CMC - Annual Report 2018 | FinancialReports.eu

China Motor Corporation and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2018 and 2017 and Independent Auditors’ Report

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2018 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standard 10 “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we have not prepared a separate set of consolidated financial statements of affiliates.

Very truly yours,

CHINA MOTOR CORPORATION

By:

LI-LIEN CHEN YEN Chairman

March 27, 2019

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders China Motor Corporation

Opinion

We have audited the accompanying consolidated financial statements of China Motor Corporation and its subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors (refer to Other Matter section), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, 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 International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion based on our audits and the reports of other auditors.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2018. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters for the consolidated financial statements of the Group for the year ended December 31, 2018 are stated as follows:

Evaluation of Write-down of Inventory

Inventories of the Group are stated at the lower of cost or net realizable value. The estimation of the net realizable value is based on current market conditions and historical experience with product sales of a similar nature. Since rapid changes in market conditions may have a material impact on the result of such evaluation which could thus lead to the risk of inventory being inactive or obsolete, the evaluation of the write-off of inventory has been identified as a key audit matter.

Our audit procedures in respect of the evaluation of the impairment of inventory included:

Discussing with management whether the accounting methods and calculations of the evaluation of inventory had any significant changes;
Taking stock and verifying the authenticity of documentary evidence of the net realizable value of inventory, such as sales invoices, in order to verify the accuracy of the calculation of the net realizable value of inventory.

Revenue Recognition

Domestic sales of vehicles is material to the Group’s consolidated financial statements. Since the sales of vehicles is subject to the market situation and might lead to recognizing revenue in advance of the appropriate point of recognition, revenue recognition has been identified as a key audit matter.

Our audit procedures in respect of revenue recognition included:

Discussing with management whether the accounting methods for revenue recognition were appropriate and consistently applied;
Testing the design of the revenue recognition internal controls and the operating effectiveness of such controls as well as verifying the authenticity of sales transaction-related documentary evidence;
Performing cut-off tests, including examining transaction terms in sales contracts and vehicle delivery receipts, in order to verify whether the risks and rewards of the merchandise were truly transferred and whether the timing of revenue recognition was accurate.

Other Matter

We did not audit the financial statements as of and for the years ended December 31, 2018 and 2017 of Daimler Vans Hong Kong Ltd., Guangzhou NTN-Yulon Drivertrain Co., Ltd., Xiangyang NTN-Yulon Drivertrain Co., Ltd., Shung Ye Motors Corporation, Uni Auto Parts Manufacture Co., Ltd. and Southeast-Motor Co., Ltd. in which the Group had equity-method investments, but such financial statements were audited by other auditors whose reports have been furnished to us. Our opinion, insofar as it relates to the amounts included for these investees in the Group’s consolidated financial statements, is based solely on the reports of the other auditors. The aforementioned equity-method investments were 12.1% (NT$7,814,960 thousand) and 10.5% (NT$6,656,901 thousand) of the Group’s total assets as of December 31, 2018 and 2017, respectively. The Group’s share of equity of the aforementioned equity-method investments amounted to NT$1,282,377 thousand in comprehensive income and NT$1,216,697 thousand in comprehensive income for the years ended December 31, 2018 and 2017, respectively, which amounted to 36.4% and 29.3% of the Group’s consolidated total comprehensive income, respectively.

We have also audited the parent company only financial statements of China Motor Corporation as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified opinion with other matter section.

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 International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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 members of the Audit Committee) are responsible for overseeing the Group’s financial reporting process.

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

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

Identify and assess the risks of material misstatement of the 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.
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.
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Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the 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 auditors’ 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 auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.
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.
Obtain sufficient and appropriate audit evidence regarding the financial information of 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.

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 for the year ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Chih-Ming Shao and Ya-Ling Wong.

Deloitte & Touche Taipei, Taiwan Republic of China March 27, 2019

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss (Notes 4 and 7) Financial assets at amortized cost (Notes 4, 9 and 10) Financial assets for hedging (Notes 4 and 11) Debt investments with no active market (Notes 4 and 18) Notes receivable, net (Notes 4 and 13) Accounts receivable, net (Notes 4 and 13) Trade receivables from related parties (Notes 4 and 33) Other receivables (Note 4) Inventories (Notes 4, 5 and 15) Prepayments (Note 33) Non-current assets held for sale (Notes 4 and 16) Other current assets (Notes 4, 28 and 34) Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss (Notes 4 and 7) Financial assets at fair value through other comprehensive income (Notes 4 and 8) Available-for-sale financial assets (Notes 4 and 12) Financial assets at amortized cost (Notes 4, 9 and 10) Financial assets measured at cost (Notes 4 and 17) Debt investments with no active market (Notes 4, 18 and 33) Investments accounted for using the equity method (Notes 4 and 19) Property, plant and equipment (Notes 4, 20, 33 and 34) Investment properties (Notes 4, 21 and 34) Intangible assets under development (Note 4) Deferred tax assets (Notes 4 and 28) Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 22 and 34) Short-term bills payable Notes and accounts payables Trade payables to related parties (Note 33) Other payables (Note 23) Current tax liabilities (Notes 4 and 28) Other current liabilities (Notes 4, 7, 11 and 33) Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities (Notes 4 and 28) Net defined benefit liabilities (Notes 4 and 24) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Notes 4, 8 and 25) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translating foreign operations Unrealized gain on investments in financial assets at fair value through other comprehensive income Unrealized gain on available-for-sale financial assets Loss on effective portion of cash flow hedges (Notes 6 and 11) Gain on the hedging instruments (Note 11) Equity directly associated with non-current assets held for sale (Note 16) Total other equity Total equity attributable to owners of the Corporation NON-CONTROLLING INTERESTS (Note 14) Total equity TOTAL		2018 Amount % $ 14,429,460 23 567,643 1 104,359 - 743,303 1 - - 16,663 - 1,160,791 2 1,952,469 3 98,749 - 4,070,264 6 1,134,247 2 148,023 - 596,590 1 25,022,561 39 734,341 1 227,396 - - - 824,705 1 - - - - 29,106,774 45 6,388,147 10 1,380,002 2 304,163 1 336,711 1 179,616 - 39,481,855 61 $ 64,504,416 100 $ 645,000 1 93,972 - 2,705,317 4 944,954 2 2,717,065 4 117,081 - 297,523 1 7,520,912 12 268,161 1 910,328 1 30,926 - 1,209,415 2 8,730,327 14 13,840,508 22 6,403,633 10 8,897,857 14 1,046,967 1 22,486,952 35 32,431,776 50 (646,278) (1) 117,177 - - - - - 20,997 - (7,538) - (515,642) (1) 52,160,275 81 3,613,814 5 55,774,089 86 $ 64,504,416 100		2017
				Amount % $ 13,816,041 22 529,496 1 - - - - 744,052 1 23,799 - 1,161,493 2 1,703,903 3 105,184 - 4,464,469 7 1,436,696 2 - - 586,784 1 24,571,917 39 - - - - 726,472 1 - - 194,860 - 1,534,751 2 27,700,662 44 6,543,043 10 1,395,488 2 154,628 - 417,001 1 290,104 1 38,957,009 61 $ 63,528,926 100 $ 745,000 1 109,933 - 2,555,888 4 886,390 1 2,871,988 5 328,393 1 289,470 - 7,787,062 12 114,554 - 1,140,697 2 29,651 - 1,284,902 2 9,071,964 14 13,840,508 22 6,407,340 10 8,487,293 13 1,051,658 2 20,895,137 33 30,434,088 48 (485,118) (1) - - 765,456 1 (12,253) - - - - - 268,085 - 50,950,021 80 3,506,941 6 54,456,962 86 $ 63,528,926 100

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

(With Deloitte & Touche audit report dated March 27, 2019)

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 4, 26 and 33) Net sales Other operating revenue Total operating revenue OPERATING COSTS (Notes 11, 15, 24, 27 and 33) Cost of goods sold Other operating cost Total operating costs GROSS PROFIT REALIZED (UNREALIZED) GAIN ON TRANSACTIONS WITH ASSOCIATES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 24, 27 and 33) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME Share of profit of associates and joint ventures accounted for using the equity method (Notes 4 and 19) Interest income (Note 4) Dividend income (Notes 4 and 8) Other income Gain on disposal of investments (Notes 4, 17 and 30) Foreign exchange gain (loss) Interest expense Other expense Loss on financial instruments at fair value through profit or loss Impairment loss (Notes 4, 17 and 20) Total non-operating income and expenses		2018 Amount % $ 33,490,420 96 1,379,094 4 34,869,514 100 27,789,296 80 887,608 2 28,676,904 82 6,192,610 18 (2,053) - 6,190,557 18 914,786 3 1,284,988 4 2,092,742 6 4,292,516 13 1,898,041 5 2,407,876 7 195,251 1 29,755 - 112,747 - - - 12,498 - (14,639) - (53,721) - (49,059) - (228,036) (1) 2,412,672 7		2017
				Amount % $ 37,419,056 96 1,489,037 4 38,908,093 100 31,358,370 80 1,038,443 3 32,396,813 83 6,511,280 17 9,933 - 6,521,213 17 904,794 3 1,154,064 3 2,027,795 5 4,086,653 11 2,434,560 6 2,133,611 5 198,151 1 40,525 - 101,934 - 194,162 1 (108,800) - (13,329) - (14,766) - (6,109) - (83,932) - 2,441,447 7 (Continued)

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 28) NET PROFIT FROM CONTINUING OPERATIONS NET PROFIT FROM DISCONTINUED OPERATIONS (Note 16) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) (Note 4) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans (Note 24) Unrealized loss on investment equity instruments designated as fair value through other comprehensive income (Note 25) Gain on hedging instruments (Notes 11 and 25) Share of other comprehensive loss of associates accounted for using the equity method (Notes 19 and 25) Income tax relating to items that will not be reclassified subsequently to profit or loss (Note 28) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations (Note 25) Unrealized loss on available-for-sale financial assets (Note 25) Total gain on effective portion of cash flow hedges (Note 25)		2018 Amount % $ 4,310,713 12 418,671 1 3,892,042 11 - - 3,892,042 11 3,913 - (74,082) - 40,663 - (120,566) - (1,168) - (38,618) - - - - -		2017
				Amount % $ 4,876,007 13 338,656 1 4,537,351 12 2,839 - 4,540,190 12 (31,460) - - - - - (52,796) - 5,348 - (25,165) - (120,588) - 20,084 - (Continued)

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Share of the other comprehensive loss of associates and joint ventures accounted for using the equity method (Notes 19 and 25) Income tax relating to items that may be reclassified subsequently to profit or loss (Note 28) Other comprehensive loss for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR NET PROFIT ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests EARNINGS PER SHARE (Note 29) From continuing and discontinued operations Basic Diluted From continuing operations Basic Diluted		2018 Amount % $ (177,764) (1) - - (367,622) (1) $ 3,524,420 10 $ 3,592,999 10 299,043 1 $ 3,892,042 11 $ 3,298,141 9 226,279 1 $ 3,524,420 10 $ 2.64 $ 2.63 $ 2.64 $ 2.63		2017
				Amount % $ (181,113) (1) (3,702) - (389,392) (1) $ 4,150,798 11 $ 4,105,643 11 434,547 1 $ 4,540,190 12 $ 3,743,553 10 407,245 1 $ 4,150,798 11 $ 3.01 $ 3.01 $ 3.01 $ 3.01

		$		$
		$		$
		$		$
		$		$
		$		$

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

(With Deloitte & Touche audit report dated March 27, 2019)

(Concluded)

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CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

		Equity Attribu	le to Owners of the Corporation
Ordinary S	hares Amounts Capital Surplus $ 13,840,508 $ 6,407,220 - - - - - 120 - - - - - - - - - - 13,840,508 6,407,340 - - 13,840,508 6,407,340 - - - - - - - (3,707 ) - - - - - - - - - - - - - - $ 13,840,508 $ 6,403,633	Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $ 8,168,383 $ 1,051,658 $ 19,399,595 318,910 - (318,910 ) - - (2,214,481 ) - - (826 ) - - - - - - - - 4,105,643 - - (75,884) - - 4,029,759 8,487,293 1,051,658 20,895,137 - - 888,982 8,487,293 1,051,658 21,784,119 410,564 - (410,564 ) - - (2,491,292 ) - (4,691 ) 4,691 - - 9,720 - - - - - 3,592,999 - - 2,244 - - 3,595,243 - - - - - (5,111 ) - - 146 $ 8,897,857 $ 1,046,967 $ 22,486,952		Other Equity		Equity Directly Associated With Loss on the Non-current Hedging Instruments Assets Held For Sale $ - $ - - - - - - - - - - - - - - - - - - - (12,253) - (12,253 ) - - - - - - - - - - - - - 33,250 - 33,250 - - (7,538 ) - - - - $ 20,997 $ (7,538)
			Exchange Differences on Unrealized Gain on Investments in Financial Assets at Fair Value U Translating Through Other Foreign Operations Comprehensive Income A F $ (268,058 ) $ - - - - - - - - - - - - - (217,060) - (217,060) - (485,118 ) - - 273,866 (485,118 ) 273,866 - - - - - - - - - - - - (168,698) (161,654) (168,698) (161,654) 7,538 - - 5,111 - (146) $ (646,278) $ 117,177	nrealized Gain (Loss) on vailable-for-sale inancial Assets $ 850,984 - - - - - - (85,528) (85,528) 765,456 (765,456) - - - - - - - - - - - - $ -	Gain (Loss) on Effective Portion of Cash Flow Hedges $ (28,635 ) - - - - - - 16,382 16,382 (12,253 ) 12,253 - - - - - - - - - - - - $ -
Shares (In Thousands) 1,384,051 - - - - - - - - 1,384,051 - 1,384,051 - - - - - - - - - - - 1,384,051

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

(With Deloitte & Touche audit report dated March 27, 2019)

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CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax from continuing operations Income before income tax from discontinued operations Income before income tax Adjustments for: Depreciation expenses Amortization expenses Impairment loss reversed on trade receivables Expected credit loss Net loss on fair value change of financial instruments at fair value through profit or loss Interest expense Interest income Dividend income Share of profit of associates and joint ventures accounted for using the equity method Net loss on disposal of property, plant and equipment Loss (gain) on disposal of investments Impairment loss of financial assets Impairment loss of non-financial assets Unrealized (realized) gain on transactions with associates Unrealized loss (gain) on foreign currency exchange Loss on disposal of subsidiaries Changes in operating assets and liabilities Financial assets held for trading Financial assets mandatorily classified as at fair value through profit or loss Notes receivable Accounts receivable Trade receivables from related parties Other receivables Inventories Prepayments Other current assets Notes and accounts payable Trade payables to related parties Other payables Other current liabilities Net defined benefit liabilities Cash generated from operations Income tax paid Net cash generated from operating activities	2018 $ 4,310,713 - 4,310,713 978,026 120,447 - 9,413 49,059 14,639 (195,251) (29,755) (2,407,876) 8,922 610 - 228,036 2,053 (4,321) - - (56,661) 7,019 (16,177) (249,747) (29,949) 389,744 301,025 55,243 150,343 56,858 (148,332) 23,759 (226,456) 3,341,384 (465,503) 2,875,881	2017 $ 4,876,007 2,662 4,878,669 940,169 119,118 (3,017) - 6,109 13,329 (198,363) (40,525) (2,133,611) 826 (115,954) 21,616 62,316 (9,933) 27,423 2,179 (516,798) - 81,385 (42,996) (127,448) 25,325 582,031 (907,645) (182,046) 78,841 66,991 (237,478) (99,085) (262,689) 2,028,739 (293,946) 1,734,793 (Continued)

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CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Disposal of financial assets at fair value through other comprehensive income Acquisition of financial assets at amortized cost Proceeds from repayment of principal of financial assets at amortized cost Decrease in available-for-sale financial assets Acquisition of debt investments with no active market Proceeds from repayments of principal of debt investments with no active market Purchase of financial assets measured at cost Proceeds from disposal of financial assets measured at cost Acquisition of investments accounted for using the equity method Disposal of investments accounted for using the equity method Disposal of subsidiaries Proceeds from capital reduction of investments accounted for using the equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Increase in other non-current assets Interest received Dividends received Net cash generated from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Decrease in short-term borrowings Increase (decrease) in short-term bills payable Increase in other non-current liabilities Cash dividends paid Interest paid Decrease in non-controlling interests Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2018 $ 12,603 (1,210,257) 2,588,643 - - - - - (553,113) - - 127,737 (1,020,468) 47,714 (190,126) (50,683) 231,426 1,295,659 1,279,135 (100,000) (15,961) 1,593 (2,491,292) (14,601) (163,237) (2,783,498) (14,796) 1,356,722 13,816,041 $ 15,172,763	2017 $ - - - 728,887 (1,843,867) 1,477,280 (1,137) 86,832 (22,298) 91,116 6,328 - (1,149,990) 45,579 (49,865) (108,329) 173,687 831,420 265,643 (23,000) 20,580 3,083 (2,214,481) (12,784) (174,259) (2,400,861) (15,293) (415,718) 14,231,759 $ 13,816,041 (Continued)

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CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

Reconciliation of the amounts in the consolidated statements of cash flows with the equivalent items reported in the consolidated balance sheets at December 31, 2018 and 2017:

Cash and cash equivalents in consolidated balance sheets Other items that meet the requirement of IAS 7 cash and cash equivalents definitions Cash and cash equivalents in consolidated statements of cash flows		December 31	December 31
		2018 $ 14,429,460 743,303 $ 15,172,763	2017 $ 13,816,041 - $ 13,816,041

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

(With Deloitte & Touche audit report dated March 27, 2019) (Concluded)

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CHINA MOTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

China Motor Corporation (the “Corporation”) manufactures and sells cars and related parts. Its shares are listed on the Taiwan Stock Exchange.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements of the Corporation and its subsidiaries (collectively referred to as the “Group”) were approved by the Corporation’s board of directors on March 27, 2019.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRIC (IFRIC), and Interpretations of SIC (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

1) IFRS 9 “Financial Instruments” and related amendments

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

The requirements for classification, measurement and impairment of financial assets have been applied retrospectively starting from January 1, 2018, and the requirements for hedge accounting have been applied prospectively. IFRS 9 is not applicable to items that have already been derecognized as of December 31, 2017.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as of January 1, 2018, the Group has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

15 -

The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Group’s financial assets as of January 1, 2018.

Financial Assets Cash and cash equivalents Derivatives Equity securities Mutual funds Debt securities Notes receivable, accounts receivable (related parties included) and other receivables Other financial assets (included in other current assets) and guarantee deposits (included in other non-current assets)	MeasurementCategory IAS 39 IFRS 9 Loans and receivables Amortized cost Loans and receivables Hedging instruments Held`‑`for`‑`trading Held`‑`for`‑`trading Available`‑`for`‑`sale Mandatorily at fair value through profit or loss (FVTPL) Available`‑`for`‑`sale Fair value through other comprehensive income (FVTOCI) - equity instruments Available-for-sale (financial assets measured at cost) Mandatorily at FVTPL Available-for-sale (Financial assets measured at cost) FVTOCI - equity instruments Held`‑`for`‑`trading Mandatorily at FVTPL Loans and receivables (debt investment with no active market) Amortized cost Loans and receivables Amortized cost Loans and receivables Amortized cost	Carrying Amount IAS 39 IFRS 9 Remark $ 13,816,041 $ 13,348,114 - 467,927 2,954 2,954 703,983 703,983 a) 22,489 22,489 b) 21,531 63,778 c) 173,329 293,111 d) 529,496 529,496 2,278,803 2,269,299 e) 2,994,379 2,994,379 556,367 556,367

Financial Assets Amortized cost Add: Reclassification from loans and receivables (IAS 39) Less: Reclassification to hedging instruments (IFRS 9) Hedging instruments Add: Reclassification from loans and receivables (IAS 39) FVTPL Add: Reclassification from available-for-sale (IAS 39) Required reclassification Add: Reclassification from available-for-sale (financial assets measured at cost) (IAS 39) FVTOCI Equity instruments Add: Reclassification from available-for-sale (financial assets measured at cost) (IAS 39) Add: Reclassification from available-for-sale (IAS 39) Financial Assets Investments accounted for using the equity method	IAS 39 Carrying Amount as of January 1, 2018 $ - - - - - - - 529,496 - - 529,496 - - - - $ 529,496 IAS 39 Carrying Amount as of January 1, 2018 $ 27,700,662	Rec $	lassifications Re sure - $ 19,645,590 (467,927 ) 19,177,663 - 467,927 467,927 - 703,983 21,531 725,514 - 173,329 22,489 195,818 20,566,922 $ Adjustments Arising from Initial Application $ 288,698	Re sure $	mea- ments IFRS 9 Carrying Amount as of January 1, 2018 Retained Earnings Effect on January 1, 2018 - $ - $ - (9,504 ) 19,636,086 (9,504 ) - (467,927 ) - (9,504) 19,168,159 (9,504) - - - - 467,927 - - 467,927 - - 529,496 - - 703,983 672,983 42,247 63,778 42,247 42,247 1,297,257 715,230 - - - 119,782 293,111 23,820 - 22,489 - 119,782 315,600 23,820 152,525 $ 21,248,943 $ 729,546 IFRS 9 Carrying Amount as of January 1, 2018 Retained Earnings Effect on January 1, 2018 $ 27,989,360 $ 159,436	Other Equity Effect on January 1, 2018 Remark $ - - e) - - - - - - (672,983 ) a) - c) (672,983) - 52,131 d) - b) 52,131 $ (620,852) Other Equity Effect on January 1, 2018 Remark $ 129,262 f)







		$		$

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a) The Group elected to classify its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTPL under IFRS 9. As a result, the related other equity - unrealized gain on available-for-sale financial assets of $672,983 thousand was reclassified to retained earnings.
b) The Group elected to designate its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not held for trading. As a result, the related other equity - unrealized gain on available-for-sale financial assets was reclassified to other equity - unrealized gain on financial assets at FVTOCI.
c) Investments in unlisted shares previously measured at cost under IAS 39 have been classified at FVTPL under IFRS 9 and were remeasured at fair value. Consequently, an increase of $63,778 thousand and $42,247 thousand was recognized in financial assets at FVTPL and retained earnings separately on January 1, 2018.
d) Investments in unlisted shares previously measured at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase in financial assets at FVTOCI of $293,111 thousand, an increase in other equity - unrealized gain on financial assets at FVTOCI of $75,951 thousand and an increase in non-controlling interests of $43,831 thousand on January 1, 2018.

The Group recognized under IAS 39 impairment loss on certain investments in equity securities previously measured at cost and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, an adjustment was made that resulted in a decrease of $23,820 thousand in other equity - unrealized gain on financial assets at FVTOCI and an increase of $23,820 thousand in retained earnings on January 1, 2018.

e) Debt investments previously classified as debt investments with no active market and measured at amortized cost under IAS 39 were classified as measured at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows. As a result of retrospective application, the related adjustments comprised an increase in the loss allowance of $9,504 thousand and a decrease in retained earnings of 9,504 thousand on January 1, 2018.
f) As a result of retrospective application of IFRS 9 by associates, there was an increase in investments accounted for using the equity method of $288,698 thousand, a decrease in other equity - unrealized gain on available-for-sale financial assets of $35,287 thousand, an increase in other equity - unrealized gain on financial assets at FVTOCI of $164,549 thousand and an increase in retained earnings of $159,436 thousand on January 1, 2018.

Hedge accounting

On adoption of IFRS 9, the Group elected not to apply the treatment of hedging cost for forward contracts retrospectively. Furthermore, due to the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers, all derivative and non-derivative financial assets and financial liabilities which are designated as hedging instruments are presented as financial assets and financial liabilities for hedging starting from January 1, 2018.

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2) IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

IAS 21 stipulated that a foreign currency transaction shall be recorded on initial recognition in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. IFRIC 22 further explains that the date of the transaction is the date on which an entity recognizes a non-monetary asset or non-monetary liability from payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine the date of the transaction for each payment or receipt of advance consideration.

The Group applied IFRIC 22 prospectively to all assets, expenses and income recognized on or after January 1, 2018 within the scope of the Interpretation.

b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019

New, Amended or Revised Standards and Interpretations (the“New IFRSs”) Annual Improvements to IFRSs 2015-2017 Cycle 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”	Effective Date Announced by IASB (Note 1)
	January 1, 2019 January 1, 2019 (Note 2) January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

New, Amended or Revised Standards and Interpretations
(the“New IFRSs”)
Annual Improvements to IFRSs 2015-2017 Cycle

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”

Effective Date
Announced by IASB (Note 1)

January 1, 2019
January 1, 2019 (Note 2)
January 1, 2019
January 1, 2019
January 1, 2019
January 1, 2019

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The FSC permits the election for early adoption of the amendments starting from January 1, 2018.

The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group’s accounting policies, except for the following:

IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17, IFRIC 4 and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply the guidance of IFRS 16, in determining whether contracts are, or contain, a lease, only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

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The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets, and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value and short-term leases will be recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal and the interest portion of lease liabilities will be classified within financing activities. Currently, payments under operating lease contracts, are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets will be measured at an amount equal to the lease liabilities. The Group will apply IAS 36 to all right-of-use assets.

The Group expects to apply the following practical expedients:

a) The Group will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
b) The Group will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.
c) The Group will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.
d) The Group will use hindsight, such as in determining lease terms, to measure lease liabilities.

The Group as lessor

The Group will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

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Anticipated impact on assets, liabilities and equity

Right-of-use assets Investments accounted for using the equity method Total effect on assets Lease liabilities - current Lease liabilities - non-current Total effect on liabilities Unappropriated earnings	Carrying Amount as of December 31, 2018 $ - 29,106,774 $ 29,106,774 $ - - $ - $ 22,486,952	Adjustments Arising from Initial Application Adjusted Carrying Amount as of January 1, 2019 $ 538,229 $ 538,229 (19,503) 29,087,271 $ 518,726 $ 29,625,500 $ 94,157 $ 94,157 444,072 444,072 $ 538,229 $ 538,229 $ (19,503) $ 22,467,449

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group assessed that the application of other standards and interpretations would not have a significant impact on the Group’s financial position and financial performance.

c. New IFRSs issued by IASB but not yet endorsed and issued into effect by the FSC

New IFRSs Amendments to IFRS 3 “Definition of A Business” 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 and IAS 8 “Definition of Material”	Effective Date Announced by IASB (Note 1)
	January 1, 2020 (Note 2) To be determined by IASB January 1, 2021 January 1, 2020 (Note 3)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.
Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

As of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs issued into effect by the FSC.

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs for the asset or liability.
c. Classification of current and non-current assets and liabilities

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within 12 months after the reporting period; and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;
2) Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and
3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period. 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.

Assets and liabilities that are not classified as current are classified as non-current.

21 -
d. Basis of consolidation
1) Principles for preparing the consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Corporation and the entities controlled by the Corporation (i.e. its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective date of acquisition up to the effective date of disposal, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Corporation.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.

Total comprehensive income of subsidiaries is attributed to the owners of the Corporation and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the interest of the Group and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Corporation.

When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and any investment retained in the former subsidiary at its fair value at the date when control is lost and (ii) the assets (including any goodwill) and liabilities and any non-controlling interests of the former subsidiary at their carrying amounts at the date when control is lost. The Group accounts for all amounts recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

2) Entities included in the consolidated financial statements

Investor
Investee
Main Business
China-Motor Corporation
(parent)
Kian Shen Corporation (“Kian Shen”)
Production of frame of
heavy-duty car and mold
Hwa Wei Holdings Corporation Ltd.
(“Hwa Wei”)
Overseas investment in
production and service
industries
China Engine Corporation (“China
Engine”)
Manufacture of automobile
engine and parts
Sino Diamond Motors Corporation (“Sino
Diamond Motors”)
Sales and providing after-sales
service of vehicle
Hwa Hann Corporation (“Hwa Hann”)
Sales of automobile parts
Alliance Investment & Management Co.,
Ltd. (“Alliance Investment &
Management”)
Investment
Gatetech Technology Inc. (“Gatetech
Technology”)
Aluminum-magnesium alloy
casting industry
China Motor Investment Co., Ltd. (CMI) Investment
Hwa Chung Motors Corporation (“Hwa
Chung Motors”)
Sales of vehicle and parts
COC Tooling & Stamping Co., Ltd.
(COC)
Production of mold, fixture and
gauge of vehicle

Combined Shareholding
Ratio
December 31
2018
2017
Note
43.87
43.87
a)
100.00
100.00
52.11
52.11
100.00
100.00
-
99.99
c)
100.00
100.00
72.81
72.81
100.00
100.00
100.00
100.00
49.76
49.76
b)
(Continued)

22 -

Investor
Investee
Main Business
Kian Shen
Kian Shen Investment Co., Ltd. (“Kian
Shen Investment”)
Overseas investment in
production and service
industries
China Engine
Advance Power Machinery Co., Ltd.
(“Advance Power Machinery”)
Manufacture of automobile
engine and parts
Advance Power Investment Co., Ltd.
(“Advance Power Investment”)
Investment and sales
Sino Diamond Motors
Hwa-Yu Corporation Ltd. (“Hwa-Yu”)
Overseas investment in
production and service
industries
Brilliant Insight International Consultancy
Service Co., Ltd. (“Brilliant Insight
International”)
Consulting and servicing business
Gatetech Technology
Gatetech Holding Co., Ltd. (GH)
Investment
Alliance Investment &
Management
Greentrans Investment Co., Ltd.
(“Greentrans Investment”)
Investment
Hwa Chung Motors
Greentrans Corporation (“Greentrans”)
Sales of motorcycle, bicycle and
parts
Ling Wei Motor Co., Ltd. (“Ling Wei”)
Sales of second-hand vehicle
COC
Y. M. Hi-Tech Industry Ltd. (“Y. M.
Hi-Tech”)
Steel cutting
Shye Shinn Corporation (“Shye Shinn”)
Investment
Kian Shen Investment
Kian Shen Investment Hong Kong Co.,
Limited (KSIHK)
Investment
Hwa-Yu
Hwa-Lin Investments Ltd. (“Hwa-Lin”)
Overseas investment in
production and service
industries
Fujian Rui Hua Consulting Co., Ltd.
(“Fujian Rui Hua”)
Consulting and servicing business
GH
Gatetech International Co., Ltd. (GI)
Investment
Greentrans Investment
Jiangsu Greentrans Automotive Parts Co.,
Ltd. (“Jiangsu Greentrans”)
Production and sales of parts of
electronic motorcycle
Shye Shinn
Zhengzhou Tooling & Stamping Co., Ltd.
(“Zhengzhou Tooling & Stamping”)
Design, production, sales and
technical service of mold,
fixture and gauge of vehicle
GI
Gatetech (Suchou) Technology Co., Ltd.
(“Gatetech Suchou Technology”)
Aluminum-magnesium alloy
casting industry
Hwa-Lin
Dongguan Huayi Motor Maintenance Co.,
Ltd. (“Dongguan Huayi”)
Sales and maintenance of vehicle
and parts
Tianjin Hwarui Maintenance Co., Ltd.
(“Tianjin Hwarui”)
Sales and maintenance of vehicle
and parts
Sichuan Huafeng Hanwei Cars Service
and Maintenance Co., Ltd. (“Sichuan
Huafeng Hanwei”)
Sales and maintenance of vehicle
and parts
Guangzhou Huayou Motor Maintenance
Co., Ltd. (“Guangzhou Huayou Motor
Maintenance”)
Sales and maintenance of vehicle
and parts
Dongguan Huayi
Dongguan Huashun Motor Sales Co., Ltd.
(“Dongguan Huashun”)
Sales and maintenance of vehicle
and parts
Tianjin Hwarui
Tianjin Hwahong Sales Co., Ltd.
(“Tianjin Hwahong”)
Sales of vehicle and parts
Sichuan Huafeng Hanwei
Sichuan Houwei Cars Service and
Maintenance Co., Ltd. (“Sichuan
Houwei”)
Sales of vehicle and parts
Sichuan Lingwei Cars Service and
Maintenance Co., Ltd. (“Sichuan
Lingwei”)
Sales of vehicle and parts
Guangzhou Huayou Motor
Maintenance
Guangzhou Huayou Motor Sales Co., Ltd.
(“Guangzhou Huayou Motor Sales”)
Sales of vehicle and parts

Combined Shareholding
Ratio
December 31
2018
2017
Note
43.87
43.87
a)
52.11
52.11
52.11
52.11
100.00
100.00
100.00
100.00
72.81
72.81
100.00
100.00
100.00
100.00
100.00
100.00
42.30
42.30
b)
49.76
49.76
b)
43.87
43.87
a)
100.00
100.00
100.00
100.00
72.81
72.81
100.00
100.00
-
-
d)
72.81
72.81
100.00
100.00
100.00
100.00
100.00
100.00
f)
100.00
100.00
f)
100.00
100.00
100.00
100.00
-
100.00
e)
100.00
100.00
f)
100.00
100.00
f)

(Concluded)

a) The Group’s equity in Kian Shen was 43.87%. Kian Shen is a listed company, and 56.13% of Kian Shen’s shares were held by numerous shareholders unrelated to the Group. Considering the Group’s substantial influence on Kian Shen, with an absolute number of voting rights and the relative size of shareholdings compared to others; therefore, Kian Shen was deemed a subsidiary.
b) The Group’s equity in COC was 49.76%. However, the Corporation controlled more than half of the members of the board and held relatively major shares of COC; thus, COC was considered a subsidiary.
c) In April 2009, the board of directors of Hwa Hann resolved to dissolve the company; in August, 2018, the liquidation had been completed.
23 -
d) All of the interest of Zhengzhou Tooling & Stamping had been disposed on September 15, 2017, refer to Note 16.
e) In October 2017, Sichuan Houwei decided to annul its registration. As of November 30, 2018, the annulment had been completed.
f) In November 2018, Sichuan Huanfeng Hanwei, Sichuan Linguei. Guangzhou Huayou Motor Maintenance and Guangzhou Huayou Motor Sales resolved to dissolve their companies. As of December 31, 2018, the liquidation had not been completed.

For the relationship between the Corporation and its controlled entities as of December 31, 2018, refer to Table 10.

e. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as they are incurred.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after re-assessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interests in the acquiree, the excess are recognized immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets.

f. Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which cases, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of transaction.

24 -

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including subsidiaries, associates and joint ventures in countries or with currencies different from that of the Corporation) are translated into the New Taiwan dollar using exchange rates prevailing at the end of the reporting year. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising are recognized in other comprehensive income (attributed to the owners of the Corporation and non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of joint control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest becomes a financial asset), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Corporation are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

g. Inventories

Inventories consist of merchandise, raw materials, supplies, finished goods and work in progress and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

h. Investment in associates and joint ventures

An associate is an entity over which the Group has significant influence and which is neither a subsidiary nor an interest in a joint venture. Joint venture is a joint arrangement whereby the Group and other parties that have joint control of the arrangement have rights to the net assets of the arrangement.

The Group uses the equity method to account for its investments in associates and joint ventures.

Under the equity method, investments in an associate and a joint venture are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate and joint venture. The Group also recognizes the changes in the Group’s share of the equity of associates and joint venture attributable to the Group. The Group’s equity in the investees’ net income or net loss is calculated using the treasury share method when investees also have investments in the Group (reciprocal holding).

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets and liabilities of an associate or a joint venture at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

When the Group subscribes for additional new shares of an associate and joint venture at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate and joint venture. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates and joint ventures accounted for using the equity method. If the Group’s ownership interest is reduced due to its additional subscription of the new shares of the associate and joint venture, the proportionate amount of the gains

25 -

or losses previously recognized in other comprehensive income in relation to that associate and joint venture is reclassified to profit or loss on the same basis as would be required had the investee directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

When the Group’s share of losses of an associate and a joint venture equals or exceeds its interest in that associate and joint venture, the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate and joint venture.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate and a joint venture. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate and the joint venture attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and the joint venture. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate and the joint venture on the same basis as would be required had that associate directly disposed of the related assets or liabilities. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Group continues to apply the equity method and does not remeasure the retained interest.

When a group transacts with its associate and joint venture, profits and losses resulting from the transactions with the associate and joint venture are recognized in the Group’s consolidated financial statements only to the extent of interests in the associate and the joint venture are not related to the Group.

i. Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment loss.

Property, plant and equipment in the course of construction are measured at cost less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such assets are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.

Depreciation of property, plant and equipment, except for tooling (included in machinery) which is amortized using the production unit method, is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimate accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

j. Investment properties

Investment properties are properties held to earn rentals or for capital appreciation.

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Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.

k. Intangible assets

Expenditures on research activities are recognized as expenses in the period in which they are incurred.

An internally-generated intangible asset arising from the development phase of an internal project is recognized if, and only if, all of the following have been demonstrated:

1) The technical feasibility of completing the intangible asset so that it will be available for use or sale;
2) The intention to complete the intangible asset and use or sell it;
3) The ability to use or sell the intangible asset;
4) How the intangible asset will generate probable future economic benefits;
5) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
6) The ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally-generated intangible assets is the sum of the expenditures incurred from the date when the intangible asset first meets the recognition criteria listed above. Subsequent to initial recognition, they are measured at cost less accumulated amortization and accumulated impairment loss.

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

l. Impairment of tangible and intangible assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the assets may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

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When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount (less amortization expenses or depreciation expenses) that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

m. Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset is available for immediate sale in its present condition. To meet the criteria for the sale being highly probable, the appropriate level of management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within 1 year from the date of classification.

When a sale plan would result in a loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale, regardless of whether the Group will retain a non-controlling interest in that subsidiary after the sale. However, such investment is still accounted for using the equity method.

When the Group is committed to a sale plan involving the disposal of an investment or a portion of an investment in an associate or a joint venture, only the investment or the portion of the investment that will be disposed of is classified as held for sale when the classification criteria are met, and the Group discontinues the use of the equity method in relation to the portion that is classified as held for sale. Any retained portion of an investment in an associate or a joint venture that has not been classified as held for sale continues to be accounted for using the equity method. If the Group ceases to have significant influence or joint control over the investment after the disposal takes place, the Group accounts for any retained interest that has not been classified as held for sale in accordance with the accounting policies for financial instruments.

Non-current assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. Recognition of depreciation of those assets would cease.

When a subsidiary, joint operation, joint venture, associate, or a portion of an interest in a joint venture or an associate previously classified as held for sale no longer meets the criteria to be so classified, it is measured at the carrying amount that would have been recognized had such interests not been classified as held for sale. The consolidated financial statements for the periods since classification as held for sale are amended accordingly.

n. Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1) Financial assets

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

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a) Measurement categories

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and investments in debt instruments and equity instruments at FVTOCI.

i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss. Fair value is determined in the manner described in Note 32.

ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, debt instrument, notes receivable, trade receivables (including related parties), other financial assets (included in other current assets) and refundable deposits (included in other non-current assets) are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset, except for:

i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and
ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.
iii. Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

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Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

Financial assets are classified into the following categories: Financial assets at FVTPL, available-for-sale financial assets and loans and receivables.

i. Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is held for trading.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.

Fair value is determined in the manner described in Note 32.

ii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when such investments are disposed of or are determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and presented as a separate line item as financial assets measured at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and the fair value of such financial assets is recognized in other comprehensive income. Any impairment losses are recognized in profit and loss.

iii. Loans and receivables

Loans and receivables (including cash and cash equivalents, debt investments with no active market, notes receivable and accounts receivable (including related parties), other receivables, other financial assets (included in other current assets) and guarantee deposits paid (included in other non-current assets) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

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b) Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables), investments in debt instruments that are measured at FVTOCI, lease receivables, as well as contract assets.

The Group always recognizes lifetime expected credit losses (ECLs) for trade receivables. For all other financial instruments, the Group recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of such a financial asset.

2017

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence, as a result of one or more events that occurred after the initial recognition of such financial assets, that the estimated future cash flows of the investment have been affected.

For financial assets measured at amortized cost, such as accounts receivable are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, as well as observable changes in national or local economic conditions that correlate with defaults on receivables, and other situations.

For financial assets measured at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment (at the date the impairment is reversed) does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

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For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for those financial assets because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, impairment loss is subsequently reversed through profit or loss if an increase in the fair value of such an investment can be objectively related to an event occurring after the recognition of the impairment loss.

For financial assets that are measured at cost, the amount of the impairment loss is measured as the difference between such an asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of accounts receivable, where the carrying amount is reduced through the use of an allowance account. When accounts receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible accounts receivables that are written off against the allowance account.

c) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss which had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2) Financial liabilities

a) Subsequent measurement

Except the following situations, all financial liabilities are measured at amortized cost using the effective interest method:

Financial liabilities are classified as at FVTPL when such financial liabilities are held for trading.

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Financial liabilities held for trading are stated at fair value, with any gain or loss arising on remeasurement recognized in profit or loss.

Fair value is determined in the manner described in Note 32.

b) Derecognized financial liabilities

The difference between the carrying amount of a financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

3) Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risks, which include foreign exchange forward contracts.

Derivatives are initially recognized at fair value at the date on which the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instrument is positive, the derivative is recognized as a financial asset; when the fair value of a derivative financial instrument is negative, the derivative is recognized as a financial liability.

Before 2018, derivatives embedded in non-derivative host contracts were treated as separate derivatives when they met the definition of a derivative; their risks and characteristics were not closely related to those of the host contracts; and the contracts were not measured at FVTPL. Starting from 2018, derivatives embedded in hybrid contracts that contain financial asset hosts that is within the scope of IFRS 9 are not separated; instead, the classification is determined in accordance with the entire hybrid contract. Derivatives embedded in non-derivative host contracts that are not financial assets that is within the scope of IFRS 9 (e.g. financial liabilities) are treated as separate derivatives when they meet the definition of a derivative; their risks and characteristics are not closely related to those of the host contracts; and the host contracts are not measured at FVTPL.

o. Hedge accounting

The Group designates certain hedging instruments as cash flow hedges.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gains or losses relating to the ineffective portion are recognized immediately in profit or loss.

The associated gains or losses that were recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in the same period in which the hedged item affects profit or loss. If the hedge of a forecasted transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the associated gains and losses that were recognized in other comprehensive income are removed from equity and included in the initial cost of the non-financial asset or non-financial liability.

Before 2018, hedge accounting is discontinued prospectively when the Group revokes the designated hedging relationship; when the hedging instrument expires or is sold, terminated, or exercised, or when the hedging instrument no longer met the criteria for hedge accounting. Starting from 2018, the Group discontinues hedge accounting only when the hedging relationship ceases to meet the qualifying criteria; for instance, when the hedging instrument expires or is sold, terminated or exercised. The cumulative gain or loss on the hedging instrument that was previously recognized in other comprehensive income

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(from the period when the hedge was effective) remains separately in equity until the forecasted transaction occurs. When a forecasted transaction is no longer expected to occur, the gains or losses accumulated in equity are recognized immediately in profit or loss.

p. Provisions

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

Provisions for the expected cost of warranty obligations are recognized at the date of sale of the relevant products at the best estimate by the management of the Corporation of the expenditures required to settle the Group’s obligations.

q. Revenue recognition

2018

The Group identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

For contracts where the period between the date on which the Group transfers a promised good or service to a customer and the date on which the customer pays for that good or service is one year or less, the Group does not adjust the promised amount of consideration for the effects of a significant financing component.

1) Revenue from sale of goods

Revenue from sale of goods is recognized when receiving control; that is to say, when the goods are delivered to the customer’s specific location and satisfy its performance, revenue and accounts receivable can be recognized.

2) Revenue from rendering of services

Revenue from rendering of services is recognized when services are rendered.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowances for sales returns and liabilities for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

1) Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
c) The amount of revenue can be measured reliably;
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d) It is probable that the economic benefits associated with the transaction will flow to the Group; and
e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.
2) Rendering of services

Service income including that from operating services provided under service concession arrangements is recognized when services are provided.

3) Royalty Revenue

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement and provided that it is probable that the economic benefits will flow to the Group and that the amount of revenue can be measured reliably. Royalties determined on a time basis are recognized on a straight-line basis over the period of the agreement. Royalty arrangements that are based on production, sales and other measures are recognized by reference to the underlying arrangement.

4) Dividend and interest income

Dividend income from investments is recognized when a shareholder’s right to receive payment has been established and provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate.

r. Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

s. Employee benefits
1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and past service cost) and net interest on the net defined benefit liabilities are recognized as employee benefits expense in the period in which they occur.

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Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities represent the actual deficit in the Group’s defined benefit plans.

t. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

According to the Income Tax Law in the Republic of China (“ROC”), an additional tax of unappropriated earning is provided for as income tax in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences and unused loss carryforwards to the extent that it is probable that taxable profit will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profit against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current and deferred taxes are also recognized in other comprehensive income.

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5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Write-down of Inventory

The net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of the net realizable value was based on current market conditions and historical experience with products sales of a similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value.

6. CASH AND CASH EQUIVALENTS

Cash Cash on hand Checking accounts and demand deposits Cash equivalents Time deposits Repurchase agreements collateralized by bonds		December 31	December 31
		2018 $ 4,439 1,870,223 1,874,662 11,104,232 1,450,566 12,554,798 $ 14,429,460	2017 $ 5,272 2,781,356 2,786,628 10,056,737 972,676 11,029,413 $ 13,816,041

Cash equivalents, for the purpose of meeting short-term cash commitments, consist of highly liquid time deposits and repurchase agreements collateralized by bonds that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

The interest rate intervals of cash in banks and repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

Checking accounts and demand deposits Time deposits Repurchase agreements collateralized by bonds	December 31
	2018 2017 0.00%-2.45% 0.00%-2.00% 0.50%-3.95% 0.16%-4.20% 0.50%-0.60% 0.37%-0.39%

The Group’s hedging strategy is to buy Japanese Yen (JPY) at the spot rate on December 31, 2017, so as to avoid foreign currency exposure in relation to Japanese Yen (JPY) forecasted purchases. When the forecasted purchases actually take place, the carrying amounts of the non-financial hedged items will be adjusted accordingly.

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At the end of the reporting period, Japanese Yen (JPY) bought at spot rate, and not being offset, was as follows:

December 31, 2017

Notional Amount Currency Due Date (In Thousands) JPY/NTD 2018.1.18-2018.3.31 JPY1,771,108/NTD467,927

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets-current Financial assets held for trading Non-derivative financial assets Mutual funds Financial assets mandatorily classified as at FVTPL Non-derivative financial assets Mutual funds Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts Financial liabilities (included in other current liabilities) Financial liabilities held for trading Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts Financial assets-non-current Financial assets mandatorily classified as at FVTPL Non-derivative financial assets Domestic unlisted common shares		December 31	December 31
		2018 $ - 567,620 23 $ 567,643 $ 79 $ 734,341	2017 $ 529,496 - - $ 529,496 $ 2,954 $ -

Domestic unlisted common shares were classified as available-for-sale and financial assets measured at cost under IAS 39. Refer to Note 3, Note 12 and Note 17 for information relating to their reclassification and comparative information for 2017.

At the end of the reporting period, the Group’s outstanding foreign exchange forward contracts not under hedge accounting were as follows:

December 31, 2018

			Notional Amount
Transaction	Currency	Maturity Date	(In Thousands)
Buy	USD/NTD	2019.01.04-2019.01.22	USD5,000/NTD153,480

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December 31, 2017

			Notional Amount
Transaction	Currency	Maturity Date	(In Thousands)
Buy	USD/NTD	2018.01.31-2018.03.29	USD14,000/NTD416,839

The Group entered into foreign exchange forward contracts to manage exposures to exchange rate fluctuations of foreign currency denominated assets and liabilities.

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

	December 31,	December 31,
		2018
Investments in equity instruments at FVTOCI
Domestic investments
Listed shares	$	18,673
Unlisted shares		24,045
		42,718
Foreign investments
Unlisted shares		184,678
	$	227,396

These investments in equity instruments are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale and financial assets measured at cost under IAS 39. Refer to Note 3, Note 12 and Note 17 for information relating to their reclassification and comparative information for 2017.

After the Group acquired an additional 15% interest of Yue Ki Industrial, the shareholding ratio had been increased to 15.08% and one of the seats in the board of directors was obtained by the Corporation in June 2018. This transaction was deemed as the Group’s disposal of financial assets at fair value through other comprehensive income and acquisition of investments accounted for using the equity method at market value on the day the Group began exercising significant influence over Yue Ki Industrial. The Group reclassified a gain of $507 thousand from other equity to retained earnings when the Group began exercising significant influence over Yue Ki Industrial.

For the year ended December 31 2018, the Group disposed of part of its unlisted shares which had a fair value of $12,603 thousand and the Group transferred a gain of $361 thousand from other equity to retained earnings.

Dividends of $1,636 thousand were recognized during the year. Those dividends all related to investments held at the end of the reporting period.

39 -

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

	December 31,
	2018
Current
Principal guaranteed notes	$ 105,015
Less: Allowance for impairment loss	(656)
	$ 104,359
Non-current
Bonds	$ 820,015
Preference shares	9,900
	829,915
Less: Allowance for impairment loss	(5,210)
	$ 824,705

a. The principal guaranteed notes, preference shares and bonds were classified as debt investments with no active market under IAS 39. Refer to Note 3 and Note 18 for information relating to their reclassification and comparative information for 2017.
b. The range of coupon rates of principal guaranteed notes was 3.03%-3.07% per annum as of December 31, 2018.
c. The range of coupon rates of bonds was 0.86%-4.80% per annum as of December 31, 2018.
d. The coupon rate of the preference shares was 1.50% per annum as of December 31, 2018.
e. Refer to Note 10 for information relating to their credit risk management and impairment.

10. CREDIT RISK MANAGEMENT FOR INVESTMENTS IN DEBT INSTRUMENTS - 2018

Investments in debt instruments were classified as at amortized cost.

December 31, 2018

	Financial Assets
	At Amortized
	Cost
Gross carrying amount	$ 934,930
Less: Allowance for impairment loss	(5,866)
Amortized cost	$ 929,064

The Group only invests in debt instruments that have higher credit ratings and low credit risk after impairment assessment. The credit ratings are provided by independent rating agencies. The Group’s exposures and its external credit ratings are continuously monitored. The Group reviews changes in bond yields and other public information of debtors to evaluate whether there has been a significant increase in the credit risk since the initial recognition.

40 -

The Group considers the historical default rates of each credit rating supplied by external rating agencies, the current financial condition of debtors, and industry forecast to estimate 12-month or lifetime expected credit losses. The Group’s current credit risk grading framework comprises the following categories:

				Gross
		Basis for		Carrying
		Recognizing		Amount at
		Expected Credit	Expected	December 31,
Category	Description	Losses	Loss Rate	2018
Performing	The counterparty has a low risk	12-month ECL	0.0769%-	$ 925,030
	of default and a strong		0.6221%
	capacity to meet contractual
	cash flows
No rating	The preference shares do not	Lifetime ECL - not	32.4908%	9,900
	have credit rating	credit-impaired

The allowance for impairment loss of investments in debt instruments at amortized cost as at January 1, 2018 and December 31, 2018 grouped by credit rating is reconciled as follows:

Allowance for Impairment Loss Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9 Financial assets purchased (a) Derecognition (b) Change in exchange rates or others Balance at December 31, 2018	Credit Rating
	Performing (12-month ECL) No Rating (Lifetime ECL - Not Credit- impaired) $ - $ - 5,572 3,932 5,572 3,932 6,984 - (10,063) - 157 (716) $ 2,650 $ 3,216

a. During 2018, new investments in principal guaranteed notes of $1,110,257 thousand, bonds of $100,000 thousand, and the corresponding loss allowance for investments rated as performing was increased by $6,984 thousand.
b. Investments in negotiable certificates of deposit of $700,000 thousand, principle guaranteed notes of $1,579,440 thousand and bonds of $309,203 thousand were expired and redeemed during 2018, with consequential decrease in the loss allowance for performing of $10,063 thousand.

11. HEDGING INSTRUMENTS

2018

December 31, 2018 Financial assets Cash flow hedge - spot rate $ 743,303

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The Group’s hedging strategy is to enter into foreign exchange forward contracts and to buy foreign currency banknote at the spot rate to avoid exchange rate exposure from its foreign currency receipts and payments and to manage exchange rate exposure of its forecasted foreign currency purchases. Those transactions are designated as cash flow hedges. The hedging effects are adjusted to the carrying amounts of non-financial hedging items when the forecasted purchases take place.

For the hedges of highly probable forecasted purchases, the critical terms (i.e. notional amount, duration and underlying) of the foreign exchange forward contracts are corresponded to their hedged items. The Group performs a qualitative assessment and expects that the value of the foreign exchange forward contracts and the corresponding hedged items will be systematically changed in the opposite direction when the underlying exchange rate changes.

The source of hedge ineffectiveness in these hedging relationships is the effect of the counterparty and the Group’s own credit risk on the fair value of the foreign exchange forward contracts, which is not reflected in the fair value of the hedged item attributable to changes in foreign exchange rates. No other sources of ineffectiveness is expected to emerge from these hedging relationships.

The following tables summarize the information relating to the hedges of foreign currency risk.

December 31, 2018

								Change in
								Value Used for
						Carrying		Calculating
		Notional Amount		Forward Rate		Amount		Hedge
Hedging Instruments	Currency	(In Thousands)	Maturity	(Note)	Line Item		Asset	Ineffectiveness
Cash flow hedge
Forecast purchases - spot	JPY/NTD	JPY2,671,828/NTD717,056	2019.1.15-	0.2679-0.2706	Financial assets	$	743,303	$ 20,997
rate			2019.6.30		for hedging
					Change in
					Value Used for		Balance in
					Calculating		Other Equity
					Hedge		Continuing
Hedged Items					Ineffectiveness			Hedges
Cash flow hedge
Forecast purchases					$ (20,997)			$ 20,997
For the year ended	December	31, 2018
							Hedging Gains
							Recognized in
Comprehensive Income								OCI
Cash flow hedge
Forecast purchases								$ 40,663

The Group had signed component purchasing contracts with the suppliers in Japan and China, and also signed foreign exchange forward contracts with the banks and purchased foreign currency banknotes at the spot rate to avoid exchange rate risk associated with its forecasted purchases. When the forecasted purchases take place, the amount originally deferred and recognized in equity will be reclassified to the carrying amount of the materials purchased.

42 -

2017

The hedging policy for foreign currency risk is the same in 2018 and 2017 which used the following hedging instruments.

	December 31,
	2017
Derivative financial liabilities under hedge accounting
(included in other current liabilities)
Cash flow hedges - foreign exchange forward contracts	$ 12,362

The Group’s hedging strategy is to enter into foreign exchange forward contracts to avoid exchange rate exposure in relation to Japanese Yen (JPY) forecasted purchases. When the forecasted purchases actually take place, the carrying amounts of the non-financial hedged items will be adjusted accordingly.

The Group’s outstanding foreign exchange forward contracts at the end of the reporting period were as follows:

December 31, 2017

			Notional Amount
	Currency	Maturity Date	(In Thousands)
Buy	JPY/NTD	2018.01.31-2018.07.31	JPY2,002,019/NTD538,393

Gains and losses of hedging instruments reclassified from equity to cost of goods sold amounted to $42,546 thousand for the year ended December 31, 2017.

12. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

	December 31,
	2017
Domestic unlisted shares	$ 703,983
Domestic listed shares	22,489
	$ 726,472

13. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

Notes receivable Notes receivable - operating Less: Allowance for impairment loss		December 31	December 31
		2018 $ 16,668 (5) $ 16,663	2017 $ 23,886 (87) $ 23,799 (Continued)

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Accounts receivable At amortized cost Gross carrying amount Less: Allowance for impairment loss		December 31	December 31
		2018 $ 1,180,557 (19,766) $ 1,160,791	2017 $ 1,168,194 (6,701) $ 1,161,493 (Concluded)

2018

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all accounts receivable. The expected credit losses on accounts receivable are estimated by reference to past default experience of the debtor and an analysis of the debtor’s current financial position. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

The aging of receivables was as follows:

December 31, 2018

	December 31,
	2018
0 days	$ 1,146,617
1-60 days	29,254
61-90 days	11,971
More than 90 days	9,383
Gross carrying amount	1,197,225
Loss allowance (Lifetime ECL)	(19,771)
Amortized cost	$ 1,177,454

The movements of the loss allowance of notes receivable and accounts receivable were as follows:

Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9 Add: Net remeasurement of loss allowance Foreign exchange gains and losses Balance at December 31, 2018	2018 $ 6,788 - 6,788 13,051 (68) $ 19,771

2017

The Group applied the same credit policy in 2018 and 2017. Due to insignificant risks on the recoverability of the historical Group’s notes receivable and accounts receivable, allowance for impairment loss was recognized based on the estimated irrecoverable amounts determined by reference to past default experience of the counterparties and an analysis of their current financial position.

44 -

For some accounts receivable balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss because there was no significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements for these balances.

The aging of receivables was as follows:

	December 31,
	2017
0 days	$ 1,146,395
1-60 days	37,367
61-90 days	6,405
More than 90 days	1,913
	$ 1,192,080

The above aging schedule was based on the number of past due days from the end of the credit term.

The aging of receivables that were past due but not impaired was as follows:

	December 31,	December 31,
		2017
1-60 days	$	1,295
61-90 days		404
More than 90 days		8
	$	1,707

The above aging schedule was based on the number of past due days from the end of the credit term.

Individually Assessed for Impairment Collectively Assessed for Impairment Balance at January 1, 2017 $ 2,528 $ 7,288 Add: Impairment losses recognized on receivables - 41 Less: Impairment losses reversed - (3,058) Foreign exchange translation gains and losses - (11) Balance at December 31, 2017 $ 2,528 $ 4,260	Total $ 9,816 41 (3,058) (11) $ 6,788

14. SUBSIDIARIES WITH MATERIAL NON-CONTROLLING INTERESTS

The Group had a 43.87% interest in Kian Shen as of December 31, 2018 and 2017. The remaining 56.13% interest in Kian Shen is dispersed and held by shareholders unrelated to the Group.

Refer to Table 7 for the information on place of incorporation and principal place of business.

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The summarized financial information below represents amounts before intragroup eliminations of Kian Shen and Kian Shen’s subsidiaries:

Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to: Owners of Kian Shen Non-controlling interests of Kian Shen Revenue Profit for the year Other comprehensive loss for the year Total comprehensive income for the year Profit attributable to: Owners of Kian Shen Non-controlling interests of Kian Shen Total comprehensive income attributable to: Owners of Kian Shen Non-controlling interests of Kian Shen Net cash outflow from: Operating activities Investing activities Financing activities Foreign exchange adjustments Net cash outflow Dividends paid to non-controlling interests		December 31	December 31
	2018 2017 $ 836,938 $ 893,851 4,140,669 3,904,197 (685,896) (746,612) (178,573) (164,347) $ 4,113,138 $ 3,887,089 $ 1,804,434 $ 1,705,266 2,308,704 2,181,823 $ 4,113,138 $ 3,887,089 For the Year Ended December 31
		2018 $ 1,337,755 $ 453,196 (129,075) $ 324,121 $ 198,817 254,379 $ 453,196 $ 142,192 181,929 $ 324,121 $ (53,507) 257,104 (212,160) (2,464) $ (11,027) $ 98,877	2017 $ 1,169,100 $ 540,584 (36,865) $ 503,719 $ 237,154 303,430 $ 540,584 $ 220,982 282,737 $ 503,719 $ (50,868) 30,244 (98,820) (6,126) $ (125,570) $ 94,757

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15. INVENTORIES

Merchandise Finished goods Work in progress Raw materials Materials in transit		December 31	December 31
		2018 $ 196,059 1,453,757 374,472 1,759,515 286,461 $ 4,070,264	2017 $ 350,679 1,821,266 331,154 1,785,137 176,233 $ 4,464,469

The costs of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 were $27,789,296 thousand and $31,358,370 thousand, respectively. The costs of goods sold for the year ended December 31, 2017 included inventory write-downs of $73,531 thousand.

16. NON-CURRENT ASSETS HELD FOR SALE

a. Discontinued operations

On October 14, 2016, the Group’s approved to dispose of, Zhengzhou Tooling & Stamping Co., Ltd., which is the Corporation’s subsidiary, in the shareholders’ meetings. The Group entered into a memorandum with Zhengzhou Nissan Automobile Co., Ltd. The base date for the measurement of price was on May 31, 2017, and the transaction was completed on September 15, 2017. Therefore, the income and expenses related to the subsidiary were classified as discontinued operations.

The details of the profit (loss) from discontinued operations and the related cash flows information were as follows:

	For the Year	For the Year
		Ended
	December 31,
		2017
Operating revenue	$	60,596
Operating costs		(51,342)
Gross profit		9,254
Operating expenses		(6,795)
Profit from operations		2,459
Non-operating income and expenses		203
Profit before tax		2,662
Income tax benefit		177
Net profit for the period	$	2,839
Profit from discontinued operations attributable to:
Owners of Zhengzhou Tooling & Stamping	$	847
Non-controlling interests		1,992
	$	2,839
		(Continued)

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		For the Year
		Ended
		December 31,
		2017
	Net cash used in operating activities	$ (16,089)
	Net cash used in financing activities	(5,045)
	Foreign exchange adjustments	(1,841)
	Net cash outflows	$ (22,975)
		(Concluded)
b.	Non-current assets held for sale
		For the Year
		Ended
		December 31,
		2018
	Investments accounted for using the equity method classified as held for sale	$ 148,023
	Equity directly associated with non-current assets classified as held for sale	$ (7,538)

In August, 2018, the Group approved to dispose of its joint venture, Zhejiang Kanda, and entered into a transfer contract with Zhejiang Kanda Motor Industry and Trading. The transfer of shareholding rights was intended to be completed in 2019, therefore, the investments accounted for using the equity method were reclassified as held for sale.

17. FINANCIAL ASSETS MEASURED AT COST - 2017

	December 31,
	2017
Overseas unlisted ordinary shares	$ 146,734
Domestic unlisted ordinary shares	48,126
	$ 194,860
Classified according to financial asset measurement categories
Available-for-sale financial assets	$ 194,860

Management believed that the above unlisted equity investments held by the Group had fair values which could not be reliably measured, because the range of reasonable fair value estimates was so significant. Therefore, they were measured at cost less impairment at the end of the reporting period.

The Group evaluated the invested corporations by future cash flow and market rate of return and recognized impairment loss $21,616 thousand for the year ended December 31, 2017.

The Group disposed of certain financial assets measured at cost with carrying amount of $2,801 thousand for the year ended December 31, 2017, recognizing disposal benefit of $84,031 thousand (included in gain on disposal of investments).

48 -

The Group acquired 5% interests of Uni-Calsonic Corporation in March 2017 and increased its shareholding from 18.2% to 23.2%. Thus, at the day the Group gained significant influence over Uni-Calsonic Corporation, it was deemed that the Group disposed of the financial asset measured at cost and recognized an investment accounted for using the equity method by its market value. The Group recognized gain on disposal of investments of $31,517 thousand for the year ended December 31, 2017 in accordance with the market value of the day the Group gained significant influence.

18. DEBT INVESTMENT WITH NO ACTIVE MARKET - 2017

	December 31,	December 31,
		2017
Current
Negotiable certificates of deposit	$	700,000
Principal guaranteed notes		44,052
	$	744,052
Non-current
Bonds	$	1,018,136
Principal guaranteed notes		506,715
Preferred shares		9,900
	$	1,534,751

a. The coupon rate of negotiable certificates of deposit was 0.83% per annum as of December 31, 2017.
b. The range of coupon rates of principal guaranteed notes was 2.05%-3.85% per annum as of December 31, 2017.
c. The range of coupon rates of bonds was 1.02%-4.80% per annum as of December 31, 2017.
d. The coupon rate and range of coupon rate for the Group’s preference shares was 1.50% per annum as of December 31, 2017.

19. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates Investments in joint ventures		December 31	December 31
		2018 $ 20,979,597 8,127,177 $ 29,106,774	2017 $ 20,465,081 7,235,581 $ 27,700,662

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a. Investments in associates

Associate Material associates Yulon Associates that are not individually material		December 31	December 31
		2018 $ 11,479,604 9,499,993 $ 20,979,597	2017 $ 11,283,338 9,181,743 $ 20,465,081

1) Material associates

Refer to Table 7 for the nature of activities, principal place of business and countries of incorporation of the associates.

The Group held 16.80% interest in Yulon on December 31, 2018 and 2017, respectively.

The Group exercises significant influence over Yulon and applies the equity method of accounting because the Group and Yulon share the same president of the board even though the Group holds less than 20% of an interest in Yulon.

The investments accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments were based on the associates’ financial statements which have been audited for the same years.

Fair values (Level 1) of investments in associates with available published price quotation is summarized as follows:

Name of Associate Yulon		December 31	December 31
		2018 $ 4,772,553	2017 $ 6,332,810

The summarized financial information below represents amounts shown in the associates’ consolidated financial statements prepared in accordance with IFRSs adjusted by the Group for equity accounting purposes.

Yulon

Current assets Non-current assets Current liabilities Non-current liabilities Equity Non-controlling interests Proportion of the Group’s ownership		December 31	December 31
		2018 $ 209,300,378 96,372,715 (195,992,191) (26,620,612) 83,060,290 (11,323,162) $ 71,737,128 16.80%	2017 $ 169,428,441 88,988,066 (158,832,963) (20,462,405) 79,121,139 (8,688,986) $ 70,432,153 16.80% (Continued)

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Equity attributable to the Group Cross-shareholdings Unrealized gain on sidestream transactions Carrying amount Operating revenue Net profit for the year Other comprehensive loss Total comprehensive income for the year Dividends received from Yulon		December 31	December 31
	2018 2017 $ 12,051,837 $ 11,832,602 (575,518) (552,549) 3,285 3,285 $ 11,479,604 $ 11,283,338 (Concluded) For the Year Ended December 31
		2018 $ 88,115,701 $ 3,847,036 (687,796) $ 3,159,240 $ 152,092	2017 $ 94,111,028 $ 3,078,421 (870,238) $ 2,208,183 $ 131,114

2) Aggregate information of associates that are not individually material

The Group’s share of: Net profit for the year Other comprehensive loss Total comprehensive income for the year	For the Year Ended	For the Year Ended	December 31
		2018 $ 677,242 (40,318) $ 636,924	2017 $ 483,643 (42,938) $ 440,705

All the associates are accounted for using the equity method.

In June 2018, the Group increased its investment in $35,178 thousand and acquired 8% interests of Uni-Calsonic Corporation, which led to an increase of its holding from 23.2% to 31.2%.

In June 2018, the Group acquired 29% of interests in Fujian Spicer and Tai-Ya Investment in the amounts of $329,134 thousand (RMB71,660 thousand) and $79,505 thousand (RMB17,310 thousand) from Taiguang Investment and ROC-Spicer Investment, which were the subsidiaries of ROC-Spicer, and thus the Group exercised significant influence over Fujian Spicer and Tai-Ya Investment.

Investments in associates that are not individually material are accounted for using the equity method although the Group holds less than 20% interest because the Group exercises significant influence on their major transactions or shares the same president of the board of directors.

51 -

b. Investments in joint ventures

Joint ventures that are not individually material		December 31	December 31
		2018 $ 8,127,177	2017 $ 7,235,581

Aggregate information of joint ventures that are not individually material:

The Group’s share of: Net profit of the year Other comprehensive loss Total comprehensive income for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,410,901 (162,880) $ 1,248,021	2017 $ 1,346,091 (60,714) $ 1,285,377

All the joint ventures are accounted for using the equity method.

The operation of Hangzhou King-Long Kian-Shen Co., Ltd., which was the subsidiary of the Group’s joint venture, Xiamen King-Long Kian-Shen Frame, had already been discontinued before June 30, 2018, and was approved by its board of directors on May 22, 2018. The future operational transformation is under discussion. The board of directors of Hangzhou King-Long Kian-Shen Co., Ltd. approved to rent its plant and equipment to Xiamen King-Long Kian-Shen Frame on September 11, 2018.

The investments accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments were based on the joint ventures’ financial statements which have been audited for the same years.

20. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Reclassifications Disposal of subsidiary Effect of foreign currency exchange differences Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Disposals Depreciation expenses Reclassifications Impairment losses Disposal of subsidiary Effect of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017	Land $ 2,127,397 - - - - - $ 2,127,397 $ 2,127,397	Land Improvements $ 115,086 - (2,572 ) 2,159 - - $ 114,673 $ 100,158 (2,571 ) 4,371 34 - - - $ 101,992 $ 12,681	Buildings $ 4,897,391 6,117 - 51,987 - (4,649) $ 4,950,846 $ 3,703,019 - 138,341 257 - - (1,010) $ 3,840,607 $ 1,110,239	Machinery $ 24,421,298 15,356 (761,001 ) 833,347 (222 ) (7,156) $ 24,501,622 $ 22,184,709 (757,766 ) 705,914 (25 ) 62,199 (170 ) (5,587) $ 22,189,274 $ 2,312,348	Other Equipment $ 1,843,008 88,945 (124,587 ) 75,205 (2,557 ) (742) $ 1,879,272 $ 1,486,941 (81,418 ) 75,877 (396 ) 117 (2,148 ) (419) $ 1,478,554 $ 400,718	Construction in Progress Total $ 503,090 $ 33,907,270 1,039,572 1,149,990 - (888,160 ) (962,969 ) (271 ) - (2,779 ) (33) (12,580) $ 579,660 $ 34,153,470 $ - $ 27,474,827 - (841,755 ) - 924,503 - (130 ) - 62,316 - (2,318 ) - (7,016) $ - $ 27,610,427 $ 579,660 $ 6,543,043 (Continued)

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Cost Balance at January 1, 2018 Additions Disposals Reclassifications Effect of foreign currency exchange differences Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Depreciation expenses Reclassifications Impairment losses Effect of foreign currency exchange differences Balance at December 31, 2018 Carrying amounts at December 31, 2018	Land $ 2,127,397 - - - - $ 2,127,397 $ 2,127,397	Land Improvements $ 114,673 - - 9,672 - $ 124,345 $ 101,992 - 3,389 5,346 - - $ 110,727 $ 13,618	Buildings $ 4,950,846 1,149 (448 ) 40,147 (8,468) $ 4,983,226 $ 3,840,607 (448 ) 139,620 (5,346 ) - (3,008) $ 3,971,425 $ 1,011,801	Machinery $ 24,501,622 4,285 (375,018 ) 606,691 (7,947) $ 24,729,633 $ 22,189,274 (369,813 ) 737,192 - 148,360 (5,972) $ 22,699,041 $ 2,030,592	Other Equipment $ 1,879,272 50,971 (228,854 ) 90,198 (1,007) $ 1,790,580 $ 1,478,554 (177,423 ) 82,339 - - (625) $ 1,382,845 $ 407,735	Construction in Progress Total $ 579,660 $ 34,153,470 964,063 1,020,468 - (604,320 ) (746,708 ) - (11) (17,433) $ 797,004 $ 34,552,185 $ - $ 27,610,427 - (547,684 ) - 962,540 - - - 148,360 - (9,605) $ - $ 28,164,038 $ 797,004 $ 6,388,147 (Concluded)

Because the sales volume of certain car models were lower than the Group’s expectation, the estimated future cash flows arising from the related machinery had decreased, which led to the carrying amount exceeding the recoverable amount. Therefore, the Group recognized impairment losses of $148,360 thousand and $62,316 thousand for the years ended December 31, 2018 and 2017, respectively. The Group determined the recoverable amount of the related machinery on the basis of its value in use. The discount rates used in measuring the value in use were 6.047%-6.69% and 6.69%, respectively.

Except for tooling (included in machinery), which is depreciated on an expected production quantity basis, the above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Category Land improvements Buildings Machinery Other equipment	Year
	3-20 years 2-60 years 2-24 years 2-20 years

Property, plant and equipment pledged as collateral for bank borrowings are set out in Note 34.

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21. INVESTMENT PROPERTIES

Cost
Balance at January 1, 2017

Reclassification

Balance at December 31, 2017

Accumulated depreciation and impairment
Balance at January 1, 2017

Depreciation expenses
Reclassification

Balance at December 31, 2017

Carrying amounts at December 31, 2017

Cost
Balance at January 1, 2018 and December 31, 2018

Accumulated depreciation and impairment
Balance at January 1, 2018

Depreciation expenses

Balance at December 31, 2018

Carrying amounts at December 31, 2018

$ 1,820,616

271
$ 1,820,887
$ 409,603
15,666

130
$ 425,399
$ 1,395,488
$ 1,820,887
$ 425,399

15,486
$ 440,885
$ 1,380,002

The investment properties held by the Group are depreciated over their estimated 10 to 60 years of useful lives, using the straight-line method.

The fair values of investment properties of the Group were $2,414,732 thousand and $2,312,470 thousand as of December 31, 2018 and 2017, respectively. Except for a part of investment properties appraised by the independent valuer, as of December 31, 2018 and 2017, the remaining investment properties as of December 31, 2018 and 2017 were appraised by the Group’s management using the valuation model in which other market participants frequently used. The valuation from management was arrived at by reference to market evidence of transaction prices for similar properties. The independent valuer’s valuation was based on the weighted-average cost analysis and revenue method and assumed a discount rate of 3.04% as of December 31, 2018 and 2017, and a capitalization rate of 2.24% as of both dates.

For the amount of investment properties pledged as deposits for certain projects, refer to Note 34.

22. SHORT-TERM BORROWINGS

Line of credit borrowings Bank loans		December 31	December 31
		2018 $ 340,000 305,000 $ 645,000	2017 $ 415,000 330,000 $ 745,000

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a. The ranges of interest rate on credit borrowings were 0.95%-0.98% and 0.95%-1.54% per annum as of December 31, 2018 and 2017, respectively.
b. The interest rates on bank loans were 1.18% and 1.25% per annum as of December 31, 2018 and 2017, respectively.

23. OTHER PAYABLES

Payable for salaries or bonus Payable for warranties Payable for advertisement Payable for taxes Provisions for employee benefits Others		December 31	December 31
		2018 $ 1,149,478 263,952 197,919 191,369 153,296 761,051 $ 2,717,065	2017 $ 1,265,640 269,322 233,386 151,991 115,788 835,861 $ 2,871,988

24. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Corporation and Kian Shen, China Engine, Advance Power Machinery, Sino Diamond Motors, Brilliant Insight International, COC, Y.M. Hi-Tech, Gatetech Technology and Ling Wei of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The employees of the Group’s subsidiaries in China are members of a state-managed retirement benefit plan operated by the government of China. The subsidiary is required to contribute a specified percentage of payroll costs per month to the retirement benefit scheme to fund the benefits.

b. Defined benefit plans

The defined benefit plan adopted by the Corporation and Kian Shen, China Engine, Sino Diamond Motors, COC, Y.M. Hi-Tech and Gatetech Technology of the Group in accordance with the Labor Standards Law is operated by the government of the ROC. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. The Group contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the “Bureau”); the Group has no right to influence the investment policy and strategy.

55 -

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities		December 31	December 31
		2018 $ 2,578,708 (1,668,380) $ 910,328	2017 $ 2,532,411 (1,391,714) $ 1,140,697

Movements in net defined benefit liabilities were as follows:

Present Value
of the Defined
Benefit
Obligation
Fair Value of
the Plan Assets
Balance at January 1, 2017
$ 2,512,855
$ (1,140,929)

Service cost
Current service cost
49,678
-
Net interest expense (income)

26,833

(12,774)

Recognized in loss (profit)

76,511

(12,774)

Remeasurement
Return on plan assets
-
1,618
Actuarial (gain) loss
Changes in demographic assumptions
18,072
-
Changes in financial assumptions
5,714
-
Experience adjustments

6,056

-

Recognized in other comprehensive income

29,842

1,618

Contributions from the employer
-
(296,906)
Benefits paid
(57,277)
57,277
Portion of benefits paid by the Corporation

(29,520)

-

Balance at December 31, 2017

2,532,411
(1,391,714)

Service cost
Current service cost
46,309
-
Past service cost
47,004
-
Net interest expense (income)

31,754

(17,673)

Recognized in loss (profit)

125,067

(17,673)

Remeasurement
Return on plan assets
-
(37,943)
Actuarial (gain) loss
Changes in demographic assumptions
3,599
-
Changes in financial assumptions
34,615
-
Experience adjustments

(4,184)

-

Recognized in other comprehensive income
(loss)

34,030

(37,943)

Contributions from the employer
-
(293,274)
Benefits paid
(72,224)
72,224
Portion of benefits paid by the Corporation

(40,576)

-

Balance at December 31, 2018
$ 2,578,708
$ (1,668,380)

Net Defined
Benefit
Liabilities
$ 1,371,926
49,678

14,059

63,737
1,618
18,072
5,714

6,056

31,460

(296,906)
-

(29,520)

1,140,697
46,309
47,004

14,081

107,394

(37,943)
3,599
34,615

(4,184)

(3,913)

(293,274)
-

(40,576)
$ 910,328

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An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses	For the Year Ended	For the Year Ended	December 31
		2018 $ 61,847 3,491 13,088 28,388 $ 106,814	2017 $ 36,953 2,068 4,818 19,175 $ 63,014

The disbursement amounts of defined benefit plans of associates were $580 thousand and $723 thousand in 2018 and 2017, respectively.

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate Expected rate of salary increase	December 31
	2018 2017 0.875%-1.2% 1.125%-1.45% 1%-2.5% 1%-2.5%

If possible reasonable changes in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase 0.25% increase 0.25% decrease		December	31
		2018 $ (66,703) $ 69,259 $ 67,910 $ (65,730)	2017 $ (69,817) $ 72,609 $ 71,269 $ (68,866)

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The sensitivity analysis presented above may not be representative of the actual changes in the present value of the defined benefit obligation as it is unlikely that the changes in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Expected contributions to the plans for the next year Average duration of the defined benefit obligation		December 31
	2018 2017 $ 197,784 $ 307,420 8.5-15.7 years 9.1-17 years

25. EQUITY

a. Share capital

1) Ordinary shares

Numbers of shares authorized (in thousands) Amount of shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2018 1,800,000 $ 18,000,000 1,384,051 $ 13,840,508	2017 1,800,000 $ 18,000,000 1,384,051 $ 13,840,508

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and a right to dividends.

2) Capital reduction

For the purpose of adjusting the capital structure and enhancing the return on equity, the Corporation’s board of directors had proposed the capital reduction through cash returned to shareholders on March 27, 2019, which was still waiting for approval at the shareholders’ meeting to be held in June, 2019. The estimated total capital reduction amounted to $8,304,305 thousand, which represented the cancellation of 830,431 thousand shares (60% of common shares). After the capital reduction, the paid-in capital will be $5,536,203 thousand.

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (Note 1) Conversion of bonds Issuance of ordinary shares Others May be used to offset a deficit only Changes in percentage of ownership interest in subsidiaries (Note 2) Share of changes in capital surplus of associates		December 31	December 31
		2018 $ 5,183,923 1,184,920 4,666 2,225 27,899 $ 6,403,633	2017 $ 5,183,923 1,184,920 4,666 2,225 31,606 $ 6,407,340

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Note 1: Such capital surplus may be used to offset a deficit; in addition, when the Corporation has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Corporation’s capital surplus and once a year).
Note 2: Such capital surplus arises from the effect of changes in ownership interest in a subsidiary resulting from equity transactions other than actual disposal or acquisition, or from changes in capital surplus subsidiaries accounted for using equity method.
c. Retained earnings and dividend policy

Under the dividend policy as set forth in the Articles, where the Corporation made a profit in a fiscal year, the profit shall be first utilized for offsetting losses of previous years and paying taxes, then for setting aside as legal reserve 10% of the remaining profit. If there is remaining profit, the profit shall be utilized for setting aside a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Corporation’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for distribution. For the policies on distribution of employees’ compensation and remuneration of directors, refer to Note 26.

The operating environment of the Corporation is considered as a mature and steady industry. In determining dividend amounts, the Corporation takes its future capital expenditures and related factors into account and also seeks to uphold the shareholders’ interests while realizing the Corporation’s long-term financial plan. Dividends are distributed at no less than 40% of profits after tax, but dividends cannot be distributed if the Corporation has deficit. Dividends are paid in the form of cash or stock. The Corporation’s policy is that cash dividends should be at least 20% of total dividends.

An appropriation of earnings to the legal reserve shall be made until the legal reserve equals the Corporation’s paid-in capital. The legal reserve may be used to offset deficits. If the Corporation has no deficit and the legal reserve has exceeded 25% of the Corporation’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Items referred to under Rule No. 1010012865, Rule No. 1010047490 and Rule No. 1030006415 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reserved from a special reserve by the Corporation.

The appropriations of earnings for 2017 and 2016 approved in the shareholders’ meetings in June 2018 and 2017, respectively, were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For For Year 2017 Year 2016 $ 410,564 $ 318,910 2,491,292 2,214,481	Dividends Per Share (NT$)
		For For Year 2017 Year 2016 $ 1.80 $ 1.60

Information on the appropriation of earnings in the shareholders’ meetings is available on the Market Observation Post System website of the Taiwan Stock Exchange.

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The appropriation of earnings for 2018 had been proposed by the Corporation’s board of directors on March 27, 2019. The appropriations and dividends per share were as follows:

	Appropriation	Appropriation	Dividends Per
	of	Earnings	Share (NT$)
Legal reserve	$	359,300
Cash dividends		2,352,886	$1.7

The appropriations of earnings for 2018 are subject to the resolution of the shareholders in their meeting to be held in June 2019.

d. Special reserves

Beginning at January 1 Reversals Disposal of subsidiaries and associates Balance at December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,051,658 (4,691) $ 1,046,967	2017 $ 1,051,658 - $ 1,051,658

e. Other equity items

1) Exchange differences on translating foreign operations

For the Year Ended 2018 Balance at January 1 $ (485,118) Recognized for the year Exchange differences on translating the financial statements of foreign operations 9,066 Share from associates and join ventures accounted for using the equity method (177,764) Other comprehensive loss recognized for the year (168,698) Reclassified equity that related to non-current assets held for sale 7,538 Balance at December 31 $ (646,278) 2) Unrealized gain (loss) on available-for-sale financial assets Balance at January 1, 2017 Recognized for the year Unrealized loss on revaluation of available-for-sale financial assets Share from associates accounted for using the equity method Other comprehensive loss recognized for the year Balance at December 31, 2017 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9	For the Year Ended	December 31
		2017 $ (268,058) (887) (216,173) (217,060) - $ (485,118) $ 850,984 (120,588) 35,060 (85,528) 765,456 (765,456) $ -

60 -
3) Unrealized gain on financial assets at FVTOCI

	For the Year	For the Year
		Ended
	December 31,
		2018
Balance at January 1 per IAS 39	$	-
Adjustment on initial application of IFRS 9		273,866
Balance at January 1 per IFRS 9		273,866
Recognized for the year
Unrealized loss - equity instruments		(45,133)
Share from associates accounted for using the equity method		(116,521)
Other comprehensive loss recognized for the year		(161,654)
Cumulative unrealized gain of equity instruments transferred to retained
earnings due to disposal		(146)
Cumulative gain of disposal of equity instruments of associates transferred to
retain earning		5,111
Balance at December 31	$	117,177

4) Cash flow hedges

Balance at January 1 Effect of change in tax rate Recognized for the year Gain on changes in the fair value of hedging instruments Foreign currency risk - foreign exchange forward contracts Foreign currency risk - spot rate Other comprehensive income recognized for the year Balance at December 31 f. Non-controlling interests Balance at January 1 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1 per IFRS 9 Share of profit for the year Other comprehensive loss recognized for the year Exchange difference on translation the financial statements of foreign operations Unrealized loss on financial assets at FVTOCI Remeasurement on defined benefit plans Other comprehensive loss recognized for the year Disposal of subsidiaries Cash dividend distributed by subsidiaries Balance at December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2018 2017 $ (12,253) $ (28,635) 382 - 9,889 2,335 22,979 14,047 33,250 16,382 $ 20,997 $ (12,253) For the Year Ended December 31
		2018 $ 3,506,941 43,831 3,550,772 299,043 (47,684) (28,949) 3,869 (72,764) - (163,237) $ 3,613,814	2017 $ 3,299,707 - 3,299,707 434,547 (24,278) - (3,024) (27,302) (25,752) (174,259) $ 3,506,941

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26. REVENUE

Revenue from contracts with customers Revenue from sale of goods Revenue from sale of vehicles Revenue from sale of components Service revenue Rental income Other revenue	For the Year Ended December 31, 2018 $ 26,262,721 7,227,699 33,490,420 1,221,406 67,065 90,623 $ 34,869,514

27. NET PROFIT FROM CONTINUING OPERATIONS

a. Depreciation and amortization

An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating costs Operating expenses An analysis of amortization in intangible assets by function Research and development expenses	For the Year Ended	For the Year Ended	December 31
		2018 $ 825,857 152,169 $ 978,026 $ 11,677 68,179 $ 79,856 $ 40,591	2017 $ 800,487 139,608 $ 940,095 $ 13,181 68,126 $ 81,307 $ 37,808

b. Rental income and operating expenses directly related to investment properties

Rental income from investment properties Direct operating expenses from investment properties that generated rental income	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 65,802 $ 22,666	2017 $ 63,677 $ 22,289

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c. Employee benefits expense

Post-employment benefits Defined contribution plans Defined benefit plans Short-term benefits An analysis of employee benefits expenses by function Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 88,548 106,814 195,362 3,794,655 $ 3,990,017 $ 2,121,078 1,868,939 $ 3,990,017	2017 $ 86,216 63,014 149,230 3,834,554 $ 3,983,784 $ 2,158,398 1,825,386 $ 3,983,784

d. Employees’ compensation and remuneration of directors

According to the Articles of Incorporation of the Corporation, the Corporation accrued employees’ compensation and remuneration of at rates of no less than 0.1% and no higher than 0.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors. The employees’ compensation and remuneration of directors for the years ended December 31, 2018 and 2017 which were approved by the Corporation’s board of directors in March 2019 and 2018, respectively, were as follows:

Accrual rate

Employees’ compensation Remuneration of directors Amount Employees’ compensation Remuneration of directors	For the Year Ended December 31	For the Year Ended December 31
	2018 2017 0.85% 1.03% 0.50% 0.50% For the Year Ended December 31
	2018 Cash $ 33,511 19,746	2017
		Cash $ 45,459 22,036

If there is a change in the amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate.

There was no difference between the actual amounts of employees’ compensation and remuneration of directors and supervisors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the Corporation’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

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28. INCOME TAXES FROM CONTINUING OPERATIONS

a. Income tax recognized in profit or loss

Major components of tax expense were as follows:

Current tax In respect of the current year Adjustments for the prior years Deferred tax In respect of the current year Adjustments to deferred tax attributable to changes in tax rates and laws Adjustments for the prior years Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2018 $ 277,104 (90,799) 186,305 207,839 (50,751) 75,278 232,366 $ 418,671	2017 $ 470,717 (48,274) 422,443 (78,285) - (5,502) (83,787) $ 338,656

A reconciliation of accounting profit and income tax expense is as follows:

Profit before tax from continuing operations Income tax expense calculated at the statutory rate Tax-exempt income Income tax on unappropriated earnings Unrecognized deductible temporary differences Investment credits Unrecognized loss carryforwards Effect of different tax rates of group entities operating in other jurisdictions Effect of change in tax rate Adjustments for prior years’ tax Others Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 4,310,713 $ 862,143 (520,374) 147,499 1,528 (67,833) 35,807 (3,513) (50,751) (15,521) 29,686 $ 418,671	2017 $ 4,876,007 $ 828,921 (259,252) 72,156 (48,593) (74,235) (117,188) 19,778 - (53,776) (29,155) $ 338,656

In 2017, the applicable corporate income tax rate used by the group entities in the ROC was 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings has been reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

As the status of the 2019 appropriation of earnings is uncertain, the potential income tax consequences of the 2018 unappropriated earnings are not reliably determinable.

64 -

b. Income tax recognized in other comprehensive income

Deferred tax Effect of change in tax rate In respect of the current year Cash flow hedges Remeasurement of defined benefit plans Current tax assets and liabilities Current tax assets (included in other current assets) Tax refund receivable Current tax liabilities Income tax payable	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 7,535 (7,795) (908) $ (1,168) December	2017 $ - (3,702) 5,348 $ 1,646 31
		2018 $ 70,110 $ 117,081	2017 $ 1,287 $ 328,393

c. Current tax assets and liabilities

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2018

Deferred tax assets Temporary differences Defined benefit plans Other payables Inventories Others Loss carryforwards Deferred tax liabilities Temporary differences Investments accounted for using the equity method Reserve for land value increment tax Others	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehensive Income $ 167,008 $ (22,282) $ 6,245 57,466 15,119 - 33,624 2,509 - 31,497 (2,862) (2,164) 289,595 (7,516) 4,081 127,406 (76,855) - $ 417,001 $ (84,371) $ 4,081 $ 44,543 $ 147,356 - 69,799 - - 212 639 5,249 $ 114,554 $ 147,995 $ 5,249	Others Closing Balance $ - $ 150,971 - 72,585 - 36,133 - 26,471 - 286,160 - 50,551 $ - $ 336,711 363 $ 192,262 - 69,799 - 6,100 $ 363 $ 268,161

65 -

For the year ended December 31, 2017

Deferred tax assets Temporary differences Defined benefit plans Other payables Inventories Others Loss carryforwards Deferred tax liabilities Temporary differences Reserve for land value increment tax Unappropriated earnings of investments accounted for using the equity method Others	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehensive Income $ 206,825 $ (45,165) $ 5,348 46,614 10,852 - 22,541 11,083 - 43,843 (8,644) (3,702) 319,823 (31,874) 1,646 78,408 48,998 - $ 398,231 $ 17,124 $ 1,646 $ 69,799 $ - $ - 109,633 (65,762) - 2,500 (901) - $ 181,932 $ (66,663) $ -	Others Closing Balance $ - $ 167,008 - 57,466 - 33,624 - 31,497 - 289,595 - 127,406 $ - $ 417,001 $ - $ 69,799 (715) 43,156 - 1,599 $ (715) $ 114,554

e. Deductible temporary differences and unused loss carryforwards for which no deferred tax assets have been recognized in the consolidated balance sheets

Loss carryforwards Expiry in 2018 Expiry in 2020 Expiry in 2021 Expiry in 2022 Expiry in 2023 Expiry in 2024 Expiry in 2025 Expiry in 2027 Expiry in 2028 Deductible temporary differences		December 31	December 31
		2018 $ - 165,643 340,931 152,803 91,783 51,449 32,313 20,785 448,332 $ 1,304,039 $ 2,240,415	2017 $ 126,896 253,548 382,025 171,235 91,783 55,235 23,477 20,805 - $ 1,125,004 $ 1,962,684

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f. Information about unused loss carryforwards

Loss carryforwards as of December 31, 2018 comprised:

Unused Amount	Unused Amount	Expiry Year
$	121,375	2019
	296,562	2020
	340,931	2021
	152,803	2022
	91,783	2023
	51,449	2024
	32,313	2025
	20,785	2027
	448,792	2028
$	1,556,793

g. The aggregate amount of temporary difference associated with investments for which deferred tax liabilities have not been recognized

As of December 31, 2018 and 2017, the taxable temporary differences associated with an investment in subsidiaries for which no deferred tax liabilities have been recognized were $584,214 thousand and $440,205 thousand, respectively.

h. Income tax assessments

The income tax returns of the Corporation through 2016 have been assessed by the tax authorities.

29. EARNINGS PER SHARE

Basic earnings per share From continuing operations From discontinued operations Total basic earnings per share Diluted earnings per share From continuing operations From discontinued operations Total diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2.64 - $ 2.64 $ 2.63 - $ 2.63	2017 $ 3.01 - $ 3.01 $ 3.01 - $ 3.01

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The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share Less: Profit for the year from discontinued operations used in the computation of basic earnings per share from discontinued operations Earnings used in the computation of basic earnings per share from continuing operations	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 3,592,999 - $ 3,592,999	2017 $ 4,105,643 847 $ 4,104,796

Weighted Average Number of Ordinary Shares Outstanding (In Thousands of Shares)

Weighted average number of ordinary shares in computation of basic earnings per share Weighted average number of ordinary shares Adjustment for associates holding shares Effect of potentially dilutive ordinary shares Employees’ compensation Weight average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended	For the Year Ended	December 31
		2018 1,384,051 (20,599) 1,363,452 1,801 1,365,253	2017 1,384,051 (20,599) 1,363,452 1,373 1,364,825

When calculating earnings per share (EPS), the Group considers the shares which associates hold as the treasury shares to reduce the outstanding shares.

If the Group offered to settle compensation paid to employees in cash or shares, the Group assumed the entire amount of the compensation will be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

30. DISPOSAL OF SUBSIDIARIES

The Group entered into a memorandum with Zhenzhou Nissan Automobile Co., Ltd. on May 23, 2017, and the disposal was completed on September 15, 2017.

a. Consideration received from disposal

For the Year Ended December 31, 2017

Sales proceeds receivable (US$1,303 thousand)

$ 39,419

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b. Analysis of assets and liabilities on the date control was lost

	Zhengzhou
	Tooling &
	Stamping Co.,
	Ltd.
Current assets
Cash and cash equivalents	$ 33,091
Trade receivables	47,350
Other receivables	12
Non-current assets
Property, plant and equipment	461
Other non-current assets	6
Current liabilities
Other payables	(16,538)
Net assets disposed of	$ 64,382

c. Loss on disposal of subsidiaries

On the date of the loss of control, the Group reclassified Zhengzhou Tooling & Stamping Co., Ltd. as a disposal group held for sale measured at the fair value of its investments. The differences between the fair value and the book value of the investments on the date of loss of control were recognized in profit or loss. In addition, for all of amounts related to the subsidiaries that were recognized in other comprehensive income, the accounting treatments were consistent with those of the subsidiaries as if the related assets and liabilities were directly sold by these subsidiaries. As a result, the loss on disposal of Zhengzhou Tooling & Stamping Co., Ltd. recognized was $2,179 thousand (accounted for as the debit to gain on disposal of investments).

d. Net cash outflow on disposal of subsidiary

	For the Year	For the Year
		Ended
	December 31,
		2017
Proceeds of disposal	$	39,419
Less: Cash and cash equivalent balances disposal of		(33,091)
Net cash outflow on disposal of subsidiaries	$	6,328

31. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance. The Group’s overall strategy remains unchanged in the future.

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32. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

The Group’s management believes the carrying amounts of financial assets and financial liabilities that are not measured at fair value recognized in the consolidated financial statements approximate their fair values or their fair values cannot be reliably measured.

b. Fair value of financial instruments that are measured at fair value on a recurring basis
1) Fair value hierarchy

December 31, 2018 Financial assets Financial assets at FVTPL Mutual funds Domestic unlisted shares Derivative financial instrument Financial assets at FVTOCI Domestic listed shares Domestic unlisted shares Overseas unlisted shares Financial assets for hedging Non-derivative financial instruments Financial liabilities Financial liabilities at FVTPL Derivative financial instruments (included in other current liabilities)	Level 1 $ 567,620 - - $ 567,620 $ 18,673 - - $ 18,673 $ 743,303 $ -	Level 2 $ - - - $ - $ - - - $ - $ - $ -	Level 3 $ - 734,341 23 $ 734,364 $ - 24,045 184,678 $ 208,723 $ - $ 79	Total $ 567,620 734,341 23 $ 1,301,984 $ 18,673 24,045 184,678 $ 227,396 $ 743,303 $ 79

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December 31, 2017

Financial assets Financial assets at FVTPL Mutual funds Available-for-sale financial assets Domestic listed securities Domestic unlisted securities Financial liabilities Financial liabilities at FVTPL Derivative financial instruments (included in other current liabilities) Derivative financial liabilities for hedging Derivative financial instruments (included in other current liabilities)	Level 1 $ 529,496 $ 22,489 - $ 22,489 $ - $ -	Level 2 $ - $ - - $ - $ - $ -	Level 3 $ - $ - 703,983 $ 703,983 $ 2,954 $ 12,362	Total $ 529,496
				$ 22,489 703,983
				$ 726,472
				$ 2,954
				$ 12,362

There were no transfers between Levels 1 and 2 in the current and prior years.

2) Reconciliation of Level 3 fair value measurements of financial instruments

For the year ended December 31, 2018

Financial Assets Equity Instruments at FVTPL Derivative Financial Instruments at FVTOCI Equity Instruments at FVTOCI Balance at January 1 $ 767,761 $ - $ 293,111 Recognized in profit or loss (33,420) 23 - Recognized in other comprehensive loss - - (71,178) Sales - - (13,210) Balance at December 31 $ 734,341 $ 23 $ 208,723	Total $1,060,872 (33,397) (71,178) (13,210) $ 943,087

71 -

						Derivative
			Equity			Financial
			Instruments at			Instruments for
	Financial Liabilities		FVTPL			Hedging		Total
Balance at	January 1		$	2,954		$ 12,362	$	15,316
Recognized in profit or loss				(2,875)		-		(2,875)
Recognized in other comprehensive loss				-		(12,362)		(12,362)
Balance at	December 31		$	79		$ -	$	79
For the year ended December		31, 2017
		Derivative		Available-		Derivative
		Financial		for-sale		Financial
		Instruments at		Financial		Instruments
Financial Assets			FVTPL	Assets		for Hedging		Total
Balance at	January 1	$	812	$ 732,680		$ 1,371	$	734,863
Recognized in profit or loss			(812)		-	(1,371)		(2,183)
Recognized in other
comprehensive loss			-	(28,697)		-		(28,697)
Balance at	December 31	$	-	$ 703,983		$ -	$	703,983
			Derivative			Derivative	Derivative
			Financial			Financial	Financial
			Instruments at			Instruments for	Instruments at
	Financial Liabilities		FVTPL			Hedging	FVTPL
Balance at	January 1		$	-		$ 16,546	$	16,546
Recognized in profit or loss				2,954		(16,546)		(13,592)
Recognized in other comprehensive
income				-		12,362		12,362
Balance at	December 31		$	2,954		$ 12,362	$	15,316

3) Valuation techniques and inputs applied for the purpose of measuring Level 3 fair value measurement
a) Derivative financial instruments: The fair values of warrants are determined using option pricing models where the significant unobservable inputs are historical volatility. An increase in the historical volatility used in isolation would result in an increase in the fair value.
b) Derivative financial instruments: The fair values of foreign exchange forward contracts of future cash flows are estimated based on observable forward exchange rates at the end of the reporting period and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.
72 -
c) Domestic unlisted securities to which the market approach was applied: The fair values of domestic unlisted shares referred to stock prices of listed companies with operating activities that were similar to those of the Corporation. The material unobservable inputs were as follows:

Operating income ratio Gross profit ratio EBIT ratio EBITDA ratio Post-tax profit ratio P/B ratio Discount rate for lack of marketability	December 31
	2018 2017 0.14-5.68 times - 0.32-14.44 times - 2.44-23.21 times 8.96 times - 7.23-31.73 times 11.99-85.49 times - 0.82-5.09 times 1.66-3.11 times 11.58%-32.28% 32.28%

If the inputs to the valuation model were changed to reflect reasonably possible alternative assumptions while all the other variables were held constant, the fair values of the shares would have increased (decreased) as follows:

Operating income ratio 0.1 time increase 0.1 time decrease Gross profit ratio 1 time increase 1 time decrease EBIT ratio 1 time increase 1 time decrease EBITDA ratio 1 time increase 1 time decrease Post-tax profit ratio 1 time increase 1 time decrease P/B ratio 0.1 time increase 0.1 time decrease		December	31
		2018 $ 36,301 $ (36,301) $ 65,961 $ (65,961) $ 18,188 $ (18,188) $ - $ - $ 11,020 $ (11,020) $ 88,737 $ (88,737)	2017 $ - $ - $ - $ - $ 63,057 $ (63,057) $ 75,149 $ (75,149) $ - $ - $ 70,398 $ (70,398)

73 -

c. Categories of financial instruments

Financial assets
FVTPL
Held for trading

Mandatorily at FVTPL
Financial assets for hedging
Loans and receivables (Note 1)
Available-for-sale financial assets (Note 2)
Financial assets at amortized cost (Note 3)
Financial assets at FVTOCI
Financial liabilities
Amortized cost (Note 4)
FVTPL (included in other current liabilities)
Held for trading
Financial liabilities for hedging (included in other current
liabilities)

December 31

2018
2017
$ - $ 529,496
1,301,984
-
743,303
-
-
19,645,590
-
921,332
19,052,314
-
227,396
-
7,132,785
7,197,353
79
2,954
-
12,362

Note 1: The balances included cash and cash equivalents, debt investments with no active market, notes receivable, accounts receivable (related parties included), other receivables, other financial assets (included in other current assets) and guarantee deposits (included in other non-current assets).
Note 2: The balances included the carrying amounts of available-for-sale financial assets and available-for-sale financial assets measured at cost.
Note 3: The balances included financial assets measured at amortized cost, which comprised cash and cash equivalents, debt investments, notes receivable, accounts receivable (related parties included), other receivables, other financial assets (included in other current assets) and guarantee deposits (included in other non-current assets).
Note 4: The balances included financial liabilities measured at amortized cost which comprised short-term borrowings, short-term bills payable, notes payable, accounts payable (related parties included), other payables and deposits received (included in other non-current liabilities).
d. Financial risk management objectives and policies

The Group’s major financial instruments include equity and debt investments, accounts receivable, accounts payable and borrowings. Financial risks include market risk, credit risk, and liquidity risk.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates, interest rates and price.

74 -

a) Foreign currency risk

Holding foreign currency-denominated assets and liabilities exposes the Group to adverse fluctuations of cash flows and the reduction of foreign currency assets due to the changes in foreign currency rate. The Group avoids cash flow risk resulting from the changes in adverse foreign currency rate by using derivative contracts.

Sensitivity analysis

The Group is mainly exposed to the U.S. dollar (USD), Japanese Yen (JPY) and Renminbi (RMB).

The following table details the Group’s sensitivity to a 1% increase and decrease in the New Taiwan dollar against the relevant foreign currencies. The sensitivity rate used when reporting foreign currency risk internally to key management personnel and representing management’s assessment of the reasonably possible change in foreign exchange rates is 1%. The sensitivity analysis included outstanding foreign currency denominated monetary items and their translation at the end of the reporting period is adjusted for a 1% change in foreign currency rates. A positive number below indicates an increase in pre-tax profit and equity associated with a 1% strengthening of the New Taiwan dollar strengthening 1% against the relevant currency. For a 1% weakening of the New Taiwan dollar against the relevant currency, there would be an equal and opposite impact on pre-tax profit and equity, and the balances below would be negative.

USD to NTD	USD to NTD	USD to NTD
For the Year Ended December 31
	2018 2017 $ (10,385) $ (15,025) JPYto NTD
For the Year Ended December 31
	2018 2017 $ 1,287 $ (695) $ (7,433) $ (9,969) RMB to NTD
For the Year Ended December 31
	2018 $ (12,219)	2017 $ (21,934)

b) Interest rate risk

The carrying amounts of the Group’s financial assets and financial liabilities with exposure to interest rate risk at the end of the reporting period were as follows:

Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2018 2017 $ 15,330,348 $ 13,974,008 738,972 854,933

75 -

Sensitivity analysis

The sensitivity analysis below were determined based on the Corporation’s exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. The sensitivity rate of 0.25% is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 0.25% higher/lower and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2018 and 2017 would increase/decrease by $36,478 thousand and $32,798 thousand, respectively.

The Group’s sensitivity to interest rates increased during the current year was mainly due to the increase in variable rate asset instruments.

c) Other price risk

The Group was exposed to equity price risk on its investments in listed securities and mutual funds.

Sensitivity analysis

The sensitivity analysis below was determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 5% lower, pre-tax profit for the year ended December 31, 2018 would have decreased by $28,381 thousand, as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the year ended December 31, 2018 would have decreased by $934 thousand, as a result of the changes in fair value of financial assets at FVTOCI.

If equity prices had been 5% lower, pre-tax profit for the year ended December 31, 2017 would have decreased by $26,475 thousand, as a result of the changes in fair value of held-for-trading investments, and the pre-tax other comprehensive income for the year ended December 31, 2017 would decrease by $1,124 thousand, as a result of the changes in fair value of available-for-sale shares.

2) Credit risk

The amounts of financial assets will be potentially impacted if the counter-parties of the Corporation or third parties fail to perform their obligations in financial instrument contracts. The impact includes the concentrated degrees, composition parts and contracts amounts of the financial instruments and other receivables. The Group believes the risk is low because the trading parties are creditworthy banks, brokers and dealers.

3) Liquidity risk

The Group has sufficient operating capital to meet cash requirements for settlement of derivative transactions. Thus, liquidity risk is low.

76 -

33. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Corporation and its subsidiaries, which are related parties of the Corporation, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

a. Names and categories of related parties

Related Party Name
Mitsubishi Motors Corporation (Mitsubishi Motors Corp.)

Mitsubishi Corporation (Mitsubishi Corp.)

Tai Yuen Textile Co., Ltd. (Tai Yuen Textile)

Le Wen Investment Co., Ltd.

Yulon Management Company Ltd. (Yulon Management)

Mitsubishi Corporation (Taiwan) Ltd.

Mitsubishi Motors Philippines Corporation

Mitsubishi Motors Thailand

Mitsubishi Motors North America., Inc.

Mitsubishi Motors Europe B.V.

Mitsubishi Corporation Technos

Shye Shyang Mechanical Industrial Co., Ltd.

Uni-Calsonic Corp.

Yulon Motor Co., Ltd. (Yulon)

Fortune Motors Co., Ltd. (Fortune Motors)

ROC Spicer Ltd. (ROC-Spicer)

Uni Auto Parts Manufacture Co., Ltd.

Shung Ye Motor Co., Ltd. (Shung Ye Motor)

Hua-Chuang Automobile Information Technical Center Co.,
Ltd. (Hua-Chuang Automobile Information Technical
Center)

Yulon IT Solutions Inc.

Sinjang Co., Ltd. (Sin Jang Enterprises)

Tokio Marine Newa Insurance Co., Ltd.

Hong Shuo Cultural Enterprises, Co., Ltd.

Hsiang Shuo Enterprises

Sinqual Technology Co., Ltd.

Taiwan Acceptance Corporation (Taiwan Acceptance)

Yue Sheng Industrial Co., Ltd.

Luxgen Motor Co., Ltd.

Yulon Nissan Motor Co., Ltd.

Related Party Category

Investors that have significant influence
over the Group
Investors that have significant influence
over the Group
Investors that have significant influence
over the Group
Investors that have significant influence
over the Group
Subsidiary of investors that have
significant influence over the Group
Subsidiary of investors that have
significant influence over the Group
Subsidiary of investors that have
significant influence over the Group
Subsidiary of investors that have
significant influence over the Group
Subsidiary of investors that have
significant influence over the Group
Subsidiary of investors that have
significant influence over the Group
Subsidiary of investors that have
significant influence over the Group
The Group is its major management
authority
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate

(Continued)

77 -

Related Party Name
Y-Teks Co., Ltd.

Yulon Energy Service Co., Ltd.

Yuchia Motor Co., Ltd.

Yue Ki Industrial Co., Ltd. (Yue Ki Industrial)

Carplus Auto Leasing Corporation

eCBO Information Services Co., Ltd.

Hsieh-Shin Motors Co., Ltd.

Yu Rich Financial Services Company

Visionary International Consulting Co., Ltd.

ROC-Keeper Industrial Ltd.

Taiguang Investment (HK) Co., Ltd. (Taiguang Investment)
ROC-Spicer Investment Co., Ltd. (BVI) (ROC-Spicer
Investment)

Tai-Ya Investment (HK) Co., Ltd. (Tai-Ya Investment)

Fujian Spicer Drivetrain System Co., Ltd. (Fujian Spicer)

Shanghai Hopeful Wheel Automobile Maintenance Co., Ltd.
South East (Fujian) Motor Corporation Ltd.

Fujian Benz Automotive Co., Ltd.

Fuzhou Fushiang Motor Industrial Co., Ltd.

Xiamen King-Long Kian-Shen Frame

Hangzhou King-Long Kian-Shen Co., Ltd.

China Engine (Fujian)

Zhejiang Kangda Motor Industry and Trade Co., Ltd.
(Zhejiang Kangda)

Automotive Research & Testing Center

China Motor Indigenous Foundation

Related Party Category

Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Joint Venture
Joint Venture
Joint Venture
Joint Venture
Joint Venture
Joint Venture
Joint Venture (Note)
Substantive related party (Note)
Substantive related party
(Concluded)

Note: The relationship ended in August 2018.

b. Operating transactions
1) Sales of goods

Line Items Related Party Category/Name Sales Associates Fortune Motors Shung Ye Motor Others Investors and subsidiaries of the investors that have significant influence over the Group Others Joint ventures Others Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 18,020,746 7,181,616 1,375,902 26,578,264 127,786 59,162 - $ 26,765,212	2017 $ 18,800,506 5,134,913 1,649,385 25,584,804 823,737 95,662 1,328 $ 26,505,531

78 -

2) Purchases of goods

For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
2018 2017 $ 1,967,217 $ 2,192,295 1,192,906 3,468,357 3,492 6,036 1,196,398 3,474,393 3,166,731 1,981,080 136,758 100,726 3,303,489 2,081,806 329,152 374,513 $ 6,796,256 $ 8,123,007 For the Year Ended December 31
2018 2017 $ 190,038 $ 206,895 For the Year Ended December 31
	2018 $ 91,718 12,600 $ 104,318 $ 53,493 56,211 689 $ 110,393	2017 $ 92,413 16,124 $ 108,537 $ 51,750 55,030 1,925 $ 108,705

79 -

5) Receivables from related parties

Line Items Related Party Category/Name Trade receivables from Associates related parties, net Fortune Motors Shung Ye Motor Hua-Chuang Automobile Information Technical Center Yulon Others Joint ventures Others Investors and subsidiaries of the investors that have significant influence over the Group Others 6) Prepayments Line Items Related Party Category/Name Prepayments Investors and subsidiaries of investors that have significant influence over the Group Mitsubishi Corp. Others Joint ventures South East (Fujian) Motor Others		December 31	December 31
		2018 2017 $ 870,216 $ 944,038 536,279 238,467 199,992 189,314 97,190 203,263 187,844 13,473 1,891,521 1,588,555 44,905 99,142 16,043 16,206 $ 1,952,469 $ 1,703,903 December 31
		2018 $ 117,943 6,883 124,826 13,162 91 $ 138,079	2017 $ 416,905 28,155 445,060 91,367 232 $ 536,659

7) Acquisitions of property, plant and equipment

Line Items Related Party Category/Name Property, plant and Associates equipment Others The Group is its major management Others Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 31,279 7,349 - $ 38,628	2017 $ 25,879 4,500 301 $ 30,680

80 -

8) Payables to related parties

Line Items Related Party Category/Name Trade payables to Associates related parties Yulon ROC-Spicer Others Investors and subsidiaries of investors that have significant influence over the Group Yulon Management Mitsubishi Motors Corp. Others The Group is its major management Others Joint ventures Others Substantive related parties Others		December 31	December 31
		2018 $ 94,762 87,219 434,365 616,346 95,013 92,182 71,715 258,910 60,301 9,397 - $ 944,954	2017 $ 86,995 93,771 360,777 541,543 92,216 114,418 51,066 257,700 63,643 12,498 11,006 $ 886,390

9) Contract liabilities - 2018 (deposit in advance - 2017)

Line Items Related Party Category/Name Other current liabilities Associates Luxgen Sin Jang Enterprises Others Others		December 31	December 31
		2018 $ 45,514 - 1,191 46,705 273 $ 46,978	2017 $ 1,030 20,492 98 21,620 2,769 $ 24,389

10) Acquisitions of financial assets

For the year ended December 31, 2017

Related Party
Category/Name	Line Items	Underlying Assets	Purchase Price
Associates
Taiwan Acceptance	Debt investments with no active	3-year unsecured	$ 250,059
	market - non-current	corporate bond

81 -
11) Other transactions with related parties

In November 2017, the Group paid $400 thousand to acquire 56 thousand shares in Hua-Chuang Automobile Information Technical Center from Tai-Yuen Textile.

The outstanding payables to related parties had no guarantees and would be paid in cash. The Group receives guarantees of the receivables from part of the related parties. For the years ended December 31, 2018 and 2017, no impairment loss was recognized for trade receivables from related parties.

Transactions with related parties have the same terms for pricing, receipts and payments as of those for the third parties. Lease contracts with related parties are based on market conditions, and the terms of receipts or payments are the same as those for the third parties.

The Group signed contract with Mitsubishi Motors Corporation. Refer to Note 35.

c. Compensation of key management personnel

Short-term employee benefits Post-employment benefits	For the Year Ended	For the Year Ended	December 31
		2018 $ 125,315 2,793 $ 128,108	2017 $ 134,492 2,705 $ 137,197

The remuneration of directors and key executives was determined by the remuneration committee based on the performance of individuals and market trends.

34. ASSETS PLEDGED AS COLLATERAL

The following assets were provided as collateral for bank borrowings, the tariff of importing vehicle parts and materials, escrows, government tenders and the deposit of project:

Property, plant and equipment Pledge deposits (included in other current assets) Investment properties		December 31	December 31
		2018 $ 778,643 157,585 52,323 $ 988,551	2017 $ 786,435 157,967 52,323 $ 996,725

35. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Significant commitments and contingencies of the Group as of December 31, 2018 were as follows:

a. Guarantee notes amounted to $5,020,938 thousand, which had been issued to financial institutions as collaterals for loans; unused letters of credit amounted to $5,257 thousand.
82 -

b. The Group entered into an agreement with Mitsubishi Motors Corp. as stated below:

Project Technical royalty Technical royalty	Content Technical cooperation and manufacture of Delica and other car models Technical cooperation and manufacture of Outlander and other car models	Date of Agreement/ Expiry Date 2006.3.1-2025.4.8 2005.7.1-2025.9.7	Agreement Price Royalty was agreed to be the basis of the FOB price of automobiles sold and manufactured parts repaired Royalty was agreed to be the fixed amount of automobiles sold per unit and the basis of the FOB price of manufactured parts repaired	Payment
				Paid every 6 months within 90 days Paid every 6 months within 60-90 days

c. The status of endorsements/guarantees is listed in Table 2.

36. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Group’s group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated by foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

December 31, 2018

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Foreign currency assets
Monetary items
RMB	$	289,576	4.4720	$ 1,294,982
USD		29,859	30.7150	917,123
JPY		2,765,664	0.2782	769,408
Non-monetary items
Investments accounted for using the equity
method
RMB		1,326,111	4.4720	5,930,370
EUR		72,973	35.2000	2,568,646
Foreign currency liabilities
Monetary items
JPY		556,293	0.2782	154,761

83 -

December 31, 2017

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Foreign currency assets
Monetary items
RMB	$	485,634	4.5650	$ 2,216,921
USD		39,835	29.7600	1,185,494
JPY		2,643,053	0.2642	698,295
Non-monetary items
Investments accounted for using the equity
method
RMB		1,199,135	4.5650	5,474,050
EUR		49,523	35.5700	1,761,531
Foreign currency liabilities
Monetary items
JPY		608,986	0.2642	160,894

For the years ended December 31, 2018 and 2017, net foreign exchange gains (losses) were $12,498 thousand and $(108,800) thousand, respectively. It is impractical to disclose net foreign exchange gains (losses) by each significant foreign currency due to the variety of the foreign currency transactions.

37. SEPARATELY DISCLOSED ITEMS

Excluded Notes 7, 11, and 32, and Tables 1 to 10, there are no other separately disclosed items.

38. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group’s reportable segments were vehicle manufacturing, channel and others.

84 -

The following was an analysis of the Group’s revenue and results by reportable segment.

Vehicle manufacturing Channel Others Adjustment and eliminations Administration cost and remunerations to directors Other non-operating income and expenses, net Profit before income tax		Segment Revenues For the Year Ended December 31 2018 2017 $ 29,639,511 $ 33,628,634 5,422,462 5,509,577 87,057 93,596 (279,516) (323,714) $ 34,869,514 $ 38,908,093		Segment Income or Loss	Segment Income or Loss
				For the Year Ended December 31
		2018 $ 29,639,511 5,422,462 87,057 (279,516) $ 34,869,514		2018 $ 4,582,039 73,522 (2,420) - 4,653,141 (347,224) 4,796 $ 4,310,713	2017 $ 4,646,978 199,387 2,240 - 4,848,605 (280,434) 307,836 $ 4,876,007

Intersegment transactions were accounted for according to market prices.

Segment profit represented the profit before tax earned by each segment without allocation of central administration costs and remunerations to directors, interest income, other income, gain on disposal of investments, net foreign exchange gain (loss), gains (losses) on financial instruments at fair value through profit or loss, other expense, impairment loss, interest expense and income tax expense. This was the measure reported to the chief operating decision maker for resource allocation and assessment of segment performance.

85 -

TABLE 1

CHINA MOTOR CORPORATION AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Year (Note 1)	Ending Balance (Note 1)	Actual Borrowing Amount (Notes 1 and 4)	Interest Rate (%)	Nature of Financing	Business Transaction Amount	Reason for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower (Note 2)	Aggregate Financing Limit (Note 3)
													Item	Value
0	China Motor Corporation	Sino Diamond Motors	Other receivables	Yes	$ 700,000	$ 700,000	$ 700,000	1.1	Short-term financing	$ -	Working capital	$ -	-	$ -	$ 1,564,808	$ 10,432,055
1	Hwa-Lin	Sichuan Huafeng Hanwei Guangzhou Huayou Motor Maintenance Dongguan Huayi Dongguan Huashun	Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes	68,162 (US$ 1,200 thousand and RMB 7,000 thousand) 91,505 (US$ 1,960 thousand and RMB 7,000 thousand) 109,653 (US$ 3,570 thousand) 31,304 (RMB 7,000 thousand)	68,162 (US$ 1,200 thousand and RMB 7,000 thousand) 91,505 (US$ 1,960 thousand and RMB 7,000 thousand) 109,653 (US$ 3,570 thousand) 31,304 (RMB 7,000 thousand)	- - 107,963 (US$ 3,515 thousand) -	- - 2 -	Short-term financing Short-term financing Short-term financing Short-term financing	- - - -	Working capital Working capital Working capital Working capital	- - - -	- - - -	- - - -	1,564,808 1,564,808 1,564,808 1,564,808	10,432,055 10,432,055 10,432,055 10,432,055
2	Guangzhou Huayou Motor Maintenance	Guangzhou Huayou Motor Sales Tianjin Hwahong Sichuan Huafeng Hanwei Dongguan Huashun Dongguan Huayi	Other receivables Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes Yes	447,200 (RMB 100,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand)	447,200 (RMB 100,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand)	- - - - -	- - - - -	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing	- - - - -	Working capital Working capital Working capital Working capital Working capital	- - - - -	- - - - -	- - - - -	1,564,808 1,564,808 1,564,808 1,564,808 1,564,808	10,432,055 10,432,055 10,432,055 10,432,055 10,432,055
3	Sichuan Huafeng Hanwei	Sichuan Lingwei Sichuan Hauwei Tianjin Hwahong Guangzhou Huayou Motor Maintenance	Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes	44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand 44,720 (RMB 10,000 thousand	44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand 44,720 (RMB 10,000 thousand	- - - -	- - - -	Short-term financing Short-term financing Short-term financing Short-term financing	- - - -	Working capital Working capital Working capital Working capital	- - - -	- - - -	- - - -	1,564,808 1,564,808 1,564,808 1,564,808	10,432,055 10,432,055 10,432,055 10,432,055

(Continued)

86 -

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Year (Note 1)	Ending Balance (Note 1)	Actual Borrowing Amount (Notes 1 and 4)	Interest Rate (%)	Nature of Financing	Business Transaction Amount	Reason for Short-term Financing	Allowance for Impairment Loss	Collateral	Collateral	Financing Limit for Each Borrower (Note 2)	Aggregate Financing Limit (Note 3)
													Item	Value
		Dongguan Huashun Dongguan Huayi	Other receivables Other receivables	Yes Yes	$ 134,160 (RMB 30,000 thousand) 134,160 (RMB 30,000 thousand)	$ 134,160 (RMB 30,000 thousand) 134,160 (RMB 30,000 thousand)	$ - -	- -	Short-term financing Short-term financing	$ - -	Working capital Working capital	$ - -	- -	$ - -	$ 1,564,808 1,564,808	$ 10,432,055 10,432,055
4	Tianjin Hwarui	Tianjin Hwahong Guangzhou Huayou Motor Maintenance Dongguan Huayi Dongguan Huashun	Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes	44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 134,160 (RMB 30,000 thousand) 134,160 (RMB 30,000 thousand)	44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 134,160 (RMB 30,000 thousand) 134,160 (RMB 30,000 thousand)	- - - -	- - - -	Short-term financing Short-term financing Short-term financing Short-term financing	- - - -	Working capital Working capital Working capital Working capital	- - - -	- - - -	- - - -	1,564,808 1,564,808 1,564,808 1,564,808	10,432,055 10,432,055 10,432,055 10,432,055
5	Tianjin Hwahong	Tianjin Hwarui Sichuan Huafeng Hanwei Dongguan Huayi Dongguan Huashun Guangzhou Huayou Motor Maintenance	Other receivables Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes Yes	223,600 (RMB 50,000 thousand) 89,440 (RMB 20,000 thousand) 67,080 (RMB 15,000 thousand) 67,080 (RMB 15,000 thousand) 134,160 (RMB 30,000 thousand)	223,600 (RMB 50,000 thousand) 89,440 (RMB 20,000 thousand) 67,080 (RMB 15,000 thousand) 67,080 (RMB 15,000 thousand) 134,160 (RMB 30,000 thousand)	73,788 (RMB 16,500 thousand) - - - 22,360 (RMB 5,000 thousand)	4.35 - - - 2.90	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing	- - - - -	Working capital Working capital Working capital Working capital Working capital	- - - - -	- - - - -	- - - - -	1,564,808 1,564,808 1,564,808 1,564,808 1,564,808	10,432,055 10,432,055 10,432,055 10,432,055 10,432,055
6	Dongguan Huayi	Dongguan Huashun	Other receivables	Yes	223,600 (RMB 50,000 thousand)	223,600 (RMB 50,000 thousand)	44,720 (RMB 10,000 thousand)	4.35	Short-term financing	-	Working capital	-	-	-	1,564,808	10,432,055
7	Dongguan Huashun	Dongguan Huayi Sichuan Huafeng Hanwei Tianjin Hwahong Guangzhou Huayou Motor Maintenance	Other receivables Other receivables Other receivables Other receivables	Yes Yes Yes Yes	44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand)	44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand) 44,720 (RMB 10,000 thousand)	- - - -	- - - -	Short-term financing Short-term financing Short-term financing Short-term financing	- - - -	Working capital Working capital Working capital Working capital	- - - -	- - - -	- - - -	1,564,808 1,564,808 1,564,808 1,564,808	10,432,055 10,432,055 10,432,055 10,432,055
8	GH	Gatech Suzhou	Other receivables	Yes	46,073 (US$ 1,500 thousand)	46,073 (US$ 1,500 thousand)	-	-	Short-term financing	-	Working capital	-	-	-	1,564,808	10,432,055

(Continued)

87 -

(Concluded)

Note 1: At the exchange rates on December 31, 2018, US$1=NT$30.715, RMB1=NT$4.472.

Note 2: The amount is 3% of the total shareholders’ equity in the latest financial statement of China Motor Corporation.

Note 3: The amount is 20% of the total shareholders’ equity in the latest financial statement of China Motor Corporation.

Note 4:

Eliminated.

88 -

TABLE 2

CHINA MOTOR CORPORATION AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No.	Endorser/Guarantor	Endorsee/Guarantee Receiver	Endorsee/Guarantee Receiver	Limit on Endorsement/ Guarantee Given on Behalf of Each Party	Maximum Amount Endorsed/ Guaranteed During the Year (Note)	Outstanding Endorsement/ Guarantee at the End of the Year (Note)	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collaterals	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiary	Endorsement/ Guarantee Given by Subsidiary on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Company in Mainland China
		Name	Relationship
1	Sino Diamond Motors	Guangzhou Huayou Motor Maintenance Tianjin Hwarui Sichuan Huafeng Hanwei Dongguan Huayi	Subsidiary Subsidiary Subsidiary Subsidiary	20% of the Corporation’s issued capital, $2,768,102 thousand 20% of the Corporation’s issued capital, $2,768,102 thousand 20% of the Corporation’s issued capital, $2,768,102 thousand 20% of the Corporation’s issued capital, $2,768,102 thousand	$ 223,600 (RMB 50,000 thousand) 223,600 (RMB 50,000 thousand) 223,600 (RMB 50,000 thousand) 223,600 (RMB 50,000 thousand)	$ 223,600 (RMB 50,000 thousand) 223,600 (RMB 50,000 thousand) 223,600 (RMB 50,000 thousand) 223,600 (RMB 50,000 thousand)	$ - - - -	$ - - - -	0.43 0.43 0.43 0.43	50% of the Corporation’s issued capital, $6,920,254 thousand 50% of the Corporation’s issued capital, $6,920,254 thousand 50% of the Corporation’s issued capital, $6,920,254 thousand 50% of the Corporation’s issued capital, $6,920,254 thousand	No No No No	No No No No	Yes Yes Yes Yes

Note: At the exchange rates on December 31, 2018, US$1=NT$30.715, RMB1=NT$4.472.

89 -

TABLE 3

CHINA MOTOR CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Name	Type and Name/Issuer of Marketable Security	Relationship with the Holding Company	Financial Statement Account		December	31, 2018		Note
				Number of Shares (In Thousands)	Carrying Amount (Note 3)	Percentage of Ownership	Fair Value
China Motor Corporation	Beneficiary certificates Allianz Global Investors All Seasons Harvest Fund of Bond Funds Franklin Templeton SinoAm Money Market Fubon Chi Hsiang Money Market Fund The RSIT Enhanced Money Market Fubon China Policy Bank Bond ETF CTBC Hua Win Money Market Fund Hua Nan Phoenix Money Market Fund UPAMC James Bond Money Market Fund Sinopac Money Market Fund Paradigm Pion Money Market Cathay Taiwan Money Market Fund Prudential Financial Money Market Fund Nomura Global Short Duration Bond Fund Accumulate Shares Shye Shyang Machinery Industrial Myson Century, Inc. Taiwan Aerospace	- - - - - - - - - - - - - Corporate director Corporate director -	Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - non-current Fair value through other comprehensive income financial assets - non-current Fair value through other comprehensive income financial assets - non-current	4,785 4,867 3,205 4,201 1,500 2,738 1,856 1,806 2,167 2,610 2,423 1,906 2,844 9,009 4,705 811	$ 57,201 50,235 50,211 50,208 31,125 30,134 30,131 30,128 30,127 30,117 30,108 30,108 28,953 671,565 17,736 10,664	- - - - - - - - - - - - - 10.00 7.84 0.60	$ 57,201 50,235 50,211 50,208 31,125 30,134 30,131 30,128 30,127 30,117 30,108 30,108 28,953 671,565 17,736 10,664

(Continued)

90 -

Holding Company Name	Type and Name/Issuer of Marketable Security	Relationship with the Holding Company	Financial Statement Account		December	31, 2018		Note
				Number of Shares (In Thousands)	Carrying Amount (Note 3)	Percentage of Ownership	Fair Value
KSIHK Alliance Investment & Management Sino Diamond Motors	Com2B (Cayman) Corp. NORM Pacific Automation Corp. Carnival Corporate bonds Taiwan Acceptance Corp. Gatetech Technology Morgan Stanley Deutsche Bank Aktiengesellschaft, Singapore Branch Evergreen Marine Corporation Crédit Agricole Corporate and Investment Bank SA Société Générale Fonterra Co-operative Group Ltd. Shares Beijing NTN-SEOHAN Driveshaft Beneficiary certificates Capital Money Market Fund Shares Samuel (Cayman) Co., Ltd. Carplus Auto Leasing Corporation T-Car Inc. Solidlite Corporation Site information service Phalanx Biotech Group Preference shares Rock Financial Risk Service Co., Ltd. Beneficiary certificates CTBC Hwa win Money Market Fund	- - - Associate Subsidiary - - - - - - - - - - - - - - - -	Fair value through other comprehensive income financial assets - non-current Fair value through other comprehensive income financial assets - non-current Fair value through other comprehensive income financial assets - non-current Amortized cost financial assets - non-current Amortized cost financial assets - non-current Amortized cost financial assets - non-current Amortized cost financial assets - non-current Amortized cost financial assets - non-current Amortized cost financial assets - non-current Amortized cost financial assets - non-current Amortized cost financial assets - non-current Fair value through other comprehensive income financial assets - non-current Financial assets at fair value through profit or loss - current Fair value through other comprehensive income financial assets - non-current Financial assets at fair value through profit or loss - non-current Fair value through other comprehensive income financial assets - non-current Fair value through other comprehensive income financial assets - non-current Fair value through other comprehensive income financial assets - non-current Fair value through other comprehensive income financial assets - non-current Amortized cost financial assets - non-current Financial assets at fair value through profit or loss - current	2,000 128 190 - - - - - - - - - 94 6,327 2,849 1,275 789 65 696 - 6,021	$ - 1,654 937 248,471 150,000 134,133 134,057 99,922 89,371 $ 67,301 44,767 41,133 (RMB 9,198 thousand) 1,512 107,666 62,776 35,879 5,457 4,189 2,081 6,683 66,255	4.44 0.45 0.05 - - - - - - - - 9.00 - 15.07 3.45 4.05 3.60 0.54 1.13 - -	$ - 1,654 937 - - - - - - $ - - 41,133 1,512 107,666 62,776 35,879 5,457 4,189 2,081 - 66,255	Note 1

(Continued)

91 -

Holding Company Name	Type and Name/Issuer of Marketable Security	Relationship with the Holding Company	Financial Statement Account		December	31, 2018		Note
				Number of Shares (In Thousands)	Carrying Amount (Note 3)	Percentage of Ownership	Fair Value
Hwa Lin Brilliant Insight International China Engine	Principle guaranteed notes President Securities 100% Principle Guaranteed Note Beneficiary certificates Taishin Ta-Chong Money Market Beneficiary certificates Hua Nan Phoenix Money Market Fund	- - -	Amortized cost financial assets - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current	- 74 1,233	$ 104,359 1,051 20,016	- - -	$ - 1,051 20,016

Note 1: Eliminated.

Note 2: Refer to Tables 7 and 8 for the information of investments in subsidiaries and associates.

Note 3: At the exchange rate on December 31, 2018, RMB1=NT$4.472.

(Concluded)

92 -

TABLE 4

CHINA MOTOR CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal		Ending Balance (Note)	Ending Balance (Note)
					Number of Shares	Amount	Number of Shares	Amount	Number of Shares	Amount	Carrying Amount	Gain on Disposal	Shares	Amount
China Motor Corporation	Shares Fujian Spicer	Investments accounted for using the equity method	Taiguang Investment	Associate	-	$ -	7,308	$ 329,134	-	$ -	$ -	$ -	7,308	$ 371,839

Note: The ending amount includes profit and loss of associates accounted for using the equity method and related adjustment items.

93 -

TABLE 5

CHINA MOTOR CORPORATION AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Seller/Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)
			Purchase/ Sale	Amount	% to Total (Note 2)	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total (Note 2)
China Motor Corporation (“CMC”) Sino Diamond Motors Kiah Shen COC	Fortune Motors Shung Ye Motor Mitsubishi Motor Corp. Mitsubishi Corp. Kian Shen (Note 1) Uni Auto Parts Manufacture ROC-Spicer Shye Shyang Machinery Industrial COC (Note 1) Uni-Calsonic Yueki Taiwan Mitsubishi Corp. Shung Ye Motor Fortune Motors Mitsubishi Motor Corp. China Motor Corporation (Note 1) Yueki China Motor Corporation (Note 1) Yulon Luxgen	Equity-method investee Equity-method investee Director of CMC Director of CMC Subsidiary Equity-method investee Equity-method investee Director of Shye Shyang Machinery Industrial Subsidiary Equity-method investee Equity-method investee’s subsidiary Equity-method investee Equity-method investee Equity-method investee Director of CMC Parent company Equity-method investee Parent company Equity-method investee Equity-method investee’s subsidiary	Sale Sale Sale Purchase Purchase Purchase Purchase Purchase Purchase Purchase Purchase Purchase Sale Sale Purchase Sale Purchase Sale Sale Sale	$ (17,454,487) (4,398,207) (107,618) 1,714,457 619,186 592,654 471,220 326,661 280,741 140,796 137,299 136,473 (2,760,699) (565,825) 1,452,274 (619,186) 166,884 (280,741) (228,506) (107,772)	(66) (17) - 10 4 4 3 2 2 1 1 1 (77) (16) 64 (46) 15 (25) (20) (9)	Collect after 16-60 days of delivery Collect after 16-60 days of delivery Collect after 20-80 days of delivery Pay after 7 days of cargo ship out Pay after 15 days of the month of delivery Pay after 15 days of the month of delivery Pay after 45 days of the month of delivery Pay after 45 days of the month of delivery Pay after 45 days of the month of delivery Pay after 45 days of the month of delivery Pay after 45 days of the month of delivery Pay after 25 days of cargo ship out Collect after 7-45 days of delivery Collect after 16-45 days of delivery Pay after 10 days of cargo ship out Collect after 15 days of the month of delivery Pay after 45 days of the month of delivery Collect after 45 days of the month of delivery Collect after 45 days of the month of delivery Collect after 45 days of the month of delivery	$ - - - - - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - - -	$ 796,615 284,533 9,867 (64,524) (58,298) (75,239) (86,961) (58,864) (44,892) (25,782) (27,088) - 249,200 73,424 (12) 58,298 (64,928) 44,892 36,574 105,374	47 17 1 (2) (2) (3) (3) (2) (2) (1) (1) - 68 20 - 31 (21) 11 9 26
										(Continued)

94 -

Seller/Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% to Total (Note 2)	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total (Note 2)
Y. M. Hi-Tech China Engine Sichuan Hwafeng Hanwei Guangzhou Huayou Motor Maintenance Tianjin Huahong Donggun Huashun	Sin Jiang Enterprises Yulon Yulon Yulon Hua-Chuang Automobile Information Technical Center South Eastern (Fujian) Motor South Eastern (Fujian) Motor South Eastern (Fujian) Motor South Eastern (Fujian) Motor	Equity-method investee Equity-method investee Equity-method investee Equity-method investee Equity-method investee Equity-method investee Equity-method investee Equity-method investee Equity-method investee	Sale Purchase Sale Purchase Sale Purchase Purchase Purchase Purchase	$ (102,458) 125,825 (118,625) 122,754 (497,300) 258,147 162,543 311,488 404,309	(9) 24 (44) 49 (72) 98 97 97 97	Collect after 45 days of the month of delivery Net 75 days from the end of the month of when an invoice is issued Collect after 45 days of the month of delivery Net 75 days from the end of the month of when an invoice is issued Net 90 days from the end of the month of when an invoice is issued Cash before delivery Cash before delivery Cash before delivery Cash before delivery	$ - - - - - - - - -	- - - - - - - - -	$ 72,533 (110) 23,055 (82,066) 195,899 - - (61) (40)	18 - 50 (59) 82 - - (9) (2)

Note 1: Eliminated.

Note 2: The proportion of the individual company’s total purchase (sale) or total receivable (payable).

(Concluded)

95 -

TABLE 6

CHINA MOTOR CORPORATION AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
China Motor Corporation Sino Diamond Motors China Engine COC	Fortune Motors Shung Ye Motor Shung Ye Motor Hua-Chuang Automobile Information Technical Center Luxgen	Equity-method investee Equity-method investee Equity-method investee Equity-method investee Equity-method investee’s subsidiary	$ 796,615 284,533 249,200 195,899 105,374	20.98 17.34 20.96 2.59 2.01	$ - - - - -	- - - - -	$ 796,615 284,533 249,200 82,086 1,220	$ - - - - -

96 -

TABLE 7

CHINA MOTOR CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investor Company	Investee Company	Location	Main Business and Product	Investment Amount	Investment Amount	As of December 31, 2018	As of December 31, 2018	As of December 31, 2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares (In Thousands)	%	Carrying Amount
China Motor Corporation Kian Shen Kian Shen Investment Alliance Investment & Management Sino Diamond Motors	Yulon (Note 6) Kian Shen (Note 1) Fortune Motors Sino Diamond Motors (Note 1) Tokio Marine Newa Insurance (Note 2) Alliance Investment & Management (Note 1) Daimler Vans Hong Kong Ltd. ROC-Spicer CMI (Note 1) COC (Note 1) Hwa Wei (Note 1) Hua-Chuang Automobile Information Technical Center (Note 4) Uni Auto Parts Manufacture Shung Ye Motor (Notes 3 and 7) Gatetech Technology (Note 1) China Engine (Note 1) Uni-Calsonic Yueki Industrial Co., Ltd. Sin Gan Sin Jiang Enterprises Tai-Ya Investment Hwa Chung Motors (Note 1) Yulon IT Solutions Hwa Hann (Note 1) Kian Shen Investment (Note 1) KSIHK (Note 1) Hua-Chuang Automobile Information Technical Center Greentrans Investment (Note 1) Gatetech Technology (Note 1) Hua-Yu (Note 1) Hua-Chuang Automobile Information Technical Center China Engine (Note 1) Gatetech Technology (Note 1) Brilliant Insight International (Note 1) Shung Ye Motors (Note 5) Fortune Motors Hwa Hann (Note 1)	Miaoli, Taiwan Taoyuan, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Taipei, Taiwan Hong Kong Taoyuan, Taiwan Samoa Taoyuan, Taiwan British Virgin Islands Taipei, Taiwan Miaoli, Taiwan Taipei, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Miaoli, Taiwan Hsinchu, Taiwan Taipei, Taiwan Taipei, Taiwan Hong Kong Taoyuan, Taiwan Taipei, Taiwan Philippines British Virgin Islands Hong Kong Taipei, Taiwan Samoa Taoyuan, Taiwan Samoa Taipei, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taipei, Taiwan Taipei, Taiwan Philippines	Manufacture and sale of vehicles The production of frames of heavy-duty car and mold Sales and providing after-sales service of vehicles Sales and providing after-sales service of vehicles Property insurance Investment Investment Manufacture and sales of automobile parts Investment The production of mold, fixture and gauge of vehicles Overseas investment in production and service industries Product design The production of mold, fixture and gauge of vehicles Sales and providing after-sales service of vehicles Aluminum-magnesium alloy casting industry Manufacture of automobile engine and parts Manufacture and sales of automobile parts Manufacture and sales of car components Wholesale, repair and other service of vehicles Retail and wholesale of second-hand vehicles Investment Manufacture and sale of vehicles Information software wholesale services Buy and sell of automobile parts Investment Investment Product design Investment Aluminum-magnesium alloy casting industry Overseas investment in production and service industries Product design Manufacture of automobile engine and parts Aluminum-magnesium alloy casting industry Consulting and service Sales and providing after-sales service of vehicles Sales and providing after-sales service of vehicles Buy and sell of automobile parts	$ 3,835,585 344,800 2,132,826 3,463,724 955,941 1,200,030 2,011,363 675,896 1,402 412,125 1,202 1,028,013 109,813 391,142 474,941 320,000 105,806 109,396 71,316 85,893 79,505 328,900 83,320 - 328,888 US$ 25,907 thousand 473,760 344,369 145,123 1,758,773 473,760 616,000 149,369 22,000 180 24 -	$ 3,835,585 344,800 2,132,826 3,463,724 955,941 1,200,030 2,011,363 803,633 1,402 412,125 1,202 1,028,013 109,813 391,142 474,941 320,000 70,628 - 71,316 85,893 - 328,900 83,320 - 328,888 US$ 25,907 thousand 473,760 344,369 145,123 1,758,773 473,760 616,000 149,369 22,000 180 24 -	262,228 32,201 132,117 278,167 61,511 183,000 46,566 145 40 33,565 40 56,600 13,032 28,228 29,278 32,000 6,084 2,936 7,074 8,568 2,242 8,790 8,332 - 10,296 25,907 26,715 11,200 3,757 45,643 26,715 56,000 4,672 2,200 12 1 -	16.80 43.87 41.93 100.00 20.57 100.00 32.45 29.00 100.00 49.76 40.00 17.25 15.00 39.98 56.53 18.95 31.20 15.08 24.67 20.01 29.00 100.00 43.85 - 100.00 100.00 8.14 100.00 7.26 100.00 8.14 33.16 9.02 100.00 0.02 - -	$ 11,476,319 2,048,431 4,276,471 2,768,821 1,766,730 1,639,695 2,568,646 700,244 1,159,432 761,596 771,520 497,612 373,815 384,354 311,858 146,178 136,670 121,062 101,801 100,549 77,137 63,913 20,875 - 3,829,833 RMB 851,118 thousand 332,536 266,321 40,063 985,192 332,536 317,457 49,818 21,236 212 16 -	$ 2,037,032 453,197 1,178,575 (73,671) 821,757 (19,938) 2,648,313 310,136 5,922 107,308 9,695 (177,499) 3,351 84,595 63,905 (57,045) 19,658 (21,036) 71,730 50,800 3,927 (2,311) (1,269) - 492,159 RMB 103,063 thousand (177,499) (23,196) 63,905 (76,386) (177,499) (57,045) 63,905 (269) 84,595 1,178,575 -	$ 319,732 198,479 494,159 (80,804) 169,043 (19,938) 859,377 89,979 5,922 54,278 3,878 (104,616) 587 33,822 36,131 (8,156) 6,035 (3,311) 17,699 10,164 3,093 (2,311) (556) - - - - - - - - - - - - - -	Equity-method investee Subsidiary Equity-method investee Subsidiary Equity-method investee Subsidiary Equity-method investee Equity-method investee Subsidiary Subsidiary Subsidiary Equity-method investee Equity-method investee Equity-method investee Subsidiary Subsidiary Equity-method investee Equity-method investee Equity-method investee Equity-method investee Equity-method investee Subsidiary Equity-method investee Subsidiary (liquidated) Subsidiary Subsidiary Equity-method investee Subsidiary Subsidiary Subsidiary Equity-method investee Subsidiary Subsidiary Subsidiary Equity-method investee Equity-method investee Subsidiary (liquidated)
											(Continued)

97 -

Investor Company	Investee Company	Location	Main Business and Product	Investment Amount	Investment Amount	As of December 31, 2018	As of December 31, 2018	As of December 31, 2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares (In Thousands)	%	Carrying Amount
Hua-Yu Gatetech Technology GH China Engine CMI Hwa Chung Motors COC	Hwa-Lin (Note 1) GH (Note 1) GI (Note 1) Advance Power Investment (Note 1) Advance Power Machinery (Note 1) Hwa Wei holdings (Note 1) Ling Wei (Note 1) Greentrans (Note 1) Y. M. Hi-Tech (Note 1) Shye Shinn (Note 1)	British Virgin Islands Samoa Samoa Mauritius Miaoli, Taiwan British Virgin Island Taipei, Taiwan Taipei, Taiwan Taoyuan, Taiwan British Virgin Islands	Overseas investment in production and service industries Investment Investment Reinvestment and sales Manufacture of vehicles and parts Overseas investment in production and service industries Sales of second-hand vehicles Sales of motorcycles and parts Steel cutting Investment	US$ 45,929 thousand 647,041 US$ 20,268 thousand 59,456 5,000 1,428,503 31,000 10,000 46,250 US$ 968 thousand	US$ 45,929 thousand 647,041 US$ 20,268 thousand 59,456 5,000 1,428,503 31,000 10,000 46,250 US$ 968 thousand	42,093 20,130 20,268 3,750 500 60 3,608 1,000 4,250 968	100.00 100.00 100.00 100.00 100.00 60.00 100.00 100.00 85.00 100.00	$ 893,357 610,086 610,060 96,732 10,099 1,157,280 25,534 10,489 62,801 39,718	$ (74,903) 26,115 26,115 2,739 236 9,695 (2,531) 152 4,610 299	$ - - - - - - - - - -	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

Note 1: Eliminated.
Note 2: During the preparation of the consolidated financial statement, price making $75,455 thousand of intra-group transactions had been eliminated.
Note 3: During the preparation of the consolidated financial statement, loss on disposal $22,538 thousand of intra-group transactions had been eliminated.
Note 4: During the preparation of the consolidated financial statement, sidestream transaction $34,386 thousand had been eliminated.
Note 5: During the preparation of the consolidated financial statement, gain on disposal $31 thousand of intra-group transactions had been eliminated.
Note 6: During the preparation of the consolidated financial statement, sidestream transaction $3,285 thousand had been eliminated.
Note 7: During the preparation of the consolidated financial statement, sidestream transaction $7,132 thousand had been eliminated.

(Concluded)

98 -

TABLE 8

CHINA MOTOR CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Main Businesses and Products	Paid-in Capital (Note 1)	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2018 (Note 1)	Investment Flows	Investment Flows	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2018 (Note 1)	Net Income (Loss) of the Investee (Notes 2 and 3)	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Notes 2 and 3)	Carrying Amount as of December 31, 2018 (Note 1)	Accumulated Repatriation of Investment Income as of December 31, 2018 (Note 1)
					Outflow	Inflow
South Eastern (Fujian) Motor (Note 4) China Engine (Fujian) Fujian Benz Automotive Guangzhou NTN-YULON Drivertrain Fuzhou Fushiang Motor Industrial Xiangyang NTN-YULON Drivertrain Xiamen King-Long Kian-Shen Frame Beijing NTN-SEOHAN Driveshaft Jiangsu Greentrans Automotive Parts (Note 5) Fujian Rui Hua (Note 5) Fujian Spicer	Manufacture and sales of industrial automation products Manufacture and sales of engines and engine parts Sales of industrial automation products Sales and manufacture of vehicles’ components Sales and manufacture of vehicles’ components Sales and manufacture of vehicles’ components Sales and manufacture of vehicles’ components The assembling and extra work of transmission shafts and other parts Manufacture and sales of parts of electronic motorcycles Consultation and services Manufacture of vehicles’ key components, drive axle assembly and engine parts series products	$ 4,238,670 (US$ 138,000 thousand) 460,725 (US$ 15,000 thousand) 10,102,400 (EUR 287,000 thousand) 383,938 (US$ 12,500 thousand) 546,113 (US$ 17,780 thousand) 1,044,310 (US$ 34,000 thousand) 429,312 (RMB 96,000 thousand) 184,290 (US$ 6,000 thousand) 344,008 (US$ 11,200 thousand) 104,431 (US$ 3,400 thousand) 915,892 (RMB 204,806 thousand)	The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region Go directly to the mainland China to invest	$ 1,059,668 (US$ 34,500 thousand) 230,363 (US$ 7,500 thousand) 1,639,123 (EUR 46,566 thousand) 153,575 (US$ 5,000 thousand) 87,077 (US$ 2,835 thousand) - 46,902 (US$ 1,527 thousand) 16,586 (US$ 540 thousand) 344,008 (US$ 11,200 thousand) 104,431 (US$ 3,400 thousand) -	$ - - - - - - - - - - 331,876 (US$ 10,805 thousand)	$ - - - - - - - - - - -	$ 1,059,668 (US$ 34,500 thousand) 230,363 (US$ 7,500 thousand) 1,639,123 (EUR 46,566 thousand) 153,575 (US$ 5,000 thousand) 87,077 (US$ 2,835 thousand) - 46,902 (US$ 1,527 thousand) 16,586 (US$ 540 thousand) 344,008 (US$ 11,200 thousand) 104,431 (US$ 3,400 thousand) 331,876 (US$ 10,805 thousand)	$ 132,442 10,955 5,296,738 (EUR 148,743 thousand) 779,476 (RMB 170,938 thousand) 36,451 (RMB 7,994 thousand) 503,021 (RMB 110,312 thousand) (73,538) (RMB -16,127 thousand) - (23,164) (1,484) 180,611	25.00 38.03 16.23 17.55 15.35 17.55 21.94 3.95 100.00 100.00 29.00	$ 33,111 5,477 859,412 (EUR 24,134 thousand) 311,790 (RMB 68,375 thousand) 12,758 (RMB 2,798 thousand) 201,208 (RMB 44,125 thousand) (36,769) (RMB -8,063 thousand) - (23,164) (1,484) 16,605	$ 1,778,536 193,437 2,568,685 (EUR 72,974 thousand) 1,916,686 (RMB 428,597 thousand) 642,829 (RMB 143,745 thousand) 789,620 (RMB 176,570 thousand) 249,706 (RMB 55,838 thousand) 41,133 (RMB 9,198 thousand) 266,237 91,795 371,839	$ 799,296 (US$ 26,023 thousand) - - 502,733 (RMB 112,418 thousand) 158,917 (RMB 35,536 thousand) - - - - - -
												(Continued)

99 -

Investee Company	Main Businesses and Products	Paid-in Capital (Note 1)	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2018 (Note 1)	Investment Flows	Investment Flows	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2018 (Note 1)	Net Income (Loss) of the Investee (Notes 2 and 3)	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Notes 2 and 3)	Carrying Amount as of December 31, 2018 (Note 1)	Accumulated Repatriation of Investment Income as of December 31, 2018 (Note 1)
					Outflow	Inflow
Shenyang Spicer Zhejiang Kangda Motor Industry And Trading (Note 7) Guangzhou Huayou Motor Maintenance (Note 5) Sichuan Huafeng Hanwei (Note 5) Tianjin Hwarui (Note 5) Dongguan Huayi (Note 5) Sichuan Hauwei (Notes 5 and 6) Sichuan Lingwei (Note 5) Dongguan Huashun (Note 5) Tianjin Hwahong (Note 5) Guangzhou Huayou Motor Sales (Note 5) Gatech Suzhou (Note 5)	Manufacture and sale of automobile transmission, shafts, mechanical transmission, shafts and components Sales of vehicles and parts Sales and maintenance of vehicles and parts Sales and maintenance of vehicles and parts Sales and maintenance of vehicles and parts Sales and maintenance of vehicles and parts Sales of vehicles and parts Sales of vehicles and parts Sales of vehicles and parts Sales of vehicles and parts Sales of vehicles and parts Aluminum-magnesium alloy casting industry	$ 384,266 (RMB 85,927 thousand) 178,880 (RMB 40,000 thousand) 393,459 (US$ 12,810 thousand) 409,431 (US$ 13,330 thousand) 246,334 (US$ 8,020 thousand) 136,682 (US$ 4,450 thousand) 13,416 (RMB 3,000 thousand) 8,944 (RMB 2,000 thousand) 111,800 (RMB 25,000 thousand) 268,320 (RMB 60,000 thousand) 192,296 (RMB 43,000 thousand) 746,375 (US$ 24,300 thousand)	The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region The Corporation indirectly owns these investees through investment company registered in a third region	$ - 37,104 (US$ 1,208 thousand) 343,977 (US$ 11,199 thousand) 409,431 (US$ 13,330 thousand) 238,379 (US$ 7,761 thousand) 129,525 (US$ 4,217 thousand) - - - - - 622,501 (US$ 20,267 thousand)	$ 80,166 (US$ 2,610 thousand) - - - - - - - - - - -	$ - - - - - - - - - - - -	$ 80,166 (US$ 2,610 thousand) 37,104 (US$ 1,208 thousand) 343,977 (US$ 11,199 thousand) 409,431 (US$ 13,330 thousand) 238,379 (US$ 7,761 thousand) 129,525 (US$ 4,217 thousand) - - - - - 622,501 (US$ 20,267 thousand)	$ 4,914 (US$ 163 thousand) - (79,729) (58,866) 50,284 (24,248) 1,094 (RMB 240 thousand) 2,681 (RMB 588 thousand) 11,833 (RMB 2,595 thousand) 8,605 (RMB 1,887 thousand) 7,697 (RMB 1,688 thousand) 26,070	20.25 - 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 72.81	$ 3,618 (US$ 120 thousand) 23,949 (79,729) (58,866) 50,284 (24,248) 1,094 (RMB 240 thousand) 2,681 (RMB 588 thousand) 11,833 (RMB 2,595 thousand) 8,605 (RMB 1,887 thousand) 7,697 (RMB 1,688 thousand) 26,070	$ 78,293 (US$ 2,549 thousand) - 29,397 58,464 211,179 104,265 - 210 (RMB 47 thousand) 92,709 (RMB 20,731 thousand) 277,752 (RMB 62,109 thousand) 5,908 (RMB 1,321 thousand) 608,671	$ - - - - - - - - - - - -
												(Continued)

100 -

(Concluded)

Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2018 (Note 1)	Investment Amount Authorized by Investment Commission, MOEA (Note 1)	Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$6,055,234 (US$143,777 thousand and EUR46,566 thousand)	$7,175,898 (US$218,195 thousand and EUR13,467 thousand)	$31,296,165

Note 1: At the exchange rates on December 31, 2018, US$1= NT$30.715, RMB1= NT$4.472, EUR1= NT$35.2.

Note 2: At the average exchange rates for the year ended December 31, 2018, US$1= NT$30.149, RMB1= NT$4.56, EUR1= NT$35.61.
Note 3: The carrying amount and related investment income of the equity investment were calculated based on the audited financial statements of the corresponding year.

Note 4: During the preparation of the consolidated financial statements, the unrealized profit of $12,283 thousand had been eliminated.

Note 5: Eliminated.

Note 6: The cancellation procedures of Sichuan Houwei were processed in November 2018.

Note 7: In August 2018, the Group reclassified the joint venture, Zhejiang Kangda, as non-current assets held for sale.

101 -

TABLE 9

CHINA MOTOR CORPORATION AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

No.	Company Name	Related Party	Relationship			Transaction Details
				Financial Statement Accounts	Amount	Payment Terms	% to Total Sales or Assets
0	China Motor Corporation	Kian Shen Sino Diamond Motors COC Gatetech Technology	Subsidiary Subsidiary Subsidiary Subsidiary	Cost of goods sold Other receivables Other operating revenue Cost of goods sold Amortized cost financial assets - non-current	$ 619,186 700,000 173,880 280,741 150,000	The prices and payment terms for related-party transactions were based on market price which is not significantly different from those to third parties. The prices and payment terms were based on agreements. The prices and payment terms for related-party transactions were based on market price which is not significantly different from those to third parties. The prices and payment terms for related-party transactions were based on market price which is not significantly different from those to third parties. The prices and payment terms were based on agreements.	1.78 1.09 0.50 0.81 0.23
1	Hwa-Lin	Dongguan Huayi	Subsidiary	Other receivables	107,963	The prices and payment terms were based on agreements.	0.17

Note 1: Eliminated.

Note 2: This table includes transactions for amounts over one hundred million.

102 -

TABLE 10

CHINA MOTOR CORPORATION AND SUBSIDIARIES

INTERCOMPANY INVESTMENT RELATIONSHIPS AND PERCENTAGE OF SHARE HELD FRAMEWORK DECEMBER 31, 2018

==> picture [1073 x 504] intentionally omitted <==

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

Parent Corporation
43.87% 18.95% 100.00% 100.00% 56.53% 100.00% 100.00% 49.76%
Alliance Gatetech CMI
Kian Shen China Engine Sino Diamond Hwa Chung COC
Motors Investment & Technology (Samoa) Motors
Management
33.16% 7.26%
60.00% 100.00% 100.00% 85.00%
100.00% 9.02% 100.00%
100.00%
100.00% 100.00% 100.00% 100.00%
GH
Kian Shen Investment Advance Power Machinery Advance Power Investment Hua-Yu (Samoa) Brilliant Insight International Investment Greentrans (Samoa) 40.00% Greentrans Ling Wei Y.M.
(British Virgin Hi-Tech
(Mauritius) Consultancy (Samoa)
Islands) Service 100.00%
100.00%
Co., Ltd. 100.00%
100.00% 100.00%
100.00%
(Hong Kong) KSIHK Fujian Rui Hua (British Virgin Hwa-Lin Greentrans Jiangsu (Samoa) GI Hwa Wei Holdings (British Virgin (British Virgin Shye Shinn
Islands) Islands) Islands)
100.00%
100.00% 99.75%
100.00% 100.00% Gatech
0.25%
(Suzhou)
Sichuan Huafeng Guangzhou
Dongguan Huayi Tianjin Hwarui Technology
Hanwei Huayou Motor
Maintenance
100.00% 100.00% 100.00%
100.00%
Dongguan Tianjin Sichuan Guangzhou
Huashun Hwahong Lingwei Huayou Motor
Sales
----- End of picture text -----

103 -

AI assistant

CMC — Annual Report 2018

51979_rns_2018-12-27_1e8156f3-077b-4d54-88f6-929315378409.pdf

China Motor Corporation and Subsidiaries

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Evaluation of Write-down of Inventory

Revenue Recognition

Other Matter

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Notice to Readers

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CHINA MOTOR CORPORATION AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

1) IFRS 9 “Financial Instruments” and related amendments

Classification, measurement and impairment of financial assets

Hedge accounting

Definition of a lease

The Group as lessee

The Group as lessor

Anticipated impact on assets, liabilities and equity

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

e. Business combinations

f. Foreign currencies

g. Inventories

h. Investment in associates and joint ventures

j. Investment properties

m. Non-current assets held for sale

n. Financial instruments

1) Financial assets

2018

2017

iii. Loans and receivables

b) Impairment of financial assets

2018

2017

2) Financial liabilities

3) Derivative financial instruments

o. Hedge accounting

2018

2017

t. Taxation

1) Current tax

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Write-down of Inventory

6. CASH AND CASH EQUIVALENTS

December 31, 2017

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31, 2018

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

10. CREDIT RISK MANAGEMENT FOR INVESTMENTS IN DEBT INSTRUMENTS - 2018

11. HEDGING INSTRUMENTS

December 31, 2018

December 31, 2017

12. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

13. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

2018

December 31, 2018

2017

CMC Annual Report 2018