EANS-News: Statetment of the Supervisory Board of Balda AG

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Company Information/Statement of the Supervisory Board of Balda AG

Bad Oeynhausen (euro adhoc) - Supervisory Board of Balda AG responds
to Octavian´s request to substitute the Supervisory Board members

Press Release

Bad Oeynhausen, 29 December 2011 - Octavian Advisors LP ("Octavian")
via Octavian Special Master Fund L.P. requested the Management Board
of Balda AG ("Company") to convene an extraordinary general meeting
with the aim to substitute the Supervisory Board members of the
Company. Having reviewed said request, the Management Board of the
Company decided to convene an extraordinary general meeting to be
held on 8 February 2012.

The Supervisory Board of the Company hereby takes the opportunity to
comment on the allegations put forward in Octavian´s press release
dated 12 December 2011. However, the Supervisory Board is still
astonished about how Octavian could get hold of these Company´s
secrets that now have been published in a way that may be
disadvantageous to the Company and, consequently, to all of its
shareholders.

In fact,

- This current Supervisory Board has always acted and will always act
solely in the interest of the Company;

- This current Supervisory Board members fulfil their duties
independently;

- the election of the Supervisory board members proposed by Octavian
would lead to severe conflicts of interests and would strongly
deteriorate the Company´s corporate governance.

In detail:

The Supervisory Board´s function in a German stock corporation is
limited to vote in favour of or against a proposal of the management
board (and not to conduct the business). Hence, the duty of the
Supervisory Board is to evaluate the Management Board´s proposals in
light of the best interests of the Company and to decide accordingly.
The Supervisory Board of the Company understands that shareholders
may doubt the Company´s decision not to sell its shareholding in the
touch screen producer TPK Holding Co., Ltd. ("TPK") at a time when
the stock exchange price was favourable for such transaction.
However, the better reasons argued for a refusal of the requested
approvals in each of the respective cases.

The Company has announced its intention to sell TPK shares in
numerous occasions including its annual general meeting in May 2011.
Nevertheless, the Company as a major shareholder of TPK (owning 16.1%
of TPK or around 37.8 million TPK shares) cannot dump TPK shares into
the stock market recklessly to destroy the stability of TPK stock
price and, hence, the value of its remaining TPK shares held. The
common practice is to conduct this activity via a block trade or a
secondary offering. In addition, the securities laws of Taiwan
require the Company, before selling or buying, to file with Taiwan
authorities for change of its shareholding in TPK for more than
10,000 TPK shares, as by operation of law, the Company is deemed to
be an insider.

The aforementioned market circumstances and regulatory constraints
required the Supervisory Board to intensively review each of the
Management Board´s proposals of how and when to proceed with selling
the TPK shares. The Supervisory Board is still convinced that none of
the Management Board´s proposals has had the capacity to comply with
these complex requirements in the respective situation.

Firstly, it should be mentioned that the further lock-up after April
2011 was not the result of a blindfold decision of the Company. TPK
issued a USD 400m convertible bond in April 2011 to fund its capital
expenditure and M&A activities. This was not an uneventful
capital-raising. It was the result of a demand from TPK´s customers
which required expansion of production capacity by TPK and had been
scheduled by TPK since the beginning of 2011. As a result, the bond´s
underwriters had imposed a lock-up to all major shareholders of TPK
including the Company for three months as a standard market practice.
Not to agree to this lock-up was no alternative for the Company since
it would have otherwise endangered the whole TPK investment.
Consequently, 50% of the Company´s TPK shares were further locked-up
to 13 July 2011; the other 50% of the Company´s TPK shares were
anyway locked-up.

Further, all proposals from the Management Board that followed the
end of the further lock-up were either not sufficient with regard to
the regulatory aspects of the said filing to the Taiwan authorities
or endangered the stock exchange price of the Company´s TPK shares
that would have remained with the Company after the envisaged
transactions. Even the attempt to launch a joint GDR (Depository
Receipt) offering together with TPK which would have complied with
the respective requirements failed at the end of the day due to the
decreasing stock exchange price of the TPK shares. It would have not
been in the best interest of the Company to accomplish this GDR
offering in a market where TPK shares lost value to such a tremendous
extent. There was and there is no reason for the Company to sell its
shareholding in TPK to a price that does not reflect the value of
TPK. The Company is not forced to act on short notice like a hedge
fund may be and, hence, able to wait for better market conditions.

As far as Octavian mentioned that the Supervisory Board was
obstructing the implementation of the management board´s strategy to
concentrate on growth in its core business areas, this allegation is
of no substance. The Supervisory Board has never been un-supportive
of exploring strategic growth areas for the Company including the
medical field. However, strategic exploration is not equivalent to
conducting an M&A activity that does not make economic sense. The
Supervisory Board believes that it was in best interest of the
Company and its shareholders to consider any M&A activity carefully
without any unneeded pressure and will act accordingly in future.

Octavian´s further allegations that two of the three members of the
Company´s Supervisory Board were not independent or were subject to
conflict of interests are misleading and incorrect. They are based on
the wrong assumption that Mr Michael Chiang was the major shareholder
of the Company. However, as is well known by the public notifications
of voting rights held in the Company that the Company´s major
shareholder, Yield Return Investments Limited, is solely owned by Mrs
Yun-Ling Chiang. To the extent known to and knowable by the Company,
Mr Chiang is neither a shareholder in the Company nor in Yield Return
Investments Limited. In particular, the Supervisory Board members
deem it inappropriate, to say the least, to attempt to evidence their
purported lack of independence with an allegedly unfair sale of TPK
shares that occurred in 2008 when neither the current Management
Board nor the current Supervisory Board members were in charge.
However, it should be mentioned that Mr. Chiang helped out the
Company in 2008 by paying a price for the TPK shares (that had not
been listed at that time): A well-respected investment firm had
conducted an evaluation analysis reaching a conclusion of TPK´s
equity value at USD 205 million in 2008. This was exactly the same
acquisition price Mr. Chiang paid for to buy additional TPK shares
from the Company in October 2008 as mentioned by Octavian. It is
needless to say that the acquisition was pivotal to the Company at
the time of its liquidity crunch to service bank debt. Furthermore,
the timely help was solely undertaken by Mr. Chiang for the purpose
of helping out the Company while certain major shareholders were also
offered but declined the same opportunity to buy secondary TPK shares
from the Company.

Based on these facts, Octavian´s allegations that the Supervisory
Board would not be independent but act in the interest and for the
benefit of individual shareholders are barely comprehensible.

In fact, the Supervisory Board is proud of the current composition of
membership. Dr. Michael Naschke is an experienced corporate lawyer in
Germany and has been involved with the Company for a long period of
time. Mr. Chun-Chen Chen is a veteran in the touch industry who is
capable of providing strategic guidance to the Supervisory Board
concerning the industry dynamics of TPK whose shares represent all,
if not more than 100%, of the Company´s market capitalization. Mr.
Yu-Sheng Kai is a seasoned private equity investor with relevant
finance experience of more than 20 years. Neither Mr. Chun-Chen Chen
nor Mr. Yu-Sheng Kai is an employee of TPK as wrongfully insinuated
by Octavian. Needless to say that both are not influenced in a way
(as alleged by Octavian) that could hinder them to comply with their
duties in an independent and lawful manner. The recently announced
changes to the Management Board include Dominik Mueser and Mr. James
Lim. Mr. Mueser, the new CEO, is a renowned specialist who is
expected to lend his experience to develop proper strategies for the
Company and its current operations, much needed to re-define and
re-position the Company`s future as going concern. Mr. Lim, the new
COO, is returnee to the Company with a proven track record as general
manager of Balda Malaysia generating positive bottom-line results for
many years.

In contrast, the Supervisory Board of the Company fears that the
election of the candidates proposed by Octavian would lead to severe
conflicts of interests and would strongly deteriorate the Company´s
corporate governance. This is based on the following reasons:

Mr René Charles Jäggi, who is intended to become the Chairman of the
Supervisory Board, holds numerous management and supervisory mandates
in listed and non-listed other companies in Germany and abroad that
demand ample time. As stated in Octavian´s press release, Mr Jäggi
holds various supervisory positions. Some (but not necessarily all)
of them will be listed in the invitation to the Company´s
extraordinary general meeting. It is hardly imaginable that the
remaining fraction of time that Mr Jäggi disposes of could allow him
to serve the Company as an active member of the Supervisory Board -
be it as a simple member or as its Chairman. The full number and the
details of management and supervisory positions exercised by Mr Jäggi
are not known to the Supervisory Board of the Company. However, the
Supervisory Board of the Company believes Mr Jäggi´s election would
not be in line with the recommendations set forth in the German
Corporate Governance Code (No. 5.4.5). As a consequence, his election
might be declared void by the courts.

Mr Igor Kuzniar works as a managing director for Octavian. His
conflict of interests is obvious. The substantiation of Octavian´s
proposal of Mr Kuzniar´s election as a member of the Supervisory
Board together with Mr Alizadeh, partner of a hedge fund also based
in New York, with the asserted aim to improve the Company´s corporate
governance in the Supervisory Board appears to be rather cynical.

The Supervisory Board kindly asks the shareholders of the Company to
take the aforementioned information into account when forming their
opinion and casting their votes in the extraordinary general meeting.
In light of this information, the Supervisory Board of the Company
will propose to the extraordinary general meeting to reject
Octavian´s proposals for resolution.

Further inquiry note:
Clas Röhl
Tel.: +49 (0) 5734 922-2728
croehl@balda.de

end of announcement euro adhoc
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company: Balda AG
Bergkirchener Str. 228
D-32549 Bad Oeynhausen
phone: +49 (0) 5734 9 22-0
FAX: +49 (0) 5734 922-2747
mail: info@balda.de
WWW: http://www.balda.de
sector: Semiconductors & active components
ISIN: DE0005215107
indexes: CDAX, Prime All Share
stockmarkets: regulated dealing/prime standard: Frankfurt, free trade: Berlin,
Hamburg, Stuttgart, Düsseldorf, München
language: English