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LU HAI AGM Information 2021

Jul 19, 2021

51977_rns_2021-07-19_5662eb6f-db18-47fa-a256-98fa88926709.pdf

AGM Information

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(This English translation is provided for reference only and might not exactly reflect the true meaning and full text of the Chinese version. In case of any discrepancy between the the Chinese version and this translation, the Chinese version shall prevail.)

Stock Code 2115

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LU HAI HOLDING CORP.

2021 Annual General Shareholders’ Meeting

Meeting Handbook

Translation

Time: 10:00 am, Thursday, June 24, 2021 Place: Conference Room, 1F, No.64, Shing-Kong 5th Rd., Tianzhong Township, Changhua County 520, Taiwan (R.O.C.)

Table of Contents

Meeting Procedure ................................................................................... 1 Meeting Agenda ..................................................................................................... 2 Reports Items ....................................................................................................... 3 Items for Ratification ........................................................................................... 3 Items for Discussion ............................................................................................ 4 Election Item ....................................................................................................... 6 Extempore Motion ............................................................................................... 8 Adjournment ........................................................................................................ 8 Attachment 1.2020 Business Report ............................................................................. 9 2.Audit Committee’s Review Report ......................................................... 12 3.Comparison Table on Amendments to the Regulations Governing Procedure for Board of Directors Meetings 4.Accountant's Audit Report, Financial Statements .................................... 13 5.2020 Earnings Distribution Table ....................................................................... 24 6.Comparison Table on Amendments to the Rules for Election of Directors 7.Comparison Table on Amendments to the Rules of Procedure for Shareholders’ Meetings 8.Comparison Table on Amendments to the Regulations Governing Loaning of Funds Appendix (Note:Attachment 3,6,7,8 and Appendix 1~8, please refer to the Chinese version of the Handbook for details.)

LU HAI HOLDING CORP.

2021 Annual General Shareholders’ Meeting Procedure

  • I. Opening Address

  • II. Chairman Address

  • III. Reports Items

  • IV. Items for Ratification

  • V. Items for Discussion

  • VI. Election Item

VII. Extempore Motion

VIII. Adjournment

1

LU HAI HOLDING CORP.

2021 Annual General Shareholders’ Meeting Agenda

Time: 10:00 am, Thursday, June 24, 2021 Place: Conference Room on 1F, No.64, Shing-kong 5th Rd, Tien-chung Town, Chang-hua County

Agenda:

  • I. Opening Address (report the attending number of shares)

  • II. Chairman Address

  • III. Reports Items

  • 2020 Business Report.

  • Audit Committee’s review report on the 2020 financial statements.

  • Report on employees’ and directors’ compensation in 2020.

  • Amendments to the “Regulations Governing Procedure for Board of Directors Meetings” of the Company.

  • IV. Items for Ratification

  • Ratification of the 2020 business report and financial statements.

  • Ratification of 2020 earnings distribution.

  • V. Items for Discussion

  • The Company’s planning to transfer surplus to capital increase by issuing new shares.

  • Amendments to the “Rules for Election of Directors” of the Company.

  • Amendments to the “Rules of Procedure for Shareholders’ Meetings” of the Company.

  • Amendments to the “Regulations Governing Loaning of Funds” of the Company.

  • VI. Election Item

  • Election of the 6[th] Term of the Board of Directors.

  • VII. Extempore Motion

VIII. Adjournment

2

Reports Items

Item 1: 2020 Business Report.

Explanation: Please refer to Attachment 1 for the 2020 business report of the Company.

Item 2: Audit Committee’s review report on the 2020 financial statements.

Explanation: Please refer to Attachment 2 for the Audit Committee’s Review Report

  • Item 3: Report on employees’ and directors’ compensation in 2020.

  • Explanation: 1. It is planned to issue NTD13,236,978 as Director’s compensation and NTD 13,236,978 as employee’s compensation according to the provisions of Articles of Incorporation.

  • All employee’s compensation will be issued in cash.

Item 4: Amendments to the “Regulations Governing Procedure for Board of Directors Meetings” of the Company.

  • Explanation: 1. In accordance with the Announcement Reference No. 1090009468 of the Taiwan Stock Exchange (TWSE), this amendment is made to comply with Section 10, Item 1, Article 14-5 of Securities and Exchange Act, and to revise the Company’s “Regulations Governing Procedure for Board of Directors Meetings” at the same time.

  • Please refer to Attachment 3 of Chinese version of the handbook for the Comparison Table on Amendments to the “Regulations Governing Procedure for Board of Directors Meetings”.

Items for Ratification

(Proposed by the Board of Directors)

Item 1: Ratification of the 2020 business report and Financial statements.

  • Explanation: 1. 2020 financial statements of the Company have been audited by accountants LIN, MING-SHOU and SHAO, CHAO-BIN from Crowe Horwath (TW) CPAs, and audit report has been issued, and it has been submitted together with the business report to Audit Committee and has been audited.

  • Please refer to Attachment 1 and Attachment 4 for the 2020 business report, accountant’s audit report and financial statements of the Company.

Resolution:

(Proposed by the Board of Directors)

Item 2: Ratification of 2020 earnings distribution.

  • Explanation: 1. The net profit after tax of the Company in 2020 is NTD594,758,633, 10% of them, namely NTD59,475,863, is allocated as statutory surplus reserve according to the Articles of Incorporation, and plus “Beginning undistributed earnings”, namely NTD579,218,493, then total earnings available for distribution is NTD1,114,501,263; it is planned to distribute stock dividend to shareholders at NTD1.00000005 per share (namely free allotment of

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100.00000553 shares per thousand shares) and cash dividend at NTD1.49999995 per share this time, the total distribution of dividend to shareholders is NTD2.50 per share, and total distribution of dividends to shareholders is NTD225,915,938. The distribution of cash dividend to shareholders this time is calculated up to one New Taiwan Dollar (digits after the decimal point to be ignored), the fractional amount less than one New Taiwan Dollar is listed into other income of the company.

  1. Regarding the distribution of shares and cash dividend to shareholders, after it is proposed and passed in General Meeting, Board of Directors is authorized to determine the record date of allotment of shares and dividend, distribution date and other relevant matters.

  2. In case of the Company’s cash capital increase, shares buyback, transfer or cancellation of treasury share, transfer of convertible corporate bonds or exercise of employee’s stock warrant etc., and thereby affects the amount of outstanding shares of the Company, and causes changes in shares allotment ratio and dividend payout ratio, hence it is planned to authorize the Chairman to make adjustment.

  3. Please refer to Attachment 5 for 2020 Earnings Distribution Table.

Resolution:

Items for Discussion

(Proposed by the Board of Directors)

Item 1: The Company’s planning to transfer surplus to capital increase by issuing new shares.

  • Explanation: 1. In consideration of the needs of future business development, the Company plans to issue 9,036,638 new shares with the shock dividend shall be distributed to shareholders in 2020, namely NTD90,366,380, and the aforesaid new shares issued for capital increase are the ordinary shares with nominal amount of NTD10 per share.

  • The distribution of stock dividend to shareholders is calculated based on the 90,366,375 outstanding shares on February 28, 2021, free allotment of 100.00000553 new shares per thousand shares, totally 9,036,638 shares, and the rights and obligations of the new shares are the same as the original shares. Regarding the distribution of stock dividend to shareholders, after it is proposed and passed in General Meeting, Board of Directors is authorized to determine the record date for allotment of shares and other relevant matters. In case of the Company’s cash capital increase, shares buyback, transfer or cancellation of treasury share, transfer of convertible corporate bonds or exercise of employee’s stock warrant etc., and thereby affects the amount of outstanding shares of the Company, and causes changes in shares allotment ratio, hence it is planned to authorize the Chairman to make adjustment. For the distribution of fractional share less than one share, within five days after

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book closure day, shareholders shall voluntarily make up to one share for registration, and the insufficient part thereof shall be calculated into one New Taiwan Dollar (digits after the decimal point to be ignored) according to cash in denomination; for the fractional share less than one share thereof, the Chairman is authorized to consult with the specific person for subscription according to denomination.

  1. When relevant matters of this capital increase case must be changed due to the changes in laws and decrees or the instruction of competent authority, it is planned to authorize the Chairman for handling.

Resolution:

(Proposed by the Board of Directors)

  • Item 2: Amendments to the “Rules for Election of Directors” of the Company. Explanation: 1. To be in line with the Issue No. 1080311451 for Financial-Supervisory-Securities-Trading made public by Financial Supervisory Commission (FSC) on April 25, 2019, the election for both directors and supervisors in public listed or OTC firms is required to adopt a candidate nomination system beginning in 2021, and Provisions 87 of the Articles of Incorporation proclaims that shareholders must elect directors among the list of candidates, thus the “Rules for Election of Directors” of the Company is proposed to revise accordingly.

  • Please refer to Attachment 6 of Chinese version of the handbook for the Comparison Table on Amendments to the “Rules for Election of Directors”.

Resolution:

(Proposed by the Board of Directors)

  • Item 3: Amendments to the “Rules of Procedure for Shareholders’ Meetings” of the Company.

  • Explanation: 1. In accordance with both Announcement Reference No.1090009468 and Announcement Reference No.1100001446 made by Taiwan Stock Exchange (TWSE), the Company’s “Rules of Procedure for Shareholders’ Meetings” are revised to meet the reference example of public listed firms’ shareholders meetings on rules of procedure, and the Company's practical operations for the time being.

  • Please refer to Attachment 7 of Chinese version of the handbook for the Comparison Table on Amendments to the “Rules of Procedure for Shareholders’ Meetings”.

Resolution:

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(Proposed by the Board of Directors)

  • Item 4: Amendments to the “Regulations Governing Loaning of Funds” of the Company.

  • Explanation: 1. According to Article 37 of Frequently Asked Questions of “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”, the Company’s “Regulations Governing Loaning of Funds” is revised.

  • Please refer to Attachment 8 of Chinese version of the handbook for the Comparison Table on Amendments to the “Regulations Governing Loaning of Funds”.

Resolution:

Election Item

(Proposed by the Board of Directors)

  • Item 1: Election of the 6[th] Term of the Board of Directors. Explanation: 1. As the 5[th] Term of the Board of Directors is scheduled to expire on June 24, 2021, the Company proposes to re-elect the 6[th] Term of the Board of Directors in 2021 Shareholders’ Meeting. Based on the Article 80 of “Articles of Incorporation” of the company, 9 to 13 directors can be set up, of which nine directors (including 3 independent directors) are elected.

  • The term of newly-elected board of directors begins on June 24, 2021 and ends on June 23, 2024, with a tenure of three years.

  • The Company’s “Articles of Incorporation” proclaim that the election adopts a candidate nomination system for directors, and shareholders should vote them from the list.

  • The list of directors (including independent directors) is screened with approval by the Board of Directors on May 7, 2021, and the candidate list together with relevant information are as follows:

Title Name Education Main Experience Current Position Shares Held
Director WU,
CHIN-LU
Dah-Chin
Commercial &
Industrial Vocation
High School
Chairman of LU HAI HOLDING
CORP.
Chairman of LU HAI INDUSTRIAL
CORP.
Director ofPT. LUHAI INDUSTRIAL
General Manager of LU HAI
HOLDING CORP.
Director of LUHAI RUBBER
METAL (KUNSHAN) CO., LTD.
Director of XIAMEN XIAHUI
RUBBER METAL IND. CO., LTD.
Director of LU HAI INDUSTRIAL
CORP.
Director of LU HAI HOLDING
CORP
Director of GET JOINT
BUSINESS CORP.
Director of DAY LIGHT
BUSINESS CO., LTD.
381,794
Director WU,
CHING-SHU
Master degree of
Management,
National Chung
Hsing University
Director of XIAMEN XIAHUI
RUBBER METAL IND. CO., LTD.
Director of LU HAI INDUSTRIAL
CORP.
Supervisor of XIAMEN XIAHUI
RUBBER METAL IND. CO., LTD.
Supervisor of LU HAI
INDUSTRIAL CORP.
Supervisor of PT. LUHAI
INDUSTRIAL
Director of LU HAI HOLDING
CORP
Director of GET JOINT BUSINESS
CORP.
Director of DAY LIGHT
803,131

6

Title Name Education Main Experience Current Position Shares Held
BUSINESS CO., LTD.
Director of LUHAI RUBBER
METAL(KUNSHAN)CO.,LTD.
Director HSU,
LIEN-KAI
Department of Law,
National Chengchi
University
CEO of LU HAI HOLDING CORP.
General Manager of LU HAI
HOLDING CORP.
General Manager of LU HAI
INDUSTRIAL CORP.
General Manager ofPT. LUHAI
INDUSTRIAL
General Manager of XIAMEN
XIAHUI RUBBER METAL IND.
CO., LTD.
General Manager of LUHAI
RUBBER METAL (KUNSHAN)
CO., LTD.
Director of XIAMEN XIAHUI
RUBBER METAL IND. CO.,LTD.
Chairman and General Manager of
LU HAI HOLDING CORP.
Director of LU HAI INDUSTRIAL
CORP.
Director of XIAMEN XIAHUI
RUBBER METAL IND. CO., LTD.
Director of LUHAI RUBBER
METAL (KUNSHAN) CO., LTD.
Supervisor of PT. LUHAI
INDUSTRIAL
3,016,126
Director HSU,
YA-TING
Department of
Finance, National
Taichung
University of
Science and
Technology
Professional Manager of LU HAI
HOLDING CORP.
Section Manager of YOKE Industrial
Corp.
Director of LU HAI HOLDING
CORP
Director of LU HAI INDUSTRIAL
CORP.
Director of XIAMEN XIAHUI
RUBBER METAL IND. CO., LTD.
Director of LUHAI RUBBER
METAL (KUNSHAN) CO., LTD.
Supervisor of PT. LUHAI
INDUSTRIAL
Assistant VP of LU HAI
HOLDING CORP.
VP of XIAMEN XIAHUI
RUBBER METAL IND. CO.,LTD.
623,807
Director HSU,
HUAI-YUN
Information
Management,
Tamkang
University
General Manager of Yun-Yi
International Ltd.
Director of LU HAI HOLDING
CORP
Director of LU HAI INDUSTRIAL
CORP.
Director of XIAMEN XIAHUI
RUBBER METAL IND. CO., LTD.
Director of LUHAI RUBBER
METAL (KUNSHAN) CO., LTD.
Supervisor of PT. LUHAI
INDUSTRIAL
24,149
Director HSU,
HAN-YUAN
Civil Engineering
Department,
Nanya Institute of
Technology
General Manager of XIAMEN
XIAHUI RUBBER METAL IND.
CO., LTD.
Assistant VP of LU HAI HOLDING
CORP.
Business Manager of Yuan-Hong
Metal Co., Ltd.
Special Assistant of Chairman, LU
HAI HOLDING CORP.
Director of LU HAI HOLDING
CORP
Director of LU HAI INDUSTRIAL
CORP.
Director of XIAMEN XIAHUI
RUBBER METAL IND. CO., LTD.
Supervisor of LUHAI RUBBER
METAL (KUNSHAN) CO., LTD.
Supervisor of PT. LUHAI
INDUSTRIAL
2,101,951
Independent
Director
YEN,
MEI-YING
Master degree of
Accounting,
National Taiwan
University
Assistant VP of PONY Leather
Corporation
Assistant Manager of Finance
Department, LU HAI INDUSTRIAL
CORP.
Manager of Administration Department,
PONY Leather Corporation
Manager of Finance Department &
Spokesman, PONY Leather Corporation
Assistant Manager of Deloitte
AccountingFirm


Director of PONY Leather
Corporation
Assistant VP of GM Room and
Head of Administration
Department, PONY Leather
Corporation
0
Independent
Director
CHANG,
HORNG-YAN
Enterprise
Research Institute
and Accounting
Institute of St.
Interplex Industries Inc., New York,
USA – Deputy Chief Financial
Officer and Assistant Chief Controller
Part-time Associate Professor of
Independent Director of TPK
Holding Co., Ltd.
Supervisor of Soft-World
International Corporation
0

7

Title Name Education Main Experience Current Position Shares Held
John’s University,
New York, US
Department of Business
Administration, Soochow University
Full-time Associate Professor of
Department of Communications
Management, Shih Hsin University
Part-time Professor of Department of
Business Administration, Soochow
University
Professor of Department of
Communications Management,
Shih Hsin University
Independent
Director
YEH,
ZHI-MING
PHD, University
of Chinese
Academy of
Sciences
(Management
Science and
Engineering)
VP/General Manager, CVC
Technologies, Inc.
General Manager, Jinbi Technology
Co., Ltd.
General Manager, HongYi Industrial
Co., Ltd.
Independent Director of Cayman
Engley Industrial Co., Ltd.
Director of WellTech Energy Inc.
Director of CVC Technologies, Inc.
0
  1. According to Article 5 of “Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies”, the reasons behind nomination of independent directors for three consecutive terms were described below:

  2. As a candidate for the Company’s 6[th] term of independent directors, Ms. YAN, MEI-YING is now an independent director of the Company with over three terms in straight. In consideration of her expertise in finance and CPA (Certified Public Accountant) backgrounds that have obviously helped the governance of the Company and diversification efforts of the Board of Directros , therefore Ms. YAN, MEI-YING is still listed as an independent director candidate.

  3. Please vote.

Resolution:

Extempore Motion

Adjournment

8

【Attachment 1】

LU HAI HOLDING CORP.

2020 Business Report

Following a worldwide spread of the Covid-19 virus in 2020, the epidemic in mainland China, Europe, the U.S., and Southeast Asia broke out one after another, and most of them continued to implement lock-downs or border controls as essential prevention measures. This, together with impacts from both home quarantines and delays in resuming work, engages the global industry in a hard challenge unprecedented. Mainly affected by the impact of epidemic, the Company's valve shipments dropped tremendously in the first half of 2020, especially in categories of motorcycles, trucks and off-the-road vehicles. Such influences began to slow down with the retaliatory consumption emerged beginning in the third quarter, paving the way for the automobile industry to enjoy a booming and rebounded recovery. The Company increased its shipments in passenger car valves. Regarded as a benefit during the post-epidemic era (due to maintaining of social distancing, people are unwilling to take public transportation and switching to travel with bicycles, electric bicycles and other transportations, the demand on sports and casual purposes increased significantly), the bicycle market has become increasingly hectic, as well as motorcycles, passenger car, and trucks are now in a phase of strong recovery. Thus, the Company's shipments for bicycle and electric vehicle valves have fared well against the trend. Meanwhile, the Company has finished the development of TPMS valves for its new customers and started mass production with stable shipments. Its entire sales volume of valves was up by 2.39% in 2020, compared with 2019, but the sharp appreciation of the New Taiwan dollar led to a decline of 4.22% in revenue, down from NTD2.717 billion to NTD2.602 billion. Beginning in 2020, the Company has spared no efforts to improve its manufacturing processes, enhance efficiency and invest in automation equipment to meet customer orders. Affected by both material procurement cost drop and exchange rate fluctuations, the gross profit rate increased from 22.64% to 24.08%. One thing worth mentioning is that lots of expenses, development projects, and operating expenses are cut down due to the Covid-19 epidemic. This increases the Company’s operating net profit rate from 11.51% to 12.61%. After a strategic moving to new location in 2020, the net benefit in relocation compensation is recognized together with input of subsidies, the Company’s non-operating income increased largely. In summary, the Company's net profit margin increased from 8.90% to 22.86% in 2020 with earnings per share standing at NTD6.58, up from NTD2.68.

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In an attempt to cope with challenges in the future, the Company will solicit more customers, to be in coordination with the market demand, to enlarge market share and profitability, and to invest in automation equipment. To this end, it will adopt a solid financial management, and insists on its business motto: "quality is the root, honesty is the essence, customer-oriented, and keeps improving”.

Financial performance

Implementation achievement in the last two years:

Unit: NTD thousand Unit: NTD thousand
Year
Item

2020
2019 Percent Change
Operatingrevenue 2,602,257 2,716,889 -114,632 -4.22%
Grossprofit 626,635 615,058 11,577 1.88%
Operating profit 328,035 312,635 15,400 4.93%
Profit before income tax 829,789 345,838 483,951 139.94%
Profit for the Period 594,759 241,910 352,849 145.86%

Budget implementation

The Company has not disclosed financial forecasting to the public in 2020, hence it is not applicable.

Financial revenue and expenditure and profitability analysis

Financial revenue and expenditure and profitability analysis
Item Year
2020
2019
Financial
structure (%)
Debt to asset ratio 42.45 44.52
Long-term fund to property, plant and
equipment
233.46 243.85
Liquidity (%) Current ratio 302.24 203.02
Quick ratio 222.52 153.18
Times interest earned(times) 95.89 27.62
Profitability (%) Return on assets 13.55 6.67
Return on equity 23.70 10.68
Pre-tax income topaid-in capital 91.82 40.18
Netprofit margin 22.86 8.90
Earningsper share(NTD) 6.58 2.68

Description: To be in line with the Hua Qiao government’s strategic relocation policy, the non-removable property is transferred during this period. The relocation net income is admitted as a net profit of relocation compensation calculated by

10

deductions of second relocation compensation funds (which are recognized as long term deferred income) and moving expenses. This reduced current liabilities and increased non-business income (other benefits). As a result, the Company’s solvency and profitability are better than the previous period.

Research and development situation

The major R&D projects mapped out for 2020 was proceed according to its annual plan progress, which mainly includes the development of new materials and equipment automation to reduce material costs, upgrade of production automation, improving production efficiency, and saving workforce.

Major results are explained below: the project of EPDM rubber new formula to reduce costs, PVR70 forging process to reduce costs, CR202L, AR, TR13 specification cleaning and cost reduction, VFR60L new transfer cold forging production, BU specification vulcanization time optimization, PVR64 vulcanization efficiency improvement, and vulcanization mold rubber-saving project. In addition, the development of automatic equipment such as PVR70 bending assembly German machines, high speed valve automatic airtight machine, automatic bending machine with noise reduction project, oval specification automatic grinding machine, PVR64 automatic vulcanized disc inserting machine, CR202L automatic sand blasting machine, and so on, thus moving forward to reduce the overall production cost and upgrade the production efficiency.

As for 2021, the Company expects its R&D focus to promote automation projects, reduce raw material costs, improve quality and save manpower. In primary, these projects include CR202L series of new forging development, high-speed valves cold runner vulcanization process development, truck valve defect and cost reduction project, EPDM rubber low-cost formula re-development, TR4 valve multi-axis bottom forming design and development, TR4, VFR vulcanized automatic nail inserting plate machine development, RV series cold forging processing technology development, VFR automatic sandblasting development, truck valve efficiency improvement & development, truck valve vulcanization efficiency improvement & development, truck valve vulcanization time reduction project, BS truck valve post-vulcanization process production line development, and VFR automatic assembly riveting machine projects.

Chairman: General Manager: Accounting Officer: HSU, LIEN-KAI HSU, LIEN-KAI CHANG, SHENG-HUNG

11

【Attachment 2】

LU HAI HOLDING CORP.

Audit Committee’s Review Report

The Board of Directors has prepared 2020 business report, financial statements and earning distribution proposal etc. of the Company; among them, the financial statements have been audited by accountants LIN, MING-SHOU and SHAO, CHAO-BIN from Crowe (TW) CPAs, and the audit report of unqualified opinion has been issued. The above business report, financial statements and earnings distribution proposal have been reviewed and determined to be correct and accurate by the Audit Committee members of the Company, we hereby submit this report.

To the 2021 General Shareholders’ Meeting

Audit Committee:

YEN, MEI-YING CHANG, HORNG-YAN HU, TA-HSIANG

March 12, 2021

12

【Attachment 4】

Accountant's Audit Report, Financial Statements

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【Attachment 5】

LU HAI HOLDING CORP. Earnings Distribution Table 2020

Unit: NTD

2020 Unit: NTD Unit: NTD
Item Amount
Netprofit after tax in 2020 594,758,633
Minus:
Allocation of statutorysurplus reserve 59,475,863
Earnings available for distribution in 2020 535,282,770
Plus:
Beginningundistributed earnings 579,218,493
Accumulated earnings available for distribution as
at the end of 2020
1,114,501,263
Distribution item:
Shareholder Dividend-share(Notes 1) 90,366,380
Shareholder Dividend-cash(Notes 1) 135,549,558
Endingundistributed earnings 888,585,325

Notes 1: It is planned to distribute stock dividend to shareholders at NTD1.00000005 per share (namely free allotment of 100.00000553 shares per thousand shares) and cash dividend at NTD1.49999995 per share this time, the total distribution of dividend to shareholders is NTD2.50 per share, and total distribution of dividends to shareholders is NTD225,915,938.

Chairman: HSU, LIEN-KAI

General Manager: HSU, LIEN-KAI

Accounting Officer: CHANG, SHENG-HUNG

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