,960mm shares.

 (million shares)

Share count

Pro-forma %[1]

Pro-forma %[2]

Current outstanding shares as of March 31, 2016

3,116.3

86.6%

78.7%

+ Headroom reserved for the potential conversion of US$400mm CB due 2019 (current conversion price of NT$49.4668)

245.8

6.8%

6.2%

+ Existing headroom left after full CB conversion

237.9

6.6%

6.0%

Current authorized shares

3,600.0

100.0%

90.9%

+ Headroom for potential operational and funding needs

360.0


9.1%

Proposed authorized shares

3,960.0


100.0%

While we have grown our total assets by ~44% since 2007, the current authorized share capital has remained the same and significantly limited us of the financing capability critical to operating in a highly competitive environment. The proposed revision is meant for the Company to catch up to the flexibility generally available to Taiwan listed technology peers as the average headroom[3] between authorized and issued share capital is 26% for the top 20 Taiwan technology companies by market cap. On the other hand, SPIL's current headroom is approximately 7%[4] and would be 15%[4] after the proposed increase in authorize shares.  

The proposed headroom could provide financing that helps to accelerate our expansions and optimize the potential of our facilities. For example, we intend to continue our investments in our production sites, including the ZhongKe facility, a strategically centralized site for our advanced solutions, and our Suzhou subsidiary to provide advanced capability to capture China's growing semiconductor industry.

We are seeking your approval for only a modest increase in authorized capital, and to ensure that our capital structure is aligned with shareholder value. SPIL will also seek shareholders meeting's approval according to applicable laws for new share issuance, such as private placements. We further undertake that for an annual cumulative new share issuance, in the next 12 months, beyond 10% of the current outstanding shares we will separately seek shareholders meeting's approval in accordance with applicable laws, thereby serving as a safeguard against excessive dilution and offering shareholders an opportunity to have a say in significant equity issuance that may impact the Company's strategic direction.

c. Proposal to replace supervisors with audit committee and associated
    technical/language changes:
In order to comply with regulations, we have created an
    audit committee in lieu of the supervisors and the necessary AOI revisions to reflect such
    change has to be effected this year. Additionally, we are required to have at least three and
    at least 1/5th of the board as independent directors. These changes ensure an independent
    voice that represents shareholder interest, in all matters of the board including
    remuneration, nomination of directors, and mergers and acquisition.

d. Proposal to update employee bonus and director compensation scheme: To comply
    with the Company Act and official order from the MOEA, employee and director
    compensation will be based on pre-tax profit and recognized as an expense in income
    statement as opposed to be based on after-tax profit and treated as earnings distribution
    previously.

According to the rulings promulgated by the Ministry of Economic Affairs of the Republic of China, after the amendment to the Company Act in 2015, companies cannot issue employee bonuses pursuant to their old Articles of Incorporation any more. If a company does not amend its Articles of Incorporation in accordance to the amended Company Act by the end of June 2016, such company shall have no basis to distribute employee compensation and thus employees will not be able to receive compensation distributions. Consequently, such company shall also not be able to distribute earnings to shareholders. Therefore, please support the passage of the amendment to the Company's Articles of Incorporation in the 2016 AGM, to prevent the Company's employees and shareholders from not being able to receive their respective compensation and dividend distributions.

Matters to be Recognized:

  1. Recognition of the Company's 2015 Business Report and Financial Statements
  2. Recognition of 2015 Earnings Distribution (NT$ 2.8 per share)

Other Proposals to Seek Shareholder Support

1.       Additional cash payout from capital reserves

Propose additional cash payout of NT$1 per share from capital reserves: The board of SPIL has approved to distribute cash dividend of NT$2.8 from 2015 earnings, which equates to an increased payout ratio of nearly 100%. To further reflect our commitment in maximizing shareholder value, the board has proposed an additional cash distribution of NT$1 per share from capital reserves, bringing total cash distribution to NT$3.8 per share.

2.       Amendment to the Procedures for Acquisition and Disposal of Assets

Proposal to increase the aggregate and individual limits on investments in securities: In order to maintain our competitive advantage through operational flexibility as well as required business expansions, we are putting forth a proposal to increase both the aggregate and individual limits on investments in securities. Our current aggregate and individual security investment limits are 20% of our Company's net worth, which is well below the average of the top 20 technology companies in Taiwan, putting us at significant disadvantage relative to our peers.

(Left) Benchmark for limit on aggregate investments; (Right) Benchmark for limit on individual security
(Left) Benchmark for limit on aggregate investments; (Right) Benchmark for limit on individual security

We propose to increase the limit on aggregate investments from 20% to 40% and the limit on individual security investment from 20% to 30%. This will afford us the requisite flexibility while still places us below the average and the median of our peer group, thus providing appropriate safeguards for our shareholders.

The limits have been unchanged since 2003, and given how the industry has evolved since then, such flexibility will allow us to support our growth aspirations in the Chinese market. We plan to invest in our Suzhou subsidiary for advanced IC packaging and testing solutions to capture the growth of China's semiconductor industry as it progresses. Your support in this matter is of utmost importance and will allow our board to make decisions that will benefit shareholders in a timely and pragmatic manner.

As mentioned earlier, the intent behind these changes is to ensure that we can focus on sustainable business growth. Despite outside distractions and hostile interests, our primary goal remains to maximize shareholder value over the long term. Your support on these matters will allow us to set the foundation for the long term and is extremely important so that we can collectively continue towards increasing shareholder value.

SPIL will continue to comply with the high standards of corporate governance as demonstrated in our track record. The company has ranked among the top 5% for two consecutive years in the Corporate Governance Evaluation held by the Taiwan Stock Exchange Corporation since it began in 2015. A total of 1,447 companies listed on the TWSE/Taipei Exchange were evaluated in the Second Corporate Governance Evaluation, and only 49 companies received this award in two straight years. Further, the Company received special honors for two consecutive years since 2013 in the Excellence in Corporate Social Responsibility Award by the Common Wealth Magazine and the Taiwan Corporate Sustainability Award from the Taiwan Institute for Sustainable Energy. Chairman Bough Lin is also ranked at #20 on the list of Top 50 Taiwan CEOs in 2016 by Harvard Business Review.

The optimism about the future shared by all members of the Company remains strong in our culture. With the support of our employees, customers, partners and you -- the shareholders, we have built a solid foundation for a bolder SPIL. We are now on the path for future success without the need for any outside intervention. We look forward to your support and seeing you at the upcoming AGM.

For more information, you can find our communication slides: http://photos.prnasia.com/prnk/20160415/8521602436, or please contact our Investor Relations Director Janet Chen at janet@spil.com.tw or +886-3-5795678#3675 or our Spokesperson Mike Ma at mikema@spil.com.tw or +886-4-25545527#5601 or our proxy solicitor Alliance Advisors at twallace@allianceadvisorsllc.com or +1-973-873-7717.

[1] Based on current authorized capital.

[2] Based on proposed authorized capital.

[3] Calculated as (authorized shares -- issued shares) / authorized shares.

[4] Assumes conversion of outstanding convertible bonds; current conversion price of NT$49.4668.

Photo - http://photos.prnasia.com/prnh/20160415/8521602436-a
Photo - http://photos.prnasia.com/prnh/20160415/8521602436-b


Source: Siliconware Precision Industries Co., Ltd.
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