Test Rite International Co., Ltd. of Test... · Test Rite International Co., Ltd. ... Chairmen Judy...

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Test Rite International Co., Ltd.

Handbook for the 2011 Annual Meeting of

Shareholders

MEETING TIME:June 17, 2011

PLACE:6F., No.23, Hsin Hu 3rd Rd., Nei Hu, Taipei, Taiwan, ROC

Stock CodeStock CodeStock CodeStock Code：：：：2908290829082908

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Table of Contents

I. Meeting Procedure P1

II. Meeting Agenda P2

1. Management Presentation P3

2. Proposals P4

3. Discussion P5

4. Questions and Motions P6

III. Attachments

1. Business Report P7

2. Supervisor’s Review Report P10

3. Regulations of Repurchased Shares Transfered to Employees P11

4. 2010 Profits Distribution Table P13

5. Procedures for Lending Funds to Others Reference Table for Revised Clauses

P14

6. Endorsement/Guarantee Procedures Reference Table for Revised Clauses P18

7. Articles of Incorporation Reference Table for Revised Clauses P21

IV. APPENDIX

1. Current Shareholdings of Directors and Supervisors P24

2. The Impact of Stock Dividend Issuance on Business Performance, EPS, and Shareholder Return Rate

P25

3. Details of Employee Bonus and Total Salary for the Board of Directors and Superviosors

P26

4. Other Matters-Details of Shareholder Proporsal at Shareholders’ Meeting P27

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Test Rite International Co., Ltd .

Meeting Procedure for the 2011 Annual Meeting of

Shareholders

1.Call Meeting to Order

2.Chairman’s Remarks

3.Management Presentation

4.Proposals

5.Discussion

6.Questions and Motions

7.Adjournment

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2011 Annual General Shareholders’ Meeting

Agenda

Time: 9:00 am, June 17, 2011 Place: Test Rite (6F.,No. 23, Hsin-Hu 3nd Road, Nei Hu, Taipei, Taiwan) Call Meeting to Order Chairman’s Remarks Management Presentation 1. 2010 Business Report 2. Supervisor’s Review Report - 2010 Financial Statements 3. Amendment to the Article for Treasury Shares Purchase/Transfer to

Employees

Proposals 1. Adoption of the 2010 Business Report and Financial Statements 2. Adoption of the Proposal for 2010 Profits Distribution Discussion 1. Amendment to Procedures for Lending Funds to Others. 2. Amendment to Endorsement / Guarantee Procedures. 3. Amendment to Articles of Incorporation. 4. Remove Non-competition Clause for Board Members and their Representatives Questions and Motions Adjournment

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Management Presentation 1. 2010 Business Report (proposed by the Board of Directors)

Details: The 2010 Business Report is attached as Attachment I on page 7~9. 2. Supervisor’s Review Report on the 2010 Financial Statements (proposed by the

Board of Directors)

Details: The 2010 Supervisor’s Review Report is attached as Attachment II on page 10. 3. The Amendment to the Regulations of Repurchased Shares Transferred to

Employees (proposed by the Board of Directors)

Details: Amendment to the Regulations of Repurchased Shares Transferred to Employees was approved at January 4th, 2011 in the Board Meeting. Please refer to Attachment III on page 11~12 for the details.

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Proposals 1. 2010 Business Report and Financial Statements (proposed by the Board of Directors)

Details:

1. 2010 parent level financial statements and consolidated financial statements, audited by independent auditors Mr. Yu, Hong-Bin and Mr. Lu, Chi-Chant of Deloitte Touche, along with 2010 Business report, have been approved by the Board of Directors and examined by the supervisors of the company.

2. Please refer to Attachment I (page 7~9) for 2010 Business report. 3. 2010 Business report and Financial Statements are to be discussed for approvaled by

the shareholders Resolution: 2. Adoption of the Proposal for 2010 Profits Distribution (proposed by the Board of

Directors) Details:

1. In accordance with Articles of Incorporation, fiscal year 2010 profits are to be distributed in the following manners with profits from fiscal year 2010 are to be distributed with first. Please refer to Appendix IV (page 13) for details.

(1) 10% of the profits, or NT$37,548,821, is to be reserved as Legal Reserve. (2) Employee bonus, amounting to NT$27,035,151, is to be distributed in cash.

The Chairman is authorized to manage details related to employee bonus distribution..

(3) Total compensation to directors and supervisors is NT$6,758,788 dollars. (4) Shareholder dividends totaled NT$337,436,210 dollars. Total outstanding

shares as of April 19th 2011 is 516,422,872 shares. After deducting treasury shares oustanding of 9,000,000 shares, the number of shares eligible for earnings distributions is 507,422,872 shares. Accordingly, each eligible share will receive cash dividend payout of NT$0.665 per share (payout amount of less than NT$1 will be not be distributed.)

(5) After the distribution, the accumulated retained earnings is NT$503,180.

2. The profit distribution proposal is to be approved by the shareholder at the 2011 shareholders’ meeting. Following the proposal’s approval, the Chairman, with the authority granted by the shareholder’s meeting, will set the ex-dividend date. The Chairman should also be empowered to manage all issues related to dividend payouts in the event that the number of shares outstanding changes and impacts the payout ratio. Potential impact on shares outstanding may be the result of rights issueance, holders of convertible bond realizing their conversion options,or buy back, transfers, and cancellation of treasury shares.

3. The proposal is to be discussed for approval by shareholders.

Resolution:

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Discussion

1. Amendment to Procedures for Lending Funds to Others. Please proceed to discuss.

(proposed by the Board of Directors) Details:

1. Partial amendment to Procedures for Lending Funds to Others in accordance with Regulations Governing Lending of Funds and Making of Endorsements/Guarantees by Pubic Companies.

2. Please refer to Attachment V (page 14~17) for details. 3. The amendment is to be discussed by the shareholder meeting.

Resolution:

2. Amendment to Endorsement / Guarantee Procedures. Please proceed to discuss.

(proposed by the Board of Directors)

Details: 1. Partial amendment to Endorsement / Guarantee Procedures in accordance with

Regulations Governing Lending of Funds and Making of Endorsements/Guarantees by Pubic Companies.

2. Please refer to Attachment VI (page 18~20) for details. 3. The amendment is to be discussed by shareholder meeting.

Resolution: 3. Partial amendment to Articles of Incorporation. Please proceed to discuss.

(proposed by the Board of Directors)

Details:

1. Partial amendment to Articles of Incorporation in accordance with regulation rules and operation management needs.

2. Please refer to Attachment VII (page 21~23) for details. 3. The amendment is to be discussed by the shareholder meeting.

Resolution:

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4. Remove non-competition clause for board members and their representatives

Description: (1) According to Company Act article 209, a director who does anything for himself/herself or on behalf of another person that is within the scope of the company's businesses, shall explain to the meeting of shareholders the essential contents of such an act and secure the approval of the meeting of shareholers. (2) A proposal is to remove non-competition clause for Judy Lee (President), Tony Ho, and Robin Ho, under the condition that the Company’s interests are not compromised. Details of positions concurrently held with our other companies for Judy Lee (President), Tony Ho, and Robin Ho are as follows:

Title Director Positions concurrently held with other companies

Chairmen Judy Lee Director of Hola Home Furnishings Co., Ltd. Director of CoValue Marketing & Consultant Co., Ltd. Chariman of Hola Beijing Retail & Trading Co., Ltd. Chariman of Test Rite (China) Investment Co., Ltd. Director of Test Rite Products Corp. Director of Rollabind, LLC. Director of Test Rite Int’l (Canada) Ltd. Director of Test Rite Viet Nam Co., Ltd. Director of TEST-RITE (UK) Ltd. Director of Rui Feng International Co., Ltd. Director of TRS Investment Company Limited Director of Fortune Miles Trading Inc.

Director Tony Ho Director of Rollabind, LLC. Director of Test Rite Int’l (Canada) Ltd. Director of Test Rite Trading Co., Ltd. Director of Test Rite Retailing Co., Ltd. Director of Test-Rite Fortune Co., Ltd. Director of B&S Link Corporation Director of Test-Rite Star Co., Ltd. Director of Test Rite International Investment Co., Ltd.

Director Robin Ho Director of Tong Lung Metal Industry Co., Ltd. Director of Test Rite (China) Investment Co., Ltd. Director of Test Rite Int'l (Australia) Pty. Director of TEST-RITE (UK) Ltd. Director of Test Rite de Mexico, S.A. de C.V. Director of Test Rite International (U.S.)Co., Ltd.

(3) Please approve proposal discussed above Resolution:

Questions and Motions

Adjournment

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Attachment I


Business Report

Dear shareholders,

Our 2010 parent level revenue stands at NT$11.51 billion, representing a year-over-year increase of 8.3%. After-tax EPS more than doubled to NT$1.01 compared to fiscal year 2009. As the North American economies lead the in recovery for developed countries in 2010, and because of the efforts of all employees, our trading business saw sustained growth. Principal trading business, which provides customers with full range of service solutions saw annual increase of 8% over 2009 in shipments. In addition, the Company continued to broaden its customer base via the Agency Business, with shipment volume accounting for 18.5% of shipments in 2010 compared with 14% in 2009. The Company also successfully introduced Joyoung brands to the Taiwan market, demonstrating the possible synergies of cooperating with various retail outlets, including our own TLW and Hola Taiwan retail channels. In the future, the Company will continue to look for opportunities to become the agent for brands looking to broaden their consumer reach in Greater China markets.

The Test Rite Group’s consoldiated sales totaled NT$32.61 bn in 2010. The Group's retail arm is well positioned to benefit from the growth in the retail markets of China and Taiwan. On the back of a recovery in consumer confidence, our retail business in Taiwan saw 2010 annual sales increase by 11.2% year over year to NT$15.04 billion. Specializing in the retail DIY and home improvement business, TLW continued to broaden the range of its products. In addition, it added one store and temporarily closed its Nangkan outlet in 2010. The outlet is being renovated and will expand to include a DIY outlet, another HOLA store, and will lease remaining selling space to other furniture and home décor businesses. The new Nangkan outlet is scheduled to reopen in the third quarter of 2011. As of the end of 2010, TLW had a total of 23 DIY outlets in Taiwan. In addition, we entered home renovation market by introducing TR Design+, TR Home Service, and TR PLUS services, with the aim to provide a full range of services of our customers. HOLA TW, with a focus on the home decoration retail business, added 5 outlets in 2010, with 4 of them located within a DIY outlet of TLW. As of the end of 2010, there were 18 HOLA outlets. We also 9 HOLA stores in China in 2010 and as of year end 2010, we operated 27 HOLA China stores in major cities such as Shanghai, Beijing, Chengdu and Shenzhen. New stores contributed to a high sales growth rate, with annual sales totaling RMB$640 million in 2010, a 43% year on year increase over 2009.

Tong Lung Metal Industry (TLM), a subsdiary of Test-Rite Group, saw a modest recovery of demand in 2010 as the state of U.S. housing market remains fluid. In 2010, TLM’s revenue reached NT$3.07 billion, an increase of approximately 30% on 2009. The company continued to invest in its production capacity and intends to shift more production to the Philippines factory in Subic Bay. Currently the Philippines facilities can produce 1 million units per month. The Subic Bay factory enjoys several advantages compared to other lock manufacturers in elsewhere, particularly in China. These include reduced or exempt duties on products exported to the United States and relatively low labor costs.

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Below is the the detail results of our operations in 2010, our 2010 business plan summary,

and future business strategy. We have also highlighted possible impacts from external competition, changes in both government regulations and global macro economic environment.

1. Operating result for 2010

i. Operating result based on business plan for 2010: (NT$ mn)

Item 2010 2009

YoY change amount

YoY change (%)

Net sales 11,514 10,628 886 8.3

COGS 9,281 8,667 614 7.1

Gross profit 2,233 1,961 272 13.9

Operating Expense 2,011 1,794 217 12.1

Operating profit 222 167 55 32.9

Non-operating profit (loss)

394 (1) 395 N.A.

Net profit before tax 617 166 451 271.7

Net profit after tax 487 137 350 255.5

ii. Analysis of balance sheet & profitability

2. 2011 business plan and future development strategy

1. Business plan and managerial principle: A. Meticulously cultivate and depend relationship for existing clients for the trading

business. B. Leverage our innovative capabilities to provide differentiating products and

improve full range of sourcing services. C. Aggressively expand Agency Business. D. Continue to integrate operations of trading and retail subsidiaries to enhance

synergy. 2. Future development strategy:

A. Aggressively expand the scope and identify targets for Agency Business. B. Integrate and develop emerging markets such as Southeast Asia and India. C. Further penetrate into the China’s retail market through brand licensing.

Item Fiscal Year 2010 2009 YoY

change(%)

Total liability to total asset

56.5% 56.9% (0.7) Balance sheet

Current ratio 227.8% 205.8% 10.7

ROE 7.9% 2.4% 229.2

Net margin 4.2% 1.3% 223.1 Profitability

EPS 1.01 0.31 225.8

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3. Potential influence from external competition, regulation and macro economic

environment

Faced with a rapidly changing competitive landscape, Test-Rite has leveraged its +30 years of experience in trading and continue to strengthen our product offering by developing Total Solution service for our trading business. These services encompass product and packaging design, logistics, and storage/warehousing capacitilties that we believe is necessary to further strength or role within the supply to chain to global retail operators. In addition, by leverage relationships with our customers and suppliers, Test-Rite is able to improve the cooperative efficiency between them, and create value-added services for customers and suppliers. Recently, Taiwanese and Chinese authorities adopted policies aimed at curbing the overheated real estate markets. These policies may have potential impact on our retail businesses in the nearterm, but we remain optimistic about our growth prospects of our retail channels. Taiwanese consumers will likely to continued seek to upgrade their quality of living, particualry via upgrades/replacement of home related products, while China's 12th 5-Year Plan is aimed at tipping the growth drivers to a more domestic/consumption driven economy. We see no shortage of growth opportunities for both our trading and retail businesses.

Lastly, all staff of Test Rite Group will spare no efforts to adequately plan, and manage our trading, retail and other investment businesses in an honest, sincere and dedicated manner, with the objective to enhance the return on shareholder equity (ROE). We, on behalf of all the employees at Test-Rite, would like to take this opportunity to thank our shareholders for your continued support and encouragement.

Chairman: Judy Lee GM: Sophia Tong Controller: Linda Lin

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Attachment II To: Test Rite International Co., Ltd. 2011 Shareholders Meeting

From: Supervisors of Test Rite International Co., Ltd

Re: Supervisor’s review report on the 2010 Financial Statements Dear shareholders,

Here we ensure the annual financial reports of TRIC stands alone and its consolidation

for 2010 have been rendered by Board and audited independent auditors Mr. Yu,

Hong-Bin and Mr. Lu, Chi-Chant of Deloitte Touche. Further we review 2010

Business report and 2010 Profits Distribution proposal and assure to it’s compliance with

Company Act No. 219 as well.

Supervisors:

Tsai-Chi Co., Ltd.

Representative: Mr. Lai, Yung-Chi

Representative: Mr. Liao, Hsueh-Hsing

April 28, 2011

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Attachment III


Regulations of Repurchasd Shares Transfered to Employees Article 1 In attempt to incentivize employees and boost employee loyalty, the Company has

drawn up the Regulations of Repurchased shares Transfered to Employees in accordance with Subparagraph 1, Paragraph 1, Article 28-2 of the Securities and Exchange Act as well as the Regulations Governing Share Repurchased by Exchange-Listed and OTC-Listed Companies promulgated by the Financial Supervisory Commission, Executive Yuan (the “FSC). Unless it is otherwise provided by law, the transfer of repurchased shares to employees shall be governed by the Regulation.

Article 2 The shares to be transferred to the employees shall be common shares and bear the same rights and obligations as other outstanding common shares unless otherwise provided for in laws and regulations concerned and the Regulations.

Article 3 Pursuant to the Regulation, the shares repurchased may be transferred to employees all at once or in installments within three years from the date of repurchased. The Chairman is authorized to set out the time period for share subscription and payment and relevant matters for each transfer operation. Shares that are not transferred within the specified time period shall be deemed as unissued shares of the Company and cancelled according to applicable regulation.

Article 4 Employees of subsidiaries, in which the Company employees and the Company collectively hold directly or indirectly more than 50 percent of their voting shares on the record date, are eligible for share subscription (including overseas subsidiaries and subsidiaries as defined in accordance with issue no. 0960073134 by the Financial Supervisory Commission of the Executive Yuan(issued on December 26, 2007)

Article 5 The Chairman is authorized to allocate the number of shares to be subscribed in consideration of their position, special contribution to the Company, and other standards.

Article 6 Operating procedure for transfer of repurchased shares to employees: 1. The Company shall make disclosure and repurchased its shares within a specified

period, in accordance with the resolution of the Board of Directors. 2. The Board of Director will establish and announce the record date for share

subscription by employees, standards for number of shares that may be subscribed, subscription payment period, associated rights, restrictions and other matters in accordance with these Measures.

3.An employee who did not make the subscription payment before the specified payment deadline is deemed forfeiting his or her right to subscription. For unsubscribed shares, the Chairman may contact other employees for subscription; if there are still unsubscribed shares thereafter, the shares shall be handled in accordance with Article 3 herein.

4. The Company will tally the number of shares subscribed and paid, and proceed with the registration of title transfer.

Article 7 Shares bought back at this instance shall be sold to employees at 10% discount to the closing price of the common shares on the date the sale is approved by the Board. If the selling price is lower than the average buyback price, the average buyback price shall be the selling price. However if the Company’s common shares issued and outstanding increase or decrease prior to the transfer, the transfer price will be

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adjusted within the percentage of increase/decrease of shares issued and outstanding. Pursuant to the Company’s Articles of Incorporation, if the shares are to be transferred to employees at below the average of repurchased prices, the transfer may not be effected unless the Company has obtained the consent of at least two-thirds of the voting rights present at the most recent shareholders’ meeting attended by shareholders representing a majority of total issued shares, and must have enumerated the matters provided in Article 10-1 of the Regulations Governing Share Repurchased by Exchange-Listed and OTC-Listed Companies in the notice of reasons for that shareholders meeting.

Article 8 Unless it is otherwise provided, the rights and obligations associated with the shares transferred to employees with title transfer formality completed shall be the same as those of the original shares.

Article 9 The Regulations and subsequent revisions thereto shall take effect after approval by the Board of Directors. These Regulations and subsequent revisions thereto shall be reported in the Shareholders’ Meeting.

Article 10 These Rules of Transfer Shares to employees were adopted on September 14, 2000. The first amendment was made on October 6, 2000. The second amendment was made on August 14, 2003. The third amendment was made on June 9, 2006. The fourth amendment was made on July 19, 2007. The fifth amendment was made on October 9, 2008. The sixth amendment was made on April 28, 2010. The seventh amendment was made on January 4, 2011.

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Attachment IV

Test Rite International Co., Ltd

2010 Profits Distribution Table (NTD) Item Amonut Notes

Beginning balance of retained earnings 1,442,918

Less: Cancellation of treasury stock (112,772,393)

Add: Net profit after tax 486,817,686

Less: 10% for Legal reservation (37,548,821)

Earnings available for pay-out 337,939,390

Allocation:

Cash dividend 337,436,210 NTD 0.665 per share

Sub total 337,436,210

Ending balance of retained earnings 503,180

Remark:

Compensation for directors 6,758,788

Employees bonus 27,035,151

Chairman: Judy Lee GM: Sophia Tong Controller: Linda Lin Further information as below: Note 1: Compensation for directors & cash bonus for employees are NT$ 6,758,788 & NT$

27,035,151 respectively. Note 2: Board proposed NT$ 0.665 of cash dividend per share or a total dollar value of

NT$337,436,210 to be paid out from the earnings of 2010. Following the approval, the Board of Directors will decided on a ex-dividend date.

Note 3: As of April 19th, 2011, the total number of common stocks outstanding is 516,422,872 shares. After adjusting for 9,000,000 of treasury shares on hand, the the number of shares eligible to receive the above proposal of earnings distribution is 507,422,872 shares.

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Attachment V

TEST RITE International Co., Ltd.

Procedures for Lending Funds to Others Reference Table for Revised Clauses

Article No.

Original clause Revised clause Basis and reasons for

revision

Article 2

The borrower of the loaning funds:

1、Where an inter-company or

inter-firm business transaction calls for a loan arrangement; or

2、A company or business that

requires short-term financing shall not borrow funds that exceed 40% of its net worth. Financing refers to the cumulative balance of the funds the Company lends for a short term; or

3、Funds lent or borrowed between

overseas companies that are 100% held by Companies in which a publicly issued company either directly or indirectly are not bound by the second subparagraph of the first paragraph.

The borrower of the loaning funds:

1、Where an inter-company or

inter-firm business transaction calls for a loan arrangement; or

2、A company or business that

requires short-term financing shall not borrow funds that exceed 40% of its net worth. Financing refers to the cumulative balance of the funds the Company lends for a short term; or

3、Funds lent or borrowed between

overseas companies that are 100% held by the Company either directly or indirectly are not bound by the second subparagraph of the first paragraph. The amount lent shall be governed by the rules of the Company that govern the lending of funds to a third party.

Revision is made in accordance with regulatory change.

Article 3

Limits on the combined amount lent and the amount lent to a particular third party 1. The Company shall not lend

funds that exceed 40% of its net worth.

2. A company or business that does business with the Company shall not borrow funds from the Company that exceed the amount transacted between them. The amount transacted between them refers to the sales or purchases made between them, whichever is higher. However, the short-term financing required

Limits on the combined amount lent and the amount lent to a particular third party 1. The Company shall not lend

funds that exceed 40% of its net worth.

2. A company or business that does business with the Company shall not borrow funds from the Company that exceed the amount transacted between them. The amount transacted between them refers to the sales or purchases made between them in the most recent year, whichever is higher. However, the


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Article No.


revision

by companies with which the Company does business shall be dealt with pursuant to the following rules.

3. The said companies shall not be provided with short-term financing that exceeds 20% of the Company's net worth. The Company shall not lend funds that exceed 40% of its net worth.

short-term financing required by companies with which the Company does business shall be dealt with pursuant to the following rules.

3. The said companies shall not be provided with short-term financing that exceeds 20% of the Company's net worth.

Article 4

Period of financing In principle, the period of financing shall not exceed one year. One month before the financing period ends, the borrower shall be notified to pay back the financing pursuant to the agreement. In ordinary circumstances, the period may be extended after being approved by the Board. Legal action shall be taken against parties that fail to pay back financing by the specified date. In addition, the CPA that audits and certifies our books and financial statements shall be requested to include a detailed evaluation in his/her auditing report.

Period of financing In principle, the period of financing shall not exceed one year. One month before the financing period ends, the borrower shall be notified to pay back the financing pursuant to the agreement.


Article 8

Control of funds lent and procedure for the handling of NPLs 1. After a loan is made, attention

shall be constantly paid to the financial condition, business operations, and credit status of the borrower and the guarantor. If security is provided, attention shall be paid to changes in the value of the security. One month before the loan matures, the borrower shall be notified to pay back the principal and the accrued interest or extend the loan.

2. After the borrower pays back the principal and the accrued

Control of funds lent and procedure for the handling of NPLs 1. After a loan is made, attention

shall be constantly paid to the financial condition, business operations, and credit status of the borrower and the guarantor. If security is provided, attention shall be paid to changes in the value of the security. One month before the loan matures, the borrower shall be notified to pay back the principal and the accrued interest or extend the loan.

2. After the borrower pays back the principal and the accrued


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Article No.


revision

interest, the promissory note and IOU presented as security may be canceled and returned to the issuer.

3. If the borrower applies to have the lien canceled, ensure that the borrower has paid back the loan in full before determining whether to cancel the lien.

4. When a loan matures, the borrower shall immediately pay back the principal and the interest in full. If the borrower is unable to repay the loan, the borrower should apply for the Board of Directors’ approval first to extend the loan period, which extension is not exceeding three months and limited to one time. Otherwise, the Company may dispose of the security provided and seek compensation if the borrower fails to do so.

5. Internal auditors shall audit the amount lent, the procedure followed, and how well it is implemented at least once every three months, with written records prepared. If major violations are discovered, they shall immediately notify the Supervisors in writing. If the Manager and responsible person designated in the procedure are found to have violated the guidelines or operating procedure, they shall be ordered to take corrective actions by the end of a certain period and provide a report by a specified date describing the actions taken, or the Company may punish them as per its

interest, the promissory note and IOU presented as security may be canceled and returned to the issuer.

3. If the borrower applies to have the lien canceled, ensure that the borrower has paid back the loan in full before determining whether to cancel the lien.

4. When a loan matures, the borrower shall immediately pay back the principal and the interest in full. The Company may dispose of the security provided and seek compensation if the borrower fails to do so.

5. Internal auditors shall audit the amount lent, the procedure followed, and how well it is implemented at least once every three months, with written records prepared. If major violations are discovered, they shall immediately notify the Supervisors in writing. If the Manager and responsible person designated in the procedure are found to have violated the guidelines or operating procedure, they shall be ordered to take corrective actions by the end of a certain period and provide a report by a specified date describing the actions taken, or the Company may punish them as per its rules.

6. If changed circumstances cause the borrower to not meet the criteria set out in this operating procedure or the outstanding balance exceeds the established limit, plans to improve the situation shall be drawn up and

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Article No.


revision

rules. 6. If changed circumstances cause

the borrower to not meet the criteria set out in this operating procedure or the outstanding balance exceeds the established limit, plans to improve the situation shall be drawn up and sent to the Supervisors, with improvements made according to schedule.

sent to the Supervisors, with improvements made according to schedule.

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Attachment VI


Endorsement/Guarantee Procedures Reference Table for Revised Clauses

Article No.

Original clause Revised clause Basis and reason for revision

Article 3

The Company may make endorsements/ guarantees for the following entities having a relationship with the Company: (omitted) Companies in which a publicly issued company directly and indirectly owns more than 90 percent of their voting shares may provide endorsements/ guarantees for each other, but the amount thereof shall not exceed 10 percent of the publicly issued company’s net book value. However the preceding provision does not apply to endorsements/ guarantees between companies in which a publicly issued company directly and indirectly owns 100 percent of their voting shares,

The Company may make endorsements/ guarantees for the following entities having a relationship with the Company: (omitted) The Company directly and indirectly owns more than 90 percent of their voting shares may provide endorsements/ guarantees for each other, but the amount thereof shall not exceed 10 percent of the Company’s book value. Guarantees may be provided between companies 100% held by the Company either directly or indirectly. Amounts of guarantee provided shall be determined as per their respective endorsements/ guarantees procedures.


Article 5

The total amount of endorsements / guarantees made by the Company and subsidiaries combined shall not exceed 100% of the Company’s net worth book value as of the end of the previous quarter. Limits on the amount of endorsements / guarantees provided for a single entity are set forth as follows: 1. Endorsements/guarantees provided for parent company or a subsidiary of the Company shall not exceed 50% of the Company’s net book value. 2. For companies with which the Company has business dealings and in which the Company owns less than 50% of its equity interest, the amount of endorsements/ guarantees

The total amount of endorsements / guarantees made by the Company and subsidiaries combined shall not exceed 100% of the Company’s net worth book value as of the end of the previous quarter. Limits on the amount of endorsements / guarantees provided for a single entity are set forth as follows: 1. Endorsements/guarantees provided for parent company or a subsidiary of the Company shall not exceed 50% of the Company’s net book value. 2. For companies with which the Company has business dealings, the amount of endorsements/ guarantees provided for such entity shall not exceed the total transaction amount between the parties during the period of a year prior to the time of lending.


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Article No.


provided for such entity shall not exceed its net worth or 35% of the Company’s net worth, whichever is higher. 3. For companies with which the Company has business dealings and in which the Company does not own any equity interest, either directly or indirectly, the amount of endorsements/guarantees provided for such entity shall not exceed 50% of its net worth or 20% of the Company’s net worth, whichever is higher.

Article 5-1

The total amount of endorsements / guarantees made by the Company and subsidiaries combined shall not exceed 100% of the Company’s net worth book value as of the end of the previous quarter. Limits on the amount of endorsements / guarantees provided for a single entity are set forth as follows: 1. Endorsements/guarantees provided for parent company or a subsidiary of the Company shall not exceed 50% of the Company’s net book value. 2. For companies with which the Company has business dealings and in which the Company owns less than 50% of its equity interest, the amount of endorsements/ guarantees provided for such entity shall not exceed its net worth or 35% of the Company’s net worth, whichever is higher. 3. For companies with which the Company has business dealings and in which the Company does not own any equity interest, either directly or indirectly, the amount of endorsements/guarantees

The total amount of endorsements / guarantees made by the Company and subsidiaries combined shall not exceed 100% of the Company’s net worth book value as of the end of the previous quarter. Limits on the amount of endorsements / guarantees provided for a single entity are set forth as follows: 1. Endorsements/guarantees provided for parent company or a subsidiary of the Company shall not exceed 50% of the Company’s net book value. 2. For companies with which the Company has business dealings, the amount of endorsements/ guarantees provided for such entity shall not exceed the total transaction amount between the parties during the period of a year prior to the time of lending.


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Article No.


provided for such entity shall not exceed 50% of its net worth or 20% of the Company’s net worth, whichever is higher.

Article 12

A memorandum document should be set up to record endorsement / guarantee activities of the Company, including the entity for which the endorsement/ guarantee is made, the results of risk assessment, the amount of guarantee, the collateral obtained, conditions under which the endorsement / guarantee responsibility is discharged, and date of discharge. If the recipient of endorsement/guarantee is a subsidiary with book value less than 50 percent of its paid-in capital, the Company shall put in place subsequent control measures.

A memorandum document should be set up to record endorsement / guarantee activities of the Company, including the entity for which the endorsement/ guarantee is made, the results of risk assessment, the amount of guarantee, the collateral obtained, conditions under which the endorsement / guarantee responsibility is discharged, and date of discharge. If a guarantee is provided to a subsidiary whose net worth is less than 50 percent of its paid-in capital, constant attention shall be paid to its financial condition, business operations, and credit status. If collateral is provided, attention shall be paid to changes in the value of the collateral. In the event of a major unfavorable change, the guarantee shall be terminated or adequate actions shall be taken.

Revision is made in line with regulatory change.

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Attachment VII


Articles of Incorporation Reference Table for Revised Clauses

Article No.


revision

Article 2 The scope of business of the Corporation shall be as follows:

1、E605010 Apparatus

Installation Construction Business (omitted)

94、ZZ99999 Except the

permitted business, the Company may engage in other businesses not prohibited or restricted by laws and regulations

The scope of business of the Corporation shall be as follows:

1、E605010 Apparatus

Installation Construction Business (omitted)

94、ZZ99999 Except the

permitted business, the Company may engage in other businesses not prohibited or restricted by laws and regulations

95、A102060 Grain Commerce

96、F108031 Wholesale of Medical Equipments

97、F208031 Retail sale of

Medical Equipments

Revision is made in accordance with actual business needs.

Article 6 The authorized capital of the Company shall be NT$7,500,000,000, to be divided into 750,000,000 shares of NT$10 par value, of which, 50,000,000 shares will be reserved for the issue of stock warrants, preferred shares, or corporate bonds with warrant. The Board of Directors is authorized to issue the unissued shares in tranches in view of operating needs of the Company. Share certificates with NT$10,000 par value may be combined into share certificates with par value exceeding NT$10,000, and share certificates with par value exceeding NT$10,000 may be split into share certificates with NT$10,000 par value.

The authorized capital of the Company shall be NT$7,500,000,000, to be divided into 750,000,000 shares of NT$10 par value, of which, 50,000,000 shares will be reserved for the issue of stock warrants, preferred shares, or corporate bonds with warrant. The Board of Directors is authorized to issue the unissued shares in tranches in view of operating needs of the Company.

The Company's shares have been dematerialized and the relevant rules have been revised accordingly.

Article 6-1

Taiwan Depository & Clearing Corporation may request the Company to convert its securities to those of larger denominations

(deleted) The Company's shares have been dematerialized

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Article No.


revision

and the Company shall cooperate fully with its request.

and the relevant rules have been revised accordingly.

Article 7 Shares of the Company shall be issued as registered shares. The share certificates shall be issued after they are signed or sealed by at least three directors and duly certified according to law. Shares of the Company may be issued in dematerialized form and shall be registered with a centralized securities custody enterprise.

Shares of the Company may be issued in dematerialized form and shall be registered with a centralized securities custody enterprise.

Revision is made in accordance with regulatory change ad actual business needs.

Article 31 After taxes are paid, earnings in any given year shall be first used to offset previous years' losses. 10% of the remainder shall then be set aside as statutory surplus. 2% of the remainder, if any, shall be set aside as Director and Supervisor remuneration, with at least 2% set aside as employee bonus. The remainder shall be distributed in a way that is proposed by the Board and approved at the AGM. When necessary, the Company may set aside a special reserve.

After taxes are paid, earnings in any given year shall be first used to offset previous years' losses. 10% of the remainder shall then be set aside as statutory surplus. However, if the cumulative statutory surplus has reached an amount the equivalent of the paid-in capital, no additional statutory surplus is required to be set aside, and a special reserve shall be set aside or reversed as per the relevant regulations or rules announced by the supervisory authority. Separately, 2% of the remainder, if any, shall be set aside as Director and Supervisor remuneration, with at least 2% set aside as employee bonus. The remainder shall be distributed in a way that is proposed by the Board and approved at the AGM. When necessary, the Company may set aside a special reserve.

Revision is made in accordance with regulatory change ad actual business needs.

Article 34 Date of Revision The Articles of Incorporation were drawn up on July 24, 1978. (Omitted)

Date of Revision The Articles of Incorporation were drawn up on July 24, 1978. (Omitted)

Adding revision date

- 23 -

Article No.


revision

The 35th revision was adopted on June 15, 2010.

The 36th revision was adopted on June 17, 2011.

- 24 -

APPENDIX I.


Current Shareholdings of Directors and Supervisors

Record Date: April 19, 2011 Number of shares

Title Title Shareholding Name The minimum

number of shares Shares Total

Chairman Ms. Lee, Judy 36,050,614

Mr. Ho, Tony 42,682,905

Mr. Hsu, George 1,060,919

Ms. Ho, Robin 973,431

Li-Hsiung Co., Ltd. Representative: Ms. Lee, Ai-Chen

13,022,769

Li-Hsiung Co., Ltd. Representative: Mr. Huang, Chung-Hsing

13,022,769

Directors

Li-Hsiung Co., Ltd. Representative: Mr. Huang, Hsin-Hsien

20,656,915

13,022,769

93,790,638

Tsai-Chi Co., Ltd. Representative: Mr. Lai, Yung-Chi

31,362,873 Supervisor

Tsai-Chi Co., Ltd. Representative: Mr. Liao, Hsueh-Hsing

2,065,691

31,362,873

31,362,873

Notes: 1. The shareholding ratios in this table are based on a total of 516,422,872 outstanding shares

as of the book close date before this year's Shareholders Meeting. 2. The tenure of directors is from June 16, 2009 to on June 15, 2012.

＊According to Article 26 of the Securities and Exchange Act and Article 2, Paragraph 1,

Sub-paragraph 4 and Paragraph 2 of the Regulations Governing Ratios and Auditing of Director and Supervisor Share Ownership at Public Companies: the minimum number of shares that may be held by all Company directors is 20,656,915 shares, and the minimum number of shares that may be held by all supervisors is 2,065,691 shares.

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APPENDIX II.

The Impact of Stock Dividend Issuance on Business Performance, EPS, and

Shareholder Return Rate: Not applicable since the Company does not have stock dividend distribution this year.

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Appendix III.

Details of Employee Bonus and Total Salary for the Board of Directors and

Superviosors

1. As pursuant of the Company Act and Article of Incorporation, the Company, after reporting positive earnings for a given fiscal year and paying applicable taxes, should first reserve its earnings to cover any losses from prior years. Thereafter, the company should reserve 10% of its earnigs for legal reserve before allocating no less than 2% of its earnings for employee bonus, and 2% of its earnings for the salary for the Board of Directors and Supervisors.

2. A portion or all of employees’ bonus can be issued via new shares, but within the

pre-papproved ratio according the company’s Article of Incorporation. The Chairman can decided, which employees of the company will receive employee stock bonus, once their eligibility is confirmed.

3. On April 28th, the Board of Directors approved employee cash bonus of NT$

27,035,151 and total salary for the Board of Directors and Superviosors of NT$6,758,788.

Items for Distribution

As proposed by the Board (A)

Estimated expense (B)

Difference (A)-(B)

Remark

Employee cash bonus 27,035,151 28,800,000 1,764,849

Total salary for the Board of Directors and Superviosors

6,758,788 7,300,000 541,212

Difference is between estimate and actual expense. Since, the difference is minor, the amount will be applied to 2011 earnings.

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Appendix IV

Other Matters-Details of Shareholder Proporsal at Shareholders’ Meeting Note:

1. According to Company Act No. 172, Shareholders who hold more than 1% can submmit only ONE written shareholder proposal that is 300 characters or less.

2. Written subimssion of shareholder proposals must be submitted between the dates of April 8th, 2011 and April 19th, 2011. The Company has posted information regarding shareholder proposals on the Market Obeservation Post System (MOPS) as required by regulation .

3. The company has not yet to receive any written submission of shareholder proposals.

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