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GS AGM Information 2022

Jun 21, 2022

52110_rns_2022-06-21_e6d331df-deaf-4d4a-b15a-b9fecc6aadfc.pdf

AGM Information

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G-SHANK ENTERPRISE CO., LTD.

2022 Annual Shareholder’ Meeting

Meeting Agenda

(Translation)

June 10,2022

Ｔａｂｌｅ ｏｆ Ｃｏｎｔｅｎｔｓ
Agenda of the Annual Shareholders’ Meetings-------------------------------
Report matters------------------------------------------------------------------
Adoption of proposals----------------------------------------------------------
Discussion matters--------------------------------------------------------------
Extemporarymotions-----------------------------------------------------------
2021 Earnigns Distribution Statment-------------------------------------------
2021 Financial Statements-------------------------------------------------------
Cross-reference oftheamendments Company’s Articles of Incorporation
before and after-------------------------------------------------------------------------
Cross-reference oftheamendments to the Company’s “Procedures for
Acquisition and Disposal of Assets Procedures” before and after---------------
Appendices
(1) Articles of Incorporation(before amendment)-----------------------
(2)Rules of Procedure for Shareholders’ Meetings-------------------------
(3)Procedures for the Acquisition and Disposal of Assets (before
amendment)------------------------------------------------------------------
(4)Shareholding of Directors---------------------------------------------------		 Ｐａｇｅ
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G-SHANK ENTERPRISE CO., LTD.

Agenda of the 2022 Annual Shareholders’ Meetings

Time: 9:00 a.m., June 10 (Friday), 2022

Place: The Company (No. 1, Jiuzhou Road, Jiudouli, Hsinwu District, Taoyuan City)

Meeting convention: Physical shareholders’ meeting

Agenda of the Annual Shareholders’ Meetings:

  1. Calling the meeting to order

  2. Chairman’s address

  3. Report matters

  4. (1). The 2021 Business Report

  5. (2). Audit Committee’s report on the 2021 Financial Statements

  6. (3). Report on the 2021 employees’ compensation and directors’ remuneration

  7. (4). Report on the investment in mainland China

  8. Adoption of proposals

  9. (1).Adoption of the 2021 Business Report and Parent-only and Consolidated Financial Statements

(2).Adoption of the proposal of 2021 Dividend Distribution

  1. Discussion matters

  2. (1).Amendment to the Company’s Articles of Incorporation

  3. (2).Amendment to the Company’s “Procedures for the Acquisition and Disposal of Assets”

  4. Extemporary motions

  5. Adjournment 

 1

G-SHANK ENTERPRISE CO., LTD. The 2022 Annual Shareholders’ Meetings

1. Calling the meeting to order

2. Chairman’s address

3. Report matters

(1) The 2021 Business Report

A.Operating income overview

The Company’s consolidated operating income was NT$6,420,460 thousand in 2021, an increase of 34.33% from the NT$4,779,614 thousand in 2020, mainly due to the increase of sales in parts from an amount of NT$4,296,392 thousand in 2020 to NT$6,018,668 thousand in 2021, representing an increase of 40.09%, which resulted from the increasing purchase orders received by the Group. The relevant statistics of the product sales of the Company are illustrated as follows:

Product sales statistics

Unit: NT$ Thousand

Year
Item
Sales in 2021		 Sales in 2020 Growth rate
Parts 6,018,668 4,296,392 40.09%
Tooling 208,400 260,569 -20.02%
Tools 101,720 81,596 24.66%
Instruments 91,672 141,057 -35.01%
Total 6,420,460 4,779,614 34.33%

B.Profit and loss overview

The Company’s net income before tax was NT$1,038,684 thousand in 2021, representing an increase of 94.76% from the NT$533,314 thousand in 2020; also, the sales had gone up by 34.33% from the year before. The gross profit ratio and operating profit rate had grown by 1.4% and 4.4%, respectively, mainly due to the expansion of business scale, different product portfolios, and the effective control of internal process optimization costs and expenses, resulting in better gross profit and operating profit than the previous year. The non-operating income and expense was mainly due to the higher reinvestment profit than the previous year. In summary, the net income was increased by 110.91% from NT$356,967 thousand in 2020 to NT$752,865 thousand in 2021. The profit and loss overview, budget execution, financial income and expense overview, and profitability analysis are detailed as follows:

Profit and Loss Overview

Unit: NT$ Thousand

Item Actual amount in
2021
Actual amount in
2020		 Increase /
Decrease ratio
Operatingincome 6,420,460 4,779,614 34.33%
Operatingcost 4,524,682 3,434,436 31.74% 
 2
Grossprofit 1,895,778 1,345,178 40.93%
Operatingexpense 894,052 809,389 10.46%
Other income, expense,
and loss - net		 1,285 1,479 -13.12%
Operating profit 1,003,011 537,268 86.69%
Non-operating income
and expense		 35,673 (3,954) NM
Net income before tax 1,038,684 533,314 94.76%
Income tax expense 285,819 176,347 62.08%
Net income 752,865 356,967 110.91%
Net income attributable
to
Parent company’s
shareholders		 648,364 287,441 125.56%
Non-controlling
interests		 104,501 69,526 50.30%
Earningsper share 3.49 1.55 125.16%

C.Budget execution

The Group did not disclose the financial forecast to the public in 2021.

D. Financial income and expense overview

Unit: NT$Thousand Unit: NT$Thousand Unit: NT$Thousand Unit: NT$Thousand
Item 2021 2020 Increase
(Decrease)ratio
Non-operat
ing income
and
expense		 Interist income 92,719 90,713 2.21%
Other income 35,500 33,721 5.28%
Otherprofit and loss (38,529) (33,159) 16.19%
Financial cost 14,684 14,253 3.02%
Percentage of profit from
the associates under the
equitymethod		 4,809 (18,307) NM
Foreign currency exchange
loss – net		 44,142 62,669 -29.56%
Subtotal 35,673 (3,954) NM

E.Profitability analysis

Item Item 2021 2020
Financial
structure		 Ratio of Liabilityto Assets(%) 36.56 35.64
Ratio of Long term fund to fixed assets
(%)		 531.52 502.70
Profitability Ratio of Return on Total assets(%) 8.75 4.56
Ratio of Return on Shareholders’
Equity (%)		 15.16 7.64
Ratio to issued
capital stock(%)		 Operating
income		 53.40 29.05 
 3
Net income
before tax		 55.30 28.83
Profit Ratio(%) 11.73 7.47
Earningsper share(NTD) 3.49 1.55

F. Research and development status

  • (A) Industry analysis

The Company has been engaging in the tooling development and production for computer/information/home appliance-related components for a long time, and is committed to industrial dispersion with the hope of increasing the sales ratio in automotive/industrial equipment/medical-related products. The Company had gradually achieved the set goal since the year of 2021, including 52% in 3C products, 32% in industrial equipment (including medical), and 16% in automotive products; also, the Company’s ultimate goal is to achieve one third of sales from each category. a. 3C electronics industry:

The emerging of 5G communication has driven the development of three major trends, broadband/big link/low latency that not only help breakthrough the bottleneck of data transmission speed, but also further activate the unman vehicles real-time networking, efficient smart factory, telemedicine, virtual education, etc., as well as B2B and B2C application revolution, which then further drive the development of next-generation component technologies, such as, motion tracking, environmental ranging, tactile feedback, etc., added with the further integration of AI/edge computing and sensors that will enable future perception solutions to have excellent capability in awareness and judgment. Naturally, such development trend is not out of nothing, instead, it must be based on the improvement of the existing software and hardware. Therefore, it is an inevitable trend for the key components to be lighter, higher precision, and more functional.

b. Vehicle related:

The traditional automotive industry supply chain has relied on the support of mass production with various types of molds in use to help reduce costs. In recent years, due to the rapid development of smart technology, various models of vehicles are equipped with massive electronic smart devices, which are inseparable from the traditional electronics industry. In addition, the environmental awareness has made the electric vehicle industry with clean fuel more attractive to major automakers to invest with productivity of 11.2 million cars expected in 5 years and 3.11 million cars in 2030, representing a compound annual growth rate (CAGR) of 29% expected in 10 years; therefore, the future is full of promises.

  • c. Industrial equipment:

All manufacturers have made automatic assembly and production the first choice in reducing cost while facing the challenge of soaring labor costs; also, it helps eliminate the trouble of personnel management. Under the circumstance, the demand for components that are indispensable to automation equipment, such as, relays/PLCs/fuse-free switches/breakers will grow constantly. 

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The Company is at the upstream position of the aforementioned three major industrial supply chains. In terms of the Company’s manufacturing process, in addition to the supply of electronic components, the electrical equipment/vehicle electronics/medical related...etc. can be transformed and supplied with the use of the existing technologies or equipment quickly, which is the Company’s core competence.

(B) Responsive strategies

  • a.If the existing electronic component industry maintains the traditional processing mode with customer-supplied materials, there is no possibility of responding to the global massive/rapid changes. Therefore, the Company will focus on ODM operation and participating in customer design in the future.

  • b.The Company is mainly engaged in stamping and metal/plastic injection business with Stage-I one-step manufacturing process completed and has the manufacturing process extended to finished product assembly, an electromechanical department established for the design and production of automatic assembly machines so to achieve the goal of becoming a one-stop full-process supplier.

  • c.The inheritance of craftsmanship in a technology-intensive industry is the key to success. In addition to continuing the operation of the education and training center and the industry-university cooperation with three universities, the Company has introduced a mentor-disciple system and one-on-one in-depth teaching program to have the Company’s core technology integrated and inherited effectively.

  • d.Based on the existing 3C electronic components business to expand and enter the market of automotive-related and industrial equipment. The Company had achieved the set goal in sales since the year 2021, including 52% in 3C products, 16% in automotive products, and 32% in industrial equipment; also, the Company’s mid-term and long-term goal is to achieve one-third of sales from each category in 2025.

  • e.The Company has introduced TPS Toyota-style production management to improve corporate management per se, reduce mold-changing time, and enhance process linkage capabilities in response to the expansion of the automotive market. Also, the Company has initiated continuous, uninterrupted, and lean improvement of manpower, materials, and manufacturing processes to meet the high-standard requirements of the automotive market through visualized management, including purchasing, feeding, manufacturing, processing, quality assurance, shipping, etc.

  • f.Reinforce customer relationship management, conduct research on new customers and new markets, and share relevant industry information with existing customers so to make it easier for us to communicate and interact with customers and maintain customer relationships. Comprehensively grasp the customer’s product development schedule and synchronize with the customer’s project schedule so as to have the customer’s project completed before the deadline, to have the customers satisfied, and to prevent the customers from information or schedule gap.

  • (C). Research & Development achievements

  • a.Introduction of AU electroplating layer laser engraving and gold stripping 

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technologyElectronic products are getting smaller and more precise. The soldering process of B2B and other board-side connectors are destined to fail due to the solder wicking (siphon principle) as a result of the sized down device; therefore, the laser engraving and gold stripping technology is applied to prevent the solder wicking from happening; therefore, the ultra-fine soldering as thin as 0.3mm has been achieved. There are currently two production lines in service since the year of 2019.

b.6.0mm thick forging and stamping

The traditional thick metal forging and stamping is processed with hydraulic or servo press punching machines to make the material flow evenly; however, the equipment investment cost is high. The Company has invested in research and development with the use of the integrated existing crankshaft punching machine/continuous die + single-engineering die/robot arm to successfully develop the thick forging and stamping production line.

  • c.Electronic monitoring wearable device

General electronic connectors are suitable for metal or plastic welding. In terms of electronic wearable technology development, in addition to the well-known electronic wristbands, the development of electronic monitoring functional clothing is underway. Physiological functions can be monitored with the cloth worn. The connector that can be welded onto the fabric is co-developed with the customers, through the existing Insert Molding technology to have metal terminal/plastic injected, and then welded on the functional fabric for having physiological signals transmitted to the mobile phone. d.Multiple invention patents

GUI detection software AI Master new (invention) patent, AIOT common gateway interface APIs platform technology new (invention) patent, and flat image precision dimension measurement new (invention) patent help reinforce the information technology and services of G-SHANK ENTERPRISE CO., LTD.

G.The 2022 business plan outline

  • (A)Operating strategy:

Uphold the corporate culture of kindness, integrity, courage, and responsibility. Extend and adjust the Company’s internal physique with “energy,” “action,” “movement,” “discipline,” “art,” “goodness,” “ability,” “integrity,” “truth,” “positiveness,” “harmony,” “sincerity,” and “diligence.” Form an attitude of practical, courageous execution, and uplifting team morale. Also, provide customers with professional, fast, ample, and massive service with a stable, healthy, simple, and practical business policy. Finally, achieve the management indicators of self-interest, altruism, and the greater good of the society taking as a whole; enhance management in the three aspects of quality, cost, and benefit.

  • a.Decentralized markets, diversified operations, and generated income.

b.Enhance product quality control.

  • c.Reduce costs and increase profitability.

d.Internal management requires fair and reasonable rewards for merits and good deeds.

  • e.6S continuous pursuit of excellence 
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  • f.Introduce TPS lean production system.

  • (B)Expected sales volume and the reference: The Group does not have to disclose the financial forecast for 2022.

  • (C)Important production and marketing policies:

  • a.Substantiate ISO system, introduce IATF 16949, and improve product quality.

  • b.Production and sales/production planning is responsible for internal and external production management to meet customer delivery requirements.

  • c.The sales team is divided into 8 teams by function to exercise individually and support mutually.

  • d.Exercise the advantages of the Group and actively expand global deployment.

  • e.Refine technology research and development and set up a “Technology Committee” to promote innovation and enhance competitiveness.

  • f.Design of a brand new globally applicable website of the Group for international marketing.

  • g.Substantiate education and training; actively train independent and internationalized talents.

  • h.Quality objectives:

  • (a)Customer complaints are less than 16 cases per month.

  • (b)Sales return rate due to quality issue is PPM 2500 per month or less.

  • (c)Manufacturing process loss rate is below 1.15% per month.

  • Automotive Products Business Division:

    • I.Number of customer complaints per month ≦ 1 complaint

    • II.Delivery completion rate ≧ 90%

H.Future development strategy of the Company

The Company focuses on the principle of “developing the main business,” that is, the development and production of precision molds. That’s how it is and will be for the Company. However, market information is constantly changing and technology is working progress; therefore, the Company’s development strategy will be implemented in multiple aspects:

  • (A) Continue to develop international market and fulfill market demand, we will be at where we are needed.

  • (B) Vertical integration of upper and lower manufacturing processes and one-stop solution to meet customer needs;

  • (C) Diversify market risks and aim to reach one-third of revenues from 3C/vehicle/industrial equipment by 2025.

  • (D) Cooperate with Japanese industry and create a win-win situation with technology/market mutual-supplementation.

  • (E) Participate in customer research and development, provide key mold technology, and work jointly to shorten the development schedule.

In addition, the Company continues to promote innovation and enhance quality control internally. The delivery management platform and the price management platform have been established currently. A control and management of raw material, price, manufacturing 

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process, and delivery is systemized so to make the real-time and visible information available to the management. G-SHANK ENTERPRISE CO., LTD. basing on the various needs of customers plans to build a manufacturing process integration platform and to continuously improve and optimize the operation process for the satisfaction of customers and for a better operation per se in response to future challenges.

  • I.The impact of external competitive environment, regulatory environment, and overall business environment

  • (A) Impact of external competitive environment

Stamping industry is with a low entry threshold. More than 80% of the domestic operations are by small-scale business entities (less than 30 employees) according to the statistics of Taiwan Mold & Die Association. While facing the demand for a low manufacturing cost, price competition is severe that is to the disadvantage of the Company.

Chinese government has forcefully supported the fundamental industries, including tooling industry, in recent years with various preferential measures offered continuously (tax relief / low-interest loans, etc.); also, Japan, South Korea, and Taiwan have invested in the tooling industry in China with many talents cultivated. The scale, technology, management, and other aspects of the current tooling industry in China have approached or even surpassed the tooling industry in Taiwan. The rise of tooling industry in mainland China is of disadvantage to the business operation of the Company.

Therefore, the Company expects to face more severe competitions externally and exchange rate risks continuously. Especially, electronic products are the most important exports of Taiwan. The Company will continue to rely on the profound mold technology capabilities, the continuous betterment of various manufacturing processes, and the integration of upstream and downstream processes to enhance quality control. The Company bases on the advanced automation production and peripheral equipment, integrated information management system, and self-developed visual inspection system (AI CCD vision system) to gradually realize unmanned and automation production. The Company has comprehensive mold design, processing, and assembly capabilities with more than 95% mold parts made in-house, and can quickly cooperate with customers to develop precision parts and to prepare samples. There are 15 factories and 2 offices globally with the mold R&D centers set up in Taiwan and Shanghai. The R&D budget accounts for 3% of the Company’s annual revenue. While facing the challenges of the Sino-US trade war, the prevalence of COVID-19 pandemic, the exchange rate, and soaring labor and raw materials cost in 2021, the Company actively introduced manufacturing process optimization internally to control costs and expenses. The main product portfolio had helped the Company generated NT$6.42 billion in revenue and an 86.69% growth in operating profit. 

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In prospect, the Company is to work centralized on the mid-term and long-term transformation plan, and to focus on the development in the industrial machinery and smart automotives continuously with a hope to keep competitors in distance and to secure a long-term stable growth.

(B) Regulatory environment

In terms of regulatory environment, the Company has already taken countermeasures to respond to the RoHS EU environmental protection directives, including the formulation of norms and the purchase of XRF spectrum analyzers for in-house testing, which is currently used in the 10 factories of the Group. In terms of corporate energy saving and carbon reduction measures, the Group has built solar panels at Xinwu factory in Taiwan and the factory in Malaysia. The Company values the importance of corporate responsibility and environmental protection, promotes energy saving and carbon reduction, improves energy efficiency, increase waste disposal performance, establishes a green supply chain, markets green products and services, maintains the ecological environment, etc. The Company strives to promote and introduce ISO14001 and execute the environmental policy propaganda “protecting the natural resources on the Earth, reducing environmental pollution, and complying with environmental protection laws and regulations” so to fulfill the Company’s social responsibilities. At the same time, the Company actively cooperates with the competent authorities in the amendments to the Securities Exchange Act and the introduction of IFRS policy so to comply with the requirements of corporate governance and transparent financial information.

  • (C) Impact of overall business environment

We while facing the aforementioned external competition and domestic production cost increase base on the business philosophy of sustainable management, continuous technology innovation, manufacturing process integration from top to bottom, new project introduction, creation of an environment complying with regulations, etc. to be differentiated from the competitors in the sense of technology/delivery time/quality/environmental protection so to exercise our greatest advantage to give customers a peace of mind. We must secure an irreplaceable dominant position in the supply chain, adhere to a prudent and rigorous management attitude and concept, and continue to cultivate talents and develop specialized technologies at the 17 operation bases worldwide with a global supply network and sales system formed. The Company shall face up to the uncertain factors in the global economy calmly and respond to the challenges with a rigorous and responsible attitude for the pursuit of an optimized cost structure and the creation of better and finer quality products that are recognized by customers and will help generate more profits for the good of the shareholders and employees taking as a whole. 

 9

(2) Audit Committee’s Report on the 2021 Financial Statements

G-SHANK ENTERPRISE CO., LTD. Audit Report of the Audit Committee

The Board of Directors had prepared the 2021 Business Report, Financial Report (including the Consolidated Financial Report), and Earnings Distribution Proposal, of which, the Financial Report (including the Consolidated Financial Report) was audited by CPA Tseng, Chon-Hui and CPA Rui-Yan Tseng of Diwan & Company with an audit report issued. The Audit Committee found no nonconformity in the aforementioned reports. This report is thus presented to the Company for review and approval pursuant to the provisions of the Securities and Exchange Act and the Company Act.

Sincerely yours,

To

The 2022 Annual Shareholders’ Meeting of G-SHANK ENTERPRISE CO.,

LTD.

Convener of the Audit Committee

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  • (3) Please review and approve the report on the 2021 compensation to employees and remuneration to directors.

  • Note: 1.It is to be handled in accordance with Article 17 of the Company’s Articles of Incorporation.

    • 2.The Company’s net income before tax and before deducting compensation to employees and remuneration to directors was NT$822,588,613 in 2021. An appropriation for an amount equivalent to 2.55% of the net income, that was NT$21,000,000, was distributed as compensation to employees in cash. There is no appropriation for the remuneration to directors currently.

  • (4) Please review and approve the report on the investment in mainland China. Note: G-BAO (SHENZHEN) PRECISION MOLD COMPANY, a subsidiary of the Company, invested in G-BAO (HUIZHOU) PRECISION MOLD COMPANYH with A business license acquired in March 2021. A total amount of RMB 20 million was paid for Stage I~III as of March 2022. The construction of the factory was slightly behind the schedule due to the pandemic control policy executed in Guangdong and the construction is expected to be completed by the end of 2022.

4. Adoption of proposals

Proposal (1): (Proposed by the Board of Directors)

Cause of action: Please approve the Company’s 2021 Business Report, Individual and Consolidated Financial Reports.

  • Note: (1) The Company’s 2021 Individual and Consolidated Financial Reports have been audited by the CPAs.

  • (2) The 2021 Business Reprot (Please refer to Page 2-9 of the Agenda Handbooks for details)

  • (3) The 2021 Financial Reprots (Please refer to Page 15-34 of the Agenda Handbooks for details).

Resolutions:

Proposal (2): (Proposed by the Board of Directors)

Cause of action: The approve the Company’s 2021 Profit Distribution Proposal.

  • Note: (1) The Company’s net income was NT$648,363,968 in 2021, added with the actuarial benefits of the 2021 defined benefit plan and the equity instruments measured at the fair value through the comprehensive profit and loss by the associates under the equity method, the percentage of other comprehensive profit and loss from the associates under the equity method - items not reclassified to profit or loss with an adjustment made to the unappropriated 
 11

earnings for an amount of NT$9,836,237, the appropriation of legal reserve for an amount of NT$65,820,021, and the unappropriated earnings of previous years for an amount of NT$1,279,232,767, resulting in a grand total of distributable earnings of NT$1,871,612,951. It is proposed to distribute cash dividends to shareholders at NT$2.1 per share for a total of NT$394,447,826. The unappropriated earnings after the said distribution amounted to NT$1,477,165,125. Please refer to page 14 of the Agenda Handbooks for the earnings distribution in details.

  • (2) Cash dividends are calculated to the dollar (rounded up to dollar). The total amount of fractional shares is included in the Company’s other income. The Chairman will be authorized to determine the ex-dividend date, dividend distribution date, and other relevant matters after the resolutions of the general shareholders’ meeting.

  • (3) If there is change in the Company’s outstanding shares due to the repurchase of the Company’s stock shares, the employee’s executing stock warrant, etc., it is advisable for the shareholders’ meeting to authorize the Chairman to have dividend rate adjusted discretionarily.

Resolutions:

5. Discussion matters

Proposal(1): (Proposed by the Board of Directors)

  • Cause of action: The proposal for the amendments to the Company’s “Articles of Incorporation” is hereby presented for resolutions.

  • Explanation: (1) Amendments are to be made to the Company “Articles of Incorporation” partially in response to the law and regulations and the Company’s actual business needs.

  • (2) Please refer to Page 35 of the Agenda Handbooks for the cross-reference of the amendments to the “Articles of Incorporation” before and after.

Resolutions:

Proposal (2): (Proposed by the Board of Directors)

Reason for action: The amendments to the Company’s “Procedures for the Acquisition and Disposal of Assets” are hereby presented for resolutions.

  • Note: (1) It is to be handled in accordance with the Jin-Guang- Zheng-Fa-Tzi No. 1110380465 Order dated January 28, 2022 by the Financial Supervisory Commission. It is proposed to make amendments to the Company’s 
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  • “Procedures for the Acquisition and Disposal of Assets” partially.

  • (2) Please refer to Page 36 of the Agenda Handbooks for the amendments to the “Procedures for the Acquisition and Disposal of Assets.”

Resolutions:

  1. Extemporary motions

7. Adjournment

 13

G-SHANK ENTERPRISE CO., LTD.

The 2021 Earnigns Distribution Statment

Unit: NTD


Unit: NTD
Item Amount
Unappropriated earnings - beginning
Add: The 2021 net income
Add: Actuarial profit from the 2021 defined benefit plan
Add: Equity instruments measured at the fair value through
the comprehensive profit and loss by the associates under
the equity method
Add: The percentage of other comprehensive profit and loss
from the associates under the equity method - items not
reclassified to profit or loss with an adjustment made to
the unappropriated earnings
Minus: Legal reserve appropriated
Distributable earnings
Minus: Distribution items
Shareholders’ dividend – cash (NT$2.1/share)
Unappropriated earnings - ending



$1,279,232,767
648,363,968
9,034,153
762,419
39,665
(65,820,021)

1,871,612,951
(394,447,826)
$ 1,477,165,125
$

Note: The aforementioned shareholder dividends are based on the 187,832,298 common stock shares issued by the Company as of March 10, 2022. 

 14

INDEPENDENT AUDITOR’S REPORT

To: G-SHANK ENTERPRISE CO., LTD.

INDEPENDENT AUDITOR’S OPINION

We have audited the accompanying consolidated balance sheets of G-SHANK ENTERPRISE CO., LTD. (hereinafter referred to as “G-SHANK GROUP”) and its subsidiaries as of December 31, 2021, and 2020, and the related consolidated statements of comprehensive income, retained earnings, and cash flows for the years then ended.

In our opinion, based on our audit and the audit reports of other independent auditors (please refer to the relevant paragraphs for details), the consolidated financial statements referred to above present fairly, in all material respects, the financial position of G-SHANK GROUP as of December 31, 2021, and 2020, and the results of its operations and its cash flows for the years then ended in conformity with the “Regulations Governing the Preparation of Financial Reports by Securities Firm” and International Financial Reporting Standards (IFRSs) that was recognized by the Financial Supervisory Commission, International Accounting Standards, Interpretations, and Notices (IFRSs), Interpretation (IFRIC) and Interpretative Announcement (SIC).

BASIS OF AN AUDIT OPINION

We conducted our audit in accordance with the “Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountings” and generally accepted auditing standards. The responsibilities of the independent auditors under these standards will be further explained in the audit performed on the consolidated financial statements. The personnel of the CPA Firm subject to the independence requirement has acted independently from the business operations of G-SHANK GROUP in accordance with the Code of Ethics and have performed other responsibilities of the Code of Ethics. We believe that our audit and other CPA’s audit reports provide a reasonable basis for our opinion.

KEY AUDIT MATTERS

The key audit matters refer to the most important matters in auditing the 2021 consolidated financial statements of G-SHANK GROUP in accordance with the professional judgment of the independent auditors. These matters have been handled during the process of reviewing the consolidated financial statements as a whole with audit opinions formed. The independent auditor does not express an independent opinion on these matters. The independent auditor determines that the key audit matters to be communicated in the audit report are as follows:

I. Income recognition

Please refer to Note IV.17 to the consolidated financial statements for the accounting policy on income recognition. Also, please refer to Note VI.25 for the operating income in detail.

The operating income of G-SHANK GROUP is mainly generated from the production and sales of molds and stamping parts. The timing of income recognition is based on the transaction conditions agreed with each individual customer. An inappropriate timing for income recognition and unreasonable estimation of the refund liabilities for sales returns and sales discounts are key matters for income recognition, which will have an impact on the financial performance of G-SHANK GROUP. The independent auditor has the income recognition classified as a key audit matter in auditing the consolidated financial statements of G-SHANK GROUP.

The auditing procedures implemented by the independent auditors for the aforementioned key 

15

audit matters include: Understanding the sales process of G-SHANK GROUP, testing the internal control related to income recognition, reviewing the terms of the sales with the major customers, performing income cut-off tests, and checking the book-entry of sales returns and discounts, the measurement of the estimated refund liabilities for sales returns and sales discounts, and the implementation of analytical procedures.

II. Inventory evaluation

Please refer to Note IV.11 of the consolidated financial statements for the accounting policy of inventory evaluation. please refer to Note V.2(4) of the consolidated financial statements for the major sources of uncertainty of significant estimates and assumptions. Please refer to Note VI.6 of the consolidated financial statements for inventory details.

G-SHANK GROUP is mainly engaged in the production and sale of molds and stamping parts with the production and sales policies formed that are indirectly affected by the needs of end-user. The cost of inventory could be un-recoverable due to the occurrence of inventory damaged, outdated, or price dropped entirely or partially; also, when the estimated cost to be invested to completion and the estimated sale expenses increased. The use and value of inventories rely on the management’s inventory policy and sale forecast. However, a forecast comes with uncertainties. Therefore, the independent director has the inventory evaluation classified as one of the key audit matters in auditing the consolidated financial statements of G-SHANK GROUP.

A decisive factor in the value of inventories is the estimated net realizable value, which is based on the most reliable evidence of the expected realizable amount of inventories available at the time of estimation. Therefore, the relevant audit procedures of the independent auditor include reviewing and assessing whether the policy of G-SHANK GROUP in determining the net realizable value of inventories can reasonably reflect the forecast of future inventory sales, historical experience and other specific circumstances, inventory aging analysis and testing so to identify whether an allowance for inventory loss in valuation is appropriated reasonably according to historical experience for a specific obsolete inventory, the correlation between the assessment of past events and the yearend situation, and the impact of the price or cost fluctuation related to the said post events on the net realizable value of inventory.

OTHER MATTERS

Regarding the subsidiaries included in the consolidated financial report of G-SHANK GROUP and the relevant information of the subsidiaries disclosed in Note XIII of the consolidated financial report, the financial statements as of December 31, 2021, and 2020 of G-SHANK, INC. are prepared in conformity with the generally accepted principles of the USA, the financial statements as of December 31, 2021, and 2020 of G-S G-SHANK (Thai) Co., Ltd. are prepared in conformity with the generally accepted principles of Thailand, and the financial statements as of December 31, 2021, and 2020 of G-SHANK ENTERPRISE (M) SDN are prepared in conformity with the generally accepted principles of Malaysia, which were audited by other certified public accountants instead of the independent auditor. The financial statements of G-SHANK, INC., G-SHANK (Thai) Co., Ltd., and G-SHANK ENTERPRISE (M) SDN are translated in conformity with the “Regulations Governing the Preparation of Financial Reports by Securities Firms” and International Financial Reporting Standards (IFRS) that was recognized by the Financial Supervisory Commission, International Accounting Standards, Interpretations, and Notices (IFRS), Interpretation (IFRIC) and Interpretative Announcement (SIC). The independent auditor has completed all necessary auditing procedures. Therefore, the opinions of the independent auditor on the unadjusted amounts in the aforementioned financial statements of the subsidiaries are based on the audit reports of other certified public accountants and the results of additional audit procedures performed by them in compliance with the “Regulations Governing the Preparation of Financial Reports by Securities Firms” and generally auditing principles of the ROC. The total assets of the aforementioned subsidiaries were NT$1,050,706 thousand and NT$1,003,781 thousand on December 31, 2021, and December 31, 2020, accounting for 11.45% and 12.13% of the 

16

total consolidated assets, respectively. The net operating income from January 1 to December 31, 2021, and 2022 were NT$810,628 thousand and NT$616,749 thousand, accounting for 12.63% and 12.90% of the consolidated net operating income, respectively.

Please refer to the independent auditor’s report issued with additional sections added by the independent auditor for the 2021 and 2020 parent alone financial reports prepared by G-SHANK GROUP.

THE RESPONSIBILITY OF THE MANAGEMENT AND GOVERNANCE UNIT FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The responsibility of the management is to have the consolidated financial statements presented fairly, in all material respects, in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Firms,” International Financial Reporting Standards (IFRSs) that were recognized by the Financial Supervisory Commission, International Accounting Standards, Interpretations, and Notices (IFRSs), Interpretation (IFRIC) and Interpretative Announcement (SIC). Also, maintain the necessary internal controls related to the consolidated financial statements to ensure that the consolidated financial statements are free of any material misstatement arising from frauds or errors.

In the preparation of the consolidated financial statements, the management’s responsibility also includes assessing the continuing operation of G-SHANK GROUP, the disclosure of the relevant matters, and the adoption of the continuing operation accounting base, unless the management intends to liquidate G-SHANK GROUP or cease the business operation, or there is lack of any option except for liquidation or suspension.

The governance unit (including the Audit Committee or supervisors) of G-SHANK GROUP is responsible for supervising the financial reporting process.

CPA’S RESPONSIBILITY FOR AUDITING THE CONSOLIDATED FINANCIAL STATEMENTS

The purpose of the independent auditor’s auditing of the consolidated financial statements is to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement arising from frauds or errors and with an audit report issued. Reasonable assurance means high assurance. However, the audit conducted in accordance with generally accepted auditing standards does not guarantee to have any material misstatement in the consolidated financial statements detected. Material misstatement could be arising from frauds or errors. If the misstated amount or aggregated amount is reasonably expected to affect the economic decisions made by the readers of the consolidated financial statements, it is considered significant.

The independent auditors when conducting the audit in accordance with generally accepted auditing standards shall exercise professional judgment and maintain professional suspicion. The independent auditors also perform the following auditing tasks:

  • I. Identify and evaluate the risk of material misstatement arising from frauds or errors of the consolidated financial statements; design and implement proper responsive measures for the assessed risks; also, obtain sufficient and adequate audit evidence for forming an audit opinion. Frauds may involve conspiracy, forgery, deliberate omission, false declaration, or violation of internal control; therefore, the risk of material misstatement arising from fraud is higher than that caused by errors.

  • II. Obtain the necessary understanding of the internal control related to the audit in order to design appropriate audit procedures under the circumstance, but the purpose is not to express an opinion on the effectiveness of the internal control of G-SHANK GROUP. 

17

  • III. Assess the appropriateness of the accounting policies adopted by the management; also, the reasonableness of the accounting estimates and related disclosures made.

  • IV. Based on the audit evidence obtained , make conclusions on the suitability of the continuing operation accounting base adopted by the management and whether or not the events or circumstances causing significant doubts to the continuing operation ability of G-SHANK GROUP are with significant uncertainties. If the independent auditors believe that such events or circumstances are with significant uncertainties, it is necessary to remind the readers of the consolidated financial statements in the audit report to pay attention to the relevant disclosure or to revise the audit opinion when such disclosures are inappropriate. The conclusion of the independent auditors is based on the audit evidence obtained as of the audit report date. However, future events or circumstances may result in the inability of G-SHANK GROUP to continue operating.

  • V. Assess the overall presentation, structure, and content of the consolidated financial statements (including the relevant notes) and whether or not the relevant transactions and events in the consolidated financial statements are presented fairly.

  • VI. Obtain sufficient and appropriate audit evidence on the financial information of the individual business entity within the GROUP in order to express an opinion on the consolidated financial statements. The independent auditors are responsible for guiding, supervising, and implementing the auditing process of the GROUP; also, are responsible for forming an opinion on the audit of the GROUP.

The matters communicated by the independent auditors to the governing unit include the scope and timing of the planned audit, and the significant findings (including the major nonconformities of internal controls identified in the auditing process).

The independent auditors have provided to the governing unit the declaration of independence of the CPA Firm personnel subject to the Code of Ethics; also, have communicated with the governing unit regarding the relationship and other matters (including the relevant protection measures) that may affect the independence of the independent auditors.

The independent auditors have based on the communications with the governing unit to determine the key audit matters to be performed on the 2021 consolidated financial statements of G-SHANK GROUP. The independent auditors shall state the key audit matters in the audit report except for the specific matters prohibited from being disclosed, or, in rare cases; the independent auditors decide not to have specific matters communicated in the audit report since the negative effect of such disclosure can be reasonably expected to be greater than the increase of public interest.

Diwan & Company Financial Supervisory Commission Certificate No.: FSC-Shen-Tzi No. 1070312218 FSC-Shen-Tzi No. 0990071790

Chiung-hui Tseng

CPAs:

Arnico Tseng March 10, 2022 

18

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Expressed in thousands of New Taiwan dollar)

(December 31, 2021 & 2020 have been audited)

ASSETS ASSETS Notes December 31,2021 December 31,2021 December 31,2020 December 31,2020
Code Accounts AMOUNT % AMOUNT %
11xx
1100
1110
1136
1150
1170
1180
1200
1220
130x
1470
1476
15xx
1517
1550
1600
1755
1780
1840
1915
1920
1990
1xxx		 Current assets
Cash and cash equivalents
Financial assets at fair value through profit or loss - current
Current financial assets at amortised cost
Notes receivable, net
Accounts receivable, net
Accounts receivable- related parties
Other receivables
Current tax assets
Inventory
Prepayments and Other current assets
Other financial assets-current
Total current assets
Noncurrent Asset
Financial assets at fair value through profit or loss - noncurrent
Investments accounted for using equity method
Property, Plant and Equipment
Right-of-use asset
Intangible assets
Deferred tax assets
Prepayments for business facilities
Refundable deposits
Other noncurrent assets, others
Total noncurrent Asset
Total Assets		 4 & 6.(1)
4 & 6.(2)
4 & 6.(3)
4, 5, 6.(4) & 6.(5)
4, 5 & 6.(5)
4, 5 & 7
4 & 5
4 & 6.(30)
4, 5 & 6.(6)
4, 6.(7) & 8
4, 5, 6.(8) & 6.(22)
4 & 6.(9)
4, 6.(10), 7 & 8
4, 6.(11), 6.(15) & 8
4 & 6.(12)
4 & 6.(30)
4
8		 3,232,253
$ 1,141,540
-
55,848
1,485,748
112
31,964
42,099
1,092,347
143,782
45,481		 35
12
-
1
16
-
-
-
12
2
1
79
3
2
14
2
-
-
-
-
-
21
100		 3,134,587
$ 1,101,179
22,708
80,901
1,148,656
32
57,647
49,054
745,421
47,689
95,560
6,483,434
205,354
146,510
1,213,352
159,129
3,373
21,582
16,672
4,841
24,074
1,794,887
8,278,321
$		 38
13
-
1
13
-
1
1
9
1
1
78
2
2
15
2
-
-
-
-
1
22
100
7,271,174
299,338
157,750
1,238,776
130,394
1,575
33,518
17,371
4,857
17,832
1,901,411
9,172,585
$

(CONTINUING)

(The accompanying notes are an integral part of the consolidated financial statements.) 

19

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(Expressed in thousands of New Taiwan dollar)

(December 31, 2021 & 2020 have been audited)

Liabilities and Equity Liabilities and Equity Notes December 31,2021 December 31,2021 December 31,2020 December 31,2020
Code Accounts AMOUNT % AMOUNT %
21xx
2100
2120
2130
2170
2180
2200
2220
2230
2280
2300
25xx
2540
2570
2580
2640
2645
2xxx
31xx
3100
3110
3200
3300
3310
3320
3350
3400
3410
3420
36xx
3xxx		 Current liabilities
Short-term borrowings
Financial liabilities at fair value through profit or loss - current
Contract liabilities - current
Accounts payable
Accounts payable-related parties
Other payables
Other payables-related parties
Current tax liabilities
Lease liabilities-current
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term borrowings
Deferred tax liabilities
Lease liabilities - noncurrent
Net defined benefit liabilities- noncurrent
Guarantee deposits received
Total non-current liabilities
Total liabilities
Equity attributable to owners of parent
Share capital
Ordinary shares
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Other equity
Exchange differences on translation
of foreign financial statements
Unrealised gains (losses) from financial assets
measured at fair value through other
comprehensive income
Total equity attributable to owners
of parent
Non-controlling interests
Total Equity
Total liabilities and equity		 4, 6.(13), 6.(32) & 8
4 & 6.(2)
4 & 6.(25)
4
4 & 7
4, 6.(10), 6.(16) & 6.(26)
4 & 7
4 & 6.(30)
4 , 6.(15) & 6.(32)
4, 6.(14) & 6.(32)
4 & 6.(30)
4, 6.(15) & 6.(32)
4, 5 & 6.(16)
4, 6.(17) & 6.(24)
4, 6.(18), 6.(23) & 6.(24)
6.(19) & 6.(21)
6.(20)
6.(21)
6.(22)
4, 6.(9), 6.(22), 6.(23) &
6.(29)
4, 6.(8), 6.(9), 6.(22) & 6.(29)
4 & 6.(23)		 1,260,000
$ 1,671
14,748
550,041
3,913
552,516
3,607
139,348
18,377
44,076
2,588,297
76,324
563,593
58,468
62,014
4,711
765,110
3,353,407
1,878,323
452,744
827,106
284,690
1,937,433
(441,852)
279,295
5,217,739
601,439
5,819,178
9,172,585
$		 14
-
-
6
-
6
-
2
-
-
28
1
6
1
1
-
9
37
20
5
9
3
21
(4)
3
57
6
63
100		 1,235,824
$ -
12,415
383,577
546
451,513
2,377
51,336
16,645
24,605
2,178,838
44,365
555,982
84,076
82,291
4,712
771,426
2,950,264
1,849,683
432,784
798,682
284,690
1,529,619
(357,177)
177,692
4,715,973
612,084
5,328,057
8,278,321
$		 15
-
-
5
-
5
-
1
-
-
26
1
7
1
1
-
10
36
22
5
10
3
19
(4)
2
57
7
64
100

(The accompanying notes are an integral part of the consolidated financial statements.) 

20

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Amounts in thousands of New Taiwan dollars, except for earnings per share amounts)

Code Accounts Notes 2021 2021 2020
4000
5000
5900
6000
6100
6200
6300
6450
6500
6900
7000
7100
7010
7020
7050
7060
7630
7900
7950
8200
8300
8310
8311
8316
8320
8349
8360
8361
8370
8399
8500
8600
8610
8620
8700
8710
8720
9750
9850		 Sales revenue
Operating costs
Gross profit from operations
Operating expense
Selling expense
General and administrative expenses
Research and development expenses
Loss (reversal) of expected
credit loss
Total operating expense
Net other income (expenses)
Net operating income
Non-operating income and expenses
Interest income
Other income
Other gains and losses
Finance costs
Share of the profit (loss) of associates
Foreign exchange gains (loss)
Total non-operating income and expenses
Profit (loss) from continuing operations before tax
Income Tax Expense
Profit (loss) for the period
Other comprehensive income
Components of other comprehensive income that will not be
reclassified to profit or loss：
Remeasurements of the defined benefit plan
Unrealised gain (loss) on financial assets measured
at fair through other comprehensive income
Share of the other comprehensive (loss) income of
associates
Income tax benefit (expense) relating to items that
will not be reclassified subsequently to profit or loss
Other comprehensive income (loss) that will not be reclassified to
profit or loss
Items that may be reclassified subsequently to profit or loss：
Exchange differences on translating foreign operations
Share of the other comprehensive income of associates
Income tax expense relating to items
that may be reclassified subsequently to profit or loss
Total items that may be reclassified subsequently to profit or loss
Total other comprehensive income (loss) for the period
Total comprehensive income for the period
Net profit (loss) attributable to：
Owners of the Corporation
Non-controlling interests
Net income (loss)
Total comprehensive income attributable to：
Owners of the Corporation
Non-controlling interests
Total comprehensive income
Earnings per share (dollar)
Basic
Diluted		 6(25) & 7
6.(6)、6.(16)、6.(26) & 7
6.(15)、6.(16)、6.(26) & 7
6.(5)
6.(10)、6.(27) & 7
6.(28)
6.(28)
6.(2)、6.(9)、6.(10) & 6.(28)
6.(15) & 6.(28)
6.(9) & 6.(28)
6.(28)
4 & 6.(30)
6.(8)、6.(9) & 6.(29)
6.(31)		 6,420,460
$ (4,524,682)		 100
(70)
30
(4)
(7)
(3)
-
(14)
-
16
1
1
(1)
-
-
(1)
-
16
(4)
12
1
-
-
1
(1)
-
-
(2)
-
12
10
2
12
11
1
12		 4,779,614
$ (3,434,436)
1,345,178
(224,095)
(413,218)
(166,615)
(5,461)
(809,389)
1,479
537,268
90,713
33,721
(33,159)
(14,253)
(18,307)
(62,669)
(3,954)
533,314
(176,347)
356,967
(3,112)
38,922
(627)
-
35,183
(9,943)
(76)
-
(10,019)
25,164
382,131
$ 287,441
$ 69,526
356,967
$ 310,743
$ 71,388
382,131
$ 1.55
$ 1.53
$		 100
(72)
1,895,778
(268,963)
(433,635)
(185,949)
(5,505)
(894,052)
1,285
1,003,011
92,719
35,500
(38,529)
(14,684)
4,809
(44,142)
35,673
1,038,684
(285,819)
752,865
9,034
93,984
8,421
-
111,439
(97,441)
-
-
(97,441)
13,998
766,863
$ 648,364
$ 104,501
752,865
$ 675,128
$ 91,735
766,863
$ 3.49
$ 3.39
$		 28
(5)
(9)
(3)
-
(17)
-
11
1
1
(1)
-
-
(1)
-
11
(4)
7
1
-
-
1
-
-
-
-
1
8
6
1
7
7
1
8

(The accompanying notes are an integral part of the consolidated financial statements.) 

21

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands of New Taiwan dollars)

Accounts Equity Attributable t o Owners of the Corporation o Owners of the Corporation Non-controlling
Interests		 Total Equity
Share Capital Capital Surplus Retained Earnings Other Equity Total
Ordinary Shares Legal Reserve Special Reserve Unappropriated
Earnings		 Exchange Differences
on Translating
Foreign Operations		 Unrealized Gains and
Losses on Financial
Assets at Fair Value
Through Other
Cpmprehensive Income
BALANCE AT JANUARY 1, 2020
Appropriation of 2019 earnings (Note 6.(21))
Legal reserve
Cash dividends to ordinary shareholders
Changes in the net interest of associates recognised under the equity method
Received donation from shareholders
Net profit for 2020
Other comprehensive income for 2020
Total comprehensive income for 2020
The difference between the actual price of equity acquired from the
subsidiary and the book amount
Share-based payment expenses
Cash dividends paid by subsidiaries to non-controlling interests
BALANCE AT DECEMBER 31, 2020
Appropriation of 2020 earnings (Note 6.(21))
Legal reserve
Cash dividends to ordinary shareholders
Share of the other comprehensive income of associates disposal equity instruments designated as at
fair value hrough other comprehensive income
Received donation from shareholders
Net profit for 2021
Other comprehensive income for 2021
Total comprehensive income for 2021
Share-based payment transaction
Cash dividends paid by subsidiaries to non-controlling interests
BALANCE AT DECEMBER 31, 2021		 1,849,683
$ -
-
-
-
-
-
-
-
-
-
1,849,683
$ -
-
-
-
-
-
-
28,640
-
1,878,323
$		 421,121
$ -
-
159
28
-
-
-
3,563
7,913
-		 768,091
$ 30,591
-
-
-
-
-
-
-
-
-		 284,690
$ -
-
-
-
-
-
-
-
-
-
284,690
$ -
-
-
-
-
-
-
-
-
284,690
$		 1,516,426
$ (30,591)
(240,459)
-
-
287,441
(3,198)
284,243
-
-
-
1,529,619
$ (28,424)
(221,962)
763
-
648,364
9,073
657,437
-
-
1,937,433
$		 (344,771)
$ -
-
-
-
-
(11,881)
(11,881)
(525)
-
-
(357,177)
$ -
-
-
-
-
(84,675)
(84,675)
-
-
(441,852)
$		 139,311
$ -
-
-
-
-
38,381
38,381
-
-
-
177,692
$ -
-
(763)
-
-
102,366
102,366
-
-
279,295
$		 4,634,551
$ -
(240,459)
159
28
287,441
23,302
310,743
3,038
7,913
-
4,715,973
$ -
(221,962)
-
23
648,364
26,764
675,128
48,577
-
5,217,739
$		 579,189
$ -
-
-
-
69,526
1,862
71,388
(13,952)
-
(24,541)
612,084
$ -
-
-
-
104,501
(12,766)
91,735
-
(102,380)
601,439
$		 5,213,740
$ -
(240,459)
159
28
356,967
25,164
382,131
(10,914)
7,913
(24,541)
432,784
$ -
-
-
23
-
-
-
19,937
-
452,744
$		 798,682
$ 28,424
-
-
-
-
-
-
-
-
827,106
$		 5,328,057
$ -
(221,962)
-
23
752,865
13,998
766,863
48,577
(102,380)
5,819,178
$

(The accompanying notes are an integral part of the consolidated financial statements.) 

22

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax from continuing operations
Adjustments for
The profit or loss items which did not affect cash flows:
Depreciation
Amortization
Expected credit loss
Net loss on financial assets and liabilities at fair value through profit
or loss
Interest expenses
Interest income
Dividends income
Share-based payment expenses
Share of (profit) loss of associates ventures accounted for using the
equity method
(profit) Loss on disposal of property, plant and equipment
Property, plant and equipment for recognition as an expense
Loss on disposal of investments
Unrealized foreign exchange (gains) losses
Other item
Changes in operating assets and liabilities：
Financial assets at fair value through profit or loss
Notes receivables
Accounts receivable
Accounts receivable-related parties
Other receivables
Other receivables -related parties
Inventories
Prepayments and Other current assets
Current contract
Accounts payable
Accounts payable-related parties
Other payables
Other payables-related parties
Other current liabilities
Net defined benefit liabilities
Cash generated from operating activities:
Interest received
Dividends received
Interest paid
Income tax paid
Net cash flows from operating activities
Description		 2021 2020
1,038,684
$ 169,466
24,664
5,505
36,920
14,684
(92,719)
(8,482)
4,443
(4,809)
1,173
-
-
35,947
(5,938)
(90,457)
25,053
(344,920)
(80)
21,671
-
(346,926)
(96,093)
2,333
166,894
3,367
87,382
1,230
19,471
(11,243)
657,220
96,571
8,482
(14,571)
(195,177)
552,525		 533,314
$ 168,831
26,422
5,461
32,575
14,253
(90,713)
(10,178)
7,913
18,307
(1,775)
851
786
37,544
-
(592,586)
(2,910)
(50,880)
35
9,386
203
1,484
(15,216)
(2,580)
21,764
(492)
45,008
217
6,951
(15,525)
148,450
83,168
10,178
(14,155)
(131,912)
95,729

(Continuing) 

23

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUING)

(Amounts in thousands of New Taiwan dollars)

Description 2021 2020
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets measured at amortized cost
Proceeds from disposal of financial assets measured at amortized cost
Proceeds from disposal of investments accounted for using equity method
Dividends received from investments accounted for using equity method
Disposal of subsidiaries
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
(Increase) Decrease in refundable deposits
Acquisition of intangible assets
Decrease (Increase) in other current financial assets
Increase in other noncurrent assets
(Increase) Decrease in prepayments for business facilities
Other investing activities
Net cash (used in) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Short-term borrowings
Increase in long-term borrowings
Repayment of long-term borrowings
Decrease in guarantee doposits received
Cash payment for the principal portion of the lease liabilities
Payment of cash dividends
Employee exercise of stock warrant
Cash dividends paid by subsidiaries to non-controlling interests
Acquisition of subsidiaries Equity
Other financing activities
Net cash (used in) provided by financing activities
Effect of changes in exchange rate on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period		 -
$ 22,486
-
1,990
-
(183,471)
2,776
(16)
(477)
45,431
(16,310)
(699)
-
(128,290)
29,503
32,818
(16,998)
(221,962)
44,134
(102,380)
-
23
(234,862)
(91,707)
97,666
3,134,587
3,232,253
$		 (509,558)
$ 732,271
629
4,975
317
(142,567)
8,845
918
(1,798)
(19,180)
(17,353)
22,482
80
80,061
192,824
45,195
(830)
501
(13,040)
(240,459)
-
(24,541)
(7,749)
28
(48,071)
(26,466)
101,253
3,033,334
3,134,587
$

(The accompanying notes are an integral part of the consolidated financial statements.) 

24

INDEPENDENT AUDITOR’S REPORT

To: G-SHANK ENTERPRISE CO., LTD.

INDEPENDENT AUDITOR’S OPINION

We have audited the accompanying parent company only balance sheets of G-SHANK ENTERPRISE CO., LTD. as of December 31, 2021, and 2020, and the related parent company only statements of comprehensive income, retained earnings, and cash flows for the years then ended.

In our opinion, based on our audit and the audit reports of other independent auditors (please refer to the relevant paragraphs for details), the parent company only financial statements referred to above present fairly, in all material respects, the financial position of G-SHANK as of December 31, 2021, and 2020, and the results of its operations and its cash flows for the years then ended in conformity with the “Regulations Governing the Preparation of Financial Reports by Securities Firm”.

BASIS OF AN AUDIT OPINION

We conducted our audit in accordance with the “Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountings” and generally accepted auditing standards. The responsibilities of the independent auditors under these standards will be further explained in the audit performed on the consolidated financial statements. The personnel of the CPA Firm subject to the independence requirement has acted independently from the business operations of G-SHANK in accordance with the Code of Ethics and have performed other responsibilities of the Code of Ethics. We believe that our audit and other CPA’s audit reports provide a reasonable basis for our opinion.

KEY AUDIT MATTERS

The key audit matters refer to the most important matters in auditing the 2021 parent company only financial statements of G-SHANK in accordance with the professional judgment of the independent auditors. These matters have been handled during the process of reviewing the parent company only financial statements as a whole with audit opinions formed. The independent auditor does not express an independent opinion on these matters. The independent auditor determines that the key audit matters to be communicated in the audit report are as follows:

III. Income recognition

Please refer to Note 4.(15) to the parent company only financial statements for the accounting policy on income recognition. Also, please refer to Note 6.(21) for the operating income in detail.

The operating income of G-SHANK is mainly generated from the production and sales of molds and stamping parts. The timing of income recognition is based on the transaction conditions agreed with each individual customer. An inappropriate timing for income recognition and unreasonable estimation of the refund liabilities for sales returns and sales discounts are key matters for income recognition, which will have an impact on the financial performance of G-SHANK. The independent auditor has the income recognition classified as a key audit matter in auditing the parent company only financial statements of G-SHANK.

The auditing procedures implemented by the independent auditors for the aforementioned key audit matters include: Understanding the sales process of G-SHANK, testing the internal control related to income recognition, reviewing the terms of the sales with the major customers, performing income cut-off tests, and checking the book-entry of sales returns and discounts, the 

25

measurement of the estimated refund liabilities for sales returns and sales discounts, and the implementation of analytical procedures.

IV. Inventory evaluation

Please refer to Note 4.(9) of the parent company only financial statements for the accounting policy of inventory evaluation. please refer to Note 5.(2)(C) of the parent company only financial statements for the major sources of uncertainty of significant estimates and assumptions. Please refer to Note 6.(5) of the parent company only financial statements for inventory details.

G-SHANK is mainly engaged in the production and sale of molds and stamping parts with the production and sales policies formed that are indirectly affected by the needs of end-user. The cost of inventory could be un-recoverable due to the occurrence of inventory damaged, outdated, or price dropped entirely or partially; also, when the estimated cost to be invested to completion and the estimated sale expenses increased. The use and value of inventories rely on the management’s inventory policy and sale forecast. However, a forecast comes with uncertainties. Therefore, the independent director has the inventory evaluation classified as one of the key audit matters in auditing the parent company only financial statements of G-SHANK.

A decisive factor in the value of inventories is the estimated net realizable value, which is based on the most reliable evidence of the expected realizable amount of inventories available at the time of estimation. Therefore, the relevant audit procedures of the independent auditor include reviewing and assessing whether the policy of G-SHANK in determining the net realizable value of inventories can reasonably reflect the forecast of future inventory sales, historical experience and other specific circumstances, inventory aging analysis and testing so to identify whether an allowance for inventory loss in valuation is appropriated reasonably according to historical experience for a specific obsolete inventory, the correlation between the assessment of past events and the yearend situation, and the impact of the price or cost fluctuation related to the said post events on the net realizable value of inventory.

OTHER MATTERS

Regarding the parent company only financial report of G-SHANK and the relevant information of the investee company disclosed in Note 13. of the parent company only financial report, the financial statements as of December 31, 2021, and 2020 of G-SHANK, INC. are prepared in conformity with the generally accepted principles of the USA, the financial statements as of December 31, 2021, and 2020 of G-S G-SHANK (Thai) Co., Ltd. are prepared in conformity with the generally accepted principles of Thailand, and the financial statements as of December 31, 2021, and 2020 of G-SHANK ENTERPRISE (M) SDN are prepared in conformity with the generally accepted principles of Malaysia, which were audited by other certified public accountants instead of the independent auditor. The financial statements of G-SHANK, INC., G-SHANK (Thai) Co., Ltd., and G-SHANK ENTERPRISE (M) SDN are translated in conformity with the “Regulations Governing the Preparation of Financial Reports by Securities Firms” and International Financial Reporting Standards (IFRS) that was recognized by the Financial Supervisory Commission, International Accounting Standards, Interpretations, and Notices (IFRS), Interpretation (IFRIC) and Interpretative Announcement (SIC). The independent auditor has completed all necessary auditing procedures. Therefore, the opinions of the independent auditor on the unadjusted amounts in the aforementioned financial statements of the subsidiaries are based on the audit reports of other certified public accountants and the results of additional audit procedures performed by them in compliance with the “Regulations Governing the Preparation of Financial Reports by Securities Firms” and generally auditing principles of the ROC. The total assets of the aforementioned subsidiaries were NT$868,806 thousand and NT$844,639 thousand on December 31, 2021, and December 31, 2020, accounting for 11.10% and 12.13% of the total parent company only assets, respectively. The net operating income from January 1 to December 31, 2021, and 2022 were NT$138,640 thousand and NT$79,419 thousand, accounting for 17.30% and 22.31% of the parent company only net operating income, respectively. Recognized the other 

26

comprehensive profit and loss of the subsidiaries and affiliated companies for an amount of NT$(53,971) thousand and NT$(52,163) thousand, accounting for (7.99)% and (16.79)% of the total comprehensive profit and loss, respectively.

THE RESPONSIBILITY OF THE MANAGEMENT AND GOVERNANCE UNIT FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The responsibility of the management is to have the parent alone financial report prepared fairly in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Firms” and maintain the necessary internal control related to the preparation of the parent alone financial report so to assure that the financial report is free of material misstatement.

In the preparation of the parent company only financial statements, the management’s responsibility also includes assessing the continuing operation of G-SHANK, the disclosure of the relevant matters, and the adoption of the continuing operation accounting base, unless the management intends to liquidate G-SHANK or cease the business operation, or there is lack of any option except for liquidation or suspension.

The governance unit (including the Audit Committee or supervisors) of G-SHANK is responsible for supervising the financial reporting process.

CPA’S RESPONSIBILITY FOR AUDITING THE PARENT COMPANY ONLY FINANCIAL STATEMENTS

The purpose of the independent auditor’s auditing of the parent company only financial statements is to obtain reasonable assurance about whether the parent company only financial statements are free of material misstatement arising from frauds or errors and with an audit report issued. Reasonable assurance means high assurance. However, the audit conducted in accordance with generally accepted auditing standards does not guarantee to have any material misstatement in the parent company only financial statements detected. Material misstatement could be arising from frauds or errors. If the misstated amount or aggregated amount is reasonably expected to affect the economic decisions made by the readers of the consolidated financial statements, it is considered significant.

The independent auditors when conducting the audit in accordance with generally accepted auditing standards shall exercise professional judgment and maintain professional suspicion. The independent auditors also perform the following auditing tasks:

  • VII. Identify and evaluate the risk of material misstatement arising from frauds or errors of the parent company only financial statements; design and implement proper responsive measures for the assessed risks; also, obtain sufficient and adequate audit evidence for forming an audit opinion. Frauds may involve conspiracy, forgery, deliberate omission, false declaration, or violation of internal control; therefore, the risk of material misstatement arising from fraud is higher than that caused by errors.

  • VIII.Obtain the necessary understanding of the internal control related to the audit in order to design appropriate audit procedures under the circumstance, but the purpose is not to express an opinion on the effectiveness of the internal control of G-SHANK.

  • IX. Assess the appropriateness of the accounting policies adopted by the management; also, the reasonableness of the accounting estimates and related disclosures made.

  • X. Based on the audit evidence obtained , make conclusions on the suitability of the continuing operation accounting base adopted by the management and whether or not the events or circumstances causing significant doubts to the continuing operation ability of G-SHANK are with significant uncertainties. If the independent auditors believe that such events or 

27

circumstances are with significant uncertainties, it is necessary to remind the readers of the parent company only financial statements in the audit report to pay attention to the relevant disclosure or to revise the audit opinion when such disclosures are inappropriate. The conclusion of the independent auditors is based on the audit evidence obtained as of the audit report date. However, future events or circumstances may result in the inability of G-SHANK to continue operating.

  • XI. Assess the overall presentation, structure, and content of the parent company only financial statements (including the relevant notes) and whether or not the relevant transactions and events in the consolidated financial statements are presented fairly.

  • XII. Obtain sufficient and appropriate audit evidence on the financial information of the individual business entity within the G-SHANK in order to express an opinion on the parent company only financial statements. The independent auditors are responsible for guiding, supervising, and implementing the auditing process of the G-SHANK; also, are responsible for forming an opinion on the audit of the G-SHANK.

The matters communicated by the independent auditors to the governing unit include the scope and timing of the planned audit, and the significant findings (including the major nonconformities of internal controls identified in the auditing process).

The independent auditors have provided to the governing unit the declaration of independence of the CPA Firm personnel subject to the Code of Ethics; also, have communicated with the governing unit regarding the relationship and other matters (including the relevant protection measures) that may affect the independence of the independent auditors.

The independent auditors have based on the communications with the governing unit to determine the key audit matters to be performed on the 2021 parent company only financial statements of G-SHANK. The independent auditors shall state the key audit matters in the audit report except for the specific matters prohibited from being disclosed, or, in rare cases; the independent auditors decide not to have specific matters communicated in the audit report since the negative effect of such disclosure can be reasonably expected to be greater than the increase of public interest.

Diwan & Company Financial Supervisory Commission Certificate No.: FSC-Shen-Tzi No. 1070312218 FSC-Shen-Tzi No. 0990071790

Chiung-hui Tseng

CPAs:

Arnico Tseng

March 10, 2022 

28

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES

PARENT COMPANY ONLY BALANCE SHEET

(Expressed in thousands of New Taiwan dollar)

(December 31, 2021 & 2020 have been audited)

ASSETS ASSETS Notes December 31,2021 December 31,2021 December 31,2020 December 31,2020
Code Accounts AMOUNT % AMOUNT %
11xx
1100
1110
1150
1170
1180
1200
1210
1220
130x
1470
1476
15xx
1517
1550
1600
1780
1840
1915
1920
1990
1xxx		 Current assets
Cash and cash equivalents
Financial assets at fair value through profit or loss - current
Notes receivable, net
Accounts receivable, net
Accounts receivable- related parties
Other receivables
Other receivables - related parties
Current tax assets
Inventory
Prepayments and Other current assets
Other financial assets-current
Total current assets
Noncurrent Asset
Financial assets at fair value through profit or loss - noncurrent
Investments accounted for using equity method
Property, Plant and Equipment
Intangible assets
Deferred tax assets
Prepayments for business facilities
Refundable deposits
Other noncurrent assets, others
Total noncurrent Asset
Total Assets		 4 & 6.(1)
4 & 6.(2)
4, 5, 6.(3) & 6.(4)
4, 5 & 6.(4)
4, 5 & 7
4, 5 & 6.(4)
4, 5 & 7
4 & 6.(26)
4, 5 & 6.(5)
4 & 6.(6)
4, 5, 6.(7) & 6.(19)
4 & 6.(8)
4 & 6.(8)
4 & 6.(10)
4 & 6.(26)
4		 1,038,389
$ 948,471
3,864
560,386
8,367
21,365

21,132

38,483

261,098
7,668

25,589
2,934,812
299,338
4,097,995
441,544

1,450

28,717
12,769
480
7,235
4,889,528
7,824,340
$		 13

12

-

7

-

-

-
1
4

-
1
38
4
52
6
-
-
-
-
-
62
100		 681,851
$ 967,231

12,862

228,931

5,035

27,154

30,731
42,090
170,349
3,445
30,297
2,199,976
205,354

4,133,330

389,221
3,366
18,948
3,759
324

6,155
4,760,457
6,960,433
$		 10
14
-
3
-
-
-
1
3
-
-
32
3
59
6
-
-
-

-
-
68
100

(CONTINUING)

(The accompanying notes are an integral part of the parent company only financial statements.) 

29

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES

PARENT COMPANY ONLY BALANCE SHEET

(Expressed in thousands of New Taiwan dollar)

(December 31, 2021 & 2020 have been audited)

Liabilities and Equity Liabilities and Equity Notes December 31,2021 December 31,2021 December 31,2020 December 31,2020
Code Accounts AMOUNT % AMOUNT %
21xx
2100
2120
2170
2180
2200
2220
2230
2300
25xx
2540
2570
2640
2645
2xxx
31xx
3100
3110
3200
3300
3310
3320
3350
3400
3410
3420
3xxx		 Current liabilities
Short-term borrowings
Financial liabilities at fair value through profit or loss - current
Accounts payable
Accounts payable-related parties
Other payables
Other payables-related parties
Current tax liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term borrowings
Deferred tax liabilities
Net defined benefit liabilities- noncurrent
Guarantee deposits received
Total non-current liabilities
Total liabilities
Equity attributable to owners of parent
Share capital
Ordinary shares
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Other equity
Exchange differences on translation
of foreign financial statements
Unrealised gains (losses) from financial assets
measured at fair value through other
comprehensive income
Total Equity
Total liabilities and equity		 4, 6.(11) & 6.(28)
4 & 6.(2)
4
4 & 7
4, 6.(9), 6.(13) & 6.(22)
4 & 7
4 & 6.(26)
4, 6.(12) & 6.(28)
4 & 6.(26)
4, 5 & 6.(13)
4, 6(14) & 6.20)
4, 6.(15) & 6.(20)
6.(16) & 6.(18)
6.(17)
6.(18)
4, 6.(7), 6.(8), 6.(19) & 6.(25)
4, 6.(7), 6.(8), 6.(19) & 6.(25)		 1,260,000
$ 1,671
204,489
4,775
326,939
4,021
81,768
16,361
1,900,024
76,324
563,593
62,014
4,646
706,577
2,606,601
1,878,323
452,744
827,106
284,690
1,937,433
(441,852)
279,295
5,217,739
7,824,340
$		 16
-
3
-
4
-
1
-
24
1
7
1
-
9
33
24
6
10
4
25
(6)
4
67
100		 1,220,000
$ -
96,453
1,108
224,588
4,013
-
11,873
1,558,035
43,506
555,982
82,291
4,646
686,425
2,244,460
1,849,683
432,784
798,682
284,690
1,529,619
(357,177)
177,692
4,715,973
6,960,433
$		 18
-
1
-
3
-
-
-
22
1
8
1
-
10
32
27
6
11
4
22
(5)
3
68
100

(The accompanying notes are an integral part of the parent company only financial statements.) 

30

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES PARENT COMPANY ONLY STATEMENT OF COMPREHENSIVE INCOME

(Amounts in thousands of New Taiwan dollars, except for earnings per share amounts)

Code Accounts Notes For the years en For the years en ded December 31, ded December 31,
2021 % 2020 %
4000
5000
5900
6000
6100
6200
6300
6450
6500
6900
7000
7100
7010
7020
7050
7060
7630
7900
7950
8200
8300
8310
8311
8316
8330
8349
8360
8380
8399
8500
9750
9850		 Sales revenue
Operating costs
Gross profit from operations
Operating expense
Selling expense
General and administrative expenses
Research and development expenses
Loss (reversal) of expected credit loss
Total operating expense
Net other income (expenses)
Net operating income (loss)
Non-operating income and expenses
Interest income
Other income
Other gains and losses
Finance costs
Share of the profit (loss) of associates and subsidiaries for using equity method
Foreign exchange gains (loss)
Total non-operating income and expenses
Profit (loss) from continuing operations before tax
Income Tax Expense
Profit (loss) for the period
Other comprehensive income
Components of other comprehensive income
that will not be reclassified to profit or loss：
Remeasurements of the defined benefit plan
Unrealised gain (loss) on financial assets measured
at fair through other comprehensive income
Share of the other comprehensive (loss) income of
associates for using equity method-will not be reclassified to profit or loss
Income tax benefit (expense) relating to items that
will not be reclassified subsequently to profit or loss
Other comprehensive income (loss) that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss：
Share of the other comprehensive income of subsidiaries and associates
for using equity method-will may be reclassified subsequently to profit or loss
Income tax expense relating to items
that may be reclassified subsequently to profit or loss
Total items that may be reclassified subsequently to profit or loss
Total other comprehensive income (loss) for the period
Total comprehensive income for the period
Earnings per share (dollar)
Basic
Diluted		 4, 6.(21) & 7
4, 6.(5), 6.(13), 6.(22),
6.(29) & 7
4, 6.(13), 6.(22), 6.(29) & 7
4, 5 & 6.(4)
4, 6.(9) & 6.(23)
6.(24) & 7
6.(7), 6.(24) & 7
6.(2) & 6.(24)
4 & 6.(24)
4, 6.(5) & 6.(24)
4 & 6.(24)
4 & 6.(26)
4, 6.(8), 6.(13), 6.(19) & 6.(25)
4 & 6.(27)		 1,976,474
$ (1,575,825)		 100

(80)
20

(5)

(8)

(2)

-

(15)
-
5
4
5

(2)

(1)
31

(1)		 1,270,409
$ (1,130,417)		 100
(89)
400,649 139,992 11
(7)
(12)
(4)
-
(23)
(100,493)
(155,619)
(44,311)
(372)		 (84,099)
(157,123)
(57,391)
(697)
(300,795) (299,310)
1,285 1,341 -
(12)
101,139 (157,977)
68,979
92,088
(32,343)
(10,515)
602,724
(20,483)		 57,069
86,134
(30,434)
(9,822)
425,007
(14,006)		 4
7
(2)
(1)
33
(1)
700,450 36
41

(8)		 513,948 40
28
(5)
801,589
(153,225)		 355,971
(68,530)
648,364 33
-
5
-
-
-
-		 287,441 23
(1)
3
-
-
-
-
9,034
93,984
8,421
-		 (3,112)
38,922
(627)
-
111,439 5

(4)
-

(4)		 35,183 2
(1)
-
(1)
(84,675)
-		 (11,881)
-
(84,675) (11,881)
26,764 1
34		 23,302 1
24
675,128
$		 310,743
$
3.49
$		 1.55
$
3.39
$		 1.53
$

(The accompanying notes are an integral part of the parent company only financial statements.) 

31

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands of New Taiwan dollars)

Accounts Equity Attributable t o Owners of the Corporation o Owners of the Corporation
Share Capital Capital Surplus Retained Earnings Other Equity Total
Ordinary Shares Legal Reserve Special Reserve Unappropriated
Earnings		 Exchange Differences
on Translating
Foreign Operations		 Unrealized Gains and
Losses on Financial
Assets at Fair Value
Through Other
Cpmprehensive Income
BALANCE AT JANUARY 1, 2020
Appropriation of 2019 earnings (Note 6.(18))
Legal reserve
Cash dividends to ordinary shareholders
Changes in the net interest of subsidiaries and associates recognised
under the equity method
Received donation from shareholders
Net profit for 2020
Other comprehensive income for 2020
Total comprehensive income for 2020
The difference between the actual price of equity acquired from the
subsidiary and the book amount
Share-based payment expenses
BALANCE AT DECEMBER 31, 2020
Appropriation of 2020 earnings (Note 6.(18))
Legal reserve
Cash dividends to ordinary shareholders
Share of the other comprehensive income of associates disposal equity instruments designated as at
fair value hrough other comprehensive income
Received donation from shareholders
Net profit for 2021
Other comprehensive income for 2021
Total comprehensive income for 2021
Share-based payment transaction
BALANCE AT DECEMBER 31, 2021		 1,849,683
$ -
-
-
-
-
-
-
-
-
1,849,683
$ -
-
-
-
-
-
-
28,640
1,878,323
$		 421,121
$ -
-
159
28
-
-
-
3,563
7,913
432,784
$ -
-
-
23
-
-
-
19,937
452,744
$		 768,091
$ 30,591
-
-
-
-
-
-
-
-
798,682
$ 28,424
-
-
-
-
-
-
-
827,106
$		 284,690
$ -
-
-
-
-
-
-
-
-
284,690
$ -
-
-
-
-
-
-
-
284,690
$		 1,516,426
$ (30,591)
(240,459)
-
-
287,441
(3,198)
284,243
-
-
1,529,619
$ (28,424)
(221,962)
763
-
648,364
9,073
657,437
-
1,937,433
$		 (344,771)
$ -
-
-
-
-
(11,881)
(11,881)
(525)
-
(357,177)
$ -
-
-
-
-
(84,675)
(84,675)
-
(441,852)
$		 139,311
$ -
-
-
-
-
38,381
38,381
-
-
177,692
$ -
-
(763)
-
-
102,366
102,366
-
279,295
$		 4,634,551
$ -
(240,459)
159
28
287,441
23,302
310,743
3,038
7,913
4,715,973
$ -
(221,962)
-
23
648,364
26,764
675,128
48,577
5,217,739
$

(The accompanying notes are an integral part of the parent company only financial statements.) 

32

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(Amounts in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax from continuing operations
Adjustments for
The profit or loss items which did not affect cash flows:
Depreciation
Amortization
Expected credit loss
Net loss on financial assets and liabilities at fair value through profit
or loss
Interest expenses
Interest income
Dividends income
Share-based payment expenses
Share of (profit) loss of subsidiaries and associates ventures accounted for using the equity
method
(profit) Loss on disposal of property, plant and equipment
Property, plant and equipment for recognition as an expense
Unrealized foreign exchange (gains) losses
Changes in operating assets and liabilities：
Financial assets at fair value through profit or loss
Notes receivables
Accounts receivable
Accounts receivable-related parties
Other receivables
Other receivables -related parties
Inventories
Prepayments and Other current assets
Accounts payable
Accounts payable-related parties
Other payables
Other payables-related parties
Other current liabilities
Net defined benefit liabilities
Cash inflows and outflows generated from operating activities:
Interest received
Dividends received
Interest paid
Income tax paid
Net cash inflows and outflows from operating activities
Description		 2021 2020
801,589
$ 44,825
9,348
372
32,881
10,515
(68,979)
(8,482)
4,443
(602,724)
(538)
-
10,066
(12,450)
8,998
(332,402)
(3,345)
4,402
3,325
(90,749)
(4,223)
108,171
3,673
89,779
35
4,488
(11,243)
1,775
70,366
8,482
(10,398)
(70,008)
217		 355,971
$ 42,261
15,973
697
30,814
9,822
(57,069)
(10,178)
7,913
(425,007)
(391)
740
18,163
(574,079)
16,175
(12,555)
1,942
1,790
2,119
(3,855)
653
(3,513)
(856)
21,500
1,334
7,214
(15,525)
(567,947)
52,884
10,178
(9,728)
(44,468)
(559,081)

(Continuing) 

33

G-SHANK ENTERPRISE CO., LTD. AND SUBSIDIARIES

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(Amounts in thousands of New Taiwan dollars)

Description 2021 2020
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of investments accounted for using equity method
Dividends received from investments accounted for using equity method
Investee companies issue cash dividends for using equity method
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Other receivables -related parties -(increase) decrease in funds loan
Acquisition of intangible assets
Decrease (Increase) in other current financial assets
Increase in other noncurrent assets
(Increase) Decrease in prepayments for business facilities
Other investing activities
Net cash provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Short-term borrowings
Increase in long-term borrowings
Repayment of long-term borrowings
Decrease in guarantee doposits received
Payment of cash dividends
Employee exercise of stock warrant
Other financing activities
Net cash (used in) provided by financing activities
Effect of changes in exchange rate on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period		 -
$ -
561,805
(84,693)
538
(156)
6,136
(343)
4,708
(8,169)
(9,010)
-
470,816
40,000
32,818
-
-
(221,962)
44,134
23
(104,987)
(9,508)
356,538
681,851
1,038,389
$		 (7,749)
$ 312
191,792
(63,694)
2,395
(8)
(854)
(1,798)
(30,297)
(4,848)
11,409
80
96,740
177,000
44,336
(830)
500
(240,459)
-
28
(19,425)
(15,307)
(497,073)
1,178,924
681,851
$

(The accompanying notes are an integral part of the parent company only financial statements.) 

34

Cross-reference of the amendments to the “Articles of Incorporation” before and after

Before amendments After amendments Remarks
Newly enacted Article 8-1: The Company’s shareholders’
meeting may be convened by virtual
communication network or other methods
announced by the central competent authority.
A virtual shareholders’meeting shall be
convened in compliance with the relevant
regulations on the conditions, operating
procedures, and other mandatory matters; also,
the regulations otherwise imposed by the
competent authorities shall prevail.		 Amendments are
made in
compliance with
the laws and
regulations and the
actual needs of the
Company.
Article 22: The “Articles of Incorporation” was
enacted on __. The 29thamendment was
made on June 13, 2019. The 30thamendment
was made on June 15, 2020.		 Article 22: The “Articles of Incorporation” was
enacted on __. The 29thamendment was
made on June 13, 2019. The 30thamendment
was made on June 15, 2020.The 31st
amendment was made on June 10, 2022.		 The amendment
date is added.		 
35

Cross-reference of the amendments to the “Procedures for the Acquisition and Disposal of Asset”

before and after

before and after
Before amendments After amendments Remarks
Article 5:Professional appraisers and their
officers, certified public accounts, attorneys,
and securities underwriters that provide the
Company with appraisal reports, certified
public accountant’s opinions, attorney’s
opinions, or underwriter’s opinions shall meet
the following requirements:
一~三Omitted
When issuing an appraisal report or opinion,
the personnel referred to in the preceding
paragraph shall comply with the following
provisions:
一. Prior to accepting a case, they shall
prudently assess their own professional
capabilities, practical experience, and
independence.
二. Whenreviewingthe case, they shall
appropriately plan and execute adequate
working procedures, in order to produce a
conclusion and use the conclusion as the basis
for issuing the report or opinion. The related
working procedures, data collected, and
conclusion shall be fully and accurately
specified in the case working papers.
三. They shall undertake an item-by-item
evaluation of thecomprehensiveness,
accuracy,and reasonableness of the sources
of data used, the parameters, and the
information, as the basis for issuance of the
appraisal report or the opinion.
四. They shall issue a statement attesting to
the professional competence and
independence of the personnel who prepared
the report or opinion, and that they have
evaluated and found that the information used
is reasonableand accurate, and that they have
complied with applicable laws and
regulations.		 Article 5:Professional appraisers and their
officers, certified public accounts, attorneys,
and securities underwriters that provide the
Company with appraisal reports, certified
public accountant’s opinions, attorney’s
opinions, or underwriter’s opinions shall meet
the following requirements:
一~三Omitted
When issuing an appraisal report or opinion,
the personnel referred to in the preceding
paragraph shall comply with the
self-regulatory rules of their respective
associationsand the following matters:
一. Prior to accepting a case, they shall
prudently assess their own professional
capabilities, practical experience, and
independence.
二. Whenexecutingthe case, they shall
appropriately plan and execute adequate
working procedures, in order to produce a
conclusion and use the conclusion as the basis
for issuing the report or opinion. The related
working procedures, data collected, and
conclusion shall be fully and accurately
specified in the case working papers.
三. They shall undertake an item-by-item
evaluation of theappropriatenessand
reasonableness of the sources of data used, the
parameters, and the information, as the basis
for issuance of the appraisal report or the
opinion.
四. They shall issue a statement attesting to
the professional competence and
independence of the personnel who prepared
the report or opinion, and that they have
evaluated and found that the information used
isappropriate andreasonable, and that they
have complied with applicable laws and
regulations.
Amendments are made
in accordance with the
Jin-Guang-Zheng-Far-
Tzi No. 1110380465
Order
Article 7: Procedures for the acquisition
and disposal of property, plant and
equipment or the right-of-use assets
thereof:
一~三Omitted
四. Appraisal report of the property, plant and
equipment or right-of-use assets thereof		 Article 7: Procedures for the acquisition
and disposal of property, plant and
equipment or the right-of-use assets
thereof:
一~三Omitted
四. Appraisal report of the property, plant and
equipment or right-of-use assets thereof		 Amendments are made
in accordance with the
Jin-Guang-Zheng-Far-
Tzi No. 1110380465
Order		 
36
The Company’s acquisition or disposal of the
property, plant and equipment or the
right-of-use assets thereof, _____, meets the
following requirements:
(一)～(二) Omitted
( 三) Where any one of the following
circumstances applies with respect to the
professional appraiser’s appraisal results,
unless all the appraisal results for the assets to
be acquired are higher than the transaction
amount, or all the appraisal results for the
assets to be disposed of are lower than the
transaction
amount,
a
certified
public
accountant shall be engaged to render a
specific opinion regarding the reason for the
discrepancy and the appropriateness of the
transaction pricein accordance with Article
20 of the Statements on Auditing Standards













The Company’s acquisition or disposal of the
property, plant and equipment or the
right-of-use assets thereof, _____, meets the
following requirements:
(一)～(二) Omitted
( 三) Where any one of the following
circumstances applies with respect to the
professional appraiser’s appraisal results,
unless all the appraisal results for the assets to
be acquired are higher than the transaction
amount, or all the appraisal results for the
assets to be disposed of are lower than the
transaction
amount,
a
certified
public
accountant shall be engaged to render a
specific opinion regarding the reason for the
discrepancy and the appropriateness of the
transaction price:
Omitted hereinafter










(SASs)
announced
by
the
Accounting



Research and Development Foundation:
Omitted hereinafter
Article 8: Operating procedures for the
acquisition and disposal of marketable
securities investment
一~三Omitted
四. If the dollar amount of the transaction is
20% of the Company’s paid-in capital or
NT$300 million or more, the Company shall
engage a certified public accountant prior to
the date of occurrence of the event to provide
an opinion regarding the reasonableness of
the transaction price.If the certified public
accountant needs to use the report of an
expert as evidence, the certified public
accountant shall do so in accordance with the
provisions of Statement of Auditing
Standards No. 20 published by the
Accounting Research and Development
Foundation.This requirement does not apply,
however, to publicly quoted prices of
securities that have an active market, or
where otherwise provided by regulations of
the Financial Supervisory Commission
(FSC).		 Article 8: Operating procedures for the
acquisition and disposal of marketable
securities investment
一~三Omitted
四. If the dollar amount of the transaction is
20% of the Company’s paid-in capital or
NT$300 million or more, the Company shall
engage a certified public accountant prior to
the date of occurrence of the event to provide
an opinion regarding the reasonableness of
the transaction price. This requirement does
not apply, however, to publicly quoted prices
of securities that have an active market, or
where otherwise provided by regulations of
the Financial Supervisory Commission
(FSC).		 Amendments are made
in accordance with the
Jin-Guang-Zheng-Far-
Tzi No. 1110380465
Order
Article 9: Operating procedures for the
acquisition and disposal of intangible assets
or right-of-use assets thereof or
memberships
一~三Omitted
四. Where the Company acquires or disposes
of intangible assets or right-of-use assets		 Article 9: Operating procedures for the
acquisition and disposal of intangible assets
or right-of-use assets thereof or
memberships
一~三Omitted
四. Where the Company acquires or disposes
of intangible assets or right-of-use assets		 Amendments are made
in accordance with the
Jin-Guang-Zheng-Far-
Tzi No. 1110380465
Order		 
37
thereof or memberships and the transaction
amount reaches 20% or more of paid-in
capital or NT$300 million or more, except in
transactions with a domestic government
agency, the Company shall engage a certified
public accountant prior to the date of
occurrence of the event to render an opinion
on the reasonableness of the transaction price;
the certified public accountant shall comply
with the provisions of Statement of Auditing
Standards No. 20 published by the
Accounting Research and Development
Foundation.		 thereof or memberships and the transaction
amount reaches 20% or more of paid-in
capital or NT$300 million or more, except in
transactions with a domestic government
agency, the Company shall engage a certified
public accountant prior to the date of
occurrence of the event to render an opinion
on the reasonableness of the transaction price.
Article 13: Operating procedures for the
acquisition and disposal of related party’s
real estate or the right-of-use assets thereof
一. Appraisal and operating procedures
The Company acquires or disposes real
property or right-of-use assets thereof from or
to a related party, __, the Company may
proceed to enter into a transaction contract or
make a payment:
(一)~(七) Omitted
The Company, subsidiaries, ____, have the
decisions subsequently submitted to and
ratified by the next board of directors
meeting:
(一)~(二) Omitted
Where a matter is submitted for discussion by
the board of directors pursuant to Paragraph 1,
the board of directors shall take into full
consideration each independent director’s
opinions. If an independent director objects to
or expresses reservations about any matter, it
shall be recorded in the minutes of the board
meeting.
The matters for which Paragraph I require
recognition by the Audit Committee shall first
be approved by one-half or more of all Audit
Committee members and then submitted to
the board of directors for a resolution, and
shall be subject to mutatis mutandis
application of Article 20, Paragraph三and
四.
Article 13: Operating procedures for the
acquisition and disposal of related party’s
real estate or the right-of-use assets thereof
一. Appraisal and operating procedures
The Company acquires or disposes real
property or right-of-use assets thereof from or
to a related party, __, the Company may
proceed to enter into a transaction contract or
make a payment:
(一)~(七) Omitted
The Company, subsidiaries, ____, have the
decisions subsequently submitted to and
ratified by the next board of directors
meeting:
(一)~(二) Omitted
Where a matter is submitted for discussion by
the board of directors pursuant to Paragraph 1,
the board of directors shall take into full
consideration each independent director’s
opinions. If an independent director objects to
or expresses reservations about any matter, it
shall be recorded in the minutes of the board
meeting.
The matters for which Paragraph I require
recognition by the Audit Committee shall first
be approved by one-half or more of all Audit
Committee members and then submitted to
the board of directors for a resolution, and
shall be subject to mutatis mutandis
application of Article 20, Paragraph三and
四.
If the Company or the Company’s subsidiary
that is not a public company in Taiwan has
conducted the transaction specified in
Paragraph 1 for an amount more than 10% of
the Company’s total assets, the Company
shall submit the materials listed in Paragraph I

Amendments are made
in accordance with the
Jin-Guang-Zheng-Far-
-Tzi No. 1110380465
Order		 
38

to the shareholders’ meeting for approval before signing a transaction contract and making payment. However, the transaction between the Company and the subsidiaries, or between the subsidiaries, is not subject to this restriction.

The calculation of the transaction amounts The calculation of the transaction amounts referred to in the preceding paragraph shall be referred to in Paragraph I and the preceding made in accordance with Article 17, paragraph shall be made in accordance with Paragraph I herein, and “within the preceding Article 17, Paragraph I herein, and “within the year” as used herein refers to the year preceding year” as used herein refers to the preceding the date of occurrence of the year preceding the date of occurrence of the current transaction. Items that have been current transaction. Items that have been approved by the Audit Committee and approved by the shareholders’ meeting and resolved by the board of directors in Audit Committee and resolved by the board accordance with the “Procedures” need not be of directors in accordance with the counted toward the transaction amount. “Procedures” need not be counted toward the transaction amount. Omitted hereinafter Omitted hereinafter Article 16: Public Disclosure of Article 16: Public Disclosure of Information Information

Article 16: Public Disclosure of Amendments are made Information in accordance with the 一 . Under any of the following circumstances, Jin-Guang-Zheng-Farthe Company acquiring or disposing of assets Tzi No. 1110380465 shall publicly announce and report the Order relevant information on the FSC’s designated website in the appropriate format as prescribed by regulations within 2 days counting inclusively from the date of occurrence of the event:

一 . Under any of the following circumstances, the Company acquiring or disposing of assets shall publicly announce and report the relevant information on the FSC’s designated website in the appropriate format as prescribed by regulations within 2 days counting inclusively from the date of occurrence of the event: ( 一 )~( 五 ) Omitted

( 一 )~( 五 ) Omitted ( 六 ) Where an asset transaction other than any of those referred to in the preceding five subparagraphs, a disposal of receivables by a financial institution, or an investment in the mainland China area reaches 20% or more of paid-in capital or NT$300 million; provided, this shall not apply to the following circumstances:

( 六 ) Where an asset transaction other than any of those referred to in the preceding five subparagraphs, a disposal of receivables by a financial institution, or an investment in the mainland China area reaches 20% or more of paid-in capital or NT$300 million; provided, this shall not apply to the following circumstances:

  1. Trading of domestic government bonds or foreign government bonds;

1.Trading of domestic government bonds or foreign government bonds with a rating that is not lower than the sovereign rating of Taiwan; 2. Where done by professional investors - securities trading on securities exchanges or OTC markets, or subscription of foreign government bonds, or of ordinary corporate bonds or general bank debentures without equity characteristics (excluding subordinated debt) that are offered and issued in the primary market, or subscription or redemption of securities investment trust funds or futures trust funds, or subscription or redemption of

  1. Where done by professional investors - securities trading on securities exchanges or OTC markets, or subscription of ordinary corporate bonds or general bank debentures without equity characteristics (excluding subordinated debt) that are offered and issued in the primary market, or subscription or redemption of securities investment trust funds or futures trust funds, or subscription by a securities firm of securities as necessitated 
39
by its undertaking business or as an advisory
recommending securities firm for an emerging
stock company, in accordance with the rules
of the Taipei Exchange.
Omitted hereinafter
exchange traded notes,or subscription by a
securities firm of securities as necessitated by
its undertaking business or as an advisory
recommending securities firm for an emerging
stock company, in accordance with the rules
of the Taipei Exchange.
Omitted hereinafter
Article 21: Date of amendments
Version一Enacted on August 28, 1996.
.
.
.
Version十一Amended on June 16, 2017.
Version十二Amended on June 13, 2019.
Version十三Amended on June 15, 2020.
Version十四Amended on July 16, 2021.		 Article 21: Date of amendments
Version一Enacted on August 28, 1996.
.
.
.
Version十一Amended on June 16, 2017.
Version十二Amended on June 13, 2019.
Version十三Amended on June 15, 2020.
Version十四Amended on July 16, 2021
Version十五Amended on June 10, 2022.		 Amendment date is
added.		 
40

G-SHANK ENTERPRISE CO., LTD. – Articles of Incorporation

Chapter I General Provisions

  • Article 1: The Company is organized in accordance with the Company Act and named “G-SHANK ENTERPRISE CO., LTD.”

Article 2: The business operation of the Company:

  1. Manufacturing and trading of molds and stampings;

  2. Manufacturing and trading of tools and automation machines;

  3. Assembly and processing of electrical components and finished products;

  4. Assembly and processing of mechanical components and finished products

  5. 5.The operation of import and export business and the agency business of domestic and foreign manufacturers;

  6. Except for the business operations subject to special approval, all business not prohibited or restricted by law and regulations;

  7. Article 3: The Company has the head office setup in Taoyuan City, and may set up branches or offices, when necessary, according to the resolution of the board of directors.

Chapter II Shares

  • Article 4: The total authorized capital stock of the Company is NT$3.5 billion with 350 million shares issued at NT$10 par and with the board of directors authorized to make multiple issuances and handle all relevant matters.

  • In terms of the total capital stock referred to in Paragraph I, an amount for NT$200 million is reserved for the issuance of stock warrants for a total of 20 million shares at NT$10 par with multiple issuances arranged in accordance with the resolution of the board of directors.

  • Article 5: The Company’s stock shares are ordered and signed or stamped by the representing directors, and are issued after being certified by the competent authority or its authorized issuance agency.

  • The Company is exempted from printing certificates for the shares issued, provided that the centralized securities depository institution should be contacted for registration or custody.

  • Article 6: The entries to the shareholders’ register shall be ceased within 60 days prior to the convening date of a general shareholders’ meeting, or within 30 days prior to the convening date of an 

41

extraordinary shareholders’ meeting, or within 5 days prior to the target date fixed by the Company for distribution of dividends, bonus, or other benefits.

  • Article 7: Shareholders should fill in the specimen card when opening an account for the record of the Company. The receipt of dividends and exercise of equity in writing in the future must be with the proof of the specimen card on file. Unless otherwise provided by the Company Act or the securities regulations, it is to be handled in accordance with the “Regulations Governing the Administration of Shareholder Services of Public Companies” of the Financial Supervisory Commission.

Chapter III Shareholders’ Meeting

  • Article 8: The shareholders’ meeting includes both general shareholders’ meeting that is to be held at least once a year and convened by the board of directors within 6 months at the end of the fiscal year and extraordinary shareholders’ meeting that is to be held when necessary.

  • Article 9: The shareholder who cannot attend the shareholders’ meeting for reasons may appoint a proxy to attend the meeting by providing the proxy form issued by the Company with the scope of the proxy’s authorization detailed, then signed and sealed. The use of the proxy form, unless otherwise provided by the Company Act, shall be handled in accordance with the “Regulations Governing the Use of Proxies for Attendance at Shareholder Meetings of Public Companies.”

  • Article 10: The Company’s shareholders are entitled to one voting power in respect of each share in their possession, unless otherwise provided by law and regulations.

  • Article 11: Resolutions reached in the Company’s shareholders’ meeting shall, unless otherwise provided by the Company Act, be adopted by a majority vote of the shareholders present, who represent more than one-half of the total number of voting shares.

Chapter IV Directors

  • Article 12: The Company has a quorum of 7~11 directors set. The candidate nomination system is adopted for the shareholders to elect the directors from among the nominees listed in the register of director candidates. The directors are elected for a 3-year term and eligible for re-election. 
42

According to the quorum of board directors set in the preceding paragraph, there shall be not less than 3 independent directors in number and not less than one-fifth of the total number of directors. Independent directors shall possess professional knowledge and there shall be restrictions on their shareholdings, restriction on holding employment concurrently, nomination and election method, and other requirements on compliance that are to be handled in accordance with the Company Act, and relevant requirements of the competent securities authorities.

The Company shall acquire liability insurance for the directors during the term of office according to their indemnity responsibilities within the scope of business execution lawfully.

  • Article 12-1: The Company’s board of directors has the Audit Committee, Remuneration Committee, and other functional committees formed, of which, the Audit Committee is formed by all independent directors.

    • The duties, organizational charters, exercise of powers, and other matters to be complied with by the Audit Committee referred to in the preceding paragraph shall be handled in accordance with the relevant regulations of the competent securities authority and the Company.

  • Article 13: The board of directors is organized by all directors. The Chairman is elected with the consent of more than half of the directors present at the meeting that is attended by more than two-thirds of the directors. The Chairman is to chair the shareholders’ meeting internally and to represent the Company externally.

  • Article 14: When the Chairman requests leave or is unable to exercise his/her powers for any reason, the representative of the Chairman shall be processed in accordance with Article 208 of the Company Act. If a director is unable to attend the board meeting for some reasons, he/she may entrust another director to attend the meeting as his/her proxy in accordance with Article 205 of the Company Act. The aforementioned proxy is limited to one person only.

  • Article 14-1: The reasons for convening the board meeting shall be detailed in the written meeting notice and sent to each director 7 days in advance. However, a board meeting can be convened at any time in case of emergency.

  • The aforementioned meeting notice can be sent to each director by correspondence, fax, or e-mail.

  • Article 14-2: The board of directors is authorized to determine the remuneration and allowance for travel expenses to the Company’s board directors based on the degree of their 

43

participation in the Company’s business operation and the value of their contributions, and with reference to the standards of the industry.

Chapter V Management

  • Article 15: The Company may have one President and several Vice Presidents appointed to serve; also, their appointment, dismissal, and remuneration is to be handled in accordance with Article 29 of the Company Act.

Section VI Accounting

  • Article 16: The Company’s board of directors shall have the following reports prepared at the end of each fiscal year, and then presented in the shareholders’ meeting for resolutions in accordance with the statutory procedures: (I) The business report; (II) The financial statements; and (III) The earning distribution or loss off-setting proposals.

  • Article 17: If there is net income before tax and before deducting compensation to employees and remuneration to directors, an amount equivalent to 1%~10% of the net income shall be appropriated to pay compensation to employees and an amount not more than 3% of the net income shall be appropriated to pay remuneration to directors. However, if there remains cumulative loss, the Company shall have the equivalent amount reserved to make up for the said cumulative loss.

  • The compensation to employees stated in the preceding paragraph shall be paid with stock shares or in cash. The recipients of such compensation may include employees of subordinate companies who meet the conditions set by the board of directors. The remuneration to directors can be paid only in cash.

  • The earnings distribution stated in the preceding paragraph shall be implemented according to the resolution of the board of directors and the presentation in the shareholders’ meeting.

  • Article 17-1: The Company shall apply the earnings, if any, to pay income tax and make up for the losses of previous years, then appropriate 10% of the balance amount as legal reserve thereafter. In addition, a certain amount of special reserve shall be retained or reversed in accordance with the regulations of the competent authority. Then, for the remaining amount thereafter plus the unappropriated earnings of previous years, after having a certain amount reserved, it is to be distributed according to the distribution plan proposed by the board of directors after being resolved by the shareholders’ meeting. 

44

Chapter VII Supplementary Provisions

  • Article 18: The Company is currently engaging in a growing industry; therefore, the Company will develop and expand along with business development in the future. The earnings distribution will be handled in accordance with the Articles of Incorporation. However, for the distribution of dividends to shareholders in the current year, the maximum proportion of stock dividends shall not exceed 50% of the total dividends distributed; that is, the remaining dividends must be in the form of cash dividends.

  • Article 19: The board of directors is authorized to handle the Company’s investment that may exceed 40% of the paid-in capital.

Article 20: The Company may grant guarantees externally due to business needs.

  • Article 21: The matters not fully addressed in the Articles of Incorporation shall be handled in accordance with the Company Act.

  • Article 22 The Articles of Incorporation was formulated on October 2, 1973. The 1[st] amendment was made on January 31, 1975. The 2[nd] amendment was made on July 1, 1977. The 3[rd] amendment was made on August 6, 1979. The 4[th] amendment was made on June 22, 1984. The 5[th] amendment was made on December 28, 1985. The 6[th] amendment was made on October 30, 1987. The 7[th] amendment was made on March 26, 1989. The 8[th] amendment was made on May 31, 1992. The 9[th] amendment was made on June 27, 1993. The 10[th] amendment was made on July 25, 1994. The 11[th] amendment was made on June 21, 1995. The 12[th] amendment was made on August 1, 1995. The 13[th] amendment was made on May 22, 1996. The 14[th] amendment was made on April 30, 1997. The 15[th] amendment was made on May 21, 1999. The 16[th] amendment was made on April 29, 2000. The 17[th] amendment was made on April 29, 2000. The 18[th] amendment was made on April 19, 2001. The 19[th] amendment was made on April 19, 2001. The 20[th] amendment was made on May 30, 2002. The 21[st] amendment was made on June 15, 2004. The 22[nd] amendment was made on June 14, 2005. The 23[rd] amendment was made on June 15, 2007. The 24[th] amendment was made on June 25, 2008. The 25[th] amendment was made on June 16, 2009. The 26[th] amendment was made on June 14, 2010. The 27[th] amendment was made on June 22, 2012. The 28[th] amendment was made on June 16, 2016. The 29[th] amendment was made on June 13, 2019. The 30[th] amendment was made on June 15, 2020.

G-SHANK ENTERPRISE CO., LTD. Chairman: LIN, YU-HUANG

45

G-SHANK ENTERPRISE CO., LTD. Rules of Procedure for Shareholders’ Meetings

  • Article 1: The Company’s shareholders’ meetings are to be processed in accordance with the “Rules of Procedure for Shareholders’ Meetings.”

  • Article 2: The Company furnishes the attending shareholders with an attendance book to sign, or attending shareholders (or the representatives) may hand in a sign-in card in lieu of signing in.

  • The number of shares in attendance shall be calculated according to the shares indicated by the attendance book and sign-in cards handed in, and the number of shares whose voting rights are exercised by electronic means.

  • Article 3: Attendance at shareholders’ meetings and voting shall be calculated based on numbers of shares.

  • Article 4: The venue for a shareholders’ meeting shall be the premises of this Corporation, or a place easily accessible to shareholders and suitable for a shareholders’ meeting. The meeting may begin no earlier than 9 a.m. and no later than 3 p.m. Full consideration shall be given to the opinions of the independent directors with respect to the place and time of the meeting.

  • Article 5: If a shareholders’ meeting is convened by the board of directors, the meeting shall be chaired by the chairman of the board. When the chairman of the board is on leave or for any reason unable to exercise the powers of the chairman, the vice chairman shall act in place of the chairman. If there is no vice chairman or the vice chairman also is on leave or for any reason unable to exercise the powers of the vice chairman, the chairman shall appoint one of the directors to act as chair. Where the chairman does not make such a designation, the directors shall select from among themselves one person to serve as chair. If a shareholders’ meeting is convened by a party with power to convene but other than the board of directors, the convening party shall chair the meeting. When there are two or more such convening parties, they shall mutually select a chair from among themselves.

  • Article 6: The Company may appoint its attorneys, certified public accountants, or related persons retained by the Company to attend the shareholders’ meeting in a non-voting capacity. 

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Staff handling administrative affairs of a shareholders’ meeting shall wear identification cards or arm bands.

Article 7: The Company shall make an uninterrupted audio and video recording the entire proceedings of the shareholders’ meeting, and the recorded materials of the preceding paragraph shall be retained for at least one year.

Article 8: The Chairman shall call the meeting to order at the scheduled meeting time. However, when the attending shareholders do not represent a majority of the total number of issued shares, the chair may announce a postponement, provided that no more than two such postponements, for a combined total of no more than one hour, may be made. If the quorum is not met after two postponements and the attending shareholders still represent less than one third of the total number of issued shares, the chair shall declare the meeting adjourned.

If the quorum is not met after two postponements as referred to in the preceding paragraph, but the attending shareholders represent one third or more of the total number of issued shares, a tentative resolution may be adopted pursuant to Article 175, paragraph 1 of the Company Act. When, prior to conclusion of the meeting, the attending shareholders represent a majority of the total number of issued shares, the Chairman may resubmit the tentative resolution for a vote by the shareholders’ meeting pursuant to Article 174 of the Company Act.

Article 9: If a shareholders’ meeting is convened by the board of directors, the meeting agenda shall be set by the board of directors. Votes shall be cast on each separate proposal in the agenda (including extraordinary motions and amendments to the original proposals set out in the agenda). The meeting shall proceed in the order set by the agenda, which may not be changed without a resolution of the shareholders’ meeting.

The provisions of the preceding paragraph apply mutatis mutandis to a shareholders’ meeting convened by a party with the power to convene that is not the board of directors.

The Chairman may not declare the meeting adjourned prior to completion of deliberation on the meeting agenda of the preceding two paragraphs (including extraordinary motions), except by a resolution of the shareholders’ meeting. If the Chairman declares the meeting adjourned in violation of the rules of procedure, the other members of the board of directors shall promptly assist the attending shareholders in electing a new Chairman in accordance with statutory procedures, by agreement of a majority of the votes represented by the 

47

attending shareholders, and then continue the meeting.

After the meeting is adjourned by resolution, shareholders shall not elect another Chairman to continue the meeting at the original venues or at another venue.

Article 10: Before speaking, an attending shareholder (or a representative) must specify on a speaker’s slip the subject of the speech, his/her shareholder account number (or attendance card number), and account name. The order in which shareholders speak will be set by the Chairman.

A shareholder (or a representative) in attendance who has submitted a speaker’s slip but does not actually speak shall be deemed to have not spoken.

When the content of the speech does not correspond to the subject given on the speaker’s slip, the spoken content shall prevail.

When an attending shareholder is speaking, other shareholders may not speak or interrupt unless they have sought and obtained the consent of the Chairman and the shareholder that has the floor; the Chairman shall stop any violation.

  • Article 11: Except with the consent of the Chairman, a shareholder may not speak more than twice on the same proposal, and a single speech may not exceed 5 minutes.

If the shareholder’s speech violates the aforementioned rules or exceeds the scope of the agenda item, the Chairman may terminate the speech.

  • Article 12: The juristic person attening the shareholders’ meeting by proxy can only assign one represenative to attend the meeting.

  • When a juristic person shareholder appoints two or more representatives to attend a shareholders’ meeting, only one of the representatives so appointed may speak on the same proposal.

  • Article 13: After an attending shareholder has spoken, the Chairman may respond in person or direct relevant personnel to respond.

  • Article 14: The Chairman shall allow ample opportunity during the meeting for explanation and discussion of proposals and of amendments or extraordinary motions put forward by the shareholders; when the Chairman is of the opinion that a proposal has been discussed sufficiently to put it to a vote, the Chairman may announce the discussion closed, call for a vote, and schedule sufficient time for voting.

  • Article 15: Vote monitoring and counting personnel for the voting on a proposal shall be appointed by 

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the Chairman, provided that all monitoring personnel shall be shareholders of the Company. Vote counting for shareholders’ meeting proposals or elections shall be conducted in public at the place of the shareholders’ meeting. Immediately after vote counting has been completed, the results of the voting, including the statistical tallies of the numbers of votes, shall be announced on-site at the meeting, and a record made of the vote.

  • Article 16: When a meeting is in progress, the Chairman may announce a break based on time considerations.

  • Article 17: Except as otherwise provided in the Company Act and in the Company’s Articles of Incorporation, the passage of a proposal shall require an affirmative vote of a majority of the voting rights represented by the attending shareholders.

  • At the time of a vote, for each proposal, the Chairman or a person designated by the Chairman shall first announce the total number of voting rights represented by the attending shareholders, followed by a poll of the shareholders.

  • Article 18: When there is an amendment or an alternative to a proposal, the Chairman shall present the amended or alternative proposal together with the original proposal and decide the order in which they will be put to a vote. When any one among them is passed, the other proposals will then be deemed rejected, and no further voting shall be required.

  • Article 19: The Chairman may direct the proctors (or security personnel) to help maintain order at the meeting place.

When proctors (or security personnel) help maintain order at the meeting place, they shall wear an or armband bearing the word “Proctor.”

  • Article 20: Matters not stipulated in the “Rules” shall be handled in accordance with the provisions of the Company Act and relevant laws and regulations.

  • Article 21: The “Rules” shall take effect after having been submitted to and approved by a shareholders’ meeting. Subsequent amendments thereto shall take effect in the same manner. 

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G-SHANK ENTERPRISE CO., LTD. Procedures for the Acquisition and Disposal of Assets

Article 1: Purpose

The “Procedures” is formulated to strengthen the Company’s asset management, protect investment, and substantiate information disclosure. Matters that are not fully addressed in the “Procedures” shall be handled in accordance with the relevant laws and regulations.

Article 2: Governing law and regulations

The “Procedures” is formulated in accordance with the “Rules Governing the Acquisition and Disposal of Assets by Public Companies.”

Articles III: Scope of assets

The term “assets” as used in the “Procedures” includes the following:

  • 一、 Investments in stocks, government bonds, corporate bonds, financial bonds, securities representing interest in a fund, depositary receipts, call (put) warrants, beneficial interest securities, and asset-backed securities;

  • 二、 Real property (including land, houses and buildings, and investment property) and equipment;

  • 三、 Memberships;

  • 四、 Patents, copyrights, trademarks, franchise rights, and other intangible assets;

  • 五、 Right-of-use assets;

  • 六、 Claims of financial institutions (including receivables, bills purchased and discounted, loans, and overdue receivables);

  • 七、 VII. Derivatives;

  • 八、 Assets acquired or disposed of in connection with mergers, demergers, acquisitions, or transfer of shares in accordance with law;

  • 九、 Other major assets;

  • Article 4: Terms used in the Procedures are defined as follows:

  • 一、 Derivatives: Forward contracts, options contracts, futures contracts, leverage contracts, or swap contracts, whose value is derived from a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable; or hybrid contracts combining the above contracts; or hybrid contracts or structured products containing embedded derivatives. The term “forward contracts” does not include insurance contracts, performance contracts, after-sales service contracts, long-term leasing contracts, or long-term purchase (sales) contracts.

  • 二、 Assets acquired or disposed through mergers, demergers, acquisitions, or transfer of shares in accordance with law: Refers to assets acquired or disposed through mergers, demergers, or acquisitions conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institution Merger Act and other acts, or to transfer of shares from another company through issuance of new shares of its own as the consideration therefor (hereinafter “transfer of shares”) under Article 156-3 of the Company Act.

  • 三、 Related party or subsidiary: As defined in the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

  • 四、 Professional appraiser: Refers to a real property appraiser or other person duly authorized by law to engage in the value appraisal of real property or equipment. 

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  • 五、 Date of occurrence: Refers to the date of contract signing, date of payment, date of consignment trade, date of transfer, dates of boards of directors’ resolutions, or other date that can confirm the counterpart and monetary amount of the transaction, whichever date is earlier; provided, for investment for which approval of the competent authority is required, the earlier of the above date or the date of receipt of approval by the competent authority shall apply.

  • 六、 Mainland China area investment: Refers to investments in the mainland China area approved by the Ministry of Economic Affairs Investment Commission or conducted in accordance with the provisions of the Regulations Governing Permission for Investment or Technical Cooperation in the Mainland Area.

  • 七、 Securities exchange: “Domestic securities exchange” refers to Taiwan Stock Exchange Corporation; “foreign securities exchange” refers to any organized securities exchange market that is regulated by the competent securities authorities of the jurisdiction where it is located.

  • 八、 Over-the-counter venue (“OTC venue” or “OTC”): “Domestic OTC venue” refers to a venue for OTC trading provided by a securities firm in accordance with the Regulations Governing Securities Trading on the Taipei Exchange; “foreign OTC venue” refers to a venue at a financial institution that is regulated by the foreign competent authority and that is permitted to conduct securities business.

  • Article 5: Professional appraisers and their officers, certified public accounts, attorneys, and securities underwriters that provide the Company with appraisal reports, certified public accountant’s opinions, attorney’s opinions, or underwriter’s opinions shall meet the following requirements:

  • 一、 May not have previously received a final and unappealable sentence to imprisonment for 1 year or longer for a violation of the Act, the Company Act, the Banking Act, the Insurance Act, the Financial Holding Company Act, or the Business Entity Accounting Act, or for fraud, breach of trust, embezzlement, forgery of documents, or occupational crime. However, this provision does not apply if 3 years have already passed since completion of service of the sentence, since expiration of the period of a suspended sentence, or since a pardon was received.

  • 二、 May not be a related party or de facto related party of any party to the transaction.

  • 三、 If the Company is required to obtain appraisal reports from two or more professional appraisers, the different professional appraisers or appraisal officers may not be related parties or de facto related parties of each other.

When issuing an appraisal report or opinion, the personnel referred to in the preceding paragraph shall comply with the following provisions:

  • 一、 Prior to accepting a case, they shall prudently assess their own professional capabilities, practical experience, and independence.

  • 二、 When reviewing case, they shall appropriately plan and execute adequate working procedures, in order to produce a conclusion and use the conclusion as the basis for issuing the report or opinion. The related working procedures, data collected, and conclusion shall be fully and accurately specified in the case working papers.

  • 三、 They shall undertake an item-by-item evaluation of the comprehensiveness, accuracy, and reasonableness of the sources of data used, the parameters, and the information, as the basis for issuance of the appraisal report or the opinion.

  • 四、 They shall issue a statement attesting to the professional competence and independence of the personnel who prepared the report or opinion, and that they have evaluated and found that the information used is reasonable and accurate, and that they have complied with applicable laws and regulations. 

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  • Article 6:Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may be substituted for the appraisal report or CPA opinion.

  • Article 7:Procedures for the acquisition and disposal of property, plant and equipment or the right-of-use assets thereof:

  • 一、 Appraisal and operating procedures

    • The Company’s acquisition and disposal of the property and equipment, or the right-to-use assets thereof shall be handled in accordance with the Company’s “Internal Control System” and “Hierarchical Delegation of Responsibilities.”

  • 二、 Procedure for determining transaction conditions and authorization limit

    • 一

    • ( )The acquisition and disposal of real estate or the right-of-use assets thereof must be with a reference to the announced current value, the assessed value, the actual transaction price of the adjacent real estate, etc. with an analysis report prepared for the review and approval of the Chairman. If it is for a transaction amount under (inclusive) NT$100 million, it is to be approved by the Chairman and filed with the most recent board meeting for records; however, if it is for a transaction amount over NT$100 million, it must be additionally submitted to the board of directors for approval before implementation.

    • ( 二 )The acquisition and disposal of equipment or the right-to-use assets there, the Company should choose to have it processed in accordance with the price inquiry, price comparison, price negotiation, or bidding. If it is for a transaction amount under (inclusive) NT$50 million, it is to be approved in accordance with the Company’s “Hierarchical Delegation of Responsibilities.” If it is for a transaction amount over NT$50~100 million (inclusive), it must be with the approval of the Chairman. If it is for a transaction amount over NT$100 million, it must be additionally submitted to the board of directors for approval before implementation.

  • 三、 Execution unit

    • The Company’s acquisition and disposal of the property, plant and equipment or the right-to-use assets thereof shall be implemented by the using department and General Affairs Department.

  • 四、 Appraisal report of the property, plant and equipment or right-of-use assets thereof In acquiring or disposing of real property, equipment, or right-of-use assets thereof where the transaction amount reaches 20% of the Company’s paid-in capital or NT$300 million or more, the Company, unless transacting with a domestic government agency, engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposing of equipment or right-of-use assets thereof held for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions:

    • 一

    • ( )Where due to special circumstances it is necessary to give a limited price, specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for approval in advance by the board of directors; the same procedure shall also be followed whenever there is any subsequent change to the terms and conditions of the transaction.

    • ( 二 )Where the transaction amount is NT$1 billion or more, appraisals from two or more professional appraisers shall be obtained.

    • ( 三 )Where any one of the following circumstances applies with respect to the professional appraiser’s appraisal results, unless all the appraisal results for the assets to be acquired are higher than the transaction amount, or all the appraisal results for the assets to be disposed of are lower than the transaction amount, a certified public accountant shall be engaged to render a specific opinion regarding the reason for the discrepancy and the appropriateness of the transaction price in 

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accordance with Article 20 of the Statements on Auditing Standards (SASs) announced by the Accounting Research and Development Foundation: 

     1. The discrepancy between the appraisal result and the transaction amount is 20% or more of the transaction amount.

     2. The discrepancy between the appraisal results of two or more professional appraisers is 10% or more of the transaction amount.

  - ( 四 )No more than 3 months may elapse between the date of the appraisal report issued by a professional appraiser and the contract execution date; provided, where the publicly announced current value for the same period is used and not more than 6 months have elapsed, an opinion may still be issued by the original professional appraiser.

  • Article 8: Operating procedures for the acquisition and disposal of marketable securities investment 一、 Appraisal and operating procedures

    • The Finance Department shall analyze the relevant benefits and evaluate possible investment risk on the Company’s acquisition and disposal of marketable securities that should be handled in accordance with the Company’s “Internal Control System” and “Hierarchical Delegation of Responsibilities.”

  • 二、 Procedure for determining transaction conditions and authorization limit

    • 一

    • ( )Securities that have been traded on the securities exchange or over-the-counter venue are determined based on the equity or bond prices at that time.

    • ( 二 )For the marketable securities that are not traded on the securities exchange or the over-the-counter venue, the most recent financial statement of the issuing company that has been audited, certified, or reviewed by a certified public accountant should be obtained before the date of the “Date of occurrence” as a reference in appraising the transaction price.

  • 三、 Execution unit

    • The Company’s acquisition and disposal of marketable securities shall be handled in accordance with the Company’s “Hierarchical Delegation of Responsibilities” and then implemented by the Finance Department.

  • 四、 If the dollar amount of the transaction is 20% of the Company’s paid-in capital or NT$300 million or more, the Company shall engage a certified public accountant prior to the date of occurrence of the event to provide an opinion regarding the reasonableness of the transaction price. If the certified public accountant needs to use the report of an expert as evidence, the certified public accountant shall do so in accordance with the provisions of Statement of Auditing Standards No. 20 published by the Accounting Research and Development Foundation. This requirement does not apply, however, to publicly quoted prices of securities that have an active market, or where otherwise provided by regulations of the Financial Supervisory Commission (FSC).

  • Article 9: Operating procedures for the acquisition and disposal of intangible assets or right-of-use assets thereof or memberships

  • 一、 Appraisal and operating procedures

    • The Company shall have the acquisition and disposal of intangible assets or the right-to-use assets thereof or memberships handled in accordance with the Company’s internal control system.

  • 二、 Procedure for determining transaction conditions and authorization limit

    • 一

    • ( ) The acquisition and disposal of intangible assets or the right-of-use assets thereof must be with a reference to the expert’s evaluation report or the fair market price for determining the transaction conditions and transaction price. An analysis report of such transaction shall be prepared for the review and approval of the Chairman. If it is for a transaction amount under NT$50 million, it is to be approved by the 

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Chairman and filed with the most recent board meeting for records; however, if it is for a transaction amount over NT$50 million, it must be additionally submitted to the board of directors for approval before implementation. 

  - ( 二 )The acquisition and disposal of memberships must be with a reference to the fair price in market for determining the transaction conditions and transaction price with an analysis report prepared for the review and approval of the President. If it is for a transaction amount under NT$50 million, it is to be approved by the Chairman and filed with the most recent board meeting for records; however, if it is for a transaction amount over NT$50 million, it must be additionally submitted to the board of directors for approval before implementation.

  • 三、 Execution unit

    • The Company’s acquisition and disposal of the intangible assets or the right-to-use assets thereof or memberships shall be approved in accordance with the authorization hierarchy in the preceding paragraph and then implemented by the using department and Finance Department.

  • 四、 Professional appraisal report and opinions on the intangible assets or the right-of-use assets thereof or memberships

    • Where the Company acquires or disposes of intangible assets or right-of-use assets thereof or memberships and the transaction amount reaches 20% or more of paid-in capital or NT$300 million or more, except in transactions with a domestic government agency, the Company shall engage a certified public accountant prior to the date of occurrence of the event to render an opinion on the reasonableness of the transaction price; the certified public accountant shall comply with the provisions of Statement of Auditing Standards No. 20 published by the Accounting Research and Development Foundation.

  • Article 10: The calculation of the transaction amounts referred to in the preceding three paragraphs shall be made in accordance with Article 17 herein, and “within the preceding year” as stated herein refers to the year preceding the date of occurrence of the current transaction. The appraisal report issued by a professional appraiser or the CPA’s opinions obtained in accordance with the “Procedures” need not be counted toward the transaction amount.

  • Article 11: Operating procedures for the acquisition and disposal of financial institutions’ claims

  • The Company does not currently engage in the acquisition and disposal of financial institutions’ claims. If the Company intends to engage in transactions of acquiring or disposing of financial institutions’ claims in the future, the Company will report to the board of directors for approval and then have the evaluation and operating procedures formulated accordingly.

  • Article 12: When the Company engages in any acquisition or disposal of assets from or to a related party, in addition to ensuring that the necessary resolutions are adopted pursuit to Article 7 and handling the relevant deliberation procedures and assessing the reasonableness of the transaction terms in accordance with the following provisions, if the transaction amount reaches 10% or more of the Company’s total assets, the Company shall obtain an appraisal report from a professional appraiser or a CPA’s opinion in compliance with the provisions of Article 7. Also, the amount of the aforementioned transaction shall be calculated in accordance with Article 10.

  • In addition, when judging whether a transaction counterparty is a related party, in addition to legal formalities, the substance of the relationship shall also be considered.

  • Article 13: Operating procedures for the acquisition and disposal of related party’s real estate or the right-of-use assets thereof

  • 一、 Appraisal and operating procedures 

     - When the Company intends to acquire or dispose of real property or right-of-use assets thereof from or to a related party, or when the Company intends to acquire or dispose of assets other than real property or right-of-use assets thereof from or to a related party and the transaction amount reaches 20% or more of paid-in capital, 10%

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or more of the Company’s total assets, or NT$300 million or more, except in trading of domestic government bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises, the Company may not proceed to enter into a transaction contract or make a payment until the following matters have been approved by the Audit Committee and resolved by the board of directors.

  • 一

  • ( )The purpose, necessity, and anticipated benefit of the acquisition or disposal of assets;

  • ( 二 )The reason for choosing the related party as a transaction counterparty;

  • ( 三 )With respect to the acquisition of real property or right-of-use assets thereof from a related party, information regarding appraisal of the reasonableness of the preliminary transaction terms in accordance with Paragraph II, Subparagraph (I) and (V) of this Article;

  • ( 四 )The date and price at which the related party originally acquired the real property, the original transaction counterparty, and that transaction counterparty’s relationship to the Company and the related party;

  • ( 五 )Monthly cash flow forecasts for the year commencing from the anticipated month of signing of the contract, and evaluation of the necessity of the transaction, and reasonableness of the funds utilization;

  • ( 六 )An appraisal report from a professional appraiser or a CPA’s opinion obtained in compliance with Paragraph I, Subparagraph I of this Article;

  • ( 七 )Restrictive covenants and other important stipulations associated with the transaction;

The calculation of the transaction amounts referred to in the preceding paragraph shall be made in accordance with Article 17, Paragraph I herein, and “within the preceding year” as used herein refers to the year preceding the date of occurrence of the current transaction. Items that have been approved by the Audit Committee and resolved by the board of directors in accordance with the “Procedures” need not be counted toward the transaction amount.

With respect to the types of transactions listed below, when to be conducted between the Company, subsidiaries, or between the subsidiaries in which the Company directly or indirectly holds 100% of the issued shares or authorized capital, the board of directors may pursuant to Article 7, Paragraph I delegate the Chairman to decide such matters when the transaction is within a certain amount and have the decisions subsequently submitted to and ratified by the next board of directors meeting:

  • 一

  • ( )Acquisition or disposal of equipment or right-of-use assets thereof held for business use;

( 二 )Acquisition or disposal of real property right-of-use assets held for business use; Where a matter is submitted for discussion by the board of directors pursuant to Paragraph I, the board of directors shall take into full consideration each independent director’s opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board meeting.

The matters for which Paragraph I require recognition by the Audit Committee shall first be approved by one-half or more of all Audit Committee members and then submitted to the board of directors for a resolution, and shall be subject to mutatis mutandis application of Article 20, Paragraphs III and IV.

  • 二、 Reasonableness assessment of transaction costs:

  • 一

  • ( ) The Company that acquires real property or right-of-use assets thereof from a related party shall evaluate the reasonableness of the transaction costs by the following means:

    1. Based upon the related party’s transaction price plus necessary interest on funding and the costs to be duly borne by the buyer. “Necessary interest on 
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funding” is imputed as the weighted average interest rate on borrowing in the year the Company purchases the property; provided, it may not be higher than the maximum non-financial industry lending rate announced by the Ministry of Finance.

  1. Total loan value appraisal from a financial institution where the related party has previously created a mortgage on the property as security for a loan; provided, the actual cumulative amount loaned by the financial institution shall have been 70% or more of the financial institution’s appraised loan value of the property and the period of the loan shall have been 1 year or more. However, this shall not apply where the financial institution is a related party of one of the transaction counterparties.

  2. ( 二 ) Where land and structures thereupon are combined as a single property purchased or leased in one transaction, the transaction costs for the land and the structures may be separately appraised in accordance with either of the means listed in subparagraph (I).

  3. ( 三 ) The Company that acquires real property or right-of-use assets thereof from a related party and appraises the cost of the real property or right-of-use assets thereof in accordance with Paragraph II, Subparagraph (I) and (II) of this Article shall also engage a CPA to check the appraisal and render a specific opinion.

  4. ( 四 ) Where the Company acquires real property or right-of-use assets thereof from a related party and one of the following circumstances exists, the acquisition shall be conducted in accordance with Article 12, and the preceding three paragraphs do not apply:

  5. The related party acquired the real property or right-of-use assets thereof through inheritance or as a gift.

  6. More than 5 years will have elapsed from the time the related party signed the contract to obtain the real property or right-of-use assets thereof to the signing date for the current transaction.

  7. The real property is acquired through signing of a joint development contract with the related party, or through engaging a related party to build real property, either on the Company’s own land or on rented land.

  8. The real property right-of-use assets for business use are acquired by the Company, subsidiaries, or by the subsidiaries in which the Company directly or indirectly holds 100% of the issued shares or authorized capital.

  9. ( 五 )When the results of the Company’s appraisal conducted in accordance with Paragraph III, Subparagraph (I) and Subparagraph (II) of this Article are uniformly lower than the transaction price, the matter shall be handled in compliance with Paragraph III, Subparagraph (V) of this Article. However, where the following circumstances exist, objective evidence has been submitted and specific opinions on reasonableness have been obtained from a professional real property appraiser and a CPA have been obtained, this restriction shall not apply:

  10. 1.Where the related party acquired undeveloped land or leased land for development, it may submit proof of compliance with one of the following conditions:

    • (1) Where undeveloped land is appraised in accordance with the means in the preceding Article, and structures according to the related party’s construction cost plus reasonable construction profit are valued in excess of the actual transaction price. The “Reasonable construction profit” shall be deemed the average gross operating profit margin of the related party’s construction division over the most recent 3 years or the gross profit margin for the construction industry for the most recent period as announced by the Ministry of Finance, whichever is lower. 
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  - (2)Completed transactions by unrelated parties within the preceding year involving other floors of the same property or neighboring or closely valued parcels of land, where the land area and transaction terms are similar after calculation of reasonable price discrepancies in floor or area land prices in accordance with standard property market sale or leasing practices.

  • 2.Where the Company acquiring real property, or obtaining real property right-of-use assets through leasing, from a related party provides evidence that the terms of the transaction are similar to the terms of completed transactions involving neighboring or closely valued parcels of land of a similar size by unrelated parties within the preceding year. Completed transactions involving neighboring or closely valued parcels of land in the preceding paragraph in principle refers to parcels on the same or an adjacent block and within a distance of no more than 500 meters or parcels close in publicly announced current value; transactions involving similarly sized parcels in principle refers to transactions completed by unrelated parties for parcels with a land area of no less than 50% of the property in the planned transaction; within the preceding year refers to the year preceding the date of occurrence of the acquisition of the real property or obtainment of the right-of-use assets thereof.

  • ( 六 )Where the Company acquires real property or right-of-use assets thereof from a related party and the results of appraisals conducted in accordance with Paragraph II, Subparagraph (I)~(V) of this Article are uniformly lower than the transaction price, the following steps shall be taken:

  • 1.special reserve shall be set aside in accordance with Article 41, Paragraph I of the Security Exchange Act against the difference between the real property transaction price and the appraised cost, and may not be distributed or used for capital increase or issuance of bonus shares.

  • Audit Committee members shall comply with Article 218 of the Company Act.

  • 3.Actions taken pursuant to the preceding two subparagraphs shall be reported to a shareholders’ meeting, and the details of the transaction shall be disclosed in the annual report and any investment prospectus.

The Company has set aside a special reserve under the preceding paragraph may not utilize the special reserve until the Company has recognized a loss on decline in market value of the assets purchased or leased at a premium, or they have been disposed of, or the leasing contract has been terminated, or adequate compensation has been made, or the status quo ante has been restored, or there is other evidence confirming that there was nothing unreasonable about the transaction, and the security competent authority has given its consent.

When the Company obtains real property or right-of-use assets thereof from a related party, it shall also comply with the preceding two paragraphs if there is other evidence indicating that the acquisition was not an arms length transaction.

Article 14: Operating procedures for the acquisition and disposal of derivatives

一、 Trading principles and strategies

  • ( 一 ) The types of derivatives that may be traded

  • The Company’s derivatives refer to the forward contracts, options contracts, futures contracts, leverage contracts, or swap contracts, whose value is derived from a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable; or hybrid contracts combining the above contracts. The term “forward contracts” does not include insurance contracts, 

57

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

  1. Matters related to guaranteed bond transactions shall be handled in accordance with the relevant provisions of the “Procedure.” Bond transactions with repurchase (reverse purchase) conditions are not subject to the provision of the “Procedures.”

  2. ( 二 ) Operating or hedging strategies

The Company’s derivatives transactions are classified into the category of “purpose other than trading” and “trading purpose” according to the holding or issuing purpose.

The aforementioned “purpose other than trading” means that the purpose of holding or issuing derivatives is to protect the Company from current and future risks arising from changes in financial market interest rates and exchange rates; also, the operation is based on the principle of prudence and conservation.

The aforementioned “purpose other than trading” means that the purpose of holding or issuing derivatives is to have them sold or repurchased in a short term for short-term profit; also, the operation is based on the principles of flexibility and mobility.

The aforementioned transactions must be assessed carefully before implementation and must be authorize and approved in advance.

  • ( 三 ) Segregation of duties

  • Finance Section: Responsible for collecting market information, judging trends and risks, etc., and conducting transactions in accordance with the instructions of the competent authorities and the authorized positions to avoid the risk of market price fluctuations, regularly assess the future trend of exchange rates and interest rates, and provide sufficient and timely information and transaction risk measurement for the reference of the relevant departments.

  • Accounting Section: Responsible for confirming whether the transaction conditions are consistent with the transaction documents, processing bookkeeping in accordance with the International Financial Reporting Standards, and preparing financial statements and making announcement and report on a monthly basis.

  • Cashiers: Responsible for fund scheduling and clearing.

  • For the approval of the derivatives, regardless of the transaction amount, all transaction must be approved and authorized by the President in advance.

  • ( 四 ) Performance evaluation

  • Hedging transactions

    • (1) The performance evaluation is based on the exchange rate costs on the Company’s books and the profit and loss arising from engaging in derivatives transactions.

    • (2) The Company adopts the monthly evaluation method to evaluate the profit and loss in order to fully grasp and express the evaluation risk of the transaction.

    • (3) The Financial Department shall provide foreign exchange position evaluation, foreign exchange market trends, and market analysis to the President as management reference and instructions.

  • Intended-use transactions:

    • Base the performance evaluation on the actual profit and loss, and the accounting personnel shall regularly prepare the position reports for the reference of the management team.

  • ( 五 ) Total amount of derivatives contracts and the maximum loss limit 

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1. Total contract amount

(1) Not intended for trading purpose:

It is limited to the ceiling amount of the Company’s existing and expected foreign currency net assets and liabilities.

(2) Intended for trading purpose:

The total amount of accumulated unsettled contracts at any time shall not exceed 10% of the Company’s net worth.

  1. Ceiling amout of loss

The maximum amount of contract losses for all or individual transactions is 10% of the total or individual contract amount.

二、 Risk management measures

  • ( 一 ) Credit risk management

The transaction counterparty should be a domestic and foreign financial institution with good credit and can provide professional information. The financial officer is responsible for controlling the transaction quota of the financial institution, and shall not be excessively concentrated, and shall adjust the transaction quota of the financial institution constantly according to the changes in the market conditions.

  • ( 二 ) Market price risk management

Choose a market where quotation information can be fully disclosed.

  • ( 三 ) Liquidity risk management

The trading financial institutions must have adequate equipment, information, trading capabilities, and be able to trade in any market in order to secure the liquidity.

  • ( 四 ) Cash flow risk management

The Company uses only the proprietary funds for derivatives trading in order to ensure the stability of the Company’s working capital turnover, and the funding needs of the forecasted cash receipts and payments in the next three months should be considered as well.

  • ( 五 ) Operating risk management:

  • Comply with the Company’s loan authorization limit, operating procedures, and internal auditing to avoid operational risks.

  • Personnel engaged in derivatives trading may not serve concurrently in other operations such as confirmation and settlement.

  • Risk measurement, monitoring, and control personnel shall be assigned to a different department and shall report to the board of directors or senior management personnel with no responsibility for trading or position decision-making.

  • Derivatives trading positions held shall be evaluated at least once per week; however, positions for hedge trades required by business shall be evaluated at least twice per month. Evaluation reports shall be submitted to senior management personnel authorized by the board of directors.

  • ( 六 ) Instrument risk management

Internal traders should have comprehensive and accurate professional knowledge of financial instruments. Banks are required to disclose risks fully in order to avoid the risk of misusing financial instruments.

  • ( 七 ) Legal risk management

Documents signed with financial institutions should be reviewed by the Financial Department before they can be formally signed in order to avoid legal risks.

三、 Internal audit system

The Company’s internal auditors should regularly review the adequacy of the internal control of derivatives transactions, and audit the trading department’s compliance 

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with the operating procedures for derivatives transactions on a monthly basis with an audit report prepared. The Audit Committee should be informed in writing immediately upon detecting any major nonconformity.

  • 四、 Supervision and management of the board of directors

  • 一

  • ( ) Where the Company engaging in derivatives trading, the board of directors shall faithfully supervise and manage such trading in accordance with the following principles:

    • 1.Designate senior management personnel to pay continuous attention to monitoring and controlling derivatives trading risk.

    • 2.Periodically evaluate whether derivatives trading performance is consistent with established operational strategy and whether the risk undertaken is within the Company’s permitted scope of tolerance.

  • ( 二 ) Senior management personnel authorized by the board of directors shall manage derivatives trading in accordance with the following principles:

    1. Periodically evaluate the risk management measures currently employed are appropriate and are faithfully conducted in accordance with the “Regulations Governing the Acquisition and Disposal of Assets by Public Companies” and the “Procedures.”

    2. 2.When irregular circumstances are found in the course of supervising trading and profit-loss circumstances, appropriate measures shall be adopted and a report immediately made to the board of directors; where the Company has independent directors, independent directors shall be present at the meeting and express an opinion.

  • ( 三 )The Company shall report to the soonest meeting of the board of directors after it authorizes the relevant personnel to handle derivates trading in accordance with the “Procedures.”

  • 五、 The Company engaging in derivatives trading shall establish a log book in which details of the types and amounts of derivatives trading engaged in, board of directors’ approval dates, and the matters required to be carefully evaluated under Paragraph II (V).4, Paragraph IV (I).2, and Paragraph IV (II).1 of this Article shall be recorded in detail in the log book.

The Company’s internal audit personnel shall periodically make a determination of the suitability of internal controls on derivatives and conduct a monthly audit of how faithfully derivatives trading by the trading department adheres to the procedures for engaging in derivatives trading, and prepare an audit report. If any material violation is discovered, the Audit Committee shall be notified in writing.

  • Article 15: Assessment and operating procedures of merger, demerger, acquisition, or shares transfer 一、 Appraisal and operating procedures

  • 一

  • ( ) The Company that conducts a merger, demerger, acquisition, or transfer of shares, prior to convening the board meeting to resolve on the matter, shall engage a CPA, attorney, or securities underwriter to give an opinion on the reasonableness of the share exchange ratio, acquisition price, or distribution of cash or other property to shareholders, and submit it to the board of directors for deliberation and passage. However, the requirement of obtaining an aforesaid opinion on reasonableness issued by an expert may be exempted in the case of a merger by the Company of a subsidiary in which it directly or indirectly holds 100% of the issued shares or authorized capital, and in the case of a merger between subsidiaries in which the Company directly or indirectly holds 100% of the respective subsidiaries’ issued shares or authorized capital.

  • ( 二 ) The Company participating in a merger, demerger, acquisition, or transfer of shares shall prepare a public report to shareholders detailing important 

60

contractual content and matters relevant to the merger, demerger, or acquisition prior to the shareholders’ meeting and include it along with the expert opinion 一 referred to in Paragraph I, Subparagraph ( ) of this Article when sending shareholders notification of the shareholders’ meeting for reference in deciding whether to approve the merger, demerger, or acquisition; provided, where a provision of another Act exempts the Company from convening a shareholders’ meeting to approve the merger, demerger, or acquisition, this restriction shall not apply.

  • ( 三 ) Where the shareholders’ meeting of any one of the companies participating in a merger, demerger, or acquisition fails to convene or pass a resolution due to lack of a quorum, insufficient votes, or other legal restriction, or the proposal is rejected by the shareholders’ meeting, the companies participating in the merger, demerger or acquisition shall immediately publicly explain the reason, the follow-up measures, and the preliminary date of the next shareholders’ meeting.

  • 二、 Other things to know

  • 一

  • ( ) The Company participating in a merger, demerger, or acquisition shall convene a board meeting and shareholders’ meeting on the day of the transaction to resolve matters relevant to the merger, demerger, or acquisition, unless another Act provides otherwise or the Financial Supervisory Commission is notified in advance of extraordinary circumstances and grants consent.

  • ( 二 ) The Company participating in a transfer of shares shall call a board meeting on the day of the transaction, unless another Act provides otherwise or the Financial Supervisory Commission is notified in advance of extraordinary circumstances and grants consent.

  • ( 三 ) Confidentiality commitment prior to the transaction implemented: Every person participating in or privy to the plan for merger, demerger, acquisition, or transfer of shares shall issue a written undertaking of confidentiality and may not disclose the content of the plan prior to public disclosure of the information and may not trade, in their own name or under the name of another person, in any stock or other equity security of any company related to the plan for merger, demerger, acquisition, or transfer of shares.

  • ( 四 ) Alteration in the share exchange ratio or acquisition price:

    • The Company participating in a merger, demerger, acquisition, or transfer of shares may not arbitrarily alter the share exchange ratio or acquisition price unless under the below-listed circumstances, and shall stipulate the circumstances permitting alteration in the contract for the merger, demerger, acquisition, or transfer of shares:

    • Cash capital increase, issuance of convertible corporate bonds, or the issuance of bonus shares, issuance of corporate bonds with warrants, preferred shares with warrants, stock warrants, or other equity-based securities.

    • An action, such as a disposal of major assets, that affects the company's financial operations.

    • An event, such as a major disaster or major change in technology, that affects shareholder equity or share price.

    • An adjustment where any of the companies participating in the merger, demerger, acquisition, or transfer of shares from another company, buys back treasury stock.

    • An increase or decrease in the number of entities or companies participating in the merger, demerger, acquisition, or transfer of shares.

    • Other terms/conditions that the contract stipulates may be altered and that have been publicly disclosed.

  • ( 五 ) Contractual information 

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The contract for participation by the Company in a merger, demerger, acquisition, or of shares shall record the rights and obligations of the Company participating in the merger, demerger, acquisition, or transfer of shares, and shall also record the following:

  1. Handling of breach of contract;

  2. Principles for the handling of equity-type securities previously issued or treasury stock previously bought back by the Company that is extinguished in a merger or that is demerged;

  3. The amount of treasury stock the Company is permitted under law to buy back after the record date of calculation of the share exchange ratio, and the principles for handling thereof;

  4. The manner of handling changes in the number of participating entities or companies;

  5. Preliminary progress schedule for plan execution, and anticipated completion date;

  6. Scheduled date for convening the legally mandated shareholders’ meeting if the plan exceeds the deadline without completion, and relevant procedures;

  7. ( 六 ) The number of participating companies in the merger, demerger, acquisition, or share transfer decreased:

  8. After public disclosure of the information, if any company participating in the merger, demerger, acquisition, or share transfer intends further to carry out a merger, demerger, acquisition, or share transfer with another company, all of the participating companies shall carry out anew the procedures or legal actions that had originally been completed toward the merger, demerger, acquisition, or share transfer; except that where the number of participating companies is decreased and a participating company’s shareholders’ meeting has adopted a resolution authorizing the board of directors to alter the limits of authority, such participating company may be exempted from calling another shareholders’ meeting to resolve on the matter anew.

  9. ( 七 ) Where any of the companies participating in a merger, demerger, acquisition, or transfer of shares is not a public company, the Company shall sign an agreement with the non-public company whereby the latter is required to abide by the provisions of Paragraph 二 , Subparagraph ( 一 ), ( 二 ), ( 三 ),( 六 ) of this Article.

  10. ( 八 )When participating in a merger, demerger, acquisition, or transfer of another company's shares, the Company shall prepare a full written record of the following information and retain it for 5 years for reference:

  11. 1.Basic identification data for personnel: Including the occupational titles, names, and national ID numbers (or passport numbers in the case of foreign nationals) of all persons involved in the planning or implementation of any merger, demerger, acquisition, or transfer of the Company’s shares prior to disclosure of the information.

  12. 2.Dates of material events: Including the signing of any letter of intent or memorandum of understanding, the hiring of a financial or legal advisor, the execution of a contract, and the convening of a board meeting.

  13. 3.Important documents and minutes: Including merger, demerger, acquisition, and share transfer plans, any letter of intent or memorandum of understanding, material contracts, and minutes of board of meetings.

  14. 4.The Company within 2 days counting inclusively from the date of passage of a resolution by the board of directors, report the information set out in subparagraphs 1 and 2 to the online reporting system stipulated by Financial Supervisory Commission for recordation in the prescribed formate. 

62

  • ( 九） Where any of the companies participating in a merger, demerger, acquisition, or transfer of shares is neither listed on an exchange nor has its shares traded on an OTC market, the Company shall sign an agreement with the non-public companies in accordance with the provisions stated in the preceding paragraph.

  • Article 16: Public Disclosure of Information

  • 一、 Under any of the following circumstances, the Company acquiring or disposing of

  • assets shall publicly announce and report the relevant information on the FSC’s designated website in the appropriate format as prescribed by regulations within 2 days counting inclusively from the date of occurrence of the event:

    • 一

    • ( ) (I) Acquisition or disposal of real property or right-of-use assets thereof from or to a related party, or acquisition or disposal of assets other than real property or right-of-use assets thereof from or to a related party where the transaction amount reaches 20% or more of paid-in capital, 10% or more of the Company’s total assets, or NT$300 million or more; provided, this shall not apply to trading of domestic government bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises.

    • ( 二 ) Conducting merger, demerger, acquisition, or transfer of shares;

    • ( 三 ) Losses from derivatives trading reaching the limits on aggregate losses or losses on individual contract set out in the procedures adopted by the Company;

    • ( 四 ) Where equipment or right-of-use assets thereof for business use are acquired or disposed of, and the transaction counterparty is not a related party, and the transaction amount meets any of the following criteria:

      • 1.For a public company whose paid-in capital is less than NT$10 billion, the transaction amount reaches NT$500 million or more.

      • 2.For a public company whose paid-in capital is NT$10 billion or more, the transaction amount reaches NT$1 billion or more.

    • ( 五 ) Where real estate is acquired under an arrangement on engaging others to build on the Company’s own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the transaction counterparty is not a related party, and the amount the Company expects to invest in the transaction reaches NT$500 million.

    • ( 六 ) Where an asset transaction other than any of those referred to in the preceding five subparagraphs, a disposal of receivables by a financial institution, or an investment in the mainland China area reaches 20% or more of paid-in capital or NT$300 million; provided, this shall not apply to the following circumstances:

      1. Trading of domestic government bonds or foreign government bonds;

      2. 2.Where done by professional investors - securities trading on securities exchanges or OTC markets, or subscription of foreign government bonds, or of ordinary corporate bonds or general bank debentures without equity characteristics (excluding subordinated debt) that are offered and issued in the primary market, or subscription or redemption of securities investment trust funds or futures trust funds, or subscription or redemption of exchange traded notes, or subscription by a securities firm of securities as necessitated by its undertaking business or as an advisory recommending securities firm for an emerging stock company, in accordance with the rules of the Taipei Exchange.

      3. Trading of bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises.

The aforementioned transaction amount shall be calculated as follows: 

63

     - (1) The amount of any individual transaction;

     - (2) The cumulative transaction amount of acquisitions and disposals of the same type of underlying asset with the same transaction counterparty within the preceding year;

     - (3) The cumulative transaction amount of acquisitions and disposals (cumulative acquisitions and disposals, respectively) of real property or right-of-use assets thereof within the same development project within the preceding year;

     - (4) The cumulative transaction amount of acquisitions and disposals (cumulative acquisitions and disposals, respectively) of the same security within the preceding year;

  - “Within the preceding year” as stated in the preceding paragraph refers to the year preceding the date of occurrence of the current transaction. Items duly announced in accordance with the “Procedures” need not be counted toward the transaction amount.

  • 二、 The Company shall compile monthly reports on the status of derivatives trading engaged in up to the end of the preceding month by the Company and any subsidiaries that are not domestic public companies and enter the information in the prescribed format into the information reporting website designated by the Financial Supervisory Commission by the 10[th] day of each month.

  • 三、 When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entirety within 2 days counting inclusively from the date of knowing of such error or omission.

  • 四、 The Company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, log books, appraisal reports and CPA, attorney, and securities underwriter opinions at the Company, where they shall be retained for 5 years except where another Act provides otherwise.

  • 五、 Where any of the following circumstances occurs with respect to a transaction that the Company has already publicly announced and reported in accordance with the Paragraph I~IV, a public report of relevant information shall be made on the information reporting website designated by the Financial Supervisory Commission within 2 days counting inclusively from the date of occurrence of the event:

    • 一

    • ( )Change, termination, or rescission of a contract signed in regard to the original transaction;

    • ( 二 )The merger, demerger, acquisition, or transfer of shares is not completed by the scheduled date set forth in the contract.

    • ( 三 )Change to the originally publicly announced and reported information;

  • Article 17: For the calculation of 10% of total assets under the “Procedures,” the total assets stated in the most recent parent company only financial report or individual financial report prepared under the Regulations Governing the Preparation of Financial Reports by Securities Issuers shall be used.

In the case of a company whose shares have no par value or a par value other than NT$10 - for the calculation of transaction amounts of 20% of paid-in capital under the “Procedures,” 10% of equity attributable to owners of the parent shall be substituted.

  • Article 18: The Company’s subsidiaries shall comply with the following requirements in process:

  • 一、 The subsidiary shall have the acquisition and disposal of assets processed and implemented in accordance with the Company’s “Procedures for the Acquisition and Disposal of Assets.”

  • 二、 Information required to be publicly announced and reported in accordance with the provisions of this Article on acquisitions and disposals of assets by the Company’s 

64

subsidiary that is not itself a public company in Taiwan shall be reported by the Company.

The so-called “reaches 20% or more of paid-in capital or 10% of total assets of the company” in the declaration standard of the subsidiary, it is based on the parent company’s paid-in capital or total assets.

Article 19: Penalties

If the employees of the Company who undertake the acquisition and disposal of assets violating the provisions of the “Procedures,” the auditors shall report such committed violations to the Chairman for a disciplinary act in accordance with the Company’s “Personnel Management Rules” and “Work Rules.”

Article 20: Execution and amendments

The “Procedures” must be approved by a majority of the Audit Committee members, resolved by the board of directors, and approved by the shareholders’ meeting for implementation, same for the amendments. If any director expresses dissent and it is contained in the meeting minutes or a written statement, the Company shall submit the director’s dissenting opinion to the Audit Committee.

When the “Procedures” is submitted for discussion by the board of directors, the board of directors shall take into full consideration each independent director’s opinions. If an independent director objects to or expresses reservations about any matter, it shall be recorded in the minutes of the board meeting.

If approval of one-half or more of all Audit Committee members as required in Paragraph I is not obtained, the “Procedures” may be implemented if approved by two-thirds or more of all directors, and the resolution of the Audit Committee shall be recorded in the minutes of the board meeting.

The terms “all Audit Committee members” in Paragraph I and “all directors” in the preceding paragraph shall be counted as the actual number of persons currently holding those positions.

Article 21: Date of amendments made: Version I Enacted on August 28, 1996. Version II Amended on May 26, 1997. Version III Amended on November 25, 1999. Version IV Amended on March 7, 2003. Version V Amended on December 29, 2003. Version VI Amended on December 9, 2004. Version VII Amended on March 16, 2007. Version VIII Amended on June 22, 2012. Version IX Amended on June 17, 2013. Version X Amended on June 23, 2014. Version XI Amended on June 16, 2017. Version XII Amended on June 13, 2019. Version XIII Amended on June 15, 2020. Version XIV Amended on July 16, 2021. 

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G-SHANK ENTERPRISE CO., LTD.

Shareholdings of Directors

  • 一

  • ( ) The minimum number of shares to be held by all directors and the number of shares recorded in the shareholder register

Title Shares to be held Shares recorded in the
shareholders register
Directors 11,386,097 18,503,541

( 二 ) Shareholdings of directors

April 12, 2022

Title Name Shares recorded in the
shareholders register		 Remarks
Chairman LIN, YU-HUANG 8,612,089
Director LIN, SHEAN-KUO 3,793,106
Director TSENG, CHAI-JUNG 2,362,703
Director LIN, YING-SHUO 3,503,643
Independent
Director		 MA, SHU-CHIN 30,000
Independent
Director		 LIAO, YA-LING 202,000
Independent
Director		 CHEN, HUNG-YI 0 
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