Patec — Annual Report 2019

Jul 23, 2020

TSE ： 2236

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Patec Precision Industry Co., Ltd.

2019 Annual Report

Printed on May 22, 2020

Annual report inquiry website Market Observation Post System: http://mops.twse.com.tw

I. Spokesman: Name: Wee Liang-Kiang Title: General Manager Tel: (65) 6257-8122 E-mail: michaelwee@patec-intl.com Deputy Spokesman: Name: Sean Hsu Title: CFO Tel: (886) 2-7745-8530 E-mail: seanhsu@patec-intl.com

• II. Contact information of the headquarters, branch offices and subsidiaries:

(I) Headquarters Name: Patec Precision Industry Co., Ltd. Address: 190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands Company website: www.patec-intl.com Tel: (65) 6257-8122 (II) Branch offices and subsidiaries: Name: Patec Pte. Ltd. Address: 54 Serangoon North Avenue4 #05-01 Cyberhub North Singapore 555854 Tel: (65) 6257-8122 Name: Patec Precision Industry Co., Ltd. (Taiwan) Address: 14F., No. 137, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.) Tel: (886) 2-7745-8530 Name: Press Automation Technology Pte. Ltd. Address: 54 Serangoon North Avenue4 #05-01 Cyberhub North Singapore 555854 Tel: (65) 6257-8122 Name: Wuxi Jingxin Precision Machining Co., Ltd. Address: No. C21-1, Shuofang Industrial Park Area, Phase 5, Xinwu Dist., Wuxi, China. Tel: (86) 510-8531-1462 Name: PT. PatecPresisi Engineering Address: Jl. Angsana Raya BlokL 3-01 Delta Silicon Industrial Park, Lippo Cikarang, Bekasi 17550, Indonesia Tel: (62) 21-8990-8366

• (III) Name, job title, contact telephone number, and e-mail address of the litigious and non-litigious agent within the R.O.C.

Name: Jack Liu Title: Associate general manager of Sales Tel: (886) 2-7745-8530 E-mail: jackliu@patec-intl.com

III. Overseas trade places for listed negotiable securities: Name: Transfer Agency Department of CTBC Bank Co., Ltd. Address: 5F., No. 83, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.) Official website: www.chinatrust.com.tw Tel: (886) 2-6636-5566

IV. Names of CPAs who attested the financial report for the most recent year, and the CPA firm names, addresses, web addresses, and telephone numbers. Name of CPA: CPA Chin-Chang Chen and CPA Yi-Fan Lin CPA firm: PricewaterhouseCoopers (PwC) Taiwan Address: 27F., No. 333, Sec. 1, Keelung Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.) Official website: www.pwc.com.tw Tel: (02) 2729-6666

V. The name of any exchanges where the Company's securities are traded offshore, and the method by which to access information on said offshore securities: None.

• VI. Company website: www.patec-intl.com

• VII. List of directors

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Title Name Nationality Main experience and education
Senior Cambridge Examination
Mayertro Electronics Pte. Ltd. sales and
Goh Mui marketing manager
Director Teck Singapore Motorola Electronics Pte. Ltd. sales and
William marketing manager
JIT Holdings Ltd. deputy chairman and group
executive director
PhD in Industrial and Business Management,
West Coast University
Wee Liang
Director Singapore Production Engineer of Fujitec
Kiang
Maxton Intl Pte. Ltd. sales manager
Business manager of Komatsu Ltd., Japan
Royal Melbourne Institute of Technology
Bachelor’s degree in Mechanical Engineering and
Wee Hong
Director Singapore Business Management, Royal Melbourne Institute
Jie
of Technology
Sales Manager of Patec Pte. Ltd.
Aeronautical Maintenance of Tokyo Aeronautical
Engineering College
Hidaka
Director Japan Performance Efficiency of Sanno College
Hiroyuki
Sales Manager of Press Automation Technology
Pte. Ltd.
Bachelor’s degree in Accounting, Tunhai
Independent Yen Chun
R.O.C. University
Director Te
CFO of Softstar Entertainment Inc.
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Title	Name	Nationality	Main experience and education
Independent Director	Tan Jee Yaw	Singapore	Nanyang Technological University Bachelor’s degree in Accounting, Nanyang Technological University Manager of Barclays Audit Manager of PwC Singapore Qualified CPA in Singapore Qualified CFA
Independent Director	Ernest Yogarajah Balasubram aniam	Singapore	National University of Singapore Master’s degree in Law Arfat Selvan Alliance LLC

Table of Contents

One. LETTER TO SHAREHOLDERS ........................................................................................... 4	One. LETTER TO SHAREHOLDERS ........................................................................................... 4
Two. COMPANY PROFILE ............................................................................................................. 6
I.	DATE OF INCORPORATION .................................................................................... 6
II.	A BRIEF HISTORY OF THE COMPANY ................................................................. 6
III.	GROUP STRUCTURE ................................................................................................ 7
IV.	RISK MATTERS ......................................................................................................... 7
Three. CORPORATE GOVERNANCE REPORT ......................................................................... 8
I.	ORGANIZATIONAL SYSTEM .................................................................................. 8
II.	INFORMATION ON THE COMPANY’S DIRECTORS, GENERAL
	MANGER, DEPUTY GENERAL MANAGER AND ASSISTANT
	GENERAL MANAGER OF ALL THE COMPANY’S DIVISIOTN AND
	BRANCH UNITS ...................................................................................................... 10
III.	THE STATE OF THE COMPANY’S IMPLEMENTATION OF
	CORPORATE GOVERNANCE ................................................................................ 21
IV.	INFORMATION ON CPA PROFESSIONAL FEES ................................................. 41
V.	INFORMATION ON REPLACEMENT OF CERTIFIED PUBLIC
	ACCOUNTANT ........................................................................................................ 41
VI.	INFORMATION ON SERVICE OF THE COMPANY’S CHAIRMAN,
	PRESIDENT, AND FINANCIAL OR ACCOUNTING MANAGERS AT
	THE ACCOUNTING FIRM OR ITS AFFILIATES IN THE RECENT
	FISCAL YEAR, THE NAME AND POSITION OF THE PERSON, AND
	THE PERIOD DURING WHICH THE POSITION WAS HELD, SHALL BE
	DISCLOSED .............................................................................................................. 42
VII.	ASSESSMENT ON INDEPENDENCE OF THE CPA ............................................. 42
VIII.	ANY TRANSFER OF EQUITY INTERESTS AND/OR PLEDGE OF OR
	CHANGE IN EQUITY INTERESTS BY A DIRECTOR, SUPERVISOR,
	MANAGERIAL OFFICER OR SHAREHODER WITH A SHARE OF
	MORE THAN 10 PERCENT IN THE MOST RECENT FISCAL YEAR
	AND UP TO THE DATE OF PUBLICATION OF THE ANNUAL REPORT ......... 43
IX.	RELATIONSHIP INFORMATION, IF AMONG THE COMPANY’S 10
	LARGEST SHAREHOLDERS ANY ONE IS A RELATED PARTY OR A
	RELATIVE WITHIN THE SECOND DGREE OF KINSHIP OF ANOTHER ........ 44
X.	THE TOTAL NUMBER OF SHARES AND TOTAL SHAREHOLDING IN
	ANY SINGLE ENTERPRISE BY THE COMPANY, ITS DIRECTORS AND
	SUPERVISORS, MANAGERS AND ANY COMPANIES CONTROLLED
	EITHER DIRECTLY OR INDIRECTLY BY THE COMPANY .............................. 45
Four. CAPITAL RAISING ACTIVITIES ...................................................................................... 47
I.	CAPITAL AND SHARES ......................................................................................... 47
II.	CORPORATE BONDS (INCLUDING OVERSEAS CORPORATE BONDS) ....... 55
III.	PREFERRED SHARES ............................................................................................. 55
IV.	GLOBAL DEPOSITORY RECEIPTS (GDR) ........................................................... 55
V.	EMPLOYEE STOCK WARRANTS ......................................................................... 55
VI.	NEW RESTRICTED EMPLOYEE SHARES ........................................................... 55
VII.	STATUS OF NEW SHARES ISSUANCE IN CONNECTION WITH
	MERGERS AND AQUISITIONS ............................................................................. 55

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VIII.	THE STATUS OF IMPLEMENTATION OF CAPITAL ALLOCATION
	PLANS ....................................................................................................................... 55
Five. OPERATIONAL HIGHLIGHTS .......................................................................................... 56
I.	BUSINESS ACTIVITIES .......................................................................................... 56
II.	MARKET AND SALES OVERVIEW ...................................................................... 76
III.	THE NUMBER OF EMPLOYEES AND THEIR INFORMATION FOR
	THE 2 MOST RECENT FISCAL YEARS ................................................................ 89
IV.	DISBURSEMENTS FOR ENVIRONMENTAL PROTECTION ............................. 89
V.	LABOR RELATIONS ............................................................................................... 90
VI.	IMPORTANT CONTRACTS .................................................................................... 92
Six. AN OVERVIEW OF THE COMPANY’S FINANCIAL STATUS ....................................... 95
I.	CONDENSED BALANCE SHEETS FOR THE PAST 5 FISCAL YEARS ............ 95
II.	FINANCIAL ANALYSIS FOR THE PAST 5 FISCAL YEARS ............................... 97
III.	SUPERVISORS’ OR AUDIT COMMITTEE’S REPORT FOR THE MOST
	RECENT YEAR’S FINANCIAL STATEMENT .................................................... 100
IV.	FINANCIAL STATEMENT FOR THE MOST RECENT FISCAL YEAR ............ 101
V.	IF THE COMPANY OR ITS AFFILIATES HAVE EXPERIENCED
	FINANCIAL DIFFICULTIES IN THE MOST RECENT FISCAL YEAR
	AND UP TO THE DATE OF PUBLICATION OF THE ANNUAL REPORT,
	THE REPORT SHALL EXPLAIN HOW SAID DIFFICULTIES WILL
	AFFECT THE COMPANY’S FINANCIAL SITUATION ...................................... 161
Seven. A REVIEW AND ANALYSIS OF THE COMPANY’S FINANCIAL POSITION
AND FINANCIAL PERFORMANCE, AND A LISTING OF RISKS ...................................... 162
I.	FINANCIAL POSITION ......................................................................................... 162
II.	FINANCIAL PERFORMANCE .............................................................................. 163
III.	CASH FLOW ........................................................................................................... 164
IV.	MAJOR CAPITAL EXPENDITURES DURING THE MOS RECENT
	FISCAL YEAR ........................................................................................................ 164
V.	RE-INVESTMENT POLICY FOR THE MOST RECENT FISCAL YEAR,
	THE MAIN REASONS FOR THE PROFITS OR LOSSES,
	IMPROVEMENT PLANS AND INVESTMENT PLANS FOR THE
	COMING YEAR ...................................................................................................... 164
VI.	RISK MATTERS ..................................................................................................... 166
VII.	OTHER IMPORTANT MATTERS ......................................................................... 171
Eight. SPECIAL DISCLOSURE .................................................................................................. 172
I.	INFORMATION RELATED TO THE COMPANY’S AFFILIATES ..................... 172
II.	TRANSACTION ABOUT THE COMPANY’S PRIVATE PLACEMENT OF
	SECURITIES DURING THE MOST RECENT FISCAL YEAR AND UP TO
	THE DATE OF PUBLICATION OF THE ANNUAL REPORT ............................. 175
III.	HOLDING OR DISPOSAL OF SHARES IN THE COMPANY BY THE
	COMPANY’S SUBSIDIARIES DURING THE MOST RECENT FISCAL
	YEAR AND UP TO THE DATE OF PUBLICATION OF THE ANNUAL
	REPORT ................................................................................................................... 175
IV.	OTHER MATTERS THAT REQUIRE ADDITIONAL DESCRIPTION ............... 175
V.	AN EXPLANATION OF ANY MATERIAL DIFFERENCES FROM THE
	RULES OF THE R.O.C. IN RELATION TO THE PROTECTION OF
	SHAREHOLER EQUITY ....................................................................................... 176

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Nine. MATTERS IN ARTICLE 36 PARAGRAPH 3 SUBPARAGRAPH 2 OF THE SECURITIES EXCHANGE ACT THAT HAS SIGNIFICANT IMPACT ON SHAREHOLDERS’ EQUITY OR SHARE PRICE IN THE MOST RECENT FISCAL YEAR AND UP TO THE PUBLICATION OF THE ANNUAL REPORT ............................... 180

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One. Letter to Shareholders

2019 Business Report Dear Shareholders:

First of all, I would like to thank all shareholders for setting aside time from your busy schedules to participate in the 2020 Annual Shareholders' Meeting of the Company. Your encouragement and support towards our company is greatly appreciated. In 2019, global car sales reached 90.3 million cars, with a drop rate of 4.3%. It’s the first time drop from achieving peak in 2018. The global automobile market contraction mainly comes from the China's automobile market, its consumption kinetic energy is sluggish, automobile supply chain stop production and layoffs, furthermore make structural adjustments to destock. In addition, India, which was the world's fourth largest automobile market, has also reduced lending due to economic slowdown and non-bank financial institutions. Impacted its annual car sales decreased by 13%, and become fifth market in the world. Most industry observations speculate that global car sales are likely to continue to decline in 2020, and the challenge to the company's operations will be greater.

The company's main markets are in China and Europe. China's automobile industry was friction from the Sino-US trade war and decline of China economic growth slows down. Reducing people ’s willingness to buy cars has weakened consumption momentum. It was a 8.2% decline with 22.7 millions cars, with 28.5% global automobile market. While the European market is implementing new emission standards in 2020 instead stimulates consumers to buy cars. Otherwise The European market was affected by the weak global economy, the Sino-US trade war and the sluggish industry. The sales volume declined from January to August.

I. Business performance in 2019

The company's operating conditions for the year 2019, benefited from the Volkswagen Group's various new car announcements and the increase in the penetration rate of the MQB (Modularer Querbaukasten) platform, the sales amount was NTD 1.53 billion. The press machines sales amount was NTD 166 million. However, in terms of motorcycle parts, the sales volume was NTD 80 million. In summary, the overall performance of the company was NTD 1.8billion, a drop of 18.08% from 2018.

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Unit: NT$’000; %
Year Increase
Analysis 2018 2019 (Decrease)
%
Sales 2,191,727 1,795,565 (18.08)
P&L Gross Profit 608,758 437,621 (28.11)
Income after tax 164,086 52,296 (68.13)
Return on assets (%) 7.83 2.74 (65.01)
Return on equity (%) 12.57 3.90 (68.97)
Operating
53.38 25.21 (52.77)
Ratio of register profit
Profitability capital (%) Income
54.41 24.96 (54.13)
before tax
Net profit rate (%) 7.49 2.91 (61.15)
Basic EPS (dollar) 3.57 0.88 (75.35)
Diluted EPS (dollar) 3.31 0.88 (73.41)
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II. 2020 Business plan

In the first quarter, due to the Covid-19 spread rapidly all over the world. It makes a major impact on the economies of various countries. In addition, the Sino-US trade offensive and defensive war has not subsided, adding to the uncertainty of the impact on the global economy. However, the industry predicts that the global automotive consumer market will continue to slow down. The company has begun to adjust the direction of industrial policies in consideration of the overall economic environment, develop more applications for stamping parts with exclusive stamping equipment, and actively improve the production process to optimize manufacturing advantages. Cost and completive with customer needs. In order to grasp the market application trends we can provide better quality and competitive products to create a win-win situation.

In addition, the company has entered the medical device market and has started cooperation with hospital distributors in Taiwan, South Korea and China.

Looking forward to the future, the company will continue to grow steadily under the existing foundation, and continue to deepen the cultivation of automobile parts, stamping production line equipment, medical instruments and medical sterilize containers.

Thank you very much again to all the support and encouragement from all shareholders. Looking forward to 2020, the management and all colleagues will continue to work hard to actively implement the above operational plan, and continue to invest resources in technology development improvements to increase our product diversity and create new business maps. This will increase the value of the company, and continue to create good compensation for shareholders.

Goh Mui Teck CHAIRMAN William Wee Liang CEO Kiang CFO Sean Hsu

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Two. Company Profile

I. Date of incorporation: June 29, 2011

Patec Precision Industry Co., Ltd. (hereinafter referred to as “the Company”, or referred to as “the Group” with all of its subsidiaries) was established on June 29, 2011 in the British Cayman Islands. It was established mainly for the restructuring of the Company’s organizational structure, and readily apply for listing on the Taiwan Stock Exchange. After restructuring, the Company became the holding company, which consolidate all of its subsidiaries, but with no real economic activity.

II. A BRIEF HISTORY OF THE COMPANY

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Date A brief history of the Company
● Wee Liang Kiang cooperated with a Japanese colleague Mr. Hidaka and
1992
jointly established Press Automation Technology Pte. Ltd. (Singapore)
1993 ● Invested in the R &D and manufacturing of stamping equipment (Japan).
● Established a factory in Singapore to produce press machines and
1997
equipment.
● Invested in Wuxi Jingxin Precision Machining Co., Ltd. (China) to develop
2001
in China's automotive stamped component market for production and sales.
● Established Patec Pte. Ltd.
● Invested in Indonesia’s PT. Patec Presisi Engineering to develop
2006
production and sales of locomotive and auto components in Indonesia.
● Ranked 29th in Singapore’s Enterprise 50 Awards.
2007 ● Ranked 6th in Singapore’s Enterprise 50 Awards.
● Established Patec Precision Kft (Hungary) to penetrate into Europe's
2008 automotive stamped component market.
● Acquired ISO-9001 certification.
● Established Wuxi Patec Precision Machining Co., Ltd., focusing on
2009 production and sales of stamping machine equipment in China.
● Acquired ISO/TS-16949 certification.
● Established PT. PDF Presisi Engineering (Indonesia).
● Established Patec Precision Industry Co., Ltd. (Cayman Islands) for the
2011
restructuring of the Company’s organizational structure, and readily apply
for listing in Taiwan.
● Wuxi Jingxin Precision Machining Co., Ltd. obtained the high-tech
2012
enterprise certification (China).
● Established Yancheng JingXin Precision Machining Co., Ltd for processing
of automotive components.
2013
● Established the Audit Committee.
● Established the Remuneration Committee.
● Established Patec Precision Industry Co Ltd (Taiwan) as preparation for
being listed in Taiwan, which is responsible for maintaining investor
2014 relations and the disclosure of real-time information, and gradually
penetrate the sales market in Taiwan.
● Increased capital in Indonesia’s PT. API Precision.
2015 ● Officially listed on the Taiwan Stock Exchange.
2016 ● Issued the first unsecured corporate bonds in the R.O.C.
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Date A brief history of the Company
● Established Patec Medical Supplies Pte. Ltd. and Singapore Patec Medical
Supplies Pte. Ltd. Taiwan Branch for sales of medical devices.
2017
● Obtained the first grade medical equipment permit from the Ministry of
Health and Welfare.
2018 ● Acquired BionicXP Pte. Ltd. for sales of automated machinery.
2019 ● Increased capital in Indonesia’s BionicXP Pte. Ltd..
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III. GROUP STRUCTURE

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IV. Risk Matters:

Please refer to: "Seven. A Review and Analysis of the Company’s Financial Position and Financial Performance, and a Listing of Risks."

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Three. Corporate Governance Report

I. ORGANIZATIONAL SYSTEM

(I) Organizational System:

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Shareholder’s
Meeting
Audit Committee
Board of Directors
Remuneration Internal Audit
Committee Office
Chairman
General Manager
Financial Administration Sales Manufacturing R & D
Department Department Department Department Department
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(II) Department functions:

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Department / Positions Functions
Set up policies and operational goals for the Company's business
Board of Directors
operations.
Establish and regularly review policies, systems, standards and
Remuneration structures for performance appraisal and compensation to directors and
Committee managers. Assess and determine the remuneration of directors and
managers on a regular basis.
Supervise the Company’s business, financial status, fair presentation of
Audit Committee
financial statements, and internal control effectiveness.
Internal Audit Office Responsible for the Company’s internal auditing.
Execute Board resolutions, and has general management responsibilities
General Manager
in the Company.
Responsible for procurement, human resources management,
Administration
information management, logistics, acceptance and distribution of
Department
documents, employee benefits, etc.
Responsible for the company's funding, accounting, budget control, and
Financial Department the analysis and interpretation of the Company’s financial structure,
changes in profit/loss, accounting reports, etc.
Responsible for collecting market information, product sales, customer
Sales Department
service, as well as product and customer development.
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Department / Positions	Functions
Manufacturing Department	Responsible for matters related to production and manufacturing of the Company’sproducts and equipment.
R & D Department	Responsible for the development, testing, improvement and management ofproduct technologies.

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II. Information on the company's directors, general manager, deputy general manager, assistant general manager, and the supervisors of all the company's divisions and branch units

(I) Information on directors:

																Apr 30, 2020; Unit: Share	Apr 30, 2020; Unit: Share	Apr 30, 2020; Unit: Share	Apr 30, 2020; Unit: Share
itle	y or Place of stration	ame	nder	Elected	erm	st Elected	Shareholding When Elected		Current Shareholding		Spouse & Minor Current Shareholding		Current Shareholding in the name of others		Experience (Education)	Current Positions at The Company and Other	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
T	Nationalit Regi	N	Ge	Date	T	Date Fir	Shares	Percentage %	Shares	Percentage %	Shares	Percentage %	Shares	Percentage %		Companies	Title	Name	Relation
Chairman	Singapore	Goh Mui Teck William	Male	2019.06.28	3 years	2011.07.20	3,418,771	8.32%	3,733,975	8.33%	−	−	3,743,702	8.35%	Senior Cambridge Examination Mayertro Electronics Pte. Ltd. Sales and Marketing Manager Motorola Electronics Pte. Ltd. Sales and Marketing Manager JIT Holdings Ltd. Deputy Chairman and Group Executive Director	Chairman of Patec Precision Industry Co., Ltd. Director of Patec Pte Ltd Director of Press Automation Technology Pte Ltd Director of Wuxi Jingxin Precision Machining Co.,Ltd. Director of Patec Investments Pte. Ltd.	−	−	−
Director	Singapore	Wee Liang Kiang	Male	2019.06.28	3 years	2011.07.20	5,781,192	14.07%	6,314,208	14.09%	2,707,430	6.04%	4,993,939	11.14%	West Coast University PhD in Industrial and Business Management, West Coast University Production Engineer of Fujitec Maxton Intl Pte. Ltd. sales manager Sales Manager of Komatsu	General Manager of Patec Precision Industry Co., Ltd. Director of Patec Pte Ltd Director of Press Automation Technology Pte Ltd Director of Wuxi Jingxin Precision Machining Co., Ltd. Director of Wuxi Patec Precision Machining Co., Ltd Director of Patec Precision Kft Director of Patec Investments Pte. Ltd. PT. Patec Presisi Engineering President Commissioner PT. PDF Presisi Engineering President Commissioner PT. API Precision President Commissioner	Director	Wee Hong Jie	Son

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itle	y or Place of stration	ame	nder	Elected	erm	st Elected	Shareholding When Elected	Shareholding When Elected	Current Shareholding	Current Shareholding	Spouse & Minor Current Shareholding	Spouse & Minor Current Shareholding	Current Shareholding in the name of others	Current Shareholding in the name of others	Experience (Education)	Current Positions at The Company and Other	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
T	Nationalit Regi	N	Ge	Date	T	Date Fir	Shares	Percentage %	Shares	Percentage %	Shares	Percentage %	Shares	Percentage %		Companies	Title	Name	Relation
Director	Singapore	Wee Hong Jie	Male	2019.06.28	3 years	2012.01.18	113,501	0.28%	73,965	0.17%	−	−	−	−	Royal Melbourne Institute of Technology Bachelor’s degree in Mechanical Engineering and Business Management, Royal Melbourne Institute of Technology Press Automation Technology Pte Ltd	Special Assistant to GM of Patec Precision Industry Co., Ltd. Sales Manager of Patec Pte Ltd Director of Patec Precision Industry Co., Ltd. Director of Wuxi Jingxin Precision Machining Co., Ltd. PT. Director of Patec Presisi Engineering Director of Patec Precision Kft	Director	Wee Liang Kiang	Son
Director	Japan	Hidaka Hiroyuki	Male	2019.06.28	3 years	2019.06.28	2,125,571	5.25%	2,321,545	5.18%	-	-	3,743,702	8.35%	Aeronautical Maintenance of Tokyo Aeronautical Engineering College Performance Efficiency of Sanno College Sales Manager of Press Automation Technology Pte. Ltd.	Director of Patec Precision Industry Co., Ltd.	−	−	−
Independent Director	R.O.C.	Yen Chun Te	Male	2019.06.28	3 years	2013.11.29	−	−	−	−	−	−	−	−	Bachelor’s degree in Accounting, Tunhai University CFO of Softstar Entertainment Inc.	Group CFO of Winking Entertainment Co., Ltd. Patec Precision Industry Co., Ltd. independent Director Otsuka Information Technology Corp. Independent Director	−	−	−
Independent Director	Singapore	Tan Jee Yaw	Male	2019.06.28	3 years	2013.11.29	−	−	−	−	−	−	−	−	Nanyang Technological University Bachelor’s degree in Accounting, Nanyang Technological University Manager of Barclays Audit Manager of PwC Singapore Qualified CPA in Singapore CFA	Deputy general manager of BNP Paribas (Singapore) Patec Precision Industry Co., Ltd. independent Director	−	−	−

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Title	Nationality or Place of Registration	Name	Gender	Date Elected	Term	Date First Elected	Shareholding When Elected	Shareholding When Elected	Current Shareholding	Current Shareholding	Spouse & Minor Current Shareholding	Spouse & Minor Current Shareholding	Current Shareholding in the name of others	Current Shareholding in the name of others	Experience (Education)	Current Positions at The Company and Other Companies	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Executives, Directors or Supervisors who are spouses or within two degrees of kinship
							Shares	Percentage %	Shares	Percentage %	Shares	Percentage %	Shares	Percentage %			Title	Name	Relation
Independent Director	Singapore	Ernest Yogarajah Balasubramaniam	Male	2019.06.28	3 years	2012.01.18	−	−	−	−	−	−	−	−	Master’s degree in Law, National University of Singapore Arfat Selvan Alliance LLC	Certified attorney of UniLegal LLC Patec Precision Industry Co., Ltd. independent Director Independent director of VIBROPOWER Corporation Limited(Singapore)	−	−	−

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• (II) Major shareholders of institutional shareholders : Not applicable.

• (III) Major shareholders of the Company’s major institutional shareholders: Not applicable.

• (IV) Professional qualifications and independence analysis of directors (for directors that comply with the following criteria, please tick the appropriate corresponding boxes)

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At Least Five Years Work Experience
and Meet One of the Following Professional Qualification Independence Attribute (Note)
Requirements
An Instructor or A Judge, Public Have Work
Higher Position in Prosecutor, Experience in the
Criteria a Department of Attorney, Certified Areas of Number of
Commerce, Law, Public Accountant, Commerce, Law, Holding
Finance, or Other Finance, or Concurrent
Accounting, or Professional or Accounting, or Independent
Other Academic Technical Otherwise Director
Department Specialist Who has Necessary for the 1 2 3 4 5 6 7 8 9 10 11 12 Position in
Related to the Passed a National Business of the Other Public
Name Business Needs of the Company in a Examination and been Awarded a Company Companies
Public or Private Certificate in a
Junior College, Profession
College or Necessary for the
University Business of the
Company
Goh Mui Teck − − V V − − V − V V V V V V V 0
William
Wee Liang Kiang − − V − − − − − V V − V − V V 0
Wee Hong Jie − − V − − − − V V V − V − V V 0
Hidaka Hiroyuki − − V − − − V V V V V V V V V 0
Ernest Yogarajah − V V V V V V V V V V V V V V 1
Balasubramaniam
Yen Chun Te − − V V V V V V V V V V V V V 1
Tan Jee Yaw − V V V V V V V V V V V V V V 0
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• Note: The Directors and Supervisors comply with the following conditions from two years before being elected and appointed, and during his term of office, please tick the appropriate corresponding boxes.

• (1) Not an employee of this Company or its affiliates.

• (2) Not a Director or Supervisor of the Company or its affiliates. (However, this does not apply, in cases where the person is an Independent Director of the company or its parent company, subsidiary are set up according to this Act or local country ordinances).

• (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 one percent or more of the total number of outstanding shares of the Company or ranking in the top ten in holdings.

• (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of a managerial officer under subparagraph 1 or any of the persons in the preceding two subparagraphs.

• (5) Not a director, supervisor, or employee of a corporate shareholder that directly holds five percent or more of the total number of issued shares of the company, or that ranks among the top five in shareholdings, or that designates its representative to serve as a director or supervisor of the company under Article 27, paragraph 1 or 2 of the Company Act.

• (6) Not a director, supervisor, or employee of the company which majority director seats or voting shares and those of any other company are controlled by the same person.

• (7) Not a director (or governor), supervisor, or employee of the company or institution which the chairperson, general manager, or person holding an equivalent position of the company and a person in any of those positions at another company or institution are the same person or are spouses.

• (8) Not a director, supervisor, officer, or shareholder holding five percent or more of the shares, of a specified company or institution that has a financial or business relationship with the company.

• (9) Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting or related services to the company or any affiliate of the company for which the provider in the past 2 years has received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided, this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for

− 13 −

merger/consolidation and acquisition, who exercises powers pursuant to the Act or to the Business Mergers and Acquisitions Act or related laws or regulations.

• (10) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.

• (11) Not been a person of any conditions defined in Article 30 of the Company Law.

• (12) Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

− 14 −

(V) Information of general manager, deputy general manager, assistant general manager and managers of the Company’s divisions and branch units:

		branch	units:
													April 30, 2020; Unit: Share
Title	Nationalit	Name	Gender	Inauguration	Shareholding		Spouses & Minor Shareholding		Current Shareholding in the name of others		Exerience (Education)	Current Positions at	Managers who are spouses or within two degrees of kinship			Managers holding employee share subscription warrants
	y			date	Shares	Percentage %	Shares	Percentage %	Shares	Percentage %	p	Other Companies	Title	Name	Relation
Group General Manager	Singapore	Wee Liang Kiang	Male	2013.11.29	6,314,208	14.09%	2,707,430	6.04%	4,993,939	11.14%	West Coast University PhD in Industrial and Business Management, West Coast University Production Engineer of Fujitec Maxton Intl Pte. Ltd. sales manager Sales Manager of Komatsu	Director of Patec Precision Industry Co., Ltd. Director of Patec Pte Ltd Director of Press Automation Technology Pte Ltd Director of Wuxi Jingxin Precision Machining Co., Ltd. Wuxi Patec Precision Machining Co., Ltd. Director Director of Patec Precision Kft Director of Patec Investments Pte. Ltd. PT. Patec Presisi Engineering President Commissioner PT. PDF Presisi Engineering President Commissioner PT. API Precision President Commissioner	None	None	None	−
General Manager (Wuxi Jingxin)	China	Chang Ping	Male	2002.02.01	51,685	0.12%	−	−	−	−	Bachelor’s degree in Mechanical Engineering, Tsinghua University, Beijing Manager of Kaihua Moulds	General Manager of Wuxi Patec Precision Machining Co., Ltd General manager of Yancheng JingXin Precision Machining Co., Ltd Director of Wuxi Jingxin Precision Machining Co.,Ltd. Director of Patec Precision Kft Supervisor of Wuxi Patec Precision MachiningCo., Ltd	None	None	None

− 15 −

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Managers who are Managers
Spouses & Minor Current Shareholding in
Title Nationality Name Gender Inauguration date Shareholding Shareholding the name of others Experience (Education) Current Positions at Other Companies spouses or within two degrees of kinship employee holding share
Shares Percentage Shares Percentage Shares Percentage Title Name Relation subscription
% % % warrants
PhD in American
Institute of Management
Studies
Master’s degree in
Corporate Management,
Kennedy Western
University
Master’s degree in
General Chemical Engineering,
Manager Indonesia Adrian Male 2019.04.30 − − − − − − Bandung Institute of None None None None
(PT. Nicolas Technology
Patec, General manager and
director of Philips
Lightings
Regional manager and
executive director of
Adient Automotive,
Indonesia
CEO of Staedtler
Indonesia
Bachelor’s degree in
Accounting, Soochow
University
Group R.O.C. Sean Hsu Male 2013.11.29 487,572 1.09% − − − − Deputy audit manager of PT. Patec Director None None None
CFO PwC Taiwan
Deputy manager of
Chailease Finance Co.,
Ltd.
Bachelor’s degree in
Accounting, Soochow
Auditing Manager R.O.C. Peri-Ling Li Female 2014.02.28 41,105 0.09% − − − − University Auditor of Reanda M Y None None None None
Wu & Co.
Auditor of PwC Taiwan
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• (VI) Remuneration to directors, supervisors, general manager and deputy general manager in the most recent fiscal year 1. Remuneration paid to directors (independent directors):

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Units: NT$ thousands
Remunerations of Directors Ratio of Total Relevant remuneration received by directors who are also employees Ratio of total
Base Directors Remuneration Salary, compensation
Compensation Severance Pay Compensation Allowances (D) (A+B+C+D) to Bonuses and Severance Pay Employee Compensation (G) (A+B+C+D+E+F+ G)
(A) (B) (C) Net Income (%) Allowances (E) (F) to net income (%)
All companies in
the consolidated
The Company financial
statement
Title Name
(Note 7)
Cash Stock Cash Stock
Goh Mui Teck
Chairman − − − − 100 100 72.32 72.32 0.44 0.44 − − − − − − − − 0.44 0.44 −
William
Director Wee Liang Kiang − − − − 100 100 72.32 72.32 0.44 0.44 − 12,083 − 122 − − − − 0.44 31.90 −
Director Wee Hong Jie − − − − 100 100 54.24 54.24 0.40 0.40 − 4,881 − 277 − − − − 0.40 13.69 −
Director Hidaka Hiroyuki − − − − 100 100 36.16 36.16 0.35 0.35 − − − − − − − − 0.35 0.35 −
Independent Yen Chun Te − − − − 100 100 54.24 54.24 0.40 0.40 − − − − − − − − 0.40 0.40 −
Director
Ernest
Independent Director Yogarajah − − − − 100 100 72.32 72.32 0.44 0.44 − − − − − − − − 0.44 0.44 −
Balasubramaniam
Independent Tan Jee Yaw − − − − 100 100 72.32 72.32 0.44 0.44 − − − − − − − − 0.44 0.44 −
Director
1.Please state the payment policy, system, standard, and structure of the independent directors’ remuneration, and state the relevance with the amount of remuneration based on factors such as responsibility, risk, and time devoted:
According to Article 99 of the Company's Articles of Association, if there is any surplus at the end of the fiscal year, no more than 3% of the net profit before tax shall be allocated as the remuneration for all directors of the Company.
Reasonable remuneration shall be given after referring to the industry level, the Company's operating results, and the director’s contribution to the Company's performance, and shall be reviewed by the Remuneration Committee and
the Board of Directors.
2.Except the sheet disclosed above, the remuneration to all the directors served for all the companies within the consolidated financial statement (such as a consultant not an employees) in the most recent fiscal year: None.
The Company The Company The Company The Company The Company The Company The Company The Company
subsidiary or parent Company
All companies in the All companies in the All companies in the All companies in the All companies in the All companies in the All companies in the All companies in the
Compensation paid to directors from an
consolidated financial statement consolidated financial statement consolidated financial statement consolidated financial statement consolidated financial statement consolidated financial statement consolidated financial statement consolidated financial statement invested company other than the company’s
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Range of Remunerations

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Names of Directors
Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)
Range of remuneration paid to
the Company’s directors All companies in All companies in
The Company the consolidated The Company the consolidated
financial statement financial statement
Goh Mui Teck Goh Mui Teck
William, Wee William, Wee
Liang Kiang, Wee Liang Kiang, Wee
Hong Jie, James H. Hong Jie, James H.
Under NT$ 1,000,000 − −
Wang, Yen Chun Wang, Yen Chun
Te, Tan Jee Yaw, Te, Tan Jee Yaw,
Ernest Yogarajah Ernest Yogarajah
Balasubramaniam Balasubramaniam
NT$1,000,000 (included) ~
NT$2,000,000 (excluded) − − − −
NT$2,000,000 (included) ~
NT$3,500,000 (excluded) − − − −
NT$3,500,000 (included) ~
NT$5,000,000 (excluded) − − − −
NT$5,000,000 (included) ~
− − − Wee Hong Jie
NT$10,000,000 (excluded)
NT$10,000,000 (included) ~
− − − Wee Liang Kiang
NT$15,000,000 (excluded)
NT$15,000,000 (included) ~
NT$30,000,000 (excluded) − − − −
NT$30,000,000 (included) ~
NT$50,000,000 (excluded) − − − −
NT$50,000,000 (included) ~
NT$100,000,000 (excluded) − − − −
− − − −
Over NT$100,000,000
Total 7 0 7 2
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• ※ The remuneration disclosed in this table is different from the income concept of the Income Tax Act. Therefore, the purpose of this form is for information disclosure, and is not used for tax purposes.

• Remunerations of Supervisors: Not applicable, as the Company has only established the audit committee.

• Remunerations of General manager and deputy general manager

												Units: NT$ thousands	Units: NT$ thousands	Units: NT$ thousands
Title	Name	Salary (A)		Severance Pay (B)		Bonus and Allowances (C)		Employee Compensation (D)				Ratio of total compensation (A+B+C+D) to net income(%)		Compensation on paid to directors from an invested company other than the company’s subsidiary or parent company
		The Company	All companies in the consolidated financial statement	The Company	All companies in the consolidated financial statement	The Company	All companies in the consolidated financial statement		The Company	All companies in the consolidated financial statement		The Company	All companies in the consolidated financial statement
								Cash	Stock	Cash	Stock
Group General Manager	Wee Liang Kiang	−	16,914	−	741	−	2,157	−	−	−	−	−	51.07	−
General Manager (Wuxi Jingxin)	Chang Ping

− 18 −

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General
Adrian
Manager Nicolas
(PT. Patec)
CFO Sean Hsu
Range of Remunerations
Range of remuneration paid to Names of General Managers and Deputy General Managers
general managers and deputy All companies in the consolidated
The Company
general managers financial statement
− −
Under NT$ 1,000,000
NT$1,000,000 (included) ~
− Adrian Nicolas
NT$2,000,000 (excluded)
NT$2,000,000 (included) ~
− Sean Hsu, Chang Ping
NT$3,500,000 (excluded)
NT$3,500,000 (included) ~
NT$5,000,000 (excluded) − −
NT$5,000,000 (included) ~
NT$10,000,000 (excluded) − −
NT$10,000,000 (included) ~
− Wee Liang Kiang
NT$15,000,000 (excluded)
NT$15,000,000 (included) ~
NT$30,000,000 (excluded) − −
NT$30,000,000 (included) ~
NT$50,000,000 (excluded) − −
NT$50,000,000 (included) ~
NT$100,000,000 (excluded) − −
− −
Over NT$100,000,000
Total 0 4
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• ※ The remuneration disclosed in this table is different from the income concept of the Income Tax Act. Therefore, the purpose of this form is for information disclosure, and is not used for tax purposes.

4. The remuneration of the company's top five remuneration executives

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Units: NT$ thousands
Ratio of total
Bonus and compensation
Salary (A) Severance Pay (B) Employee Compensation (D)
Allowances (C) (A+B+C+D) to
net income (%)
Title Name
Cash Stock Cash Stock
Group
General Wee Liang − 10,249 − 122 − 1,834 − − − − − 31.46 −
Manager Kiang
President
Director
Asan Tatang − 5,813 − 781 − 687 − − − − − 18.77 −
(Indonesia
subsidiaries)
Special
Assistant to Wee Hong − 4,881 − 277 − − − − − − − 13.29 −
Jie
Group GM
General
Manager Chang Ping − 2,820 − 280 − 323 − − − − − 8.82 −
(Wuxi
Jingxin)
HR Manager Giang Ho − 2,847 − 277 − − − − − − − 8.05 −
(Patec SG) San George
parent company
statement statement statement The Company statement
The Company The Company The Company All companies in the consolidated financial statement The Company
All companies in the consolidated financial All companies in the consolidated financial All companies in the consolidated financial All companies in the consolidated financial Compensation on paid to directors from an invested company other than the company’s subsidiary or
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− 19 −

• ※ The remuneration disclosed in this table is different from the income concept of the Income Tax Act. Therefore, the purpose of this form is for information disclosure, and is not used for tax purposes.

  1. Compensation distributed to managers, their name and distribution status: The Company did not distribute compensation to managers in the current fiscal year.

• (VII) Analysis of the proportion of the total remuneration of directors, supervisors, general managers and deputy general managers of the Company paid by the Company and all companies in the consolidated financial statement to net profit after tax in individual financial statements of the recent two years. Explanation of remuneration policies, standards and packages, the procedure for determining remuneration, and its linkage to operating performance and future risk exposure.

  1. Analysis of the proportion of the total remuneration of directors, supervisors, general managers and deputy general managers of the Company paid by the Company and all companies in the consolidated financial statement to net profit after tax in consolidated financial statements:

Units: NT$ thousands

					Units: NT$ thousands	Units: NT$ thousands	Units: NT$ thousands	Units: NT$ thousands
	2018				2019
Title	Total Remuneration		Total Remuneration		Total Remuneration		Total Remuneration
	The Company	All invested companies	The Company	All invested companies	The Company	All invested companies	The Company	All invested companies
Director	1,236	19,762	0.86%	13.69%	1,134	18,497	2.91%	47.66%
General Manager and deputy general manager	−	23,129	−	16.02%	−	19,812	−	51.07%

1. Explanation of remuneration policies, standards and packages, the procedure for determining remuneration, and its linkage to operating performance and future risk exposure:

The Company has established a Remuneration Committee, which is composed of the entire number of independent directors as members of the committee. The Remuneration Committee is responsible for establishing and regularly reviewing policies, systems, standards and structures for the performance appraisal and compensation to directors and managers. In addition, the committee regularly assess and refer to remuneration levels of its peers to determine the remuneration of directors and managers.

− 20 −

III. THE STATE OF THE COMPANY’S IMPLEMENTATION OF CORPORATE GOVERNANCE

• (I) The state of operations of the board of directors: Number of meetings; attendance rate of each director; an evaluation of targets for strengthening of the functions of the board during the current and immediately preceding fiscal years, and measures taken toward achievement thereof; and any other matters that require reporting, please refer to the attached table:

The board of directors has held 4 meetings (A) in the most recent fiscal year (2019); the attendance of directors is shown below:

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In-person
In-person
Title Name By proxy Attendance Rate Remarks
Attendance (B)
(%) (B/A)
Re-elected on
Chairman Goh Mui Teck William 4 0 100
June 28, 2019
Re-elected on
Director Wee Liang Kiang 4 0 100
June 28, 2019
Re-elected on
Director Wee Hong Jie 3 1 75
June 28, 2019
Newly-elected
Director Hidaka Hiroyuki 2 0 100 on June 28,
2019
Independent Re-elected on
Yen Chun Te 3 1 75
Director June 28, 2019
Independent Re-elected on
Tan Jee Yaw 4 0 100
Director June 28, 2019
Independent Ernest Yogarajah Re-elected on
3 1 75
Director Balasubramaniam June 28, 2019
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Other matters to be recorded:

1. For matters specified in Article 14.3 of the Taiwan Securities and Exchange Act and an independent director has opinions expressing objections or reservations at the meeting that were included in records or stated in writing, the meeting date, period, content, qualified opinion and resolution made by any independent directors, and the handling of opinions by the Company should be specified.

(1) Matters specified in Article 14.3 of the Taiwan Securities and Exchange Act

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Qualified opinions from
any independent director
Period Content Resolutions
and the handling of
opinions by the Company
March 28, 2019 1. Allocation of earnings for Proposals 1~2 were Approved by resolution of
16th meeting of the 4th capital increase and issuance of approved by all attendees all independent directors
term board of directors new shares with no objection
2. Appointment of the accounting
firm PwC Taiwan to conduct
audit
May 13, 2019 Amend the “Management of Proposal was approved by Approved by resolution of
17th meeting of the 4th Acquisition and Disposal of all attendees with no all independent directors
term board of directors Assets”, “Management of Loans to objection
Others”, “Endorsements
Management”, and “Operational
Procedures for Trading Financial
Derivatives”
Aug 13, 2019 Endorsements/Guarantees to the Proposal was approved by Approved by resolution of
1st meeting of the 5th Company’s subsidiary in all attendees with no all independent directors
term board of directors Singapore objection
Nov 12, 2019 Endorsements/Guarantees to the Proposal was approved by Approved by resolution of
2nd meeting of the 5th Company’s subsidiary in Indonesia all attendees with no all independent directors
term board of directors objection
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Mar 27, 2020 1. Allocation of earnings for Proposals 1~2 were Approved by resolution of
3rd meeting of the 5th capital increase and issuance of approved by all attendees all independent directors
term board of directors new shares with no objection
2. Appointment of the accounting
firm PwC Taiwan to conduct
audit
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3rd meeting of the 5th term board of directors	capital increase and issuance of new shares 2. Appointment of the accounting firm PwC Taiwan to conduct audit	approved by all attendees with no objection	all independent directors
May 11, 2020 4th meeting of the 5th term board of directors	1. Amend the “Management of Board Meetings Operations”, “Ethical Corporate Management Best Practice Principles”, “Procedures for Ethical Management and Guidelines for Conduct”, “Audit Committee Charter”and “Remuneration Committee Charter” 2. Amend the “Rules of Procedure for Shareholders Meetings”and “Endorsements Management”	Proposals 1~2 were approved by all attendees with no objection	Approved by resolution of all independent directors

1. For the avoidance of conflicts of interest among directors, the director’s name, meeting content, and reason for avoiding conflict of interest and participation in the voting process must be properly recorded: None.

2. Strengthening the functions of the board in the current and recent fiscal years (e.g. establishing the Audit Committee, promoting information transparency, etc.) and implementation assessment: In order to improve the functions of the Board of Directors, the Company has approved the establishment of Audit Committee and Remuneration Committee on November 29, 2013, which is composed of the entire number of independent directors, and has also adopted an audit committee charter and a remuneration committee charter. In addition, in order to enhance information transparency, the Company’s auditor submits an audit report to the independent director by the end of each month, report to the board of directors on a regular basis, and disclose relevant information on a website designated by the competent authority.

(II) Operations of the Audit Committee:

The Audit Committee has held 4 meetings (A) in the most recent fiscal year (2019); the attendance of members of the committee is shown below:

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In-person
In-person
Title Name By proxy Attendance Rate Remarks
Attendance (B)
(%) (B/A)
Independent
Yen Chun Te 3 1 75 -
Director
Independent
Tan Jee Yaw 4 0 100 -
Director
Independent Ernest Yogarajah
3 1 75 -
Director Balasubramaniam
Other matters to be recorded:
1. For matters specified in Article 14.5 of the Taiwan Securities and Exchange Act, and any matter that has not been
approved upon the consent of two-thirds or more of all directors, the period, content, and results of the Audit
Committee’s resolutions shall be disclosed.
(1) Matters specified in Article 14.5 of the Taiwan Securities and Exchange Act
Qualified opinions from
any independent director
Period Content Resolutions
and the handling of
opinions by the Company
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− 22 −

March 28, 2019 14th meeting of the 2nd term board of directors	1. The Company’s 2018 business report and consolidated financial statements 2. The Company’s Internal Control Statement 3. Appointment of the accounting firm PwC Taiwan to conduct audit	Proposals 1~3 were approved by all attendees with no objection	Approved by resolution of all independent directors
May 13, 2019 15th meeting of the 2nd term board of directors	Amend the “Management of Acquisition and Disposal of Assets”, “Management of Loans to Others”, “Endorsements Management”, and “Operational Procedures for Trading Financial Derivatives”	Proposal was approved by all attendees with no objection	Approved by resolution of all independent directors
Aug 13, 2019 1st meeting of the 3rd term board of directors	1. The Company’s consolidated financial statements for the second quarter of 2019. 2. Endorsements/Guarantees to the Company’s subsidiary in Singapore	Proposals 1~2 were approved by all attendees with no objection	Approved by resolution of all independent directors
Nov 12, 2019 2nd meeting of the 3rd term board of directors	Endorsements/Guarantees to the Company’s subsidiary in Indonesia	Proposal was approved by all attendees with no objection	Approved by resolution of all independent directors
Mar 27, 2020 3rd meeting of the 3rd term board of directors	1. The Company’s 2019 business report and consolidated financial statements 2. The Company’s Internal Control Statement 3. Appointment of the accounting firm PwC Taiwan to conduct audit	Proposals 1~3 were approved by all attendees with no objection	Approved by resolution of all independent directors
May 11, 2020 4th meeting of the 3rd term board of directors	Amend the “Management of Board Meetings Operations”, “Ethical Corporate Management Best Practice Principles”, “Procedures for Ethical Management and Guidelines for Conduct”, “Audit Committee Charter”and “Remuneration Committee Charter”, “Rules of Procedure for Shareholders Meetings”and “Endorsements Management”	Proposal was approved by all attendees with no objection	Approved by resolution of all independent directors

(2) Except for the matters stated above, the resolutions rejected by the Audit Committee and two thirds or more directors gave their approval: None.

1. For the avoidance of conflicts of interest among directors, the independent director’s name, meeting content, and reason for avoiding conflict of interest and participation in the voting process must be properly recorded: None. 3. Communication between independent directors and internal auditors and CPAs (including audit materials, methods, and results pertaining to corporate finances and/or operations, etc.):

(1) The Company has held at least one Audit Committee Meeting every quarter, where the head of internal audit is responsible for audit reports. In addition, an audit report is sent by the end of each month for review of independent directors, in order to fully achieve a two-way communication between independent directors and audit supervisors.

(2) The CPA will send a written communication to the management unit before issuing an audit report, including details of important audit findings and defects of internal control systems, roles and responsibilities of accountants, relevant audit plans, risk assessment and key audit matters, and CPA independence, in order to fully achieve a two-way communication between independent directors and audit supervisors.

− 23 −

(III) The state of the Company's implementation of corporate governance, any departure of such implementation from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies, and the reason for any such departure:

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Deviations from the “Corporate
Implementation Status
Governance Best-Practice
Items Principles for TWSE/TPEx
Yes No Description Listed Companies” and
Reasons
I. Does the company establish and disclose the Corporate V The Company has established and disclosed the Corporate No significant difference.
Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles based on “Corporate Governance
Governance Best-Practice Principles for TWSE/TPEx Best-Practice Principles for TWSE/TPEx Listed Companies”. In
Listed Companies”? addition, the Company has implemented related regulations based on
the spirit of corporate governance, and in the future, it will promote
corporate governance by revising the relevant management
regulations, as well as improving information transparency and board
functions.
II. Shareholding structure & shareholders’ rights
(I) Does the company establish an internal operating procedure V (I) The Company’s spokesman is designated to be responsible for No significant difference.
to deal with shareholders’ suggestions, doubts, disputes and dealing with matters such as shareholders’ suggestions and
litigations, and implement these based on the procedure? disputes, and to coordinate the relevant departments for its
implementation. No significant difference.
(II) Does the company possess a list of its major shareholders as V
well as the ultimate owners of those shares? (II) The shareholder service agency provides up-to-date information
on a regular basis for the Company’s list of major shareholders as No significant difference.
(III) Does the company establish and execute a risk V well as the ultimate owners of those shares.
management and firewall system within its conglomerate
structure? (III) The assets and financial management are independent between No significant difference.
V the Company and its affiliates, hence the Company establishes
(IV) Does the company establish internal rules against insider and executes a risk management and firewall system in
trading with undisclosed information? accordance with its own internal regulation system.
(IV) The Company has set up the “Regulations Governing the
Prevention of Insider Trading” as internal rules against insiders
trading.
III. Composition and Responsibilities of the Board of Directors
(I) Does the Board develop and implement a diversified policy V (I) The Board has developed a diversified policy for the composition No significant difference.
for the composition of its members? of its members, and designated 3 independent directors, Chun-Te
Yen, Jee Yaw Chen, and Ernest Yogarajah Balasubramaniam.
Among them, Chun-Te Yen and Jee Yaw Chen have professional
backgrounds related to finance and accounting, whereas Ernest
(II) Does the company voluntarily establish other functional V Yogarajah Balasubramaniam has a legal background. No significant difference.
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− 24 −

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Deviations from the “Corporate
Implementation Status
Governance Best-Practice
Items Principles for TWSE/TPEx
Yes No Description Listed Companies” and
Reasons
committees in addition to the Remuneration Committee and (II) The company has not established other functional committees, and
the Audit Committee? will plan on establishing other functional committee in the future
V when necessary. No significant difference.
(III) Has the Company established performance evaluation
measures and methods for the Board of Directors? Does it V (III) In view of the need for corporate governance, the Company’s
conduct performance evaluation on a regular basis annually, standard to measure the performance of the Board has already No significant difference.
and report the results of this performance evaluation to the been approved. In the future, performance evaluation will be
Board of Directors and apply them as a reference for salary carried out every year, and the results of the performance
and remuneration, nomination, and renewal of individual evaluation will be submitted to the Board of Directors and
directors? applied as a reference for individual directors' remuneration and
(IV) Does the company regularly evaluate the independence of nomination for renewal.
CPAs? (IV) The Company annually evaluates the independence of CPAs.
There is no relationship between the Company and the CPA other
than the accounting services agreement.
4. Does the listed or OTC company have an appropriate number V At present, the Company's Finance Department is also in charge of No significant difference.
of competent corporate governance personnel, and has it corporate governance, and the Chief Financial Officer is appointed to
designated a corporate governance director to be be in charge of the supervision. In the future, appropriate personnel
responsible for corporate governance-related matters will be allocated according to the laws, regulations, and the
(including but not limited to providing information Company's needs.
required by directors and supervisors to carry out business,
assisting directors and supervisors with legal compliance,
managing matters related to the Board of Directors’ and
shareholders' meetings in accordance with the law, taking
minutes of the Board of Directors’ and shareholders'
meetings, etc)?
V. Has the company established communication channels and V The Company has established a dedicated section for stakeholders in No significant difference.
dedicated a section for stakeholders (including but not the company website, in order to enable stakeholders to communicate
limited to the shareholders, employees, clients, and with the Company by phone, writing, fax, or email.
suppliers) on its website to respond to important issues of
corporate social responsibility concerns?
VI. Does the company appoint a professional shareholder V The Transfer Agency Department of Chinatrust Commercial Bank is No significant difference.
service agency to deal with shareholder affairs? designated for handling relevant matters of the shareholders' meeting.
VII. Disclosure of information No significant difference.
(I) Does the company have a corporate website to disclose both V (I) The Company has disclosed both financial standings and the status
financial standings and the status of corporate governance? of corporate governance in the MOPs and the Company website
(II) Does the company have other information disclosure V in accordance with the relevant laws. No significant difference.
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Items	Implementation Status Deviations from the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons Yes No Description	Implementation Status Deviations from the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons Yes No Description	Implementation Status Deviations from the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons Yes No Description	Implementation Status Deviations from the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons Yes No Description
channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)? (III) Does the company announce and file its annual financial report within two months after the end of the fiscal year, and announce and file its first, second, and third quarter financial reports and the operation of each month ahead of the required time limit? (II) The Company has set up a Chinese and English website, and appointed a spokesman and deputy spokesman to answer queries related to the Company, while the finance department is designated to handle information collection and disclosure. (III) At present, the Company has a large number of operating sites in various regions, and the time for preparation of the annual financial report data and independent auditor’s audit is long. Therefore, the Company is currently unable to announce and file the reports within two months after the end of the fiscal year. The financial reports for the first, second, and third quarters and the operation of each month will be announced and filed before the specified timelimit. No significant difference.
VIII. Is there any other important information to facilitate a better understanding of the company’s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors and supervisors)?	V		(I) Employee rights: The Company and its affiliates established relevant employee benefit systems in accordance with the relevant laws and regulations of foreign governments and the R.O.C., in order to ensure employee benefits. (II) Investor relations: The Company has appointed a spokesman and deputy spokesman to answer queries from investors and other stakeholders about the Company's operating status or related interests, and disclosed relevant and reliable corporate information on the MOPS in accordance with the relevant laws and regulations. (III) Supplier relations: The Company maintains good relationships with its suppliers, discusses recent market prices and relative information on a regular basis, and adheres to the concept of integrity when conducting supplier management. The Company will uphold the spirit of mutual trust and mutual benefit, and hope to support each other and create a win-win situation. (IV) Rights of stakeholders: The Company has been maintaining good communication with its correspondent banks, clients and suppliers, as well as respecting and ensuring the legitimate rights and interests of stakeholders. (V) Directors’ training records: All of the Company‘s directors and independent directors have completed training hours in accordance with the relevant laws,and have alreadyacquired	No significant difference.

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Items	Implementation Status Deviations from the “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons Yes No Description
	directors liability insurance. (VI) Risk management policies and risk evaluation measures: The Company focuses on its core business operations, and implements various policies in accordance with the relevant laws andregulationsinordertoreduce and avoid any possiblerisks.
IX. According to the latest results of the Corporate Governance Evaluation System by the Corporate Governance Center of TWSE, explain the amendments or propose priority matters and measurements to unimproved items. In the corporate governance assessment of 2019, the following are the priority items pending improvement: 1. Indicator 3.5 The company will upload the English version of its annual report 7 days before the general shareholders’ meeting: the Company will upload the English version of its annual report 7 days before the 2020 general shareholders’ meeting. 2. The annual report of indicator 3.14 The company discloses the link to the directors' performance evaluation and remuneration: the Company will disclose the same in its 2019 general shareholders’ meeting.

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• (IV) If the company has a compensation committee in place, the composition, duties, and operation of the compensation committee shall be disclosed:

• Information on members of the Compensation Committee

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At Least Five Years Work Experience
and Meet One of the Following Professional Independence Attribute (Note 2)
Qualification Requirements
An Instructor or A Judge, Public Have Work
Higher Position Prosecutor, Experience in
in a Department Attorney, the Areas of
of Commerce, Certified Public Commerce, Law,
Law, Finance, Accountant, or Finance, or Concurrent
Criteria Accounting, or Other Accounting, or compensation Remarks
Identity Other Academic Professional or Otherwise committee (Note 3)
(Note 1) Department Technical Necessary for position in End of the
Name Related to the Business Needs Specialist Who has Passed a the Business of the Company 1 2 3 4 5 6 7 8 9 10 other publicly listed document
of the Company National companies
in a Public or Examination and
Private Junior been Awarded a
College, College Certificate in a
or University Profession
Necessary for
the Business of
the Company
Independent Yen Chun Te − −    1 -
Director
Independent Tan Jee Yaw −     0 -
Director
Independent Ernest Yogarajah −     0 -
Director Balasubramaniam
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• Note 1: Fill in the Identity with directors, independent directors or others.

• Note 2: All members comply with the following conditions from two years before being elected and appointed, and during his term of office, please fill “  ” in the appropriate corresponding boxes.

• (1) Not an employee of the Company or any of its affiliates.

• (2) Not a director or supervisor of affiliated companies. Not applicable in cases where the person is an independent director of the parent company, or any subsidiary 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 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 ranking in the top 10 in holdings.

• (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of a managerial officer under subparagraph 1 or any of the persons in the preceding two subparagraphs.

• (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 that ranks in the top 5 in shareholding, or that designates its representative to serve as a director or supervisor of the company under Article 27, paragraph 1 or 2 of the Company Act.

• (6) Not a director, supervisor, or employee of the company which majority director seats or voting shares and those of any other company are controlled by the same person.

• (7) Not a director (or governor), supervisor, or employee of the company or institution which the chairperson, general manager, or person holding an equivalent position of the company and a person in any of those positions at another company or institution are the same person or are spouses.

• (8) Not a director, supervisor, managerial officer, or shareholder holding 5% or more of the shares, of a specified company or institution that has a financial or business relationship with the company.

• (9) Not a professional individual who, or an owner, partner, director, supervisor, or managerial officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting or related services to the company or any affiliate of the company for which the provider in the past 2 years has received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided that this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Act or to the Business Mergers and Acquisitions Act or related laws or regulations.

• (10) Not have any of the circumstances set forth in Article 30 of the Company Act.

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• Note 3: If the members are directors, please indicate whether they meet the requirements of Article 6 paragraph 5 of the “Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter”.

• Operation status of the Remuneration Committee:

  • (1) There are 3 members in the Company’s Remuneration Committee.

  • (2) Current Term: From August 13, 2019 to June 27, 2022, the Compensation Committee held 2 meetings (A) in the most recent fiscal year (2019). Qualifications and attendance of the Committee are shown as follows:

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In-person
Attendance Rate
In-person
Title Name By proxy (%) Remarks
Attendance (B)
(B/A)
(Note)
Convenor Yen Chun Te 1 1 50 −
Member Tan Jee Yaw 2 0 100 −
Ernest Yogarajah
Member 2 0 100 −
Balasubramaniam
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Other matters to be recorded:

1. If the board of directors declines to adopt or modifies a recommendation of the remuneration committee, it should specify the date of the meeting, session, content of the motion, resolution by the board of directors, and the Company’s response to the remuneration committee’s opinion (eg., the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified): None.

2. 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 motion, all members’ opinions and the response to members’ opinion should be specified: None.

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(V) Performance of social responsibility and deviations from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies and reasons ：

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Implementation Status Deviations from the “Corporate Social
Responsibility Best-Practice Principles
Items
Yes No Description for TWSE/TPEx Listed Companies”
and Reasons
I. Does the company conduct risk assessment on environmental, V The Company has formulated the “Corporate Social No significant difference.
social, and corporate governance issues related to the Responsibility Best Practice Principles” and requires its
company's operation in accordance with the principle of directors and employees to follow the relevant norms.
materiality, and formulate relevant risk management
policies or strategies?
II. Has the company set up a full-time (part-time) unit to V The Company has not yet set up a full-time corporate No significant difference.
promote corporate social responsibility, which is authorized social responsibility promotion unit, but will promote
by the Board of Directors to be under the charge of the corporate social responsibility from top to bottom
senior management and report to the Board of Directors? through the operation of the Board of Directors.
III. Environmental issues
(I) Has the company established an appropriate environmental V (I) The Company has relevant specifications for quality No significant difference.
management system according to its industrial management, safety and health, environmental
characteristics? protection, etc, which conform to the auditing
standards of the relevant management units.
(II) Is the company committed to improving the utilization V (II) To value resources, the Company continues to No significant difference.
efficiency of resources and using recycled materials with promote energy conservation via waste recycling,
low impact on the environment? reduction of paper use, and the use of
environmentally-friendly tableware.
(III) Does the company assess the potential risks and V (III) In response to the development trend of climate No significant difference.
opportunities of climate change for it now and in the future, change and greenhouse gas reduction, the Company
and take measures to deal with climate-related issues? advocates turning off the lights when not used and
saving water, so as to reduce carbon, power, and
water.
(IV) Did the company prepare statistics of greenhouse gas V (IV) According to the Company's regulations, no No significant difference.
emissions, water consumption, and total weight of waste in air-conditioner shall be turned on until the
the past two years, and formulate policies for energy temperature reaches 28 ℃, and the Company
conservation and carbon reduction, greenhouse gas advocates turning off the lights when not used and
reduction, water use reduction, or other waste management? saving water, and implements classified recycling of
wastes, so as to achieve energy saving.
IV. Social Issues
(I) Does the company formulate appropriate management V (I) The Company safeguards the legitimate rights and No significant difference.
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Implementation Status Deviations from the “Corporate Social
Responsibility Best-Practice Principles
Items
Yes No Description for TWSE/TPEx Listed Companies”
and Reasons
policies and procedures according to the relevant interests of employees in accordance with the
regulations and the International Bill of Human Rights? labor-related laws and regulations. In addition, the
relevant employee rights are stipulated in the
employee handbook and executed accordingly.
(II) Has the company established and implemented reasonable V (II) The Company has established and implemented No significant difference.
employee welfare measures (including compensation, reasonable employee welfare measures in the
vacation, and other benefits), and properly reflected the Personnel Management Regulations, and properly
operating performance or results in employee reflected the results of business performance in
compensation? employee remuneration.
(III) Does the company provide a healthy and safe working V (III) The Company provides a safe working environment No significant difference.
environment, and organize training on health and safety for in accordance with labor-related laws and
its employees on a regular basis? regulations. In addition, employee health checks are
conducted on an intermittent basis to ensure health
and safety for its employees.
(IV) Has the company established an effective career V (IV) The Company has established an effective career No significant difference.
development training program for its employees? development training program for its employees.
(V) Does the company comply with the relevant laws, V (V) The Company has formulated relevant after-sales No significant difference.
regulations, and international standards for the health and service measures in accordance with the relevant
safety of customers, customer privacy, marketing and laws and regulations of each operation area to protect
labeling of products and services, and has it formulated the rights and interests of consumers.
relevant policies and complaint procedures to protect the
rights and interests of consumers?
(VI) Does the company have a supplier management policy that V (VI) The Company has developed supplier management No significant difference.
requires suppliers to follow the relevant specifications and procedures. At present, it has not found any
their implementation in environmental protection, suppliers’ violation of the relevant laws and
occupational safety and health, or labor human rights regulations of the local environmental protection,
issues? occupational safety and health, and labor human
rights. In the future, relevant specifications will be
developed for management purposes.
V. Does the company prepare a corporate social responsibility V The Company has set up a dedicated section for investors There is no demand at present, and it
report and other reports that disclose the company's and social responsibility on the Company's website to will be prepared according to the
non-financial information in accordance with international disclose information related to the performance of social Company’s scale and needs in the
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Implementation Status Deviations from the “Corporate Social
Responsibility Best-Practice Principles
Items
Yes No Description for TWSE/TPEx Listed Companies”
and Reasons
reporting standards or guidelines? Are confirmation or responsibility. At present, no corporate social future.
guarantee opinions obtained from third-party verification responsibility report has been prepared. It will be
units for the reports above? prepared according to the Company’s scale and needs in
the future.
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VI. If the company has established its own corporate social responsibility best practice principles based on the “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies”, please describe the difference between its operation and the regulations.

The Company has set up “the Corporate Social Responsibility Best Practice Principles”, but has not yet appointed dedicated units to be in charge of its implementation. However, corporate social responsibility will be implemented from top to bottom through the operation of the Board of Directors. There has been no major difference with the Rules. VII. Other important information which is helpful to understand the operation of corporate social responsibility: The Company will adhere to the spirit of corporate social responsibility, actively engage in the aforementioned social responsibility practices, encourage employees to consider situations with others' conditions in mind, help with disaster relief, and commit to serving society.

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• (VI) Performance of ethical corporate management best practice principles and deviations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies and reasons:

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Deviations from the “Ethical
Implementation Status
Corporate Management Best Practice
Items
Principles for TWSE/TPEx Listed
Yes No Description Companies” and reasons
I. Establishment of an ethical corporate management policy
and program
(I) Has the company established an ethical corporate V (I) The Company has established the “Ethical No significant difference.
management policy approved by the Board of Corporate Management Best Practice Principles”,
Directors, and clearly stated the ethical corporate and actively advocated the spirit of ethical
management policy and practice in its regulations and corporate management in the Board of Directors
external documents, as well as the commitment of the and management meetings.
Board of Directors and senior management to actively
implement the operation policy?
(II) Has the company established an evaluation mechanism V (II) The Company has formulated its "Ethical No significant difference.
for the risk of unethical behavior, regularly analyzed Corporate Management Best Practice Principles"
and evaluated the business activities with high unethical and "Ethical Corporate Management Behavior
behavior risk within the business scope, and formulated Guidelines" to put forward preventive measures
a plan for preventing unethical behavior based on it? for unethical behavior.
Does the mechanism at least cover preventive measures
for the behaviors in paragraph 2, Article 7 of the
“Ethical Corporate Management Best Practice
Principles for TWSE/GTSM Listed Companies”?
(III) Has the company specified the operating procedures, V (III) The Company has formulated its "Ethical No significant difference.
behavioral guidelines, and disciplinary and grievance Corporate Management Behavior Guidelines", and
systems for violations in the plan for prevention of regularly reviews and amends it by reference to
unethical behavior and implemented them, and the latest revised "Ethical Corporate Management
regularly reviewed and revised the plan? Best Practice Principles for TWSE/GTSM Listed
Companies".
II. Fulfill Ethical Operations
(I) Does the company assess the integrity records of its V (I) The Company's regulations stipulate that ethical No significant difference.
counterparties and specify the integrity terms in the records of business partners shall be first assessed
contracts it enters into with them? before conducting the transaction, in order to
avoid transactions with partners that have
unethical behavioral records. If business
transactions or business partners are found out to
have unethical behavior, it shall be listed as a
dishonored company, and the Company shall
immediately stop business transactions with the
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Deviations from the “Ethical
Implementation Status
Corporate Management Best Practice
Items
Principles for TWSE/TPEx Listed
Yes No Description Companies” and reasons
business partner.
(II) Has the company set up a dedicated unit under the V (II) The Company is planning on setting up a dedicated The setup is being planned.
Board of Directors to promote ethical operations, and ethical corporate management unit.
regularly (at least once a year) reported its integrity
operation policy, plan to prevent unethical behavior,
and supervision of the implementation to the Board of
Directors?
(III) Does the company establish policies to prevent V (III) If the employee finds a conflict of interest when No significant difference.
conflicts of interest and provide appropriate conducting the Company's business, the situation
communication channels, and implement it? shall be reported directly to the immediate
manager, and appropriate guidance shall be
provided by the immediate manager.
(IV) Has the company established an effective accounting V (IV) The audit unit has drawn up an audit plan No significant difference.
system and internal control system for the according to the results of risk assessment and
implementation of ethical operation, and authorized the carried out an internal audit, issued an audit report
internal audit unit to, according to the assessment after the audit, and regularly reported the
results of the risk of unethical behavior, draw up the implementation status to the Audit Committee.
relevant audit plans, and audit the compliance with the
plan accordingly to prevent unethical behavior? Or an
accountant is commissioned to carry out the audit?
(V) Does the company regularly hold internal and external V (V) The Company has established the “Ethical No significant difference.
educational training on operational integrity? Corporate Management Best Practice Principles”,
and actively advocated the spirit of ethical
corporate management in the Board of Directors
and management meetings.
III. Operation of the integrity channel
(I) Does the company establish both a reward/punishment V When the Company discovers or receives accusations No significant difference.
system and an integrity hotline? Can the accused be of an employee's unethical behavior, it shall
reached by an appropriate person for follow-up? immediately ascertain the relevant facts. If it is
(II) Has the company established the standard operating V confirmed to violate the relevant laws or ethical No significant difference.
procedures for investigation of reported matters, corporate management policies and regulations, the
follow-up measures to be taken after investigation, and Company shall immediately request the offender to
relevant confidentiality mechanisms? stop their relevant behaviors, take appropriate
(III) Does the company provide proper whistleblower V remedies, and claim for damages through legal No significant difference.
protection? proceedings when necessary, in order to safeguard the
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Deviations from the “Ethical
Implementation Status
Corporate Management Best Practice
Items
Principles for TWSE/TPEx Listed
Yes No Description Companies” and reasons
reputation and interests of the Company.
IV. Enhanced information disclosure
(I) Does the company disclose the content and the V The Company has disclosed the “Ethical Corporate No significant difference.
promotion effects of its ethical corporate management Management Best Practice Principles” on the Investors
best practice principles on its website and MOPS? Centre of the Company website and MOPS.
V. If the company has its own ethical corporate management best practice principles in accordance with the “Ethical Corporate Management Best Practice Principles
for TWSE/GTSM Listed Companies”, please describe the variation between its operation and the regulations:
The Company has formulated its "Ethical Corporate Management Best Practice Principles" and requests its business team to follow the "Ethical Corporate
Management Behavior Guidelines" in order to implement and promote the ethical corporate management best practice principles. There is no significant variance.
VI. Other important information to facilitate a better understanding of the company’s ethical corporate management policies (matters such as review and revision of
regulations):
The Company has reviewed and revised its "Ethical Corporate Management Best Practice Principles" in 2020 in accordance with the “Ethical Corporate Management
Best Practice Principles for TWSE/GTSM Listed Companies”, and submitted it to the shareholders' meeting.
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− 35 −

• (VII) If the Company has adopted corporate governance best-practice principles or related bylaws, disclose how these are to be searched: Please refer to the Company website (http://www.patec-intl.com) → Investor Centre → Corporate Governance.

• (VIII) Other significant information that will provide a better understanding of the state of the company's implementation of corporate governance may also be disclosed: None.

~36~

• (IX) Internal Control System Execution Status:

• Statement of Internal Control System:

Statement of Internal Control System

Date: March 27, 2020

Based on the findings of a self-assessment, the Company states the following with regard to its internal control system during the year 2019:

• I. The Company’s board of directors and management are responsible for establishing, implementing, and maintaining an adequate internal control system, and have already established it. Its purpose is to provide reasonable assurance over the effectiveness and efficiency of our operations (including profitability, performance and safeguarding of assets), the reliability, timeliness, transparency of the report, and to be in compliance with applicable rulings, laws and regulations.

• II. An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can provide only reasonable assurance of accomplishing its three stated objectives above. Moreover, the effectiveness of an internal control system may be subject to changes due to extenuating circumstances beyond our control. Nevertheless, our internal control system contains self-monitoring mechanisms, and the Company takes immediate remedial actions in response to any identified deficiencies.

• III. The Company evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (hereinafter referred to as the Regulations). The criteria adopted by the Regulations identify five key components of managerial internal control: 1. control environment, 2. risk assessment, 3. control activities, 4. information and communication, and 5. monitoring activities. Each key component is comprised of several items. Please refer to the Regulations for provisions of the aforementioned items.

~37~

• IV. The Company has evaluated the design and operating effectiveness of its internal control system according to the aforesaid Regulations.

• V. Based on the findings of such evaluation, the Company believes that, on December 31, 2019, it has maintained, in all material respects, an effective internal control system (that includes the supervision and management of our subsidiaries), to provide reasonable assurance over our operational effectiveness and efficiency, reliability, timeliness, transparency of reporting, and compliance with applicable rulings, laws and regulations.

• VI. This Statement is an integral part of the Company’s annual report for the year 2019 and prospectus, and will be made public. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Law.

• VII. This statement was passed by the board of directors in their meeting held on March 27, 2020, with none of the 7 attending directors expressing dissenting opinions, and the remainder all affirming the content of this Statement.

Patec Precision Industry Co., Ltd. Chairman: Goh Mui Teck William General Manager: Wee Liang Kiang

~38~

1. If the CPA was engaged to conduct a Special Audit of the Internal Control System, its Audit Report shall be provided: None.

2. (X) For the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, disclose any sanctions imposed in accordance with the law upon the company or its internal personnel, any sanctions imposed by the company upon its internal personnel for violations of internal control system provisions, principal deficiencies, and the state of any efforts to make improvements.: None.

3. (XI) Material resolutions of a shareholders meeting or a board of directors meeting during the most recent fiscal year and up to the date of publication of the annual report:

Date	MeetingName	Important Resolutions	Implementation Status
2019.06.28	Shareholders’ Meeting	1. Adoption of the Fiscal 2018 Business Report and Consolidated Financial Statement. 2. Adoption of the Proposal for Distribution of 2018 Earnings. 3. Discussion of the proposal to amend the Articles of Incorporation. 4. Proposal for a new share issue through capitalization of earnings. 5. Amend the “Management of Acquisition and Disposal of Assets”. 6. Amend the “Management of Loans to Others”. 7. Amend the “Endorsements Management”. 8. Amend the “Operational Procedures for Trading Financial Derivatives”. 9. Proposal for the Company’s re-election of Directors. 10. Proposal for release the prohibition on Directors from participation in competitive business.	1. Item1&3&5~8 were adopted by resolution. 2. Item2&4 were adopted by resolution, and the capital increase and dividend payment completed in 2019.10.14 3. Item 9 elected 4 directors and 3 independent directors according to the election list. 4. Item 10 released the non-compete prohibition of directors Goh Mui Teck William, Wee Liang Kiang and Wee Hong Jie.
2019.08.13	Board of Directors’ Meeting	1. Election of the Chairman of the company. 2. Propose to carry out the relevant matters of distribution of dividends. 3. Discuss an endorsement and guarantee for the Singapore subsidiary. 4. Appointment of members of 3rd Remuneration Committee.	1.Item 1~4 were adopted by resolution. 2.Item 1 was re-elected by Chairman Goh Mui Teck William. 3.Item 4 appointed 3 independent directors Yen Chun Tech, Tan Jee Yaw and Ernest Yogarajah Balasubramaniam as members of the Remuneration Committee.

~39~

Date	MeetingName	Important Resolutions	Implementation Status
2019.11.12	Board of Directors’ Meeting	1. Proposed the earnings distribution in the first half of 2019. 2. Discuss an endorsement and guarantee for the Indonesia subsidiary. 3.Patec Group Budget of 2020. 4.The Company’s 2020 audit plans is submitted for resolution.	Item1~4 were adopted by resolution.
2020.03.27	Board of Directors’ Meeting	1. Business Report and Consolidated Financial Statements for the year 2019. 2. Proposed the Fiscal 2019 earnings distribution. 3. Proposal for a new share issue through capitalization of earnings. 4. Issuance of Company’s 2019 Internal Control Declaration is submitted for resolution. 5. Proposed Company’s 2020 PwC CPA service is submitted for resolution. 6. Adoption of the Nineth Amended and Restated Memorandum and Articles of Association of the Company. 7. Proposed Convening and Holding of the General Shareholders’ Meeting of the Company of the Year 2020. 8. Proposed the Fiscal 2019 compensation of directors and employee bonus sharing (includingmanagers).	Item1~8 were adopted by resolution.
2020.05.11	Board of Directors’ Meeting	1. Amend the “Management of Board Meetings Operations”, “Ethical Corporate Management Best Practice Principles”, “Procedures for Ethical Management and Guidelines for Conduct”, “Audit Committee Charter”and “Remuneration Committee Charter”. 2. Amend the “Rules of Procedure for Shareholders Meetings”and “Endorsements Management”. 3. Proposed Convening and Holding of the General Shareholders’ Meeting of the Company of the Year 2020.(Add new resolution)	Item1~3 were adopted by resolution.

(XII) Important resolutions made by the board of directors’ meeting during the current fiscal year and up to the date of printing of the annual report: None.

(XIII) A summary of resignations and dismissals, during the most recent fiscal year and up to the date of publication of the annual report, of the company's chairman, general manager, accounting manager, financial manager, chief internal auditor, and research and development manager: None.

~40~

IV. INFORMATION ON CPA PROFESSIONAL FEES

Information on replacement of certified public accountant in 2019: None.

INFORMATION ON CPA PROFESSIONAL FEES

Accounting firm	Name of account ant	Name of account ant	Period Covered by CPA’s Audit	Remarks
PwC Taiwan	Chin-ChangChen	Yi-Fan Lin	Jan 1,2019-Dec 31,2019	None

Currency: NT$

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Items
Audit fee Non-Audit fee Total
Range
1 Under 2,000,000
2 2,000,000 (included)~4,000,000  
3 4,000,000 (included)~6,000,000
4 6,000,000 (included)~8,000,000
5 8,000,000 (included)~10,000,000
6 Above 10,000,000 (included)
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• (I) When non-audit fees paid to the CPA, to the accounting firm of the CPA, and to any affiliated enterprise of such accounting firm are equivalent to one quarter or more of the audit fees paid to them, the amounts of both audit and non-audit fees and the details of the non-audit services shall be disclosed: Not applicable.

• (II) When the securities firm changes its accounting firm and the audit fees paid for the financial year in which the change took place are lower than those paid for the financial year immediately preceding the change, the amount of the audit fees before and after the change and the reason shall be disclosed: Not applicable.

• (III) When the audit fees paid for the current financial year are lower than those paid for the immediately preceding financial year by 15 percent or more, the amount and percentage of and reason for the reduction in audit fees shall be disclosed: Not applicable.

V. Information on replacement of certified public accountant: None.

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VI. Where the securities firm's chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its auditing CPAs or at an affiliated enterprise of such accounting firm, the name and position of the person, and the period during which the position was held, shall be disclosed: None.

VII. Evaluation of CPA’s independence:

Based on the following matters, the independence of the CPA and accounting firm is evaluated annually by the Audit Committee, and assessment results are reported to the Board of Directors.

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

Independence Yes No Remarks
Is the CPA not a director or independent director of the Company
V
or its affiliates?
Is the CPA not a shareholder of the Company or its affiliates? V
Has the CPA not been paid wages by the Company or any of its
V
affiliates?
Has the Company been appointing the auditor for less than 7
V
consecutive years?
Has the CPA ensure that the accounting firm has already abide by
V
regulations related to independence.
Have CPAs of the joint CPA firm not been designated as a
director, manager or a position that has a significant impact on the V
audit case within one year after the CPA is relieved from office?
Whether during the financial reporting period, the non-audit
service fees and details of services provided by joint accounting V
firm of the CPA not violate the CPA's independence.
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• VIII. ANY TRANSFER OF EQUITY INTERESTS AND/OR PLEDGE OF OR CHANGE IN EQUITY INTERESTS BY A DIRECTOR, SUPERVISOR, MANAGERIAL OFFICER OR SHAREHODER WITH A SHARE OF MORE THAN 10 PERCENT IN THE MOST RECENT FISCAL YEAR AND UP TO THE DATE OF PUBLICATION OF THE ANNUAL REPORT

(I) Changes of directors, supervisors, managers or major shareholders in the company

Unit: Share

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

Current year to Apr
2019
24,2020
Title Name Shareholding Pledged Shareholding Pledged
Shares Shares
Increase / Increase /
Increase/ Increase/
Decrease Decrease
Decrease Decrease
Goh Mui Teck
Chairman 315,204 - - -
William
Director and GM
（ and held over
Wee Liang Kiang 533,016 - - -
10% shares major
shareholder ）
10,464
Director Wee Hong Jie - - -
(50,000)
Director Hidaka Hiroyuki 195,974 - - -
Independent
Yen Chun Te - - - -
Director
Independent
Tan Jee Yaw - - - -
Director
Independent Ernest Yogarajah
Director Balasubramaniam - - - -
China GM Chang Ping 4,363 - - -
Indonesia GM Adrian Nicolas - - - -
Sales Vice
Jack Liu - - -
President
CFO Sean Hsu 41,158 - - -
Internal Audit
Jennifer Lee 3,469 - - -
Manager
----- End of picture text -----

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• (II) Information on equity transfer by directors, supervisors, managers or major shareholders for counterparties that are related parties: None.

• (III) Information on equity pledge by directors, supervisors, managers or major shareholders for counterparties that are related parties: None.

IX. Relationship information, if among the company's 10 largest shareholders any one is a related party or a relative within the second degree of kinship of another:

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

April 24, 2020; Unit: Share
Relationships among the top
ten shareholders, anyone
Current
Spouses & Minor who is a related party,
Shareholding Shareholding in the
Shareholding spouse, or second-degree
name of others
kinship of another: Name
Name and relation Remarks
Name Relation
The CTBC The CTBC
hosting Patec hosting Patec
Investments Pte. Investments Pte.
Ltd investment Ltd investment
account account is jointly
held by Goh Mui
Goh Mui
Teck William,
Teck
Wee Liang Kiang
William
and Hidaka
12,481,343 27.84% - - - - Wee
Hiroyuki, of −
Liang which
Representative ： Kiang
shareholdings are
Wee Liang Hidaka 3,743,702
Kiang Hiroyuki shares(8.35%),
4,993,939
shares(11.14%)
and 3,743,702 股
(8.35%)
respectively.
Wee Liang 6,314,208 14.09% 2,707,430 6.04% 4,993,939 11.14% [Wong ] Spouse −
Kiang Jee Buay
Goh Mui Teck
3,733,975 8.33% - - 3,743,702 8.35% [Goh ] Father and Son −
William Nianzhe
Wee
Wong Jee Buay 2,707,430 6.04% 6,314,208 14.09% - - Liang Spouse −
Kiang
Goh Mui
Goh Nianzhe 2,615,967 5.84% - - - - Teck Father and Son −
William
% % %
Shares Shares Shares
Percentage Percentage Percentage
----- End of picture text -----

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

Relationships among the top
ten shareholders, anyone
Current
Spouses & Minor who is a related party,
Shareholding Shareholding in the
Shareholding spouse, or second-degree
name of others
kinship of another: Name
Name and relation Remarks
Name Relation
Cathay Bank
Trust Phillip
Securities (Hong 2,472,717 5.52% - - - - − − −
Kong) Company
Investment
Account
Hidaka Hiroyuki 2,321,545 5.18% - - 3,743,702 8.35% − − −
Lin Zhi Long 1,135,172 2.53% - - - - − − −
Tong-An
Investment Co.,
Ltd. - - - -
695,954 1.55% − − −
Representative:
Mao-Hsiung,
Huang
Sean Hus 487,572 1.09% - - - - − − −
X. The total number of shares and total equity stake held in any single
enterprise by the company, its directors and supervisors, managers, and
any companies controlled either directly or indirectly by the company:
March 31, 2020; Unit: Share
Investments by
directors, supervisors,
Investment by the
managers and directly Total investment
Company
or indirectly controlled
Reinvested entities
enterprises
Percentage Percentage Percentage
Shares shareholding Shares shareholding Shares shareholding
(%) (%) (%)
Pate Pte. Ltd. 31,287 100.00 - - 31,287 100.00
Press Automation Technology Pte. Ltd. 6,247 100.00 - - 6,247 100.00
Patec Medical Supplies Pte. Ltd. 600 57.97 - - 600 57.97
BionicXP Pte. Ltd. 100 100.00 - - 100.00 100.00
Wuxi Jingxin Precision Machining Co., Note 93.00 - - Note 93.00
Ltd.
Wuxi Patec Precision Machining Co., Ltd. Note 93.00 - - Note 93.00
Yancheng JingXin Precision Machining Note 93.00 - - Note 93.00
Co., Ltd
Patec Precision Kft Note 100.00 - - Note 100.00
% % %
Shares Shares Shares
Percentage Percentage Percentage
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----- Start of picture text -----

Investments by
directors, supervisors,
Investment by the
managers and directly Total investment
Company
or indirectly controlled
Reinvested entities
enterprises
Percentage Percentage Percentage
Shares shareholding Shares shareholding Shares shareholding
(%) (%) (%)
Pt Patec Presisi Engineering 4,340 70.00 279 4.50 4,619 74.50
Pt PDF Presisi Engineering 1,210 62.28 - - 1,210 62.28
Pt API Precision 1,483 62.14 63 3.74 1,546 65.88
----- End of picture text -----

Note: The Company is a limited company with no shares issued, and hence have no par value and number of shares.

~46~

Four. Capital Raising Activities

I. CAPITAL AND SHARES

(I) Source of capital stock

1. The formation of capital

April 30, 2020; Unit: Share / NT$

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

Authorized capital stock Paid-in capital Remarks
Share
Year / Par payments
month Value Shares Amount Shares Amount Source of capital offset by Others
assets
other than
cash
Capital of the
2011.06 10 1 10 1 10 Company’s None -
establishment
Capital increase
2011.07 10 2 20 2 20 None Note 1
by cash
Conversion of
2011.11 10 100,000,000 1,000,000,000 28,081,162 280,811,620 None Note 2
equity
Capital increase
2011.12 40 100,000,000 1,000,000,000 28,567,039 285,670,390 None Note 3
by cash
Capital increase
2014.04 40 100,000,000 1,000,000,000 30,067,039 300,670,390 None Note 4
by cash
Capital increase
2015.06 39 100,000,000 1,000,000,000 33,867,039 338,670,390 None Note 5
by cash
Conversion of
employee share
2016.07 25.67 100,000,000 1,000,000,000 33,906,039 339,060,390 None Note 6
subscription
warrants
Conversion of
employee share
2016.08 25.67 100,000,000 1,000,000,000 34,040,039 340,400,390 None Note 6
subscription
warrants
Conversion of
employee share
2016.09 25.67 100,000,000 1,000,000,000 34,126,039 341,260,390 None Note 6
subscription
warrants
Capital increase
2016.12 10 100,000,000 1,000,000,000 37,512,743 375,127,430 None Note 7
by earnings
Conversion of
employee share
2017.03 22.99 100,000,000 1,000,000,000 37,562,743 375,627,430 None Note 8
subscription
warrants
Conversion of
employee share
2017.04 22.99 100,000,000 1,000,000,000 37,658,743 376,587,430 None Note 9
subscription
warrants
Conversion of
2017.06 59.3 100,000,000 1,000,000,000 37,812,196 378,121,960 None Note 9
corporate bonds
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----- Start of picture text -----

Authorized capital stock Paid-in capital Remarks
Share
Year / Par payments
month Value Shares Amount Shares Amount Source of capital offset by Others
assets
other than
cash
Conversion of
employee share
2017.07 22.99 100,000,000 1,000,000,000 37,919,196 379,191,960 None Note 10
subscription
warrants
Conversion of
employee share
2017.08 22.99 100,000,000 1,000,000,000 38,239,196 382,391,960 None Note 10
subscription
warrants
Conversion of
employee share
2017.09 21.03 100,000,000 1,000,000,000 38,244,196 382,441,960 None Note 10
subscription
warrants
Conversion of
employee share
2017.11 21.03 100,000,000 1,000,000,000 38,272,196 382,721,960 None Note 11
subscription
warrants
Conversion of
employee share
2017.12 21.03 100,000,000 1,000,000,000 38,307,196 383,071,960 None Note 11
subscription
warrants
Conversion of
employee share
2018.02 21.03 100,000,000 1,000,000,000 38,729,196 387,291,960 None Note 12
subscription
warrants
Cancellation of
2018.03 100,000,000 1,000,000,000 38,229,196 382,291,960 None Note 12
treasury shares
Capital increase
2018.09 10 100,000,000 1,000,000,000 41,096,386 410,963,860 None Note 13
by earnings
Capital increase
2019.09 10 100,000,000 1,000,000,000 44,826,766 448,267,660 None Note 14
by earnings
----- End of picture text -----

Note 1: Capital increase by cash by resolution of the board of directors on July 20, 2011.

Note 2: Increase of approved capital by resolution of the shareholders' meeting on November 18, 2011.

Note 3: Capital increase by cash by resolution of the board of directors on December 16, 2011. Note 4: Capital increase by cash by resolution of the board of directors on April 17, 2014. Note 5: Capital increase by cash by resolution of the board of directors on March 27, 2015. Note 6: Approved by Taiwan Stock Exchange Corporation on Oct 27, 2016. Note 7: Approved by Taiwan Stock Exchange Corporation on Dec 21, 2016. Note 8: Approved by Taiwan Stock Exchange Corporation on Apr 11, 2017. Note 9: Approved by Taiwan Stock Exchange Corporation on Aug 18, 2017. Note 10: Approved by Taiwan Stock Exchange Corporation on Oct 5, 2017. Note 11: Approved by Taiwan Stock Exchange Corporation on Jan 10, 2018. Note 12: Approved by Taiwan Stock Exchange Corporation on Apr 12, 2018.

~48~

Note 13: Approved by Taiwan Stock Exchange Corporation on Oct 1, 2018.

Note 14: Approved by Taiwan Stock Exchange Corporation on Oct 1, 2019.

2. Type of Stock

2.	Type of Stock
				April 24, 2020; Unit: Share
Type of Stock		Authorized	capital stock		Remarks
	Issued shares	Treasuryshares	Un-issued shares	Total
Registered common stock	44,190,766	636,000	55,173,234	100,000,000	−

1. General information about the reporting system: None.

(II) Shareholder structure:

April 24, 2020

Shareholder Structure/ Quantity	Government Institutions	Financial Institutions	Other Juridical Persons	Natural Persons	Foreign Institutions and Foreign Persons	Treasury Stock	Total
Number of Shareholders	0	0	16	1,414	24	1	1,455
Shareholding	0	0	1,576,702	9,334,591	33,279,473	636,000	44,826,766
Percentage shareholding (%)	0%	0%	3.52%	20.82%	74.24%	1.42%	100.00%

Note: According to Article 3 of the "Regulations Governing Permission for People from the Mainland Area to Invest in Taiwan", for any individual, juristic person, organization, or other institution of China or any company it invests in any third area, the total combined shareholding shall be 0.23%.

(III) Diffusion of ownership:

1. Diffusion of common stock ownership

April 24, 2020

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

Number of
Class of Shareholding Shareholding (share) Percentage (%)
Shareholders
1 ~ 999 457 89,159 0.20%
1,000 ~ 5,000 679 1,379,566 3.08%
5,001 ~ 10,000 136 969,197 2.16%
10,001 ~ 15,000 56 684,561 1.53%
15,001 ~ 20,000 26 449,981 1.00%
20,001 ~ 30,000 30 745,941 1.66%
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----- Start of picture text -----

Number of
Class of Shareholding Shareholding (share) Percentage (%)
Shareholders
30,001 ~ 40,000 19 672,771 1.50%
40,001 ~ 50,000 7 303,949 0.68%
50,001 ~ 100,000 19 1,333,454 2.97%
100,001 ~ 200,000 11 1,520,267 3.39%
200,001 ~ 400,000 4 1,076,037 2.40%
400,001 ~ 600,000 1 487,572 1.09%
600,001 ~ 800,000 2 1,331,954 2.97%
800,001 ~ 1,000,000 0 0 0.00%
Over 1,000,001
Classified under specific 8 33,782,357 75.37%
circumstances
Total 1,455 44,826,766 100.00%
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2. Preferred Share: None.

• (IV) Major Shareholders: List all shareholders with a stake of 5 percent or greater, or the names of the top ten shareholders, specifying the number of shares and stake held by each shareholder on the list:

Unit: Share

==> picture [457 x 267] intentionally omitted <==

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

Nationality or
Shareholding
Name of Major Shareholders Place of Percentage (%)
(share)
Registration
CTBC Bank is entrusted protect the investment R.O.C.
12,481,343 27.84%
account of Patec Investments Pte. Ltd. (Taiwan)
Wee Liang Kiang Singapore 6,314,208 14.09%
Goh Mui Teck William Singapore 3,733,975 8.33%
Wong Jee Buay Singapore 2,707,430 6.04%
Goh Nianzhe Singapore 2,615,967 5.84%
Cathay Bank Trust Phillip Securities (Hong R.O.C.
2,472,717 5.52%
Kong) Company Investment Account (Taiwan)
Hidaka Hiroyuki Japan 2,321,545 5.18%
R.O.C.
Lin Zhi Long 1,135,172 2.53%
(Taiwan)
R.O.C.
Tong-An Investment Co., Ltd. 695,954 1.55%
(Taiwan)
R.O.C.
Sean Hsu 487,572 1.09%
(Taiwan)
----- End of picture text -----

~50~

Note: The CTBC hosting Patec Investments Pte. Ltd investment account is jointly held by Goh Mui Teck William, Wee Liang Kiang and Hidaka Hiroyuki, of which shareholdings are 3,743,702 shares (8.35%), 4,993,939 shares (11.14%) and 3,743,702 shares (8.35%) respectively.

~51~

• (V) Share prices for the past 2 fiscal years, together with the Company's net worth per share, earnings per share, dividends per share, and related information:

Unit: NT$

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

Current year to
Year
2018 2019 March 31, 2020
Item
(Note 8)
Market price per Highest 60.1 34.95 23.75
unit Lowest 24.75 21.20 12.50
(Note 1) Average 44.39 26.51 17.68
Net Worth Per Before distribution 28.71 25.87 24.76
Share
After distribution 27.13 Note 9 −
(Note 2)
Weighted average shares (thousand
44,147 44,191 44,191
shares)
Earnings per share
Earnings per share Before adjustment 3.57 0.88 (0.42)
−
(Note 3) After adjustment 3.27 Note 9
0.06
Cash Dividend 0.10244247 −
(Note 9)
Stock Dividends
0.35
Appropriated from 0.92198329 −
(Note 9)
Retained Earnings
Dividend Stock Dividends
Stock Dividends
Appropriated from − − −
capital surplus
Accumulated Undistributed Dividends
(Note 4) − − −
−
P/E ratio (Note 5) 12.43 30.125
Return on −
Price-dividend ratio (Note 6) 433.32 441.83
Investment
Cash dividend yield (Note 7) 0.23% 0.23% −
----- End of picture text -----

• If shares are distributed in connection with a capital increase out of earnings or capital reserve, it shall

• further disclose information on market prices and cash dividends retroactively adjusted based on the number of shares after distribution.

• Note 1: State the highest and lowest market price of each year, and calculate the average market price for each year by the annual turnover and volume.

• Note 2: Based on the number of shares that have been issued at the end of the year and the allocation according to resolution of the shareholders’ meeting in the next fiscal year.

• Note 3: If there are retrospective adjustments due to matters such stock dividend distributions, the earnings per share before and after the adjustment shall disclosed.

• Note 4: If the conditions attaching to equity issuance includes payment of dividends to make up for not having distributed a dividend in years in which it did not post a profit, the accumulated unpaid dividends of each fiscal year shall be disclosed.

• Note 5: P/E ratio = current year average closing price per share /earnings per share.

• Note 6: Price-dividend ratio = current year average closing price per share / cash dividend per share.

• Note 7: Cash dividend yield = cash dividend per share/ current year average closing price per share.

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• Note 8: Net value per share and earnings per share refers to the amount in the financial report of the most recent quarter up to the date of publication of the annual report, audited and certified or reviewed by a CPA. Whereas other values refer to the amount in the most recent fiscal year up to the date of publication of the annual report.

• Note 9: The 2019 earnings distribution has been approved by the board of directors' meeting on March 27, 2020, and submitted for resolution by the shareholders' meeting.

• (VI) The Company's dividend policy and implementation thereof:

• Dividend Policy provided in the Articles of Incorporation According to Article 99 of the Company's Articles of Incorporation, the

Company is currently in growth stage, and hence dividends can be distributed by cash/stock to shareholders in consideration of the Company's capital expenditures, business expansion plans, financial planning and other plans for sustainable development. During the listing period, except for laws and regulations in Cayman Islands, provisions for TWSE/TPEx listed companies or the Articles of Incorporation, or the rights in the shares, the Company’s distribute dividends in accordance with the distribution policy in Article 99(1). If there is a surplus (including undistributed surplus of the previous fiscal year) at the end of the fiscal year, it shall first allocated for tax payments and make up for previous losses (including the losses of the previous fiscal year), then retained for special reserves (if any), and the remaining surplus (hereinafter referred to as "distributable surplus") can be distributed according to resolution of the annual shareholders' meeting in the following manner:

  - (1) Directors’ remuneration shall not be higher than 3% of pre-tax profit,

  - (2) Employees’ compensation shall not be lower than 0.1% of pre-tax profit, and

  - (3) Shareholders’ dividends shall not be lower than 5% of the distributable earnings, of which cash dividends shall account for at least 3% of the total dividends.

1. Distribution of stock dividends at the Shareholders’ Meeting

The Company’s 2019 earnings distribution was resolved by the board of directors on March 27, 2020, with the proposed cash dividend is NT$0.06 per share, and stock dividend of NT$0.35 per share. After the resolution of the shareholders' meeting on June 22, 2020, the Board shall fix a date for the

~53~

distribution of stock and cash dividends, and shall have full authority to handle the affect of change in outstanding shares on the dividend payout ratio.

• (VII) Effect upon business performance and earnings per share of any stock dividend distribution proposed or adopted at the most recent shareholders' meeting: Not applicable.

• (VIII) Compensation to employees, directors, and supervisors:

• Ratio or scope of compensation to employees, directors, and supervisors, as set forth in the Company’s Articles of Incorporation: Please refer to: (VI) The Company's dividend policy and implementation thereof.

• The basis for the estimated compensation to employees, directors, and supervisors for the current period, the basis for calculating the number of shares to be distributed, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure: The Company has distributed NT$700,000 as directors' remuneration and NT$200,000 as employees' compensation in 2019. If there is discrepancy between the actual distributed amount and the estimated figure when the compensation to directors and employees is distributed according to the Company’s Articles of Incorporation, it will be regarded as a change in accounting estimate, and recorded as profit/loss in the year of shareholders’ resolution.

• Information on distribution of compensation to employees as approved by the Board of Directors: The Company’s 2019 earnings distribution has been approved by the Board of Directors on March 27,2020. Information on the distribution of compensation to employees and directors are as follows:

  • (1) The employees’ compensation of $250,000 distributed in cash and directors’ remuneration of $700,000 as resolved at the shareholders’ meeting.

  • (2) Employees’ compensation of NT$0 is distributed in stock, which accounted for 0% of the sum of the current after-tax net income and total employee compensation.

• The actual distribution of compensation to employees, directors, and supervisors for the previous fiscal year (with an indication of the number of shares, monetary amount, and stock price, of the shares distributed), and, if there is any discrepancy between the actual distribution and the recognized

~54~

amount, additionally specify the amount of the discrepancy, the cause, and how it is treated: The Company has estimated NT$200,000 as employees' compensation in 2019, the Board of Directors considered the operating situation and operating strategy, and decided to distribute NT$250,000 for employees' compensation, the discrepancy between the actual distributed amount and the estimated figure will be regarded as a change in accounting estimate, and recorded as loss in 2020.

• (IX) Buyback of Treasury Stock: Not applicable.

II. Corporate Bonds (including overseas corporate bonds): None.

III. Issuance of Preferred Stocks: None

IV. Issuance of Global Depository Receipts: None

V. Issuance of Employee Stock Options: None

VI. Issuance of New Restricted Employee Share: None

VII. Status of New Shares Issuance in Connection with Mergers and Acquisitions: None

VIII. Implementation of the Company's Capital Allocation Plans:

The Company does not have issues that were completed in the most recent 3 years but have not yet fully yielded the planned benefits.

~55~

Five. Operational Summary

I. BUSINESS ACTIVITIES

• (I) Scope of business:

• Business content: The main business items of the Group is producing the press components for automobile and motorcycle and producing press production line machine

• Percentage out of the entire company business

==> picture [458 x 155] intentionally omitted <==

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

December 31, 2019
2018 2019
Major Products
Amount % Amount %
Press production line
284,031 12.96 165,713 9.23
Equipment
Automobile components 1,790,014 81.67 1,533,391 85.40
Motorcycle components 102,229 4.66 80,328 4.47
Revenue from processing 15,361 0.70 15,532 0.87
Medical device 92 0.01 601 0.03
Total 2,191,727 100.00 1,795,565 100.00
----- End of picture text -----

3. Current products (services) of the Company

==> picture [457 x 155] intentionally omitted <==

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

Product category Service
According to the market demand and characteristic requirement, selling press
Press production production line equipment to customers and provide differentiated services,
line machine such as the service for in-situ installation and instruction and the logistics
technical support service for the repair, maintenance, and spare parts supply.
The Company provides a wide range of product specifications and categories,
Automotive and
mainly for motorcycle components and automobile safety system components,
motorcycle
such as: door lock parts, seat parts, brake disc shock absorber, flange, exhaust
components
system hook and so on.
Revenue from
The revenue from processing of automobile components
processing
----- End of picture text -----

1. The new products planned to be developed:

2. (1) Medical device

3. (2) The products development in automation equipment and technology field.

~56~

• (II) Industry summary:

• Current status and development of the industry

  • (1) Automotive industry overview

    • A. Automotive industry overview

Automotive industry, being one of the world's largest and one of the most important industry, has become the pillar industry of national economy in United States, Japan, Germany, France and other industrial developed countries, and accounted for a large proportion in the manufacturing industry. It has a strong driving effect on the upgrading of industrial structure and the development of related industries, and has many characteristics such as high industrial correlation, wide coverage, high technical requirements, strong integration, large number of components, and large added value. Automobile products go through the process of market research, product research and development, production and manufacturing, and sales feedback. The product development cycle is quite long, and the production and manufacturing process is rather complicated. As a result, it involves a wide range of satellite manufacturers, which need the mutual cooperation of various industries. The automotive industry can be divided into whole automotive industry and automobile component industry According to industrial production statistics, the automobile component industry can be classified into the following ten categories

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Figure 1, automotive industry classification

==> picture [356 x 149] intentionally omitted <==

==> picture [356 x 149] intentionally omitted <==

Source: Industrial Technology Research Institute, IEK(2015/02). Note: Other automobile components include automobile beam, body stamping component, bumper, exhaust pipe, castings, auxiliary airbag system, seat belt and other components not listed.

a. Global automobile industry

According to the data of LMC Automotive on the scale of the global vehicle market in recent years, the sales of global light vehicles in 2019 were about 90,270,000, a decline of 4.4%. The reasons for the decline include a sharp slowdown of China's economic growth and the cancellation of the preferential tax policy for electric vehicles by the Chinese authorities, which led to a sharp drop in demand. On the India side, due to the domestic credit crunch and economic slowdown, consumers avoided large consumption activities such as car purchases. On the European side, the increasingly strict WLTP emission standards caused major global car factories to cut costs and reduce car models available. These factors coupled with the reduction of growth

~58~

momentum of global economies, the US-China trade war, and the uncertain prospect of Brexit resulted in a sales volume decline from January to August. However, in 2020 the emission standards and regulations will be more stringent, which will stimulate consumers to buy cars, leading to a small growth of 1.3% in the whole year. The scale of the global car market In recent years is shown in Figure 2.

Figure 2, the global size of automotive markets in recent year

==> picture [391 x 179] intentionally omitted <==

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

9800 6.00%
9600
4.00%
9400
9200
單 2.00%
位 9000 成
： 8800 0.00% 長
萬 8600 率
輛 -2.00%
8400
8200
-4.00%
8000
7800 -6.00%
2013 2014 2015 2016 2017 2018 2019
----- End of picture text -----

Source: LMC Automotive, sorted by PATEC

In 2019, the top five auto markets in the world were mainland China, the United States, Japan, Germany, and India in descending order. With the support of its 1.3 billion plus population, the sales volume of mainland China still ranks first in the world, totaling 25,769 thousand vehicles. However, the Sino-US trade war and the slowdown of China's economic growth reduced people's willingness to buy cars and weakened the consumption momentum, resulting in a decline of 8.2% in China's car sales. In the United States, although the sales of large and medium-sized vehicles such as SUVs and light trucks are relatively strong, the sales of traditional cars continue to decline, while the rise of car prices and loan interest rates have affected the ability and willingness of consumers to buy cars. The total sales volume is 17,048,000, down 1.3% from 2018. The automobile markets in Japan and Germany, ranking third and fourth, are mature markets, have a total sales volume of 5,195,000 and

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3,960,000 respectively, down 1.5% and up 5% from 2018. In India, due to the credit crunch and the slowdown of economic growth, the sales volume is 3,816,000, down 13% from 2018. The main market sales of light vehicles in the world from 2018 to 2019 are summarized in the table below.

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

2018 2019
Country Sales Quantities Sales Quantities
% %
(Unit: 10,000) (Unit: 10,000)
China 2,775 29 2,545 28
U.S.A. 1,723 18 1,699 19
W. Europe 1,615 17 1,628 18
Japan 520 6 513 6
E. Europe 423 5 413 5
India 400 4 352 4
Brazil 325 3 311 3
Canada 199 2 193 2
Korea 178 3 175 2
Others 1,284 14 1,201 13
Total 9,442 100 9,030 100
----- End of picture text -----

b. Global automotive component industry

Automotive industry is high precision, and high degree of technical integration of comprehensive industry. The development process of product is quite long, which is from market research, product development, manufacturing to sales feedback. The manufacturing process is also very complicated, so it involves a wide range of industries, which relevant satellite manufacturers need to cooperate with various industries. There are plenty of automobile components. Depending on the complexity of the components, the number of components required is up to 30,000 units. The materials that are used in each component include steel, nonferrous metals, rubber, asbestos, china, fiber and petrochemical industry. The manufacturing method of components includes casting, press, forging, mechanical processing and thermal processing and so on. The completed components are inspected for quality before being transported to the central factory for assembly. The assembly process of automobile in the center factory includes welding, painting, pre-assembly of partial components, and assembly of vehicle. The automobile components must pass the inspection and test standards in various conditions before leaving the factory. Only after being

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confirmed as qualified, can a safe and reliable automobile be considered as completion.

With respect to the development trend of global automobile market, although the automotive industry is rather mature and the whole industrial chain structure is also very complete, in current year, the content rate of automobile components of plant are decreasing under pressure of profit and cost. Consequently, the degree of dependence on the external automobile component plants gradually increases. Automobile component plant from a simple component original equipment manufacturing, become the main research and development partner of the plants, which has transferred pressure to component plants and caused the cost pressures among major automobile component suppliers worldwide are increasing. Therefore, outsourcing or joint venture manufacturing methods have been adopted to bring automobile component manufacturers business opportunities. The scale of the global automobile industry is gradually expanding, and after years of efforts in the development of the automotive industry, automobile components have had the advantages of a small number of diverse and flexible manufacturing. After on-going investing in research and development and upgrading of production technology, it has strength of international competitiveness.

Basically, the international automobile component industry is developing with plants and local government with relevant industry policies. There are two main markets. One is to cooperate with the local domestic, foreign car manufacturers play the role of OEM, and provide the original factory to assemble new automobile components. The other is to provide components maintained or refitted to domestic and foreign aftermarket. In terms of sales outlet of components, it can be divided into four kinds of sales outlet of automotive components, which are Original Equipment Manufacturing (OEM), Original Design Manufacturing (ODM), Original Equipment Service (OES), After Market (AM). OEM and ODM market are for the original assembly components, while OES is the original certified components for after-sales maintenance. The components that AM provides are components for aftermarket maintenance and refitting.

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Figure 3: The type of international division of labor in automotive components

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Source: Industrial Technology Research Institute (2013/05)

The automotive industry is different from electronics industry, which upstream and downstream are the closed markets of a few manufacturers. Each automobile component needs a rigorous and lengthy testing and certification before they can be used by the original equipment manufacturing. The automotive industry has high requirements for quality systems and yield. ISO-9001, QS-9000 and TS-16949 are basic requirements. The components purchased are almost no defects.

The global automobile component industry continues to be highly dependent on vehicle production. With emerging countries, particularly China, benefiting from rapid domestic economic growth in recent years, the demand for vehicles has also increased significantly. In the meantime, the global large plants have expanded rapidly, which drive other components suppliers to follow up, so as to meet the overall production demand. As overall car sales increase, so does demand for aftermarket components. In addition, consumers tend to hold vehicles for longer periods of time, which increases the market demand for replacement of aftermarket components. In 2019, the global automobile market was in a recession, and the sales momentum of whole vehicles was depressed. However, the poor sales of the international automobile manufacturers affected the demand for upstream parts and components, and prompted whole vehicle manufacturers to transfer the pressure to the upstream parts

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manufacturers, so that they could stand a keener price cutting competition which affects their profits.

B. Motorcycle industry overview

General motorcycle industry refers to the manufacture of motorcycle and parts. According to the definition of Standard Industrial Classification prepared by Directorate-General of Budget, Accounting and Statistics, Executive Yuan, it is the industry which manufactures cycles,

three-wheel motorcycle, engine, motorcycle‘s sidecar and motorcycle specialized parts. The industrial production is classified into the motorcycle industry and motorcycle component industry. The detailed categories are shown in the following table:

Table 1: The table of motorcycle industry classification

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Source: Directorate-General of Budget, Accounting and Statistics, Executive Yuan

Motorcycle originated in Europe, America and other places. Before World War II, leading manufacturers in the motorcycle industry are mainly European and American brands, including BMW, PIAGGIO, DUCATI, TRIUMPH, HARLEY‐ DAVIDSON, INDIAN and so on. After World War II, Japanese motorcycle manufacturers emerged at the historic moment, and with the characteristics of use, it is suitable to use in developing countries. HONDA, YAMAHA, SUZUKI and KAWASAKI gradually become global leaders. Currently, Asia is the world's major motorcycle market, accounting for 90% of the global motorcycle sales in 2017. India, the largest market, has grown rapidly in recent years. Under the double

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influence of China's anti-motorcycle policy and slowdown of economic growth, India’s motorcycle sales volume in 2016 surpassed that of China, making India the world's largest motorcycle production and sales country. According to the statistics of SIAM, India’s automotive association, in 2017 the output of India's two wheeled vehicles reached 23,150,000, with a growth of 16.1% over the same period. The sales volume reached 20,190,000, with a growth of 14.8%. Both of them broke through the 20 million mark. At present, the motorcycle penetration rate in rural areas of India still has room for improvement and is expected to continue to drive sales. China, the second largest motorcycle market, gave to India its number one rank in motorcycle sales for 23 consecutive years in 2016 due to its government's ban on motorcycles. According to the statistics and analysis of CAAM, China’s automotive association, in 2017 the total production and sales volume of China's motorcycle industry recovered after five consecutive years of decline. The output of two-wheel plus three-wheel motorcycles was 17,156,000, up 1.9% over the same period. The sales volume was 17,135,000, up 2.0%. According to AISI, Indonesia’s automotive association, Indonesia, as the third largest motorcycle market, had a motorcycle production of about 6,321,000 in 2017, up 1.7% over the same period. The sales volume was about 5,886,000, down 0.8%. The sales volume fell below the 6 million level for two consecutive years, mainly due to a rise in electricity and vehicle registration fees, which lowered the public's willingness to buy.

Figure 4: Global main motorcycle market distribution

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

Country 2013 2014 2015 2016 2017
India 1,481 1,600 1,646 1,759 2,019
China 2,289 2,129 1,882 1,680 1,713
Indonesia 777 787 648 593 589
Vietnam 283 240 290 320 327
Pakistan 80 74 106 163 193
Thailand 200 170 164 174 181
Philippine 75 79 85 114 132
Taiwan 64 67 67 79 91
Brazil 159 143 119 86 81
Colombia 66 70 68 67 50
----- End of picture text -----

Source: Automobile industry associations and motorcycle associations of various countries, sorted by ARTC

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Countries such as North America and Europe, with stable economy and mature market, have limited growth of demand for motorcycle in the future, which tend to focus on leisure and urban short distance travel, with relatively low growth range. In addition to the current main regional markets, developing countries such as Africa are also increasing the demand for motorcycle. With the economic growth, people's demand for transportation tools changes, and the demand for two-wheelers will also gradually increase, which is expected to become a major global motorcycle market in the future.

C. Machine tool industry overview

The production value of machine tool are US$ 875.2 million in 2017, which is 7.3% higher than in 2016. In order of production value, the top ten machine tool countries in the world are China, Japan, Germany, Italy, America, South Korea, Taiwan, Swiss, Spain and India.

Figure 5: The main production of the top 15 countries in 2017

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Source: Gardner Publication, Inc.; TMBA finishing

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Since 2009, China leaps to the world's largest producer. Strong domestic demand gives rise to create China to be the world's largest country of consumption of machine tools, which makes its machine tools become the world's largest machine tool consumer and importer for many years. On the other hand, the current market for machine tools in China is still dominated by domestic demand, and the value of exports is relatively small. In the last one or two year, as the independence of machine tool in China has gradually become effective, some of the low-end machine tools produced by China have been exported to emerging markets in Southeast Asia, so the export value of China has gradually increased. In 2017, China remains the world's largest demand country for machine tool, with a total output value of us $24.52 billion, going up by 3.6% compared to 2016, and a global market share of 28%. China is also the world's largest country of consumption for machine tools. The market size in 2017 was US$29.97 billion, going up by 9% compared to 2016. It is expected that under the promotion of the "Made in China 2025" policy, China's tool machine consumption will continue to increase.

1. Relations with industries upstream, downstream and at the same level

2. A. Automobile components

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==> picture [335 x 99] intentionally omitted <==

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B. Motorcycle components

==> picture [347 x 153] intentionally omitted <==

C. Machine tool equipment

==> picture [320 x 163] intentionally omitted <==

• (3) Various trends of product development

A. Automobile components

Caused by the globalization trend of auto industry, the industry value chain from research and development, procurement, production, sales to after-market, each functional activity has tended to global configuration and retain research and development institutions in local. Instead of investing in replicating products to other target markets, each functional activity has been allocated to the global market according to their capabilities. As a result of the new specialized division of labor cooperation system, the plants adopt the global procurement strategy for reducing the cost. On the other hand, there is a trend of separation between

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the component companies of the original collaborative system, which also leads to more and more multinational component companies.

The development modes of automobile component manufacturers can be divided into three categories: (1) Enter into the international plants or the supply chain system of Tier-1. (2) Joint venture with local plants or technical partners to enter overseas markets. (3) Cooperate with big international factories to set up delivery warehouse or logistics center, so as to seize the opportunity of local automobile after-market and maintenance market. The Group's current development direction is mainly in the previous two categories

In addition, automobile components industry development and automotive production are closely related to after-sales service and maintenance. There are three major automotive industry in the world: China, North America and Japan. These three regions all belong to the mature automobile market and are also the important consumer market of automobile components in the world.

In recent years, the global plants and automobile components industry has been developing towards the decrease of enterprises, expansion of business scale and rapid internationalization. The overall trend is as follows:

• Industrial scale: The innovation of product and technology is also committed to the direction of plants. To reduce development costs and component costs, the plants will expand the economies of scale of a single platform or model through common platforms, modular design and global strategic vehicles.

• Specialization of production: So as to shorten the whole new cars development time, and ensure the quality, cost and delivery time, automobile components factories can no longer only produce as well as provide loading components on assembly line based on drawings provided by plants, but should be more deeply participate in the whole value chain of automobile, from research and development, sales to after-sales service to improve professional level.

• Internationalization of production and operation: In line with the global plants, the scope of multinational automobile component factories is becoming larger and larger. Its main purpose is to match with plants overseas, to develop new markets, or to seek low-cost advantages in local production. Therefore, the formation of

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• automobile components factory production and management of internationalization.

• The collaborative system relationship is complicated: In the past, plants and component suppliers were inseparable through the operation of a collaborative system. However, with the white-hot competition in the automobile market, plants not only require the existing subcontractors to reduce the annual cost, but also seeks compliance with specifications through its procurement platform but replace subcontractors that cannot match price cuts with component factories of superior supply prices.

• Upgrading of automobile application technology: The other pressure that component suppliers need to face is the upgrading of automobile application technology, including miniaturization, lightweight, energy saving and so on. Suppliers also need to invest in research and development to meet the needs of new technologies.

• Automobile component manufacturers will more invest actively in the China market: In the future, the plants will mainly invest in developing countries. Apart from manufacturing, design and engineering, value activities will also be introduced simultaneously. And the scale of automotive market in China continues to grow and becomes the world's largest automotive sales country. The domestic market is also the reason why plants will manufacture locally. Its current car ownership per thousand is still low. Therefore, it brings business opportunities for plants, and so does for automobile component manufacturers. Also, due to the growth of the automobile market in China over the years, the demand for automotive component industry in the automobile aftermarket will increase. Automobile component manufacturers are planning to expand investment into China for gaining access to the huge automobile components market and actively cooperate with local automobile manufacturers for business opportunities.

• Energy efficiency and low carbon emissions have become an inevitable trend in the development of automobile products. With fuel prices still high and environmental concerns, the proportion of energy-saving and hybrid vehicles is gradually increasing. Government policies and related fiscal and tax incentives are the most important driving force at present. Electric cars will still be one of the industry's core development within automobile manufacturers

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because apart from the change of automobiles’ power system, the automobile manufacturers have dedicated to developing small energy-saving models. In addition to complying with regulatory requirements, it will also provide consumers with more options to buy cars in tough economic times.

B. Motorcycle components

In recent years, due to the rapid changes in the global climate, countries have become increasingly concerned about environmental pollution and exhaust emissions from automobile and motorcycle. Each motorcycle manufacturer keeps processing research and development of new products in order that it can produce safer, more environmentally friendly, higher quality products, which has encouraged upstream suppliers to develop the newer technologies, more environmentally friendly and more expensive and profitable components. With the rapid growth of economy, the need of motorcycles in Southeast Asian Nations gradually increases. The main Japanese motorcycles manufacturers such as HONDA, YAMAHA and SUZUKI has shifted value activities, including procurement, production or sales to Southeast Asian Nations such as Indonesia, Vietnam and Thailand, where the motorcycle market is growing rapidly in order to decrease labor cost. The relevant potential competitors are also dominated by this market. For this reason, the future development of the Group not only actively becomes the main suppliers in Indonesia market, but also looks other ASEAN market.

C. Machine tool equipment

In terms of machine tool production - China, China has been engaging in the economic structure adjustment and the transformation of the development direction. Because of the development of key areas such as aviation, ships, automobiles, energy and other aspects, there is huge need for high-end CNC, high efficiency cutting tool and precision measuring machine. On the other hand, the rise of intelligent manufacturing also provides a new path for the development of machine tool industry. In the next five years, the development demand of tool machine industry in China will further shift to the high-end. According to Gardner Research’s statistics, although the sales growth of the machine tool industry was in a downward trend in 2012, the sources of product with serious decline were mainly medium and low-end products, which also indicated that the demand for machine tools in China was shifting to the

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high-end. Overall, the demand for high-end machine tools in China has maintained a strong trend.

The global machine tool market is constantly in the competition of pursuing high efficiency and low energy consumption. Meanwhile, emerging fields and emerging materials also put forward new requirements for the machine tool market. Consequently, machine tool suppliers should not only pursue in-depth development in traditional fields, but also make their products catch up with the pace of emerging fields to maintain competitiveness and their position.

(4) Competition status

In recent years, the world's major manufacturers covet the Chinese huge automobile market and ASEAN area’s motorcycle market. Furthermore, as the cost of production can't effectively reduce the pressure, the products are gradually made by other national foundry production or nearby local procurement. With the economic rise of mainland China and the continuous growth of ASEAN market economy in recent years, the average income of the Chinese people has been increasing steadily and the consumer spending also rose. As a result, local demand for automobile and motorcycle has grown steadily and the China and ASEAN markets have benefited. With the continuous increase in the production of automobile and motorcycle components, the demand for press production line equipment for the production of related components also increases. For this purpose, in addition to actively improving the production efficiency and reducing the production cost of automobile components, the Group also strengthens the sales market of press production line equipment and fights for more sales orders for machine equipment.

In general, for the reason that the wide use of industrial products, the current competitive trend is not as fierce as that of electronic products. Nevertheless, as the use of industrial products is wider, the future market will be valued, which means that the competition will be more obvious in the future.

1. Technology and research & development summary

2. (1) Technological arrangement in business operations, research & development

What customers appreciate the Group is always being ahead of the same industry with the speed of research and development. Along with the

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Group based on years of experience in metal processing and the ability to develop module itself, the key factor is that the Group can adjust the machine instantly to meet the requirements of customers with different product specifications. With the ability to develop samples quickly, effectively improve customer product design and process integration, the Group has been maintaining good relations with customers, and more willing to attract international customers to cooperate.

The Group’s main technical capabilities of product manufacturing process include press forming, assembly, automatic production and detecting. By designing, homemade automatic production and measuring equipment, it reaches 100% of manufacturing and quality inspection and also meets the special requirements of high precision specification and quality assurance. Through the new product quality planning process, it continues to promote the establishment of innovative precision technology.

(2) Personnel involved in research & development and their educational

background and employment history

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

Year 2020
2018 2019
Education As of March 31,
Above Masters 7 7 7
Bachelor’s Degree 23 23 23
Senior High School 3 3 3
Total 33 33 33
----- End of picture text -----

(3) R&D expenses invested in latest five years

Unit: NT$ thousands

==> picture [457 x 125] intentionally omitted <==

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

Item Consolidated net
R&D expenses %
Year operating revenue
2019 52,964 1,795,565 2.95
2018 79,453 2,191,727 3.63
2017 110,443 2,073,289 5.33
2016 73,246 2,009,440 3.65
2015 44,014 1,539,487 2.86
2018 79,453 2,191,727 3.63
----- End of picture text -----

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(4) Technology and products developed successfully in the last five years

As of March 31, 2020

==> picture [457 x 600] intentionally omitted <==

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

No. Items Description
It can improve production efficiency and production safety,
Cold press compound die
1 especially suitable for large press parts compound discharge
automatic discharge device
device.
It is high precision and small gap blanking die, which can
2 Floating die set device
improve the precision of the die.
It can improve production efficiency and production safety,
3 Thick plate blanking die
especially suitable for pressing parts with thick plates.
It can improve production safety and meet the requirements of
Reel stretch press automatic
4 mass production as well as improve the working stability and
discharge device
the efficiency of parts discharge.
Press riveting and flattening It can reduce unnecessary procedures, effectively improve
5
die work efficiency, and reduce manufacturing costs.
It can make die discharge smoothly and simply, make the
Cold die automatic
6 waste materials in the mold fall down smoothly, and greatly
discharge device
improve the production efficiency and production safety.
Fixture device on pierce It can be processed coaxial parts and larger cylindrical,
7
punch forming improve the processing efficiency.
It is an innovation of engineering, and effectively reduce the
8 Curl press die
process.
Ironing burring press It can improve the engineering and work efficiency to meet the
9
engineering needs of mass production.
Completing the design and optimization of the emboss mold
Emboss mold for plate
10 for plate workpiece, which increases working stability and
workpiece
efficiency.
Pre-punching hole of die for Through the use of pressure spring, increase the working
11
plate workpiece stability and efficiency
Burring mold for plate It can improve quality of burring end surface and the working
12
workpiece efficiency
It can improve engineering and work efficiency and mold
13 Solid rod upsetting mold
stability.
It improves the engineering, effectively reduce the process and
Compound mold for blank
14 processing costs, and improve the machining precision and
stretching
quality of components.
It can separate the press part from the material belt
Device for material
15 automatically and improve the production efficiency and
discharge automatically
safety.
It can improve the engineering, effectively reduce the
16 Clod hobbing processing cost and improve the precision and quality of
components.
Aluminum material It can improve the precision and quality processing of
17
embossing fixture components.
----- End of picture text -----

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No.	Items	Description
18	Stainless steel flanged dimplingdie	It can increase the strength of the female die, and do mirror buffingfor female die insert andpierce.

• (III) Long-term and short-term plans for business development.

The Group draws up various long-term and short-term plans to plan the future business direction of the Group in order to cope with the trend of future industrial development and overall economic environment and enhance its competitiveness. The brief description of the Group’s long-term and short-term plans

1. Short-term development strategy and plan

2. (1) Marketing strategy

   • A. Strengthening the good relationship with customers, keep abreast of the latest market information, reasonably estimate the future demand planning of customers for products.

   • B. Continuous participating in customer project plan, suggesting and assist to evaluating equipment requirement, configuration, cost, delivery and other supporting solutions.

   • C. Active participation in international exhibitions of related industries, increasing market visibility and enhancing brand image of the Group by participating in the exhibition, so as to win orders of machines and equipment from international big factories and obtain higher profits.

3. (2) Procurement strategy

Maintain good interaction with suppliers, understand new product development plan and price trend, and provide customers’ idea of the product or future demand.

• (3) Operational management and financial support

• A. In response to operational development, through sound financial planning and operation management, the Group resources will be allocated to maximize the overall benefits of the Group resources.

• B. Making the best of the advantage of capital market to establish sound and diversified financing channels and establishing close and mutually beneficial relationships with financial institutions in response to working capital required for business growth and development.

• C. The introduction of enterprise resource planning system (ERP), which is the integration of front-end and back-end information, provides

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more timely financial information as the basis for management decision-making.

  - D. Organizing internal staff education and training on a regular or ad hoc basis to enhance technical research and development, business and management capabilities. Moreover, encouraging employees to give the comments for improvement within the Group and strengthen the communication bridge between the Group and employees in order to reduce the risk of labor disputes.

1. Long-term plan

2. (1) Marketing strategy

   • A. Continuing to strengthen the customer base, increase operational flexibility, reduce operational risks, so that the operation will not have a significant impact on single customer, regional market, individual industries, and so on, and continuing to maintain the competitiveness of the Group.

   • B. Seeking strategic partners can not only reach new markets, customers and sales networks, but expand the product range, enhance economic efficiency and competitiveness, thereby expanding the economic scale and become the momentum for future growth.

   • C. Setting up overseas machine and equipment sales market, increasing the revenue of machine and equipment sales, and increasing the contribution of revenue and profit.

   • D. Cultivating professional talents, collecting information on future development trends, grasping the market highlights of competitors and new entrants, and expanding the European sales market.

3. (2) Procurement strategy

   • A. Expanding the source of suppliers can not only strengthen the stable supply of goods, ensure the reliability of delivery, but also obtain competitive purchasing price and maintain the competitive advantage of purchasing cost.

   • B. Seeking strategic partners can not only reach new markets, customers and sales networks, but expand the product range, enhance economic efficiency and competitiveness, thereby expanding the economic scale and become the momentum for future growth.

4. (3) Operational management and financial support

   • A. Establishing sound internal control management system,

     • implementing corporate governance and management philosophy, ~75~

shaping excellent corporate culture, and realizing the vision of sustainable business operation.

• B. Through the diversification of capital market financing channels, strengthen the financial structure for long-term development strength; Cooperating with the group operation scale growth, so as to enrich the management team and enhance the group's popularity and image.

• C. Promoting the concept of global competition and lifelong learning for employees, aiming at multinational enterprise groups.

II. MARKET AND SALES OVERVIEW

• (I) Market Analysis

• Sales (Provide) Region of Main Products (Service)

Unit: NT$ thousands; %

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

Year 2018 2019
Area Amount % Amount %
Chana 1,207,231 55.08 694,840 38.70
South east Asia region 472,012 21.54 546,055 30.41
Europe 438,245 20.00 438,966 24.45
Others 74,239 3.38 115,704 6.44
Total 2,191,727 100.00 1,795,565 100.00
----- End of picture text -----

2. Market share:

The Group is as a professional manufacturer of precision metal components. Because most of the Group product components are automobile components, it is hard to calculate its market share. Since its establishment, the Group has been adhering to the concept of serving customers and has become a supplier of MQB (modular querbaukasten) platform of Volkswagen Group. Therefore, the Group’s market share of products should also be significantly increased. Accordingly, the goal of the Group’s market share is continued increasing the Group's performance growth. With the steady growth of global automotive market demand, it is expected that the demand for automobile components will continue to grow in the future. There is still great room for growth in the Group's revenue.

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3. Future market supply/demand and growth

A. Future market supply/demand

The automobile and motorcycle components industry is monopoly market. As automotive manufacturers strive for stability in their component supply chain, most of manufacturers will not switch suppliers easily. The automobiles and motorcycles are also the industry with a high emphasis on safety, which its components has higher precision and reliability than that of other industries, so the downstream plants have strict authentication mechanisms for the components suppliers. As a result, the automotive high entry threshold. The system manufacturer is based on quality control, and once the qualified supplier is selected, it is less likely to change partners easily, thus forming a relatively closed supply chain relationship. The growth of the company's industrial market is analyzed as follows:

a. Automobile components

Multinational automobile manufacturers of well-known brands have established new models of international division of labor and actively engaged in automotive industry and market operation in emerging countries such as China, due to the fact that the upcoming globalization. This not only increases the dependence of local automotive components suppliers on multinational automobile manufacturers, but also attracts more manufacturers to invest, building up a more integrated automotive industry supply chain because of the huge demand in emerging countries. As far as automobile sales quantity is concerned, it is difficult to find explosive room for growth as automobile appetite is almost at the stage of saturation in developed countries. In the meantime, as the economic rise of emerging countries, the increase in people’s income generate growing demand for automobiles, which the vehicle market will continue to grow steadily in the medium to long term.

In 2017, global automotive sales hit a new record high. Nonetheless, because of the conservative outlook of the U.S. and China automotive market, the high risk of exchange rate and raw materials, and the immature opportunity for mass production of electric vehicles, the industry is expected to see a slight recession in 2018.

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China has become the world's largest automobile production and sales country, and cars per capita are far below the standards of developed countries. But for the past 10 years, the rapid growth of the number of automobiles, has brought Chinese society came many problems such as congestion, pollution and traffic safety, formed the contradiction between quantity growth and limitation. This is also the problem that needs to be faced when Chinese government is actively developing automotive industry. Overall, as people consuming ability rise, demand has increased. It is expected that the sales volume of motorcycle as a whole in China will still grow year by year, but the growth of new car sold will gradually decrease or stagnate over the next few years.

With the rapid growth of China's automotive industry in recent years, car ownership increases sharply. The scale of China's demand for automotive components continue to expand, owing to the fact that the low unit price of Chinese automobiles, the relatively unstable quality and the relatively high frequency of component replacement. Meanwhile, with Chinese people's income gradually increased, the price is no longer the only one consideration when people change components. Instead, the importance of driving safety increase. Compared with Chinese automotive components industry, foreign has quality advantage, so the demand for automotive components in Chinese market will continue to rise. So as to fight for this business opportunity, in recent years, the foreign automotive components industry develops more actively in China.

There are few local manufacturers investing 100% in automotive OEM components industry in Indonesia. Most of them are domestic and foreign joint ventures or factories invested by Japanese,

Taiwanese or Korean companies. Most precision components need to be imported. Indonesian vehicle operators believe that there is great opportunities for Indonesia to regain its position as a regional vehicle assembly and components production center with the implementation of ASEAN Free Trade Area and political instability in Thailand. TOYOTA Astra Motor indicates that Indonesia has a potential market and natural resources, coupled with the implementation of ASEAN Free Trade Area, which 5% import tariffs on automobiles and components have been lifted among six ASEAN founding members, including Thailand, Malaysia, Philippines, Singapore, Brunei and

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Indonesia. It has become very accessible to export cars and automotive components from Indonesia to southeast Asian countries, and the industry is now in the best position to overtake Thailand.

Even though Indonesia has a large automotive component market, Japanese’s automobile manufacturers have a closed system. Most of the major automotive components are monopolized by their agents or joint ventures, consequently, OEM suppliers of Japanese automotive components produced in foreign countries have little access to their supply chains. As for the large scale of the AM, the manufacturers estimated that around two-thirds of them are non-factory components, so there is still a lot to be done.

• b. Motorcycle components

Due to the motorcycle has the characteristic of being easy to use, being applicable to wider road surface, cargo capacity and not taking up a lot of space, it has become the important tools for commuting and carrying goods. Different from the developed countries which regard motorcycles as leisure and competition, motorcycles in emerging countries are more widely used, especially in Asia. In countries with lower per capita income, and less developed public transportation systems, it becomes common that motorcycle is used as daily transport and production tool. In terms of the analysis of global motorcycle market development, the trend of increasing population and increasing urbanization will still drive the growth of global motorcycle market as a whole, however, due to the low oil price and the slow upturn of global economy, the motorcycle is still a temporary means of transport. The car is still the type of vehicle that consumers are eager to buy, so the growth momentum of global motorcycle will be relatively flat in the future. According to the industrial technology research institute, it estimated that the global motorcycle market will only grow to 80 million units in 2017.

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Figure 7: Analysis of global motorcycle market size trend

==> picture [303 x 149] intentionally omitted <==

Source: Industrial Technology Research Institute, IEK(2015/05).

According to Indonesian Motorcycle Industry Association, the data is shown in the following table

Table 3: Indonesia motorcycle sales and export statistics during 2014 and 2019

Unit: Volume

==> picture [375 x 112] intentionally omitted <==

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

Year Sales Exports
2014 7,867,195 41,746
2015 6,480,155 228,229
2016 5,931,285 284,065
2017 5,886,103 434,691
2018 6,383,108 627,421
2019 6,487,460 810,433
----- End of picture text -----

Source: Indonesian Motorcycle Industry Association and AISI website

Indonesia is the third largest motorcycle market in the world. Like other Southeast Asian countries, due to the high population density, the lack of road infrastructure and mass transportation tools, the traffic jam issue in major cities in Indonesia is quite serious. Therefore, motorcycles with convenient driving and low price have become the first choice for people. With the improvement of income level and the increase of personal consumption, the annual sales volume exceeded 8 million in 2011. In 2012, due to an increase of

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motorcycle loan down payments and the impact of stricter financial audit standards of financial institutions, the market was significantly tightened. In addition, the continuous devaluation of the rupiah exchange rate in 2014 led to an increase of production cost of imported parts and components quoted in US dollars, coupled with the reduction of inflation-based fuel subsidies. The consumer market has been in a weak state for many years. However, Indonesia has a population of about 262 million, and is the fourth largest country in the world. With the continuous increase of basic local wages, the number of middle-level consumers has increased, and the consumption power of its domestic market has also been driven. In 2018, the sales volume returned to more than 6 million vehicles.

C. Machine tool equipment

Due to the continued recession in the overall economic growth rate of China and the reduced demand in most emerging markets, it is estimated that the output value of machine tool in China will shrink further in 2016, with a total output value of US$ 20.2 billion, 8.5% lower than that in 2015.

Figure 8: Analysis of machine tool market trend in China during 2014 and 2018

==> picture [323 x 162] intentionally omitted <==

Source: Gardner Research(2016/04) sorted by Industrial Technology Research Institute, IEK (2016/05).

However, in the future, the following factors will be conducive to the transformation of machine tool manufacturers in China:

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• The continued development of large commercial aircraft and general aviation markets in the Chinese will bring new demand to the aerospace machine tool market. China will continue to develop high-end rail transport equipment, and actively enter the international market, will form another large-scale high-end machine tool market. Furthermore, Chinese government actively encourages manufacturers to carry out high-end machine tool localization. Driven by the conducive market demand, it will be able to encourage Chinese machine tool manufacturers to continue to carry out the research and development of high-end machine.

• The Chinese is actively promoting the application of intelligent manufacturing and forming a complementary and cooperative situation with German industry 4.0 in terms of market and technology. Although it is not obvious that the intelligent machine tool are needed in China market, facing the shortage of workers caused by the lowest fertility issue and the need to strengthen the country's overall competitiveness through the transformation of manufacturing industry, many machine tool manufacturers in China have invested in the research and development of intelligent tool and increased the proportion of manufacturing service revenue.

• Many enterprises in China have accumulated many old machine tool equipment for the last 30 years. The enterprise has gradually emerged the trend of machine tool refitting and remanufacturing for improving production efficiency, processing quality and reduce energy consumption, and it also brought new business opportunities for machine tool manufacturers in China.

4. Competitive niche

(1) Relationship with customers

The Group maintains long-term and good partnership with major customers and provides advice and demand for market intelligence and product development to jointly expand the market. Through the past many years of hard work, it has become an important supplier of international large factories. In the international automobile manufacturers’ supply chain system, the main supplier is not easy to be changed and replaced because

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international automobile manufacturers’ procurement and certification system is complicated and strict, plus a long time to prepare, and what they care is its high quality, stable supply and R&D efficiency. As the cost price is not the most important factor, what international automobile manufacturers care about the potential risk and cost is due to changing the suppliers too often, which causes intangible loss and time cost.

• (2) Continuous investment in research and development and technology upgrading

The Group has put lots of effort on the investment of research and development. Recently, so as to shorten the development process, show the determination and efforts in product development speed, technology improvement and cost control the personnel and equipment investment are growing.

• (3) Competitive price:

For the sake of gradually achieving the market demand of cost reduction, the Group should adopt the international procurement layout, in response to rising costs and carry out precise production management to drive the management improvement by technology improvement.

• (4) International Organization for Standardization:

It has obtained ISO9002, QS9000 and ISO/TS16949 certification of international quality, and the quality management system is in line with international standards. To meet the strict requirements on the quality of suppliers, major international automobile manufacturers have developed QS 9000, the certification system of quality. Only when the supplier meets the certification qualification will it be the qualified supplier. In accordance with the increasingly strict requirements and specifications of international plants, the Group has passed the ISO/TS16949 quality certification, and ensures that the Group has met the basic requirements of international plants Therefore, through this certification, it not only can improve the Group's product image, but also contribute to increase international competitiveness.

(5) Precision testing instrument

The Group’s detecting instruments is a testing equipment that has been equipped with international standards. The product yield is nearly 100%.

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• (6) Professional technical ability and stable quality:

Since the Group established, it has been continuously inventing and developing. It builds up its own professional and technical capabilities, has the ability to customize products to meet customers’ special needs and enhance customers' competitiveness. The products with stable quality are also recognized by customers.

1. Positive/negative factors of long-term development, and the countermeasures thereof:

Positive factors

• (1) China market that flourishes has brought the market opportunity

Although China has become the country that has the highest sale volume of cars around the world, its car ownership per thousand is still low, which is less than half the global average and less than a tenth of that in developed countries. With the continuous economic development in China, the automobile market in China is still in a stage of high demand. This huge business opportunity will attract manufacturers in automotive industry to invest in China, which will help automobile component manufacturers to compete in the China market.

• (2) Due to having been dedicating product technology and market for many years, it has cultivated stable cooperation mode with customers.

Since the Group has been working with Faurecia group, it has become one of its main qualified suppliers. Participating in research and development and design which is based on technical cooperation has raised the Group’s adding value. It can be seen that after years of mutual trust and cooperation and repeated certification, the quality and price of the Group's products have been recognized.

• (3) Component plants in Europe, America and Japanese are eager to establish regional production bases:

As the rise in the Asia-pacific area market, the international automobile manufacturers have been into Asia and south east Asia region. Considering the cost and nearby customer service, component plants in Europe, America and Japanese are eager to establish regional production bases. With the Group’s excellent manufacturing management and quality management ability, it can enter the supply chain of international automobile manufacturing market.

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Negative factors

• (1) International raw material prices fluctuate greatly, which makes raw material inventory management and cost control more challenging. The main raw material of the group is steel. With the continuous growth of turnover, the use of raw material has increased significantly. Moreover, the Group has not signed long-term purchase contracts with suppliers, and the huge fluctuation of raw material prices makes it difficult to grasp the cost and delivery date.

Countermeasures:

Through direct interaction with customers, the Group understands the customers’ needs, timely adjusts and arranges production resources, actively allocates and improves self-production and capacity, produces products in line with customer needs, and increases the competitiveness of products by providing high-quality products, reasonable prices and quality services. The Group also keeps abreast of the price fluctuations in the raw material market and purchases the most beneficial raw materials at the appropriate time. In addition, it also reduces production costs by means of economies of scale and improved manufacturing process to maintain profitability.

• (2) Wages are rising in China and Indonesia, which raise production costs

Countermeasures:

The Group not only improving production process to reduce the waste of raw materials in production and shorten labor hours, so that it can improve the production efficiency and reduce the cost simultaneously. The Group has also gradually increased the ratio of automated production and introduced automatic production machinery to replace part of the labor to stabilize product quality and reduce labor costs.

• (II) Major Use and Production Procedures of Main Products

• Major Use of Main Products

The Group mainly provides customers different type of precision processing of metal materials and professional manufacture of automotive and motorcycle components. Automobile components are mainly used in automobile door lock system, seat system, brake system, exhaust system, clutch and other related automobile safety systems. Motorcycle components are

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mainly used in motorcycle starter gear, brake system and clutch and other related motorcycle safety systems.

1. Production Procedures:

==> picture [428 x 101] intentionally omitted <==

(III) Supply Status of Main Materials

==> picture [455 x 103] intentionally omitted <==

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

Major Raw Materials Source of Supply Supply Situation
Carbon steel Suzhou Baogang, Shanghai Baomeng, Fine
China Steel Corporation and Brycote
Corporation (the agent of products for
China Steel Corporation)
Stainless Steel Jiangsu Daming, Wuxi Puxin Fine
Stainless Iron Jiangsu Daming Fine
----- End of picture text -----

• (IV) Major Suppliers and Customers in the last two years:

• A list of major suppliers accounting for 10% or more of the Company’s order volume in either of the two most recent fiscal years and 2020Q1, and the explanation of the reasons for increase or decrease:

Units: NT$ thousands

==> picture [481 x 161] intentionally omitted <==

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

2018 2019 2020Q1
Ratio to Ratio to Ratio to
annual Relation annual Relation annual Relation
Company Amount net with the Company Amount net with the Company Amount net with the
purchase issuer purchase issuer purchase issuer
(%) (%) (%)
Jiangsu Jiangsu Jiangsu
Daming 177,577 15.44 None Daming 119,699 11.75 None Daming 22,945 12.23 None
Jiangsu Jiangsu Wuxi
Aucksun 158,898 13.82 None Aucksun 12,035 1.18 None Puxin 20,851 11.12 None
− − − − PuxinWuxi 78,429 7.70 None − − − −
Others 813,474 70.74 None Others 899,222 79.37 None Others 143,749 76.65 None
Total 1,149,949 100.00 − Total 1,018,921 100.00 − Total 187,545 100.00 −
----- End of picture text -----

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The reason for increase or decrease: The change of purchase amount of the group for the above-mentioned suppliers is mainly due to the defect of steel quality purchased by Jiangsu Aucksun, so the steel materials will be supplied by Suzhou Baogang and Shanghai Baomeng from the end of 2018; Wuxi Puxin will transfer the order from Jiangsu Daming for providing more preferential price.

1. A list of any clients accounting for 10% or more of the Company's total sales amount in either of the two most recent fiscal years and 2020Q1, and the explanation of the reasons for increase or decrease:

Units: NT$ thousands

==> picture [481 x 152] intentionally omitted <==

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

2018 2019 2020Q1
Ratio to Ratio to Ratio to
annual Relation annual Relation annual Relation
Company Amount net with the Company Amount net with the Company Amount net with the
revenue issuer revenue issuer revenue issuer
(%) (%) (%)
Faurecia 808,224 36.88 None Faurecia 635,935 35.42 None Faurecia 124,433 42.28 None
Inteva 49,135 16.70
automotiv Customer Customer
e parts co. 77,808 3.55 None A 203,043 11.31 None A None
ltd
Others 1,305,695 59.57 None Others 956,587 53.27 None Others 120,724 41.02 None
Total 2,191,727 100.00 − Total 1,795,565 100.00 − Total 294,292 100.00 −
----- End of picture text -----

The reason for increase or decrease: The main reason that the change of sales amount for the abovementioned customer is based on the change of business demand of the customers. The change is reasonable.

(V) Production in the last two years

Unit: Units, Set, NT$ thousands

==> picture [457 x 108] intentionally omitted <==

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

2018 2019
Year / Production
Capacity Capacity
Major Products Quantity Amount Quantity Amount
(Note) (Note)
Press production line machine 30 18 122,689 30 18 146,771
Automobile components 135,000,000 134,585,707 1,337,802 135,000,000 101,140,103 1,159,829
Motorcycle components 15,000,000 13,035,928 94,515 15,000,000 13,122,913 74,029
Revenue from processing 16,000,000 9,644,353 14,045 16,000,000 9,921,501 14,437
Total 166,000,030 157,266,006 1,569,051 166,000,030 124,184,535 1,395,066
----- End of picture text -----

Note: Capacity refers to the quantity that the company can produce with existing manufacturing equipment

under normal operation after measuring the factors such as halt in production and holiday.

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(VI) Sales value for the last two years

Unit: Units, Set, NT$ thousands

==> picture [457 x 121] intentionally omitted <==

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

Year/ Sales & Sales value 2018 2019
Major Products Sales Sales value Sales Sales value
Press production line equipment
20 284,031 23 165,713
and maintenance service
Automobile components 136,219,630 1,790,014 99,655,992 1,533,391
Motorcycle components 12,949,149 102,229 12,992,808 80,328
Revenue from processing 9,644,353 15,361 9,921,501 15,532
Medical instruments 56 92 196 601
Total 158,813,208 2,191,727 122,570,520 1,795,565
----- End of picture text -----

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III. In the last two years and the number of employees up to the printing date of this annual report

==> picture [458 x 224] intentionally omitted <==

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

Unit: person
Up to the printing date of
Year 2018 2019
this annual report in 2020
40 40 40 40
322 355 292 284
Staffs
717 776 635 603
1,079 1,171 967 928
Average age 31.16 31.16 34.73
Average years of service 3.86 3.86 5.11
1 1 1 1
Academy 11 9 10 10
Ratio 144 162 134 133
923 999 822 784
----- End of picture text -----

IV. DISBURSEMENTS FOR ENVIRONMENTAL PROTECTION

• (I) According to laws and regulations if it is required to apply for a permit for installing anti-pollution facilities, or permit of pollution drainage, or to pay anti-pollution fees, or to organize and set up an exclusively responsible unit/office for environmental issues, the description of the status of such applications, payment or establishment shall be made:

• The Group’s China plant (Wuxi Jingxin) has obtained the drainage license

• certificate (certificate no.: 2019-317 ) in September 2019, which allows the local urban drainage facilities to drain water within the scope of application.

• (II) Setting forth the company's investment on the major anti-pollution facilities, the use purpose of such facilities and the possible effects to be produced: None

• (III) Describing the process undertaken by the company on environmental pollution improvement for the last two years and up to the printing date of this annual report. If there had been any pollution dispute, its handling process shall also be described: There are no pollution dispute happened for the last two years and up to the printing date of this annual report.

• (IV) Loss (including indemnity) caused by environmental pollution and the total indemnity amount involved for the last two years and up to the printing date of this annual report; account of future countermeasures (including improvement actions)

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and possible expenditures (including loss, disposition, and an estimate of indemnity incurred by a failure to implement the countermeasure; if a reasonable estimation cannot be made, the justification shall be provided):

• (V) Explaining the current condition of pollution and the impact of its improvement to the profits, competitive position and capital expenditures of the company, as well as the projected major environment-related capital expenses to be made for the coming two years: The Group has obtained legal and complete environment operation licenses in the last two years and up to the printing date of this annual report. Each environmental protection work has been carried out effectively and there is no major environmental pollution.

V. LABOR RELATIONS

• (I) List of employee benefits, in-service training, internal training, retirement system and implementation status, as well as employer-employee agreements, and protection measures for employees’ right:

• Employee benefits

The Group has always valued the employee benefits. Apart from establishing employee outings, marriage, funeral and other events, the Group also hold group insurance for employees and annual meetup, provide lunch and other events. In the meantime, the Group distributes compensation for employees on the basis of percentage regulated in the Article of Incorporation. Employee benefits and employees’ right are fully considered.

1. The status of in-service training and internal training

For the quality of human resources, in addition to the strict appointment conditions, during the appointment period, the personnel department will formulate an annual education and training plan, including internal training and external courses, according to the needs of the employees' position and expertise, so as to improve the employees' themselves learning ability.

1. Retirement system and execution The Group’s retirement plans are governed by the relevant local related

retirement system and regulations in each major operation location.

1. Employer-employee agreements, and protection measures for employees’ right: The Group has always valued the employees’ right and the voice of

employees. To maintain the good relations, the employees can communicate with personnel management department or proper senior managers through open communicate. So far, no major labor disputes have happened.

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• (II) List of losses due to labor disputes in the last two years and up to the printing date of this annual report, disclosure of the estimated amount, and countermeasures against current and possible future occurrences. If the amount cannot be reasonably estimated, the reason shall be provided:

The Group has always valued the labor-management relation. There have been no losses resulting from labor disputes in the last two years and up to the printing date of this annual report.

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VI. IMPORTANT CONTRACTS

Type of Contract	Counter Party	Contract Period	Highlights of Provisions	Covenant
Lease Agreement	Lessor: RBC Investor Lessee: Patec SG	2019.04 ~ 2021.04	Rent the office located at 03748P, Singapore(2,300 ft2)	None
Lease Agreement	Lessor: WuXi Foretell Technology Co., Ltd. Lessee: WuXi Jingxin and WuXi Patec	2009.08 ~ 2024.07	Rent the land, building and equipment located at stage 5, shuofang industrial park, new district,Wuxi city	None
Lease Agreement	Lessor: WuXi Foretell Technology Co., Ltd. Lessee: WuXi Jingxin and WuXi Patec	2017.01 ~ 2024.12	Rent the land, building and equipment located at stage 5, shuofang industrial park, new district,Wuxi city	None
Lease Agreement	Lessor: Realys Ingatlan Kft Lessee: Patec Kft	2018.04 ~ 2038.04	Rent land and building which the property registered land serial no. is 12995/4(5,225 m2)	None
Contract of loan	Lender: Patec SG Debtor: Patec Kft	December 24, 2019, one year	Due to the business, the Patec SG loaned money to subsidiaries Patec Kft SG$ 1.159 million, annual rate 3%.	None
Deed of Credit Facility	Lender: PT Bank CTBC Indonesia Borrower: PT Patec API PDF Guarantor: Patec Precision	2019.10.10~ 2020.10.10	1. PT Bank CTBC Indonesia provides the following credit to PT Patec, API and PDF (The total credit is US$ 2 million and around RP$18 billions): (1) Comprehensive credit line (Interchangeable): Sight L/C and Usance L/C US$ 2 millions (2) Short-term loans: RP$8 billions (3) Medium and long-term loans: RP$10 billions 2. The assets provided for guarantee by PT Patec is as follow: (1) Provided the building right of the land ownership certificate serial no. 578/Sukaresmi to PT Bank CTBC Indonesia and set it as the first mortgage to guarantee the creditor's rights of RP$20 billion. (2) Provided the building right of the land ownership certificate serial no. 41/Sukaresmi to PT	None

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==> picture [481 x 628] intentionally omitted <==

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

Type of Contract
Counter Party Highlights of Provisions Covenant
Contract Period
Bank CTBC Indonesia and
set it as the first mortgage to
guarantee the creditor's rights
of RP$20 billion.
(3) The standby L/C for US$1
million opened by Chinatrust
Commercia Bank Taiwan
branch.
1. Total credit amount: US$ 1.5
million
2. Collateral conditions: The
Company and Wee Liang Kiang
General Lender: CTBC Bank have signed the guarantee that
Agreement Borrower: Patec SG 2020.01.01~ the maximum amount is US$ 1.5
None
for Omnibus Guarantor: Patec 2020.12.31 million and bear jointly and
Credit Lines Precision severally responsibility for
guarantee. Meanwhile, the
Company has signed the
commercial paper for par value
US$ 1.5 million.
1. Total credit amount: US$ 1.5
Lender: Cathay United million
Bank 2. Collateral conditions: The
General
Borrower: Patec Company and Wee Liang Kiang
Agreement 2019.07.23~
Precision have signed the guarantee that None
for Omnibus 2020.07.23
Guarantor: Patec the maximum amount is US$ 1.5
Credit Lines
Precision & Wee million and bear jointly and
Liang Kiang severally responsibility for
guarantee.
1. Total credit amount: US$ 3
Lender: Taipei Fubon million
General Bank 2. Collateral conditions: Wee Liang
Agreement Borrower: Patec 2019.09.24~ Kiang has signed the guarantee
None
for Omnibus Precision 2020.09.21 that the maximum amount is
Credit Lines Guarantor: Wee Liang US$ 3 million and bear jointly
Kiang and severally responsibility for
guarantee.
1. Total credit amount: US$ 3
million
Lender: Far East Bank
General 2. Collateral conditions: Wee Liang
Borrower: Patec
Agreement 2019.08.01~ Kiang has signed the guarantee
Precision None
for Omnibus 2020.08.01 that the maximum amount is
Guarantor: Wee Liang
Credit Lines US$ 3 million and bear jointly
Kiang
and severally responsibility for
guarantee.
----- End of picture text -----

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==> picture [481 x 595] intentionally omitted <==

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

Type of Contract
Counter Party Highlights of Provisions Covenant
Contract Period
1. Total credit amount: US$ 2
General Lender: SinoPac Bank million.
Agreement Borrower: Patec SG 2019.12.10~ 2. Collateral conditions: The
None
for Omnibus Guarantor: Patec 2020.12.31 Company has signed the
Credit Lines Precision commercial paper that maximum
amount is US$ 2 million.
The Company has entered into
Guarantor: The
General Agreement for Omnibus
Company
Credit Lines with CTBC Bank for its
Guarantee Borrower (Also 2019.08.13 None
subsidiary Patec SG and provided
Guarantee): Patec SG
the guarantee of the maximum limit
Lender: CTBC Bank
of US$ 1.5 million.
The Company has entered into
Guarantor: The
General Agreement for Omnibus
Company
Credit Lines with Bank SinoPac for
Guarantee Borrower (Also 2019.08.13 None
its subsidiary Patec SG and provided
Guarantee): Patec SG
the guarantee of the maximum limit
Lender: Bank SinoPac
of US$ 2 million.
Guarantor: The The Company has entered into
Company General Agreement for Omnibus
Borrower (Also Credit Lines with Cathay United
Guarantee 2019.08.13 None
Guarantee): Patec SG Bank for its subsidiary Patec SG and
Lender: Cathay United provided the guarantee of the
Bank maximum limit of US$ 1.5 million.
Guarantor: The The Company has entered into
Company General Agreement for Omnibus
Borrower (Also Credit Lines with PT Bank CTBC
Guarantee 2019.11.12 None
Guarantee): PT Patec Indonesia for its subsidiary PT Patec
Lender: PT Bank and provided the guarantee of the
CTBC Indonesia maximum limit of US$ 500,000.
Guarantor: The The Company has entered into
Company General Agreement for Omnibus
Borrower (Also Credit Lines with PT Bank CTBC
Guarantee 2019.11.12 None
Guarantee): API Indonesia for its subsidiary API and
Lender: PT Bank provided the guarantee of the
CTBC Indonesia maximum limit of US$ 500,000.
Guarantor: The The Company has entered into
Company General Agreement for Omnibus
Borrower (Also Credit Lines with PT Bank CTBC
Guarantee 2019.11.12 None
Guarantee): PDF Indonesia for its subsidiary PDF and
Lender: PT Bank provided the guarantee of the
CTBC Indonesia maximum limit of US$ 500,000.
----- End of picture text -----

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Six. AN OVERVIEW OF THE COMPANY’S FINANCIAL STATUS

I. Condensed financial information for the Last 5 Years

• (I) Condensed Balance Sheets and Income Statements

• Condensed Balance Sheets – Based on IFRS

Units: NT$ thousands

==> picture [457 x 483] intentionally omitted <==

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

Year Financial Summary for The Last Five Years
As of
2015 2016 2017 2018 2019
Item March 31
Current assets 1,345,152 1,674,195 1,843,395 1,744,794 1,716,011 1,560,381
Property, Plant and
375,966 376,658 330,902 311,078 249,421 257,671
Equipment
Right-of-use assets - - - - 305,338 279,823
Intangible assets 5,285 5,148 4,937 5,033 4,961 4,851
Other assets 100,539 101,580 92,844 93,477 41,555 42,010
Total assets 1,826,942 2,157,581 2,272,078 2,154,382 2,317,286 2,144,736
Before
484,613 503,477 967,101 781,755 721,683 620,202
Current distribution
liabilities After
498,160 578,552 995,773 810,427 724,373 622,892
distribution
Non-current liabilities 25,614 252,671 44,227 22,374 266,796 233,534
Before
510,227 756,148 1,011,328 804,129 988,479 853,736
Total distribution
liabilities After
523,774 831,223 1,040,000 808,274 991,169 856,426
distribution
Equity Attributable to
1,109,034 1,164,633 1,090,086 1,161,597 1,143,092 1,109,949
Shareholders of the Parent
Capital stock 338,670 375,127 383,072 410,964 448,268 448,268
Capital surplus 356,161 377,185 392,635 372,244 372,244 372,244
Before
347,318 414,780 409,884 493,192 492,743 474,020
Retained distribution
Earnings After
299,904 337,245 352,540 451,743 474,364 455,641
distribution
Others equity 66,885 (2,459) (59,408) (81,706) (134,066) (148,486)
Treasury stock - - (36,097) (36,097) (36,097) (36,097)
Non-controlling interest 207,681 236,800 170,664 188,656 185,715 181,051
Before
Total equity 1,316,715 1,401,433 1,260,750 1,350,253 1,328,807 1,291,000
distribution
----- End of picture text -----

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Item	Year		Financial	Summaryfor The Last Five Years	Summaryfor The Last Five Years	Summaryfor The Last Five Years
		2015	2016	2017	2018	2019	As of March 31
	After distribution	1,303,168	1,326,357	1,232.078	1,346,108	1,326,117	1,272,621

Source: The annual financial report that has been audited or reviewed by CPAs is based on IFRS.

2. Condensed Statement of Comprehensive Income– Based on IFRS

Units: NT$ thousands

==> picture [457 x 429] intentionally omitted <==

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

Year Financial Summary for The Last Five Years
As of
2015 2016 2017 2018 2019
Item March 31
Operating Revenue 1,539,487 2,009,440 2,073,289 2,191,727 1,795,565 294,292
Operating margin 392,121 584,272 612,108 608,758 437,621 53,999
Operating profit 108,834 256,750 231,879 219,384 113,020 (13,511)
Non-operating income and
16,740 (21,824) (2,133) 4,201 (1,148) (7,395)
expenses
Income before tax 125,574 234,926 229,746 223,585 111,872 (20,906)
Net profit from continuing
125,574 234,926 229,746 223,585 111,872 (20,906)
operations
Net loss from discontinued − − − − − −
operations
Net profit (loss) for the year 78,067 162,835 159,915 164,086 52,296 (21,941)
Other comprehensive
(25,490) (72,493) (60,139) (25,312) (57,404) (15,866)
income (income after tax)
Total comprehensive income
52,577 90,342 99,776 138,774 (5,108) (37,807)
for the year
Net income attributable to
60,695 114,931 130,247 144,341 38,797 (18,723)
Shareholders of the parent
Net income attributable to
17,372 47,904 29,668 19,745 13,499 (3,218)
non-controlling interests
Total comprehensive income
attributable to owners of the 34,159 45,532 74,179 121,490 (14,360) (33,143)
parent
Total comprehensive income
attributable to 18,418 44,810 25,597 17,284 9,252 (4,664)
non-controlling interest
Earnings per share 1.71 3.08 3.45 3.57 0.88 (0.42)
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Source: The annual financial report that has been audited or reviewed by CPAs is based on IFRS.

~96~

(II) The name of the CPAs and their auditor’s opinions for the most recent five years:

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Year CPA Name of CPA Audit Opinion Remarks
Pey-Ling Du
2015 PwC Taiwan Unqualified opinion −
Eileen Liang
Pey-Ling Du
2016 PwC Taiwan Unqualified opinion −
Eileen Liang
Pey-Ling Du
2017 PwC Taiwan Unqualified opinion −
Eileen Liang
Chin-Chang Chen
2018 PwC Taiwan Unqualified opinion −
Yi-Fan Lin
Chin-Chang Chen
2019 PwC Taiwan Unqualified opinion −
Yi-Fan Lin
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II. FINANCIAL ANALYSIS FOR THE PAST 5 FISCAL YEARS

(I) Financial Ratio Analysis – Based on IFRS

Units: NT$ thousand

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Year FINANCIAL ANALYSIS FOR THE PAST 5 FISCAL YEARS
As of
2015 2016 2017 2018 2019
Item March 31
Debt Ratio 27.93 35.05 44.51 37.33 42.66 39.81
Financial Ratio of long-term capital
structure (%) to property, plant and 352.84 435.67 382.88 435.80 624.74 579.59
equipment
Current ratio 277.57 332.51 190.61 223.19 237.78 251.59
Solvency (%) Quick ratio 201.43 247.10 135.91 145.67 168.11 173.45
Interest coverage ratio 9.27 23.07 21.99 18.66 9.88 (7.15)
Accounts receivable
2.55 3.30 3.08 3.12 2.84 2.63
turnover (times)
Average collection days 143.14 110.61 118.51 116.99 128.52 138.78
Inventory Turnover
3.47 4.00 3.24 3.05 2.67 2.09
(Times)
Accounts payable
Operating 4.72 6.67 5.45 6.26 6.81 7.00
turnover (times)
performance
Average days in sales 105.19 91.25 112.65 119.67 136.70 174.64
Property, plant and
equipment turnover 3.96 5.34 5.86 6.83 6.41 4.64
(times)
Total assets turnover
0.82 1.01 0.94 0.99 0.80 0.53
(times)
Return on Total Assets
4.84 8.56 7.58 7.83 2.74 (3.60)
(%)
Return on stockholders'
6.26 11.98 12.01 12.57 3.90 (6.70)
Profitability equity (%)
Pre-tax income to paid-in
37.08 62.63 59.97 54.41 24.96 (18.65)
capital (%)
Net Margin (%) 5.07 8.10 7.71 7.49 2.91 (7.46)
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	Year Item	FINANCIAL ANALYSIS FOR THE PAST 5 FISCAL YEARS
		2015 2016 2017 2018 2019 As of March 31
	Earningsper share(NT$)	1.71 3.08 3.45 3.57 0.88 (0.42)
CASH FLOW	Cash flow ratio(%)	34.12 23.21 12.39 4.33 55.61 39.71
	Cash flow adequacy ratio (%)	69.03 75.49 193.54 64.22 188.31 134.36
	Cash reinvestment ratio (%)	7.07 2.04 6.96 0.28 22.19 14.07
Leverage	Operatingleverage	5.65 3.68 3.60 4.48 6.65 (8.33)
	Financial leverage	1.16 1.04 1.05 1.06 1.13 0.84
	Analysis of financial ratio differences for the last two years: (Not required if the difference does not exceed 20%) (1) Ratio of long-term capital to property, plant and equipment：Recognition of the amount of lease liabilities in accordance with IFRS16 in 2019 resulted in an increase in long-term funds and an increase in the ratio. (2) Quick ratio：The main reason is that due to the inventory cost loss in 2019, the net inventory is reduced, the quick assets are increased, and the quick ratio is increased (3) Interest coverage ratio：Operating income decreased in 2019, but the change in operating expenses in the biennium was small, resulting in a reduction in the interest coverage ratio in 2019. (4) Profitability：The main reason is the decrease of operating income and the balance of expenses, which reduces the profit before income tax and reduces the profitability. (5) CASH FLOW：Mainly due to the active recovery of accounts receivable in the current period.

Source: The annual financial report that has been audited or reviewed by CPAs is based on IFRS.

Note 1: No information on the net cash flow of operating activities for the latest five years is available for calculation.

Note 2: The computation formula of financial analysis

1. Financial structure

2. (1) Debt Ratio= Total liabilities / Total assets

3. (2) Ratio of long-term capital to property, plant and equipment= (Total equity + Non-current liabilities) / Net property, plant and equipment

4. Solvency

5. (1) Current ratio= Current assets / Current liabilities

6. (2) Quick ratio= (Current assets – Inventory – Prepaid expenses) / Current liabilities

7. (3) Interest coverage ratio= Income before income tax and interest expenses / Current interest expenses

8. Operating performance

9. (1) Accounts receivable (including accounts receivable and notes receivable arising from business operations) turnover= Net sales / Average accounts receivable (including accounts receivable and notes receivable arising from business operations)

10. (2) Average collection days= 365/ Accounts receivable turnover

11. (3) Inventory turnover= Cost of sales / Average inventory

12. (4) Accounts payable (including accounts payable and notes payable arising from business operations) turnover= Cost of sales / Average accounts payable (including accounts payable and notes payable arising from business operations)

13. (5) Average days in sales= 365/ Inventory turnover

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• (6) Property, plant and equipment turnover= Net Sales / Average net property, plant and equipment

• (7) Total assets turnover= Net Sales / Average total assets

• Profitability

• (1) Return on total asset= (Net income (loss) + Interest expenses x (1 -Tax rate) ) / Average total assets

• (2) Return on stockholders' equity= Net income (loss) / Average total equity

• (3) Profit ratio= Net income (loss)/ Net sales

• (4) Earnings per share= (Net income (loss) attributable to ownerss of the parent – Preferred Shares) /

  • Weighted average number of shares outstanding

• Cash flow

• (1) Cash flow ratio= Net cash from operating activities / Current liability

• (2) Cash flow adequacy ratio = Five-year sum of net cash from operating activities / Five-year sum of capital expenditures, Increase in inventory and Cash dividend)

• (3) Cash reinvestment ratio= (Net cash from operating activities – Cash dividends) / (Gross property, plant and equipment + Long-term investments + Other asset + Working capital)

• Leverage:

• (1) Operating leverage= (Net sales - Variable cost) / Operating income

• (2) Financial leverage= Operating income / (Operating Income – Interest expenses)

~99~

III. SUPERVISORS’ OR AUDIT COMMITTEE’S REPORT FOR THE MOST RECENT YEAR’S FINANCIAL STATEMENT

Patec Precision Industry Co., Ltd.

Audit Committee’s Audit Report

The Board of Directors has prepared the Company’s 2019 Business Report, Financial Statements, and proposal for allocation of earnings. The CPA firm of PricewaterhouseCoopers was retained to audit PATEC’s Financial Statements and has issued an audit report relating to the Financial Statements. The Business Report, Financial Statements, and earnings allocation proposal have been reviewed and determined to be correct and accurate by Audit Committee members of the Company. According to relevant requirements of the Securities and Exchange Act and Company Law, we hereby submit this report.

Patec Precision Industry Co., Ltd.

Chairman of the Audit Committee

Yen Chun-Teck

27th March, 2020

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IV. FINANCIAL STATEMENT FOR THE MOST RECENT FISCAL YEAR REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of Patec Precision Industry Co., Ltd.

Opinion

We have audited the accompanying consolidated balance sheets of Patec Precision Industry Co., Ltd. and its subsidiaries (the “Group”) as at December 31, 2019 and 2018, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audit of the consolidated financial statements as of and for the year ended December 31, 2019 in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants”, “Rule No. Financial-Supervisory-Securities-Auditing-1090360805 issued by the Financial Supervisory Commission on February 25, 2020” and generally accepted auditing standards in the Republic of China (ROC GAAS); and in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and ROC GAAS for our audit of the consolidated financial statements as of and for the year ended December 31, 2018. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the 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 for our opinion.

~101~

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

The most significant key audit matters in our audit of the consolidated financial statements of the current period are as follows:

Recognition of overseas warehouse operating revenue

Description

Refer to Note 4(28) for accounting policy on revenue recognition.

The Group’s Mainland China subsidiary, Wuxi Jingxin Precision Machining Co. Ltd. (referred herein as “Wuxi Jingxin”), stored inventories in warehouses which were under the custody of foreign third parties and checked and accepted by custodians in order to meet the requirements of overseas sales customers. The custodians regularly send inventory reports to Wuxi Jingxin to verify the quantities, and Wuxi Jingxin recognises operating revenue based on actual used inventories by customers which are shown in the inventory reports provided by custodians.

As a result of the multi-location of the Company’s warehouses in Europe, which involved manual verification, we considered the recognition of overseas warehouse operating revenue as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

1. We obtained an understanding and evaluated Wuxi Jingxin’s procedures on overseas warehouse operating revenue, and selected samples to check the accuracy of operating revenue recognition.

2. We obtained the inventory reports as at balance sheet date, and checked whether the timing of revenue recognition was reasonable.

3. We performed confirmation procedures for significant warehouse locations.

~102~

Existence of press machine revenue

Description

Refer to Note 4(28) for accounting policy on revenue recognition.

The Group’s Singapore subsidiary, PATEC PTE. LTD (referred herein as “PATEC”), is mainly engaged in the sale of press machines. Due to the nature of its business, the related transaction terms and revenue recognition are assessed based on individual contracts, and PATEC’s current revenue from sales of press machines to its counterparties had increased/decreased compared to previous year. As a result, we considered the existence of press machine revenue of PATEC as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

1. We assessed the internal control surrounding the sales of press machines during the current year.

2. We checked the related industry information in relation to current counterparties.

3. We checked the contracts which were entered with customers, and verified the acceptance reports which had been approved by customers and the related collection and transaction records.

Responsibilities of management and those charged with governance for the

consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

~103~

In preparing the consolidated financial statements, management is responsible for assessing the Group’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 Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the audit committee, are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated 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 ROC GAAS 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 consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated 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.

2. 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 Group’s internal control.

~104~

1. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

2. 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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated 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 Group to cease to continue as a going concern.

3. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

4. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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.

~105~

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s 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.

Chen, Chin-Chang For and on behalf of PricewaterhouseCoopers, Taiwan March 27, 2020

Lin, Yi-Fan

------------------------------------------------------------------------------------------------------------------------------------------------The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

~106~

PATEC PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

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December 31, 2019 December 31, 2018
Assets Notes AMOUNT % AMOUNT %
Current assets
1100 Cash and cash equivalents 6(1) $ 472,198 20 $ 320,589 15
1136 Financial assets at amortised 6(1)(8)
cost-current 218,665 9 51,994 3
1170 Accounts receivable, net 6(2) 520,221 23 738,775 34
1200 Other receivables 2,145 - 27,455 1
130X Inventories 6(3) 436,619 19 542,055 25
1410 Prepayments 66,163 3 63,926 3
11XX Total current assets 1,716,011 74 1,744,794 81
Non-current assets
1600 Property, plant and equipment, net 6(4) and 8 249,421 11 311,078 15
1755 Right-of-use assets 6(5) and 8 305,338 13 - -
1780 Intangible assets 4,961 - 5,033 -
1840 Deferred tax assets 6(20) 24,304 1 22,696 1
1990 Other non-current assets 8 17,251 1 70,781 3
15XX Total non-current assets 601,275 26 409,588 19
1XXX Total assets $ 2,317,286 100 $ 2,154,382 100
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(Continued)

~107~

PATEC PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

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December 31, 2019 December 31, 2018
Liabilities and Equity Notes AMOUNT % AMOUNT %
Current liabilities
2100 Short-term borrowings 6(6) $ 405,857 18 $ 211,996 10
2130 Contract liabilities-current 6(15) 8,688 - 59,188 3
2170 Accounts payable 167,432 7 231,259 11
2200 Other payables 6(8) 78,415 4 74,601 3
2230 Current income tax liabilities 5,938 - 1,064 -
2280 Lease liabilities-current 23,754 1 - -
2320 Long-term liabilities, current portion 6(7) - - 168,106 8
2355 Current lease obligations payable 6(9) - - 2,835 -
2399 Other current liabilities 31,599 1 32,706 1
21XX Total current liabilities 721,683 31 781,755 36
Non-current liabilities
2570 Deferred tax liabilities 6(20) 24,612 1 11,216 1
2580 Lease liabilities-non-current 229,436 10 - -
2610 Long-term notes and accounts payable 6(9) - - 5,418 -
2670 Other non-current liabilities 6(10) 12,748 1 5,740 -
25XX Total non-current liabilities 266,796 12 22,374 1
2XXX Total liabilities 988,479 43 804,129 37
Equity
Equity attributable to owners of the
parent
Share capital
3110 Ordinary share 6(12) 448,268 19 410,964 19
Capital surplus 6(7)(13)
3200 Capital surplus 372,244 16 372,244 18
Retained earnings 6(14)
3320 Special reserve 81,706 4 59,408 3
3350 Unappropriated retained earnings 411,037 18 436,784 20
Other equity interest
3400 Other equity interest ( 134,066) ( 6) ( 81,706) ( 4)
3500 Treasury stocks 6(12) ( 36,097) ( 2) ( 36,097) ( 2)
31XX Total equity attributable to
owners of the parent 1,143,092 49 1,161,597 54
36XX Non-controlling interest 185,715 8 188,656 9
3XXX Total equity 1,328,807 57 1,350,253 63
Significant contingent liabilities and 9
unrecognised contract commitments
3X2X Total liabilities and equity $ 2,317,286 100 $ 2,154,382 100
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The accompanying notes are an integral part of these consolidated financial statements.

~108~

PATEC PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED 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)

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Year ended December 31
2019 2018
Items Notes AMOUNT % AMOUNT %
4000 Operating revenue 6(15) $ 1,795,565 100 $ 2,191,727 100
5000 Operating costs 6(3)(19) ( 1,357,944) ( 76) ( 1,582,969) ( 72)
5900 Gross profit 437,621 24 608,758 28
Operating expenses 6(19)(22)
6100 Selling expenses ( 74,501) ( 4) ( 88,479) ( 4)
6200 Administrative expenses ( 195,155) ( 11) ( 221,090) ( 10)
6300 Research and development expenses ( 52,964) ( 3) ( 79,453) ( 4)
6450 Impairment loss determined in
accordance with IFRS 9 ( 1,981) - ( 352) -
6000 Total operating expenses ( 324,601) ( 18) ( 389,374) ( 18)
6900 Operating profit 113,020 6 219,384 10
Non-operating income and expenses
7010 Other income 6(16) 18,718 1 11,816 1
7020 Other gains and losses 6(17) ( 7,261) - 5,046 -
7050 Finance costs 6(18) ( 12,605) ( 1) ( 12,661) ( 1)
7000 Total non-operating income and
expenses ( 1,148) - 4,201 -
7900 Profit before income tax 111,872 6 223,585 10
7950 Income tax expense 6(20) ( 59,576) ( 3) ( 59,499) ( 3)
8200 Profit for the year $ 52,296 3 $ 164,086 7
Other comprehensive income (loss)
Components of other comprehensive
income (loss) that will not be
reclassified to profit or loss
8311 Loss on remeasurements of defined
- -
benefit plans ($ 1,519) ($ 1,053)
8349 Income tax related to components of 6(20)
other comprehensive income that
will not be reclassified to profit or
loss 380 - 263 -
Components of other comprehensive
income (loss) that will be reclassified
to profit or loss
8361 Exchange differences on translation
of foreign financial statements ( 56,265) ( 3) ( 24,522) ( 1)
8300 Other comprehensive loss for the
year ($ 57,404) ( 3) ($ 25,312) ( 1)
8500 Total comprehensive (loss) income ($ 5,108) - $ 138,774 6
Profit attributable to:
8610 Owners of parent $ 38,797 2 $ 144,341 6
8620 Non-controlling interest $ 13,499 1 $ 19,745 1
Comprehensive (loss) income
attributable to:
8710 Owners of parent ($ 14,360) ( 1) $ 121,490 5
8720 Non-controlling interest $ 9,252 1 $ 17,284 1
Earnings per share (in dollars) 6(21)
9750 Basic earnings per share $ 0.88 $ 3.27
9850 Diluted earnings per share $ 0.88 $ 3.03
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The accompanying notes are an integral part of these consolidated financial statements.

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PATEC PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (Expressed in thousands of New Taiwan dollars)

2018 Balance at January 1, 2018 Profit for the year Other comprehensive loss for the year Total comprehensive income (loss) Appropriations of 2017 earnings: Special reserve Cash dividends Stock dividends Share-based payments Purchase of treasury shares Retirement of treasury shares Changes in non-controlling interest Changes in ownership interests in subsidiaries Redemption of convertible bonds Balance at December 31, 2018 2019 Balance at January 1, 2019 Profit for the year Other comprehensive loss for the year Total comprehensive income (loss) Appropriations of 2018 earnings: Special reserve Cash dividends Stock dividends Changes in non-controlling interest-cash dividends Balance at December 31, 2019	Notes 6(14) 6(11) 6(12) 6(12) 6(14)				Equity attributable	Equity attributable	to owners of the	parent			Total $ 1,090,086 144,341 ( 22,851 ) 121,490 - ( 28,672 ) - 8,875 ( 26,908 ) - - 72 ( 3,346 ) $ 1,161,597 $ 1,161,597 38,797 ( 53,157 ) ( 14,360 ) - ( 4,145 ) - - $ 1,143,092	Non-controllin g interest $ 170,664 19,745 ( 2,461 ) 17,284 - - - - - - 780 ( 72 ) - $ 188,656 $ 188,656 13,499 ( 4,247 ) 9,252 - - - ( 12,193 ) $ 185,715	Total $ 1,260,750 164,086 ( 25,312 ) 138,774 - ( 28,672 ) - 8,875 ( 26,908 ) - 780 - ( 3,346 ) $ 1,350,253 $ 1,350,253 52,296 ( 57,404 ) ( 5,108 ) - ( 4,145 ) - ( 12,193 ) $ 1,328,807
		Ordinary share $ 383,072 - - - - - 28,672 4,220 - ( 5,000 ) - - - $ 410,964 $ 410,964 - - - - - 37,304 - $ 448,268		Capital R	eserves	Stock warrants $ 11,683 - - - - - - - - - - - ( 3,346 ) $ 8,337 $ 8,337 - - - - - - - $ 8,337	Retaine	d Earnings Unappropriated retained earnings $ 409,884 144,341 ( 553 ) 143,788 ( 59,408 ) ( 28,672 ) ( 28,672 ) - - - - ( 136 ) - $ 436,784 $ 436,784 38,797 ( 797 ) 38,000 ( 22,298 ) ( 4,145 ) ( 37,304 ) - $ 411,037	Exchange difference on translation of financial statements ($ 59,408 ) - ( 22,298 ) ( 22,298 ) - - - - - - - - - ($ 81,706 ) ($ 81,706 ) - ( 52,360 ) ( 52,360 ) - - - - ($ 134,066 )	Treasury shares ($ 36,097 ) - - - - - - - ( 26,908 ) 26,908 - - - ($ 36,097 ) ($ 36,097 ) - - - - - - - ($ 36,097 )
			Additional paid-in capital $ 372,255 - - - - - - 13,352 - ( 21,908 ) - - - $ 363,699 $ 363,699 - - - - - - - $ 363,699	Changes in ownership interests in subsidiaries $ - - - - - - - - - - - 208 - $ 208 $ 208 - - - - - - - $ 208	Employee stock warrants $ 8,697 - - - - - - ( 8,697 ) - - - - - $ - $ - - - - - - - - $ -		Special reserve $ - - - - 59,408 - - - - - - - - $ 59,408 $ 59,408 - - - 22,298 - - - $ 81,706

The accompanying notes are an integral part of these consolidated financial statements.

~110~

PATEC PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) Expected credit loss / Provision for bad debts Gain on bond redemption Gain on disposal of property, plant and equipment Interest income Depreciation Depreciation of right-of-use assets Interest expense Net gain on financial assets or liabilities at fair value through profit or loss Changes in operating assets and liabilities Changes in operating assets Accounts receivable Other receivables Inventories Prepayments Changes in operating liabilities Contract liabilities Accounts payable Other payables Other current liabilities Other non-current liabilities Cash inflow generated from operations Interest received Interest paid Income tax paid Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES (Increase) decrease in financial assets at amortised cost-current Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of ownership interests in subsidiaries Decrease (increase) in other non-current assets Net cash flows (used in) from investing activities

Notes 2019 2018 $ 111,872 $ 223,585 12(2) 1,981 352 6(17) - ( 1,817 ) 6(17) ( 592 ) ( 1,226 ) 6(16) ( 10,050 ) ( 7,572 ) 6(4) 57,432 59,945 6(5) 30,515 - 6(18) 12,605 12,661 6(17) - ( 964 ) 216,490 ( 75,755 ) 25,310 ( 12,700 ) 105,436 ( 60,146 ) ( 2,237 ) ( 16,841 ) ( 50,500 ) 54,697 ( 63,827 ) ( 43,034 ) 3,790 ( 27,716 ) ( 1,107 ) ( 846 ) 5,489 805 442,607 103,428 10,050 7,572 ( 8,811 ) ( 6,445 ) ( 42,534) ( 70,700) 401,312 33,855 ( 166,671 ) 134,570 ( 27,558 ) ( 40,920 ) 5,710 2,131 - ( 86,505 ) 3,908 ( 5,159) ( 184,611) 4,117

(Continued)

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PATEC PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Decrease in short-term borrowings Repayment of long-term borrowings Redemption of convertible bonds Repayment of convertible bonds Payment of lease liability Payment of lease payable Cash dividends paid Exercise of employee share options Payments to acquire treasury shares Cash dividends paid to non-controllong interest Changes in non-controlling interests Net cash flows used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Notes 2019 2018 6(24) $ 418,384 $ 31,685 6(24) ( 219,738 ) - 6(24) - ( 56,939 ) 6(24) - ( 69,000 ) 6(24) ( 171,900 ) - 6(24) ( 48,982 ) - 6(24) - ( 4,764 ) 6(14) ( 4,121 ) ( 28,672 ) - 8,875 6(12) - ( 26,908 ) ( 12,193 ) - - 780 ( 38,550 ) ( 144,943 ) ( 26,542 ) ( 22,150 ) 151,609 ( 129,121 ) 6(1) 320,589 449,710 6(1) $ 472,198 $ 320,589

The accompanying notes are an integral part of these consolidated financial statements.

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PATEC PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANIZATION

Patec Precision Industry Co., Ltd. (the “Company”) was incorporated in the Cayman Islands on June 29, 2011. Starting from June 3, 2015, the Company’s stocks were officially listed on the Taiwan Stock Exchange. The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in investment holdings, production and sale of press machines and parts for automobiles and motorcycles.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorised for issuance by the Board of Directors on March 27, 2020.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

• (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments endorsed by FSC effective from 2019 are as follows:

follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. IFRS 16, ‘Leases’

• i. IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a 'right-of-use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

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• ii. The Group has elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Group increased ‘right-of-use asset’ by $373,069 and ‘lease liability’ by $309,099, and decreased long-term prepaid rents (shown as other non-current assets) by $49,622, property, plant and equipment by $22,601, current lease obligations payable by $2,835 and non-current lease obligations payable (shown as long-term notes and accounts payable) by $5,418 with respect to the lease contracts of lessees on January 1, 2019.

• iii. The Group has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:

• i. Reassessment as to whether a contract is, or contains, a lease is not required, instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17 and IFRIC 4.

• ii. The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.

• iii.The accounting for operating leases whose period will end before December 31, 2019 as short-term leases and accordingly, rent expense of $7,419 was recognised in 2019.

• iv. The exclusion of initial direct costs for the measurement of ‘right-of-use asset’.

• v. The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

• iv. The Group calculated the present value of lease liabilities by using the weighted average incremental borrowing interest rate ranging from 0.13% to 4.4%.

• v. The Group recognised lease liabilities which had previously been classified as ‘operating leases’ under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate and lease liabilities recognised as of January 1, 2019 is as follows:

Operating lease commitments disclosed by applying IAS 17 as at December 31, 2018 Add: Lease payable recognised under finance lease by applying IAS 17 as at December 31, 2018 Total lease contracts amount recognised as lease liabilities by applying IFRS 16 on January 1, 2019 Incremental borrowing interest rate at the date of initial application Lease liabilities recognised as at January 1, 2019 by applying IFRS 16

306,669 $ 8,253 314,922 $ 0.13%~4.4% 309,099 $

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(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 9, IAS 39 and IFRS7, ‘Interest rate benchmark	January 1, 2020 January 1, 2020 January 1, 2020

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

as endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
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-	To be determined by International Accounting Standards Board January 1, 2021 January 1, 2022

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(4) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(5) Basis of preparation

• A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:

• (a) Financial assets and liabilities (including derivative instruments) at fair value through profit or loss.

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• (b) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.

• B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(6) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

• (a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

• (b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

• (c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

• (d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.

• B. Subsidiaries included in the consolidated financial statements:

Name of investor The Company PATEC PATEC	Name of subsidiary PATEC PTE. LTD. (PATEC) Press Automation Technology Pte Ltd. (PAT) Wuxi Jingxin Precision Machining Co. Ltd. (Wuxi Jingxin)	Main business activities Sale of press machines Production and sale of press machines Production and sale of products for automobiles	December December 31,2019 31,2018 100 100 100 100 93 93 Ownership (%)	Description
			December 31,2019 100 100 93

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Name of investor PATEC PATEC PATEC PAT Wuxi Jingxin Wuxi Jingxin PT. Patec PT. Patec	Name of subsidiary Patec Precision Kft (KFT) Patec Medical Supplies Pte. Ltd. (Patec Medical) Bionicxp Pte. Ltd. (BIONICXP) PT. PATEC PRESISI ENGINEERING (PT. Patec) Wuxi Baida Precision Molding Co., Ltd. (Wuxi Baida) Yancheng Jingxin Precision Machining Co. Ltd. (Yancheng Jingxin) PT. PDF Presisi Engineering (PT. PDF) PT. API Precision (PT. API)	Main business activities Production and sale of products for automobiles Medical device and equipment Application sales of manipulators Production and sale of products for automobiles and motorcycles Production and sale of press machines Production and sale of products for automobiles Production and sale of products for automobiles Production and sale of products for automobiles	December December 31,2019 31,2018 Ownership (%) 100 100 58 58 100 - 70 70 100 100 100 100 89 89 89 89	Description Note
			December 31,2019 100 58 100 70 100 100 89 89

Note: To meet the Group’s operating policies, the Company invested in BIONICXP through the subsidiary, PATEC, in December 2018. On April 1, 2019, PATEC invested SGD 0.3 thousand and acquired a 100% equity interest of BIONICXP. Additionally, on May 30, 2019, BIONICXP increased its capital in cash amounting to SGD 100 thousand which was fully subscribed by PATEC.

C. Subsidiaries not included in the consolidated financial statements: None.

D. Adjustments for subsidiaries with different balance sheet dates: None.

E. Significant restrictions: None.

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F. Subsidiaries that have non-controlling interests that are material to the Group:

As of December 31, 2019 and 2018, the non-controlling interest amounted to $185,715 and $188,656, respectively. The information on non-controlling interest and respective subsidiaries is as follows:

as follows:
Name of Principal place subsidiary ofbusiness Wuxi Jingxin Group China PT. PATEC Group Indonesia		Non-controllinginterest
	December	Ownership (%) 7 30 31,2019	December 31,2018
	Amount 75,980 $ 99,608		Ownership Amount (%) 77,141 $ 7 95,793 30

Summarized financial information of the subsidiaries:

Balance sheets

Balance sheets
			Wuxi Jingxin Group
			December 31,
			2019		2018
Current assets		$	1,144,627	$	1,220,845
Non-current assets			153,944		129,819
Current liabilities	(		143,429)	(	209,916)
Non-current liabilities	(		69,706)	(	38,727)
Total net assets		$	1,085,436	$	1,102,021

				PT. PATEC Group	PT. PATEC Group
				December 31,
			2019			2018
Current assets		$		226,961	$		219,371
Non-current assets				185,510			201,053
Current liabilities	(			78,690)	(		92,616)
Non-current liabilities	(			17,970)	(		8,500)
Total net assets		$		315,811	$		319,308

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Statements of comprehensive income

Revenue Profit before income tax Income tax expense Profit for the year Total comprehensive income for the year Comprehensive income attributable to non-controlling interest Dividends paid to non-controlling interest

Wuxi Jingxin Group	Wuxi Jingxin Group
Years ended December 31,
2019 1,117,898 $ 233,469 33,019) ( 200,450 $ 200,450 $ 14,032 $ 12,193 $	2018
	1,545,642 $
	276,854 43,673) (
	233,181 $
	233,181 $
	16,323 $
	- $

PT. PATEC Group

	PT. PATEC Group
Revenue Profit before income tax Income tax expense ( Profit for the year Other comprehensive loss ( Total comprehensive income for the year Comprehensive income attributable to non-controlling interest	2019 2018 453,585 $ 422,755 $ 7,586 16,810 3,423) 2,805) ( 4,163 14,005 1,138) 790) ( 3,025 $ 13,215 $ 839 $ 3,964 $ Years ended December 31,
	2019 453,585 $ 7,586 3,423) ( 4,163 1,138) ( 3,025 $ 839 $

Statements of cash flows

Statements of cash flows
			Wuxi Jingxin Group
			Years ended	December 31,
			2019	2018
Net cash generated from operating activities		$	373,687	$	59,097
Net cash used in investing activities	(		166,890)	(	1,634)
Net cash used in financing activities	(		186,992)	(	53,667)
Effect of exchange rates on cash and cash
equivalents	(		8,300)	(	5,747)
Increase (decrease) in cash and cash
equivalents			11,505	(	1,951)
Cash and cash equivalents, beginning of year			222,687		224,638
Cash and cash equivalents, end of year		$	234,192	$	222,687

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			PT. PATEC Group	PT. PATEC Group	PT. PATEC Group
			Years ended December			31,
			2019			2018
Net cash generated from (used in) operating		$	60,985	($		8,333)
activities
Net cash used in investing activities	(		13,305)	(		1,668)
Net cash (used in) generated from financing activities	(		27,819)			4,912
Effect of exchange rates on cash and cash
equivalents	(		1,009)			640
Increase (decrease) in cash and cash equivalents			18,852	(		4,449)
Cash and cash equivalents, beginning of year			19,034			23,483
Cash and cash equivalents, end of year		$	37,886		$	19,034

(7) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan dollars, which is the Company’s functional and the Group’s presentation currency.

• A. Foreign currency transactions and balances

• (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.

• (b) Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.

• (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

• (d) All foreign exchange gains and losses are presented in the statement of comprehensive income within “other gains and losses”.

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• B. Translation of foreign operations

The operating results and financial position of all the group entities, associates and joint agreements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• (a) Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

• (b) Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

• (c) All resulting exchange differences are recognised in other comprehensive income.

(8) Classification of current and non-current items

• A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

• (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

• (b) Assets held mainly for trading purposes;

• (c) Assets that are expected to be realised within twelve months from the balance sheet date;

• (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

• B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

• (a) Liabilities that are expected to be paid off within the normal operating cycle;

• (b) Liabilities arising mainly from trading activities;

• (c) Liabilities that are to be paid off within twelve months from the balance sheet date;

• (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(9) Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

(10) Financial assets at amortised cost

• A. Financial assets at amortised cost are those that meet all of the following criteria:

• (a) The objective of the Group’s business model is achieved by collecting contractual cash flows.

• (b) The assets’ contractual cash flows represent solely payments of principal and interest.

• B. On a regular way purchase or sale basis, financial assets at amortised cost are recognised and derecognised using trade date accounting.

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(11) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.

• B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(12) Impairment of financial assets

For assets at amortised cost including accounts receivable that have a significant financing component, at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.

(13) Derecognition of financial assets

The Group derecognises a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

(14) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The item by item approach is used in applying the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(15) Property, plant and equipment

• A. Property, plant and equipment are initially recorded at cost.

• B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting

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Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

Buildings and structures 27 years Machinery and equipment 5 ～ 10 years Transportation equipment 5 ～ 10 years Office equipment 3 ～ 10 years Other equipment 5 ～ 10 years Leasehold assets 5 ～ 10 years

(16) Leasing arrangements (lessee) － right-of-use assets/ lease liabilities

Effective 2019

• A. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. For short-term leases or leases of low-value assets, lease payments are recognised as an expense on a straight-line basis over the lease term.

• B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Lease payments are comprised of fixed payments, less any lease incentives receivable.

• The Group subsequently measures the lease liability at amortised cost using the interest method and recognises interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognised as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.

• C. At the commencement date, the right-of-use asset is stated at cost comprising the following: (a) The amount of the initial measurement of lease liability; and

• (b) Any lease payments made at or before the commencement date.

The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognised as an adjustment to the right-of-use asset.

(17) Leased assets/ operating leases (lessee)

Prior to 2019

• A. Based on the terms of a lease contract, a lease is classified as a finance lease if the Group assumes substantially all the risks and rewards incidental to ownership of the leased asset.

• (a) A finance lease is recognised as an asset and a liability at the lease’s commencement at the lower of the fair value of the leased asset or the present value of the minimum lease payments.

• (b) The minimum lease payments are apportioned between the finance charges and the reduction of the outstanding liability. The finance charges are allocated to each period over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

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  - (c) Property, plant and equipment held under finance leases are depreciated over their estimated useful lives. If there is no reasonable certainty that the Group will obtain ownership at the end of the lease, the asset shall be depreciated over the shorter of the lease term and its useful life.

• B. Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

• (18) Long term prepaid rent

• Prior to 2019

Long-term prepaid rent is the agreed-upon fee for land use paid by the Group’s subsidiary in Indonesia to the Republic of Indonesia government. Long-term prepaid rent is stated initially at its cost and amortised on a straight-line basis over its lease period.

• (19) Intangible assets goodwill

Goodwill arises in a business combination accounted for by applying the acquisition method.

• (20) Impairment of non-financial assets

• A. The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal or value in use. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

• B. The recoverable amounts of goodwill shall be evaluated periodically. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognised in profit or loss shall not be reversed in the following years.

• C. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

• (21) Borrowings

• A. Borrowings comprise long-term and short-term bank borrowings. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

• B. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

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(22) Notes and accounts payable

• A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

• B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (23) Financial liabilities at fair value through profit or loss

• A. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorised as financial liabilities held for trading unless they are designated as hedges or financial liabilities at fair value through profit or loss. Financial liabilities that meet one of the following criteria are designated as at fair value through profit or loss at initial recognition:

  • (a) Hybrid (combined) contracts; or

  • (b) They eliminate or significantly reduce a measurement or recognition inconsistency; or

  • (c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management policy.

• B. At initial recognition, the Group measures the financial liabilities at fair value. All related transaction costs are recognised in profit or loss. The Group subsequently measures these financial liabilities at fair value with any gain or loss recognised in profit or loss.

• (24) Convertible bonds payable

Convertible bonds issued by the Group contain conversion options (that is, the bondholders have the right to convert the bonds into the Group’s common shares by exchanging a fixed amount of cash for a fixed number of common shares), call options and put options. The Group classifies the bonds payable upon issuance as a financial asset, a financial liability or an equity instrument in accordance with the contract terms. They are accounted for as follows:

• A. The embedded call options and put options are recognised initially at net fair value as ‘financial assets or financial liabilities at fair value through profit or loss’. They are subsequently remeasured and stated at fair value on each balance sheet date; the gain or loss is recognised as ‘gain or loss on valuation of financial assets or financial liabilities at fair value through profit or loss’.

• B. The host contracts of bonds are initially recognised at fair value. Any difference between the initial recognition and the redemption value is accounted for as the premium or discount on bonds payable and subsequently is amortised in profit or loss as an adjustment to ‘finance costs’ over the period of circulation using the effective interest method.

• C. The embedded conversion options which meet the definition of an equity instrument are initially recognised in ‘capital surplus—share options’ at the residual amount of total issue price less the amount of financial assets or financial liabilities at fair value through profit or loss and bonds payable as stated above. Conversion options are not subsequently remeasured.

• D. Any transaction costs directly attributable to the issuance are allocated to each liability or equity component in proportion to the initial carrying amount of each abovementioned item.

• E. When bondholders exercise conversion options, the liability component of the bonds (including bonds payable and ‘financial assets or financial liabilities at fair value through profit or loss’) shall be remeasured on the conversion date. The issuance cost of converted common shares is the total book value of the abovementioned liability component and ‘capital surplus—share options’.

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(25) Derecognition of financial liabilities

Financial liability is derecognised when the obligation under the liability specified in the contract is either discharged or cancelled or expired.

(26) Employee benefits

• A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

• B. Pensions

• (a) Defined contribution plans

For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

• (b) Defined benefit plans

  • i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in these corporate bonds, the Group uses interest rates of government bonds (at the balance sheet date) instead.

  • ii. Remeasurements arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

  • iii. Past service costs are recognised immediately in profit or loss.

• C. Employees’ compensation and directors’ and supervisors’ remuneration

Employees’ compensation and directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is paid by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

- (27) Employee share based payment

For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments

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that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

(28) Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities.

• C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

• D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.

(29) Share capital

• A. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.

• B. Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(30) Dividends

Shareholders’ dividends are recorded in the Company’s financial statements in the period in which they are resolved by the Company’s Board of Directors. Cash dividends are recorded as liabilities. Stock dividends recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(31) Revenue recognition

Sales of goods

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• A. The Group manufactures and sells press machines and products for automobiles and motorcycles. Sales are recognised when control of the products has transferred, being when the products are delivered to the customers, the customers have full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customers’ 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 customers, and either the customers have accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.

• B. The goods are often sold with volume discounts based on aggregate sales over a 12-month period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated sales returns and allowances. Accumulated experience is used to estimate and provide for the sales returns and allowances, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. The estimation is subject to an assessment at each reporting date. A refund liability is recognised for expected sales returns and allowances payable to customers in relation to sales made until the end of the reporting period. The sales usually are made with a credit term of 91 to 180 days, which is consistent with the market practice, so the contract does not contain a significant financing component.

• C. The Group’s obligation to provide a refund for faulty products under the standard warranty terms is recognised as a provision.

• D. A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

(32) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker. The Group’s Chief Operating Decision-Maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Critical judgements, estimates and assumptions concerning uncertainties are addressed below:

(33) Critical judgements in applying the Group’s accounting policies

None.

(34) Critical accounting estimates and assumptions

None.

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6. DETAILS OF SIGNIFICANT ACCOUNTS

(35) Cash and cash equivalents

)Cash and cash equivalents
Cash on hand Demand deposits Time deposits	December 31,
	2019 238 $ 325,748 146,212 472,198 $	2018
		928 $ 285,984 33,677
		320,589 $

• A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. As of December 31, 2019 and 2018, cash and cash equivalents amounting to $48,586 and $38,636 were pledged to others as collateral and were classified to current financial assets at amortised cost. Details are provided in Note 8.

• C. The Group has deposits with maturity over three months amounting to $170,079 and $13,358, and the effective interest rate was 3.05%~3.85% and 1.75%~3.76% in 2019 and 2018, respectively. As the time deposits are not highly-liquid investments, they were classified to current financial assets at amortised cost.

(36) Accounts receivable

)Accounts receivable
Accounts receivable Less: Allowance for bad debts (	2019 2018 523,473 $ 740,129 $ 3,252) 1,354) ( 520,221 $ 738,775 $ December 31,
	2019 523,473 $ 3,252) ( 520,221 $

• A. The ageing analysis of accounts receivable is as follows:

Not due Up to 30 days 31 to 90 days 91 to 180 days Over 181 days	December 31,	December 31,
	2019 463,804 $ 38,993 14,327 1,880 4,469 523,473 $	2018
		620,470 $ 72,724 32,906 7,910 6,119
		740,129 $

The above ageing analysis was based on due date.

• B. As of December 31, 2019 and 2018, accounts receivable and notes receivable were all from contracts with customers. As of January 1, 2018, the balance of receivables from contracts with customers amounted to $664,787.

• C. The Group does not hold any collateral as security.

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D. Information relating to credit risk is provided in Note 12(2).

(37) Inventories

Inventories
Raw materials Work in process Finished goods Raw materials Work in process Finished goods			December 31,2019		Book value 185,397 $ 72,405 178,817 436,619 $
	Cost 192,506 $ 72,467 205,355 470,328 $ Cost 229,868 $ 126,530 192,045 548,443 $		Allowance for valuation loss 7,109) ($ 62) ( 26,538) ( 33,709) ($ December 31,2018
		Cost		Allowance for valuation loss		Book value
		229,868 $ 126,530 192,045		1,273) ($ 64) ( 5,051) ( 6,388) ($		228,595 $ 126,466 186,994
		548,443 $				542,055 $

The cost of inventories recognised as expense for the year:

Cost of inventory sold Inventory write-down	2019 1,330,623 $ 27,321 1,357,944 $	2018
		1,582,969 $ -
		1,582,969 $

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(38) Property, plant and equipment

Buildings and Machinery and Transportation Office Leasehold structures equipment equipment equipment improvements Others At January 1, 2019 Cost 63,649 $ 668,544 $ 32,706 $ 11,823 $ 11,793 $ 29,199 $ Accumulated depreciation 20,272) ( 436,589) ( 17,132) ( 9,812) ( 5,752) ( 17,938) ( 43,377 $ 231,955 $ 15,574 $ 2,011 $ 6,041 $ 11,261 $ 2019 Opening net book amount 43,377 $ 231,955 $ 15,574 $ 2,011 $ 6,041 $ 11,261 $ Adjustment to restrospective application (Note) - (14,830) (7,771) - - - 43,377 217,125 7,803 2,011 6,041 11,261 Additions - 19,677 1 1,014 4,903 1,427 Disposals - 3,741) ( - 46) ( 1,284) ( 47) ( Reclassifications - 3,164 150 - - - Depreciation charge 2,376) ( 47,678) ( 2,338) ( 931) ( 1,913) ( 2,196) ( Net exchange differences 882) ( 5,949) ( 31) ( 30) ( 271) ( 174) ( Closing net book amount 40,119 $ 182,598 $ 5,585 $ 2,018 $ 7,476 $ 10,271 $ At December 31, 2019 Cost 62,252 $ 644,019 $ 21,314 $ 12,065 $ 14,117 $ 29,581 $ Accumulated depreciation 22,133) ( 461,421) ( 15,729) ( 10,047) ( 6,641) ( 19,310) ( 40,119 $ 182,598 $ 5,585 $ 2,018 $ 7,476 $ 10,271 $

Construction inprogress Total 859 $ 818,573 $ - 507,495) ( 859 $ 311,078 $ 859 $ 311,078 $ - (22,601) 859 288,477 536 27,558 - 5,118) ( - 3,314 - 57,432) ( 41) ( 7,378) ( 1,354 $ 249,421 $ 1,354 $ 784,702 $ - 535,281) ( 1,354 $ 249,421 $

Note: Adjustment to retrospective application about the property, plant and equipment is provided in Note 3(1)B.

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		Buildings and	Buildings and	Machinery and	Machinery and	Transportation	Transportation			Office			Leasehold					Construction	Construction
			structures		equipment		equipment			equipment		improvements				Others			inprogress			Total
At January 1, 2018
Cost	$		61,761	$	639,226	$	29,626		$	11,464		$	8,420		$	23,351		$	6,946		$	780,794
Accumulated depreciation	(		17,384)	(	389,947)	(	13,314)	(		8,845)	(		4,846)	(		15,556)			-	(		449,892)
	$		44,377	$	249,279	$	16,312		$	2,619		$	3,574		$	7,795		$	6,946		$	330,902
2018
Opening net book amount	$		44,377	$	249,279	$	16,312		$	2,619		$	3,574		$	7,795		$	6,946		$	330,902
Additions			-		19,885		2,517			351			645			933			19,162			43,493
Disposals			-	(	607)		-	(		3)			-	(		295)			-	(		905)
Reclassifications			-		15,322		957			151			2,928			5,711	(		25,069)			-
Depreciation charge	(		2,321)	(	48,528)	(	4,248)	(		1,066)	(		1,022)	(		2,760)			-	(		59,945)
Net exchange differences			1,321	(	3,396)		36	(		41)	(		84)	(		123)	(		180)	(		2,467)
Closing net book amount	$		43,377	$	231,955	$	15,574		$	2,011		$	6,041		$	11,261		$	859		$	311,078
At December 31, 2018
Cost	$		63,649	$	668,544	$	32,706		$	11,823		$	11,793		$	29,199		$	859		$	818,573
Accumulated depreciation	(		20,272)	(	436,589)	(	17,132)	(		9,812)	(		5,752)	(		17,938)			-	(		507,495)
	$		43,377	$	231,955	$	15,574		$	2,011		$	6,041		$	11,261		$	859		$	311,078

• A. The Group leases certain machinery and automobiles, classified as machinery and transportation equipment, under finance lease. As of December 31, 2018, the carrying value of the leased assets was $22,601.

• B. Information about the property, plant and equipment that were pledged to others as collateral is provided in Note 8.

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－ (39) Leasing arrangements lessee

Effective 2019

• A. The Group leases various assets including land, buildings, machinery and equipment, business vehicles. Rental contracts are typically made for periods of 1 to 34 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.

• B. The carrying amount of right-of-use assets and the depreciation charge are as follows:

Land Buildings Machinery and equipment Transportation equipment (Business vehicles) Office equipment (Photocopiers)		December 31,2019		Year ended December 31,2019
		Carryingamount		charge
		47,112 $ 242,710 9,708 5,634 174 305,338 $		1,464 $ 24,698 1,952 2,316 85 30,515 $

• C. For the year ended December 31, 2019, the additions to right-of-use assets was $18,738.

• D. The information on profit and loss accounts relating to lease contracts is as follows:

Items affecting profit or loss Interest expense on lease liabilities Expense on short-term lease contracts	Year ended December31,2019
	$ 2,064 7,419

• E. For the year ended December 31, 2019, the Group’s total cash outflow for leases was $58,465.

(40) Short-term borrowings

$58,465. )Short-term borrowings
		December 31,
Type of borrowings		2019		2018
Bank borrowings
Unsecured borrowings	$	197,430	$	111,574
Secured borrowings		208,427		100,422
	$	405,857	$	211,996
Interest rate range		0.85%~6.05%		0.13%~11%
Details of assets pledged as collateral for borrowings is		provided in Note 8.
)Bonds payable
	December 31,2019		December 31,2018
Bonds payable	$	-	$	171,900
Less: Discount on bonds payable		-	(	3,794)
Less: Current portion		-	(	168,106)
	$	-	$	-

(41) Bonds payable

A. The issuance of domestic convertible bonds by the Company:

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The terms of the first domestic unsecured convertible bonds issued by the Company are as follows:

• (a) The Company issued $250,000, 0% first domestic unsecured convertible bonds, as approved by the regulatory authority. The bonds mature 3 years from the issue date (December 14, 2016 ~December 14, 2019) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on December 14, 2016.

• (b) The bondholders have the right to ask for conversion of the bonds into common shares of the Company during the period from the date after one month of the bonds issue to the maturity date, except the stop transfer period as specified in the terms of the bonds or the laws/regulations. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

• (c) The conversion price of the bonds is set up based on the pricing model in the terms of the bonds (the conversion price was NT$47.8 per share), and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price will be reset based on the pricing model in the terms of the bonds on each effective date regulated by the terms. If the reset conversion price is higher than the conversion price before the reset, the conversion price will not be adjusted.

• (d) The bondholders have the right to require the Company to redeem any bonds at the price of the bonds’ face value plus 1% of the face value as interests upon two years from the issue date.

• (e) The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at 5 business days after the effective date: (i) the closing price of the Company common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after one month of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after one month of the bonds issue to 40 days before the maturity date.

• (f) All bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued.

• B. As of December 31, 2019, the bonds totaling $9,100 (face value) had been converted into 153 thousand shares of common stock. The face value of redemption amounted to $69,000. The remaining amount of $171,900 was settled.

• C. Regarding the issuance of convertible bonds, the equity conversion options amounting to $12,125 were separated from the liability component and were recognised in ‘capital surplus—share options’ in accordance with IAS 32. As of December 31, 2019, capital surplus—share options amounted to $8,337. The call options and put options embedded in bonds payable were separated from their host contracts and were recognised in ‘financial assets or liabilities at fair value through profit or loss’ in net amount in accordance with IAS 39 because the economic characteristics and risks of the embedded derivatives were not closely related to those of the host contracts. The effective interest rate of the bonds payable after such separation was 2.41%.

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(42) Other payables

)Other payables
Payables for investment Expense payable and others	December 31,2019 17,201 $ 61,214 78,415 $	December 31,2018
		17,804 $ 56,797
		74,601 $

To meet the Group’s operating policies, the Board of Directors of the Company at their meeting resolved to acquire 8% equity shares of the Mainland China subsidiary, Wuxi Jingxin, from its shareholders through the subsidiary, PATEC, with the transaction price of RMB 30 million. As of December 31, 2019, the Company has paid RMB 26 million for this transaction.

(43) Lease payable

Prior to 2019

The Group leases machinery and automobiles, classified as machinery and transportation equipment, under finance lease. The lease will expire in January 2022. Under the lease contract, future minimum lease payments and their present value are as follows:

Current Not later than one year Non-current (shown as ‘long-term notes and accounts payable’) Later than one year but not later than five years		December 31,2018	December 31,2018
	Total finance lease liabilities 3,321 $ 6,032 9,353 $	Future finance charges 486 $ 614 1,100 $	Present value of finance lease liabilities
			2,835 $ 5,418
			8,253 $

(44) Pensions

• A. Consolidated entity, PT. Patec, has a defined benefit pension plan in accordance with regulations of the Republic of Indonesia. As of December 31, 2019 and 2018, the net amount of liabilities recognised in the balance sheet was $12,748 and $5,740, respectively.

• B. Other consolidated entities make monthly contributions to pension and post-retirement funds administered by the government in accordance with local pension regulations.

(45) Share-based payment

• A. On February 28, 2014, the Board of Directors has resolved to issue employee stock options of 1,500 units and has set the same date as the grant date. Each employee stock option allows employees to purchase 1,000 ordinary shares.

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• B. The Group’s share-based payment arrangement is as follows:

Contract Vesting Type of arrangement Grant date Quantity granted period conditions Employee stock options 2014. 2. 28 1,500 thousand shares 4 years 2-3 years service

• C. Details of the share-based arrangement are as follows:

Years ended December 31,

	Years ended December 31,	Years ended December 31,
Options outstanding at beginning of the year Options exercised Options forfeited Options outstanding at end of the year Options exercisable at end of the year	Number of Weighted-average Number of Weighted-average options exercise price options exercise price (in shares) (in dollars) (in shares) (in dollars) - - $ 432,000 23 $ - - 422,000) ( 21 - - 10,000) ( 21 - - - - - - - - 2019 2018
		23 $ 21 21 - -

• D. The fair value of stock options granted on grant date is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

Type of arrangement Employee stock options	Grant date 2014. 2. 28 Expected option life 3~3.5 years	Fair value at grant date (in dollars) $ 45 Expected dividendsrate 0%	Exercise price (in dollars) $ 28 Risk-free dividendsrate 0.83%~0.94%	Expected price volatility
				36.90%~37.31% (Note) Fair value per unit(indollars)
				$20.39~$21.12

• Note: Expected price volatility rate was estimated by using the stock prices of the most recent period with length of this period approximate to the length of the stock options’ expected life, and the standard deviation of return on the stock during this period.

(46) Share capital

• A. As of December 31, 2019, the Company has 44,491 thousand shares of ordinary stock outstanding, and the paid-in capital was $448,268 with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

• B. Movements in the number of the Company’s ordinary shares outstanding (in thousands)

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are as follows:

are as follows:
At January 1 Exercise of employee share options Stock dividends Purchase of treasury shares At December 31	2019 2018 40,460 37,671 - 422 3,731 2,867 - 500) ( 44,191 40,460 Years ended December 31,
	2019 40,460 - 3,731 - 44,191

• C. Treasury shares

• (a) Reason for share reacquisition and movements in the number of the Company’s treasury shares are as follows:

Name of company holdingthe shares The Company Name of company holdingthe shares The Company	Reason for reacquisition To be reissued to employees Reason for reacquisition To be reissued to employees	December	31,2019
		Number of shares 636 December	Book value
			36,097 $ 31,2018
		Number of shares 636	Book value
			36,097 $

• (b) On August 17, 2017, the Board of Directors at their meeting resolved to purchase treasury shares during the estimated period from August 18, 2017 to October 17, 2017, and the estimated price ranged between NT$50 and NT$65. As of December 31, 2017, the Company had purchased a total of 636 thousand shares in the amount of $36,097. On January 17, 2018, the Board of Directors at their meeting resolved to purchase treasury shares. As of March 26, 2018, the Company purchased a total of 500 thousand shares in the amount of $26,908. At the same day, the Board of Directors resolved to proceed with the registration of retirement of shares, and the record date for capital reduction is March 30, 2018.

• (c) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realised capital surplus.

• (d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should not be pledged as collateral and is not entitled to dividends before it is reissued.

• (e) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and the stockholders’ equity should be retired within six months of acquisition.

(47) Capital surplus

The Company’s capital surplus arose from the paid-in capital in excess of par. Subject to the Cayman Company Rules, so long as the shares are listed on any securities exchange, the Company may use capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations to issue new shares to stockholders, provided that

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the Company has no accumulated deficit, as approved by the shareholders by way of a special resolution, in accordance with the Company’s Articles of Incorporation.

(48) Retained earnings

• A. At the end of the accounting year, if there is any retained earnings (including the unappropriated earnings of prior years), shall first be used to pay all taxes and offset prior years’ operating losses (including the deficits of prior years) and then set aside special reserve (if any). The residual should be distributed based on the majority vote of the shareholders during their meeting. The ratio of appropriation of retained earnings proposed by the Board of Directors should not be less than 10% of distributable retained earnings, the dividends should be distributed to shareholders in accordance with their shareholding ratio. The amount of cash dividends should not be less than 10% of total dividend distribution.

• B. As the Company is in the growth stage, the dividend policy is adopted taking into consideration the Company’s capital expenditure, future expansion plans, financial plan and other plans for continuous development.

• C. Dividends, bonus or other benefits to shareholders should be distributed in New Taiwan dollars.

• D. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• E. On June 28, 2019 and 2018, the shareholders resolved the distribution of earnings for 2018 and 2017 as follows:

Cash dividend Stock dividend Special reserve	Dividends per Dividends per Amount share(in dollars) Amount share(in dollars) $ 4,145 $ 0.10 $ 28,672 $ 0.75 37,304 0.92 28,672 0.75 22,298 - 59,408 - 2018 2017 Years ended December 31,	Dividends per Dividends per Amount share(in dollars) Amount share(in dollars) $ 4,145 $ 0.10 $ 28,672 $ 0.75 37,304 0.92 28,672 0.75 22,298 - 59,408 - 2018 2017 Years ended December 31,
	Dividends per Amount share(in dollars) $ 4,145 $ 0.10 37,304 0.92 22,298 - 2018
	Amount $ 4,145 37,304 22,298	Amount $ 28,672 28,672 59,408

• F. Events after balance sheet date:

On March 27, 2020, the Board of Directors proposed the distribution of earnings for 2019 as follows:

Events after balance sheet date: On March 27, 2020, the Board of Directors proposed the as follows:	distribution of earnings for 2019	distribution of earnings for 2019
Cash dividend Stock dividend Special reserve	Year ended December 31,2019
	Amount $ 2,690 15,689 52,360	Dividend per share(in dollars)
		$ 0.06 0.35 -

As of March 27, 2020, the abovementioned distribution of 2019 earnings has not yet been resolved by the shareholders.

• G. For the information relating to employees’ remuneration and directors’ and supervisors’ remuneration, please refer to Note 6(19).

(49) Operating revenue

• A. The Group derives revenue from the transfer of goods and services at a point in time and

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related information is provided in Note 14.

• B. As of December 31, 2019 and 2018, and January 1, 2018, the Group recognised contract liabilities in relation to contract revenue amounting to $8,688, $59,188 and $4,491, respectively.

• C. For the years ended December 31, 2019 and 2018, revenue recognised that was included in the contract liability balance at the beginning of the year was $59,188 and $4,491, respectively.

(50) Other income

respectively. Other income
Interest income: Bank deposit interest Other income	Years ended December 31,
	2019 10,050 $ 8,668 18,718 $	2018
		7,572 $ 4,244
		11,816 $

(51) Other gains and losses

Other gains and losses
		Years ended	December	31,
		2019		2018
Net currency exchange (loss) gain	($	7,853)	$	708
Gain on disposal of property, plant and
equipment		592		1,226
Net gain on financial assets / liabilities at
fair value through profit or loss		-		964
Gain on redemption of convertible bonds		-		1,817
Miscellaneous income		-		331
	($	7,261)	$	5,046

(52) Finance costs

Finance costs
Interest expenses: Bank borrowings Convertible bonds Others Finance costs	Years ended December 31,
	2019 6,747 $ 3,794 2,064 $ 12,605	2018
		6,445 $ 5,616 600
		$ 12,661

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(53) Employee benefit expense

Employee benefit expense
Employee benefit expense Wages and salaries Insurance expense Pension costs Other personnel expenses Depreciation	Years ended December 31,
	2019 359,742 $ 10,354 32,376 24,728 427,200 $ 87,947 $	2018
		378,963 $ 13,432 35,731 25,937
		454,063 $
		59,945 $

Depreciation

• A. In accordance with the Articles of Incorporation of the Company, a ratio of distributable profit of the current year, after covering accumulated losses, shall be distributed as employees' compensation and directors’ and supervisors’ remuneration. The ratio shall not be lower than 0.1% for employees’ compensation and shall not be higher than 3% for directors’ and supervisors’ remuneration.

• B. The employees’ compensation and directors’ and supervisors’ remuneration for the years ended December 31, 2019 and 2018 were estimated and accrued based on a ratio of distributable profit of current year as regulated in the Company’s Articles as of the end of the reporting period. For 2019 and 2018, employees’ compensation was accrued at $200 and $350, respectively; directors’ and supervisors’ remuneration was accrued at $700 for both years. The aforementioned amounts were recognised in salary expenses.

• C. Employees’ compensation and directors’ and supervisors’ remuneration for 2018 amounted to $250 and $700, respectively, as resolved by the Board of Directors during its meeting on March 28, 2019. The difference of $100 between the amounts resolved at the Board meeting and the amounts of $350 and $700 recognised in the 2018 financial statements, was recognised in profit or loss in 2019. The distribution of the aforementioned amounts has not been completed.

• D. Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved at the meeting of Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

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(54) Income tax

A. Components of income tax expense

ome tax Components of income tax expense
		Years ended December 31,
		2019	2018
Current tax:
Current tax on profits for the year	$	47,319	$	49,522
Prior year income tax underestimation		89		888
Total current tax		47,408		50,410
Deferred tax:
Origination and reversal of temporary
differences		12,168		9,089
Income tax expense	$	59,576	$	59,499
The income tax (charge)/credit relating to components		of other comprehensive income		is
as follows:
		Years ended	December 31,
		2019	2018
Remeasurement on defined benefit obligations	($	380)	($	263)

• B. The income tax (charge)/credit relating to components of other comprehensive income is as follows:

• C. Reconciliation between income tax expense and accounting profit:

Reconciliation between income tax expense and	accounting profit:
Tax calculated based on profit before tax and statutory tax rate Prior year income tax underestimation Effects from items disallowed by tax regulation Taxable loss not recognised as deferred tax assets Income tax expense	2019 2018 36,073 $ 54,563 $ 89 888 (4,289) (7,847) 27,703 11,895 59,576 $ 59,499 $ Years ended December 31,
	2019 36,073 $ 89 (4,289) 27,703 59,576 $

Note: The basis for computing the applicable tax rate are the rates applicable in the respective countries where the Group entities operate or is the rate applicable in the parent company’s country.

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• D. Amounts of deferred tax as a result of temporary differences and loss carryforward are as follows:

follows:
								2019
												Recognised
							Recognised					in other
								in profit		comprehensive
			January1					or loss				income			December31
Deferred tax assets
Temporary differences
Unrealised gain on		$	5,738		($			421)			$		-		$		5,317
disposal of property,
plant and equipment
Others			11,421					1,699				380					13,500
Loss carryforward			5,537		(			50)					-				5,487
		$	22,696			$		1,228			$	380			$		24,304
Deferred tax liabilities
Temporary differences
Book-tax difference in the	($		2,591)			$		273			$		-	($			2,318)
basis of finance lease
Investment income of long-	(		2,604)		(			15,293)					-	(			17,897)
term equity investments
Others	(		6,021)					1,624					-	(			4,397)
	($		11,216)		($			13,396)			$		-	($			24,612)
									2018
												Recognised
								Recognised				in other
								in profit			comprehensive
			January1					or loss				income				December 31
Deferred tax assets
Temporary differences
Unrealised gain on		$	5,558			$		180				$		-		$	5,738
disposal of property,
plant and equipment
Others			7,066					4,092					263				11,421
Loss carryforward			14,598			(		9,061)						-			5,537
		$	27,222			($		4,789)				$	263			$	22,696
Deferred tax liabilities
Temporary differences
Book-tax difference in the	($		4,691)			$		2,100				$		-	($		2,591)
basis of finance lease
Investment income of long-
term equity investments	(		2,225)			(		379)						-	(		2,604)
Others				-		(		6,021)						-	(		6,021)
	($		6,916)			$		1,721				$		-	($		11,216)

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• E. Expiration dates of unused loss carryforward and amounts of unrecognised deferred tax assets are as follows:

assets are as follows:
	December 31,2019
Year incurred 2015 2016 2017 2018 2019	Amount filed/ assessed Unused amount 89,747 $ 89,747 $ 93,958 93,958 56,373 56,373 62,460 62,460 109,498 109,498 December 31,2018	Unrecognised deferred tax assets - $ 93,958 56,373 62,460 109,498	Usable until
			- - - - -

Year incurred 2015 2016 2017 2018	Amount filed/ assessed 89,747 $ 93,958 56,373 62,460	Unused amount 89,747 $ 93,958 56,373 62,460	Unrecognised deferred tax assets - $ 93,958 56,373 62,460	Usable until
				- - - -

(55) Earnings per share

Earnings per share
Basic (Diluted) earnings per share Profit attributable to ordinary shareholders of the parent	Year ended December 31,2019
	Amount after tax ( 38,797 $	Weighted average number of ordinary shares outstanding shares in thousands) 44,191	Earnings per share (in dollars)
			0.88 $

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Basic earnings per share Profit attributable to ordinary shareholders of the parent Diluted earnings per share Profit attributable to ordinary shareholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees’ stock options Domestic convertible bonds Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares	Year ended December 31,2018	Year ended December 31,2018	Year ended December 31,2018
	Amount after tax ( 144,341 $ 144,341 $ - 5,616 149,957 $	Weighted average number of ordinary shares outstanding shares in thousands) 44,147 44,147 50 5,289 49,486	Earnings per share (in dollars)
			3.27 $
			3.03 $

The domestic convertible bonds issued by the Company have anti-dilutive effect, thus were not included in the diluted earnings per share for the year ended December 31, 2019.

(56) Operating leases

Prior to 2019

The Group leases land and buildings to others under non-cancellable operating lease agreements. The leases will expire in March 2038. The Group has recognised $34,027 as rental expense for the year ended December 31, 2018. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

payments under non-cancellable operating leases are as follows:
Not later than one year Later than one year but not later than five years Later than five years	December 31,2018
	25,120 $ 92,704 188,845
	306,669 $

(57) Supplemental cash flow information

Supplemental cash flow information
Financing activities with no cash flow effects: Retained earning transferred to common stock	Years ended December 31,
	2019 37,304 $	2018
		28,672 $

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2019

(58) Changes in liabilities from financing activities

At January 1 Changes in cash flow from financing activities Changes in other non-cash items At December 31 At January 1 Changes in cash flow from financing activities Changes in other non-cash items At December 31	Short-term borrowings	Short-term borrowings	Leasepayable	Leasepayable	Bonds payable (including current portion)	Bonds payable (including current portion)	Bonds payable (including current portion)	Bonds payable (including current portion)
	211,996 $ 198,646 4,785) ( 405,857 $		309,099 $ $ 48,982) ( ( 6,927) ( 253,190 $ $ 2018			168,106 171,900) 3,794 -
	Short-term borrowings	Long-term borrowings (including current portion)		Lease payable		Bonds payable (including currentportion)
	180,311 $ 31,685 - 211,996 $	56,939 $ 56,939) ( - - $		9,844 $ 4,764) ( 3,173 8,253 $		229,960 $ 67,470) ( 5,616 168,106 $		477,054 $ 97,488) ( 8,789 388,355 $

7. RELATED PARTY TRANSACTIONS

(59) Names of related parties and relationship

(60)Significant related party transactions I. Endorsements and guarantees provided to related parties: The above pertains to guarantee provided by related party for the Company’s borrowings. (61)Key management compensation Name of related party Relationship with the Company WEE LIANG KIANG Chief Executive Officer of the Company December 31,2019 December 31,2018 WEE LIANG KIANG 243,841 $ 130,076 $	Name of related party	Relationship with the Company

Key management compensation
Salaries and other short-term employee benefits Post-employment benefits	Year ended December 31,2019 Year ended December 31,2018 29,573 $ 30,291 $ 1,390 1,365 30,963 $ 31,656 $
	29,573 $ 1,390 30,963 $		30,291 $ 1,365 31,656 $

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8. PLEDGED ASSETS

The Group’s assets pledged as collateral are as follows:

PLEDGED ASSETS The Group’s assets pledged as	collateral are as follows:
Pledgedasset Property, plant and equipment Right-of-use asset Long-term prepaid rents Financial assets at amortised cost - current - time deposits	2019 2018 40,000 $ 65,824 $ 61,110 - - 49,622 48,586 38,636 149,696 $ 154,082 $ Book value December 31,	Purpose
	2019 40,000 $ 61,110 - 48,586 149,696 $
		Short-term borrowings Long-term and short- term borrowings and lease payable Short-term borrowings Short-term borrowings

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

2019: None

For significant commitments and contingencies for 2018, please refer to Notes 6(9) and (22).

10. SIGNIFICANT DISASTER LOSS

None.

1. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

Information on appropriation of earnings is provided in Note 6(14) F.

12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Relevant liability and capital ratios are provided in balance sheets for each period end.

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(2) Financial instruments

A. Financial instruments by category

December 31, 2019 December 31, 2018

Financial assets Financial assets at amortised cost Loans and receivables Cash and cash equivalents Financial assets at amortised cost Accounts receivable Other receivables Guarantee deposits paid Financial liabilities Financial liabilities at amortised cost Short-term borrowings Accounts payable Other payables Current lease obligations payable Corporate bonds payable (including current portion) Long-term notes and accounts payable Lease liability	472,198 $ 218,665 520,221 2,145 15,109 1,228,338 $ 405,857 $ 167,432 78,415 - - - 651,704 $ 253,190 $	320,589 $ 51,994 738,775 27,455 19,058
		1,157,871 $
		211,996 $ 231,259 74,601 2,835 168,106 5,418
		694,215 $
		- $

• B. Financial risk management policies

• (a) The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial position and financial performance.

• (b) Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Group operates internationally and is exposed to foreign exchange risk arising from the transactions of the Company and its subsidiaries used in various functional currency, primarily with respect to the USD and RMB. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.

• ii. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

• iii. The Group has certain investments in foreign operations, whose net assets are

~147~

exposed to foreign currency translation risk.

• iv. The Group’s businesses involve some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: NTD; other certain subsidiaries’ functional currency: RMB, SGD and USD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

December 31, 2019

(Foreign currency: functional currency) Financial assets Monetary items EUR:RMB USD:RMB EUR:HUF USD:SGD RMB:SGD JPY:SGD IDR:USD Financial liabilities Monetary items IDR:USD USD:SGD JPY:SGD RMB:SGD EUR:SGD EUR:HUF USD:NTD EUR:NTD SGD:NTD (Foreign currency: functional currency) Financial assets Monetary items EUR:RMB USD: RMB EUR: HUF USD:SGD IDR:USD Financial liabilities Monetary items IDR:USD USD:SGD EUR:RMB EUR:HUF USD:NTD EUR:NTD SGD:NTD	Foreign currency (in thousands) 3,301 $ 2,589 1,129 605 35,872 42,985 67,551,981 32,765,462 $ 214 41,243 4,000 1,256 1,102 1,550 7,040 925 Foreign currency (in thousands) 4,268 $ 3,286 986 908 59,470,571 36,982,117 $ 439 8 1,171 1,550 1,760 925	Foreign currency (in thousands) 3,301 $ 2,589 1,129 605 35,872 42,985 67,551,981 32,765,462 $ 214 41,243 4,000 1,256 1,102 1,550 7,040 925 Foreign currency (in thousands) 4,268 $ 3,286 986 908 59,470,571 36,982,117 $ 439 8 1,171 1,550 1,760 925	Exchange rate 7.82 6.96 331.15 1.34 0.19 0.01 0.00007 0.00007 1.34 0.01 0.19 1.51 331.15 29.94 33.62 22.27	Exchange rate 7.82 6.96 331.15 1.34 0.19 0.01 0.00007 0.00007 1.34 0.01 0.19 1.51 331.15 29.94 33.62 22.27	Bookvalue (NTD) 110,975 $ 77,521 37,959 18,109 154,264 11,483 145,910 70,772 $ 6,398 11,363 17,201 42,224 37,037 46,413 236,669 20,598 December	Bookvalue (NTD) 110,975 $ 77,521 37,959 18,109 154,264 11,483 145,910 70,772 $ 6,398 11,363 17,201 42,224 37,037 46,413 236,669 20,598 December		Sensitivity analysis	Sensitivity analysis
							Degree of variation 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 31,2018	Effect on profit or loss 1,110 $ 775 380 181 1,543 115 1,459 708 $ 64 114 172 422 370 464 2,367 206	Effect on other comprehensive income - $ - - - - - - - $ - - - - - - - -
		Foreign currency (in thousands)		Exchange rate		Bookvalue (NTD) 149,694 $ 100,609 34,565 27,784 126,965 78,954 $ 13,451 280 41,065 47,454 61,726 20,787		Sensitivity analysis
							Degree of variation 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%	Effect on profit or loss 1,497 $ 1,006 346 278 1,270 790 $ 135 3 411 475 617 208	Effect on other comprehensive income
		4,268 $ 3,286 986 908 59,470,571 36,982,117 $ 439 8 1,171 1,550 1,760 925		7.88 6.88 320.78 1.36 0.00007 0.00007 1.36 7.88 320.78 30.62 35.07 22.47					- $ - - - - - $ - - - - - -

v. Total exchange gain (loss), including realised and unrealised arising from

~148~

significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2019 and 2018, amounted to ($7,853) and $708, respectively.

• (b) Credit risk

• i.Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms.

• ii.The Group adopts the following assumption to assess whether there has been a significant increase in credit risk on that instrument since initial recognition:

• iii.If the aging of contract payments was over 365 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

• iv.The Group classifies customers’ accounts receivable in accordance with credit risk on trade. The Group applies the simplified approach to estimate expected credit loss under the provision matrix basis.

• v.The Group used the forecastability of Basel Committee on Banking Supervision to adjust historical and timely information to assess the default possibility of accounts receivable. On December 31, 2019 and 2018, the provision matrix is as follows:

Up to 30 days past 31~90 days 91~180 days Over 181 days Not past due due past due past due past due Total At December 31, 2019 Expected loss rate 0.03% 0.03~7.81% 0.03~7.81% 0.03%~20.20% 19.17%~100% Total book value $ 463,804 $ 38,993 $ 14,327 $ 1,880 $ 4,469 $ 523,473

~149~

At December 31, 2018 Expected loss rate Total book value	Notpastdue	Up to 30 days past due	31~90 days pastdue	91~180 days pastdue		Over 181 days pastdue	Total
	0.03%~0.15% 620,470 $	1%~1.5% 72,724 $	3.31% 32,906 $	6.46% 7,910 $		14.73%~100% 6,119 $	740,129 $

• vi.Movements in relation to the Group applying the modified approach to provide loss allowance for accounts receivable, contract assets and lease payments receivable are as follows:

At January 1 Provision for impairment Write-offs Effect of foreign exchange At December 31	2019 2018 1,354 $ 1,442 $ 1,981 352 - 392) ( 83) ( 48) ( 3,252 $ 1,354 $

• (c) Liquidity risk

• i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities.

• ii. Surplus cash held by the operating entities over and above balance required for working capital management are invested in time deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the abovementioned forecasts.

• iii. As of December 31, 2019 and 2018, except for non-current liabilities, the Group’s short-term borrowings, accounts payable and other payables are all due within one year. The balance of cash flow within one year is undiscounted and agrees with each account’s balance under the balance sheets.

• iv. The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

December 31, 2019 Non-derivative financial liabilities: Lease liability December 31, 2018 Non-derivative financial liabilities: Bonds payable Lease payable	Up to 3months 7,669 $ Up to 3months - $ 1,046	Between 3 months and1year 21,757 $ Between 3 months and1year 168,106 $ 2,276	Between 1 and 2 years 28,000 $ Between 1 and 2 years - $ 2,094	Between 2 and 5 years 61,365 $ Between 2 and 5 years - $ 3,937	Over 5 years
					139,803 $ Over 5 years
					- $ -

(3) Fair value information

• A. Details of the fair value of the Group’s financial assets and financial liabilities not

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measured at fair value are provided in Note 12(2)A.

• B. The different levels that the inputs to valuation technique are used to measure fair value of financial and non-financial instruments have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3: Unobservable inputs for the asset or liability. The fair values of the call and put options issued by the Group are included in Level 3.

13. SUPPLEMENTARY DISCLOSURES

(4) Significant transactions information

• A. Loans to others: Please refer to table 1.

• B. Provision of endorsements and guarantees to others: Please refer to table 2.

• C. Holding of marketable securities at the end of the period ( not including subsidiaries, associates and joint ventures): None.

• D. Acquisition or sale of the same security with the accumulated cost exceeding NT$300 million or 20% of the Company’s paid-in capital: None

• E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 3.

• H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: None.

• I. Trading in derivative instruments undertaken during the reporting periods: None.

• J. Significant inter-company transactions during the reporting periods: Please refer to table 4.

(5) Information on investees

Names, locations and other information of investee companies ( not including investees in Mainland China): Please refer to table 5.

(6) Information on investments in Mainland China

• A. Basic information: Please refer to table 6.

• B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: None.

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14. SEGMENT INFORMATION

(7) General information

Management has determined the reportable operating segments based on the reports reviewed by the Chief Operating Decision-Maker that are used to make strategic decisions. The Group manufactures and sells customized machinery and equipment and parts of automobiles and motorcycles from a geographic perspective and provides information for the Chief Operating Decision-Maker to review. The areas of sales and order receiving are separated into four major areas which are Singapore, China, Indonesia and Europe. The Company’s Chief Operating Decision-Maker also separates into these four areas when managing finance and reviewing operating performance, therefore, Singapore, China, Indonesia and Europe shall be reportable segments.

(8) Measurement of segment information

The Chief Operating Decision-Maker assesses the performance of operating segments based on segment revenues and profit or loss after tax.

(9) Information about segments and their profit or loss

The segment information provided to the Chief Operating Decision-Maker for the reportable segments is as follows:

Revenue from external customers Machinery and maintenance service Parts of motorcycles Parts of automobiles Processing Medical devices Inter-segment revenue Total segment revenue Total segment profit (loss) Segment income (loss): Depreciation Income tax expense		Year ended December 31,2019	Year ended December 31,2019	Year ended December 31,2019	Total 165,713 $ 80,328 1,533,391 15,532 601 1,795,565 - 1,795,565 $ 52,296 $ 87,947) $ 59,576) $
	Singapore 155,637 $ - - - 601 156,238 109,916 266,154 $ 116,393) ($ 7,809) ($ ( 8,161) ($ (	Indonesia - $ 80,328 373,257 - - 453,585 - 453,585 $ 3,025 $ 33,220) $ ( 3,423) $ (	China 10,076 $ - 1,035,919 15,532 - 1,061,527 56,371 1,117,898 $ 200,451 $ ( 30,760) $ ( 33,019) $ (	Reconciliation Europe elimination - $ - $ - - 124,215 - - - - - 124,215 - - 166,287) ( 124,215 $ 166,287) ($ 13,047) $ 21,740) ($ 18,940) $ 2,782 $ ( 1,465) $ 13,508) ($ (

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Year ended December 31, 2018

Revenue from external customers Machinery and maintenance service Parts of motorcycles Parts of automobiles Processing Medical devices Inter-segment revenue Total segment revenue Total segment profit (loss) Segment income (loss): Depreciation Income tax expense	Singapore 160,705 $ - - - 92 160,797 115,873 276,670 $ 47,674) ($ 3,713) ($ - $	Indonesia - $ 102,229 320,526 - - 422,755 - 422,755 $ 14,005 $ 30,770) ($ 2,805) ($	China 123,326 $ - 1,361,619 15,361 - 1,500,306 45,336 1,545,642 $ 233,181 $ 25,108) ($ 43,673) ($	Reconciliation and Europe elimination Total - $ - $ 284,031 $ - - 102,229 107,869 - 1,790,014 - - 15,361 - - 92 107,869 - 2,191,727 - 161,209) ( - 107,869 $ 161,209) ($ 2,191,727 $ 17,336) ($ 18,090) ($ 164,086 $ 7,436) ($ 7,082 $ 59,945) ($ 1,602) ($ 11,419) ($ 59,499) ($

Note: Because the measurement amount of the Group’s assets does not include the measurement amount of segment assets reviewed by the Chief Operating Decision-Maker, therefore, the measurement amount of assets to be disclosed is $0 in accordance with IFRS 8, ‘Operating segments’.

(10) Information about segment profit or loss, assets and liabilities

The adoption of IFRS 16, ‘Leases’, had the following impact on the segment information for 2019.

Depreciation expense increased Segment assets increased Segment liabilities increased	Singapore 85 $ 174 $ 192 $	Indonesia 1,464 $ - $ - $	China 10,647 $ 43,165 $ 42,934 $	Europe 10,875 $ 190,180 $ 179,992 $	Total
					23,071 $
					233,519 $
					223,118 $

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(11) Reconciliation for segment income (loss)

As the Group’s Chief Operating Decision-Maker evaluates segment performance and determines how to allocate resources based on segment revenue and profit or loss, sales between segments are carried out at arm’s length. The revenue from external parties reported to the Chief Operating Decision-Maker is measured in a manner consistent with that in the statement of comprehensive income. The accounting policies of the operating segments are in agreement with the significant accounting policies summarized in Note 4, therefore, no adjustment to operating profit or loss is needed.

(12) Information on products and services

Please refer to Note 14(3).

(13) Major customer information

Major customer information of the Group for the years ended December 31, 2019 and 2018 is as follows:

is as follows:
Customer A Customer B	Years ended December 31,
	Revenue Segment 635,935 $ China 203,043 Indonesia 2019	2018
	Revenue 635,935 $ 203,043	Revenue 876,985 $ 164,302	Segment
			China Indonesia

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V. If the companies and other affiliated companies have incurred any financial difficulties in the latest year and up to the printing date of this annual report, the impact on the financial status of the Company: None.

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Seven. A REVIEW AND ANALYSIS OF THE COMPANY’S FINANCIAL POSITION AND FINANCIAL PERFORMANCE, AND A LISTING OF RISKS

I. FINANCIAL POSITION

I. FINANCIAL POSITION
	Units: NT$ thousands
Year Item 2018 2019	Difference
	Amount %
Current asset 1,744,794 1,716,011	(28,783) (1.65)
Property, plant and equipment 311,078 249,421	(61,657) (19.82)
Other assets 98,510 351,854	253,344 257.18
Total assets 2,154,382 2,317,286	162,904 7.56
Current liabilities 781,755 721,683	(60,072) (7.68)
Long-term liability 5,418 -	(5,418) (100.00)
Other liability 16,956 266,796	249,840 1,473.46
Total liabilities 804,129 988,479	184,350 22.93
Capital stock 410,964 448,268	37,304 9.08
Capital surplus 372,244 372,244	- -
Retained Earnings 496,192 492,743	(3,449) (0.70)
Exchange difference on translation of financial statements (81,706) (134,066)	(52,360) 64.08
Treasurystock (36,097) (36,097)	- -
Total equity 1,350,253 1,328,807	(21,446) (1.59)
Where the difference exceeds 20% and the amount is changed for NT$ 10,000,000, the analysis is as follow: 1. Increase in other assets: Mainly due to the recognition of right-of-use assets by IFRS 16 from 2019. 2. Increase in other liabilities: Mainly due to the recognition of lease liabilities by IFRS 16 from 2019. 3. Increase in total liabilities: Mainly due to the recognition of lease liabilities by IFRS 16 from 2019. 4. The increase in the exchange difference in the conversion of financial statements of foreign operating institutions is mainly due to the depreciation of RMB against Taiwan dollars in 2019.

Source: The annual financial report that has been audited by CPA is based on IFRS.

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II. Financial Performance:

(I) Financial Performance Analysis

Units: NT$ thousand

Year Item 2018 2019 Amount of Increase (Decrease) %
OperatingRevenue 2,191,727 1,795,565 (396,162) (18.08)
Operatingmargin 608,758 437,621 (171,137) (28.11)
OperatingExpenses (389,374) (324,601) (64,773) (16.64)
OperatingIncome 219,384 113,020 (106,364) (48.48)
Non-operating income and expenses 4,201 (1,148) (5,349) (127.33)
Income before tax from continuingoperations 223,585 111,872 (111,713) (49.96)
Tax Expense (59,499) (59,576) 77 0.13
Netprofit for theyear 164,086 52,296 (111,790) (68.13)
Other comprehensive income (25,312) (57,404) (32,092) (126.79)
Total comprehensive income for theyear 138,774 (5,108) (143,882) (103.68)
Where the difference exceeds 20% and the amount is changed for NT$ 10,000,000, the analysis is
as follow:
1. Gross operating profit, net operating profit, before-tax profit and loss of continuing business
departments and decrease in net profit in the current period: The main reason is that the
operating revenue from China's automobile market in 2019 decreased by about 14.36%, and
the operating revenue of machinery and equipment decreased by about 41.65%. Customers
need to digest inventory and wait for industrial recovery, resulting in a decrease in the
operating revenue of the Company by NT$396,162,000 or about 18%, while the maintenance
of fixed manufacturing expenses led to a decrease in the gross profit rate. All these factors led
to the decline of gross operating profit, net operating profit, before-tax profit, and loss of
continuing business departments and net profit of the current period compared with the same
period of last year.
2. Increase in other comprehensive losses: Mainly due to an increase in the exchange difference
on the conversion of financial statements of foreign operating institutions in the current
period.

• (II) Expected future sales volume and basis

Based on customers' estimated demand, and in viewing of capacity planning and past business experience, the Company set annual shipment target.

• (III) The Impact on the Company's future financial business and response plan

The Company is still in the growth stage of the industry, meanwhile, the Company will pay attention to market demand changes all the time, the development of new customers to enhance the Company's profits, continuing to maintain a stable and well financial situation.

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III. CASH FLOW

(I) Analysis of liquidity in the coming year

Item / Year	2018 2019	Amount of Increase (Decrease)	%
Cash generated from operations - inflow(outflow)	33,855 401,312	367,457	1,085.38
Net cash used in investing activities - inflow(outflow)	4,117 (184,611)	(188,728)	(4,584.11)
Net cash provided by (used in) financing activities - inflow (outflow)	(144,943) (38,550)	106,393	73.40
The main reason of change in cash flow in the latest year:
1. Increase in cash inflow from	business activities: Mainly due to the active recovery of accounts
receivable in the current period.
2. Increase in cash outflow from investment activities: Mainly due to an increase in fixed
deposits in the current period.
3. Decrease in cash outflow from financing activities: Mainly due to an increase in short-term
borrowings in the currentperiod to repaythe matured corporate bonds.

(II) An analysis of the Company's cash liquidity for the coming year

The Company has not yet experienced any shortage of liquidity. As of March 31, 2020, the cash on the Company's account is NT$355,665,000. Based on the 2020 budget estimate, it should be sufficient to pay the cash outflow from the investment and financing activities without an insufficient liquidity problem.

IV. The Impact of Major Capital Expenditure Items on Financial Service for Latest Year

The amount of property, plant and equipment purchased by the Company in 2019 is NT$27,558,000, which is to expand the production capacity in line with business needs and purchase production line machinery and equipment. The capital source is generated from operations. According to the profit situation of the company, it has no significant impact on the company's finance.

V. The Company's policy for the most recent year on investments in other companies, the main reasons for profit/losses resulting therefrom, plans for improvement, and investment plans for the coming year.

• (I) The Company’s Investment in Other Companies Policy

The Company focuses on what they do best. The policy of investments in other companies takes automobile and motorcycle components and press equipment as the investment target. The relevant executive departments shall follow the internal control system “Investment cycle” and “The Regulation of Acquiring or Disposing of Assets” and other procedures, which have been discussed and approved by the Board of Director or shareholders’ meeting.

~164~

(II) The Company's policy for the most recent year on investments in other companies, the main reasons for profit/losses resulting therefrom, plans for improvement.

Units: NT$ thousand

==> picture [455 x 602] intentionally omitted <==

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

Recognized
The name of profit (loss) on Plans for
% The reasons for profit/losses
investment company investment in improvement
2019
Mainly due to investment
Patec Pte. Ltd. 100 48,304 income recognized under None
equity-method.
At present, the
scale of the
factory is
reduced, and
the
Press Automation 100 (39,881) [Mainly due to the reduction of ] expenditure is
Technology Pte. Ltd. press equipment orders.
reduced, and
the fixed cost
is reduced by
means of
outsourcing.
Wuxi Jingxin Mainly due to the stable
Precision Machining 93 186,937 operation of automotive None
Co., Ltd. components orders.
Mainly due to the stable
Wuxi Patec Precision
100 14,326 operation of press equipment None
Machining Co., Ltd.
orders.
Yancheng JingXin
Precision Machining 100 2,961 [Mainly due to the stable ] operation of processing orders. [None ]
Co., Ltd.
Mainly due to the increase of Actively
factory expansion costs and consult and
Patec Precision Kft 100 (12,730)
reflect cost adjustment price to develop
make customer transfer order. customers.
Actively
develop
Patec Medical 58 (815) [Still developing new products ] customer
Supplies Pte. Ltd. and markets.
promotion
products.
Actively
develop
BionicXP Pte. Ltd. 100 (8,910) [Still developing new products ] customer
and markets.
promotion
products.
Mainly due to the stable
PT. Patec Presisi
70 3,029 operation of automotive None
Engineering
components orders.
----- End of picture text -----

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The name of investment company	%	Recognized profit (loss) on investment in 2019	The reasons for profit/losses	Plans for improvement
PT. PDF Presisi Engineering	89	(1,253)	Mainly due to the increase of basic wage cause minor loss.	Actively receiving orders and developing more product applications.
PT. API Precision	89	687	Active taking orders, and the growth of automotive components market.	None

(III) The investment plan for the coming year

• The Company has stepped into the medical equipment market in recent years.

• According to the data of the Taiwan Institute of Economic Research, the scale of the global medical equipment market in 2019 reached US$411.6 billion, 5.77% higher than that in 2018. The preferential tax rate and deregulation on the medical materials industry in the United States will effectively promote the development of the industry. In developed countries and China, the population aging speed will accelerate, and the population of chronic diseases caused by the change of life style and the increasingly serious environmental pollution will increase, which will respectively make the demand of mobile medical aids and physiological monitoring system grow significantly. In addition, emerging countries continue to strengthen their basic medical construction, and will therefore have a significant demand for medical devices and equipment. For example, China continues to implement the "2030 Healthy China" strategy to substantially improve the level of medical facilities in the second and third tier urban hospitals in China. BMI Research points out that the global medical material market will reach US$425.3 billion in 2020. With excellent press and cold forming technology, the company not only reduces the environmental pollution caused by the production process, but also effectively improves the product precision and production efficiency. It is expected that the company will enter the supply chain of the manufacturer to cooperate with the internationally renowned big factories in the production of medical equipment, which will contribute to business growth. Besides, the developed sterilizing box for medical devices has obtained hospital orders from Taiwanese foundations this year. Chinese and Korean markets also continue to cooperate with agents, which are expected to bring more profits to the Company.

VI. RISK MATTERS

• (I) The impact upon the Company's changes in interest, exchange rates and inflation in the latest year, and the measures the company plans to adopt in response:

• The impact upon the Company's changes in interest and the measures the company plans to adopt in response:

To meet operational needs, the Group borrows long-term and short-term loans, and the interest expense mainly comes from bank loans and convertible bonds. The Group’s interest expense in 2018 and 2019 is 12,661 thousand and 12,605 thousand respectively, accounting for the operating profit ratio 5.77%

~166~

and 11.15% respectively in the current year. Facing risks arising from interest rate fluctuations, the financial department of the Group may take the following measures:

The financial units of the Group will keep an eye on the trend of interest rates and maintain good relationship with financial institutions to obtain a lower cost of capital and reduce liabilities when the company has abundant capital, so as to reduce the interest rate risk.

1. The impact upon the Company's changes in exchange rates and the measures the company plans to adopt in response:

The Group is multinational operation, which gives rice to the risk of exchange rate in different currencies, including SGD, USD, RP$ and RMB. The relevant risk of exchange rate comes from business transactions, recognized assets and liabilities and the net investment of foreign operations. The Group’s exchange gain or loss in 2018 and 2019 is 708 thousand and (7,853) thousand respectively, accounting for the operating profit ratio 0.32% and (6.95%) respectively in the current year. Facing risks arising from exchange rate fluctuations, the financial department of the Group may take the following measures:

  - (1) Financial personnel collect real-time foreign exchange information at any time, according to the future trend of exchange rates, maintain appropriate net foreign exchange position and provide business reference for quotation.

  - (2) To adjust the position of foreign currency deposits according to the changes in exchange rates, if necessary, to reduce the exchange rate risk by taking buy forward or sell forward exchange agreement and borrowing debts for hedging purposes.

  - (3) According to “Regulations Governing the Acquisition and Disposal of Assets by Public Companies”, the “Operating Procedure for Derivatives Transaction” shall be stipulated as the basis for the transaction of derivative commodities, so as to limit the exchange losses of daily operations to a controllable range.

1. The impact upon the Company's changes in inflation and the measures the company plans to adopt in response:

   • The Group’s past profits and losses have not been significantly affected by

   • inflation. If the inflation leads to higher cost of goods purchased, the Group will adjust the sales price properly in addition, the group will review and compile relevant information for management decision making on a regular or irregular basis by referring to the economic data and reports of the government and research institutions.

2. (II) High-risk investments, highly leveraged investments, loans to other parties, endorsements, guarantees, and derivatives transactions; the main reasons for the profits/losses generated thereby; and response measures to be taken in the future.

3. The policy of high-risk investments and highly leveraged investments, the main reasons for the profits/losses, and response measures to be taken in the future: The Group focuses on main business operation and has never evolved in

other high-risk industries. Moreover, the financial policy is based on the principle of conservatism and does not make high-leverage investment, so the risk is still limited.

1. Regarding the policy of loans to other parties, the main reasons for the profits/losses, and response measures to be taken in the future:

The Group loans to other parties only toward the affiliated companies or the companies which has business with, and moreover, the Group shall comply with the regulations of "The Regulation for Management of Loans to Others"

~167~

and handles the operation of financing. It has no impact on the profits or losses of the Group’s consolidated financial statements up to the printing date of this annual report. The Company will keep following the regulations when it loans to other parties in the future in order to minimize the risk.

1. Regarding the policy of endorsements and guarantees, the main reasons for the profits/losses, and response measures to be taken in the future:

The Group carries out endorsements and guarantees only toward the affiliated companies or the companies which has business with, and moreover, the Group shall comply with the regulations of the "endorsements and warranties" of the company and handles the operation of endorsements and guarantees. It has no impact on the profits or losses of the Group’s consolidated financial statements up to the printing date of this annual report. The Company will keep following the regulations when it engages in endorsements and guarantees in the future in order to minimize the risk.

1. Regarding the policy of derivatives transactions, the main reasons for the profits/losses, and response measures to be taken in the future:

The purpose of trading derivatives is hedging the risk of foreign currency assets or debt which is caused by changes in exchange rates. At present, the Group mainly uses forward forex buying (selling) and is in compliance with the Company’s “Procedures for Financial Derivatives Transactions” to minimize the risk.

• (III) Future research and development projects, and expenditures expected in connection therewith:

Through the internal education and training, experience inheritance and well knowledge management policy, the Group and each subsidiary accumulated research and development team strength and strengthen the planning and R&D innovation ability of raw materials and products. The main scope of our research and development is to develop new products and process improvement. The Company provides customer high quality of products and services by improving current technical ability and manufacturing efficiency, the ability of developing products. In the future, the Company will continue to invest in research and development and process improvement to ensure the company's advantages in the industry.

• (IV) The impact upon the Company's financial operations of important policy and legal developments at home and abroad, and the measures the Company plans to adopt in response:

The Group has been closely observing the important change of policy and law in each investment area, and timely consults legal and accounting experts to evaluate, recommend and plan the response measures in order to fully understand and adapt to the changes of market environment. The important change of policy and law in each investment area has no significant impact on the Company's finance and business in the latest year and up to the printing date of this annual report.

• (V) The impact on the Company's financial operations of developments in science, technology, and industry, and the measures the Company plans to adopt in response:

In addition to collecting and analyzing the market and technical development and changes of various automobile and motorcycle components at any time to reduce the impact of technological changes, the Group also actively engages in the development of new products and the improvement of press process to stabilize and ensure the source of profits. The change of technology, and industry has no significant impact on the Company's finance and business in the latest year and up to the printing date of this annual report

~168~

• (VI) The impact of changes in the Company's image upon its crisis management, and the measures the Company plans to adopt in response

The group has always adhered to the principle of professional, integrity and sustainable management, and values importance to corporate image and risk control. The Group has no major changes in corporate image resulting in crisis management in the last year and up to the printing date of this annual report.

• (VII) The expected benefits and potential risks of any merger or acquisition, and measures to be adopted in response:

There is no plan for merger or acquisition in the last year and up to the printing date of prospectus. However, if there is any merger plan in the future, the Company will adhere to the prudent assessment attitude and consider whether or not merger will bring specific benefits to the company to ensure the protection of the Company’s interest and shareholders’ equity.

• (VIII) The expected benefits and potential risks of any plant expansion, and measures to be adopted in response:

The Group doesn’t have plan for plant expansion for the coming year.

• (IX) The risks associated with any concentration of sales or purchasing operations, and measures to be adopted in response:

• The risks associated with any concentration of purchasing operations, and measures to be adopted in response

The Group has more than two suppliers of major raw materials and maintains a good cooperative relationship to ensure the flexibility of procurement and disperse the source of purchase.

1. The risks associated with any concentration of sales operations, and measures to be adopted in response

The Group mainly produces and sells automobiles and motorcycle components and press production line machine. The majority of customers are international well-known enterprises and their subsidiaries, among which the sales amount to the largest customer of automotive components accounts for more than 30% of the annual net sales. The main reason is that automotive industry is a closed market controlled by minority of companies, and the entry barrier is high. Moreover, in order to control the quality of product, most of automotive enterprises have their long-term stable cooperative suppliers, so it is industry characteristic that the concentration of sales among the world’s top automotive components manufacturers. In recent years, however, in addition to strengthening and consolidating the cooperative relationship with the customers, the group has also been actively developing new customers and dispersing its order sources, with a view to expanding the company's operation scale and further reducing the risk of sales concentration.

• (X) Effect upon and risk to the Company if a major quantity of shares belonging to a director, supervisor, or shareholder holding greater than a 10 percent stake in the company has been transferred or has otherwise changed hands, and measures to be adopted in response

The directors and major shareholders holding more than 10% of the shares of the Company have no substantial transfer of shares in the latest year and up to the printing date of this annual report.

~169~

• (XI) Effect upon and risk to the Company associated with any change in governance personnel or top management, and measures to be adopted in response:

There is no change in governance personnel or top management happened up to the printing date of this annual report. The company has strengthened various corporate governance measures, invited independent directors with financial and legal expertise and set up an audit committee for the sake of enhancing the overall operating efficiency and strengthening the protection of shareholders' equity.

• (XII) Litigious and non-litigious matters

• If there has been any substantial impact upon shareholders' equity or prices for the Company's securities as a result of any litigation, non-litigious proceeding, or administrative dispute involving the company that was finalized or remained pending during the last two years and up to the printing date of this annual report: None.

• If there has been any substantial impact upon shareholders' equity or prices for the company's securities as a result of any litigation, non-litigious proceeding, or administrative dispute involving a company director, supervisor, general manager, de facto responsible person, or major shareholder with a stake of more than 10 percent, and the matter was finalized or remained pending during the last two years and up to the printing date of this annual report: None

(XIII) Other important risks and measures to be adopted in response:

• (1) The risk that losing the top management and middle manager:

Since the Group was established, the operation strategy, business experience and industrial contacts accumulated by top management and middle manager have enabled the group to make substantial progress in business expansion. Therefore, the retention of top management and middle manager has a significant impact on the normal operation. The Group is committed to providing a competitive compensation and bonus system, supplemented by employee training, growth and promotion plans, and internal work environment improvement and optimization, to enhance the identification and coherence between top management and middle manager and the company, hence top management and middle manager are rather stable in many years.

• (2) The management faces the challenge that the Company becomes listed company.

Although the Group has made remarkable achievements in the business of automobile component industry, after the stock listing, the Company has to face the vast investors, shareholders and professional investment institutions. Furthermore, the Group is a foreign company, it still needs some time to adopt and understand the relevant securities and regulations in Taiwan. Before applying for listing, the Group has been recruiting suitable talents for the operation of the Company, and organises excellent teams to serve as strong backing for the management to meet the challenges of becoming a listed company.

• (3) The protection of shareholders' equity

There are many different regulations in companies between Caymen Islands and R.O.C. There are also many different regulations for companies’ operation in both countries. Investors’ view of shareholders’ equity on investing companies in R.O.C. cannot be used for investing companies in Caymen Islands. Investors should understand and consult with professionals ensuring whether or not there is a risk that an investment in Caymen Islands will not be protected by shareholders’ equity.

~170~

Except the above, the Company’s measures to be adopted in response are as follow:

The Company has amended Article of Association in accordance with “Important matters in connection with protection of shareholder' equity of foreign issuer's country of registration checklist” stipulated by Taiwan Stock Exchange and fully disclosed the difference between Article of Association and checklist in the annual report. In the future, if there are major law changes in the Cayman Islands, the Company will also adhere to the principle of full disclosure of information so that investors, creditors and other information users have sufficient and appropriate information to make investment decisions.

(4) Information Security

In terms of information security risk control, the Company has established and implemented the information security management system, and formulated information security policy documents to standardize the information security of the Company. The Company also conducts information security risk assessment and internal information security cycle audits on a regular basis every year to ensure the effectiveness of the management system and legal compliance. Therefore, the risk of information security is not a major operational risk of the Company.

VII. Other Major Items: None

~171~

Eight. Special Disclosure

I. INFORMATION RELATED TO THE COMPANY’S AFFILIATES

(I) Organizational Chart of Affiliated Companies:

==> picture [493 x 151] intentionally omitted <==

==> picture [493 x 151] intentionally omitted <==

~172~

(II) Information on Affiliated Companies

==> picture [483 x 449] intentionally omitted <==

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

December 31, 2019; Unit: NT$ dollar
Date of
Company Name Address Capital Stock Main Business Activity
Incorporation
54 Serangoon North Avenue4 Investment holding and
Patec Pte. Ltd. 09/2006 #05-01 Cyberhub North SG$ 31,286,731 buying and selling press
Singapore 555854 machines
54 Serangoon North Avenue4
Press Automation 09/1992 #05-01 Cyberhub North SG$ 6,247,100 [Assembly and selling of ]
Technology Pte. Ltd. equipment
Singapore 555854
Wuxi Jingxin No. C21-1, Shuofang Industrial
Precision Machining 02/2002 Park Area, Phase 5, Xinwu Dist., US$ 5,000,000 [Manufacturing and selling ]
of automotive components
Co., Ltd. Wuxi, China.
Patec Precision Kft 07/2008 3534 Miskolc, Muhi u. 2/a HUF$ 157,250,000 [Manufacturing and selling ]
Co., Ltd. Hungary of automotive components
Patec Medical 54 Serangoon North Avenue4
Supplies Pte. Ltd. 03/2017 #05-01 Cyberhub North SG$ 1,035,000 [Sales medical device and ]
equipment
Singapore 555854
BionicXP Pte. Ltd. 54 Serangoon North Avenue4
08/2018 #05-01 Cyberhub North SG$ 100,000 [Application sales of ]
manipulators
Singapore 555854
Jl. Angsana Raya Blok L3-01
Manufacturing and selling
PT. Patec Presisi Delta Silicon Industrial Park,
08/1997 US$ 6,200,000 of automotive and
Engineering Lippo Cikarang, Bekasi 17550,
motorcycle components
Indonesia
No. C21-1, Shuofang Industrial
Wuxi Patec Precision 07/2009 Park Area, Phase 5, Xinwu Dist., RMB 10,000,000 [Assembly and selling of ]
Machining Co., Ltd. equipment
Wuxi, China.
Yancheng JingXin NO.68. south taishan road,
Precision Machining 05/2013 yancheng economic development RMB 5,000,000 [Manufacturing and selling ]
of automotive components
Co., Ltd. zone, jiangsu province, P.R.C.
Jl. Angsana Raya Blok L3-01
PT. API Precision 03/2011 Delta Silicon Industrial Park, US$ 1,670,000 [Manufacturing and selling ]
Lippo Cikarang, Bekasi 17550, of automotive components
Indonesia
Jl. Angsana Raya Blok L3-01
PT. PDF Presisi 09/2011 Delta Silicon Industrial Park, US$ 1,360,000 [Manufacturing and selling ]
Engineering Lippo Cikarang, Bekasi 17550, of automotive components
Indonesia
----- End of picture text -----

(III) Shareholders in Common of Patec and Its Subsidiaries with Deemed Control and Subordination: None

~173~

(IV) Directors, Supervisors and Presidents of Affiliated Companies:

==> picture [464 x 558] intentionally omitted <==

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

As of December 31, 2019; Unit: Shares
Shareholding
Company Name Title Name or Percentage
Representative Shares shareholding
(%)
Director Wee Liang Kiang − −
Patec Pte. Ltd. − −
Director Goh Mui Teck William
Press Automation Director Wee Liang Kiang − −
− −
Technology Pte. Ltd. Director Goh Mui Teck William
Director Wee Liang Kiang − −
Wuxi Jingxin
Director Goh Mui Teck William − −
Precision Machining
Director Chang Ping − −
Co., Ltd. − −
Director Wee Hong Jie
Director Wee Liang Kiang − −
Patec Precision Kft Director Wee Hong Jie − −
− −
Director Chang Ping
Patec Medical Director Wee Liang Kiang − −
Supplies Pte. Ltd. Director Chen Shih Tien 200,000 19.32%
− −
BionicXP Pte. Ltd. Director Wee Hong Jie
President Director Asan Tatang
Director Budi Wirawan − −
PT. Patec Presisi Director Wee Hong Jie − −
Engineering Director Chng Kee Peng − −
Director Sean Hsu − −
Commissioner Wee Liang Kiang − −
Wuxi Patec Precision Executive director Wee Liang Kiang − −
− −
Machining Co., Ltd. Supervisor Ping Chang
Yancheng JingXin
Precision Machining General Manager Ping Chang − −
Co., Ltd.
President Director Asan Tatang 62,500 3.74%
Director Chng Kee Peng − −
PT. API Precision Director Lim Hong Kae 125,000 7.49%
President Commissioner Wee Liang Kiang − −
− −
Commissioner Budi Wirawan
President Director Asan Tatang − −
Director Liao, Tze-Huan − −
PT. PDF Presisi
Director Chng Kee Peng − −
Engineering
President Commissioner Wee Liang Kiang − −
− −
Commissioner Li, Yuan
----- End of picture text -----

~174~

(V) The financial position and results of operations of affiliated companies

Unit: NT$ thousands

==> picture [471 x 307] intentionally omitted <==

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

Profit for
the EPS(Dollar)
Total Total Operating
Name Capital Assets Liabilities [Net Value] Sales Profit(Loss) year(After (After
income income tax)
tax)
Patec Pte. Ltd. 709,809 1,043,741 135,427 908,314 126,219 (60,183) 48,304 Note
Press Automation
354,175 226,637 69,104 157,533 129,562 (45,527) (41,300) Note
Technology Pte. Ltd.
Wuxi Jingxin Precision
166,090 1,150,115 172,928 977,187 1,051,451 200,516 200,450 Note
Machining Co., Ltd.
Patec Precision Kft Co.,
210,643 295,601 259,217 36,384 124,215 (11,705) (13,047) Note
Ltd.
Patec Medical Supplies
12,996 22,958 2,844 20,114 601 (1,407) (1,406) Note
Pte. Ltd.
BionicXP Pte. Ltd. 2,301 6,614 13,156 (6,542) 9,772 (9,277) (8,910) Note
PT. Patec Presisi
139,483 414,794 66,703 348,091 374,312 9,139 3,025 Note
Engineering
Wuxi Patec Precision
43,004 95,012 5,589 89,423 71,304 20,597 15,019 Note
Machining Co., Ltd.
Yancheng JingXin
Precision Machining 21,502 28,195 2,023 26,172 11,145 2,960 3,184 Note
Co., Ltd.
PT. API Precision 34,314 38,034 22,084 15,950 62,779 1,604 774 Note
PT. PDF Presisi
37,595 43,447 12,821 30,626 45,472 38 (1,408) Note
Engineering
----- End of picture text -----

Note: Not limited company, so earnings per share cannot be calculated.

• (VI) Consolidated Financial Statements on Affiliated Companies: (refer to page 101 -160)

• (VII) Reports on Affiliated Companies: Not applicable.

• II. Privately placed securities handling status in the Latest Year and up to the Printing Date of this Annual Report: None.

• III. Shares in the Company held or disposed of by subsidiaries in the latest year and up to the printing date of this annual report: None.

IV. Other Necessary Supplementary Notes: None.

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V. The description of significant difference in the regulations on the protection of Taiwan’s shareholders' equity:

The Company has amended its Articles of Association in accordance with important matters in connection with protection of shareholder equity listed in the “Important matters in connection with protection of shareholder' equity of foreign issuer's country of registration checklist”, issued by Taiwan Stock Exchange on December 25, 2019. However, some important matters concerning the protection of shareholder' equity are not applicable under the laws of the Cayman Islands. Please refer to the following table for details (the English version of the Articles of Association shall prevail, and the following Chinese contents are for reference only)

Important matters in connection with protection of shareholder equity

Regulations of Articles and reasons for differences

The definition of “Special Resolution” is that where shareholders representing more than two-thirds of the total number of issued shares of the company present the shareholders' meeting, the resolution is implemented with the consent of more than half of vote cast of present shareholders. Where the total number of shares of present shareholders is less than the aforesaid quota may shareholders representing more than half of the total number of issued shares present the shareholders' meeting, the resolution is implemented with consent of two-thirds of vote cast of present shareholders.

In accordance with the requirement of Letter issued on 2010.04.13 TSEC No. 0991701319 by Taiwan Stock Exchange, article 38 and article 2(1) of Articles of Association stipulates that Special Resolution is the resolution that being passed by more than two-thirds of vote cast of Members as, being entitled to do so, vote in person or, in the case of any Members being Juristic Persons, by their respective duly authorized representatives or, where proxies are allowed, by proxy, present at a general meeting, which Members representing more than half of the total number of issued shares of the Company. At the same time, it complies with the requirements of the Cayman law and Taiwan Company Act on the voting ratio of public companies.

1. A company shall not cancel its shares, unless a resolution on capital reduction has been adopted by its shareholders' meeting; and capital reduction shall be effected based on the percentage of shareholding of the shareholders pro rata.

2. A company reducing its capital may return share prices (or the capital stock) to shareholders by properties other than cash; the returned property and the amount of such substitutive capital contribution shall require a prior approval of the shareholders’ meeting and obtain consents from the shareholders who receive such property.

3. The board of directors shall first have the value of such property and the amount of such substitutive capital contribution set forth in the preceding Paragraph audited

Articles 14 to 18 of the Cayman Islands’ company law have strict procedures and substantive rules for share capital reduction, and the relevant regulations are mandatory regulations, which can be amended only by the change of articles of association. The standard requirements are rather difference in share capital reduction between Cayman Islands’ company law and matters in connection with protection of shareholder' equity checklist. For the avoidance of doubt, based on the advices given from attorney of Cayman Islands, the Company hereby amend article 14 of the articles of association. The Company may reduce its share capital in the manner authorised, and subject to any conditions prescribed by the Law and the Applicable Listing Rules. As for the standard requirements of the matters in connection with protection of shareholder' equity checklist for the Company's

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Important matters in connection with protection of shareholder equity	Regulations of Articles and reasons for differences
and certified by a certified public accountant before the shareholders’ meeting.	capital reduction, the Company uses the way of purchase of shares, which are stipulated in article 22(1) of the Article of Association so as to achieve the standard requirements specified in the left-hand column.
1. If the general shareholders’ meeting is held outside the R.O.C, it shall be reported to the stock exchange for approval within two days after the board of directors' resolution or the shareholders’ convening permission obtained from the competent authority. 2. When the general shareholders’ meeting is held outside the R.O.C., the Company shall engage a professional Shareholder Service Agent within the R.O.C. to handle the shareholders’ voting matters.	As stipulated in the article 30 of Articles of Association, “During the Relevant Period, all general meetings shall be held in the R.O.C.” and no exception, it is no longer necessary to regulate the procedures for approval or declaration of shareholders’ meeting held outside the R.O.C. In addition, foreign issuer will hold general meeting within the R.O.C. during the Relevant Period, but foreign issuer shall engage a professional Shareholder Service Agent within R.O.C to handle the shareholders’ voting matters.
Any one or more Member(s) holding at least three percent (3%) of the issued and outstanding Shares of the Company for a period of one year or a longer time may, by depositing the requisition notice specifying the proposals to be resolved and the reasons, request the Board to convene an extraordinary general meeting. If the board of directors fails to give a notice for convening a special meeting of shareholders within 15 days after the filing of the request, the proposing shareholder(s) may, after obtaining an approval from the competent authority, convene a special meeting of shareholders on his/their own.	Since the foreign issuer is a company established in accordance with the Caymen Islands law, there is no local competent authority who is responsible for reviewing whether or not shareholders shall convene meeting their own. Article 31 of the current Articles of foreign issuer provides that Any one or more Member(s) holding at least three percent (3%) of the issued and outstanding Shares of the Company for a period of one year or a longer time may, by depositing the requisition notice specifying the proposals to be resolved and the reasons, request the Board to convene an extraordinary general meeting. If the Board does not give notice to Members to convene such meeting within fifteen (15) days after the date of the requisition notice, the proposing Member(s) may convene a general meeting. In respect of the requested shareholders may convene a shareholders' meeting by themselves in the preceding sentence, there is no need to obtain approval from the competent authority. This is in accordance with the requirement of Letter issued on 2010.04.13 TSEC No. 0991701319 by Taiwan Stock Exchange, and this shall have no adverse effect on shareholders' equity.

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Important matters in connection with protection Regulations of Articles and reasons for
of shareholder equity differences
A shareholder who casts his/her/its vote in A Member who exercises his voting power at a
writing or by way of electronic transmission general meeting by way of a written ballot or
shall be deemed to have attended the said by electronic transmission, in Caymen Islands,
shareholders’ meeting in person. shall be deemed to have appointed the
chairman of the general meeting as his proxy to
vote his Shares at the general meeting.
Therefore, article 56 of the Articles provides
that the chairman of the general meeting shall
be deemed to have been appointed as proxy.
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Important matters in connection with protection of shareholder equity Regulations of Articles and reasons for differences	Important matters in connection with protection of shareholder equity Regulations of Articles and reasons for differences
A shareholder who casts his/her/its vote in writing or by way of electronic transmission shall be deemed to have attended the said shareholders’ meeting in person. A Member who exercises his voting power at a general meeting by way of a written ballot or by electronic transmission, in Caymen Islands, shall be deemed to have appointed the chairman of the general meeting as his proxy to vote his Shares at the general meeting. Therefore, article 56 of the Articles provides that the chairman of the general meeting shall be deemed to have been appointed as proxy.
In case a shareholder who has exercised his/her/its voting power in writing or by way of electronic transmission intends to attend the shareholders' meeting in person, he/she/it shall, two days prior to the meeting date of the scheduled shareholders' meeting and in the same manner previously used in exercising his/her/its voting power, serve a separate declaration of intention to rescind his/her/its previous declaration of intention made in exercising the voting power under the preceding Paragraph Two. In the absence of a timely rescission of the previous declaration of intention, the voting power exercised in writing or by way of electronic transmission shall prevail.	In Ogier's opinion, to the best of his knowledge, there are no relevant court decisions in the Cayman Islands. However, the British case (which is a persuasive case for the Cayman Islands court) held that even if the proxy was not revoked in the manner provided for in the Articles, it did not prevent the shareholder from cast the vote in person and excluding the calculation of the voting right of the entrusted agent. Article 57 of the Articles of Association of foreign issuers stipulates “In case a Member who has cast his votes by a written instrument or by way of electronic transmission intends to attend the relevant general meeting in person, he shall, at least two (2) day prior to the date of the general meeting, revoke such votes by serving a notice in the same manner as he cast such votes. In the absence of a timely revocation of such votes, such votes shall prevail. Nonetheless, a Member who attends and votes at a general meeting in person would be deemed to have revoked his prior voting instructions by a written instrument or by way of electronic transmission, notwithstanding that such shareholder has not submitted a revocation notice in accordance with this Article 57.” Which means that after Members have cast their votes by a written instrument or by way of electronic transmission, they don’t follow the rules mentioned in article 57 of Article of Association revoking such votes by serving a notice in the same manner as they cast such votes at least two days prior to the date of the general meeting, and still attend and vote at a general meeting in person. Notwithstanding that the Members have not actually sent notice of revocation, the

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Important matters in connection with protection of shareholder equity	Regulations of Articles and reasons for differences
	Members’ attendance and exercise of their cast shall be deemed to have revoked their prior written or electronic exercise of their cast in accordance with the Articles of Association in order to comply with the requirements of the Cayman law.
1. One or more Members holding three percent (3%) or more of the total number of the outstanding shares continuously for a period of more than one year may request in writing the Supervisor to file, on behalf of the Company, an action against a Director, and Taiwan Taipei District Court of the R.O.C shall be the court of competent jurisdiction for the first instance. 2. If the supervisor does not file a lawsuit within 30 days after the request is filed by the shareholders, shareholders may file a lawsuit for the company, and Taiwan Taipei District Court of the R.O.C shall be the court of competent jurisdiction for the first instance.	The Company does not have supervisors as it is foreign issuer. Therefore, according to Company Act, the regulation that the minority shareholders request the supervisor to file a lawsuit against the director, the Company can replace the supervisor listed in the left column with an independent director. On the basis of article 85 of Articles of Association, minority Members request the Board to authorise any Independent Director to file, on behalf of the foreign issuers’, an action against a Director who has, in the course of performing his/her duties, committed any act resulting in damage to the Company or in violation of the Law, the Applicable Listing Rules or these Articles, with a competent court, including the Taiwan Taipei District Court of the R.O.C.

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Nine. Any event that results in substantial impact on the shareholders’ equity or prices of the Company’s securities as prescribed by Subparagraph 2, Paragraph 2, Article 36 of the Securities and Exchange Act that have happened in the Latest Year and up to the Printing Date of this Annual Report: None.

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