BASSO - Annual Report 2019 | FinancialReports.eu

Stock Code: 1527

This Annual Report is available at: http://mops.twse.com.tw

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BASSO INDUSTRY CORP.

2019

Annual Report

Published on May 20, 2020

BASSO INDUSTRY CORP. 2019 Annual Report

I. Company spokesperson

Name: Bo-yan Lai Title: President Tel.: (04)2359-8877 Email: [email protected]

Company Acting Spokesperson

Name: Ying-zhu Chen Title: Senior Specialist, Finance & Accounting Department Tel.: (04)2359-8877

Email: [email protected]

II. Location of the Company and Plant

Headquarters Office and Plant 1: No.24, Road 36, Industrial Park, Taichung City Tel: (04)23598877

Plant 2: No.17, Road 36, Industrial Park, Taichung City Tel: (04)2359-8877 Plant 3: No.22, Road 34, Industrial Park, Taichung City Tel: (04)2359-8877 Plant 5: No.16, Road 35, Industrial Park, Taichung City Tel: (04)2359-8877 Plant 6: No.20, Road 34, Industrial Park, Taichung City Tel: (04)2359-8877 Plant 7: No.33, Road 37, Industrial Park, Taichung City Tel: (04)2359-8877 Plant 8: No.22, Road 36, Industrial Park, Taichung City Tel: (04)2359-8877

III. Stock Transfer Agency

Company Name: Registrar Agency, Capital Securities Corp. Tel: (02)2702-3999

Address: B2, No. 97,Sec. 2, Dunhua South Road, Daan District, Taipei City

Website: www.capital.com.tw

IV. ICPA

Name: KPMG

Auditors: Jun-yuan Wu, Shi-hua Guo

Address: 68F., No.7, Section 5, Xinyi Road, Xinyi District, Taipei City Tel: (02) 8101-6666

Website: http://www.kpmg.com.tw

V. Overseas Securities Exchanges: None
VI. Company Website: http://www.basso.com.tw

Table of Contents	Table of Contents
Chapter 1 Letter to Shareholders ----------------------------------------------------------------------		1
I.	Operating Performance in 2019------------------------------------------------------------------	1
II.	Overview of 2020 Business Plan_----------------------------------------------------------------_	4
III.	Future Development Strategy of the Company ------------------------------------------------	5
IV.	Impact on the Company Due to Competition, Governmental Regulations, and Overall Operation Environment ---------------------------------------------------------------------------	5
Chapter 2 Company Profile -----------------------------------------------------------------------------		6
I.	Date of Establishment -----------------------------------------------------------------------------	6
II.	Company History ----------------------------------------------------------------------------------	6
Chapter 3 Corporate Governance Report ------------------------------------------------------------		9
I.	Organization ----------------------------------------------------------------------------------------	9
II.	Directors, Supervisors, and Management Team -----------------------------------------------	11
III.	Implementation of Corporate Governance -----------------------------------------------------	24
IV.	Information on CPA Professional Fees ---------------------------------------------------------	43
V.	Information on replacement of CPA ------------------------------------------------------------	44
VI.	The Company's Chairman, President, and Manager in charge of financial or
	accounting affairs, who have worked in a firm or affiliated company of the CPA in the
	most recent year ------------------------------------------------------------------------------------	44
VII.	Equity transfer or changes to equity pledge of directors, supervisors, managerial
	officers, or shareholders holding more than 10% of company shares in the most recent
	year to the publication date of this report ------------------------------------------------------	44
VIII.	Information on the top 10 shareholders of the Company who are identified as related
	parties, spouse or relative within second-degree of kinship ---------------------------------	46
IX.	Information on the number of shares of the company invested by the Company, any of
	the Company’s directors, supervisors and executive officers or a company directly or
	indirectly controlled by the Company and consolidated percentage of shareholding ----	47
Chapter 4 Funding Status --------------------------------------------------------------------------------		48
I.	Capital and Shares ---------------------------------------------------------------------------------	48
II.	Issuance of Corporate Bond ----------------------------------------------------------------------	54
III.	Issuance of Preferred Stocks ---------------------------------------------------------------------	54
IV.	Overseas Depository Receipts ..........................................................................................	54
V.	Handling of Employee Stock Option -----------------------------------------------------------	54
VI.	Merger and Acquisition (including Merger, Acquisition and Demerger) ------------------	54
VII.	Implementation of Capital Application Plan ---------------------------------------------------	54
Chapter 5 Business Operations Overview ------------------------------------------------------------		55
I.	Main Business Activities --------------------------------------------------------------------------	55
II.	Market and Industry Overview ------------------------------------------------------------------	58
III.	Human Resources For The Most Recent Two Years And Up To The Date Of
	Publication Of The Annual Report --------------------------------------------------------------	65
IV.	Disbursements for Environmental Protection --------------------------------------------------	65
V.	Labor Relations ------------------------------------------------------------------------------------	65
VI.	Important Agreements -----------------------------------------------------------------------------	67

Chapter 6 Financial Highlights -------------------------------------------------------------------------	Chapter 6 Financial Highlights -------------------------------------------------------------------------	68
I.	Condensed Balance Sheet and Income Statement for the Past Five Years ----------------	68
II.	Financial Analysis for the Past Five Years -----------------------------------------------------	72
III.	2019 Supervisor Review Report	76
IV.	2019 Annual Financial Statements and Audit Report of CPAs
	(attachment I: pages 87-151) ---------------------------------------------------------------------	79
V.	Impact on the Financial Position of the Company and its Related Enterprises in the
	Most Recent Year and up to the Date of Printing of the Annual Report in Case of
	Financial Turnover Difficulties -----------------------------------------------------------------	79
Chapter 7 Review and Analysis of Financial Position and Business Results and Risk
	Matters -----------------------------------------------------------------------------------------	80
I.	Review and Analysis of Financial Position ----------------------------------------------------	80
II.	Review and Analysis of Financial Performance -----------------------------------------------	81
III.	Cash Flow Analysis --------------------------------------------------------------------------------	82
IV.	The Impact of the Capital Expenditure in the Most Recent Year On the Financial
	Business ---------------------------------------------------------------------------------------------	82
V.	Investment Policies for the Most Recent Year, the Main Reasons for Profit or Loss,
	and Remedy and Investment Plans for the Coming Year ------------------------------------	82
VI.	Analysis and Evaluation of Risk Events in the Most Recent Year and up to the Date of
	Printing of the Annual Report --------------------------------------------------------------------	83
VII.	Other Important Matters --------------------------------------------------------------------------	85
Chapter 8 Special Notes ----------------------------------------------------------------------------------		86
I.	Information on Affiliated Companies -----------------------------------------------------------	86
II.	In 2019 and up to the Printing Date of the Annual Report, the Handling of Private
	Placement of Securities and the Use of Funds, the Progress of Plan Implementation
	and the Appearance of Plan Benefits ------------------------------------------------------------	86
III.	Holding or Disposal of the Company's Shares by Subsidiaries in 2019 and up to the
	Printing Date of the Annual Report -------------------------------------------------------------	86
IV.	Other Necessary Supplementary Information -------------------------------------------------	86
Chapter 9 Events that have a Significant Impact on Shareholders' Equity or Securities
	Prices in the Most Recent Year and up to the Printing Date of the Annual	86
	Report ------------------------------------------------------------------------------------------

Chapter 1 Letter to Shareholders

I. Operating Performance in 2019

In 2019, the net operating revenue is NT$3,464,083,000, including NT$2,743,884,000 of pneumatic nailers and automotive air tools , and NT$720,199,000 of others (including OEM components, products, magnesium alloy and aluminum alloy parts and heat treatment revenue, accounting for 79.21% and 20.79% respectively).

(I) Results of business plan implementation in 2019

Unit: NT$ '000

Account Year	2019	2018	Difference	Growth Rate(%)
Net operating revenue	3,464,083	3,733,320	(269,237)	(7.21)
Grossprofit	985,478	1,117,939	(132,461)	(11.85)
Gross profit margin	28.45%	29.94%	(1.49%)	(4.98)
Operating profit	576,509	725,010	(148,501)	(20.48)
Net income before tax	735,056	1,234,800	(499,744)	(40.47)
NIAT	573,554	1,031,765	(458,211)	(44.41)

(II) Budget implementation

Unit: NT$ '000

Item	2019 Budget amount	2019 Actual amount	Achievement rate (%)
Net operatingrevenue	3,900,000	3,464,083	88.82
Operatingcosts	2,749,500	2,478,605	90.15
Grossprofit	1,150,500	985,478	85.66
Operatingexpenses	390,000	408,969	104.86
Operating profit(loss)	760,500	576,509	75.81
Net income before tax	975,000	735,056	75.39
NIAT	780,000	573,554	73.53

(III) Analysis of Financial Revenue/Expenditure and Profitability

	Items	2019
Financial structure	Debt ratio(%)	15.88
	Proportion of long-term capital in PP&E (%)	407.93
Debt service ability	Current ratio(%)	505.68
	Quick ratio(%)	424.57
	Interest coverage ratio	10.42
Profitability	Return on assets(%)	6.53

Return on equity (%)	14.88	30.30
Pre-tax Income to Paid-in Capital Ratio	53.05	89.50
Netprofit ratio(%)	16.56	27.64
Earnings Per Share (EPS) (in NT$, after retrospective adjustments)	4.15	7.48

(IV) Research and Development Status

In the development of new products, the Company's team not only takes the Company's strategy of "quality, innovation and service" as the policy, but also keeps closer to the market trend, and constantly roll out with innovative design and differentiated products, so that the Company can stay competitive in the industry.
The Company's current situation and niche in the field of new product research and development are as follows:
(1) Product development strategy: be able to adjust new product strategy at any time in response to market changes and demands to ensure the Company's competitiveness and profitability.
(2) Operation of new product department: through experienced new product personnel to collect market information and interview, they can truly and accurately catch market pulse and user demand, doing cross product research and analysis in different fields. The planned new products can have more competitiveness than the same trade in the industry.
(3) Business team: Based on the spirit of being practical and satisfying customers' needs, the Company can have close connection with existing customers; on the other hand, it actively develops new customers and expands the market share of products.
(4) R&D team: persist in the quality and technology standard, regardless of the improvement of existing products, industrial level, customized products etc. They can start from safer, more durable, more human-oriented and more innovative design, by using the new version of computer-aided drawing and analysis software to improve the design level and work efficiency, and launch products that meet the market demand so that the Company can maintain the competitiveness in the industry.
(5) Patent team: With proficient patent team members collecting and analyzing the layout direction of patents among the competitors, we can deeply understand the industry pulse, so that the Company's top management can make correct judgment on the future development direction of new products; on the other hand, we can make R&D investment of innovation. By investing innovations on the R&D, we can file patents not only to protect the products but also distinguish it from the industry and produce higher added value.
(6) Mastery of key technology: through vertical integration of upstream and downstream processes and investment in high value-added equipment and molds, improving the in

house production rate and yield of key components, further control the key technology and quality.

(7) New field technology research and development: research on new processes and materials; apply them to the improvement of new product trade dress, structure and function, so as to improve product differentiation. Also the research of product technology in different fields, introducing relevant talents, in order to increase the diversity of product development.
(8) Advantages of cost control: under the conflict between rising materials cost and the customers’ expectation of lower cost, making good use of existing economy scale and new development, and actively provide customers with options to reduce costs, so as to create win-win results between the Company and customers.
(9) High efficiency production scale: Regardless of small amount in diversity or large-scale production, we can coordinate with customers to adjust the high efficiency production mode to fully meet the needs of customers.
(10) Quality insistence: to exceed customer satisfaction as the goal, adhere to the 100% quality check.

(11) Satisfactory after-sales service: according to the customer's feedbacks, there is a designated department responsible for quick solutions to problems from the customers To sum it up, our business is still growing under the fierce competition in the industry. The production and sales volume of our products are in the first place in the industry. It proves that after decades of hard work and efforts, our management direction is correct. Looking forward to the future, the Company will continue to satisfy customers’ needs in the spirit of being pragmatic and innovative in pursuit of sustainable development.

Future R&D plans:
(1) Development of innovative products:
In the future R&D, in addition to improving the quality of existing products, it is also necessary to develop new products in different fields, so as to expand more customers, create new market demands, enhance higher product added value and longer product life cycle, in the hope that the Company's profits will reach another peak.
(2) Providing new product appearance:
In order to make a clear distinction for the appearance of the existing products when they are tailor-made for different customers, in line with the training of relevant talents of industrial design professionals, provide the capacity of appearance design, so as to make the proposal more attractive. by providing a module of family design and color plan, will improve the product image in the future. To build Industry Design capability for appearance differentiation for various customers and gain more sales. To develop new generation of family trade dress with family look, modular design and in new color scheme to enhance product image.
(3) CAE (Computer Aided Engineering) performance improvement:
In order to meet the diversified demand of innovative products in the future, improve design performance and reduce try-and-errors the, we will use different types of analysis

software for various new functions, so as to fully support the relevant innovation work and increase the technical threshold of competition with the industry.

Expected investment in research and development funds:
In order to prevent competitors from eroding the product market shares and profits, continuous output of new product and value patents is necessary, which derives related development and intellectual property maintenance costs.
In addition, CAD / CAE / industrial design related software and equipment used in R&D need expenditure for continuous update to improve the development efficiency, and R&D personnel shall be trained to learn in an all-aspect way and cultivate international perspective, so as to make the products more competitive.

The Company's expenditure on research and development has always been based on the principle of "must" and "necessity".

R&D investment is expected to account for about 2-4% of revenue.

II. Overview of 2020 Business Plan

(I) Operating guidelines

Research and development of innovative pneumatic and cordless construction products, research and development of production technology.
Expansion of R&D, manufacturing and sales of innovative product line of tools for pneumatic and cordless automotive tools.
Research and enhance key component production technology and improve in-house production ratio.
Develop and research advanced processes or technologies in combination with academic institutions and external resources.
Research on mold design technology, promotion and sales of mold manufacturing efficiency.
Improvement of production efficiency and simplification of production process.
Interdisciplinary research and development of magnesium alloy parts and development of sales market.
Research on improving product quality and stability, reducing production cost.
Stabilize the existing European and American markets, develop potential emerging markets, and strengthen the local sales and maintenance network, so as to achieve the goal of increasing the market share of products.
OEM production with economic scale production equipment to service processing parts, heat treatment parts, plastic parts, etc. for diversified industry.

(II) Expected Sales Volume and Its Basis

The rapid spread of COVID-19 has hit private consumption and exports, affected the previously closely connected global economy, and impacted the growth forecast of all regions. Moody's, a credit rating agency, calls it the biggest black swan this year. However, regardless of the change of the environment, Basso will continue to promote new products to stimulate customers' procurement. In the first quarter, it slightly declined compared with the same period last year, and it is estimated that after the launch of cordless products in the middle and later periods of this year, it is expected to gradually inject revenue. Therefore, the Company holds a cautious and optimistic attitude towards the revenue in 2020.

(III) Major operations & sales policies

Active research, expansion and development of product lines of pneumatic and cordless automotive tools.
Continuous innovation and development of building cordless tools to expand the new market and enhance the existing market share.

By using the special process of external manufacturers and matching with the existing process in the factory to accept orders other than parts, the revenue can be increased and the utilization rate in the factory can be enhanced.
Increase the purchase of automation equipment and strengthen the training of personnel, to improve product quality yield and production efficiency, thereby reducing production costs to maintain product market competitiveness.
Research and development of industrial products, such as nail guns for home appliance industry, pallet and coil nailer for packaging industry, to expand product line and increase product value.
Research and development of bicycle die-casting parts products, OEM products and plastic PU foam products.
The replacement of in-house production machine will have more efficiency in quality improvement and cost reduction.

III. Future Development Strategy of the Company

Expand the OEM of relevant pneumatic tool products and OEM parts, providing customers with new purchasing options.
Strengthen production management and on-site personnel training to improve the production efficiency of each unit, and further increase product competitiveness.
Research and development of innovative technology to improve product differentiation and further differentiate market competition.
Provide customers with good quality products, quality service and more competitive price to meet customers' needs.
Actively develop new markets and new industries.

IV. Impact on the Company Due to Competition, Governmental Regulations, and Overall Operation Environment

(I) External competitive environment: the sales strategy of the hypermarket is changed to take quality as priority, which conforms to the previous marketing strategy of the Company, and is based on the niche and high-quality products. In addition, we gradually strengthened the highlevel products required by industrial or professional market channels since two years ago, and continued to develop new products and innovative technologies. It is expected that under the severe competition environment, we can avoid price competition and walk out of our own blue ocean path.
(II) Regulatory environment: in the R&D and design stage, the Company has referred to the regulations and patent requirements of countries in various regions, and complies with relevant regulations.
(III) Overall business environment: in 2020, the Company will continue to match the development of new products and new technologies, and use flexible sales strategies to move forward with the goal of exceeding 10% of last year's performance.

Chapter 2 Company Profile

I. Date of Establishment

(I) Date of establishment registration: July 2, 1983

II. Company History

July 1983	- Established in accordance with the Company Act of the Republic of China,
	BASSO INDUSTRY CORP. located on Zhongxiao East Road, Taipei has a
	capital of NT$2 million and moved to Dunhua South Road, Taipei afterwards.
	At that time, the Company mainly engaged in the import and export and
	trading of pneumatic and electric tools.
July 1987	- Cash capital increase of NT$3 million, capital amount was NT$5 million.
September 1991	- Cash capital increase of NT$7 million, capital amount was NT$12 million. It
	was renamed as "BASSO INDUSTRY CORP." and moved to Dalong Road,
	Taichung City, and purchased office building.
November 1992	- Business items were changed to "pneumatic nailing machine trading and
	import and export trade, pneumatic nailing machine manufacturing and
	processing".
March 1993	- Won the honor of "PARTNERS IN QUALITY" awarded by American
	CAMPBELL HAUSFELD company.
October 1993	- Purchased No. 17, Road 36, Taichung Industrial Park as an assembly plant.
March 1994	- Purchased No. 24, Road 36, Industrial Park, Taichung City as an office
	building and parts processing center.
April 1994	- Cash capital increase of NT$17 million, capital amount was NT$29 million
August 1994	- Cash capital increase of NT$17 million, capital amount was NT$46 million.
March 1995	- Passed the ISO 9001 quality certification of the Commodity Inspection
	Bureau.
April 1995	- Passed the British BSI BE EN ISO 9001 1994 quality system certification
	and CNS 12681 quality system certification.
May 1995	- Cash capital increase of NT$ 32,200,000, capital amount was
	NT$78,200,000.
June 1995	- Awarded the honor of "PARTNERS IN PROGRESS" by Sears of the United
	States.
October 1996	- Purchased the land and factory building of No. 21, Road 42, Industrial Park,
	Taichung City for the manufacture of plastic injection parts.
November 1996	- Purchased the land and factory building at No. 22, Road 34, Industrial Park,
	Taichung City, as the automatic storage and assembly plant.
December 1996	- Honored with the "Excellent Business Partner" award by American PORTER
	CABLE company.
May 1997	- Cash capital increase of NT$75 million and capital increase by transfer of
	surplus of NT$78.2 million, capital amount was NT$231.4 million, and
	approved for supplementary IPO.
December 1997	- Honored with the "Excellent Supplier Partner" award by American PORTER
	CABLE company.
March 1998	- The first production line connecting with the automatic storage and production
	system in Taiwan was put into operation to improve production efficiency.

April 1998	- The composite material ejection factory began mass production, which made
	a breakthrough in pneumatic nailing machine materials.
May 1998	- Started to cooperate with Hitachi of Japan for shipment.
August 1998	- The Company's application for listing on the Taipei Exchange was approved.
September 1998	- Capital increase by surplus transfer of NT$196,690,000 and capital reserve
	of 23,140,000, capital amount was NT$451,230,000.
December 1998	- Held a performance presentation meeting before going listed on TPEx.
January 1999	- The stock was officially listed on the TPEx.
January 1999	- Honored the "Excellent Supplier of the Year" by American PORTER CABLE
	company.
June 1999	- Purchased the land at No. 16, Road 35 as the processing center.
June 1999	- Capital increase by transfer of the surplus and employee bonus of
	NT$262,519,000, and capital amount was NT$713,749,000.
July 1999	- Stocks approved by the TPEx for being eligible for margin trading.
January 2000	- Applied to Taiwan Stock Exchange for listing of shares.
March 2000	- Taiwan Stock Exchange approved the application for listing of the
	Company's shares.
June 2000	- The stock was officially listed.
July 2000	- Capital increase by transfer of surplus and employee bonus of
	NT$362,443,500 and capital amount was NT$1,076,192,500.
August 2000	- Factory at No. 17, Road 36 was rebuilt into a die casting plant of magnesium
	and aluminum alloy plant.
November 2000	- Factory at No. 17, Road 36 for magnesium and aluminum alloy die casting
	plant was completed and began trial production.
June 2001	- Purchased land at No. 20, Road 34 for plant expansion.
June 2001	- Capital increase by transfer of surplus and employee bonus of
	NT$221,557,500, and capital amount was NT$1,297,750.
August 2001	- obtained QS-9000 quality certification.
July 2002	- Capital increase by transfer of employee bonus of NT$13,472,000, and
	capital amount was NT$1,311,222,000.
September 2002	- Heat treatment plant at No. 20, Road 34 was officially launched.
June 2003	- Capital increase by transfer of employee bonus of NT$14,580,000, and
	capital amount was NT$1,325,802,000.
September 2003	- A new production line (1-line flow) connecting with the automatic storage
	and production system was put into operation at No. 20, Road 34.
January 2004	- Purchased the land and factory at No. 22, Road 36 for the purpose of plant
	expansion.
April 2004	- New plastic injection factory at No. 33, Road 37 was officially launched.
June 2004	- Capital increase by transfer of surplus and employee bonus of
	NT$152,581,000, and capital amount was NT$1,478,383,000.
May 2005	- Capital increase by transfer of surplus and employee bonus of
	NT$46,568,000, and capital amount was NT$1,524,951,000.

June 2005 - A subsidiary, YOKATA TOOL, INC. was established in California, USA, with a capital of US$2 million.

July 2005 - Assembly plant at No. 22, Road 36 was officially launched. June 2006 - Capital increase by transfer of surplus and employee bonus of NT$337,245,000, and capital amount was NT$1,862,196,000.
November 2008 - 7,993,000 treasury shares were written down, and the paid in capital after capital reduction was NT$1,782,266,000.
April 2009 - 2,698,000 treasury shares were written down, and the paid in capital after capital reduction was NT$1,755,286,000.
August 2009 - 2,010,000 treasury shares were written down, and the paid in capital after capital reduction was NT$1,735,186,000.
February 2010 - 10,934,000 treasury shares were written down, and the paid in capital after capital reduction was NT$1,625,846,000.
July 2010 - 2,954,000 treasury shares were written down, and the paid in capital after capital reduction was NT$1,596,306,000.
November 2010 - 654,000 treasury shares were written down, and the paid in capital after capital reduction was NT$1,589,766,000.
March 2012 - 3,092,000 treasury shares were written down, and the paid in capital after capital reduction was NT$1,558,846,000.
July 2012 - 2,158,000 treasury shares were written down, and the paid in capital after capital reduction was NT$1,537,266,000.
December 2012 - 437,000 treasury shares were written down, and the paid in capital after capital reduction was NT$1,532,896,000.
August 2015 - 10% capital reduction in cash, paid in capital after reduction is NT$1,379,666,400.
September 2019 - Capital increase by transfer of employee bonus for 610,000 shares, and the paid in capital after the capital increase was NT$1,385,706,400.

In the most recent year and up to the date of publication of the annual report, significant changes in the mode of operation or business content, and other important matters that may affect shareholders' equity, and their impact on the company: none

Chapter 3 Corporate Governance Report

I

Organization

(I) Organizational structure

BASSO INDUSTRY CORP.

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(II) Responsibilities and Functions of Major Departments

Department	Department	Responsibilities
Board of Directors		Decision-making over business strategies, approving various rules and regulations, reviewing budgets and other functional authorities pursuant to lawsandthe Shareholders' Meeting.
Remuneration Committee		Evaluates the remuneration policy and system of the directors, supervisors and managers professionally and objectively and make suggestions to the Board of Directors accordinglyforpolicy-makingreference.
Internal Audit Office		In charge of investigating and evaluating the implementation of the Company's internal control system and to assess operational efficiency, and to providerecommendationsfor improvement.
President's Office		Overall planning and implementation of resolutions of the board of directors, and assisting the department heads to promote the Company's business.
Environmental Safety Office		Responsible for environmental safety maintenance of the Company.
Business Division		Responsible for the promotion of related products of the Company.
R&D Division		Master the market and customer needs, and constantly develop and design newproducts.
Factory Affair Division	Production Department	Responsible for product assembly and finished product inspection.
	Logistics Department	Responsible for raw material purchasing, inventory management and productionscheduling control.
Magnesium Alloy Business Division	Mold Flow Department	Responsible for mold flow analysis, manufacturing and OEM of non- company products.
	Die Casting Department	Responsible for the Company's product manufacturing process and non- company productOEM.
	Painting Department	Responsible for the Company's product manufacturing process and non- company product OEM.
	Maching Department	Responsible for the Company's product manufacturing process and non- company product OEM.
	Plastic Division	Responsible for the production of plastic parts, foaming process of componentsandnon-company products OEM.
Heat Treatment Department		Responsible for the heat treatment of the Company's mold, parts and non- company products.
Quality Assurance Department		Responsible for ensuring the quality of the Company's products (including parts and finishedproducts).
Human Resource Unit		Responsible for the Company's human resource and affairs procurement.
General Affairs Unit		Responsible for the maintenance, safety and health of the Company.
Finance and Accounting Department		Responsible for accounting, tax and budget processing, product cost calculation, cost related information provision, capital allocation, long- term and short-term investment and otherbusinesses.
IT Department		Responsible for the purchase of computer software and hardware, program modification and maintenance, and the smooth operation of computers in the Company.
Planning Department		Responsible for project research assigned by the Company.

II Directors, Supervisors, and Management Team

(I) Directors and Supervisors

1. Director and Supervisors

II Directors, Supervisors, and Management Team (I) Directors and Supervisors 1. Director and Supervisors	II Directors, Supervisors, and Management Team (I) Directors and Supervisors 1. Director and Supervisors	II Directors, Supervisors, and Management Team (I) Directors and Supervisors 1. Director and Supervisors	II Directors, Supervisors, and Management Team (I) Directors and Supervisors 1. Director and Supervisors	II Directors, Supervisors, and Management Team (I) Directors and Supervisors 1. Director and Supervisors	II Directors, Supervisors, and Management Team (I) Directors and Supervisors 1. Director and Supervisors	II Directors, Supervisors, and Management Team (I) Directors and Supervisors 1. Director and Supervisors
																	May2,2020
Title (Note 1)	Nationality/ place of registration	Name	Gender	Date Elected (Appointed) Date	Length of Period	Date first elected (Note 2)	Shareholding when elected		Current shareholding		Spouse & minor shareholding		Shareholding by nominees		Experience (education) (Note 3)	Other position concurrently held at the Company or other companies	Executives, directors or supervisors who are spouses or within the second degree of kinship			Remarks (Note 4)
							Shares	%	Shares	%	Shares	%	Shares	%			Title	Name	Relation
Director	Republic of China	Ba Wei Investment Co.,Ltd.	--	2018/06/28	3 years	1996/11/29	13,656,448	9.90	13,507,138	9.75	N/A	N/A	Nil	0	N/A	N/A	N/A	N/A	N/A
Corporate Representative of Directors	Republic of China	Ming-da Lai	Male				149,310	0.11	149,310	0.11			Nil	0	National Taichung University Chief Judge of Taichung District Court	Chairman	Director Supervisors Director Director	Ming-xing Lai Wei-ting Chang Bo-yan Lai Bo-feng Lai	Brothers Sister- in-law Son Son	Increase the number of independent directors
											1,093,534	0.79

Director	Republic of China	Ming-xing Lai	Male	2018/06/28	3 years	2009/06/19	1,220,313	0.88	1,220,313	0.88			Nil	0	President, Drill Shun Industry Inc.	Responsible person, Ding Xing Investment	Chairman Supervisors	Ming-da Lai Wei-ting Chang	Brothers Spouse
											1,378,100	0.99

Director	Republic of China	Zhong-xiung Hong	Male	2018/06/28	3 years	2003/5/27	93,275	0.07	93,275	0.07			Nil	0	Distributor of Wei Chuan Foods	Nil	Nil	Nil	Nil
											3,514	0

Director	Republic of China	Bo-yan Lai	Male	2018/06/28	3 years	2003/5/27	2,097,831	1.52	2,132,831	1.54			Nil	0	Graduated from College of Law, Taiwan National University	President	Chairman Director	Ming-da Lai Bo-feng Lai	Father Brothers	Increase the number of independent directors
											0	0

Director	Republic of China	Bo-feng Lai	Male	2018/06/28	3 years	2015/6/22	2,971,826	2.15	2,991,826	2.16			Nil	0	Graduated from Department of Industrial Engineering and Service Management, Chienkuo TechnologyUniversity	Deputy President	Chairman Director	Ming-da Lai Bo-yan Lai	Father Elder Brother
											0	0

Director	Republic of China	Qi-wen Lin	Male	2018/06/28	3 years	2015/6/22	1,200	0.001	16,200	0.01			Nil	0	Engineer of FI TOOLING	AVP, Quality Assurance Department	Nil	Nil	Nil
											0	0

Director	Republic of China	Hong-yi Chen	Male	2018/06/28	3 years	New office assumed	0	0	28,000	0.02			Nil	0	Project Manager of Coretronic Corporation	Sales Manager	Nil	Nil	Nil
											0	0

Director	Republic of China	Fu-luo Huang	Male	2018/06/28	3 years	New office assumed	0	0	15,000	0.01			Nil	0	Assistant to President of	Heat Treatment	Nil	Nil	Nil
											0	0
															Kings Yao Industrial	Manager

Independent Director	Republic of China	Chun-zhong Lian	Male	2018/06/28	3 years	2015/6/22	2,203	0.002	2,203	0			Nil	0	Certified Public Accountants	Members of the Remuneration Committee Independent director of DataVan International Corporation	Nil	Nil	Nil
											0	0

Independent Director	Republic of China	Zheng-nan Shen	Male	2018/06/28	3 years	2017.06.28	1,524	0.001	3,524	0			Nil	0	Professor of Cheng Shiu University Electrical Engineering	Members of the Remuneration Committee	Nil	Nil	Nil
											15,000	0.01

Supervisor	Republic of China	Wei-ting Chang	Female	2018/06/28	3 years	2009/06/19	1,378,100	1.00	1,378,100	0.99			Nil	0	Kaohsiung Third Credit Co-operative	Nil	Chairman Director	Ming-da Lai Ming-xing Lai	Spouse of brother- in-law
											1,220,313	0.88

Supervisor	Republic of China	Zi-ling Ye	Female	2018/06/28	3 years	New office assumed	0	0	0	0			Nil	0	Accountant of Yu Feng ChemistryIndustryCo.	Nil	Nil	Nil	Nil
											16,000	0.01

Supervisor	Republic of China	Xiao-ling Lin	Female	2018/06/28	3 years	New office assumed	0	0	0	0			Nil	0	ICU Therapist of Taichung Cheng Ching Hospital	Nil	Nil	Nil	Nil
											5,000	0

Note 1: For the institutional shareholders, their names and representatives shall be listed (for representatives, the names of the shareholders and their representatives shall be indicated) and listed in Table 1. Note 2: Fill in the time as the company's director or supervisor for the first time. Any interruption period during the term shall be noted.

Note 3: For experiences relevant to the current position, if the person held a position in the accounting firm providing audit services to the Company or in any affiliated companies during the above-mentioned periods, his/ her title and job responsibilities shall be specified.
Note 4: Where the Chairman of the Board of Directors and the President or person of an equivalent post (the highest level manager) of a company are the same person, spouses, or relatives within the first degree of kinship, an explanation shall be given of the reason for, reasonableness, necessity thereof, and the measures adopted in response thereto ((for example, increase the number of independent directors, and more than half of the directors should not be employees or managers).
The Chairman and President of the Company are first-degree relatives. Mr. Bo-yan Lai, the current President, used to hold the post of Vice President of Business and R&D. due to his excellent professional and leadership ability in the past, the Company's performance in the past few years has reached the set goal. Since the former President retires, Mr. Bo-yan Lai is appointed by the management team of the board of directors of the Company as the President. The Company plans to increase one independent director by the end of 2023. 

2. Directors’ and Supervisors' Professional Qualifications and Independence Analyses

Qualification Name (Note 1)	together with at Meets one of the	least five years of work experience following professional qualification requirements,	least five years of work experience following professional qualification requirements,				Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)				Number of other public companies where the individual concurrently serves as an independent director
	Currently serving as an instructor or higher post in a private or public college or university in the field of business, law, finance, accounting, or the business sector of the company	Currently serving as a judge, prosecutor, lawyer, accountant, or other professional practice or technician that must undergo national examinations and specialized license	Work experience necessary for business administration, legal affairs, finance, accounting, or business sector of the company	1	2	3	4	5	6	7	8	9	10	11	12
Ming-da Lai																Nil
Ming-xingLai																Nil
Zhong-xiungHong																Nil
Bo-yan Lai																Nil
Bo-fengLai																Nil
Qi-wen Lin																Nil
Hong-yi Chen																Nil
Fu-luo Huang																Nil
Chun-zhongLian																1
Zheng-nan Shen																Nil
Wei-tingChang																Nil
Zi-ling Ye																Nil
Xiao-lingLin																Nil

Note 1: The number of spaces shall be adjusted subject to the actual circumstances.

Note 2: Directors and Supervisors who meet the following qualifications two years before the assumption of office and during the office term shall put a “” in the appropriate space.  (1) Not an employee of the Company or any of its affiliates.
(2) Not a director or supervisor of the company or an affiliated business (the same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, or a subsidiary of the same parent company, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary).
(3) Not a natural person shareholder who holds more than one percent (1%) of issued shares or is ranked top ten in terms of the total quantity of shares held, including the shares held in the name of the person’s spouse, minor children, or in the name of others.
(4) Not a manager listed in (1) or a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship listed in (2) and (3).
(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of issued shares of the company or of a corporate shareholder that ranks among the top five in shareholdings (Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.).
(6) Not a director, supervisor or employees of another company controlled by the same person with more than half of the Company's director seats or voting shares. (Not applicable in

cases where the person is an independent director of the Company, its parent company, or any subsidiary or a subsidiary of the same parent company, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.)

(7) Not a director, supervisor, or an employee of a company where the chairman, president or any equivalent position are held by the same person or by his/her spouse separately. (Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary, or a subsidiary of the same parent company, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.)
(8) Not a director, supervisor, manager, or shareholder holding more than 5% of shares of a company or institution which corresponds with the Company financially or in terms of business. (The same does not apply, however, in cases where a company or institution holds more than 20 percent but less than 50 percent of sharers and the person is an independent director of the company, its parent company, or any subsidiary, or a subsidiary of the same parent company, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.)
(9) Not a professional individual, nor an owner, partner, director, supervisor, or managerial officer, and the spouse thereof, of a sole proprietorship, partnership, company, or institution that provides auditing service or commercial, legal, financial, or accounting services with a cumulative compensation not exceeding NT$500 thousand in the past two years to the Company or any of its affiliate. However, members of the special committee on remuneration, public acquisition review, or merger and acquisition who perform their functions and powers in accordance with the provisions of the Securities and Exchange Act or Business Mergers and Acquisitions Act and other relevant regulations shall not be subject to this provision.
(10) Not a spouse or a relative within the second degree of kinship with any director.
(11) Where none of the circumstances in the subparagraphs of Article 30 of the Company Act applies.
(12) Where the person is not elected in the capacity of the government, a juristic person, or a representative thereof as provided in Article 27 of the Company Act.

3. Major shareholders of Legal Persons as Shareholders: May 2, 2020 Name of Corporate Shareholder (Note 1) Major Shareholders of Institutional Shareholder (Note 2) Director -- representative of Ba Wei Investment Co., Ltd.: Ming-da Lai Ming-da Lai (25.57%), Shu-xiang Liu (9.35%), Bo-yan Lai (33.62%), Bo-feng Lai (31.46%)	3. Major shareholders of Legal Persons as Shareholders: May 2, 2020 Name of Corporate Shareholder (Note 1) Major Shareholders of Institutional Shareholder (Note 2) Director -- representative of Ba Wei Investment Co., Ltd.: Ming-da Lai Ming-da Lai (25.57%), Shu-xiang Liu (9.35%), Bo-yan Lai (33.62%), Bo-feng Lai (31.46%)
Name of Corporate Shareholder (Note 1)	Major Shareholders of Institutional Shareholder (Note 2)
Director -- representative of Ba Wei Investment Co., Ltd.: Ming-da Lai	Ming-da Lai (25.57%), Shu-xiang Liu (9.35%), Bo-yan Lai (33.62%), Bo-feng Lai (31.46%)

Note 1: If the Director or supervisor is a representative of an institutional shareholder, his/her name shall be specified.

Note 2: Please fill in the name and the shareholding percentage of the major shareholders of institutional shareholders (shareholders with the 10 highest shareholding percentage). If the major shareholders are legal entities, information shall be provided in the following table.
Note 3: For corporate shareholders who are not under the organization of the Company, the name and shareholding of the shareholders shall be disclosed (i.e. name of the investor or donor and their investment or donation ratio).

4. Major shareholder of the major corporate shareholder

 Not applicable.

May 2, 2020

(II) President, Deputy President, Assistant Manager, and Supervisors of Departments and Branch Agencies

Title (Note 1)	Nationality	Name	Gender	Date elected	Shareholding	Shareholding	Spouse/minor shareholding	Spouse/minor shareholding	Shareholding by nominees	Shareholding by nominees	Major Education and Work Experience (Note 2)	Other position concurrently held at the Company or other companies	Managers who are spouses or within the second degree of kinship	Managers who are spouses or within the second degree of kinship	Managers who are spouses or within the second degree of kinship	Remarks (Note 3)
					Shares	%	Shares	%	Shares	%			Title	Name	Relation
President	Republic of China	Bo-yan Lai	Male	2018.08.23	2,132,831	1.54	0	0	Nil	0	Graduated from College of Law, Taiwan University	Nil	Deputy President	Bo-feng Lai	Brothers	Increase the number of independent directors
Senior Manager of Sales Division	Republic of China	Yao-sheng Shen	Male	2002.01.01	381,250	0.28	22,609	0.02	Nil	0	Deputy Manager, Nan Yi Information	Nil	Nil	Nil	Nil	Nil
AVP of Magnesium Alloy Business Division	Republic of China	Jin-xing Chen	Male	2002.01.01	11,088	0	0	0	Nil	0	Factory manager of Taichi Machine Tool Works, Ltd.	Nil	Nil	Nil	Nil	Nil
Vice President of Factory Affairs Division	Republic of China	Bo-feng Lai	Male	2016.05.01	2,991,826	2.16	0	0	Nil	0	Graduated from Department of Industrial Engineering and Service Management, Chienkuo TechnologyUniversity	Nil	President	Bo-yan Lai	Brothers	Nil
AVP, Quality Assurance Department	Republic of China	Qi-wen Lin	Male	2016.05.01	16,200	0.01	0	0	Nil	0	Engineer of FI TOOLING	Nil	Nil	Nil	Nil	Nil
Heat Treatment Manager	Republic of China	Fu-luo Huang	Male	2016.05.01	15,000	0.01	0	0	Nil	0	Assistant to President of Kings Yao Industrial	Nil	Nil	Nil	Nil	Nil
Manager, Manufacturing Department	Republic of China	Yi-zheng Huang	Male	2016.05.01	15,000	0.01	0	0	Nil	0	Engineer of Fuxin Plastic Quality Assurance	Nil	Nil	Nil	Nil	Nil
Deputy manager of Information Management Department	Republic of China	Ya-hui Lu	Female	2008.05.01	6,000	0	0	0	Nil	0	Program designer of Falcon Machine Tools Co.	Nil	Nil	Nil	Nil	Nil
Deputy Manager, Department of Finance and Accounting	Republic of China	Zhi-biao Chen	Female	2018.06.01	10,042	0	0	0	Nil	0	Junior Manager of Basso Industry Corp. Accounting	Nil	Nil	Nil	Nil	Nil
Audit Supervisor	Republic of China	Bao-yuan Wang	Male	2007.12.03	10,000	0	0	0	Nil	0	Product Manage of Acer Computer	Nil	Nil	Nil	Nil	Nil

Note 1: Information regarding President, Deputy President, Assistant Vice Presidents and managers of departments and branches, or equivalent positions shall be disclosed regardless of the job titles. Note 2: Work experience of anyone in the table above that are related to their current positions, e.g. previous employment at the Company's CPA firms or affiliates, shall be disclosed with detailed job titles and responsibilities.

Note 3: If the chairman of the Board and the general manager or their equivalent (chief manager) are the same person, each other’s spouse or a first-degree relative, the reasons, reasonableness, necessity and relevant measures to be taken shall be stated. (For example, increase the number of independent directors, and more than half of the directors should not be employees or managers.)

 The Chairman and President of the Company are first-degree relatives. Mr. Bo-yan Lai, the current President, used to hold the post of Vice President of Business and R&D. due to his excellent professional and leadership ability in the past, the Company's performance in the past few years has reached the set goal. Since the former President retires, Mr. Bo-yan Lai is appointed by the management team of the board of directors of the Company as the President. The Company plans to increase one independent director by the end of 2023.

(III) Remuneration of Directors, Supervisors, President, and Vice Presidents in the Most Recent Fiscal Year

1. Remuneration to Directors

Schedule I-2 (Disclose of Remuneration)

Remuneration of General Directors, Independent Directors, Supervisors, President and Vice President

In case of any of the following circumstances, the company shall disclose the names and remunerations of its directors or supervisors individually; in addition, the company may choose to disclose the names and remunerations in the form of aggregate corresponding range, or in the form of individual disclosure of names and remunerations (in the case of individual disclosure, please fill in the titles, names and amounts separately, without filling in the remuneration range table):
(1) If there has been an after tax loss in an individual or stand-alone financial report for the last three years, the name and remuneration of the "director and supervisor" shall be disclosed separately, except for the "note 1" if the individual or standalone financial report for the last three years has generated after tax net profit and is sufficient to cover the accumulated loss.
(2) A Company with Directors whose shareholding percentages have been insufficient for three (3) or more consecutive months during the most recent fiscal year shall disclose the remuneration of individual Directors. A Company with Supervisors whose shareholding percentages have been insufficient for three (3) or more consecutive months during the most recent fiscal year shall disclose the remuneration of individual Supervisors. [Note 2]
(3) A Company with an average ratio of shares pledged by Directors or Supervisors that exceeds 50 percent in any three (3) months during the most recent fiscal year shall disclose the remuneration paid to each individual Director or Supervisor who owns a ratio of shares pledged that exceeds 50 percent for each of these three months. [Note 3]
(4) If the total amount of remuneration received by all the directors and supervisors of a company from all the companies listed in its financial statements exceeds two (2) percent of its net income after taxes, and the amount of remuneration received by any individual director or supervisor exceeds NT$ 15 million, the company shall disclose the amount of remuneration paid to individual directors or supervisors. (Note: the remuneration of directors and supervisors shall be calculated based on the "director's remuneration" plus the "supervisor's remuneration" item in the schedule, excluding the relevant remuneration received by concurrent serving employees.)
(5) Where the results of the corporate governance evaluation of a TWSE- or TPEx- listed company in the most recent year are at the last level, or where the trading method has been changed, the trading has been stopped, or the listing of the company has been terminated in the most recent year and up to the date of printing the annual report, or where the company's corporate governance evaluation committee has approved that it should not be evaluated.
(6) The average annual salary of full-time employees who are not in charge of supervisor positions in the most recent year of a TWSE- or TPEx-listed is less than NT$500,000.
Where a TWSE- or TPEx-listed company has any of the circumstances referred to in (1) or (5) of the preceding paragraph, it shall disclose separately the remuneration information of the top five supervisors (such as the general manager, deputy general manager, chief financial officer, etc.).
[Note 1] for example, taking the annual report of 2019 prepared for the shareholders' meeting in 2020 as an example, the company shall disclose the after tax losses of individual or stand-alone financial reports in any year from 2017 to 2019 in an individual way; however, although the individual or stand-alone financial reports in 2017 and / or 2018 have after tax losses, the after tax net profit of individual or stand-alone financial reports in 2019 is enough to cover the accumulated losses, individual disclosure may not be adopted.
[Note 2] For example, taking the annual report of 2009 prepared by the shareholders' meeting of 2010 as an example, the company shall disclose separately if there is insufficient shareholding of directors or supervisors for more than 3 consecutive months from January 2009 to December 2009; and if there is insufficient shareholding of directors or supervisors for more than 3 consecutive months in January 2009 (that is, in November, December, 2008 and January, 2009, for three consecutive months), the method of individual disclosure shall also be adopted.
[Note 3] for example, taking the annual report of 2009 prepared for the 2010 shareholders' meeting as an example, if the average pledged ratio of all directors in each month is greater than 50% in February, May and August of 2009 during the period of 2009, the remuneration of individual directors with the pledged ratio greater than 50% in February, May and August of 2009 should be disclosed; in addition, in the event that the average pledged ratio of a supervisor is greater than 50% in any three months, the remuneration of an individual supervisor whose pledged ratio is greater than 50% in each such month shall be disclose.
※ The average ratio of share pledging by all Directors per month: Share pledging by all Directors/shares held by all Directors (including retained decision-making trust shares). The average ratio of share pledging by all Supervisors per month: Share pledging by all Supervisors/shares held by all Supervisors (including retained decision-making trust shares).

Remuneration for general directors and independent directors (name and remuneration are disclosed individually)

Unit: NT$’000

Title	Name	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Remuneration	Ratio of Total Remuneration (A, B, C, and D) to Net Income after Tax (Note 10)	Ratio of Total Remuneration (A, B, C, and D) to Net Income after Tax (Note 10)	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Total Remuneration (A+B+C+D+E+F+G) as a % of 2018 Net Income After Tax (Note 10)	Total Remuneration (A+B+C+D+E+F+G) as a % of 2018 Net Income After Tax (Note 10)	Whether the individual receives compensation from investees other than the Company's subsidiaries (Note 11)
		Remuneration (A) (Note 2)			Severance pay and pension (B)		Remuneration to Directors (C) (Note 3)		Allowances (D) (Note 4)						Salaries, Bonus and Special Expenses (E) (Note 5)			Retirement pension (F)		Employee Rewards (G) (Note 6)
		The Company	All Companies In Financial Statements (Note 7)		The Company	All Companies In Financial Statements (Note 7)	The Company	All companies listed in this Financial Report (Note 7)	The Company		All companies listed in this Financial Report (Note 7)		The Company	All companies listed in this Financial Report (Note 7)	The Company	All companies listed in this Financial Report (Note 7)		The Company	All companies listed in this Financial Report (Note 7)	The Company		All companies listed in this Financial Report (Note 7)		The Company	All companies listed in this Financial Report (Note 7)
																				Cash	Stock	Cash	Stock
Director	Ba Wei Investment Co.,Ltd.	13,613	13,613				1,000	1,000	120		120		2.57%	2.57%										2.57%	2.57%	Nil
Corporate Representative of Directors	Ming-da Lai
Director	Ming-xingLai						1,000	1,000	120		120		0.2%	0.2%										0.2%	0.2%	Nil
Director	Zhong-xiungHong						1,000	1,000	120		120		0.2%	0.2%										0.2%	0.2%	Nil
Director	Bo-yan Lai						1,000	1,000	120		120		0.2%	0.2%	12,891	12,891				1,599		1,599		2.72%	2.72%	Nil
Director	Bo-fengLai						1,000	1,000	120		120		0.2%	0.2%	3,103	3,103				1,599		1,599		1.02%	1.02%	Nil
Director	Qi-wen Lin						1,000	1,000	120		120		0.2%	0.2%	1,560	1,560				1,020		1,020		0.65%	0.65%	Nil
Director	Hong-yi Chen						1,000	1,000	120		120		0.2%	0.2%	1,903	1,903				868		868		0.68%	0.68%	Nil
Director	Fu-luo Huang						1,000	1,000	120		120		0.2%	0.2%	1,450	1,450				872		872		0.6%	0.6%	Nil
Independent Director	Chun-zhong Lian								360		360		0.06%	0.06%										0.06%	0.06%	Nil
Independent Director	Zheng-nan Shen								360		360		0.06%	0.06%										0.06%	0.06%	Nil
1. Please illustrate the policies, systems, standards and structure of i 2. Except as disclosed in the above chart, remuneration to directors				ndependent directors' remuneration, as well as the correlation between the remuneration and the responsibilities, risks, and time: received due to the service provided to all companies listed in the financial statement in the most recent year: None
										Range of Remuneration of Directors
Range of remuneration paid to directors										Names of directors
				Total						of(A+B+C+D)										Total of(A+B+C+D+E+F+G)
				The Company (Note 8)								All companies included in the financial statements (Note 9)H					The Company (Note 8)						All companies listed in the financial report (Note 9)I
Less than NT$1,000,000				1. Chun-zhong Lian 2. Zheng-nan Shen								1. Chun-zhong Lian 2. Zheng-nan Shen					1. Chun-zhong Lian 2. Zheng-nan Shen						1. Chun-zhong Lian 2. Zheng-nan Shen
NT$1,000,000 (inclusive)~NT$2,000,000 (exclusive)				1. Ming-xing Lai 2. Zhong-xiong Hong 3. Bo-yan 4. Bo-feng Lai 5. Qi-wen Lin 6. Hong-yi Chen 7. Fu-luo Huang8. Ba Wei Investment Co.,Ltd.						Lai		1. Ming-xing Lai 2. Zhong-xiong Hong 3. Bo-yan Lai 4. Bo-feng Lai 5. Qi-wen Lin 6. Hong-yi Chen 7. Fu-luo Huang8. Ba Wei Investment Co.,Ltd.					1. Ming-xing Lai 2. Zhong-xiong Hong 3. Ba Wei Investment Co, Ltd.						1. Ming-xing Lai 2. Zhong-xiong Hong 3. Ba Wei Investment Co, Ltd.
NT$2,000,000 (inclusive) ~ NT$3,500,000 (exclusive)																	1. Fu-luo Huang						1. Fu-luo Huang
NT$35,000,000(inclusive)~NT$5,000,000(exclusive)																	1 Qi-wen Lin 2. Hong-yi Chen						1 Qi-wen Lin 2. Hong-yi Chen
NT$5,000,000(inclusive)~ NT$10,000,000(exclusive)																	1. Bo-feng Lai						1. Bo-feng Lai
NT$10,000,000 (inclusive)~NT$15,000,000 (exclusive)				1. Representative of Ba Wei Investment Co., Ltd.: Ming-da Lai								1. Representative of Ba Wei Investment Co., Ltd.: Ming-da Lai					1. Representative of Ba Wei Investment Co., Ltd.: Ming-da Lai						1. Representative of Ba Wei Investment Co., Ltd.: Ming-da Lai
NT$15,000,000(inclusive)~NT$30,000,000(exclusive)																	1. Bo-yan Lai						1. Bo-yan Lai
NT$30,000,000(inclusive)~NT$50,000,000(exclusive)
NT$50,000,000(inclusive)~NT$100,000,000(exclusive)
More than NT$100,000,000
Total				11								11					11						11

Note 1: The names of Directors shall be listed separately (names of institutional shareholders and representatives shall be listed separately), the general directors and independent directors shall be listed respectively, and the payment amount shall be disclosed collectively. If a Director concurrently serves as a President or Deputy President, his/her name and the amount of remuneration paid to him/her shall be listed in this table and Table (3-1) or table () and (3-2-2) below.3-2-1

Note 2: The amount of the remuneration paid to directors in the most recent year (including director's salaries, job remuneration, severance, bonuses, and incentives etc.).

Note 3: The amount of the remuneration paid to directors in the most recent year as approved by the Board of Directors shall be filled out.

Note 4: Business expenses paid out to Directors in the most recent year (including transport, special expenses, various allowances, accommodation, vehicles, and provision of physical goods and services). If housing, vehicle or other means of transportation, or personal expenses are provided, the nature and cost of the asset provided, the rental calculated based on the actual cost or the fair market value, fuel, and other payments shall be disclosed. If a driver is provided, disclose compensation paid to the driver in a note; however, do not calculate such as part of executive compensation.
Note 5: Salary, job-related allowances, separation pay, various bonuses, incentives, transportation allowance, special allowance, various allowances, accommodation allowance and driver allowance received by Directors who concurrently serve as employees (including as President, Deputy President, other managerial officer and an employee) in the most recent fiscal year. If housing, vehicle or other means of transportation, or personal expenses are provided, the nature and cost of the asset provided, the rental calculated based on the actual cost or the fair market value, fuel, and other payments shall be disclosed. If a driver is provided, disclose compensation paid to the driver in a note; however, do not calculate such as part of executive compensation. In addition, any salary listed under Share-Based Payment of IFRS 2, including the warrants obtained by employees, new shares with restricted employee power and subscription of shares for cash capital increase, shall also be included in remuneration.
Note 6: For Directors who concurrently serve as employees (including President, Vice President, other managerial officers, and employees) and receive remuneration of employees (including stock and cash) for the past year, disclose the amount of remuneration distributed to employees after being approved by the Board for the past year. For amounts that are unable to estimate, propose the distribution amount for the year based on the actual distribution made last year, and fill out the Table 1-3.
Note 7: Please disclose the aggregate amount of the remuneration to the Company's Directors from the companies included in the consolidated financial statements (including the Company).

Note 8: When the aggregate amount of the remuneration to the Company's Directors is disclosed, the name of the Director shall also be disclosed in the relevant range.

Note 9: When the aggregate amount of the remuneration paid to the Company's Directors from all companies in the consolidated financial statements (including the Company) is disclosed, the name of the Director shall also be disclosed in the relevant range. Note 10: Net profit after tax refers to the net profit after tax in the most recent parent company only or individual financial report.

Note 11: a. This field should clearly indicate the amount of remuneration received by the Company’s directors from a reinvestment business other than a subsidiary or the parent company (if not, please fill in “none”).

b. If the Directors of the Company receive remuneration from investees other than subsidiaries or parent company, the amount of remuneration received by the Directors from investees other than subsidiaries or parent company shall be combined into column I of the Table of Range of Remuneration and this column shall be renamed as "Parent Company and All Investment Companies".
c. Remuneration refers to rewards, compensations (including compensation to company employees, Directors or Supervisors) and allowances from professional practice received by the Director from other non-subsidiary companies invested by this Company or parent company for their services as Directors, supervisors, or managers.
The remuneration disclosed in this table is different from the concepts stipulated in the Income Tax Act. The purpose of this table is for information disclosure, not taxation

2. Remuneration of Supervisors

Supervisor's remuneration (individual disclosure of name and remuneration)

		Supervisor's remuneration (individual disclosure of name and remuneration)	Supervisor's remuneration (individual disclosure of name and remuneration)	Supervisor's remuneration (individual disclosure of name and remuneration)	Supervisor's remuneration (individual disclosure of name and remuneration)	Supervisor's remuneration (individual disclosure of name and remuneration)	Supervisor's remuneration (individual disclosure of name and remuneration)	Supervisor's remuneration (individual disclosure of name and remuneration)	Supervisor's remuneration (individual disclosure of name and remuneration)	Supervisor's remuneration (individual disclosure of name and remuneration)
		Unit: NT$’000 Supervisor’s remuneration Proportion of NIAT after summing items A, B, and C (Note 8) Compensation paid to directors from an invested company other than the Company’s subsidiaries or parent company (Note 9) Remuneration (A) (Note 2) Compensation (B) (Note 3) Allowances (C) (Note 4) The Company All companies included in the financial statements (Note 5) The Company All companies included in the financial statements (Note 5) The Company All companies included in the financial statements (Note 5) The Company All companies listed in this Financial Report 1,000 1,000 120 120 0.2% 0.2% Nil 1,000 1,000 120 120 0.2% 0.2% Nil 1,000 1,000 120 120 0.2% 0.2% Nil
Title	Name	Supervisor’s remuneration						Proportion of NIAT after summing items A, B, and C (Note 8)		Compensation paid to directors from an invested company other than the Company’s subsidiaries or parent company (Note 9)
		Remuneration (A) (Note 2)		Compensation (B) (Note 3)		Allowances (C) (Note 4)
		The Company	All companies included in the financial statements (Note 5)	The Company	All companies included in the financial statements (Note 5)	The Company	All companies included in the financial statements (Note 5)	The Company	All companies listed in this Financial Report
Supervisor	Wei-tingChang			1,000	1,000	120	120	0.2%	0.2%	Nil
Supervisor	Zi-lingYe			1,000	1,000	120	120	0.2%	0.2%	Nil
Supervisor	Xiao-ling Lin			1,000	1,000	120	120	0.2%	0.2%	Nil

Table for Remuneration Ranges of Supervisors

Supervisors Compensation Bracket	Name of Supervisors	Name of Supervisors
	Total of(A+B+C)
	The Company (Note 6)	All companies in the consolidated statement(Note 7)D
Less than NT$1,000,000
NT$1,000,000(inclusive)- NT$2,000,000(exclusive)	1. Wei-tingZhang2. Zi-lingYe 3. Xiao-lingLin	1. Wei-tingZhang2. Zi-lingYe 3. Xiao-lingLin
NT$2,000,000(inclusive)- NT$3,500,000(exclusive)
NT$3,500,000(inclusive)- NT$5,000,000(exclusive)
NT$5,000,000(inclusive)~NT$10,000,000(exclusive)
NT$10,000,000(inclusive)to NT$15,000,000(exclusive)
NT$15,000,000(inclusive)- NT$30,000,000(exclusive)
NT$30,000,000(inclusive)- NT$50,000,000(exclusive)
NT$50,000,000(inclusive)- NT$100,000,000(exclusive)
More thanNT$NT$100,000,000
Total	3	3

Note 1: The names of Supervisors shall be listed separately (the names and representatives of corporate shareholders shall be listed separately) and the amounts paid shall be disclosed in a summary. Note 2: Remuneration to supervisors in the past year (including salary, additional pay, severance pay, bonuses and rewards).
Note 3: Fill in the amount of rewards approved by the Board of Directors and distributed to the supervisors in the most recent fiscal year.
Note 4: This is business expense of Supervisors in the past year (including transportation allowance, special allowance, stipends, dormitory, and car). If housing, vehicle or other means of transportation, or personal expenses are provided, the nature and cost of the asset provided, the rental calculated based on the actual cost or the fair market value, fuel, and other payments shall be disclosed. If a driver is provided, disclose compensation paid to the driver in a note; however, do not calculate such as part of executive compensation.
Note 5: The total pay to the Supervisor from all companies in the consolidated statements (including the Company) shall be disclosed.
Note 6: The name of each Supervisor shall be disclosed in the range of remuneration corresponding to the amount of all the remuneration paid to the supervisors by the company.
Note 7: The names of Supervisors paid by all companies in the consolidated statements (including the Company) shall be disclosed in their respective remuneration range.
Note 8: Net income after tax refers to net income after tax listed in the individual or stand-alone financial statements in the most recent year.
Note 9: a. Remuneration which the company's supervisors receive from other non-subsidiary invested by the Company shall be disclosed in this column. (if none, please fill in "None").
b. If Supervisors of the Company received remuneration from investees other than subsidiaries of the Company or parent company, the remuneration received by Supervisors of the Company from investees other than subsidiaries of the Company or parent company shall be included in D column of the Remuneration Range Table and the name of the field shall be changed to "Parent Company and All Reinvestment Enterprises".
c. Remunerations refer to rewards, compensations (including compensations for company employees, Directors or Supervisors) and allowances from professional practice received by the Supervisor from other non-subsidiary companies invested by the Company for their services as Directors, Supervisors, or managers.
The remuneration disclosed in this table is different from the concepts stipulated in the Income Tax Act. The purpose of this table is for information disclosure, not taxation

3. Remuneration for the President and Vice Presidents

Remuneration of President and Vice President (individual disclosure of name and remuneration) unit: NT$ thousand

Title	Name	Salary (A) (Note 2)	Salary (A) (Note 2)	Severance pay and pension(B)	Severance pay and pension(B)	Bonuses and Allowances ( C) (Note 3)	Bonuses and Allowances ( C) (Note 3)	Employee’s remuneration (D) (Note 4)	Employee’s remuneration (D) (Note 4)	Employee’s remuneration (D) (Note 4)	Employee’s remuneration (D) (Note 4)	Sum of items A, B, C and D to NIAT Ratio(%) (Note 8)	Sum of items A, B, C and D to NIAT Ratio(%) (Note 8)
		The Company	All companies listed in this Financial Report (Note 5)	The Company	All companies listed in this Financial Report (Note 5)	The Company	All companies listed in this Financial Report (Note 5)	The Company		All companies listed in this Financial Report (Note 5)		The Company	All companies included in the financial statements (Note 5)
								Cash	Stock	Cash	Stock
President	Bo-yan Lai	3,840	3,840			9,051	9,051	1,599		1,599		2.53%	2.53%
DeputyPresident	Bo-fengLai	1,218	1,218			1,885	1,885	1,599		1,599		0.82%	0.82%

＊ Regardless of job titles, positions that are equivalent to President and Deputy President (such as President, CEO, Directors, etc.) shall be disclosed.

Range of Remuneration for Presidents and Vice Presidents

	Range of Remuneration for Presidents and Vice Presidents
Range of remuneration paid to the president and vice presidents	Name of president	and vice presidents
	The Company (Note 6)	From All Consolidated Entities(Note 7)E
Less than NT$1,000,000
NT$ 1,000,000(inclusive)- NT$ 2,000,000(exclusive)
NT$ 2,000,000(inclusive)- NT$ 3,500,000(exclusive)
NT$3,500,000(inclusive)- NT$5,000,000(exclusive)	1. Bo-fengLai	1. Bo-fengLai
NT$5,000,000(inclusive)to NT$10,000,000(exclusive)
NT$10,000,000(inclusive)to NT$15,000,000(exclusive)	1. Bo-yan Lai	1. Bo-yan Lai
NT$ 15,000,000(inclusive)to NT$ 30,000,000(exclusive)
NT$ 30,000,000(inclusive)to NT$ 50,000,000(exclusive)
NT$ 50,000,000(inclusive)to NT$ 100,000,000(exclusive)
More than NT$ 100,000,000
Total

Note 1: The names of the Presidents and Deputy Presidents shall be listed separately and the amount of remuneration paid to them shall be disclosed collectively. If a Director concurrently serves as a President or Deputy President, his/her name and the amount of remuneration paid to him/her shall be listed in this table and Table (1-1) or (1-2-1) and (1-2-2) above.
Note 2: Please specify the salaries, duty allowances and severance pay paid to the President and Deputy President in the most recent fiscal year.
Note 3: Cash and non-cash compensations to the Presidents and Deputy Presidents in the most recent year, including bonus, reward, reimbursement of expenses, special allowances, various subsidies, housing and use of vehicle. If housing, vehicle or other means of transportation, or personal expenses are provided, the nature and cost of the asset provided, the rental calculated based on the actual cost or the fair market value, fuel, and other payments shall be disclosed. If a driver is provided, disclose compensation paid to the driver in a note; however, do not calculate such as part of executive compensation. In addition, any salary listed under Share-Based Payment of IFRS 2, including the warrants obtained by employees, new shares with restricted employee power and subscription of shares for cash capital increase, shall also be included in remuneration.
Note 4: It refers to compensations paid to the President and Deputy President (including stock and cash) approved by the Board of Directors in the most recent year; If such compensations cannot be estimated, an estimation for this year shall be calculated in proportion of the compensations paid last year and the amount shall be listed in Table 1-3.
Note 5: The aggregate amount of remunerations paid to the Company's Presidents and Deputy Presidents from all companies (including the Company) included in the consolidated financial statements shall be disclosed.
Note 6: Total remuneration paid to each President and Deputy President by the Company shall be disclosed and the names of the Presidents and Deputy Presidents shall also be disclosed in the proper remuneration range.
Note 7: Total compensation of various items paid to every President and Deputy President of this Company by all companies (including the Company) listed in the consolidated statement shall be disclosed. The name of the President and Deputy President shall also be disclosed in the proper compensation range.
Note 8: Net income after tax refers to net income after tax listed in the individual or stand-alone financial statements in the most recent year.

Note 9: a. Compensations which the company's President and Deputy President receive from other non-subsidiary companies invested by the Company shall be disclosed in this column. (If none, please fill in "None").
b. If the Presidents and Deputy Presidents of the Company receive remuneration from investee companies other than subsidiaries, the amount of remuneration received by the Presidents and Deputy Presidents from investment companies other than subsidiaries or parent company shall be combined into Column E of the Table for Ranges of Remuneration, and this column shall be renamed as "Parent Company and All Investment Companies".
c. Remuneration in this case refers to remuneration, bonuses (including employee, director, or supervisor bonuses), and allowances received by the president and vice presidents of the Company as the directors, supervisors, or managerial officers of invested companies other than subsidiaries or parent company.
The remuneration disclosed in this table is different from the concepts stipulated in the Income Tax Act. The purpose of this table is for information disclosure, not taxation

4. Remuneration of the top five supervisors receiving the highest payment of TWSE- and TPEx-listed companies

Remuneration of the top five supervisors receiving the highest payment of TWSE- and TPEx-listed companies (individual disclosure of name and remuneration) (Note 1)

Unit: NT$’000

														Unit: NT$’000
Title	Name	Salary (A) (Note 2)		Severance pay and pension (B)		Bonuses and Allowances ( C) (Note 3)		Employee’s remuneration (D) (Note 4)				Sum of items A, B, C and D to NIAT Ratio (%) (Note 8)		Compensation paid to directors from an invested company other than the Company’s subsidiaries or parent company (Note 9)
		The Company	All companies listed in this Financial Report (Note 5)	The Company	All companies listed in this Financial Report (Note 5)	The Company	All companies listed in this Financial Report (Note 5)	The Company		All companies listed in this Financial Report (Note 5)		The Company	All companies included in the financial statements (Note 5)
								Cash	Stock	Cash	Stock
President	Bo-yan Lai	3,840	3,840			9,051	9,051	1,599		1,599		2.53%	2.53%	Nil
Deputy President	Bo-feng Lai	1,218	1,218			1,885	1,885	1,599		1,599		0.82%	0.82%	Nil
Senior Manager of Sales Division	Yao-sheng Shen	1,026	1,026			724	724	853		853		0.45%	0.45%	Nil
AVP of Magnesium Alloy Business	Jin-xing Chen	1,020	1,020			747	747	874		874		0.46%	0.46%	Nil
AVP, Quality Assurance Department	Qi-wen Lin	1,026	1,026			534	534	1,020		1,020		0.45%	0.45%	Nil

Note 1: the "top five supervisors with the highest remuneration" refers to the Company's managers. For the recognition standards related to the managers, according to the applicable scope of the "managers" as stipulated in the Letter No. 0920001301 issued by the former Securities and Futures Commission of the Ministry of Finance on March 27, 2003. As for the determination principle of the calculation of the "top five highest remuneration", it is determined by the sum of the salaries, retirement pensions, bonuses and special expenses received by the Company's managers from all companies in the consolidated financial report, as well as the employee bonus (i.e. the sum of four items A + B + C + D), as the top five remuneration after ranking. If the director also serves as the above supervisor, this table and the above table (1-1) shall be filled in.
Note 2: fill in the salary, extra wage for job and severance pay of the top five supervisors receiving the highest payment in the most recent year.
Note 3: fill in all kinds of bonuses, incentives, traffic allowance, special fees, various allowances, dormitories, car allocation and other physical supplies of the top five supervisors receiving the highest payments in the latest year. If housing, vehicle or other means of transportation, or personal expenses are provided, the nature and cost of the asset provided, the rental calculated based on the actual cost or the fair market value, fuel, and other payments shall be disclosed. If a driver is provided, disclose compensation paid to the driver in a note; however, do not calculate such as part of executive compensation. Any salary listed under IFRS Share-Based Payment, including employee share subscription warrants, new restricted employee shares, and cash capital increase by stock subscription should also be included in remuneration.
Note 4: it is to fill in the compensation amount (including stock and cash) of the top five supervisors receiving the highest payment approved by the board of directors in the most recent year. If it cannot be estimated, the proposed distribution amount of this year shall be calculated according to the proportion of the actual distribution amount of last year, and it shall also fill in schedule 1-3.
Note 5: the total amount of remuneration paid by all companies (including the Company) to the top five supervisors with the highest remuneration of the Company in the consolidated report shall be disclosed. Note 6: Net income after tax refers to net income after tax listed in the individual or stand-alone financial statements in the most recent year.
Note 7: a. This field should clearly indicate the amount of remuneration received by the Company’s top five supervisor with the highest payments from a reinvestment business other than a subsidiary or the parent company (if none, please fill in “none”).
b. Remuneration in this case refers to remuneration, bonuses (including employee, director, or supervisor bonuses), and allowances received by the top five supervisors with the highest payment of the Company as the directors, supervisors, or managerial officers of invested companies other than subsidiaries or parent company.
The remuneration disclosed in this table is different from the concepts stipulated in the Income Tax Act. The purpose of this table is for information disclosure, not taxation

5. Employees Compensation Distributed to Management Team

Unit: NT$’000

==> picture [483 x 220] intentionally omitted <==

----- Start of picture text -----

(Note 1Title ) (Note 1Name ) [Stock Cash Total Ratio of total amount to ] net income (%)
President Bo-yan Lai
Vice President, Factory Affairs Bo-feng Lai
Yao-sheng
Senior Manager of Sales Division
Shen
AVP of Magnesium Alloy Business Jin-xing
Division Chen 0 7,205 7,205 1.26%
AVP, Quality Assurance Department Qi-wen Lin
Deputy Manager, Department of Finance Zhi-biao
and Accounting Chen
Deputy manager of Information
Ya-hui Lu
Management Department
Executive Officers
----- End of picture text -----

Note 1: Names and titles shall be disclosed separately but the amount of profit distributed can be disclosed collectively.

Note 2: Refers to compensations paid to the Managers (including stock and cash) approved by the Board of Directors in the most recent year; If such compensations cannot be estimated, an estimation for this year shall be calculated in proportion of the compensations paid last year. Net profit after income tax refers to the one in the most recent year. Where IFRSs are adopted, net profit after tax refers to the net profit after income tax recorded in the entity's or separate financial statements.

Note 3: Managerial officers herein as defined in FSC's Decree No. 0920001301 include: March 27, 2003

(1) General manager and equivalent (2) deputy general manager and equivalent
(3) AVP and equivalent (4) head of financial department

(5) Head of accounting department (6) other persons who have the right to manage affairs and sign for the company

Note 4: If any Director, President and Deputy President received employee bonus (including stocks and cash), not only Table 1-2 shall be completed, in this table shall be filled out as well.

(IV) Analysis of the total remuneration paid to the Company's Directors, Supervisors, Presidents, and Deputy Presidents by the Company and all consolidated entities in the most recent two years as a percentage of net income, and explanation on the remuneration policy, standards and packages, determination procedures, and correlation with business performance

1. Percentage analysis

Unit: NT$’000

Year Item Title	2019	2019	2019	2019	2018	2018	2018	2018
	The Company		All companies in the consolidated report		The Company		All companies in the consolidated report
	Remuneration	Percentage on the net income after tax (%)	Remuneration	Percentage on the net income after tax (%)	Remuneration	Percentage on the net income after tax (%)	Remuneration	Percentage on the net income after tax (%)
Director	23,293	4.06%	23,293	4.06%	26,107	2.53%	26,107	2.53%
Supervisors	3,360	0.59%	3,360	0.59%	3,360	0.33%	3,360	0.33%
Presidents, Vice Presidents	19,192	3.35%	19,192	3.35%	18,241	1.77%	18,241	1.77%

2. The policies, standards, and portfolios for the payment of compensation, the procedures for determining compensation, and the correlation with risks and business performance.

A. The remuneration of directors and supervisors, such as the fare and the remuneration of directors and supervisors, shall be stipulated in the articles of incorporation. The portion of the fare shall be prescribed in the articles of incorporation. The remuneration of directors and supervisors shall be determined by the board of directors. The remuneration shall be paid in accordance with the salary management measures and bonus system of the company if they hold the post and perform the business of the company.
B. The general manager's and deputy general manager's remuneration shall be paid according to the company's operating performance, profit-making status, the company's salary management measures and bonus system. The general manager's part shall be authorized by the board of directors.

III Implementation of Corporate Governance (I) Implementation of board meetings

Information on operations of the Board

The meeting of the Board of Directors was held for 5 times (A) in total in the most recent year, with the attendance of directors and supervisors as follows:

Title	Name (Note 1)	Number of attendance in person(B)	By proxy	Actual attendance rate (%) (B/A) (Note 2)	Remarks
Chairman	Ba Wei Investment Co., Ltd. Representative: Ming-da Lai	5	Nil	100%	Re-elected on June 28,2018
Director	Ming-xing Lai	4	Nil	80%	Re-elected on June 28,2018
Director	Zhong-xiung Hong	3	Nil	60%	Re-elected on June 28,2018
Director	Bo-yan Lai	4	1	80%	Re-elected on June 28,2018
Director	Bo-feng Lai	5	Nil	100%	Re-elected on June 28,2018
Director	Qi-wen Lin	5	Nil	100%	Re-elected on June 28,2018
Director	Hong-yi Chen	4	1	80%	Newly elected on June 28,2018
Director	Fu-luo Huang	5	Nil	100%	Newly elected on June 28,2018
Independent Director	Chun-zhong Lian	5	Nil	100%	Re-elected on June 28,2018
Independent Director	Zheng-nan Shen	3	Nil	60%	Re-elected on June 28,2018
Supervisor	Wei-ting Chang	3	Nil	60%	Re-elected on June 28,2018
Supervisor	Zi-ling Ye	3	Nil	60%	Newly elected on June 28,2018
Supervisor	Xiao-ling Lin	3	Nil	60%	Newly elected on June 28,2018
Other matters: I With regard to the implementation of the Board of Directors, if any of the following circumstances occur, the dates, terms of the meetings, contents of motions, all independent directors’ opinions and the Company’s handling of such opinions shall be specified: (1) Items listed in Article 14-3 of the Securities and Exchange Act. (2) In addition to the preceding matter, other resolutions of the Board of Directors on which independent directors have dissenting opinions or qualified opinions, and that are documented or issued through written statements.  In 2019, all proposals of the company have been approved by all directors (including independent directors) attending the meeting, and none of the above matters happened. II Regarding recusals of directors from voting due to conflicts of interests, the names of the directors, contents of motions, reasons for recusal, and results of voting shall be specified: None.  There is no such interest in the proposal of the board of directors of the company. III Targets for strengthening the functions of the Board of Directors (such as establishing an Audit Committee and enhancing information transparency) in the current and the most recent fiscal year and assessing implementation thereof  The Company has established the "Rules of Procedure for Board Meetings" in accordance with the "Regulations Governing Procedure for Board of Directors Meetings of Public Companies", and reported the attendance of directors at the Market Observation Post System in accordance with the regulations. The Company will set up an Audit Committee and a Remuneration Committee in 2021 to regularly review the remuneration of directors and managers.

Note 1: Where the Director or supervisor is an institution, the name of the institutional shareholder and the name of its representative shall be disclosed.
Note 2: (1) Where Directors or Supervisors resign before the end of the year, the Notes column shall be annotated with the date of resignation. Actual presence rate (%) shall be calculated using the number of Board meetings convened and actual presence during the term of service.

(2) If any Director or Supervisor were re-elected before the end of the year, the incoming and former Directors and Supervisors shall be both listed in the table. In addition, please specify in the Remark column the reelection date and whether the Director or Supervisor are re-elected, newly elected, or Directors or Supervisors who won a by-election. Actual attendance rate (%) shall be calculated using the number of Board meetings convened and actual attendance during the term of office.

(II) Operation of the Audit Committee or Supervisors' participation in the operations of Board meetings:

1. Operations of the Audit Committee: The Company will set up an Audit Committee in 2021.

2. Supervisors' participation in the Board of Directors

Supervisors' Participation in Board Meetings

A total of 5 (A) meetings of the Board of Directors were held in the most recent year. The attendance was as follows:

as as follows:
Title	Name	Number of attendance inperson(B)	Attendance Rate (%) (B/A) (Note)	Remarks
Supervisor	Wei-ting Chang	3	60%	Re-elected on June 28,2018
Supervisor	Zi-ling Ye	3	60%	Newly elected on June 28, 2018
Supervisor	Xiao-ling Lin	3	60%	Newly elected on June 28, 2018
Other matters: 1. Composition and responsibilities of Supervisors: (1) Communication between the supervisors and employees and shareholders (e.g. channel and method of communication). The company convenes a labor management coordination meeting on a regular basis. The supervisor may participate in the meeting according to the actual needs and communicate fully with the both parties of employees and employers. With the shareholders, the opinions of the shareholder and the supervisor can be fully expressed through the spokesman's mailbox or the annual shareholders' meeting. (2) Communication between the Supervisors and the internal audit manager or CPAs (such as matters, methods, and results of communication on the finances and state of business of the Company): Supervisors may, when necessary, express their opinions to the internal audit supervisor at the board of directors or through email. In addition, after the completion of the semi annual and annual audit, the CPA will make a complete explanation of the audit results with the company's management. The Supervisor can also understand and communicate through this meeting when necessary. 2. If supervisors who attend Board of Directors' meetings have any opinions, the date and session of the Board of Directors' meeting, the content of proposals, Board of Directors resolutions and the Company's actions in response to supervisors’ opinions shall be stated. None of the above.

Note:

If any Supervisors resign from the Company before the end of the year, the date of resignation shall be stated in the remark column. The Attendance Rate (%) shall be calculated by Attendance in Person during the term of service.
If Supervisors were re-elected before the end of the year, both the incoming and outgoing Supervisors shall be listed accordingly. The Notes column shall be annotated whether the Supervisor was outgoing, incoming, or re-elected as well as the date of re-election. The Attendance Rate (%) is calculated by Attendance in Person during the term of service.

(III) Corporate Governance Implementation Status and Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons Thereof

Evaluation item			Implementation Status(Note)	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons thereof
	Yes	No	Description
I. Does the company establish and disclose the Corporate Governance Best-Practice Principles" based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?	V		The company has formulated a Code of Practice for Corporate Governance to ensure the implementation of the corporate governance spirit, so as to pursue the maximization of shareholders' equity and the sustainable operation of the enterprise.	No deviation
II. Shareholding structure & shareholders’ rights (I) Did the company establish an internal procedure for handling shareholder proposals, inquiries, disputes, and litigation? Are such matters handled according to the internal procedure? (II) Did the company maintain a register of major shareholders with controlling power as well as a register of persons exercising ultimate control over those major shareholders? (III) Did the company establish and enforce risk control and firewall systems with its affiliated businesses? (IV) Did the company stipulate internal rules that prohibit company insiders from trading securities using information not disclosed to the market?	V V V V		(I) Although the Company does not prescribe internal operation procedures to deal with shareholders' proposals, doubts, disputes and lawsuits, it has a special line for spokesmen and acting spokesmen and a mailbox on the company's website to deal with shareholders' proposals, doubts, disputes and lawsuits. (II) The Company has a list of major shareholders of corporate directors (Ba Wei Investment). (III) The Company formulates "Related Party Transaction Management Procedures" and "Internal Major Information Processing Procedures". There is no financial or business relationship with Ba Wei Investment, a corporate director. (IV) The Company has established the Code of Ethic Conducts for Directors and Managers and the Code of Ethic Conducts for Employees.	No deviation
III. Composition and responsibilities of the Board of Directors (I) Has a policy of diversity been established and implemented for the composition of the board of directors?	V		(I) The Company has established a diversity policy on Board composition in its Corporate Governance Best Practice Principles. The Company has 10 directors in total, of which 2 are independent directors. The third independent director will be added in 2021. All directors have the	No deviation

Evaluation item			Implementation Status(Note)	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons thereof
	Yes	No	Description
(II) In addition to salary and remuneration committee and audit committee established according to law, has the company voluntarily established other functional committees? (III) Did the company stipulate regulations for performance evaluation of the board, and its evaluation method, and conduct performance evaluation on a yearly basis; and submit the results of performance assessments to the board of directors and use them as reference in determining compensation for individual directors, their nomination and additional office term? (IV) Did the company regularly implement assessments on the independence of CPA?	V	V V	professional knowledge required by the Company, which is very helpful for improving operation and management. (WWW.BASSO.COM.TW Investor Zone) (II) The Company has not set up any other functional committees as of the date of printing. (III) The Company will formulate the performance evaluation method of the board of directors in 2020. (IV) In 2019, the Finance and Accounting Department of the Company has evaluated the independence of the CPA, and submitted the evaluation results to the board of directors on May 11, 2019 for deliberation and approval. According to the evaluation of the Finance and Accounting Department of the Company, Jun-yuan Wu and Shi-hua Guo from KPMG both meet the independence evaluation standard, and the CPAs have issued a statement letter.(as note below)
IV. Has the publicly-listed company appointed qualified and suitable number of corporate governance personnel and appointed a Corporate Governance Officer to handle governance related affairs (including but not limited to supplying information requested by the directors and supervisors, assisting Directors and Supervisors with legal compliance matters, processing company matters related to board meetings and shareholders' meetings according to laws, and preparing minutes of the board meetings and shareholders' meetings)?	V		A number of members of the Company's Finance and Accounting Department are concurrently responsible for all related matters of corporate governance. On March 25, 2019, the board of directors adopted "Standard Operating Procedures for Handling Directors' Requirements".	No deviation

Evaluation item			Implementation Status(Note)	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons thereof
	Yes	No	Description
V. Has the company established a communication channel with stakeholders (including but not limited to shareholders, employees, customers, and suppliers)? Has a stakeholders’ area been established in the company’s website? Are major Corporate Social Responsibility (CSR) topics that the stakeholders are concerned with addressed appropriatelybythe company?	V		The Company has set up a special area for stakeholders on the Company's website. The website is: WWW.BASSO.COM.TW and reply by specially assigned person.	No deviation
VI. Has the Company appointed a professional shareholder service agency to deal with shareholder affairs?	V		The Company has appointed "Capital Securities Co., Ltd." as our stock service agency for our Shareholders' Meetings.	No deviation
VII. Information disclosure (I) Did the company establish a website to disclose information on financial operations and corporate governance? (II) Does the company have other information disclosure channels (e.g. establishing an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences, etc.)? (III) Does the Company publish and report its annual financial report within two months after the end of a fiscal year, and publish and report its financial reports for the first, second and third quarters as well as its operating status for each month before the specified deadline?	V V	V	(I) The Company's website: WWW.BASSO.COM.TW can be used to query related information. (II) The Company has set up a Chinese and English website, designated a Business Division window to collect and disclose the Company's information, and implemented a spokesman system. (III) At present, the Company has not reported the financial report in advance, but all of them are completed within the prescribed time limit.	No deviation

Evaluation item	Implementation Status(Note)	Implementation Status(Note)	Implementation Status(Note)	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and reasons thereof
	Yes	No	Description
VIII. Is there any other important information to facilitate a better understanding of the Company’s corporate governance practices (including but not limited to employee rights, employee wellness, investor relations, supplier relations, stakeholder rights, directors’ and supervisors’ training records, implementation of risk management policies and risk evaluation measures, implementation of customer policies, and participation in liability insurance by directors and supervisors)?	V		The Company regularly holds labor-management meeting as a bridge for communication between the labor and management; establishes the employee welfare committee and labor pension supervision committee to provide annual gifts, employee travel, health check, scholarship, etc., and allocates pension according to law to protect the rights and interests of employees. Regularly hold emergency response and disaster prevention safety training workshops. Disclose financial and business information on a regular basis. Establish long-term and stable cooperation with suppliers through quality assurance system. The directors and supervisors of the Company are not easy to cooperate during busy business hours, so they have not participated in the corporate governance course in 2019. Any major decision of the Company shall be carefully evaluated and then discussed, authorized and implemented by the board of directors to reduce business risk. The Company has passed ISO9001 quality assurance certification and ISO14001 environmental management system certification, and customers are protected through customer complaint operating system. Liabilityinsurance has been covered for directors and supervisors.	No major gaps
IX. Describe improvements made according to the corporate governance assessment made in the latest fiscal year by the Corporate Governance Center of the Taiwan Stock Exchange Corporation (TWSE), and provide priority improvements and measures to be taken for improvements that have yet to be carried out. (It is not necessary to fill in if it is not listed in the company under evaluation) → Improved: 1. Strengthen the disclosure of relevant financial reports, annual report data and corporate governance information on the Company's website. 2. The Companyremains committed to thepractice of corporategovernance.
Note: Regardless of ticking"Yes" or "No" for operations,a description is required in the Summarycolumn.

Note:

Evaluation criteria for independence of CPAs in 2019:

Note: Evaluation criteria for independence of CPAs in 2019:
Evaluation item	Evaluation results	Meet independence criteria
1. Direct or indirect material financial interests between the CPAs and the Company?	No	Yes
2. Does the CPA engage in financing or guarantee activities with the Company or its directors?	No	Yes
3. Does the CPA have a close business relationship and a potential employment relation with the Company?	No	Yes
4. Are the CPA and members of the audit team holding positions in the Company as directors or managerial officers or those having significant influence on the audit currently or over the last twoyears?	No	Yes
5. Does the CPAprovide the Companynon-audit items that maydirectlyaffect the audit?	No	Yes
6. Does the CPA act as agent for stocks or other securities issued bythe Company?	No	Yes
7. Does the CPA act as the defender of the Company or on behalf of the Company to coordinate conflicts with other thirdparties?	No	Yes
8. Is the CPA a family member or relative of the Company's director, managerial officer or anotherposition that has significant influence on the audit?	No	Yes
9.The period of the CPA's undertaking has reached the time limit prescribed by the code of professional ethics or laws and regulations,and the rotation shall be carried out	Yes	Yes

To: BASSO INDUSTRY CORP.

Subject: to declare that the CPA has been entrusted to perform the audit and certification of the Company's financial statements for the year 2020 and has met the relevant independence requirements of the code of professional ethics.

Explanation: the independence norms of the firm include: the individual independence of all members (financial interests, financing guarantee, employment relationship, etc.), business relationship with customers, rotation system of CPAs, and non-audit service policies and procedures. The important norms and compliance matters are explained as follows:
I. Important norms of independence
- (I) It is required that the firm, its personnel, and other personnel subject to independence norms (including those of the alliance firm) maintain independence in accordance with the code of professional ethics.
- (II) It is prohibited for any person to engage in (directly or indirectly) insider trading, misuse of internal information or any misleading behavior that may result in securities or capital market. At the same time, a statement that the staff of the firm have followed the independence policies and procedures shall be obtained every year.
- (III) For the audit cases of financial statements of TWSE (or TPEx) and emerging stock market listed companies, if the period of undertaking of the in-charge accountant, countersign accountant, quality control review accountant and qualified audit accountant of subsidiaries has reached the time limit prescribed by the code of professional ethics or laws and regulations, rotation is required.
- (IV) Identify and assess the conditions that may affect the independence of the services provided and take appropriate measures to mitigate the impact or reduce it to an acceptable level. If necessary, terminate the appointment of the case.

II. Supervision of compliance with independence policies
(I) Through the online system, the firm controls whether all members have completed the annual independence declaration.
(II) Check the independence compliance of individual members through regular spot check, and check whether the personnel above deputy manager (inclusive) level report the individual investment changes according to the regulations through the personal investment reporting system.
(III) Supervise and spot check the rotation status of case accountants, including the period of case certification and the appropriateness of non-audit services provided by accountants.
(IV) In the event of a breach of the independence policy, the members (including partners) in violation will be handed to the risk and independence committee for handling in accordance with the independence discipline policy. Appropriate punishment shall be taken according to the seriousness and nature of the violation.

To sum up, the CPA has been entrusted with the audit of the financial statements of your company for the year 2020, and has maintained a rigorous and impartial attitude and the spirit of independence, and has not violated the provisions of No. 10 Code of Professional Ethics.

KPMG Taiwan

Jun-yuan Wu

CPAs: Shi-hua Guo

April 1, 2020

(1) Information of the members of Remuneration Committee

Identity (Note 1)	Qualification Name	together with at least five years of work experience Meets one of the following professionalqualification requirements,	together with at least five years of work experience Meets one of the following professionalqualification requirements,	together with at least five years of work experience Meets one of the following professionalqualification requirements,	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Independence criteria (Note 2)	Number of other public companies where the individual concurrently serves as a remuneration committee member
		Currently serving as an instructor or higher post in a private or public college or university in the field of business, law, finance, accounting, or the business sector of a company	Currently serving as a judge, prosecutor, lawyer, accountant, or other professional practice or technician that must undergo national examinations and specialized license	Has work experience in the areas of commerce, law, finance, or accounting, or otherwise necessary for the business of the Company	1	2	3	4	5	6	7	8	9	10
Independent Director	Chun-zhongLian		v		v	v	v	v	v	v	v	v	v	v	1
Others	Zheng-yongHuang			v	v	v	v	v	v	v	v	v	v	v	Nil
Independent Director	Zheng-nan Shen	v			v	v	v	v	v	v	v	v	v	v	Nil

Note 1: For the title column, please fill in Director, Independent Directors, or others.

Note 2: Please "" the corresponding boxes that apply to a member during the two years prior to being elected or during the term(s) of office. 

（ 1 ） Not an employee of the Company or any of its affiliates.
（ 2 ） Not serving as a Director or Supervisor of the Corporation or any affiliated business (this does not apply in cases where the person is an Independent Director of the Company, its parent or subsidiary or a subsidiary of the same parent company established in pursuant to this law or local laws and regulations).
（ 3 ） Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or is ranked in the top 10 in shareholdings.
（ 4 ） Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of a managerial officer as stated in (1) or any of the persons mentioned in (2) and (3).
（ 5 ） Not a director, supervisor, or employee of a corporate shareholder who directly holds more than 5% of the total issued shares of the Company, or a top 5 shareholder, or a director or supervisor representative appointed by the Company in accordance with paragraph 1 or 2, Article 27 of the Company Act (excluding independent directors appointed by both the Company and its parent company, subsidiary or subsidiaries under the same parent company pursuant to this regulation or the local regulations).
（ 6 ） Not directors, supervisors or employees of other companies controlled by the same person holding a majority of the company's director seats or voting shares of the company. (However, this restriction shall not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent).
（ 7 ） Not directors (governors), supervisors or employees of other companies or institutions who are the same person or spouse as the chairperson, general manager or person holding an equivalent position of the company. (However, this restriction shall not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a company and its parent or subsidiary or a subsidiary of the same parent).
（ 8 ） Not a director, supervisor, manager, or shareholder holding more than 5% of shares of a company or institution which corresponds with the Company financially or in terms of business. The same does not apply, however, in cases where a company or institution holds more than 20 percent but less than 50 percent of shares and the person is an independent director of the company, its parent company, or any subsidiary, or a subsidiary of the same parent company as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.
（ 9 ） Not a professional individual, nor an owner, partner, director, supervisor, or managerial officer, and the spouse thereof, of a sole proprietorship, partnership, company, or institution that provides auditing service or commercial, legal, financial, or accounting services with a cumulative compensation not exceeding NT$500 thousand in the past two years to the Company or any of its affiliate. However, members of the special committee on remuneration, public acquisition review, or merger and acquisition who perform their functions and powers in accordance with the provisions of the Securities and Exchange Act or Business Mergers and Acquisitions Act and other relevant regulations shall not be subject to this provision.
（ 10 ） No condition defined in Article 30 of the Company Act has appeared.

(2) Operations of Remuneration Committee

I. There are 3 member in the Remuneration Committee of the Company.
II. The Company's Remuneration Committee composes of three members. II. The term of office of the current member: August 8, 2018 to June 27, 2021, the most recent annual Remuneration Committee meeting 2 times (A), membership and attendance are as follows:

follows:
Title	Name	Attendance in person (B)	By proxy	Attendance Rate (%) (B/A) (Note)	Remarks
Committee chair	Chun-zhong Lian	2	0	100%	Re-elected on August 8,2018
Member	Zheng-yong Huang	2	0	100%	Re-elected on August 8,2018
Member	Zheng-nan Shen	1	0	50%	Re-elected on August 8,2018
Other matters: I. If the Board of Directors does not adopt or amend the proposal of the Remuneration Committee, it shall state the date, session, contents of the proposal, resolution results of the Board of Directors and the Company's handling of the opinions of the Remuneration Committee (if the remuneration adopted by the Board of Directors is superior to the proposal of the Remuneration Committee, the difference and reason shall be stated). The Board of Directors of the Company has no objection to the proposal of the Remuneration Committee, so there is no such matter. II. Resolutions of the Remuneration Committee objected to by members or expressed reservations and recorded or declared in writing, the date of the meeting, session, content of the proposal, all members’ opinions and the response to members’ opinion should be specified: All resolutions of the Remuneration Committee of the Company have been approved by all members present, so there is no such issue. III. Reasons for discussion and resolutions of the Remuneration Committee: 2 meetings of the Remuneration Committee were held in 2019 1. The third meeting of the fourth term on March 25, 2019 (1) The Distribution of the Company's Directors, Supervisors, Managers and Employees Remuneration in 2018. 2. The fourth meeting of the fourth term on December 26, 2019 (1) The Distribution of the Company's Directors, Supervisors, Managers and Employees Remuneration in 2018. (2) Annual bonus distribution of managers of the Company in 2019

Note:

(1) If any member of Compensation Committee resigned before the end of the year, the date of resignation shall be specified in remark column. Actual attendance rate (%) shall be calculated based on the number of meetings of Compensation Committee held, and number of his/her actual attendance, during the term of his/her service.
(2) If any member of Compensation Committee was reappointed before the end of the year, the new and old member shall be specified, and it shall be specified in remark column that such member is a new one or old one, or new election and reelection date shall be specified in remark column. Actual attendance rate (%) shall be calculated using the number of Remuneration Committee meetings convened and actual attendance during the term of service.

(IV) Corporate Social Responsibility (CSR), Deviations from "Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies" and Reasons

Companies" and Reasons
Evaluation item			ImplementationStatus(Note 1)	Deviations from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies and reasons thereof
	Yes	No	Summary (Note 2)
I. Does the Company conduct risk assessments on environmental, social, and corporate governance issues related to its operations in accordance with the materiality principle, and implement relevant risk management policies or strategies? (Note 3)	V		The Company's operation is based on the principle of conservatism, with the impact of the COVID-19. The Company has carried out countermeasures for clients and purchasers, implemented relevant measures for employee quarantine, safeguarded the safety of employees and shareholders' rights and interests, formulated "Corporate Social Responsibility Best Practice Principles", actively practiced corporate social responsibility, and passed ISO14001 environmental management system certification, committed to environmental management and maintenance.	No major gaps
II. Does the Company establish an exclusively (or part- time) dedicated unit for promoting Corporate Social Responsibility? Is the unit authorized by the Board of Directors to implement CSR activities at the executive level? Does the unit report the progress of such activities to the Board of Directors?	V		The Company stipulates that the Finance and Accounting Department shall be the current serving unit for promoting corporate social responsibility; as of the date of printing of annual report, the Company has not reported the handling to the Board of Directors.	No major gaps
III. Environmental Issues (I) Has the company referred to the nature of its industry to establish a suitable Environment Management System (EMS)? (II) Is the company committed to improving usage efficiency of various resources and utilizing renewable resources with reduced environmental impact? (III) Does the Company assess the potential risks and opportunities brought by climate changes, both for now and in the future, and take measures to cope with? (IV) Has the Company calculated the greenhouse gas emissions, water consumption, and total weight of waste over the past two years and established policies with regard to energy conservation and carbon reduction, greenhouse gas reduction, water consumption reduction, and waste management?	V V	V V	(I) The Company has passed ISO14001 environmental management system certification and is committed to environmental management and maintenance. (II) The Company has always been committed to improving the efficiency of resource utilization, and is committed to paperless development, recycling of waste paper, plastic aluminum iron and other resources, recycling of cartons, power and water resource control and so on. Many measures have been implemented for many years. We will continue to demand this in the future. In addition, for raw materials, due to product life and quality requirements, some parts still use recycled raw materials. (III) There is currently no such assessment. (IV) At present, there is no statistics on greenhouse gas emissions, but there are statistics on energy consumption (water, electricity, gas, etc.). Sustained energy saving and carbon reduction are the Company's established environmental goals and also comply with relevant domestic energy conservation laws and regulations.	No major gaps

Evaluation item			ImplementationStatus(Note 1)	Deviations from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies and reasons thereof
	Yes	No	Summary (Note 2)
IV. Social Issues (I) Has the Company formulated appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights? (II) Does the Company formulate and implement reasonable employee welfare measures (including compensation, days-off, and other benefits), and appropriately reflect the operating performance or results in employee compensation? (III) Has the company provided employees with safe and healthy work environment as well as conducted regular classes on health and safety? (IV) Has the Company established effective career and competence development and training plans? (V) Has the Company followed relevant laws, regulations and international guidelines for the customer health and safety, customer privacy, and marketing and labeling of its products and services and established related consumer protection policies and grievance procedures? (VI) Has the company established the supplier management policies requesting suppliers to comply with laws and regulations related to environmental protection, occupational safety and health or labor rights and supervised their compliance?	V V V V V	V	(I) The company complies with relevant labor laws and regulations, establishes work rules, protects the legitimate rights and interests of employees, and promotes persons with physical and mental disabilities according to the nature of the work and the expertise of the employees. (II) The company has an employee welfare committee, which regularly holds meetings to discuss employee welfare-related rights and interests, and stipulates employee compensation distribution ratios in the articles of incorporation. In 2019, 610,000 shares were allocated to employees to share operating performance with employees. (III) The company has a labor safety and health office, which has established a "Labor Safety and Health Work Code", regularly holds labor safety meetings, and conducts various disaster prevention drills from time to time, and conducts labor safety education training for new employees, and regularly conducts employee health checks every year to track employees' physical and mental conditions. (IV) At the end of each year, the company submits the following year's education and training plan form by each department, and it is executed according to the plan after approval; in addition, individuals apply for education and training from time to time, and the company handles all kinds of education and training according to actual needs. (V) The company’s products are sold only after they are certified by international safety regulations, but the company’s products are sold to foreign distributors, so at present, there is no need to develop relevant complaint procedures for consumer protection, which are developed by foreign channel providers. (VI) There is currentlyno such assessment.	No major gaps
V. Did the company, following internationally recognized guidelines or instructions, prepare and publish reports such as its Corporate Social Responsibility report to disclose non-financial information of the company? Is this report assured or verified bya neutral thirdparty?		V	The company has not prepared a corporate social responsibility report, but has disclosed the "corporate social responsibility best practice principal" on the company's website.	No major gaps
VI. If the company has established the corporate social responsibility best practice principles based on the "Corporate Social ResponsibilityBest Practice	V		The company has a "Corporate Social Responsibility Best Practice Principal", which is aimed at: 1. Taking care of employees. 2. Caring for customers. 3. Commitment to shareholders. 4. Fulfill the socialpublic welfare. 5. Foster a	No deviation

Evaluation item			ImplementationStatus(Note 1)	Deviations from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies and reasons thereof
	Yes	No	Summary (Note 2)
Principles for TWSE/TPEx Listed Companies", please describe any discrepancy between the Principles and their implementation:			sustainable environment. Actual implementation
VII. Other important information to facilitate better understanding of the company's Corporate Social Responsibility practices:		V	There is no such situation at present.	No major gaps

Note 1: If “Yes” is checked in the operating status column, please explain the important policies, strategies, measures and implementation situations; if “No” is checked in the operating status column, please explain the reasons, as well as give relevant policies, strategies and measures to counter the situation.

Note 2: Companies that have compiled CSR reports may specify ways to access the report and indicate the page numbers of the cited pages for operation. Note 3: The principle of materiality refers to environmental, social and corporate governance issues that have significant impacts on the Company's investors and other stakeholders.

(V) Implementation of Ethical Corporate Management and the Gaps With the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies, and the Causes Thereof

Items assessed	Implementation Status(Note 1)	Implementation Status(Note 1)	Implementation Status(Note 1)	Deviations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies and reasons thereof
	Yes	No	Description
I. Establishment of ethical corporate management policies and programs (I) Has the company established the ethical corporate management policies approved by the Board of Directors and specified in its rules and external documents the ethical corporate management policies and practices and the commitment of the board of directors and senior management to rigorous and thorough implementation of such policies? (II) Has the company established a risk assessment mechanism against unethical conduct, analyze and assess on a regular basis business activities within its business scope which are at a higher risk of being involved in unethical conduct, and establish prevention programs accordingly, which shall at least include the preventive measures specified in Paragraph 2, Article 7 of the "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies"? (III) Has the company specified in its prevention programs the operating procedures, guidelines, punishments for violations, and a grievance system and implemented them and review the preventionprograms on a regular basis?	V V V		(I) The Company has formulated the "Ethical Corporate Management Code", which was approved by the board of directors on May 5, 2017. Ethical corporate management has formed a company culture and is implemented at all levels of the company. (II) (III) The company has stipulated the "Code of Ethical Conduct for Directors and Managers" and "Code of Ethical Conduct for Employees". Ethical corporate management is the company's culture. The management's conduct of maintaining ethical management has been deeply rooted in all levels of the company. There is a suggestion box. So far, no similar event has occurred in the company since its establishment.	No major gaps
II. Fulfillment of Ethical Corporate Management (I) Does the Company evaluate business partners’ ethical records and include ethics-related clauses in the business contracts signed with the counterparties? (II) Has the company set up a dedicated (concurrent serving) unit under the Board of Directors to promote ethical corporate management and regularly (at least once every year) report to the Board of Directors the implementation of the ethical corporate management policies and prevention programs against unethical conduct? (III) Has the Company established policies to prevent conflicts of interest, provide appropriate communication channels, and implement them accordingly?	V	V V	(I) As mentioned above, ethical corporate management has formed a company culture and is implemented at all levels of the company, therefore, although no terms of ethical conduct are specified in the business contract, it is naturally not possible to conduct business activities with those who have a record of unethical conduct. (II) Up to now, the company has not set up a dedicated (concurrent serving) unit subordinate to the board of directors to promote the ethical corporate management. (III) The company has formulated the "Code of Ethical Conduct for Directors and Managers", "Code of Ethical Conduct for Employees", and set up a suggestion box to implement it.	No major gaps

(IV) Has the company established effective accounting systems and internal control systems to implement ethical corporate management and had its internal audit unit, based on the results of assessment of the risk of involvement in unethical conduct, devise relevant audit plans and audit the compliance with the prevention programs accordingly or entrusted a CPA to conduct the audit? (V) Does the Company regularly hold internal and external educational trainings on ethical corporate management?		V V	(IV) At present, it is regularly checked by internal auditors. (V) Up to now, there has not been regular internal or external education and trainingfor ethical corporate management.
III. Status of enforcing whistle-blowing systems in the company (I) Has the Company established both a reward/whistle-blowing system and convenient whistle-blowing channels? Are appropriate personnel assigned to the accused party? (II) Has the company established the standard operating procedures for investigating reported misconduct, follow-up measures to be adopted after the investigation, and related confidentiality mechanisms? (III) Does the Company provide protection to whistleblowers against receivingimproper treatment?		V V V	Although the company has not yet established a specific reporting and reward system and established a convenient reporting channel, and related investigation standard operating procedures and related confidentiality mechanisms, it has set up employee mailboxes, spokesperson hotlines, and email mailboxes; no related incidents have occurred so far. The company establishes a personnel evaluation committee composed of the heads of various units, and holds personnel evaluation meetings from time to time to deal with matters related to employee rewards orpunishment.	No major gaps
IV. Enhanced disclosure of corporate social responsibility information (I) Does the Company disclose its ethical corporate management policies and the results of its implementation on the company’s website and MOPS?	V		The company has disclosed the "Code of Ethical Corporate Management" on the relevant website.	No major gaps
V. Where the Company has stipulated its own ethical corporate management best practices according to the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies, please describe any differences between the prescribed best practices and the actual activities taken by the Company: → The companyhas formulated the "Code of Ethical Corporate Management",and it has been implemented without significant differences.
VI. Other important information to facilitate a better understanding of the company's ethical corporate management policies (e.g. review and amend its policies). → This situation has notyet occurred in the Company.

Note: Regardless of ticking "Yes" or "No" for operations, a description is required in the Summary column.

(VI) If the company has stipulated best practices for corporate governance and other relevant bylaws, the means to search for these bylaws shall be disclosed: the company has not yet established.
(VII) Other important information that is sufficient to enhance the understanding of the operation of corporate governance must be revealed together: The company has not yet established.

(VIII) Status of Internal Control System:

1. Statement of Internal Control:

Statement of the Internal Control System of TWSE/TPEx Listed Companies The design and implementation are both effective

(This report is applicable to all laws and regulations.)

BASSO INDUSTRY CORP. Statement of Internal Control System

Date: March 19, 2020

Based on the results of self-assessment, the Company's internal control system in 2019 is hereby declared as follows:

I. The Company acknowledges that the establishment, implementation and maintenance of an internal control system is the responsibility of the Board of Directors and managers, and the Company has established an internal control system. The internal control system is designed to provide reasonable assurance for the effectiveness and efficiency of the operations (including profitability, performance and protection of assets), reliability, timeliness, and transparency of reporting, and compliance with applicable laws and regulations.
II. The internal control system has innate limitations. No matter how robust and effective the internal control system, it can only provide reasonable assurance of the achievement of the foregoing three goals; in addition, the effectiveness of the internal control system may vary due to changes in the environment and conditions. However, the internal control system of the Company has self-monitoring mechanisms in place, and the Company will take corrective action against any defects identified.
III. The Company uses the assessment items specified in the Regulations Governing Establishment of Internal Control Systems by Public Companies (hereinafter referred to as the "Regulations") to determine whether the design and implementation of the internal control system are effective. Based on the process of control, the assessment items specified in the Regulations divide the internal control system into five constituent elements: 1. control environment; 2. risk assessment; 3. control activities; 4. information and communications; and 5. monitoring activities. Each constituent element includes a certain number of items. For more information on such items, refer to the Regulations.
IV. The Company has already adopted the aforementioned Regulations to evaluate the effectiveness of its internal control system design and operating effectiveness.
V. Based on the evaluation results in the preceding paragraph, the Company considers that the design and implementation of the Company's internal control system of December 31, 2019[Note 2] (including the supervision and management of its subsidiaries), including the understanding of the effect of operations and the extent to which the efficiency objectives have been achieved, the reliability, timeliness, transparency of reporting, and the compliance with the relevant regulations and relevant laws and regulations, are effective, which can reasonably ensure the achievement of the above objectives.
VI. This statement will constitute the main content of the Company's annual report and the prospectus and will be disclosed to the public. Any falsehood or concealment with regard to the above contents will entail legal liability under Articles 20, 32, 171 and 174 of the Securities and Exchange Act.
VII. This statement has been approved by the Board of Directors on March 19, 2020; among the eight Directors that attended the meeting, none objected, and the remaining have all agreed with the contents of this statement.

BASSO INDUSTRY CORP.

Chairman: Ming-da Lai signature President: Bo-yan Lai signature

Note 1: If there are significant deficiencies in the design and implementation of the internal control system of a public company during the year, an explanatory paragraph shall be added after the fourth paragraph of the statement of internal control system to list and explain the significant deficiencies found in the self-inspection, as well as the improvement actions and situations taken by the company before the balance sheet date.

Note 2: The date of statement is the date of the "end of the fiscal year".

2. The CPA's review report shall be disclosed if any CPA is commissioned to review the ICS: None.

(IX) Penalties imposed on the Company and its internal staff, penalties imposed on its internal staff by the Company for violation of internal control regulations, major deficiencies and status of improvements made in the most recent fiscal year up to the publication date of this annual report: None.
(X) Major resolutions of the shareholders' meeting and the Board of Directors and implementation of resolutions of the shareholders' meeting in the most recent year up to the printing date of this Annual Report:

Major Resolutions of Shareholders’ Meeting and Board Meetings

Date	Meetingtype	Important resolutions
2019.03.25	Board of Directors (1st Meeting in 2019)	I. It is planned to hold the 2019 Annual Shareholders' Meeting at 10:00 a.m. on June 27, 2019, and the venue will be the meeting room on the fourth floor of the Company (No. 24, Road 36, Industrial Park, Taichung City). The shareholder proposal period (adopting the principle of arrival) was from April 19, 2019 to April 29, 2019, the acceptance place is No. 24, Road 36, Industrial Park, Taichung City. The period for suspension of share transfer is from April 29, 2019 to June 27, 2019. II. Passed the Company's annual financial statements in 2018. III. Approved the Company's 2018 earnings distribution. IV. Approved the company's 2018 annual directors, supervisors and employees' bonus distribution plan reviewed by the Remuneration Committee. V. 1. Approved the proposal of the Company's 2019 operation plan. VI. Passed the Company's 2018 Annual "Internal Control Statement" proposal. VII. Approved the stipulation of the Company's "Procedures for Acquisition or Disposal of Assets". VIII. Approval of the establishment of Standard Operating Procedures for Disposal of Directors’ Requirements. → The Independent Directors Chun-zhong Lian and Zhen-nan Shen all agreed on the above major issues.
2019.05.10	Board of Directors (2nd meeting in 2019)	I. The Company's financial statements for the first quarter of 2019 are submitted for discussion. II. Evaluate the independence of the Company's CPAs. → Chun-zhong Lian, an Independent Director present, agreed to the above major issues.
2019.06.27	Shareholders’ meeting	I. Recognized the 2018 business report and final accounts. → Approved by 83% of the voting rights of the shareholders present as proposed. II. Recognized the 2018 earnings distribution plan, it was resolved to issue a cash dividend of NT$4 per share, for a total of NT$551,842,560. → Approved by 82.98% of the voting rights of the shareholders present as proposed. (Execution situation as explained in the remarks) III. Amendment to the Company's Procedure for Acquisition or Disposal of Assets. → Approved by83%of the votingrights of the shareholderspresent asproposed.
2019.08.08	Board of Directors (3rd meeting in 2019)	I. Approved the Company's Q2 2019 Financial Statements. II. The base date for ex-dividend is set at September 3, 2019, the last day for stock transfer is August 29, 2019, and the period for suspension of share transfer is from August 30, 2019 to September 3, 2019. The Chairman is authorized to handle other related matters at discretion. The cash dividend payment date is September 25, 2019. III. Approved to authorize the Chairman to deal with matters related to the issuance of new shares by the employees bonus to increase capital. → The Independent Directors Chun-zhong Lian and Zhen-nan Shen all agreed on the above major issues.
2019.11.08	Board of Directors (the 4th meeting in 2019)	I. Approved the third quarter financial report of the Company in the year 2019. II. Approved the 2020 annual audit plan declaration form. → The Independent Directors Chun-zhong Lian and Zhen-nan Shen all agreed on the above major issues.
2019.12.26	Board of Directors (the 5th meeting in 2019)	I. Approved the remuneration of directors and supervisors, the remuneration (cash) distribution of managers and employees and the year-end bonus distribution of managers in 2019 approved by the Remuneration Committee of the Company. II. Approved the Company's substantial investment in buildings, software and hardware equipment with undistributed earnings in 2018. → Chun-zhongLian,an Independent Directorpresent,agreed to the above major issues.

2020.03.19	Board of Directors (1st meeting in 2020)	I. The 2020 Annual Shareholders' Meeting is scheduled to be held at 10:00 on June 30, 2020 at the meeting room on the fourth floor of the company (No. 24, Road 36, Industrial Park, Taichung City). The shareholder's proposal period (adopting the principle of arrival) is from April 24, 2020 to May 4, 2020, the acceptance place is No. 24, Road 36, Industrial Park, Taichung City. The period for suspension of share transfer is from May 2, 2020 to June 30, 2020. II. Passed the Company's annual financial statements in 2019. III. Approved the remuneration distribution plan of directors, supervisors and employees for 2019 reviewed by the Remuneration Committee. IV. 1. Approved the proposal of the Company's 2020 operation plan. V. Approved the 2019 internal control statement. VI. Passed the revisions of certain provisions of the Company's "Articles of Association". VII. Approved the amendments to articles of the "Rules for Election of Director and Supervisor" of the Company. VIII. Approved the revision of the Company's internal control operations "CM-106 accounting professional judgment procedures, accounting policies and process management of estimated changes" for part of the articles. → Chun-zhongLian,an Independent Directorpresent,agreed to the above major issues.
2020.05.11	Board of Directors (2nd meeting in 2020)	I. Approved the Company's 2019 earnings distribution plan. II. Approved the first quarter financial report of the Company in the year 2020. III. Evaluate the independence of the Company's CPAs. → Chun-zhongLian,an Independent Directorpresent,agreed to the above major issues.

Note: the shareholders' meeting in 2019 has resolved on the plan of earnings distribution. The implementation status: it is resolved to issue cash dividends of NT$4 per share, totaling NT$551,842,560. In August 8, 2019, the board of directors set the ex-dividend base date as September 3, 2019, and the cash dividend distribution date as September 25, 2019, and the distribution is completed as scheduled.
(XI) Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors for the most recent year and up to the printing date of the annual report: None.
(XII) Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, President, and Heads of Accounting, Finance, Internal Audit and R&D in the Most Recent Year as of the Date of Publication of Annual Report:

Summary of resignation and dismissal of persons associated with the Company

				May 2, 2020
TITLE	NAME	DATE OF ASSUMPTION OF DUTY	DATE OF DISMISSAL	REASONS FOR RESIGNATION OR DISMISSAL
Nil	Nil	Nil	Nil	Nil

Note: The relevant personnel in this context refers to the Chairman, President, Accounting Supervisor, Finance Supervisor, Internal Audit Supervisor, and R&D Supervisor, etc.

IV Information on CPA Professional Fee

(I) When non-audit fees paid to the CPA, the accounting firm of the CPA, and/or any affiliated enterprise of such accounting firm are one quarter or more of the audit fees paid thereto, the amounts of both audit and non-audit fees as well as details of non-audit services shall be disclosed:

CPA professional fees by range (Please tick the range or fill in the amount)

CPA firm	Name of CPAs	Name of CPAs	Audit period	Remarks
KPMG Taiwan	Jun-yuan Wu	Shih-Hua Kuo	2019.01.01~2019.12.31

Note: Where this Company replaces the CPA or accounting firm, please list the audit periods of the former and succeeding CPAs or firms and the reason for the replacement in the remark column.

Unit: NT$’000

Category of fees Range of fees	Category of fees Range of fees	Audit fee	Non-audit fee	Total
1	Less than NT$ 2,000,000	V	V	1,563
2	NT$ 2,000,000(inclusive)toNT$ NT$ 4,000,000
3	NT$ 4,000,000(inclusive)toNT$ NT$ 6,000,000
4	NT$ 6,000,000(inclusive)toNT$ NT$ 8,000,000
5	NT$ 8,000,000(inclusive)toNT$ NT$ 10,000,000
6	More than NT$ 10,000,000(inclusive)

Information on CPA professional fees

Unit: NT$’000

CPA firm	Name of CPA	Audit fee		Non-audit fee	Non-audit fee	Non-audit fee		Audit Period	Remarks
			System Design	Business registration	Human Resource	Other (Note 2)	Subtotal
KPMG Taiwan	Jun-yuan Wu Shih-Hua Kuo	1,410		60		93	153	2019.01.01~ 2019.12.31	Non-audit fee - Others: Travel fare, English financial report translation fee, full- time worker salary review fee of non supervisor.

Note 1: Where the Company replaces the CPA or accounting firm, the auditing periods of the former and successor CPA or firm shall be annotated separately. The reason for the replacement shall be provided in the Notes section accordingly. The audit and non-audit fees paid to the former and succeeding CPA or firm shall also be disclosed.
Note 2: Non-audit fees shall be listed separately based on service items. If "Other Fees" in non-audit fees reaches 25% of total non-audit fees, the contents of the non-audit services shall be specified in remark column.

(II) Where the CPA firm was replaced, and the audit fees in the fiscal year, when the replacement was made, were less than that in the previous fiscal year before replacement, the amount of audit fees paid before/after replacement and reasons for paying this amount shall be disclosed: None.
(III) Where accounting fee paid for the current year was more than 15% less than that of the previous year, the sum, proportion, and cause of the reduction shall be disclosed: None.

V Information on Replacement of CPA

→ None.
VI The Company's Chairman, President, and Managers in charge of financial or accounting affairs who have worked in a firm or affiliated company of the CPA in the most recent year, the name, position and period shall be disclosed: None.
VII Equity transfer or changes to equity pledge of directors, supervisors, managerial officers, or shareholders holding more than 10% of company shares in the most recent year to the publication date of this report:

Changes to the equity of directors, supervisors, managerial officers, and major shareholders

Title	Name	2019	2019	As of May 2, 2020	As of May 2, 2020
		Shareholding increase (decrease)	Pledged share increase (decrease	Shareholding increase (decrease)	Pledged share increase (decrease
Director	Ba Wei Investment Co., Ltd. Representative: Ming-da Lai	0	0	0	0
Chairman	Ming-da Lai	0	0	0	0
Director	Ming-xing Lai	0	0	0	0
Director	Zhong-xiung Hong	0	0	0	0
Director and President	Bo-yan Lai	35,000	0	0	0
AVP of Magnesium Alloy Business Division	Jin-xing Chen	10,000	0	0	0
Director and Vice President	Bo-feng Lai	20,000	0	0	0
Senior Manager of Sales Division	Yao-sheng Shen	0	0	0	0
Director and AVP of Quality Assurance Department	Qi-wen Lin	15,000	0	0	0
Director and Business Manager	Hong-yi Chen	28,000	0	0	0
Director and Manager of Heat Treatment Department	Fu-luo Huang	15,000	0	0	0
Independent Director	Chun-zhong Lian	0	0	0	0
Independent Director	Zheng-nan Shen	0	0	2,000	0
Supervisors	Wei-ting Chang	0	0	0	0
Supervisors	Zi-ling Ye	0	0	0	0
Supervisors	Xiao-ling Lin	0	0	0	0
Deputy Manager, Department of Finance and Accounting	Zhi-biao Chen	5,000	0	0	0
Deputy manager of Information Management Department	Ya-hui Lu	6,000	0	0	0

Note 1: Shareholders who hold more than 10% of the Company's issued shares shall be identified as major shareholders and stated separately.

Note 2: Where the counterparts of the equity interest transfer or pledge of equity interest are related parties, the following table shall be filled in: None.

VIII Information on the Top 10 Shareholders of the Company who are identified as related parties, spouse or relatives within second-degree of kinship

May 2, 2020

Name (Note 1)	Current shareholding	Current shareholding	Spouse/minor shareholding	Spouse/minor shareholding	Shareholding by nominees	Shareholding by nominees	Name and Relationship between the Company's 10 Largest Shareholders, or Spouses or Relatives within Second Degrees of Kinship (Note 3)	Name and Relationship between the Company's 10 Largest Shareholders, or Spouses or Relatives within Second Degrees of Kinship (Note 3)	Remark Note
	Shares	%	Shares	%	Shares	%	Meeting (OR NAME)	Relation
Ba Wei Investment Co., Ltd. Representative: Ming- da Lai	13,507,138	9.75%	N/A	N/A	N/A	0	N/A	N/A	The number of shares held by the representative is as follows
Ming-da Lai	149,310	0.11%	1,093,534	0.79%	Nil	0	Bo-yan Lai Bo-feng Lai Ming-xing Lai Wei-ting Chang	Son Son Younger Brother Sister-in-law
Fubon Life Insurance	8,250,000	5.95%	N/A	N/A	N/A	0	N/A	N/A
Bo-feng Lai	2,991,826	2.16%	0	0	Nil	--	Ming-da Lai Bo-yan Lai	Father Elder Brother
Bo-yan Lai	2,132,831	1.54%	0	0	Nil	0	Ming-da Lai Bo-feng Lai	Father Younger Brother
Citibank in Custody for Norges Bank Investment Account	2,110,900	1.52%	N/A	N/A	N/A	--	N/A	N/A
Deutsche Bank in Custody for SPDR Portfolio Emerging Market Investment Account	1,889,905	1.36%	N/A	N/A	N/A	0	N/A	N/A
JPMorgan Chase in Custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds	1,442,339	1.04%	N/A	N/A	N/A	0	N/A	N/A
Wei-ting Chang	1,378,100	0.99%	1,220,313	0.88%	Nil	0	Ming-xing Lai Ming-da Lai	Spouse Brother of spouse
JPMorgan Chase Bank as custodian of Vanguard Group Emerging Market Fund Investment Account	1,277,000	0.92%	N/A	N/A	N/A	--	N/A	N/A
Ming-xing Lai	1,220,313	0.88%	1,378,100	0.99%	Nil	--	Wei-ting Chang Ming-da Lai	Spouse Elder Brother

Note 1: All the top 10 shareholders shall be listed. For juristic person shareholders, their names and the name of their representatives shall be listed separately.

Note 2: Shareholding percentage is calculated separately based on the percentage of shares held in the name of the person, his/her spouse, minor children, or others.

Note 3: Relationships between the aforementioned shareholders, including juristic person shareholders and natural person shareholders shall be disclosed based on the financial reporting standards used by the issuer.
IX Information on the number of shares of the company invested by the Company, any of the Company’s directors, supervisors and executive officers or a company directly or indirectly controlled by the Company and consolidated percentage of shareholding:
The Company has no investment business.

Chapter 4 Funding Status

I. Capital and Shares (I) Source of Capital: Type of Shares Issued in the Most Recent Year up to the Date of Publication of Annual Report

Date/ Month	Issue price	Authorized Share Capital	Authorized Share Capital	Paid-in capital	Paid-in capital	Note	Note	Note
		Stock (shares)	Amount	Stock (shares)	Amount	Sources of capital	Capital increase by assets other than cash	Other
April, 2019	Par value NT$10	186,219,600	1,862,196,000	138,570,640	1,385,706,400	--	None	A total of 32,930,000 shares of treasury stock were written down and cash capital decreased by 15,328,960 shares, A total of 610,000 shares transferred from employees' compensation to common stock (Approval number: Letter No. 10801136300 issued by Ministry of Economic Affairs on October 7, 2019 )

Note 1: Information for the current fiscal year shall be added as of the publication date of this annual report. Note 2: For any capital increase, the effective (approval) date and the document number shall be added. Note 3: Shares traded below par value shall be indicated in a clear manner.

Note 4: Capital increase by currency debts or technology shall be stated and the type and amount of assets involved in such capital increase shall be noted. Note 5: Shares traded via private placement shall be indicated in a clear manner.

Type of stocks	Authorized capital stock	Authorized capital stock	Authorized capital stock	Notes
	Issued (Listed) Shares (Note)	Unlisted shares	Total
Registered common shares	138,570,640	47,648,960	186,219,600	A total of 32,930,000 shares of treasury stock were written down cash capital decreased by 15,328,960 shares, and employees' compensation transferred to common stock of 610,000 shares (Approval number: Letter No. 10801136300 issued by Ministry of Economic Affairs on October 7, 2019)

 Note: Issued shares are listed stocks.

(II) Composition of Shareholders May 2, 2020	(II) Composition of Shareholders May 2, 2020	(II) Composition of Shareholders May 2, 2020	(II) Composition of Shareholders May 2, 2020	(II) Composition of Shareholders May 2, 2020	(II) Composition of Shareholders May 2, 2020	(II) Composition of Shareholders May 2, 2020
Shareholder Composition No. of Shareholders	Government Agencies	Financial Institutions	Other Legal Persons	Domestic Natural Persons	Foreign institutions and Natural Persons	Total
Persons	0	6	139	25,638	70	25,853
Shareholding	0	9,891,000	16,230,181	100,462,833	11,986,626	138,570,640
ShareholdingPercentage	0.00%	7.14%	11.71%	72.50%	8.65%	100.00%
Note: TWSE/TPEx listed companies should disclose Chinese investors holding percentage; in accordance with Article 3 of the Measures Governing Investment Permit to the People of Mainland Area, Chinese investors refer to Chinese nationals, legal persons, groups, other organizations, or corporates making investments outside the territory of the Republic of China.

(III) Distribution of Share Ownership

1. Common Share: May 2, 2020

Shareholding Scale	Number of Shareholders	Shareholding	Shareholding Percentage(%)
1--------999	8,001	1,107,176	0.80%
1,000------5,000	14,059	30,038,264	21.68%
5,001-----10,000	2,136	16,833,157	12.15%
10,001-----15,000	626	8,050,262	5.81%
15,001-----20,000	370	6,851,808	4.95%
20,001-----30,000	271	6,998,996	5.05%
30,001-----50,000	192	7,576,951	5.47%
50,001----100,000	129	8,924,383	6.44%
100,001----200,000	34	4,466,660	3.22%
200,001----400,000	13	3,687,680	2.66%
400,001----600,000	7	3,177,233	2.29%
600,001----800,000	1	718,000	0.52%
800,001--1,000,000	2	1,706,184	1.23%
Over 1,000,001 shares	12	38,433,886	27.73%
Total	25,853	138,570,640	100.00%

2. Preferred shares: None

(IV) List of major shareholders May 2, 2020

Shareholding Shareholders	Shareholding	Shareholding Percentage (%)
Ba Wei Holding	13,507,138	9.75%
Fubon Life Assurance Co.	8,250,000	5.95%
Bo-Feng, Lai	2,991,826	2.16%
Bo-Yen, Lai	2,132,831	1.54%
Citibank Trust Norges Bank Investors	2,110,900	1.52%
Deutsche Bank Trustee SPDR Portfolio Emerging Market Investors	1,889,905	1.36%
JPMorgan Chase Trustee Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds	1,442,339	1.04%
Wei-Ting, Chang	1,378,100	0.99%
JPMorgan Chase Bank Trustee Vanguard Group Emerging Market Fund Investment Account	1,277,000	0.92%
Ming-Xing, Lai	1,220,313	0.88%

Name, number of shares held, and shareholding percentage of shareholders who hold more than 5% of the shares or the top 10 shareholders:

(V) Market price, net worth, surplus and dividends in the last two years Unit: NT$

Items	Year	Year	2019 (Distributed in 2020)	2018 (Distributed in 2019)	As of March 31, 2020
Market price per share (Note 1)	Highest		62.4	70.70	49.95
	Lowest		43.6	40.35	33
	Average		53.1	56.7	44.03
Net worth per share(Note 2)	Pre-distribution		28.09	27.75	28.92
	Post-distribution		Undistributed	23.75	Undistributed
Earnings per share	Weighted average shares		138,138,557	137,960,640	138,570,640
	Earningsper share(Note 3)		4.15	7.48	0.91
Dividends per share	Cash dividends		Undistributed	4.00	Undistributed
	Stock dividends	Resulted from earnings	0	0	Undistributed
		Resulted from surplus	0	0	Undistributed
	Accumulated unpaid dividend (Note 4)		None	None	None
Return on investment analysis	Price/Earnings ratio(Note 5)		12.8	7.58	48.38
	Price/Dividend ratio(Note 6)		Undistributed	14.18	Undistributed
	Cash dividendyield(Note 7)		Undistributed	7.05	Undistributed

If retained earnings or capital reserves were used for capital increase, market prices and cash dividends that were retroactively adjusted based on the number of shares after distribution should be disclosed.
Note 1: The annual highest and lowest market value of common stock shall be listed. The annual average market value is calculated based on each year's transaction value and quantity.
Note 2: The quantity of shares issued at the end of the year shall be used as the reference and please fill in the table according to the distribution amount as resolved by the shareholders' meeting held in the following year.
Note 3: Where retroactive adjustment is necessary due to issuance of bonus shares, earnings per share before and after the adjustment shall be listed.
Note 4: If the terms of equity securities issuance allow unpaid dividends to be accumulated to the subsequent years in which there is profit, the Company shall disclose the accumulated unpaid dividends respectively up to that year.
Note 5: Price/Earnings Ratio = Average closing price for each share in the year/Earnings Per Share Note 6: Price/Dividend Ratio = Average closing price per share in the year/cash dividends per share Note 7: Cash dividend yield = Cash dividends per share in the year/ closing price per share.
Note 8: For net worth per share and earnings per share, list the amount published in the financial report reviewed by CPA in the most recent quarter prior to prospectus printing. For figures in other columns, list the annual amount published prior to prospectus printing.

(VI) Company's dividend policy and implementation thereof

1. The Company's Dividend Policy: According to Article 26 and 26-1 of the Company's Articles of Incorporation: Annual earnings shall be allocated as such: a minimum of 0.5% to employee bonus and a maximum of 3% to remuneration paid to Directors and Supervisors. Unless losses have been covered, the Company shall not make distribution of surplus profit. Retained earnings shall be withheld as capital reserve. Parties eligible to receive the said compensation in the form of stock or cash shall include employees in affiliated companies who met certain conditions. If there is any annual profit, the Company shall first pay out income tax, offset its losses in previous years and set aside a legal reserve at 10% of the earnings left over, until the accumulated legal reserve has equaled the total capital of the Company; then set aside or reverse special reserve if needed by the Company's operation or in accordance with relevant laws or regulations. If there is still remaining profit and beginning undistributed earnings, the Board of Directors shall propose earnings distribution to the shareholders' meeting for resolution.

According to governing authorities, factors such as allowances for decline in value of long-term investment and cumulative translation adjustments contribute to the deduction of shareholders’ equity. Before allocating retained earnings, the same amount of earnings shall be reserved as special reserve on the grounds of the deduction of shareholders’ equity.

(1) If the deduction of shareholders’ equity is resulted from the current year, the special reserve withheld shall not exceed the aggregate of net income after tax and previous year’s accumulated undistributed dividend.
(2) If the deduction of shareholders’ equity is resulted from the previous year, it shall not exceed the amount derived from deducting item (1) from the previous year’s accumulated undistributed dividend.
(3) For the subsequent decrease in the deduction amount to stockholders’ equity, any special reserve appropriated may be reversed to the extent which the net debit balance reverses.

According to Article 27, corporate’s dividend policy could be adjusted in accordance with the scale of business operation and for the need of cash flow. Cash dividend shall account for over 10% of the shares distributed to shareholders. The distribution of stock dividend, in general, accounts for over 70% of the operating profit after tax. Distribution could also be adjusted in accordance with business performance (e.g. exchange gains or losses).

2. Implementation of Dividend Allocation in Shareholders’ Meeting:

In 2019, a total of NT$1,608,574,410 retained earnings can be allocated. Cash dividend allocated to shareholders is at a value of NT$1.2 per share, totaling to NT$166,284,768.

(Note: Remuneration of Directors and Supervisors totaling to NT$11,000,000 and Employees' Compensation totaling to NT$31,973,000).

(VII) The Impact of Stock Dividend Distribution to Business Performance and Earnings Per Share:
No stock dividend allocation plan was proposed in this shareholders meeting. Such is inapplicable.
(VIII) Employees' Compensation and Remuneration of Directors and Supervisors

1. Quantity or scope of compensation for employees, Directors, and Supervisors

as prescribed under the Articles of Association:

According to Article 26 and 26-1 of the Company's Articles of Association: Annual earnings shall be allocated as such: a minimum of 0.5% to employee bonus and a maximum of 3% to remuneration paid to Directors and Supervisors. Unless

losses have been covered, the Company shall not make distribution of surplus profit. Retained earnings shall be withheld as capital reserve. Parties eligible to receive the said compensation in the form of stock or cash shall include employees in affiliated companies who met certain conditions.

2. The basis for estimating the amount of compensation to employees, Directors, and Supervisors and for calculating the number of shares to be distributed as employees' compensation, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimate for the current period:

(1) The amount allocated to 2019 employees' compensation and remuneration of Directors and Supervisors was NT$42,973 thousand based on a certain percentage of 2019 profit and factors such as legal reserve specified in Articles of Association and listed under estimates for operating costs and operating expenses in the current year. If the actual amount of bonus to employee subsequently paid differs from the above estimated amounts which is allocated in stock bonus, differences shall be recorded under 2020 net loss.

3. Remuneration Approved by Board of Directors:

(1) On March 19, 2020, Board of Directors approved 2019 employees' compensation and remuneration of Directors and Supervisors:

Unit: NT$; shares

					Unit: NT$;shares	Unit: NT$;shares
Employees'		Compensation		Remunerations of Directors and Supervisors	Difference
Cash value	Stock value	Stock (shares)	Total	Cash value	Difference	Allocation
31,973.000	0	0	31,973,000	11,000,000	No discrepancies	Inapplicable

Note: The amount of 2019 employees' compensation and remuneration of Directors and Supervisors was consistent with the estimated expense in 2018.
(2) Amount of employees' compensation distributed in stock, and its size as a percentage of the sum of net income after tax and total employees' compensation stated in the parent company only financial statements or individual financial statements for the current period

Number of Shares Distributed as Employees Compensation in the Form ofStock	Total Amount to NIAT	Total Amount to Employees' Compensation
0	0%	0%

4. Allocation of 2019’s net profit for employees' compensation and remuneration of Directors and Supervisors: NT$40,000 thousand of employees' compensation and NT$11,000 thousand of remuneration to Directors and Supervisors were distributed. The allocated amount was as approved and resolved by the Board of Directors.

(IX) Company Shares Repurchase: None.

II. Issuance of Corporate Bonds: None.

III. Issuance of Preferred Stocks: None.

IV. Overseas Depository Receipts: None.

V. Handling of Employee Stock Option:

Status of Employee Stock Options: None.
Employee Stock Options Granted to Management Team and to Top 10 Employees, Include Names, Grants, and Status: None.
Status of Employee Restricted Stock: None
Employee Restricted Stock Granted to Management Team and to Top 10 Employees, Include Names and Grants: None.

VI. Merger and Acquisition (including Merger, Acquisition and Demerger): None.

VII. Implementation of Capital Application Plan

(I) Proposal: With respect to each incomplete public issue or private placement of securities, and to such issues and placements which were completed in the most recent three years but have not yet fully yielded the planned benefits, the annual report shall provide a detailed description of the plan for each such public issue and private placement: None.

(II) Implement Status: (As proposed)

Chapter 5 Business Operations Overview

I. Main Business Activities

(I) Business Scope

1. Main Business Activities

(1) Cordless nailers, pneumatic nailers, and the manufacturing, machining, packaging, and trading of other pneumatic, cordless machinery.
(2) The machining, packaging, and trading of pneumatic tools, ~~c~~ ordless tools, hand tools and machinery.
(3) Machining, packaging, and trading of construction materials.
(4) The manufacturing, machining, packaging, and trading of related product parts and hardware parts in the above categories.
(5) The import/export of products, parts, and hardware parts in the above categories.
(6) The handling of sales leads, bids, and sales businesses (excluding futures) of domestic and overseas manufacturers.
(7) CA02020 Aluminum and Magnesium Products Manufacturing
(8) CQ01010 Mold Making
(9) CB01010 Machinery and Equipment Manufacturing
(10) CB01020 Office Machines Manufacturing
(11) CC01030 Electrical Appliances and Manufacturing
(12) CC01050 Data Storage Media Units Manufacturing
(13) CD01030 Automobiles and Parts Manufacturing
(14) CD01040 Motor Vehicles and Parts Manufacturing
(15) CD01050 Bicycles and Parts Manufacturing
(16) CE01010 Precision Instruments Manufacturing
(17) CE01030 Photographic and Optical Equipment Manufacturing
(18) CP01010 Hand Tool Manufacturing
(19) CH01010 Sporting and Athletic Articles Manufacturing
(20) CH01040 Toys Manufacturing
(21) C805030 Plastic Made Grocery Manufacturing
(22) C805050 Industrial Plastic Products Manufacturing
(23) CA01100 Aluminum Rolling, Drawing and Extruding
(24) CA01990 Other Non-metal Industry (using rolling, drawing, forging, and extruding to manufacture magnesium and magnesium alloy)
(25) CA03010 Metal Heat Treating
(26) CA04010 Metal Surface Treating
(27) ZZ99999 All business items that are not prohibited or restricted by law, except those that are subject to special approval.

2. Percentage of Business:

Unit: NT$’000

2. Percentage of Business:			Unit: NT$’000	Unit: NT$’000
Sales Unit and Percentage of Total Sales Business item	2018		2019
	Sales Unit	Percentage of Total Sales(%)	Sales Unit	Percentage of Total Sales(%)
Air nailers and other air tools	3,086,999	82.69	2,743,884	79.21
Others	646,321	17.31	720,199	20.79
Total	3,733,320	100.00	3,464,083	100.00

3. Company's Products (Services) Features:

(1) Pneumatic Nailer, Gas Nailer

(2) Automotive Air Impact Wrench, Air Ratchet Wrench

(3) Intelligent Industrial Nailer

(4) Air Saw and Air Hammer

(5) Air Sander

(6) Air Grinder

(7) Air Carton Closer
(8) Magnesium and Aluminum Alloy Die-Casting Parts
(9) High-pressure Pneumatic Nailer and Equipment

4. New Products (Services) Features Development:

(1) Automotive Maintenance, Vessel, Aviation Air Tools

(2) Cordless Nailer, Cordless Impact Wrench
(3) RC Construction Tools
(4) Industry-specific Maintenance Tools

(II) Industry Overview

1. Industry Overview and Development:

The rapid spread of COVID-19 has strongly affected the consumption and exports, and geopolitical and economic instability continues to affect consumer expectations. Regardless of changes in the environment, the Company plans to continue to launch new products to stimulate client purchase. Q1 YOY shows a slight growth. Pneumatic fastening tools manufacturing should contribute to sales increase in the second half of the year, so the Company remains optimistic about 2020 revenue and earnings.

In the global market, high-end pneumatic fastening tools feature quality assurance valuing quality, durability, and safety. The Company collaborates with major global brands in ODM partnership and has received international recognition in R&D, enhancing global competitiveness.

The Company has shown dedicated efforts to launch innovative products and reduce costs. A large budget is allocated to R&D personnel training, R&D testing, and key technologies in the manufacturing process to optimize production efficacy, achieving demands for “mass production and quality & reliability,” creating a reliable and professional corporate image, and thus enhancing customers’ satisfaction. On such basis, the Company invests in developing more new products to provide diversified value offerings and insists quality reliability and cost-reduction to provide reliable products and competitive prices. A continuous dedication to meet industry standards and demands for “small production lots with multiple models” enables the Company to maximize shareholders’ benefits and profits.

2. The correlation among the upstream, midstream and downstream of the industry:

The Company manufactures aluminum, magnesium, and composite air nailers and automotive air tools. Upstream process provides aluminum ingots, magnesium ingots, and composite raw materials. Midstream and downstream can be classified into manufacturing, machining, and user-end. Each vendor has respective tasks and functions according to division of labor. The detailed process is as below:

==> picture [398 x 440] intentionally omitted <==

----- Start of picture text -----

Upstream, Midstream and Downstream of Air Tools Diagram
Upstream Midstream Downstream
Raw Materials Manufacturing User-end
Aluminum and
Magnesium Alloy Die-Casting ODM Clients
Ingots
↓
Investment
Metal Materials → → Consumers
Casting
↓
Industrial Plastic
Machining Importers
Pellets
↓
Painting Hardware Chains
↓
Heat treatment
↓
Assembling
↓
Testing
↓
Packaging:
----- End of picture text -----

3. Product Development Prospects:

As time progresses, so does new products. Prospective product could be as follows:

(1) Light weight: new materials features (light and durable)

(2) High capacity: new function features (compact with high capacity)
(3) Multi-purpose design: multi-purposes machines
(4) Large nails: do not affect the equilibrium of nailers
(5) Low cost: reliability in quality
(6) Low in energy consumption: optimize efficacy
(7) Cordless: compact in size
(8) Customized design features

4. Market competition:

Because the domestic market features ODM air tools, competition is primarily from major foreign brands and manufacturers (e.g. US: SBDK, SENCO, RIDGID, Japan: MAX, HITACHI, MAKITA, Europe: PREBENA, BeA, and others).

(III) Technologies and R&D efforts

1. Research and Development (R&D) expense in the most recent year as of the publication date of the Annual Report

Unit: NT$’000	Unit: NT$’000	Unit: NT$’000
Year	2019	March 31, 2020
R&D Expenditures	178,743	41,857

2. Successfully Developed Technologies or Products

(1) 16 pneumatic nailers.
(2) 20 automotive air tools.

(IV) Mid- and Long-term, Short-term Sales Development

1. Mid- and Long-term Development

(1) To become the global leading professional air tools manufacturer.
(2) To develop tools in other related fields.

2. Short-term Development

(1) R&D investment in new cordless construction and automotive air tools to expand market and increase market share.
(2) To enhance personnel training to improve product quality and production efficacy, thus lowering production costs and maintaining market advantages.
(3) To analyze and expand market opportunities and increase market share.
(4) To develop industrial products, such as furniture, pallet nailers, and air carton closers to expand product lines and increase value-added product offerings.
(5) To develop bicycle parts.

II. Market and Industry Overview

(I) Market analysis

1. Primary Products (Services) Sales Regions:

Unit: NT$’000

Year Geographical region	2018	2018	2019	2019
	Amount	Product Sales(%)	Amount	Product Sales(%)
The Americas	1,721,789	49.70	1,848,016	49.50
Europe	1,084,996	31.32	1,215,452	32.56
Asia and other regions	657,298	18.98	669,852	17.94
Total	3,464,083	100.00	3,733,320	100.00

2. Market share and market's future supply and demand situation and growth:

(1) Global Demand and Supply

In the past two years, due to the China-US trade war, the increasing labor costs and manufacturing costs in the mainland China, and the improvement and innovation of Taiwan's manufacturing technology, major US brands have come back to purchase from Taiwanese manufactures or outsourced manufacturing process from Taiwanese partners, making Taiwan the largest global supplier. US still remains Taiwan’s primary export market and Europe mainly supplied by German and Italian manufacturers ranks second, followed by Japan which ranks third. Japanese vendors focus on the domestic market with US being its primary export market.

Because of the required advanced pneumatic fastening tools technology and high user-demand for product assurance, the global market is dominated by countries such as Taiwan, US, Italy, and Japan which have well-developed markets. The following chart indicates the major brands from each region.

Country	Major Brands
Taiwan	Basso,De Poan
US	SBDK,SENCO,RIDGID
Japan	MAX,HITACHI,MAKITA
Europe	PREBENA,BeA

(2) Domestic Demand and Supply

A competitive pneumatic nailer market in the global industry, Taiwan focuses on exporting while imports remain relatively low. In 2018, domestic pneumatic nailer and stapler production reached 1.6-2 million pcs. Based on recent market developments, the domestic market forecasts a steady growth, but the trend of cordless nail guns will gradually increase. The domestic market focuses on domestically-manufactured products with a low dependency on imported pneumatic fastening tools.

(3) Market Demand and Supply

US is the largest pneumatic fastening tools market in the world because the majority of its housing units are wooden constructions furnished with wooden furniture. Influenced by factors such a booming real estate market, low construction costs, short construction time, high replacement rate, as well as high renovation frequencies in springs and summers, US dominates the global pneumatic nailer and stapler market.

Due to the stable economic recovery in the U.S., construction market share and new housing trade, as well as new housing construction rate have increased. However, the COVID-19 pneumonia has caused closures and slowed down the consumption in some regions. Subsequent demand is still unknown at this

moment. The Company adopts a quality-first and fair price policy to seize more ODM opportunities in North America and exploit more retail channels. In times of economic depression, the Company extends business partnerships with clients to eliminate competition and expand market share.

In the future, the Company intends to achieve higher market share through new product sales, new retail channels, and more solid customer bases.

3. Competitive Advantages:

(1) As one of the leading manufacturers in global pneumatic fastening tools, the Company applies vertical integration to production to achieve low-cost offerings, mass production, and quality assurance.
(2) Meet the demands for “small productions with multi-designs packaging” product offerings.
(3) Augmenting key technology self-manufacturing rate, improving quality, and designing competitive product offerings to appeal to more clients from Europe and the USA to enable the Company to enhance business scope and scale.
(4) Company owns a professional business management team which has acquired an in-depth knowledge of market changes and industry trends and is capable of designing and implementing sustainable corporate strategies.

4. Favorable and unfavorable factors for long-term growth and response

(1) Favorable factors
A. The Company has acquired ISO9001 certification (Quality Assurance) and ISO14001 certification (Environmental Management), to ensure quality, delivery date, post-sales services, and makes commitments to take environmental conservation initiatives.
B. As one of the leading manufacturers in domestic fastening tools production and trade, the Company invests in automation equipment and facilities to increase productivity and efficacy, improve in-house manufacturing rate, and integrate production to overcome future market expansions and diversified demands.
C. Introduce advanced aluminum and magnesium alloy die-casting machines and computer processors to provide clients an integrated ONE-STOP-SHOPPING solution.
D. The Company commands key fastening tools technology and produce selfmanufactured products in corporate plants.
E. Continue to develop other air tools, bicycle parts, 3C product parts.
F. Manage key technologies such as mold development time and mold analysis to enhance production efficacy and product quality.
(2) Unfavorable factors
A. Fierce market price wars.
B. Decrease in working hours and an increase in salary.

C. Fierce price competitions caused by domestic and Chinese manufacturers have led to a decrease in gross profit.
D. Variables such as currency affecting price and profit.
(3) Based on the above strength and weaknesses analysis, action plans and countermeasures are as follows:
A. Design more innovative and professional industrial value-added products to prevent price-oriented competitions.
B. Introducing new industrial designs and high-efficacy manufacturing facilities to increase production efficacy and integrate manufacturing process to lower production costs and improve quality, in order to overcome the price competitions in the future.
C. Develop other air tools and bicycle parts to diversify product offerings and satisfy customer demands.

(II) Major uses and production process of the primary products

1. Product Features & Functions:

Products	Product Features & Functions:
Pneumatic Nailers, Gas Nailers High-pressure Pneumatic Nailers	Manufacturing and construction of various furniture, housing renovations, wooden houses, pallets, floors, wooden boxes
Automotive Air Tools, Impact Wrenches	The loosening and fastening of various automotive tires and engine screws
Air Saws	Pneumatic metal plate maintenance, metal plate cutting, construction hose cutting
Air Hammers	Rust removal, housing renovations, pneumatic metal plate cutting, hardware cutting
Air Carton Closers	Seal cartons
Air Sanders	Wooden surface finish or car wax
Air Grinder	Engravingand metal surfacegrinding

2. Production Process:

==> picture [520 x 121] intentionally omitted <==

----- Start of picture text -----

● Procured Parts
● Hardware
Procured Procured
Components
Preform Products
Raw Preform
Materials Molding ● Machining Combining Assembly Sales
● Painting Components Products
● Thermal
Treatment
● Outsourcing
Processing
----- End of picture text -----

(III) Supply of Primary Raw Materials

Primary raw materials include aluminum ingots, magnesium ingots, metal materials, plastic injection products, aluminum die-casting products, magnesium die-casting products, investment casting, etc. and 95% of which can be procured in Taiwan. Because the majority of the plants are located in Central Taiwan, due to its convenient location and accessible logistics delivery, the Company has secured long-term contracts and sound relationships with suppliers. Demands for quality, delivery date, and costs exceed company standards and expectations. Neither work being held up from lack of materials nor other disputes have been reported.

(IV) Clients Whom Account for Over 10% of Total Net Annual Sales in the Last Two Years

1. Clients Whom Account for Over 10% of Total Net Annual Sales in the Last Two Years, Include Name, Amount, Percentage of Total Net Annual Sales, and Reasons Leading to Change:

Unit: NT$’000

Major customer information for the last two years

	2018	2018	2018	2018	2019	2019	2019	2019	AS of 2020 Q1 (Note 2)	AS of 2020 Q1 (Note 2)	AS of 2020 Q1 (Note 2)	AS of 2020 Q1 (Note 2)
Item	Name	Amount	Percentage of net sales in the year (%)	Relationship with the issuer	Name	Amount	Percentage of net sales in the year (%)	Relationship with the issuer	Name	Amount	Percentage of net sales in the current year as of the end of last quarter (%)	Relationship with the issuer
-	A	639,231	17.12	None	A	562,314	16.23	None	A	173,029	19.86	None
	-	-	-		-	-	-		-	-	-	-
	Net sales	3,733,320	100		Net sales	3,464,083	100		Net sales	871,337	100

Note 1: Please specify the name and total trade amount of major clients that have accounted for at least 10% of sales in either of the past two years and the percentage against total sales. However, for those clients whose name cannot be disclosed according to the contract or the trade counterpart is a non-related party individual, a code name can be used instead.
Note 2: As of the publication date of this annual report, a company whose stock is listed on the TWSE or traded over the counter should disclose the most recent financial information audited or attested by a CPA.

2. Vendors Whom Account for Over 10% of Total Net Annual Purchases in the Last Two Years, Include Name, Amount, Percentage of Total Net Annual Purchases, and Reasons Leading to Change:

In 2018 and 2019, there were no vendors whose procurements account for over
10% of Total Net Annual Purchase.

(V) Output volume and value for the last two years

Output Volume and Value in the Last Two Years

Unit: NT$’000

Year Output Volume and Value PrimaryProducts	2018	2018	2018	2019	2019	2019
	Production capacity	Production volume	Production value	Production capacity	Production volume	Production value
Pneumatic nailers and other air tools	2,630,000	1,497,378	2,197,714	2,630,000	1,276,672	2,000,189
Total	2,630,000	1,497,378	2,197,714	2,630,000	1,276,672	2,000,189

Note 1: Capacity refers to the quantity that can be produced under normal operations using existing production equipment after the company has taken factors such as necessary downtime, holidays, etc. into consideration.

Note 2: If the product is substitutable, capacity can be jointly calculated and explained in the note.

(VI) Sales Volume and Value for the Last Two Years

Sales Volume and Value for the Last Two Years

Unit: NT$’000

Year Sales volume PrimaryProducts	2018	2018	2018	2018	2019	2019	2019	2019
	Domestic sales		Export Sales		Domestic sales		Export Sales
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Pneumatic nailers and other air tools	11,871	35,715	1,472,426	3,051,284	10,845	28,404	1,255,169	2,715,480
Total	11,871	35,715	1,472,426	3,051,284	10,845	28,404	1,255,169	2,715,480

III. Human Resources For The Most Recent Two Years And Up To The Date Of Publication Of The Annual Report

Item	Year	2018	2019	As of March 31, 2020
No. of employees	Administration Personnel	239	242	238
	Sales Personnel	37	35	36
	Production Personnel	450	460	460
	Total	726	737	734
Average Years of Age		38.04	38.51	38.78
Averageyear of services		8.36	9.03	9.26
Educational background (%)	Masters	35	34	35
	Bachelor's degree	324	335	330
	Senior High	190	190	186
	Senior High or Below	177	178	183

Note: The annual data shall be updated as of the publication date of this annual report.

IV. Disbursements for Environmental Protection

The Company has designated dedicated personnel to handle matters regarding environmental management, offer strict plant controls on the disposal and emission of plant waste residues or pollutants. There was no loss (including indemnity) and penalty incurred by pollution and environment over the past two years and as of the publication date of this annual report.
The Company has been approved by ROC-MOEA Bureau of Standards acquiring ISO14001 certification (Environmental Management) in April 2014.

V. Labor Relations

(I) The Company's employee welfare policies, continuing education, training, retirement systems and implementation status, the agreement between employees and employer and employees’ rights and interests:
Various employee benefit programs: The Welfare Committee is tasked with organizing employee benefit programs, emergency relief, holiday bonuses, and birthday gift certificates. Each year, the Company hosts company outings, health examinations, etc.
Further education and training programs: At the end of each year, managerial-level supervisors from each department propose an annual training program which includes a standard procedure: submit applications, grant approval, and provide training, to be implemented by Human Resources based on actual demands. Human Resources and each department also host special training sessions to enrich employees’ professional knowledge.

Retirement pension policy: Company allocates retirement pension and has established a retirement pension supervisory committee offering a complete retirement benefit plan.
Employer-employee agreements and labor rights: The Company has established a “Labor Relations Mediation Committee”. Employee representatives are appointed through nomination, voting, and election and designated to host regular labor relations mediation meetings which facilitate communications serving as a channel of communications for corporate policy or management guidelines, employee suggestions, and company feedbacks. An individual mailbox is set up by Human Resources to handle disputes. As of the publication date of this annual report, no labor disputes have been reported.
(II) List the losses suffered due to labor disputes in the most recent fiscal year up to the publication date of this annual report, and disclose the estimated amount arising both at present and in the future and the corresponding countermeasures. If the amount cannot be reasonably estimated, facts of which estimation cannot be made shall be explained:
The Company values and facilitates employer-employee communications. Therefore, no such event occurred.
(III) Work environment and protection for physical safety of workers.
The Company has set up Environmental protection” Office and Labor Safety Office under President’s Office.
Company has been approved by ROC-MOEA Bureau of Standards acquiring ISO14001 certification (Environmental Management) in April 2014.
1. Labor Safety and Hygiene Measures
2. a. Establishing Labor Safety and Hygiene Policy:
  - For the Company's consensus on safety and health measures, the Company shall revise the policy at any time according to social environment and labor regulations, so the safety and health management performance can be continuously improved.
3. b. Risk evaluation and countermeasures: Regularly conduct quarterly labor safety and health promotion committee to review whether there are potential hazard factors in the plant area, or non-compliance with regulations, etc., and establish related management measures
4. c. Reducing occupational disasters: To effectively reduce occupational disasters, employees are regularly educated and trained including hazard identification, danger prediction, and safe operating procedures. Hazardous mechanical equipment is regularly inspected, maintained, and automatically inspected; the chemicals in the plants are fully marked with their classifications, hazard diagrams and their material safety data sheets in clearly visible places.
5. d. Workplace Environment Assessment: In accordance with the Labor Operating Environment Measurement and Implementation Measures, a qualified institution

shall be appointed to implement workplace environment assessments pertaining to chemical analysis and physical measurement in workplace environments exposed to high-temperature, high-decibel noise, powder and dust, specific chemical material, organic solvent, and ionizing radiation in accordance with relevant law and regulations.

e. Labor health protection: In accordance with the "Labor Health Protection Rules", health checks for general operations and special hazard operations are carried out every year, appropriate operations are assigned to the physical condition of the workers, and their health status is continuously tracked.
Workplace Safety Control
a. Implement Labor Safety and Hygiene Policy by appointing labor safety and hygiene inspectors to supervise projects pertaining to overhead operations, organic solvents, electric operations, flaming operations, confined spaces, ionizing radiation, etc.
b. Host regular inspections for high-risk exposure machinery and equipment. Operating personnel should acquire professional permits and attend regular training programs to ensure operating safety.
c. Follow up on disability-induced injuries, non-disability injuries, and false-reported incidents to make continuous improvements in eliminating toxic chemical and physical hazards.
d. Ensure safety on labor environment and vendors’ plants premises and at nearby intersections by assigning guards to patrol traffic at plant entrances and exits. Promote personnel traffic safety awareness by penalizing driving misconducts and providing correction action plans and measures.
e. Designated safety and hygiene personnel should voluntarily inspect business activities on plant premises and take actions to correct and improve hazardous conducts and conditions. In the event of plant emergencies, provide auxiliary and relief support.
f. Labor Safety and Hygiene Office has implemented on-site supervisions for units with high-risk disability injuries by prioritizing crisis management and risk management, training programs, contractor management and purchase management, and safety procedures and auto inspections.

VI. Important Agreements

As of the date of publication of the annual report, the Company has preserved exiting or expired contracts in the most recent fiscal year, including supply/distribution contracts, technical partnership contracts, long-term loan contracts, engineering/construction contracts, and other contracts which would affect shareholders' equity.

Supply/distribution contracts, technical partnership contracts, engineering/construction contracts, and other contracts which would affect shareholders' equity: None.

Chapter 6 Financial Highlights

I. Condensed Balance Sheets and Income Statement for the Past Five Years (I) Condensed Balance Sheet - Consolidated

Unit: NT$’000

Year Item	Year Item	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	As of March 31, 2020 of this annual report (Note 3)
		2015	2016	2017	2018	2019
Current assets		12,815,508	14,514,137	11,863,062	13,223,316	3,522,576	3,565,993
Property, Plant and Equipment (Note 2)		916,468	890,199	890,017	889,073	960,244	952,891
Intangible assets		3,027	8,749	27,737	22,693	16,831	13,834
Other assets(Note 2)		993,288	339,277	1,135,982	726,600	114,094	112,751
Total asset		14,728,291	15,752,362	13,916,798	14,861,682	4,613,745	4,645,469
Current liabilities	Before distribution	10,172,866	11,799,880	10,116,890	10,575,024	696,603	603,311
	After distribution	10,628,136	12,365,519	10,310,035	11,126,867	Undistributed	Undistributed
Non-current liabilities		1,025,603	254,216	818,072	458,074	36,195	35,290
Total liabilities	Before distribution	11,198,469	12,054,096	10,934,962	11,033,098	732,798	638,601
	After distribution	11,653,739	12,619,735	11,128,107	11,584,941	Undistributed	Undistributed
Equity attributable to owners of the parent		3,529,822	3,698,266	2,981,836	3,828,584	3,880,947	4,006,868
Capital		1,379,606	1,379,606	1,379,606	1,379,606	1,385,706	1,385,706
Capital res	erve	305	305	305	593	26,396	26,396
Retained earnings	Before distribution	2,084,000	2,549,074	2,186,368	2,486,945	2,507,405	2,633,326
	After distribution	1,628,730	1,983,435	1,993,223	1,935,102	Undistributed	Undistributed
Other equity		65,911	(230,719)	(584,443)	(38,560)	(38,560)	(38,560)
Treasurystock		0	0	0	0	0	0
Non-controlling interest		0	0	0	0	0	0
Total equity	Before distribution	3,529,822	3,698,266	2,981,836	3,828,584	3,880,947	4,006,868
	After distribution	3,074,552	3,132,627	2,788,691	3,276,741	Undistributed	Undistributed

Companies having compiled a parent company only financial statement shall compile parent company only condensed balance sheet and comprehensive income statement.
If the financial information under international financial reporting standards is less than 5 years, the financial information under ROC GAAP should be prepared in table (2) below.

Note 1: The fiscal years for which reports were not CPA audited or reviewed shall be noted. →The financial data for the most recent five years has been audited and attested by CPAs.

Note 2: Any cases of asset revaluation for the current year, the date of asset revaluation and the amount of asset revaluation shall be noted. → There was no asset revaluation.

Note 3: As of the publication date of this annual report, a company whose stock is listed on the TWSE or traded over the counter should disclose the most recent financial information audited or attested by a CPA. →Financial information for the fiscal quarter ended March 31, 2020, has been reviewed by CPAs.

Note 4: Please fill the figures based on the resolution passed by the shareholders' meeting in the following year. Note 5: If the Company has been notified by the authority to self-correct or restate its financial reports, the restated figures should be compiled, along with the information and reasons for the restatement or corrections.

(II) Condensed Comprehensive Income Statement- Consolidated

Unit: NT$’000

Year Item	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	As of March 31, 2020 Financial information (Note 2)
	2015	2016	2017	2018	2019
Operatingrevenue	3,494,759	4,056,397	3,836,257	3,733,320	3,464,083	871,337
Grossprofit	1,037,462	1,265,699	1,113,859	1,117,939	985,478	242,209
Operating profit(loss)	691,201	917,770	772,701	725,010	576,509	148,274
Non-operating income and expenses	573,493	171,394	(535,903)	509,790	158,547	9,127
Net income before tax	1,264,694	1,089,164	236,798	1,234,800	735,056	157,401
Net income from continuingoperations	995,371	949,844	203,973	1,031,765	573,554	125,921
Loss from discontinued operations	-	-	-	-	-	-
Net income(loss)	995,371	949,844	203,973	1,031,765	573,554	125,921
Other comprehensive income(net,after tax)	(51,464)	(326,130)	(354,765)	7,840	(1,251)	-
Total comprehensive income	943,907	623,714	(150,792)	1,039,605	572,303	125,921
Net income attributable to owners of theparent	943,907	623,714	(150,792)	1,039,605	572,303	125,921
Net income attributable to non-controlling interests	-	-	-	-	-	-
Total comprehensive income attributable to owners of theparent	943,907	623,714	(150,792)	1,039,605	572,303	125,921
Total comprehensive income attributable to non-controllinginterests	-	-	-	-	-	-
Earningsper share	6.75	6.88	1.48	7.48	4.15	0.91

Companies having compiled a parent company only financial statement shall compile parent company only condensed balance sheet and comprehensive income statement.
If the financial information under international financial reporting standards is less than 5 years, the financial information under ROC GAAP should be prepared in table (2) below.
Note 1: The fiscal years for which reports were not CPA audited or reviewed shall be noted. →The financial data for the most recent five years has been audited and attested by CPAs.
Note 2: As of the publication date of this annual report, a company whose stock is listed on the TWSE or traded over the counter should disclose the most recent financial information audited or attested by a CPA. →Financial information for the fiscal quarter ended March 31, 2020, has been reviewed by CPAs.

Note 3: Loss from discontinued operations is shown in net amount after income tax.

Note 4: If the competent authority notified that the financial information is required to be corrected or restated, the financial information shall be presented with corrected or restated figures, and shall indicate the circumstances and reasons.

(III) Condensed Balance Sheet - Parent Company Only

Unit: NT$’000

Year Item	Year Item	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	As of March 31, 2020 Financial information (Note 3)
		2015	2016	2017	2018	2019
Current assets		12,815,508	14,514,137	11,863,062	13,223,316	3,522,576	3,565,993
Property, Plant and Equipment (Note 2)		916,468	890,199	890,017	889,073	960,244	952,891
Intangible assets		3,027	8,749	27,737	22,693	16,831	13,834
Other assets(Note 2)		993,288	339,277	1,135,982	726,600	114,094	112,751
Total asset		14,728,291	15,752,362	13,916,798	14,861,682	4,613,745	4,645,469
Current liabilities	Before distribution	10,172,866	11,799,880	10,116,890	10,575,024	696,603	603,311
	After distribution	10,628,136	12,365,519	10,310,035	11,126,867	Undistributed	Undistributed
Non-current liabilities		1,025,603	254,216	818,072	458,074	36,195	35,290
Total liabilities	Before distribution	11,198,469	12,054,096	10,934,962	11,033,098	732,798	638,601
	After distribution	11,653,739	12,619,735	11,128,107	11,584,941	Undistributed	Undistributed
Equity attributable to owners of the parent		3,529,822	3,698,266	2,981,836	3,828,584	3,880,947	4,006,868
Capital		1,379,606	1,379,606	1,379,606	1,379,606	1,385,706	1,385,706
Capital res	erve	305	305	305	593	26,396	26,396
Retained earnings	Before distribution	2,084,000	2,549,074	2,186,368	2,486,945	2,507,405	2,633,326
	After distribution	1,628,730	1,983,435	1,993,223	1,935,102	Undistributed	Undistributed
Other equity		65,911	(230,719)	(584,443)	(38,560)	(38,560)	(38,560)
Treasurystock		0	0	0	0	0	0
Non-controlling interest		0	0	0	0	0	0
Total equity	Before distribution	3,529,822	3,698,266	2,981,836	3,828,584	3,880,947	4,006,868
	After distribution	3,074,552	3,132,627	2,788,691	3,276,741	Undistributed	Undistributed

Companies having compiled a parent company only financial statement shall compile parent company only condensed balance sheet and comprehensive income statement.
If the financial information under international financial reporting standards is less than 5 years, the financial information under ROC GAAP should be prepared in table (2) below.

Note 1: The fiscal years for which reports were not CPA audited or reviewed shall be noted. →The financial data for the most recent five years has been audited and attested by CPAs.

Note 2: Any cases of asset revaluation for the current year, the date of asset revaluation and the amount of asset revaluation shall be noted. → There was no asset revaluation.

Note 3: Companies that are listed or their stock is trading on an over-the-counter market shall set out the information as of the quarter before the printing date of the annual report. Furthermore, state whether the financial information was either certified, audited by CPAs, or both. →Financial information for the fiscal quarter ended March 31, 2020, has been reviewed by CPAs.

Note 4: Please fill the figures based on the resolution passed by the shareholders' meeting in the following year.

Note 5: If the Company has been notified by the authority to self-correct or restate its financial reports, the restated figures should be compiled, along with the information and reasons for the restatement or corrections.

(IV) Condensed Statement of Comprehensive Income – Parent Company Only

Unit: NT$’000

Year Item	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	Financial Information for the Most Recent Five Years(Note 1)	As of March 31, 2020 Financial information (Note 2)
	2015	2016	2017	2018	2019
Operatingrevenue	3,494,759	4,056,397	3,836,257	3,733,320	3,464,083	871,337
Grossprofit	1,037,462	1,265,699	1,113,859	1,117,939	985,478	242,209
Operating profit(loss)	691,201	917,770	772,701	725,010	576,509	148,274
Non-operating income and expenses	573,493	171,394	(535,903)	509,790	158,547	9,127
Net income before tax	1,264,694	1,089,164	236,798	1,234,800	735,056	157,401
Net income from continuingoperations	995,371	949,844	203,973	1,031,765	573,554	125,921
Loss from discontinued operations	-	-	-	-	-	-
Net income(loss)	995,371	949,844	203,973	1,031,765	573,554	125,921
Other comprehensive income(net,after tax)	(51,464)	(326,130)	(354,765)	7,840	(1,251)	-
Total comprehensive income	943,907	623,714	(150,792)	1,039,605	572,303	125,921
Net income attributable to owners of theparent	943,907	623,714	(150,792)	1,039,605	572,303	125,921
Net income attributable to non-controlling interests	-	-	-	-	-	-
Total comprehensive income attributable to owners of theparent	943,907	623,714	(150,792)	1,039,605	572,303	125,921
Total comprehensive income attributable to non-controllinginterests	-	-	-	-	-	-
Earningsper share	6.75	6.88	1.48	7.48	4.15	0.91

Companies having compiled a parent company only financial statement shall compile parent company only condensed balance sheet and comprehensive income statement.
If the financial information under international financial reporting standards is less than 5 years, the financial information under ROC GAAP should be prepared in table (2) below.
Note 1: The fiscal years for which reports were not CPA audited or reviewed shall be noted. →The financial data for the most recent five years has been audited and attested by CPAs.
Note 2: Companies that are listed or their stock is trading on an over-the-counter market shall set out the

information as of the quarter before the printing date of the annual report. Furthermore, state whether the financial information was either certified, audited by CPAs, or both. →Financial information for the fiscal quarter ended March 31, 2020, has been reviewed by CPAs.

Note 3: Loss from discontinued operations is shown in net amount after income tax.

(V) Names of certified public accountant over the past five fiscal years and audit opinions

CPA Names and Audit Opinions

Year	Name of the accountingfirm	Name of CPAs	Audit opinion
2015	KPMG Taiwan	Chun-Man, Chen& Shih-Hua, Kuo	Unqualified opinion
2016	KPMG Taiwan	Chun-Man, Chen & Tzu-Hsin, Chang	Unqualified opinion
2017	KPMG Taiwan	Tzu-Hsin, Chang & Mei-Yi, Tseng	Unqualified opinion
2018	KPMG Taiwan	Chun-Yuan. Wu & Shih-Hua, Kuo	Unqualified opinion
2019	KPMG Taiwan	Chun-Yuan. Wu & Shih-Hua, Kuo	Unqualified opinion

II. Financial Analyses for the Past Five Years

1. Financial Analysis - Consolidated

Year (Note 1) Item (Note 3)	Year (Note 1) Item (Note 3)	Financial information in the five most recentyears	Financial information in the five most recentyears	Financial information in the five most recentyears	Financial information in the five most recentyears	Financial information in the five most recentyears	As of March 31, 2020 (Note 2)
		2015	2016	2017	2018	2019
Financial structure (%)	Ratio of liabilities to assets	76.03	76.52	78.57	74.24	15.88	13.75
	Ratio of long-term capital to property, plant and equipment	497.06	444.00	426.95	482.15	407.93	424.2
Debt service ability (%)	Current ratio	125.98	123.00	117.26	125.04	505.68	591.07
	Quick ratio	60.86	55.37	55.05	53.20	424.57	505.34
	Interest coverage ratio	12.19	10.94	3.24	13.08	10.42	-
Operating ability	Accounts receivable turnover rate(times)	4.83	4.93	4.93	4.46	4.61	5.85
	Average days for cash receipts	75.56	74.03	74.03	81.83	79.17	62.39
	Inventory turnover rate (times)	3.44	4.08	4.52	4.21	3.56	3.71
	Payables turnover rate (times)	8.85	8.18	7.31	7.99	6.41	7.12
	Average days for sale of goods	106.1	89.46	80.75	86.69	102.52	98.38
	Turnover rate for property, plant and equipment (times)	3.71	4.49	4.31	4.20	3.75	3.64
	Total asset turnover rate (times)	0.25	0.27	0.26	0.26	0.36	0.75
Profitability	Return on Assets(%)	7.78	6.83	1.97	7.74	6.53	10.88
	Return on Equity (%)	29.58	26.28	6.11	30.30	14.88	12.77
	Ratio of net profit on paid- upcapital(%) (Note 7)	91.67	78.95	17.16	89.50	53.05	45.44
	Netprofit ratio(%)	28.48	23.42	5.32	27.64	16.56	14.45
	Earningsper share(NT$)	6.75	6.88	1.48	7.48	4.15	0.91
Cash flow	Cash flow ratio(%)	14.01	8.92	3.35	8.55	155.61	74.84
	Cash flow adequacy ratio (%)	203.17	143.73	115.97	134.89	147.90	159.31
	Cash reinvestment ratio (%)	17.39	10.45	(4.59)	12.14	9.0	7.44
Leverage	Operatingleverage	2.19	2.07	2.33	2.25	2.72	2.80
	Financial leverage	1.20	1.14	1.16	1.16	1.16	1

Description of causes for changes to various financial ratios in the most recent two years: (analysis would not be required if the change is within 20%)

The decrease in Interest coverage ratio, return on equity, ratio of net profit to paid-in capital, net profit ratio, earnings per share in 2019 compared to 2018 is due to the appreciation of the US dollar in 2018, there is a foreign exchange gain and profits have increased significantly. In 2019, the depreciation of the US dollar caused exchange losses and reduction in profits.
Debt-to-asset ratio decreased in 2019 compared to 2018 is due to the disposal of USD fixed deposit and bonds in 2019 for payback of all NTD loans.
Current ratio, quick ratio, total asset turnover rate and cash flow ratio increased in 2019 compared to 2018 is due to the disposal of USD fixed deposit and bonds in 2019 for payback of all NTD loans.
Cash reinvestment ratio decreased in 2019 compared to 2018 is due to the increase in cash dividends issued in 2019 compared to 2018.
Operating leverage increased in 2019 compared to 2018 is due to the decrease in operating profit in 2019 compared to 2018.

2. Financial analysis - Parent Company Only

2. Financial analysis -	2. Financial analysis -	Parent Company Only	Parent Company Only	Parent Company Only	Parent Company Only	Parent Company Only
Year (Note 1) Item (Note 3)		Financial information in the five most recentyears					As of March 31, 2020 (Note 2)
		2015	2016	2017	2018	2019
Financial structure (%)	Ratio of liabilities to assets	76.03	76.52	78.57	74.24	15.88	13.75
	Ratio of long-term capital to property, plant and equipment	497.06	444.00	426.95	482.15	407.93	424.2
Debt service ability (%)	Current ratio	125.98	123.00	117.26	125.04	505.68	591.07
	Quick ratio	60.86	55.37	55.05	53.20	424.57	505.34
	Interest coverage ratio	12.19	10.94	3.24	13.08	10.42	-
Operating ability	Accounts receivable turnover rate(times)	4.83	4.93	4.93	4.46	4.61	5.85
	Average days for cash receipts	75.56	74.03	74.03	81.83	79.17	62.39
	Inventory turnover rate(times)	3.44	4.08	4.52	4.21	3.56	3.71
	Payables turnover rate(times)	8.85	8.18	7.31	7.99	6.41	7.12
	Average days for sale ofgoods	106.1	89.46	80.75	86.69	102.52	98.38
	Turnover rate for property, plant and equipment(times)	3.71	4.49	4.31	4.20	3.75	3.64
	Total asset turnover rate(times)	0.25	0.27	0.26	0.26	0.36	0.75
Profitability	Return on Assets(%)	7.78	6.83	1.97	7.74	6.53	10.88
	Return on Equity (%)	29.58	26.28	6.11	30.30	14.88	12.77
	Ratio of net profit on paid-up capital (%) (Note 7)	91.67	78.95	17.16	89.50	53.05	45.44
	Netprofit ratio(%)	28.48	23.42	5.32	27.64	16.56	14.45
	Earnings per share (NT$)	6.75	6.88	1.48	7.48	4.15	0.91
Cash flow	Cash flow ratio(%)	14.01	8.92	3.35	8.55	155.61	74.84
	Cash flow adequacy ratio(%)	203.17	143.73	115.97	134.89	147.90	159.31
	Cash reinvestment ratio(%)	17.39	10.45	(4.59)	12.14	9.0	7.44
Leverage	Operatingleverage	2.19	2.07	2.33	2.25	2.72	2.80
	Financial leverage	1.20	1.14	1.16	1.16	1.16	1

Description of causes for changes to various financial ratios in the most recent two years: (analysis would not be required if the change is within 20%)

The decrease in Interest coverage ratio, return on equity, ratio of net profit to paid-in capital, net profit ratio, earnings per share in 2019 compared to 2018 is due to the appreciation of the US dollar in 2018, there is a foreign exchange gain and profits have increased significantly. In 2019, the depreciation of the US dollar caused exchange losses and reduction in profits.
Debt-to-asset ratio decreased in 2019 compared to 2018 is due to the disposal of USD fixed deposit and bonds in 2019 for payback of all NTD loans.
Current ratio, quick ratio, total asset turnover rate and cash flow ratio increased in 2019 compared to 2018 is due to the disposal of USD fixed deposit and bonds in 2019 for payback of all NTD loans.
Cash reinvestment ratio decreased in 2019 compared to 2018 is due to the increase in cash dividends issued in 2019 compared to 2018.
Operating leverage increased in 2019 compared to 2018 is due to the decrease in operating profit in 2019 compared to 2018.
If the Company has prepared parent company only financial statements, it shall also prepare a parent company only financial ratio analysis.
If the financial information under international financial reporting standards is less than 5 years, the financial information under ROC GAAP should be prepared in table (2) below.
Note 1: The fiscal years for which reports were not CPA audited or reviewed shall be noted.
Note 2: As of the publication date of this annual report, a company whose stock is listed on the TWSE or traded over the counter should disclose the most recent financial information audited or attested by a CPA.
Note 3: The following calculation formulas shall be listed at the end of this Table in the annual report:
Financial structure
(1) Liability to asset ratio = Total liabilities/Total assets.
(2) Ratio of long-term capital to property, plant, and equipment = (total equity + non-current liabilities)/net amount of property, plant, and equipment.
Debt-paying capability
(1) Current ratio = Current assets/Current liabilities
(2) Quick ratio = (Current assets - Inventory - Prepaid expenditures)/Current liabilities.
(3) Interest protection multiples = Income before income tax and interest expenditure/ Interest expenditures for this period.
Business capability
(1) Accounts receivable (including accounts receivable and notes receivable resulting from operation) turnover = Net sales/balance of average accounts receivable (including accounts receivable and notes receivable resulting from operation).
(2) Average collection days = 365/Receivables turnover rate.
(3) Inventory turnover = Cost of goods sold/Average inventory value.
(4) Payables turnover rate (including notes payable resulting from accounts payable and business operations) = Cost of good sold/Average accounts payable in various periods (including notes payable resulting from accounts payable and business operations).
(5) Average sales days = 365/Inventory turnover ratio.
(6) Property, Plant and Equipment Turnover ＝ Net sales ／ Average of property, plant and equipment, net value.
(7) Total asset turnover ratio = Net sales/Average total PP&E value.
Profitability
(1) Return on assets (ROA) = [Net income after income tax + Interest expenses * (1 - tax rate)]/Average total assets.
(2) Equity remuneration rate = Net income after tax/Average total equity value.
(3) Net profit ratio = Net income after tax/Net sales.
(4) Earnings Per Share (EPS) = (Gain (loss) attributable to the owner of the parent company - Dividend for preferred shares)/Weighted average of issued shares (Note 4)
Cash flow volume
(1) Cash flow ratio = Net cash from business activities/Current liabilities.
(2) Net cash flow adequacy ratio = Net cash flow for business activities for the last 5 years/(Capital expenses + Additional inventory sum + Cash dividend) for the past 5 fiscal years.
(3) Cash re-investment ratio = (Net cash flow from business activities - Cash dividend)/(Gross amount of PP&E + Long-term investments + Other non-current assets + working capital). (Note 5)
Degree of leverage:
(1) Degree of operating leverage = (Net operating revenue - Variable operating costs and expenses) / Operating income (Note 6).

(2) Degree of Financial Leverage (DFL) = Operating profit/(Operating profit - Interest expenditures). Note 4: Special attention shall be paid to the following matters when using the formula of Earnings Per Share above:

The calculation shall be based on the weighted average quantity of common shares, instead of the number of shares outstanding as of the end of the year.
When calculating the weighted average shares after capital increase or treasury stock trades, their effective term shall be taken into consideration.
Where retained earnings or capital surplus are transferred to common stocks, retrospective adjustment shall be made in proportion to the quantity of shares issued in calculating the semiannual or annual EPS of the year. The period for the release of such new shares may be omitted.
If the preferred stock is non-convertible cumulative preferred stocks, dividend for the year (whether it is being distributed or not) shall be subtracted from net profit after income tax or added to net loss after income tax. If the preferred stock is not cumulative, dividend thereon shall be subtracted from net profit after income tax if net profit after income tax is earned, or no adjustment is required if loss arises.
Note 5: Special attention should be paid to the following matters when measuring cash flow analysis:
Net cash flow from operating activities refers to the net cash inflow from operating activities in the statement of cash flows.
Capital expenditure refers to the cash outflow to annual capital investment.
The increase in inventory is included only when the balance at the end of the period is larger than the balance at the beginning of the period. If the inventory decreases at the end of the year, it shall be calculated as zero.
Cash dividends include the cash dividends paid to holders of common shares and preferred shares.
Gross property, plant and equipment value are measured at the total value of property, plant and equipment prior to the subtraction of accumulated depreciation.
Note 6: Issuers shall separate operating costs and operating expenses by their nature into fixed and variable categories. When estimations or subjective judgments are involved, give special attention to their reasonableness and to maintaining consistency.
Note 7: In the case of a company whose shares have no par value or a par value other than NT$10, any calculations that involve paid-in capital ratio shall be replaced with the equity ratio belonging to the owner of the parent company, as shown in the balance sheet.

III. 2019 Supervisors Review Report

The Supervisors' Review Report of BASSO INDUSTRY CORP.

The Board of Directors has prepared the Company's 2019 Business Report, Balance Sheets, Statements of Comprehensive Income, Statements of Changes in Equity, and Statements of Cash Flows audited by the CPA firm. They have been determined to be correct by Supervisors. According to Article 219 of the Company Act, we hereby submit this report.

BASSO INDUSTRY CORP 2020 Annual Shareholders' Meeting

Supervisor: Wei-ting Chang

March 19, 2020

The Supervisors' Review Report of BASSO INDUSTRY CORP.

BASSO INDUSTRY CORP 2020 Annual Shareholders' Meeting

Supervisor: Xiao-ling Lin

March 19, 2020

The Supervisors' Review Report of BASSO INDUSTRY CORP.

BASSO INDUSTRY CORP 2020 Annual Shareholders' Meeting

Supervisor: Zi-ling Ye

March 19, 2020

IV. 2019 Annual Financial Statements and Audit Report of CPAs: Refer to Attachment 1 (#page87-151#).

V. Impact on the Financial Position of the Company and its Related Enterprises in the Most Recent Year and up to the Date of Printing of the Annual Report in Case of Financial Turnover Difficulties →None.

Chapter 7 Review and Analysis of Financial Position and Business Results and Risk Matters

I. Review and Analysis of Financial Position

Comparative Analysis of Financial Position

Unit: NT$’000

Year Item	2018	2019	Difference Amount	%
Current assets	13,223,316	3,522,576	(9,700,740)	(73.36)
Property, plant and equipment	889,073	960,244	71,171	8.01
Intangible assets	22,693	16,831	(5,862)	(25.83)
Other assets	726,600	114,094	(612,506)	(84.30)
Total asset value	14,861,682	4,613,745	(10,247,937)	(68.96)
Current liabilities	10,575,024	696,603	(9,878,421)	(93.41)
Non-current liabilities	458,074	36,195	(421,879)	(92.10)
Total liabilities	11,033,098	732,798	(10,300,300)	(93.36)
Share capital	1,379,606	1,385,706	6,100	0.44
Capital surplus	593	26,396	25,803	4,351.26
Retained earnings	2,486,945	2,507,405	20,460	0.82
Other equities	(38,560)	(38,560)	0	0
Treasurystock	--	--	--	--
Total shareholder equity	3,828,584	3,880,947	52,363	1.37

(I) Item explanation of the Company's major changes in assets, liabilities and shareholders' equity in the latest two years (the change in the earlier and later period is more than 20%, and the change amount is NT$10 million)
The significant decrease in current assets, other assets, total assets, current liabilities, non-current liabilities and total liabilities in the current period compared to the previous period was due to the disposal of USD fixed deposit and bonds in 2019 for payback of all NTD loans.
The decrease in intangible assets in the current period compared to the previous period was due to the lower cost of newly purchased computer software in this period.
The increase in capital reserves in the current period compared to the previous period was due to the premium of the shares issued for the transfer from employees' compensation to capital increase in 2019.
(II) The main causes and effects of changes in the current liabilities of the Company in the latest two years and the long-term liabilities due within one year, and future contingency plan:
Current liabilities and long-term liabilities due within one year have fully settled liabilities by disposing the USD fixed deposit and bonds in 2019.
There will be no significant impact on the Company's financial structure, and the financial constitution will be sounder.

II. Review and Analysis of Financial Performance

(I)Comparative Analysis of Financial Performance

Unit: NT$’000

(I) Comparative Analysis of Financial	Performan	ce		Unit: NT$’000
Year Item	2018	2019	Increased (decreased) Amount	Percentage of Change %
Total operatingrevenue	3,748,295	3,487,783	(260,512)	(6.95)
Less: Sales Return	865	4,360	3,495	404.05
Sales allowance	14,110	19,340	5,230	37.07
Net operatingrevenue	3,733,320	3,464,083	(269,237)	(7.21)
Operatingcosts	2,615,381	2,478,605	(136,776)	(5.23)
Operatingmargin	1,117,939	985,478	(132,461)	(11.85)
Operatingexpenses	392,929	408,969	16,040	4.08
Operating profit	725,010	576,509	(148,501)	(20.48)
Non-operatingincome and expenses	509,790	158,547	(351,243)	(68.90)
Net Profit Before Tax on ContinuingOperations	1,234,800	735,056	(499,744)	(40.47)
Income tax expenses	203,035	161,502	(41,533)	(20.46)
Net income	1,031,765	573,554	(458,211)	(44.41)
Current other comprehensive profit and loss (net	7,840	(1,251)	(9,091)	(115.96)
amount after tax)
Current total comprehensiveprofit and loss	1,039,605	572,303	(467,302)	(44.95)

Analysis of the change in the proportion of increase or decrease (the change in the earlier and later period is more than 20%, and the change amount is NT$ 10 million):
(1) Decrease in operating profit: due to a decline in operating revenue.
(2) Decrease in non-operating revenue and expenses: due to the exchange gains from the appreciation of the US dollar in 2018 and the exchange losses from the devaluation of the US dollar in 2019.
(3) Decrease in net profit before tax on continuing operations: due to the decrease in operating profit as a result of the revenue decline in 2019 and the decrease in non-operating income as a result of the US dollar depreciation.
(4) Decrease in income tax expenses: due to a decrease in net profit before tax.
(5) Decrease in net profit in the current period: due to the decrease in operating profit as a result of the revenue decline in 2019 and the decrease in non-operating income as a result of the US dollar depreciation.
(6) Decrease in the total profit and loss of the current period: due to the decrease in operating profit as a result of the revenue decline in 2019 and the decrease in non-operating income as a result of the US dollar depreciation.
The expected sales volume and its basis, the possible impact on the Company's future financial business and the contingency plan.
(1) Reasons for the change of main business contents of the Company (if the change is caused by the adjustment of price or cost, increase or decrease of production/marketing mix and quantity or replacement of old and new products); in the event of a material change in operating policy, market conditions, economic environment or other internal or external factors that has occurred or is expected to occur, the facts and implications of such a change and its possible impact on the Company's future financial business and its response plan: The Company still focuses on pneumatic nailers and pneumatic tools for automotive air tools, and continues to develop a series of corded and cordless to attract new customers and develop new products and expand market share.
(2) The rapid spread of COVID-19 has affected private consumption and exports, affected the previously closely linked global economy, and impacted the growth predictions of various regions. It is regarded as the largest black swan this year by Moddy's. Regardless of environmental changes, the Company will continue to introduce new products to stimulate customers' purchases. The first quarter declined slightly compared with the same period last year. It is estimated that after the launch of cordless products in the mid to late this year, it is expected to gradually inject revenue. Therefore, the Company is optimistic about the revenue in 2020.

(II) Analysis of Operating Margin Changes:

Unit: NT$’000

Items	Increment (Decrement) Change in the Earlier and Later Periods	Reasons for the Difference	Reasons for the Difference	Reasons for the Difference	Reasons for the Difference
		Price Difference	Cost Price Difference	Sales Mix Difference	Amount Difference
Pneumatic Nailer
and Automotive	(139,812)	132,556	-139,351	830	-133,847
Air Tools

Other	7,351	-	-	-	-

Description: Operating gross profit for 2019 and 2018 was NT$985,478 thousand and NT$1,117,939 thousand respectively, a decrease of NT$132,461 thousand. The operating gross profit for 2019 was 11.85% less.

Description: Operating gross profit for 2019 and 2018 was NT$985,478 thousand and NT$1,117,939 thousand respectively, a decrease of NT$132,461 thousand. The operating gross profit for 2019 was 11.85% less.

III. Cash Flow Analysis

(I)Cash Flow Analysis for the most recent years

Year Item	2018	2019	Proportion of change %
Cash flow ratio(%)	8.55	155.61	1,720
Cash flow adequacyratio(%)	134.89	147.90	9.64
Cash reinvestment ratio(%)	12.14	9	(25.86)
1. Analysis of the change in the proportion of increase or decrease:
(1) Current ratio, quick ratio, total asset turnover rate and cash flow ratio increased in 2019 compared to
2018 is due to the disposal of USD fixed deposit and bonds in 2019 for payback of all NTD loans.
(2) Cash reinvestment ratio decreased in 2019 compared to 2018 is due to the increase in cash dividends
issued in 2019 compared to 2018.
2. Liquidity shortage improvement plan: The Company has sufficient working capital and there is no
shortage of liquidity.

(II) Analysis of Cash Liquidity in the Next Year

Unit: NT$’000

Beginning cash balance (1)	Expected net cash flow from operating activities throughout theyear(2)	Expected cash outflow throughout the year(3)	Expected cash surplus (shortfall)amount (1)+(2)-(3)	Expected remedial measures for cash shortfall	Expected remedial measures for cash shortfall
				Investment plan	Financial plan

542,488	730,000	650,000	622,488	-	-

IV. The Impact of the Capital Expenditure in the Most Recent Year On the Financial Business

The Company has no significant capital expenditure for the construction of new plant in the recent year, but it needs to invest in the replacement of old equipment.
V. Investment Policies for the Most Recent Year, the Main Reasons for Profit or Loss, and Remedy and Investment Plans for the Coming Year
The Company has no other investment plans for the recent year or the next year.

VI. Analysis and Evaluation of Risk Events in the Most Recent Year and up to the Date of Printing of the Annual Report

(I)Impacts on interest rate, fluctuation in exchange and inflation on corporate gains and losses and future countermeasures:
According to the Company's comprehensive income statement for 2019, the interest income was NT$311,962 thousand, the financial cost was NT$78,032 thousand, the loss on exchange was NT$56,983 thousand and the financial asset valuation gain was NT$48,358 thousand. As of the first quarter of fiscal year 2020, interest income was NT$4,458 thousand, interest expense was NT$0, profit on exchange was NT$4,404 thousand and financial asset valuation gain was NT$0. The Company has sold all USD fixed deposits and bonds in 2019 to pay off long-term and short-term loans. The Company has a sound financial structure and abundant self-owned funds. In addition, the historical fluctuations in exchange rates that caused large fluctuations in profit and loss will be greatly reduced in the non-operating performance in 2020, which is more conducive to allowing the Company to focus on its own development.
(II) Policies on high-risk, highly leveraged investments, capital loans for others, endorsements, and derivative transactions, major causes of profits or losses and future countermeasures:
The Company is not engaged in high-risk, highly leveraged investment, capital loans for others, and endorsements. The Company has a conservative policy regarding high-risk, highly leveraged investments, capital loans for others, endorsements, and derivative transactions, and will continue to do so in the future.

(III) Future R&D plans and expected R&D investments:

Future R&D plans:
(1) Development of innovative products:
In the future R&D, in addition to improving the quality of existing products, it is also necessary to develop new products in different fields, so as to expand more customers, create new market demands, enhance higher product added value and longer product life cycle, in the hope that the Company's profits will reach another peak.
(2) Providing new product appearance:
In order to make a clear distinction for the appearance of the existing products when they are tailor-made for different customers, in line with the training of relevant talents of industrial design professionals, provide the capacity of appearance design, so as to make the proposal more attractive. by providing a module of family design and color plan, will improve the product image in the future. To build Industry Design capability for appearance differentiation for various customers and gain more sales. To develop new generation of family trade dress with family look, modular design and in new color scheme to enhance product image.
(3) CAE (Computer Aided Engineering) performance improvement: In order to meet the diversified demand of innovative products in the future, improve design performance and reduce try-and-errors the, we will use different types of analysis software for various new functions, so as to fully support the relevant innovation work and increase the technical threshold of competition with the industry.
Expected investment in research and development funds:

In order to prevent competitors from eroding the product market shares and profits, continuous output of new product and value patents is necessary, which derives related development and intellectual property maintenance costs.

In addition, CAD / CAE / industrial design related software and equipment used in R&D need expenditure for continuous update to improve the development efficiency, and R&D personnel shall be trained to learn in an all-aspect way and cultivate international perspective, so as to make the products more competitive.

The Company's expenditure on research and development has always been based on the

principle of "must" and "necessity". R&D investment is expected to account for about 2-4% of revenue.

(IV) The impact of important domestic and foreign policies and laws on the Company's financial business and countermeasures:
In case of important policy and legal changes, we always discuss with accountants, stock agents and lawyers about the countermeasures immediately. In addition, if there are material differences, the financial impact on the business will be disclosed in the financial statements.
Up to the date of publication of the annual report, there is no such situation.
(V) Impact of technology changes on the Company's financial business and countermeasures:
The Company is not affected by any change in technology to its financial business.
(VI) Impact of corporate image change on corporate crisis management and countermeasures:
The corporate image of the Company has not changed. The Company still takes "Honesty, Responsibility, Stability and Innovation" as its business philosophy, and there is no corporate crisis.
(VII) Anticipated benefit, possible risks of the merger and acquisition and countermeasures:
There is no merger or acquisition by the Company.
(VIII) Anticipated efficiency, possible risks of the expanded plants and countermeasures:  There was no plant expansion in 2019.
(IX) Risks associated with the concentration of purchases or sales and countermeasures:  There is no concentration of the Company's purchase in the recent year. In the sales part, the percentage of sales customers to the Company's net operating revenue has been reduced to less than 10% except for one customer. There is no risk of concentration of sales under the expansion of new tools, new markets and new customers.
(X) The impact and risk of a substantial transfer or replacement of the shares of Directors, Supervisors or major shareholders holding more than 10% of the shares on the Company, and countermeasures:
The Company has no such situation.
(XI) Impact of the change of management right on the Company, risks and countermeasures:
The Company has no such situation.
(XII) The Company and its Directors, Supervisors, President, substantial heads, major shareholders holding more than 10% of the shares of the Company and its subsidiaries shall be listed in the litigation or non-litigation and administrative disputes in which the Company has determined or is still in possession. Where the outcome may have a material impact on shareholders' equity or securities prices, it shall disclose the facts of the dispute, the target amount, the commencement date of the lawsuit, the major litigants involved and the disposition as of the date of publication of the annual report:
The Company has no such situation.

(XIII) Other important risks and countermeasures:

1. Information security risk: The Company has a clear policy on cyber security: strict control and management of information security rights and responsibilities, education and training, information security operations and network security protection and management, and system access control are as follows:

(1) The Company has strict control over the login account permissions and file access permissions of each system, and non-related personnel are prohibited from using them to ensure the safety of the Company’s data.
(2) Symantec SEP antivirus software is installed on the user's computer to prevent computer virus.
(3) USB external storage device use permissions have set permissions control and records, non-users cannot connect to the USB external storage device in order to avoid the risk of data breach.
(4) Implement disaster recovery drills for network hard disks and systems, and establish backup and remote backup of database systems such as ERP, EIP, and automatic storage to ensure rapid recovery of the system environment when disasters occur and maintain the Company's normal operation.
(5) Build firewall equipment and set up defense policies and VPNs, block access to the Company's internal network without permission, and have an IPS intrusion prevention system to protect against hacker attacks.
(6) Regularly participate in information security education and training to improve the information security capabilities of information personnel and ensure Company's information security.

2. Other important risks and countermeasures: None

VII. Other Important Matters:  None.

Chapter 8 Special Notes

I. Information on Affiliated Companies:

(I) Consolidated Business Report of Affiliated Companies

1. Overview of Affiliated Companies:

The Company does not have affiliated companies.

(II) Consolidated Financial Statements of Affiliated Companies

The Company is not required to prepare consolidated financial statements of affiliated companies.

II. In 2019 and up to the Printing Date of the Annual Report, the Handling of Private Placement of Securities and the Use of Funds, the Progress of Plan Implementation and the Appearance of Plan Benefits: None.
III. Holding or Disposal of the Company's Shares by Subsidiaries in 2019 and up to the Printing Date of the Annual Report: None.
IV. Other Necessary Supplementary Information: None.

Chapter 9 Events that have a Significant Impact on Shareholders' Equity or Securities Prices in the Most Recent Year up to the Printing Date of the Annual Report: None.

Stock Code:1527

(English Translation of Financial Statements and Report Originally Issued in Chinese)

BASSO INDUSTRY CORPORATION Financial Statements With Independent Auditors ’ Report

For the Years Ended December 31, 2019 and 2018

Address: No. 24, 36th Rd., Taichung Industrial Park, Taichung, 40768 Taiwan, R.O.C. Telephone: 886-4-2359-8877

The independent auditors’ report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and financial statements, the Chinese version shall prevail.

Contents 1. Cover Page 2. Table of Contents 3. Independent Auditors’Report 4. Balance Sheets 5. Statements of Comprehensive Income 6. Statements of Changes in Equity 7. Statements of Cash Flows 8. Notes to the Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Losses Due to Major Disasters (11) Subsequent Events (12) Other (13) Other disclosures (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (14) Segment information 9. Statements of major accounting items	Page
	1 2 3 4 5 6 7 8 8 8～9 10～22 22～23 23～47 47～48 48 48 48 48 48 49～50 50 50 50～51 52～62

Independent Auditors ’ Report

To the Board of Directors of Basso Industry Corporation:

Opinion

We have audited the financial statements of Basso Industry Corporation (“the Company”), which comprise the balance sheets as of December 31, 2019 and 2018, the statement of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards ( “ IFRSs ” ), International Accounting Standards (“IASs”). Interpretations developed by the International Financial Reporting Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

1. Revenue recognition

For the accounting policies relating to income recognition, please refer to Note 4 (m).

Description of key audit matter:

Part of the sales of the Company is subject to various sales terms of discount, return, warranty (according to the contract) or consignment transactions based on contractual agreements or commercial practices. So there is a risk of error in the correctness of the recognition of revenue. Therefore, the test of revenue recognition is a key audit matter.

How the matter was addressed in our audit

Our principal audit procedures included: Test the effectiveness of design and implementation of the internal control for sales and collection cycle. Assess whether recognition of revenue has been handled in accordance with the relevant regulations by acquiring and reading major customers' sales contracts and external purchase orders. Understand the sales revenue of the top ten sales customers by comparing the sales of last year to assess whether there are any major abnormalities. Select sales during the period before and after the cut off date, and check the relevant documents to assess the correctness of the revenue recognition timing and to understand whether there is any major return after the period.

2. Inventory evaluation

For the accounting policies of inventories, please refer to Note 4 (g); For the accounting estimates and assumptions uncertainty of inventory evaluation, please refer to Note 5; For the description of the inventory evaluation, please refer to Note 6(f).

Description of key audit matter:

The inventory of the Company is measured by the lower of cost and net realizable value. In recent years, the global market has become more active, which has led to an increase in the market demand for pneumatic nailing machines. The competition in the global market is fierce, driving the design and manufacturing technology of pneumatic nailing machines to change rapidly. The introduction of new products may change the needs of European and American brand manufacturers and individual consumers, and makes the original product as outdated or no longer meets market demand. Sales of related products may fluctuate drastically. So there is a risk that the cost of the inventory may exceed its net realizable value. Therefore, the inventory evaluation is considered as a key audit matter.

How the matter was addressed in our audit

The main audit procedures for the above key audit matter include: assess the reasonableness of the inventory evaluation accounting policy. Review the inventory age report, analyze the inventory age change, and evaluate whether the inventory evaluation has been handled according to accounting policies. Understand and assess the reasonableness of the net realizable value basis adopted by the management, select samples, and check relevant documents to test the correctness of the amount. Assess whether the management's disclosure of the relevant inventory evaluation is fair and sufficient.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, IFRC, SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

’ Those charged with governance (including the supervisors) are responsible for overseeing the Company s financial reporting process.

Auditor ’ s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Chun-Yuan Wu and Shyh-Huar Kuo.

KPMG

Taipei, Taiwan (Republic of China) March 19, 2020

Notes to Readers

The accompanying financial statements are intended only to present the financial position, financial performance and its cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.

The independent auditors ’ report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors ’ report and financial statements, the Chinese version shall prevail.

(English Translation of Financial Statements and Report Originally Issued in Chinese) BASSO INDUSTRY CORPORATION

Balance Sheets

December 31, 2019 and 2018

(expressed in Thousands of New Taiwan dollars)

December 31, 2019 Amount % $ 542,488 12 - - 12,450 - 576,904 13 8,811 - 101,953 2 550,959 12 1,700,000 37 29,011 1	December 31, 2019 Amount % $ 542,488 12 - - 12,450 - 576,904 13 8,811 - 101,953 2 550,959 12 1,700,000 37 29,011 1	December 31, 2018 Amount % 253,364 2 3,755,830 25 9,858 - 882,436 6 172,003 1 547,552 4 7,575,465 51 26,808 -	December 31, 2018 Amount % 253,364 2 3,755,830 25 9,858 - 882,436 6 172,003 1 547,552 4 7,575,465 51 26,808 -
Amount $ 542,488 - 12,450 576,904 8,811 101,953 550,959 1,700,000 29,011		Amount 253,364 3,755,830 9,858 882,436 172,003 547,552 7,575,465 26,808
3,522,576	77	13,223,316	89
10 960,244 16,831 76,509 - 37,575	- 20 - 2 - 1	10 889,073 22,693 222,963 473,011 30,616	- 6 - 2 3 -
1,091,169	23	1,638,366	11
$ 4,613,745	100	14,861,682	100

December 31,	2019	December 31,
Amount	%	Amount
696,603 15 10,575,024 71
- - 420,000 3 36,195 1 38,074 -
36,195 1 458,074 3
732,798 16 11,033,098 74
1,385,706 30 1,379,606 9 26,396 1 593 - 2,507,405 54 2,486,945 17 (38,560) (1) (38,560) -
3,880,947 84 3,828,584 26
$ 4,613,745 100 14,861,682 100

See accompanying notes to financial statements.

(English Translation of Financial Statements and Report Originally Issued in Chinese) BASSO INDUSTRY CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

(expressed in Thousands of New Taiwan dollars , except for earnings per share)

2019	% 101 - 1	2018	% 100 - -
Amount $ 3,487,783 4,360 19,340		Amount 3,748,295 865 14,110
3,464,083 2,478,605	100 72	3,733,320 2,615,381	100 70
985,478	28	1,117,939	30
137,939 92,287 178,743	4 3 5	154,110 85,405 153,414	4 2 4
408,969	12	392,929	10
576,509	16	725,010	20
311,962 (75,383) (78,032)	9 (1) (2)	376,454 235,571 (102,235)	10 6 (3)
158,547	6	509,790	13
735,056 161,502	22 4	1,234,800 203,035	33 5
573,554	18	1,031,765	28
(1,251) -	- -	7,840 -	- -
(1,251)	-	7,840	-
(1,251)	-	7,840	-
$ 572,303	18	1,039,605	28
$	4.15		7.48
$	4.13		7.43

See accompanying notes to financial statements.

(English Translation of Financial Statements and Report Originally Issued in Chinese) BASSO INDUSTRY CORPORATION

Statements of Changes in Equity

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan dollars)

Balance at January 1, 2018 Effects of retrospective application Equity at beginning of period after adjustments Profit for the year ended December 31, 2018 Other comprehensive income for the year ended December 31, 2018 Comprehensive income for the year ended December 31, 2018 Appropriation and distribution of retained earnings: Legal reserve Special reserve Cash dividends of ordinary shares Other changes in capital surplus Balance at December 31, 2018 Balance at January 1, 2019 Profit for the year ended December 31, 2019 Other comprehensive income for the year ended December 31, 2019 Comprehensive income for the year ended December 31, 2019 Appropriation and distribution of retained earnings: Legal reserve Special reserve Cash dividends of ordinary shares Other changes in capital shares Employee compensation transferred to common stock Balance at December 31, 2019	Ordinary shares Capital surplus	Retained earnings Legal reserve Special reserve Unappropriated retained earnings Total retained earnings	Totalotherequityinterest Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Unrealized gains (losses) on available-for-sale financial assets Total other equityinterest Total equity
	$ 1,379,606 305 679,341 230,719 1,276,308 2,186,368 - (584,443) (584,443) 2,981,836 - - - - (545,883) (545,883) (38,560) 584,443 545,883 -
	1,379,606 305 679,341 230,719 730,425 1,640,485 (38,560) - (38,560) 2,981,836
	- - - - 1,031,765 1,031,765 - - - 1,031,765 - - - - 7,840 7,840 - - - 7,840
	- - - - 1,039,605 1,039,605 - - - 1,039,605
	- - 20,397 - (20,397) - - - - - - - - 353,724 (353,724) - - - - - - - - - (193,145) (193,145) - - - (193,145) 288 288
	1,379,606 593 699,738 584,443 1,202,764 2,486,945 (38,560) - (38,560) 3,828,584
	1,379,606 593 699,738 584,443 1,202,764 2,486,945 (38,560) - (38,560) 3,828,584
	- - - - 573,554 573,554 - - - 573,554 - - - - (1,251) (1,251) - - - (1,251)
	- - - - 572,303 572,303 - - - 572,303
	- - 103,177 - (103,177) - - - - - - - - 38,560 (38,560) - - - - - - - - - (551,843) (551,843) - - - (551,843) - - - (584,443) 584,443 - - - - - 6,100 25,803 - - - - - - - 31,903
	$ 1,385,706 26,396 802,915 38,560 1,665,930 2,507,405 (38,560) - (38,560) 3,880,947

See accompanying notes to financial statements.

(English Translation of Financial Statements and Report Originally Issued in Chinese) BASSO INDUSTRY CORPORATION

Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(expressed in Thousands of New Taiwan dollars)

Cash flows from (used in) operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Net loss (gain) on financial assets or liabilities at fair value through profit or loss Interest expense Interest revenue Loss (gain) on disposal of property, plant and equipment overdue dividends Total adjustments to reconcile profit Changes in operating assets and liabilities: Changes in operating assets: (Increase) decrease in notes receivable Decrease (increase) in accounts receivable Decrease in other receivables Increase in inventories Increase in other current assets Changes in operating assets Changes in operating liabilities: Increase (decrease) in contract liability Decrease in notes payable (Decrease) increase in accounts payable (Decrease) increase in other payable Decrease in provisions Increase (decrease) in other current liabilities Decrease in net defined benefit liability Changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Interest paid Income taxes paid Net cash flows from operating activities Cash flows from (used in) investing activities: Acquisition of financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Decrease(increase) in other financial assets (Increase) decrease in other non-current assets Increase in prepaid equipment Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase in short-term loans Repayments of short-term borrowings Increase in long-term borrowings Repayments of long-term borrowings Cash dividends paid Employee compensation transferred to common stock Net cash flows from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2019 $ 735,056	2018 1,234,800
	99,638 14,260 29,184 78,032 (311,962) 237 -	85,469 11,676 46,055 102,235 (376,454) (2,175) 288
	(90,611)	(132,906)
	(2,592) 305,532 177 (17,931) (2,203)	1,048 (135,382) 517 (125,214) (1,932)
	282,983	(260,963)
	27,788 (2,016) (32,005) (12,150) (1,397) 263 (3,130)	(8,031) (139,273) 41,890 85,057 (108) (875) (3,158)
	(22,647)	(24,498)
	260,336	(285,461)
	169,725	(418,367)
	904,781 474,977 (87,256) (208,484)	816,433 354,738 (100,757) (166,247)
	1,084,018	904,167
	- 3,726,646 (23,219) 3,741 (8,398) 6,348,476 (168) (140,032)	(673,869) 496,638 (19,753) 2,910 (6,632) (456,589) 275 (74,188)
	9,907,046	(731,208)
	650,000 (9,643,000) 50,000 (1,239,000) (551,843) 31,903	310,000 (428,000) 230,000 - (193,145) -
	(10,701,940)	(81,145)
	289,124 253,364	91,814 161,550
	$ 542,488	253,364

See accompanying notes to financial statements.

(English Translation of Financial Statements and Report Originally Issued in Chinese) BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

For the years ended December 31, 2019 and 2018

(expressed in Thousands of New Taiwan dollars, Unless Otherwise Specified)

(1) Company history

Basso Industry Corporation (the “Company”) was incorporated on July 2, 1983 as a Group limited by ’ shares and registered under the Ministry of Economic Affairs, R.O.C. The address of the Company s registered office is No. 24, 36th Rd., Taichung Industrial Park, Taichung, 40768 Taiwan, R.O.C. The Company primarily is involved in the manufacturing and selling of penumatic nailers and automotive air tools.

(2) Approval date and procedures of the financial statements

The financial statements were authorized for issue by the Board of Directors on March 19, 2020.

(3) New standards, amendments and interpretations adopted

(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

New, Revised or Amended Standards and Interpretations
IFRS 16“Leases”
IFRIC 23“Uncertainty over Income Tax Treatments”
Amendments to IFRS 9“Prepayment features with negative compensation”
Amendments to IAS 19“Plan Amendment, Curtailment or Settlement”
Amendments to IAS 28“Long-term interests in associates and joint ventures”
Annual Improvements to IFRS Standards 2015–2017 Cycle

Effective date
per IASB

January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of signification changes are as follows:

(i) IFRIC 23 “Uncertainty over Income Tax Treatments”

In assessing whether and how an uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates, an entity shall assume that a taxation authority will examine the amounts it has the right to examine and have a full knowledge on all related information when making those examinations.

(Continued)

BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

If an entity concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the entity shall determine the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates consistently with the tax treatment used or planned to be used in its income tax filings. Otherwise, an entity shall reflect the effect of uncertainty for each uncertain tax treatment by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty.

The company does not expect the application of the amondments to have any significant impact on its financial statements.

(b) The impact of IFRS endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020 in accordance with Rule No. 1080323028 issued by the FSC on July 29, 2019:

New, Revised or Amended Standards and Interpretations Amendments to IFRS 3“Definition of a Business” Amendments to IFRS 9, IAS39 and IFRS7“Interest Rate Benchmark Reform” Amendments to IAS 1 and IAS 8“Definition of Material”	Effective date per IASB
	January 1, 2020 January 1, 2020 January 1, 2020

The Company assesses that the adoption of the abovementioned standards would not have any material impact on its financial statements.

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

New, Revised or Amended Standards and Interpretations Amendments to IFRS 10 and IAS 28“Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture” IFRS 17“Insurance Contracts” Amendments to IAS 1“Classification of Liabilities as Current or Non-current”	Effective date per IASB
	Effective date to be determined by IASB January 1, 2021 January 1, 2022

The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

(Continued)

BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

(4) Summary of significant accounting policies

The accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language financial statements, the Chinese version shall prevail.

The significant accounting policies presented in the financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the financial statements.

(a) Statement of compliance

These financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “ the Regulations ”) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations endorsed by the Financial Supervisory Commission, R.O.C..

(b) Basis of preparation
(i) Basis of measurement

Except for the following significant accounts, the financial statements have been prepared on a historical cost basis:

1) Financial instruments at fair value through profit or loss are measured at fair value;
2) The defined benefit liabilities (assets) are measured at fair value of the plan assets less the present value of the defined benefit obligation.
(ii) Functional and presentation currency

The functional currency of each Group is determined based on the primary economic environment in which the entities operates. The financial statements are presented in New Taiwan dollars, which is the Company’s functional currency. All financial information presented in New Taiwan dollars has been rounded to the nearest thousand.

(c) Foreign currencies

Transactions in foreign currencies are translated into the respective functional currencies of Company entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date.

Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Nonmonetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

(Continued)

BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

(i) An investment in equity securities designated as at fair value through other comprehensive income;
(ii) a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or
(iii) qualifying cash flow hedges to the extent that the hedges are effective.
(d) Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as noncurrent.

(i) It is expected to be realized, or intended to be sold or consumed , in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is expected to be realized within twelve months after the reporting period; or
(iv) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

(i) It is expected to be settled in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is due to be settled within twelve months after the reporting period; or
(iv) The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.
(e) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes, should be recognized as cash equivalents.

(Continued)

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Notes to the Financial Statements

(f) Financial instruments

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(i) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL：

it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

2) Fair value through other comprehensive income (FVOCI )

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL：

it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(Continued)

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Notes to the Financial Statements

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Company’s right to receive payment is established.

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. Trade receivables that the Company intends to sell immediately or in the near term are measured at FVTPL; however, they are included in the ‘trade receivables’ line item. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

4) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and trade receivables, other receivable, leases receivable, guarantee deposit paid and other financial assets), debt investments measured at FVOCI and contract assets.

The Company measures loss allowances at an amount equal to lifetime ECL, except for the following which are measured as 12-month ECL:

debt securities that are determined to have low credit risk at the reporting date；and
other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

(Continued)

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Notes to the Financial Statements

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company ’ s historical experience and informed credit assessment as well as forward-looking information.

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade which is ’ ’ considered to be BBB- or higher per Standard & Poor s, Baa3 or higher per Moody s ’ or twA or higher per Taiwan Ratings .

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due.

The Company considers a financial asset to be in default when the financial asset is more than a year past due or the debtor is unlikely to pay its credit obligations to the Company in full.

ECL are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECL are discounted at the effective interest rate of the financial asset.

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

significant financial difficulty of the borrower or issuer；
a breach of contract such as a default or being more than a year past due；
the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider；
it is probable that the borrower will enter bankruptcy or other financial reorganization；or
the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charge to profit or loss and recognized in other comprehensive income instead of reducing the carrying amount of the asset. The Company recognizes the amount of expected credit losses (or reversal) in profit or loss, as an impairment gain or loss.

(Continued)

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Notes to the Financial Statements

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

5) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Company enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

(ii) Financial liabilities and equity instruments

1) Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

2) Equity instrument

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

3) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss

(Continued)

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BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

4) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is calculated using the weighted-average method and includes the expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less, the estimated costs of completion and selling expenses.

(h) Property, plant and equipment
(i) Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with the expenditure will flow to the Company.

(iii) Depreciation

Depreciation is calculated on the cost of an asset, less, its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an items of property, plant and equipment.

Land is not depreciated.

The estimated useful lives of property, plant and equipment for the current and comparative periods are as follows:

1) buildings and structures:2~57 years
2) machinery and equipment:2~21 years
3) other equipment:1~21 years

(Continued)

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BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

Buildings and structures constitute mainly of building and building repair project. Each such part depreciates based on its useful life of 51~57 years and 2~56 years, respectively.

Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ from the previous estimates, the change is accounted for as a change in an accounting estimate.

(i) Lease

Applicable from January 1, 2019

Identifying a lease

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether:

－ the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and

－ the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

－ the customer has the right to direct the use of the asset throughout the period of use only if either:

(1) the customer has the right to direct how and for what purpose the asset is used throughout the period of use; or

(2) the relevant decisions about how and for what purpose the asset is used are predetermined and:

－ the customer has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or

－ the customer designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use

Leases in which the Company assumes substantially all of the risks and rewards of ownership are classified as finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair value or the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset.

Other leases are operating leases and are not recognized in the Company’s balance sheets.

Payments made under operating leases (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

(Continued)

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BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

(j) Intangible assets

(i) Research and measurement

Expenditure on research activities is recognized in profit or loss as incurred.

Development expenditure is capitalized only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Company intends to, and has sufficient resources to, complete development and to use or sell the asset. Otherwise, it is recognized in profit or loss as incurred.Capital developed expenditure is measured at cost less accumulated amortization and any accumulated impairment losses.

Other intangible assets that are acquired by the Company are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

The estimated useful lives for current and comparative periods are as follows:

1) Computer software:1~10 years

Amortization methods, useful lives and residual values are reviewed at each annual reporting dateand adjusted if appropriate.

(k) Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories, contract assets, deferred tax assets and to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest Company of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or Company of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

(Continued)

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BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

For other assets, an impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(l) Provisions

A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

Warranties liability provisions are recognized when the underlying products or services are sold, based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

(m) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company’s main types of revenue are explained below.

1) Sale of goods

The Company manufactures and sells nail machine and pneumatic tools. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’ s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

(Continued)

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BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

2) Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

(n) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are expensed during which services are rendered by employees.

(ii) Defined benefit plans

The Company’s net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(iii) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(Continued)

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BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

(o) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

The Company has determined that interest and penalties related to income taxes, including uncertain tax treatment, do not meet the definition of income taxes, and therefore accounted for them under IAS37.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

Temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction:

(i) Temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
(ii) Taxable temporary differences arising on the initial recognition of goodwill.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes.

Deferred tax assets and liabilities are offset if the following criteria are met:

(i) the same taxable entity; or
(ii) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Deferred tax assets are recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized; such reductions are reversed when the probability of future taxable profits improves.

(Continued)

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BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

(p) Earnings per share

The Company discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company, divided by the weighted-average number of ordinary shares outstanding.

Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company, divided by the weighted-average number of ordinary shares outstanding, after adjustment, for the effects of all dilutive potentially ordinary shares, such as employee compensation.

(q) Operating segments

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Company). The Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance regulatory reviews operating results of the operating segment. Each operating segment consists of standalone financial information.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty

The preparation of the financial statements in conformity with the Regulations and the IFRSs endorsed by the FSC requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The Management continues to monitor the accounting estimates and assumptions. It recognizes any changes in accounting estimates during the period and the impact of those changes in the accounting estimates in the following period.

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is as follows:

As inventories are stated at the lower of cost or net realizable value, the Company estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Please refer to note 6 (f) for further description of the valuation of inventories.

The Company’s accounting policies and disclosures include measuring financial and non financial assets and liabilities at fair value through profit or loss.

(Continued)

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BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

The Company establishes relevant internal control system for Fair value measuring. That include responsible for reviewing all significant fair value measurements (including level 3 fair values) by the financial management department , and reporting to management directly . The Company's financial department regularly review significant unobservable input values and adjustments.If the input value is used to measure the fair value of the use of external third-party information(such as broker or pricing service) The financial management department will evaluate evidence of support inputs provided by third-parties to ensure that the fair value level classification and evaluation in line with the provisions of IFRS.

The Company strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the assets or liability that are not based on observable market data.

(6) Explanation of significant accounts

(a) Cash and Cash Equivalents

Cash on hand Demand deposits and time deposits Foreign currency deposits Cash and cash equivalents	December 31, 2019 $ 740 480,672 61,076	December 31, 2018 611 80,722 172,031
	$ 542,488	253,364

Please refer to note 6(s) for the interest rate risk and sensitivity analysis of the financial assets and 。 liabilities of the Company

(b) Financial assets and liabilities at fair value through profit or loss

December 31, 2019 Financial assets designated as at fair value through profit or loss Foreign bonds $ -	December 31, 2019 Financial assets designated as at fair value through profit or loss Foreign bonds $ -	December 31, 2018 3,755,830

For market risk, please refer to note 6 (s).

As of December 31, 2019 and 2018, the financial assets at fair through profit or loss of the Company had been pledged as collateral for long-term borrowing; please refer to note 8.

(Continued)

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BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

Equity investments at fair value through other comprehensive income Domestic unlisted stock-COTA Commercial bank Domestic unlisted stock-GATETECH technology Inc. Total	December 31, 2019 $ 10 -	December 31, 2018 10 -
	$ 10	10

No strategic investments were disposed as of December 31, 2019 and 2018, there were no transfers of any cumulative gain or loss within equity relating to these investments.

For market risk; please refer to note 6 (s).

As of December 31, 2019 and 2018, the financial assets at fair value through other comprehensive income of the Company had not been pledged as collateral for long-term borrowings.

(d) Note and accounts receivables

Note receivables–measured as amortized cost Accounts receivables–measured as amortized cost Less: Loss allowances	December 31, 2019 $ 12,450	December 31, 2018 9,858
	588,193 (11,289)	893,728 (11,292)
	576,904	882,436
	$ 589,354	892,294

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provisions were determined as follows:

December 31, 2019

	Gross carrying	Gross carrying	Weighted-avera	Weighted-avera	Loss allowance
		amount	ge loss	rate	provision
Current	$	538,472	-	%	-
1 to 90 days past due		59,422		14.37%	8,540
91 to 180 days past due		2,060		100%	2,060
More than a year past due		689		100%	689
Total	$	600,643			11,289

(Continued)

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BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

Current 1 to 90 days past due 91 to 180 days past due 181 to 365 days past due More than a year past due Total	December 31, 2018 Gross carrying amount Weighted-avera ge loss rate Loss allowance provision	December 31, 2018 Gross carrying amount Weighted-avera ge loss rate Loss allowance provision
	Gross carrying amount
	$ 694,575 - % - 184,453 - % - 12,760 - % - 11,599 95.64% 11,093 199 100% 199 $ 903,586 11,292
		11,292

The movement in the allowance for notes and accounts receivables was as follows:

Balance on January 1 Impairment losses reversed Balance on December 31	For the years ended December 31, 2019 2018 $ 11,292 11,292 (3) -
	$ 11,289 11,292

The Company does not hold any collateral for the collectible amounts.

For further credit risk information, please refers to note 6 (s).

(e) Other receivables

Other receivable—interests receivable Others Less: Loss allowance	December 31, 2019 $ 1,809 7,002 -	December 31, 2018 164,824 7,179 - 172,003
	$ 8,811

For further credit risk information, please refers to note 6 (s).

(f) Inventories

Finished goods Work in progress Raw materials Commodity	December 31, 2019 $ 103,333 252,878 194,743 5	December 31, 2018 84,921 269,876 192,753 2 547,552
	$ 550,959

(Continued)

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Notes to the Financial Statements

As of December 31, 2019 and 2018，the detail of the cost of sales were as follows:

Provisions (reversal of provision) for inventory valuation and obsolescence Losses on disposal of scrap inventory losses (profit) Gains on disposal of miscellaneous warranty preparation Others	For theyears ended December 31 2019 2018 $ 18,301 16,378 10,012 5,532 - (7) (27,177) (23,706) (1,397) (108) (1,890) (1,683) $ (2,151) (3,594)

As of December 31, 2019 and 2018, the Company did not provide any inventories as collateral for its loans.

(g) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company for the years ended December 31, 2019 and 2018 were as follows:

Land $ 305,349 - - -	Buildings and Structures 665,631 2,554 (6,767) 5,955	Machinery and Equipment 1,816,582 17,072 (116,453) 133,711	Other Equipment 167,587 7,396 (35,470) 8,099	Total
				2,955,149 27,022 (158,690) 147,765
$ 305,349	667,373	1,850,912	147,612	2,971,246
$ 305,349 - - -	657,083 2,541 (1,735) 7,742	1,796,780 10,903 (43,108) 52,007	185,326 4,421 (29,806) 7,646	2,944,538 17,865 (74,649) 67,395
$ 305,349	665,631	1,816,582	167,587	2,955,149
$ - - -	281,386 18,559 (6,767)	1,641,432 72,267 (112,961)	143,258 8,812 (34,984)	2,066,076 99,638 (154,712)
$ -	293,178	1,600,738	117,086	2,011,002
$ - - -	266,634 16,487 (1,735)	1,622,631 61,174 (42,373)	165,256 7,808 (29,806)	2,054,521 85,469 (73,914)
$ -	281,386	1,641,432	143,258	2,066,076

(Continued)

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Notes to the Financial Statements

Carrying amounts: Balance at December 31, 2019 Balance at January 1, 2018 Balance at December 31, 2018	Land $ 305,349	Buildings and Structures 374,195	Machinery and Equipment 250,174	Other Equipment 30,526	Total 960,244
	$ 305,349	390,449	174,149	20,070	890,017
	$ 305,349	384,245	175,150	24,329	889,073

As of December 31, 2019 and 2018, the property, plant and equipment of the Company had been pledged as collateral for borrowings; please refer to Note 8.

(h) Intangible Assets

The costs of intangible assets, amortization, and impairment loss of the Company for the years ended December 31, 2019 and 2018 were as follows:

Costs: Balance at January1, 2019 Additions Disposals Balance at December 31, 2019 Balance at January1, 2018 Additions Disposals Balance at December 31, 2018 Amortization and Impairment Loss: Balance at January1, 2019 Amortization for the year Disposals Balance at December 31, 2019 Balance at January1, 2018 Amortization for the year Disposals Balance at December 31, 2018 Carrying amounts: Balance at December 31, 2019 Balance at December 31, 2018 Balance atJanuary 1, 2018	Computer software $ 40,749 8,398 (13,812)
	$ 35,335
	$ 35,832 6,632 (1,715)
	$ 40,749
	$ 18,056 14,260 (13,812)
	$ 18,504
	$ 8,095 11,676 (1,715)
	$ 18,056
	$ 16,831
	$ 27,737
	$ 22,693

(Continued)

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Notes to the Financial Statements

(i) Amortization

The amortizations of intangible assets were included in the statement of comprehensive income:

Operating costs Operating expenses	2019	2018 2,928 8,748
	$ 2,433 11,827
	$ 14,260	11,676

(ii) Disclosures on pledges

As of December 31, 2019 and 2018, none of the intangible assets of the Company had been pledged as collateral.

(i) Other current assets and other non-current assets

The other current assets and other non-current assets of the Company were as follows:

Current other financail assets Noncurrent other financail assets Prepaid equipment Refundable deposits Other-current Other-non current	December 31, 2019 $ 1,700,000 - 35,740 1,509 29,011 326	December 31, 2018 7,575,465 473,011 28,949 1,509 26,808 158
	$ 1,766,586	8,105,900

Other financial assets are restricted bank deposits and bank time deposits with maturities of more than three months, which are provided as collateral guarantees. Please refer to note 8.

(j) Short-term borrowings

The short-term borrowings were summarized as follows:

December 31, 2019 $ - -	December 31, 2019 $ - -	December 31, 2018 8,743,000 250,000
$ -		8,993,000
$ 6,250,000		2,152,000
	-	0.95%~1.06%

For the collateral for short-term borrowings, please refer to note 8.

(Continued)

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Notes to the Financial Statements

(k) Long-term borrowings

The details were as follows:

	December	31, 2019		Amount 2,000,000 Amount 1,189,000 (769,000)
Currency	Rate	Maturity year
	December	31, 2018	$

Currency	Rate	Maturity year
	0.95%~1.01%	109.12.28	$ $
				420,000 $ 811,000

For the collateral for long-term borrowings, please refer to note 8.

(l) Employee benefits

(i) Defined benefit plans

Reconciliation of defined benefit obligation at present value and plan asset at fair value are as follows:

Present value of the defined benefit obligations Fair value of plan assets Net defined benefit liabilities	December 31, 2019
	$ 36,195 38,074

The Company’s employee benefit liabilities were as follows:

Short-term vacation liability	December 31, 2019 $ 13,072	December 31, 2018 13,052

The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average monthly salary for the six months prior to retirement.

(Continued)

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BASSO INDUSTRY CORPORATION Notes to the Financial Statements

1) Composition of plan assets

The Company allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

The Company’s Bank of Taiwan labor pension reserve account balance amounted to 102,571 thousands at the report date. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2)

Movements in present value of the defined benefit obligations

The movement in present value of the defined benefit obligations for the Company were as follows:

Balance,January 1 Current service costs and interest costs Remeasurements loss (gain): `－`Return on plan assets excluding interest income Actuarial loss (gain) arising from: `－`demographic assumptions `－`financial assumptions Benefits paid Balance, December 31	2019 $ 132,560 2,309 (814) 1,452 4,014 (755)	2018 143,088 2,714 (9,746) 487 4,001 (7,984)
	$ 138,766	132,560

3) Movements of defined benefit plan assets

The movements in the present value of the defined benefit plan assets for the Company were as follows:

Balance, January 1 Interest income Remeasurements loss (gain): -Return on plan assets excluding interest income Amount that has been allocated to the plan Benefits paid Balance, December 31	2019 $ 94,486 957 3,401 4,482 (755)	2018 94,016 1,188 2,582 4,684 (7,984)
	$ 102,571	94,486

(Continued)

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Notes to the Financial Statements

4) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Company were as follows:

Current service costs Net interest of net liabilities for defined benefit obligations Operating cost Selling expenses Administration expenses Research and development expenses	2019 $ 993 359	2018 942 584
	$ 1,352	1,526
	$ 897 48 186 221	1,009 63 205 249
	$ 1,352	1,526

5) Remeasurement of net defined benefit liability recognized in other comprehensive income

The Company’s remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2019 and 2018, were as follows:

Accumulated amount at January 1 Recognized during the period Accumulated amount at December 31	2019 $ (53,472) (1,251)	2018 (61,312) 7,840
	$ (54,723)	(53,472)

6) Actuarial assumptions

The principal actuarial assumptions at the reporting date were as follows:

Discount rate Increase in future salary rate	2019 2018
	0.75% 1.00% 2.00% 2.00%

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is 4,318 thousands.

The weighted average lifetime of the defined benefits plans is 11 years.

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Notes to the Financial Statements

7) Sensitivity analysis

If the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2019 Discount rate Future salary increasing rate December 31, 2018 Discount rate Future salary increasing rate		Influences of defined benefitobligations	Influences of defined benefitobligations
	Increased 0.25% $ (4,074) 4,183 (4,021) 4,142		Decreased 0.25% 4,246 (4,035) 4,195 (3,992)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions remain constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There were no changes in the method and assumptions used in the preparation of sensitivity analysis for 2019 and 2018.

(ii) Defined contribution plans

The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The pension costs incurred from the contributions to the Bureau of the Labor Insurance amounted to 15,527 thousands and 14,381 thousands for the years ended December 31, 2019 and 2018, respectively.

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Notes to the Financial Statements

(m) Income Taxes

1.Income taxes

The components of income tax in the years 2019 and 2018 were as follows:

Current tax expense Current period Adjustment for prior periods Undistributed earnings additional tax 5% Deferred tax expense Origination and reversal of temporary differences Adjustment in tax rate Tax expenses	2019 $ - - 15,048	2018 185,946 (815) -
	15,048	185,131
	146,454 -	60,410 (42,506)
	146,454	17,904
	$ 161,502	203,035

Reconciliation of income tax and profit before tax for 2019 and 2018 is as follows:

Profit before income tax Income tax using the Company’s domestic tax rate Adjustment in tax rate The amount of tax adjusted according to the tax law Recognition of previously unrecognized tax profits Undistributed earnings additonal tax 5%	2019 $ 735,056	2018 1,234,800
	147,011 - (557) - 15,048	246,960 (42,506) (604) (815) -
	$ 161,502	203,035

(ii) Deferred tax assets and liabilities

Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2019 and 2018 were as follows:

Deferred Tax Assets:

Balance at January 1, 2019 Recognized in profit or loss Balance at December 31, 2019	Inventory price loss	Unrealized exchange loss	Convert-tible Bonds	Loss carry-forwa rds	Others
	$ 31,095 2,351 - 38,639 4,424 76,509

(Continued)

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Notes to the Financial Statements

Balance at January 1, 2018 Recognized in profit or loss Balance at December 31, 2018	Inventory price loss	Unrealized exchange loss	Convert-tible Bonds	Loss carry-forwa rds	Others
	$ 27,435 63,294 127,921 -				4,313 222,963

Except for the remaining profit, the tax losses, which are the previous accounting losses examined and approved by the tax authorities, are deductible from profit before tax for the current year, according to the respective local tax law of the Company and its subsidiaries. The deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilize the benefits therefrom.

As of December 31, 2019, the subsidiaries’ estimated unused loss carry-forwards were as follows:

Year of Occurrence	Unused amount	Expiry Year
2019	$ 193,196	2029

(iii) Examination and Approval

The Company’s tax returns for the years through 2017 were examined and approved by the Taipei National Tax Administration.

(n) Capital and Other Equity

As of December 31 2019 and 2018, the number of authorized ordinary shares was 138,571 thousand and 137,961 thousand shares at par value of $10 per share, amounting to $1,862,196 thousand.

Reconciliation of shares outstanding for 2019 and 2018 was as follows:

Ordinary Shares (thousand)

Balance at January 1 Exercise of share options Balance at December 31		2019	2018
		137,961 610	137,961 -
		138,571	137,961

(i) Ordinary shares

A resolution was passed during the general meeting of shareholders held on June 27, 2019 for the issuance of 610 thousand new shares of common stock for the exercise of employee stock options with par value of $10 per share. This capital increase with September 16 ,2019 as the date of capital increase. The relevant statutory registration procedures have since been completed.

(Continued)

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Notes to the Financial Statements

(ii) Capital surplus

The balances of capital surplus as of December 31, 2019 and 2018 were as follows:

Gain on disposal of assets Overdue dividends Premium from issued	December 31, 2019 $ 305 288 25,803	December 31, 2018 305 288 -
	$ 26,396	593

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, the capital increase, by transferring the capital surplus in excess of the par value, should not exceed 10% of the total common stock outstanding.

(iii) Retained Earnings

The Company's article of incorporation stipulate that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve, and then any remaining profit together with any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval.

The Company's dividend policy depends on the Company's capital expenditure budget and reqiured working capital. The remaining earnings will be distributed either in cash or in stock dividends, or both. However, the cash dividend can not be less than 10% of the total dividends distributed.

1) Legal reserve

When a company incurs no loss, it may, pursuant to a resolution by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

(Continued)

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Notes to the Financial Statements

2) Special reserve

In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, a portion of the current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should equal the current-period total net reduction of other shareholders’ equity. Similarly, a portion of undistributed prior-period earnings shall be reclassified as special earnings reserve (and does not qualify for earnings distribution) to account for cumulative changes to other shareholders ’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net.The special reserve for the years ended December 31, 2019 and 2018 were $38,560 thousand and $584,443 thousand, respectively.

3) Earnings distribution

Earnings distribution for 2018 and 2017 were decided via the general meeting of the shareholders held on June 27, 2019 and June 28, 2018, respectively. The relevant dividend distributions to shareholders were as follows:

2018 2017 Amount per share Total amount Amount per share Total amount Dividends distributed to common shareholders Cash $ 4.0 551,843 1.4 193,145 i) OCI accumulated in reserves, net of tax Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Unrealized gains (losses) on available-for-sale financial assets Total Balance at January 1, 2019 (Equal Balance at December 31, 2019) $ (38,560) - (38,560) Balance at January 1, 2018 $ - (584,443) (584,443) Effects of refrospective application (38,560) 584,443 545,883 Balance at December 31, 2018 $ (38,560) - (38,560)	2018	2018	2018		2017
	Amount per share		Total amount 551,843		Amount per share 1.4
	$ 4.0

(iii) OCI accumulated in reserves, net of tax

(Continued)

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Notes to the Financial Statements

(o) Earnings per Share

The calculation of basic earnings per share and diluted earnings per share for the year 2019 and 2018 are as follows:

Basic earnings per share Profit of the Company for the year Weighted average number of Diluted earnings per share Profit attributable to ordinary shareholders of the Company (diluted) Weighted average number of ordinary shares (diluted) at December 31 Effect of employee share bonus Weighted average number of ordinary shares (diluted) at December 31	2019 $ 573,554	2018 1,031,765
	138,139	137,961
	$ 4.15	7.48
	$ 573,554	1,031,765
	138,139 826	137,961 908
	138,965	138,869
	$ 4.13	7.43

(p) Revenue from contracts with customers
(i) Details of revenue

Primary geographical markets United States German Taiwan Japan Belgium Other Major products Pneumatic nailers Automotive air tools Magnesium alloy products Other
	$ 3,464,083	3,733,320
	$ 1,745,964 997,920 269,113 451,086	1,937,998 1,149,001 203,197 443,124
	$ 3,464,083	3,733,320

(Continued)

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Notes to the Financial Statements

(ii) Contract balances

Contract liabilities	December 31, 2019 $ 71,040	January 1, 2019 43,252

For details on trade receivable and allowance for impairment, please refer to note 6 (d).

The amount of revenue recognized for the year ended December 31, 2019 and 2018, that was included in the contract liability balance at the beginning of the period were $40,740 thousand and $34,036 thousand.

(q) Remuneration to employees and directors

The Company's articles of incorporation, which were authorized by the board of directors but has yet to be approved by the shareholders, require that earnings shall first be offset against any deficit, then, a minimum of 0.5% will be distributed as employee remuneration, and a maximum of 3% will be allocated as remuneration to directors and supervisors. Employees who are entitled to receive the above mentioned employee remuneration, in share or cash, include the employees of the Company's subsidiaries who meet certain specific requirements.

For the years ended December 31, 2019 and 2018, the Company accrued and recognized its employee remuneration amounting to $31,973 thousand and $40,000 thousand, respectively, as well as its remuneration to directors and supervisors amounting to $11,000 thousand and $11,000 thousand, respectively. These amounts were calculated by using the Company's pre-tax net profit for the period before deducting the amounts of the remuneration to employees, directors and supervisors, multiplied by the distribution of ratio of the remuneration to employees, directors and supervisors based on the Company's articles of incorporation, and expensed under operating costs or expenses. If there would be any changes after the reporting date, the changes shall be accounted for as changes in accounting estimates and recognized as profit or lost in the following year.

(r) Non-operating Income and Expenses
(i) Other income

The details of other income were as follows:

Interest income: Bank deposits and foreign bonds	2019 $ 311,962	2018 376,454

(Continued)

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Notes to the Financial Statements

(ii) Other gains and losses

The details of other gains and losses were as follows:

Foreign exchange gains or loss, net Miscellaneous income Loss on disposals of property, plant and equipment Gains or losses on fair value through profit or loss financial assets	2019 $ (56,983) 11,021 (237) (29,184)	2018 278,150 1,301 2,175 (46,055)
	$ (75,383)	235,571

(iii) Finance costs

The details of financial costs were as follows:

Interest expenses: Bank loans	2019 $ 78,032	2018 102,235

(s) Financial Instruments

(i) Credit risk exposure

The carrying amount of financial assets and contract assets represents the maximum amount exposed to credit risk.

(ii) Concentration of credit risk

The major customers of the Company are centralized in the hightech computer industry. To minimize credit risk, the Company periodically evaluates their financial positions and the possibility of collecting trade receivables.Besides, the Company monitors and reviews the recoverable amount of the trade receivables to ensure the uncollectible amount are recognized appropriately as impairment loss.As of December 31, 2019 and 2018, 43% and 46%, respectively, of accounts receivable were four and three customers. Thus, credit risk is significantly centralized.

(iii) Receivables and debt securities

For credit risk exposure of note and trade receivables, please refer to note 6(d).

Other financial assets at amortized cost includes other receivables and time deposits.All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses. (Regarding how the financial instruments are considered to have low credit risk, please refer to note 4(f).)

(Continued)

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Notes to the Financial Statements

(iv) Liquidity risk

The following table shows the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

Carrying amount	Within 6 months	6 months-1 years	1 -2 years	2 -5 years	Over 5 years
$ 244,801 244,801 198,328 198,328	244,801 198,328	- -	- -	- -	- -
$ 443,129 443,129	443,129	-	-	-	-
$ 9,932,000 9,951,028 250,000 250,111 278,822 278,822 208,043 208,043	8,830,117 250,111 278,822 208,043	694,489 - - -	426,422 - - -	- - - -	- - - -
$ 10,668,865 10,688,004	9,567,093	694,489	426,422	-	-

The Company does not expect the cash flows included in the maturity analysis to occur significantly earlier or at significantly different amounts.

(v) Currency risk
1) Exposure to foreign currency risk

The Company’s significant exposure to foreign currency risk was as follows:

December 31, 2019	December 31, 2019	December 31, 2019	December 31, 2018	December 31, 2018
Foreign currency	Exchange rates	TWD	Foreign currency	Exchange rates
		482,564 $ 415,803		30.715

2) Sensitivity analysis

The Company’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, trade and other receivables, financial assets at fair value through other comprehensive income (available-for-sale financial assets) loans and borrowings; and trade and other payables that are denominated in foreign currency.The analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. A strengthening (weakening) of 3% of the USD as of December 31, 2019 and December 31, 2018 would have increased (decreased) the net profit after tax by 11,582 and 306,513 thousand. The analysis is performed on the same basis for prior year.

(Continued)

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Notes to the Financial Statements

3) Foregin exchange gain and loss on monetary items

Since the Company transacts in different functional currencies, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For the years 2019 and 2018, the foreign exchange gain (loss) (including realized and unrealized portions) amounted to $174,983 and 193,677 thousand, respectively. please refer to note 6(r).

(vi) Interest rate risk

Please refer to the notes on liquidity risk management and interest rate exposure of the Company’s financial assets and liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of derivative and non-derivative financial instruments on the reporting date. Regarding assets with variable interest rates, the analysis is based on the assumption that the amount of assets outstanding at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate increases or decreases by 0.5% when reporting to management internally, which also represents the Company management's assessment of the reasonably possible interest rate change.

If the interest rate had increased / decreased by 0.5 basis points, the Company’s net income would have increased / decreased by $8,500 thousand and $6,181 thousand for the year ended December 31, 2019 and 2018, respectively, with all other variable factors remaining constant. This is mainly due to the Company’s borrowing at variable rates.

(vii) Fair value of financial instruments

1) Fair value hierarchy

The fair value of financial assets and liabilities at fair value through profit or loss, derivative financial instruments used for hedging, and financial assets at fair value through other comprehensive income (availablefor sale financial assets )is measured on a recurring basis. The carrying amount and fair value of the Company’s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and for equity investments that has no quoted prices in the active markets and whose fair value cannot be reliably measured, disclosure of fair value information is not required :

(Continued)

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Notes to the Financial Statements

	December 31, 2019	December 31, 2019	December 31, 2019
Book Value		FairValue
	Level 1	Level 2	Level 3
$ 10 -		-
542,488 - 598,165 - 1,700,000 -		- - -
$ 2,840,653 -		-
619,019 -		-	-
$ 619,019 -		-	-
	December 31,		2018
Book Value		FairValue
	Level 1	Level 2	Level 3
$ 3,755,830 3,755,830 - 10 - -
3,755,840 3,755,830 -
253,364 - - 1,064,297 - - 7,575,465 - - 473,011 - -
9,366,137 - -
$ 13,121,977 3,755,830 -
$ 8,993,000 - - 670,611 - - 769,000 - - 420,000 - -
$ 10,852,611 - -

(Continued)

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Notes to the Financial Statements

2) Valuation techniques for financial instruments not measured at fair value

The Company’s valuation techniques and assumptions used for financial instruments not measured at fair value are as follows:

Financial assets measured at amortized cost (held-to-maturity financial assets). If quoted prices in active markets are available, the market price is established as the fair value. However, if quoted prices in active markets are not available, the estimated valuation or prices used by competitors are adopted.

3) Valuation techniques for financial instruments measured at fair value

Non-derivative financial instruments financial instrument is regarded as being quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s-length basis. Whether transactions are taking place ‘regularly’ is a matter of judgment and depends on the facts and circumstances of the market for the instrument.

Quoted market prices may not be indicative of the fair value of an instrument if the activity in the market is infrequent, the market is not well-established, only small volumes are traded, or bid-ask spreads are very wide. Determining whether a market is active involves judgment.

Measurements of fair value of financial instruments without an active market are based on a valuation technique or quoted price from a competitor. Fair value measured by a valuation technique can be extrapolated from similar financial instruments, the discounted cash flow method, or other valuation technique including a model using observable market data at the reporting date.

4) Transfers between Level 1 and Level 2

There were no transfers from Level 1 to another in 2019 and 2018.

5) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Company’s financial instruments that use Level 3 inputs to measure fair value include “ financial assets measured at fair value through profit or loss – debt investments” and “fair value through other comprehensive income (available-for-sale ” financial assets) – equity investments .

The Company's equity investment instruments that are not available for active market quotes and are not for short-term trading purposes, the management adopts the recent financial report of the investee company to assess the industry development and view publicly available information, and to examine and Evaluate the operating status and future operating performance of the investee company to assess the fair value of the investee company. Generally, changes in industry and market prospects are highly positively correlated with changes in the operating and future performance of the investee company.

(Continued)

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Notes to the Financial Statements

Inter-relationship between significant Valuation Significant unobservable inputs and Item technique unobservable inputs fair value measurement Financial assets at fair value Net Asset Value  Net Asset Value Not applicable through other comprehensive Method income (Non-current financial assets measured at cost) equity investments without an active market

(t) Financial Risk Management

(i) Overview

The Company is exposed to the following risks from its financial instruments:

1) Credit risk

2) Liquidity risk

3) Market risk

The following likewise discusses the Company’s objectives, policies and processes for measuring and managing the above mentioned risks. For more disclosures about the quantitative effects on these risks exposures, please refer to the respective notes in the accompanying financial statements.

(ii) Structure of risk management

The Company’s finance department provides business services for the overall internal department. It coordinates the domestic and international financial market operations, as well as supervises and manages the financial risks related to the Company’s operation based on the internal risk report on exposure to risk with the analysis of the extent and the width of the risk. Operation of derivative financial instruments is subject to the policy approved by the Board of Directors, which is the documentation regarding exchange rate risk, interest risk, credit risk , operation of derivative and non-derivative financial instruments and investment in the remaining current capital. The internal auditors of the Company continue with the review of the compliance with the policy and the extent of the exposure to risk. The Company has no transactions in financial instruments (including derivative financial instruments) for the purpose of speculation.

(iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to financial ’ instruments fails to meet its contractual obligations that arise principally from the Company s receivables from customers and investments in debt securities.

(Continued)

133

BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

1) Accounts receivables and other receivable

The Company established a credit policy to obtain the necessary collateral to mitigate risks arising from financial loss due to default risk. The Company will transact with corporations having credit ratings equivalent to investment grade, and such ratings are provided by independent rating agencies. When it is not possible to obtain such information, the Company will assess the ratings based on other publicly available financial information and records of transactions with its major customers. The Company continuously monitors its exposure to credit risk and counterparty credit ratings, and establishes sales limits based on credit rating for each of its approved customer. The credit limits for each counterparty are approved and reviewed annually by the Risk Management Committee.

The Company did not have any collateral or other credit enhancements to avoid credit risk of financial assets.

2) Investments

The exposure to credit risk for the bank deposits, fixed income investments, and other financial instruments is measured and monitored by the Company’s finance department. The Company only deals with banks, other external parties, corporate organizations, government agencies and financial institutions with good credit rating. The Company expects the counterparties above to meet their obligations; hence, there is no significant credit risk arising from these counterparties.

3) Guarantee

As of December 31,2019 and 2018, there were no guarantees that were outstanding for both years.

(iv) Liquidity risk

The Company manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. Its management supervises the banking facilities and ensures compliance with the terms of loan agreements.

Loans and borrowings from the bank form an important source of liquidity for the Company. As of December 31, 2019 and 2018, the Company's unused credit lines amounted to $6,250,000 thousand and $2,152,000 thousand, respectively.

(v) Market risk

Market risk is a risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, which affects the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

(Continued)

134

BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

1) Currency risk

The Company is exposed to currency risk on sales, purchases, and borrowings that are denominated in a currency other than the respective functional currencies of the Company’s entities, primarily US Dollars (USD).

2) Interest rate risk

The Company adopts a policy of ensuring that exposure to changes in interest rates on borrowings is on a floating-rate basis

3) Other market price risk

The Company is exposed to equity price risk due to the investments in equity securities. This is a strategic investment and is not held for trading. The Company does not actively trade in these investments as the management of the Company minimizes the risk of holding different investment portfolios.

(u) Capital Management

The Company’s objective is to manage its capital to safeguard its capacity to continue to operate, and provide a return on shareholders, as well as to maintain the interest of other related parties, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the dividend payment to its shareholders, reduce the capital for redistribution to shareholders, issue new shares, or sell assets to settle any liabiltiies.

The Company and other entities in the same industry use the debt-to-equity ratio to manage their capital. This ratio is the total net debt, divided by the total capital. The net debt from the balance sheet is derived from the total liabilities, less, cash and cash equivalents. The total capital and equity include share capital, capital surplus, retained earnings, and other equity, plus, net debt.

As of December 31, 2019, the Company’s capital management strategy is consistent with that of the prior year, and the debt to equity ratio is maintained within 50% to 100% to ensure financing at reasonable cost. The Company’s debt to equity ratio at the end of the reporting period was as follows:

December 31, 2019 $ 732,798 (542,488)	December 31, 2019 $ 732,798 (542,488)	December 31, 2018 11,033,098 (253,364)
190,310 3,880,947		10,779,734 3,828,584
$ 4,071,257		14,608,318
4.67%	73.79%

(Continued)

135

BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

(v) Non-cash trading investing and financing activities

The adjustment of liabilities from financing activities are as follows:

January 1, 2019 $ 1,189,000 8,993,000	Cash flow statement	Change of non-cash Acquisition Change of exchange rate Change of fair value - - - - - -	Change of non-cash Acquisition Change of exchange rate Change of fair value - - - - - -	Change of non-cash Acquisition Change of exchange rate Change of fair value - - - - - -	December 31, 2019 - -
			Change of exchange rate - -
	(1,189,000) (8,993,000)	- -
$ 10,182,000	(10,182,000)	-	-	-	-
January 1, 2018 $ 959,000 9,111,000	Cash flow statement	Change of non-cash Acquisition Change of exchange rate Change of fair value - - - - - -			December 31, 2018 1,189,000 8,993,000
			Change of exchange rate - -
	230,000 (118,000)	- -
$ 10,070,000	112,000	-	-	-	10,182,000

(7) Related-party transactions:

Key management personnel compensation

Key management personnel compensation comprised of the following:

Short-term employee benefits Post-employment Benefits Termination benefits Other long-term employee benefits Share-based paymen	2019	2018 46,159 527 - - -
	$ 50,158 543 - - -
	$ 50,701	46,686

(Continued)

136

BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

(8) Pledged assets:

The carrying values of pledged assets were as follow:

Pledged assets	Object	December 31, 2019 $ 105,388 166,213 - -	December 31, 2018 105,388 171,400 7,511,578 3,699,194
Land Buildings and structures Other financial assets-current Financial assets at fair thorugh profit or loss	Guarantee for bank loans Guarantee for bank loans Guarantee for bank loans Guarantee for bank loans
		$ 271,601	11,487,560

(9) Commitments and contingencies: None

(10) Losses Due to Major Disasters: None.

(11) Subsequent Events: None

(12) Other:

A summary of current-period employee benefits, depreciation, depletion, and amortization, by function its as follows:

==> picture [476 x 162] intentionally omitted <==

----- Start of picture text -----

By function 2019 2018
Operating Operating Operating Operating
Total Total
By item Costs Expenses Costs Expenses
Employee benefits
Salary 319,294 139,559 458,853 329,748 137,532 467,280
Labor and health insurance 29,818 9,804 39,622 27,424 8,931 36,355
Pension 12,468 4,411 16,879 11,660 4,247 15,907
Director's remuneration - 23,293 23,293 - 26,107 26,107
Others 11,565 2,320 13,885 12,333 2,255 14,588
Depreciation 65,581 34,057 99,638 64,803 20,666 85,469
Amortization 2,433 11,827 14,260 2,928 8,748 11,676
----- End of picture text -----

(Continued)

137

BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

The number of employees in the Company and employee benefits for 2019 and 2018 were as follows:

The number of employees The number of non-employee directors Average employee benefits Average salary Adjustment of average salary		2019 2018
		753 759
		5 5
	$ 708 708
	$ 613 620
		(1.13)%

(13) Other disclosures:

(a) Information on significant transactions: None

The following is the information on significant transactions required by the “ Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company:

(i) Loans to other parties: None
(ii) Guarantees and endorsements for other parties: None
(iii) Securities held as of December 31, 2019 (excluding investment in subsidiaries, associates and joint ventures):

(In Thousands of New Taiwan Dollars)

==> picture [470 x 61] intentionally omitted <==

----- Start of picture text -----

Ending balance
Name of Category and Relationship Account Shares/Units Carrying Percentage of Fair Note
holder name of security with company title (thousands) value ownership (%) value
The company Stock-COTA None FVOCI 2 10 -% 13 Note 1
commercial bank
The company Stock-GATETECH None FVOCI 225 - 0.43% 11 Note 1
----- End of picture text -----

Note 1: The stock has not been publicly traded, and there is no clear market price available. Therefore, the proportion of shares held had been disclosed on December 31, 2019.
(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

(In Thousands of New Taiwan Dollars)

	Category and		Name of	Relationship	BeginningBalance Purc	BeginningBalance Purc	BeginningBalance Purc	hases		Sales Ending	Sales Ending	Sales Ending	Sales Ending	Balance
Name of company	name of security	Account name	counter-part y	with the company	Shares	Amount Shares		Amount	Shares	Price Cost Gain (loss) on disposal Shares				Amount
The company	UBS 4.875% 04/08/2020	FVTPL	UBS	None	-	497,138 -		-	-	494,244 546,171 (51,927) -				-
The company	UBS Float 08/15/23 Corp	FVTPL	UBS	None	-	408,663 -		-	-	415,537 408,668 6,869 -				-
The company	UBS T7.125 02/15/2023	FVTPL	UBS	None	-	1,961,752 -		-	-	1,936,824 2,418,304(481,480) -				-
The company	UBS Float T7.625 11/15/2022	FVTPL	UBS	None	-	517,557	-	-	-	509,307	652,634	(143,327)	-	-

(Continued)

138

BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None
(vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None
(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock: None
(viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock: None
(ix) Trading in derivative instruments: None
(x) Business relationships and significant intercompany transactions: None
(b) Information on investment in mainland China: None
(c) Significant transactions: None

(14) Segment information:

(a) General information

The Company has one reportable segment, the pneumatic hand tool. This segment is mainly involved in manufacturing and selling Nail machine and pneumatic tools, providing products and manage relevant skills and marketing strategies.

(b) Information about reportable segments and their measurement and reconciliations

The Company uses the internal management report that the chief operating decision maker reviews as the basis to determine the resource allocation and make a performance evaluation. The internal management report includes profit before taxation.

The segment profit includes depreciation and amortization expenses, income tax expense (income), unusual profit (loss), and other significant non-monetary items. The reporting amount is the same with that of the chief operating decision maker's.

There is no inconsistency between the accounting principles of the operating segment and the accounting principle described in Note 4. All reportable segments of the Company is consistent with the financial statements. Please refer to the balance sheet and comprehensive income statement.

(Continued)

139

BASSO INDUSTRY CORPORATION

Notes to the Financial Statements

(c) Production and service information

Revenue from the external customers of the Company was as follows:

Product and services Pneumatic nailers Automotive air tools Magnesium alloy products Others	2019 $ 1,745,964 997,920 269,113 451,086	2018
		1,937,998 1,149,001 203,197 443,124
	$ 3,464,083	3,733,320

(d) Geographic information

In presenting information on the basis of geography, segment revenue is based on the geographical location of customers and segment assets are based on the geographical location of the assets.

Geographical information United States Taiwan German Belgium Japan Finland Switzerland Other countries	2019 $ 1,689,978 383,682 291,589 123,409 99,529 95,849 86,654 693,393	2018 1,810,089 329,097 405,669 113,721 139,026 79,431 99,032 757,255
	$ 3,464,083	3,733,320

Non-current assets:

Geographical information	2019
Taiwan

Non-current assets include property, plant and equipment, investment property, intangible assets, and other assets; excluding financial instruments, deferred tax assets, pension fund assets, and rights arising from an insurance contract (non-current).

(e) Major customers

A customer of pneumatic hand tool division	2019 $ 562,314		2018 639,231

140

Basso Industry Corporation

List of cash and bank deposits

For the years ended December 31, 2019

(expressed in thousands of New Taiwan dollars)

Item Cash Bank deposits	Description Petty cash Foreign currency(USD7,961.74×30.7522 JPY284,000 ×0.2939 EUR3,260× 35.2316 HKD640× 3.9422 CNY16,962.5×4.4124 GBP2,950× 41.2180 Demand deposit and time deposit Foreign currency(USD1,016,436.82`×`29.98 JPY638,037`×`0.2760 EUR905,841.37`×`33.59 CAD3.03`×`22.99)	Amount $ 100 640 480,672 61,076 $ 542,488

141

Basso Industry Corporation

List of nots and accounts receivable

For the years ended December 31, 2019

(expressed in thousands of New Taiwan dollars)

Client's name Notes Receivable： Menards, Inc. Teng Tools Int. Sweden AB Taiwan branch Others (Note) Accounts Receivable： Techtronic Trading Ltd Professional Tool Products LLC. Taiwan branch Koki Holdings America Ltd B&D Macao Coml Offshore Ltd Others (Note) Allowance lost	Description Operating " " Operating " " " "	$	Amount 6,717 679 5,054 12,450 154,718 32,907 32,347 30,695 337,526 588,193 (11,289) 576,904
		$
		$

		$

Note:If the amount does not exceed 5% of the balance of the account, it will not be listed seperately.

Other receivable list

Item Other receivable	Description	$	Amount
	Interest receivable and others		8,811

142

Basso Industry Corporation

List of other current financial assets

For the years ended December 31, 2019

(expressed in thousands of New Taiwan dollars)

Item	Description	Amount $ 1,700,000	Amount
Other financial asset	Time deposits with maturities of more than three months

Inventory list

Item		Amount Market price 8 123,271 253,915 299,335 676,529	Notes
	Cost
Commodity Financial goods Work in process Raw materials Allowance for sluggish loss	$ 10 112,609 277,849 315,965 706,433 (155,474) $ 550,959		Net realizable value Net realizable value Net realizable value Replacement cost

143

Basso Industry Corporation

List of prepaid expenses and other current assets

For the years ended December 31, 2019

(expressed in thousands of New Taiwan dollars)

Item Prepayments Tax refund Other current assets	Description Prepaid receipts Other prepaid expenses Business tax Temporary payment	$	Amount
			2,487 11,539
			14,026
			12,707 2,278
			14,985
		$	29,011

144

Basso Industry Corporation

List of changes in P.P.E and accumulated depreciation

For the years ended December 31, 2019

(expressed in thousands of New Taiwan dollars)

Item	Opening balance $ 305,349 665,631 1,816,582 167,587	Increased	Decreased	Reclassify	Ending balance	Notes
Cost： Land Building and structure Machinery equipment Other equipment Accumulated depreciation： Building and structure Machinery equipment Other equipment		- 2,554 17,072 7,396	- (6,767) (116,453) (35,470)	- 5,955 133,711 8,099	305,349 667,373 1,850,912 147,612
						Note1 Note1 Note1
	2,955,149	27,022	(158,690)	147,765	2,971,246
	281,386 1,641,432 143,258	18,559 72,267 8,812	(6,767) (112,961) (34,984)	- - -	293,178 1,600,738 117,086
	2,066,076	99,638	(154,712)	-	2,011,002
	$ 889,073	(72,616)	(3,978)	147,765	960,244

Note1：The depreciation of fixed assets is based on the straight-line method at the cost of the following estimated years of durability.
(1)Building and structure ： 2~57 years
(2)Machinery equipment ： 2~21 years
(3)Other equipment ： 1~21 years
Note2：The reclassify of this period consisted of the transfer of prepaid equipment into the amount of 133,241 thousand and the transfer of inventory to 14,524 thousand.

145

Basso Industry Corporation

For the years ended December 31, 2019

List of changes in intangible assets

(expressed in thousands of New Taiwan dollars)

Please refer to 6 (h) for related information.

List of other non-current assets

Item	Description Refundable deposits Prepaid equipment Prepayment	$ $	Amount 1,509 35,740 326
Other Non-current assets
			37,575

List of notes and accounts payable

Supplier's name	Description " " " "	$	Amount 6,004 16,438 12,394 209,965 238,797
Notes payable Other (Note) Account payable CHANG HANG ENTERPRISE Co., LTD San De Ji Machinery Works Other (Note)
		$
		$

Note:If the amount does not exceed 5% of the balance of the account, it will not be listed seperately.

146

Basso Industry Corporation

List of accured expenses and other current liabilities

For the years ended December 31, 2019

(expressed in thousands of New Taiwan dollars)

Item Other payable Other current liabilities	Description Payroll payable Processing fee payable Employee bonus and director's compensation payable Advertising payable Other (Note) Temporary payment－other Collection payment	$	Amount
			118,972 70,052 43,133 37,181 104,880
			374,218
			447 1,077
			1,524
		$	375,742

Note: If the amount does not exceed 5% of the balance of the account, it will not be listed seperately.

147

Basso Industry Corporation List of net operating income

For the years ended December 31, 2019 (expressed in thousands of New Taiwan dollars)

Item Pneumatic nailers Automotive air tools Magnesium alloy products Other	Quantity 732,048 533,966 2,862,794	Amount $ 1,745,964 997,920 269,113 451,086
		$ 3,464,083

148

Basso Industry Corporation List of cost of goods sold

For the years ended December 31, 2019 (expressed in thousands of New Taiwan dollars)

Item Commodity Commodity, beginning of year Plus：commodity purchased Less`：`commodity, end of year Cost of goods sold Raw materials Raw materials, beginning of year Plus：raw materials purchased Less：raw materials, end of year Sale of raw materials Scrapped Other Raw materials used Direct labor Manufacturing expenses Manufacturing costs Plus：work-in-process, beginning of year Less：work-in-process, end of year Cost of finished goods Plus`：`finished goods, beginning of year finished goodspurchased Less`：`finished goods, end of year Scrapped Transferred to fixed assets Other Self-made sales cost Sale of raw material Revenue from sale of scraps Preparation for warranty Scrapped Inventory decline and sluggish loss Other Operating cost	$	Amount
		3 2,141 (10)
		2,134
		304,390 1,438,853 (315,965) (218,800) (9,742) (19,244)
		1,179,492 159,997 941,260
		2,280,749 290,051 (277,849)
		2,292,951 90,281 19,311 (112,609) (270) (14,524) (15,317)
		2,259,823
		218,800 (27,177) (1,397) 10,012 18,301 (1,890)
	$	2,478,606

149

Basso Industry Corporation

List of operating expenses

For the years ended December 31, 2019

(expressed in thousands of New Taiwan dollars)

Item Salary expenditure Freight Employee benefits Depreciation Advertising expense Sample fee Commision Export fee Professional service fees Amortization Mold fee Other expenses(note)	Sales expense $ 30,550 15,164 315 1,400 37,432 60 10,599 24,195 - 203 - 18,021 $ 137,939	Administration 65,345 - 5,612 996 - - - - 7,594 308 - 12,432 92,287	Research expense 70,316 - 529 31,661 - 21,047 - - - 11,316 11,509 32,365
			178,743

Note: If the amount does not exceed 5% of the balance of the account, it will not be disclosed seperately.

150

Basso Industry Corporation

List of non-operating income and expenses

For the years ended December 31, 2018

(expressed in thousands of New Taiwan dollars)

Item Non-operating income： Interest revenue－bank deposits and bonds Profit on exchange Other (note) Non-operating expense`：` Interest expense`－`bank loan Financial assets valuation loss Loss on disposal of financial assets	Description Non-operating " " " " "	Amount $ 311,962 48,358 10,784	Amount
		$ 371,104
		$ 78,032 56,983 77,542
		$ 212,557

Note: If the amount does not exceed 5% of the balance of the account, it will not be disclosed seperately.

151

AI assistant

BASSO — Annual Report 2019

51850_rns_2020-07-10_68298690-17ce-4412-99e8-59b7f0d422b3.pdf

BASSO INDUSTRY CORP.

2019

Annual Report

BASSO INDUSTRY CORP. 2019 Annual Report

Table of Contents

Chapter 1 Letter to Shareholders

I. Operating Performance in 2019

(III) Analysis of Financial Revenue/Expenditure and Profitability

(IV) Research and Development Status

II. Overview of 2020 Business Plan

(I) Operating guidelines

(II) Expected Sales Volume and Its Basis

(III) Major operations & sales policies

III. Future Development Strategy of the Company

IV. Impact on the Company Due to Competition, Governmental Regulations, and Overall Operation Environment

Chapter 2 Company Profile

I. Date of Establishment

II. Company History

Chapter 3 Corporate Governance Report

I

Organization

BASSO INDUSTRY CORP.

II Directors, Supervisors, and Management Team

1. Director and Supervisors

2. Directors’ and Supervisors' Professional Qualifications and Independence Analyses

4. Major shareholder of the major corporate shareholder

 Not applicable.

(III) Remuneration of Directors, Supervisors, President, and Vice Presidents in the Most Recent Fiscal Year

1. Remuneration to Directors

Remuneration of General Directors, Independent Directors, Supervisors, President and Vice President

Remuneration for general directors and independent directors (name and remuneration are disclosed individually)

2. Remuneration of Supervisors

Supervisor's remuneration (individual disclosure of name and remuneration)

Table for Remuneration Ranges of Supervisors

3. Remuneration for the President and Vice Presidents

Remuneration of President and Vice President (individual disclosure of name and remuneration) unit: NT$ thousand

4. Remuneration of the top five supervisors receiving the highest payment of TWSE- and TPEx-listed companies

Remuneration of the top five supervisors receiving the highest payment of TWSE- and TPEx-listed companies (individual disclosure of name and remuneration) (Note 1)

5. Employees Compensation Distributed to Management Team

1. Percentage analysis

III Implementation of Corporate Governance (I) Implementation of board meetings

Information on operations of the Board

(II) Operation of the Audit Committee or Supervisors' participation in the operations of Board meetings:

2. Supervisors' participation in the Board of Directors

Supervisors' Participation in Board Meetings

(III) Corporate Governance Implementation Status and Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons Thereof

Note:

To: BASSO INDUSTRY CORP.

(1) Information of the members of Remuneration Committee

(2) Operations of Remuneration Committee

Note:

(IV) Corporate Social Responsibility (CSR), Deviations from "Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies" and Reasons

(V) Implementation of Ethical Corporate Management and the Gaps With the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies, and the Causes Thereof

(VIII) Status of Internal Control System:

1. Statement of Internal Control:

Statement of the Internal Control System of TWSE/TPEx Listed Companies The design and implementation are both effective

(This report is applicable to all laws and regulations.)

BASSO INDUSTRY CORP.

Major Resolutions of Shareholders’ Meeting and Board Meetings

Summary of resignation and dismissal of persons associated with the Company

IV Information on CPA Professional Fee

CPA professional fees by range (Please tick the range or fill in the amount)

Information on CPA professional fees

V Information on Replacement of CPA

Changes to the equity of directors, supervisors, managerial officers, and major shareholders

VIII Information on the Top 10 Shareholders of the Company who are identified as related parties, spouse or relatives within second-degree of kinship

Chapter 4 Funding Status

(III) Distribution of Share Ownership

1. Common Share: May 2, 2020

2. Preferred shares: None

(IV) List of major shareholders May 2, 2020

(VI) Company's dividend policy and implementation thereof

2. Implementation of Dividend Allocation in Shareholders’ Meeting:

1. Quantity or scope of compensation for employees, Directors, and Supervisors

as prescribed under the Articles of Association:

II. Issuance of Corporate Bonds: None.

III. Issuance of Preferred Stocks: None.

BASSO Annual Report 2019