Dear Shareholders,

Even though Test-Rite was impacted by the US-China trade war, pension reform, and changes in customers’ shopping patterns, its’ accumulated revenue showed a steady growth in 2018. Under the efforts of all the employees, Test-Rite reported revenue of NT$39.9 billion, net income of NT$406 million, and basic EPS of NT$0.8 in 2018. The Board has approved the management’s proposal to distribute cash dividends at NT$1.28/share, more than NT$1.2 last year.

Test-Rite’s trading business continued to hit a record in 2018, with a growth of 18.4% from 2017. Our agency business also delivered strong performance, with shipments up by 10.5% to NT$13.3 billion. The substantial growth of the European and American markets drove the steady growth of shipments. Building on this momentum, Test-Rite decided to construct the second warehouse at the east coast of the U.S. Our strategy to sustain stable growth going forward encompasses the further expansion of sourcing on a global basis, development of a southbound policy, deepening relations with customers, strengthening product expertise and differentiation, and nurturing a new dynamism in delivering performance.

Our retail business in Taiwan was affected by a lackluster economic environment, the government’s pension reform, and a weak real estate market. Our retail business reported revenue of NT$16.5 billion in 2018, which was 1.7% lower than that in 2017. In response to the challenges posed by the external environment, we have intensified our customer-centric strategies through the integration of online and offline channels, a strong drive to increase online sales, and the use of new technologies to strengthen the shopping experience in retail stores. Having established a new retail business model, our TR Plus website saw a rise in sales by 43.4% to NT$1 billion or more in 2018. At annual “November 11” festival, we combined our virtual and physical channels and posted a new single-day retail sales record of over NT$200 million. Test-Rite also joined forces with Taobao, China’s largest e-commerce platform, to launch a smart retail store, Taobao x hoi!, in Taiwan; meanwhile, TLW set a milestone with TLW Dadun, the first small-sized smart store. We remain poised to develop the full potential of all our retail channels.

As of the end of 2018, Test-Rite Group operated 27 TLW (DIY) stores, 26 HOLA stores, 2 Crate & Barrel stores, and 2 hoi! stores in Taiwan, as well as 21 HOLA stores in China.

The following is Test-Rite’s consolidated operating result in 2018, along with the business plan for 2019 and future business strategies. We also include the highlight of potential influence from external competition, government regulations, and macroeconomic environment for your reference.

1. Operating result in 2018

(1) Operating result based on the business plan for 2018 (consolidated):

(2) Operating result based on the business plan for 2018 (standalone):

(3) Analysis of balance sheet & profitability (consolidated)

• Increase private label sales and differentiating products and further optimize supply chain and product costs.

• Strengthen the integration of topical embedded products, develop co-branding and exclusive products, and follow the film’s promotion plan.

• Expand cooperation and product development with the end maker.

• Focus on expansion of existing brands on hand this year.

• Maintain the growth momentum of our TLW Home Improvement Service Unit in providing value-added services for our customers.

• Continue to improve interactive service and customer experience and further achieve optimal customer adhesion.

• Continue to expand sales channels, strengthen online and offline channels, and expand sales levels.

B. Trading Business:

• Reinforce our existing relationships with key accounts, such as Walmart, Hillman ,Costco, Chewy and Autozone among others, to increase shipments.

• Continue to leverage in-house design capabilities to provide differentiating products for both trading and retail businesses , so as to transform Test-Rite into a product company.

• Both principal and agency maintain existing relationships with trading customers and aggressively pursue potential business opportunities.

• Strengthen the global sourcing capabilities, deepen the southbound supply chain, and implement the diversification of procurement areas.

• QAQC service deepens internal and external customer service.

(2) Future development strategies:

A. Retail Business strategy

• Reinforce product portfolio, increase sales of private label products to improve profitability, and develop personalized and functionally differentiated products.

• Continue to introduce well-known and reputed products and brands.

• Develop communities, provide services, get close to consumers’ demand, and exploit more innovative services.

• Enhance customer experience in retail stores.

• Enrich our customers’ online and offline shopping experience and integrate online and offline resources.

B. Trading Business strategy

• Leverage product development, procurement, and supply chain management to offer best-in-class value-added products and services to our customers.

• Strengthen self-development and designed capabilities, enhance customer experience, develop differentiated product functions, and respond quickly to meet market demand. Both principal and agency maintain existing relationships with trading customers and aggressively pursue potential business opportunities.

• Seek M&A opportunities in the trade and retail businesses to achieve and enhance the organic growth of the existing businesses.

3. Potential influence from external competition, government regulations, and macroeconomic environment

According to the Department of Statistics, M.O.E.A., the wholesale of household items and building materials increased by 3.27% and dropped by 1.03% YOY, separately, in 2018, showing that the real estate market was still in the correction stage after rebounding from the bottom. The total number of houses transferred increased by 4.5% year on year in 2018. Demand mostly came from self-occupation rather than arbitrage. At present, the international economy lacks the momentum, and the China-US trade war brings theripple effect. The Academia Sinica also conservatively revised down Taiwan’s economic growth rate. If the regional housing market is short of large construction projects, or the

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

Sincerely yours,

Chairman: Judy Lee