CMC - Annual Report 2019 | FinancialReports.eu

China Motor Corporation

Financial Statements for the Years Ended December 31, 2019 and 2018 and Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders China Motor Corporation

Opinion

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

In our opinion, based on our audits and the reports of other auditors (refer to the Other Matter section), the accompanying financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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 Financial Statements section of our report. We are independent of the Corporation 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 financial statements for the year ended December 31, 2019. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The key audit matter of the Corporation’s financial statements for the year ended December 31, 2019 is stated as follows:

Revenue Recognition

Domestic sales of vehicles is material to the Corporation’s financial statements. Since the sale of vehicles is strongly affected by the economy, there is a possible risk in the accuracy of revenue recognition; therefore, revenue recognition has been identified as a key audit matter.

Our audit procedures performed 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;
Verifying whether the risks and rewards of the merchandise were transferred and whether the amount of sales revenue recognized was accurate.

Other Matter

We did not audit the financial statements as of and for the years ended December 31, 2019 and 2018 of some of the Corporation’s investees accounted for using the equity method, namely Daimler Vans Hong Kong Ltd., Shung Ye Motors Corporation, and Uni Auto Parts Manufacture Co., Ltd., 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 Corporation’s accompanying financial statements, is based solely on the reports of the other auditors. The aforementioned investments accounted for using the equity method constituted 8.0% (NT$3,601,010 thousand) and 5.8% (NT$3,326,815 thousand) of the Corporation’s total assets as of December 31, 2019 and 2018, respectively. The Corporation’s share of comprehensive income of the aforementioned investments accounted for using the equity method amounted to NT$733,891 thousand and NT$829,089 thousand for the years ended December 31, 2019 and 2018, respectively, which accounted for 27.4% and 25.1% of the Corporation’s total comprehensive income (loss), respectively.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Corporation’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 Corporation 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 Corporation’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 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 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 Corporation’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Corporation to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Corporation to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the 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 financial statements for the year ended December 31, 2019 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 30, 2020

Notice to Readers

The accompanying financial statements are intended only to present the 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 financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying 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 financial statements shall prevail.

CHINA MOTOR CORPORATION

BALANCE SHEETS DECEMBER 31, 2019 AND 2018 (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 for hedging (Notes 4 and 11) Notes and accounts receivable, net (Notes 4 and 12) Trade receivables from related parties (Notes 4 and 26) Other receivables (Notes 4 and 26) Inventories (Notes 4 and 13) Prepayments (Note 29) Other current assets (Notes 4, 22 and 27) 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) Financial assets at amortized cost (Notes 4, 9, 10 and 26) Investments accounted for using the equity method (Notes 4 and 14) Property, plant and equipment (Notes 4, 15 and 26) Investment properties (Notes 4 and 16) Intangible assets under development (Note 4) Deferred tax assets (Notes 4 and 22) Other non-current assets Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable Trade payables to related parties (Note 26) Other payables (Note 17) Current tax liabilities (Notes 4 and 22) Other current liabilities (Notes 4, 7, 11 and 26) Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities (Notes 4 and 22) Net defined benefit liabilities (Notes 4 and 18) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY (Notes 4, 8, 11 and 19) 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 Gain (loss) on hedging instruments Total other equity Total equity TOTAL		2019 Amount % $ 3,361,954 7 320,671 1 398,864 1 719,498 2 1,267,862 3 611,320 1 3,702,237 8 1,287,677 3 450,341 1 12,120,424 27 617,612 1 42,668 - 768,613 2 25,688,517 57 4,013,461 9 896,305 2 484,360 1 205,882 1 55,937 - 32,773,355 73 $ 44,893,779 100 $ 2,212,254 5 887,140 2 1,822,369 4 245,152 1 143,681 - 5,310,596 12 205,642 1 626,668 1 8,812 - 841,122 2 6,151,718 14 5,536,203 12 6,414,118 14 9,257,157 21 1,029,654 2 17,306,526 39 27,593,337 62 (998,191) (2) 216,562 - (19,968) - (801,597) (2) 38,742,061 86 $ 44,893,779 100		2018
				Amount % $ 11,070,825 19 478,809 1 218,956 - 455,144 1 1,241,256 2 768,896 1 3,003,142 5 903,555 2 223,514 1 18,364,097 32 671,565 1 30,991 - 968,021 2 32,645,568 57 3,610,823 6 803,605 1 304,163 1 230,305 - 77,446 - 39,342,487 68 $ 57,706,584 100 $ 1,945,603 4 760,683 1 1,838,431 3 28,148 - 119,886 - 4,692,751 8 117,938 - 728,314 2 7,306 - 853,558 2 5,546,309 10 13,840,508 24 6,403,633 11 8,897,857 15 1,046,967 2 22,486,952 39 32,431,776 56 (653,816) (1) 117,177 - 20,997 - (515,642) (1) 52,160,275 90 $ 57,706,584 100

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

(With Deloitte & Touche auditors’ report dated March 30, 2020)

CHINA MOTOR CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

OPERATING REVENUE (Notes 4, 20 and 26) Net sales Other operating revenue Total operating revenue OPERATING COSTS (Notes 13, 18, 21 and 26) Cost of goods sold Other operating costs Total operating costs GROSS PROFIT REALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 18, 21 and 26) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Share of profit (loss) of subsidiaries, associates and joint ventures (Notes 4 and 14) Interest income (Notes 4 and 26) Other income (Note 26) Gain on disposal of investments (Note 14) Other expenses (Note 26) Net foreign exchange loss Loss on financial instruments at fair value through profit or loss (Note 4) Impairment loss (Notes 4 and 15) Total non-operating income and expenses		2019 Amount % $ 25,879,396 98 485,628 2 26,365,024 100 22,077,293 84 108,512 - 22,185,805 84 4,179,219 16 7,120 - 4,186,339 16 294,279 1 616,843 2 1,460,284 6 2,371,406 9 1,814,933 7 (3,890,853) (15) 103,353 1 68,072 - 69,699 - (38,053) - (12,381) - (61,969) - (45,374) - (3,807,506) (14)		2018
				Amount % $ 26,126,810 98 459,162 2 26,585,972 100 21,945,077 83 157,826 1 22,102,903 84 4,483,069 16 2,401 - 4,485,470 16 389,580 1 694,368 3 1,593,859 6 2,677,807 10 1,807,663 6 2,099,291 8 150,641 1 48,606 - - - (7,743) - (5,282) - (48,817) - (148,360) (1) 2,088,336 8 (Continued)

CHINA MOTOR CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

PROFIT (LOSS) BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 22) NET PROFIT (LOSS) 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 18) Unrealized loss on investments in equity instruments designated at fair value through other comprehensive income (Note 19) Gain on the hedging instruments (Notes 11 and 19) Share of other comprehensive loss of subsidiaries and associates (Notes 14 and 19) Income tax relating to items that will not be reclassified subsequently to profit or loss (Note 22) Items that may be reclassified subsequently to profit or loss: Share of the other comprehensive loss of subsidiaries, associates and joint ventures accounted for using the equity method (Notes 14 and 19) Other comprehensive loss for the year (net of income tax) TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR EARNINGS (LOSS) PER SHARE (IN NEW TAIWAN DOLLARS; Note 23) Basic Diluted		2019 Amount % $ (1,992,573) (7) (473,000) (2) (2,465,573) (9) (41,510) - 12,081 - 503 - 156,028 - 8,201 - (344,375) (1) (209,072) (1) $ (2,674,645) (10) $ (2.38) $ (2.38)		2018
				Amount % $ 3,895,999 14 (303,000) (1) 3,592,999 13 (1,098) - (7,335) - 19,728 - (139,201) - 1,746 - (168,698) (1) (294,858) (1) $ 3,298,141 12 $ 2.64 $ 2.63

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

(With Deloitte & Touche auditors’ report dated March 30, 2020)

(Concluded)

CHINA MOTOR CORPORATION

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

BALANCE AT JANUARY 1, 2018 Effect of retrospective application BALANCE AT JANUARY 1, 2018 AS ADJUSTED Appropriation of the 2017 earnings Legal reserve Cash dividends distributed by the Corporation Reversal of special reserve Change from investments in associates and joint ventures accounted for using the equity method Net profit for the year ended December 31, 2018 Other comprehensive income (loss) for the year ended December 31, 2018, net of income tax Total comprehensive income (loss) for the year ended December 31, 2018 Subsidiaries and associates disposed the investments in equity instruments designated as at fair value through other comprehensive income Disposals of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT DECEMBER 31, 2018 Effect of retrospective application BALANCE AT JANUARY 1, 2019 AS ADJUSTED Appropriation of the 2018 earnings Legal reserve Cash dividends distributed by the Corporation Reversal of special reserve Change from investments in associates and joint ventures accounted for using the equity method Net loss for the year ended December 31, 2019 Other comprehensive income (loss) for the year ended December 31, 2019, net of income tax Total comprehensive income (loss) for the year ended December 31, 2019 Capital reduction by cash Subsidiaries and associates disposed the investments in equity instruments designated as at fair value through other comprehensive income Basic adjustment for gain on hedging instruments BALANCE AT DECEMBER 31, 2019 The accompanying notes are an integral part of the financial statements.	ShareCapitalOrdinary Shares Number of Shares (In Thousands) Amount Capital Surplus 1,384,051 $ 13,840,508 $ 6,407,340 - - - 1,384,051 13,840,508 6,407,340 - - - - - - - - - - - (3,707 ) - - - - - - - - - - - - - - - 1,384,051 13,840,508 6,403,633 - - - 1,384,051 13,840,508 6,403,633 - - - - - - - - - - - 10,485 - - - - - - - - - (830,431 ) (8,304,305 ) - - - - - - - 553,620 $ 5,536,203 $ 6,414,118		Retained Earnings Legal Reserve Special Reserve Unappropriated Earnings $ 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 - - (5,472 ) - - 507 8,897,857 1,046,967 22,486,952 - - (19,503) 8,897,857 1,046,967 22,467,449 359,300 - (359,300 ) - - (2,352,886 ) - (17,313 ) 17,313 - - (35,639 ) - - (2,465,573 ) - - (46,865) - - (2,512,438) - - - - - 82,027 - - - $ 9,257,157 $ 1,029,654 $ 17,306,526		Other Equity Exchange Differences on Translating Unrealized Gain on Investments in Financial Assets at Fair Value Through Other Unrealized Gain (Loss) on Gain (Loss) on Effective Portion Gain (Loss) on Foreign Operations Comprehensive Income Available-for-sale Financial Assets of Cash Flow Hedges the Hedging Instruments $ (485,118 ) $ - $ 765,456 $ (12,253 ) $ - - 273,866 (765,456) 12,253 (12,253) (485,118 ) 273,866 - - (12,253 ) - - - - - - - - - - - - - - - - - - - - - - - - - (168,698) (161,654) - - 33,250 (168,698) (161,654) - - 33,250 - 5,472 - - - - (507) - - - (653,816 ) 117,177 - - 20,997 - - - - - (653,816 ) 117,177 - - 20,997 - - - - - - - - - - - - - - - - - - - - - - - - - (344,375) 181,412 - - 756 (344,375) 181,412 - - 756 - - - - - - (82,027 ) - - - - - - - (41,721) $ (998,191) $ 216,562 $ - $ - $ (19,968)	Total Equity $ 50,950,021 397,392 51,347,413 - (2,491,292 ) - 6,013 3,592,999 (294,858) 3,298,141 - - 52,160,275 (19,503) 52,140,772 - (2,352,886 ) - (25,154 ) (2,465,573 ) (209,072) (2,674,645) (8,304,305 ) - (41,721) $ 38,742,061

	Number of Shares (In Thousands) 1,384,051 - 1,384,051 - - - - - - - - - 1,384,051 - 1,384,051 - - - - - - - (830,431 ) - - 553,620

(With Deloitte & Touche auditors’ report dated March 30, 2020)

CHINA MOTOR CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) before income tax Adjustments for: Depreciation expenses Amortization expenses 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 loss (profit) of subsidiaries, associates and joint ventures Loss on disposal of property, plant and equipment Loss on valuation of investments Gain on disposal of investmets Impairment loss of non-financial assets Realized gain on the transactions with associates Unrealized gain on foreign currency exchange, net Changes in operating assets and liabilities Financial instruments at fair value through profit or loss Notes and accounts receivable Trade receivables from related parties Other receivables Inventories Prepayments Other current assets Accounts payable 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 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at amortized cost Proceeds from repayment of principal of financial assets at amortized cost Acquisition of investments accounted for using the equity method Disposal of investments accounted for using the equity method Proceeds from capital return of investments accounted for using the equity method Acquisition of property, plant and equipment	2019 $ (1,992,573) 770,843 95,100 25,550 61,969 86 (103,353) (14,188) 3,890,853 1,006 - (69,699) 57,763 (7,120) (3,416) 152,526 (259,512) (26,640) 35,656 (732,545) (384,122) (233,193) 267,102 129,332 (15,621) 13,468 (143,156) 1,516,116 (125,089) 1,391,027 (1,930,041) 2,105,501 - 642,256 965,022 (1,329,882)	2018 $ 3,895,999 789,185 80,283 6,308 48,817 45 (150,641) (18,762) (2,099,291) 3,610 333 - 134,258 (2,401) (23,736) 12,334 (58,465) 6,225 (28,333) 316,100 (70,598) (1,853) 46,064 (19,099) (154,712) (2,410) (199,709) 2,509,551 (303,893) 2,205,658 (1,203,382) 2,641,210 (553,113) - 127,737 (910,902) (Continued)

CHINA MOTOR CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

Proceeds from disposal of property, plant and equipment Decrease (increase) in other receivables of related parties 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 Payment of the principal portions of lease liabilities Increase (decrease) in other non-current liabilities Cash dividends paid Capital reduction payments to shareholders Interest paid Net cash used in financing activities 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	2019 $ 18,271 100,000 (237,959) (14,211) 125,863 1,292,050 1,736,870 (940) 917 (2,352,886) (8,304,305) (86) (10,657,300) (7,529,403) 11,289,781 $ 3,760,378	2018 $ 31,414 (200,000) (190,126) (45,906) 190,701 1,224,205 1,111,838 - (355) (2,491,292) - (45) (2,491,692) 825,804 10,463,977 $ 11,289,781

Reconciliation of the amounts in the statements of cash flows with the equivalent items reported in the balance sheets at December 31, 2019 and 2018:

Cash and cash equivalents in the balance sheets Cash and cash equivalents included in financial assets for hedging Cash and cash equivalents in the statements of cash flows		December 31	December 31
		2019 $ 3,361,954 398,424 $ 3,760,378	2018 $ 11,070,825 218,956 $ 11,289,781

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

(With Deloitte & Touche auditors’ report dated March 30, 2020) (Concluded)

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NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

CHINA MOTOR CORPORATION

1. GENERAL INFORMATION

China Motor Corporation (the “Corporation”) is principally engaged in the manufacture and sale of automobiles and its related parts and components, and is listed on the Taiwan Stock Exchange.

2. APPROVAL OF FINANCIAL STATEMENTS

The accompanying financial statements were approved by the Corporation’s board of directors on March 26, 2020.

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), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

Except for the following, 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 did not have material impact on the Corporation’s accounting policies:

IFRS 16 “Leases”

IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessee and lessor. It supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, and a number of related interpretations. Refer to Note 4 for information relating to the relevant accounting policies.

Definition of a lease

The Corporation elects 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 are not reassessed and are accounted for in accordance with the transitional provisions under IFRS 16.

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The Corporation as lessee

The Corporation recognizes right-of-use assets and lease liabilities for all leases on the balance sheets except for those whose payments under low-value asset and short-term leases are recognized as expenses on a straight-line basis. On the statements of comprehensive income, the Corporation presents 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 statements of cash flows, cash payments for the principal portion of lease liabilities and cash payment for the interest portion are classified within financing activities. Prior to the application of IFRS 16, payments under operating lease contracts, were recognized as expenses on a straight-line basis. Cash flow for operating lease were classified within operating activities on the statements of cash flows.

The Corporation elects to apply IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized in retained earnings on January 1, 2019. Comparative information is not restated.

Lease liabilities were recognized on January 1, 2019 for leases previously classified as operating leases under IAS 17. Lease liabilities were 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 are measured at an amount equal to the lease liabilities. The Corporation applies IAS 36 to all right-of-use assets.

The Corporation also applies the following practical expedients:

1) The Corporation applies a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.
2) The Corporation accounts for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.
3) The Corporation excludes initial direct costs from the measurement of right-of-use assets on January 1, 2019.
4) The Corporation uses hindsight, such as in determining lease terms, to measure lease liabilities.

The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized on January 1, 2019 is 1.37%. The difference between (i) the lease liabilities recognized and (ii) operating lease commitments disclosed under IAS 17 on December 31, 2018 is explained as follows:

The future minimum lease payments of non-cancellable operating lease commitments on December 31, 2018 Less: Recognition exemption for short-term leases Less: Recognition exemption for leases of low-value assets Undiscounted amount on January 1, 2019 Discounted amount using the incremental borrowing rate and lease liabilities recognized on January 1, 2019 The Corporation as lessor	$ 2,993 (585) (514) $ 1,894 $ 1,863

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

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The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16 is set out as follows:

As Originally Stated on January 1, 2019 Right-of-use assets $ - Investments accounted for using the equity method 32,645,568 Total effect on assets $ 32,645,568 Lease liabilities - current $ - Lease liabilities - non-current - Total effect on liabilities $ - Unappropriated earnings $ 22,486,952	Adjustments Arising from Initial Application Restated on January 1, 2019 $ 1,863 $ 1,863 (19,503) 32,626,065 $ (17,640) $ 32,627,928 $ 783 $ 783 1,080 1,080 $ 1,863 $ 1,863 $ (19,503) $ 22,467,449

b. The IFRSs endorsed by the FSC for application starting from 2020

Effective Date New IFRSs Announced by IASB Amendments to IFRS 3 “Definition of a Business” January 1, 2020 (Note 1) Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark January 1, 2020 (Note 2) Reform” Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020 (Note 3)

Note 1: The Corporation 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 2: The Corporation shall apply these amendments retrospectively for annual reporting periods beginning on or after January 1, 2020.
Note 3: The Corporation shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

As of the date the financial statements were authorized for issue, the Corporation assessed that the application of aforementioned standards and interpretations would not have any significant impact on the Corporation’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 10 and IAS 28 “Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	Effective Date Announced by IASB (Note)
	To be determined by IASB January 1, 2021 January 1, 2022

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Note: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates.

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

The financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (the “Regulations”).

b. Basis of preparation

The 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 an 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 an asset or liability.

When preparing these parent company only financial statements, the Corporation used the equity method to account for its investment in subsidiaries, associates and joint ventures. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements to be the same as the amounts attributable to the owners of the Corporation in its consolidated financial statements, adjustments arising from the differences in accounting treatments between the parent company only basis and the consolidated basis were made to investments accounted for using the equity method, the share of profit or loss of subsidiaries, associates and joint ventures, the share of other comprehensive income of subsidiaries, associates and joint ventures and the related equity items, as appropriate, in these parent company only financial statements.

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.
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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; and
3) Liabilities for which the Corporation does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

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

d. Foreign currencies

In preparing the Corporation’s financial statements, transactions in currencies other than the Corporation’s functional currency (i.e., 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.

For the purpose of presenting the financial statements, the functional currency of foreign operations are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting year; and income and expense items are translated at the average exchange rates for the year. The resulting currency translation differences are recognized in other comprehensive income.

On the disposal of a foreign operation (i.e., a disposal of the Corporation’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 are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Corporation losing control over the subsidiary, the proportionate share of accumulated exchange differences is included in the calculation of the equity transaction but 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.

e. Inventories

Inventories consist of 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 the weighted-average cost on the balance sheet date.

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f. Investments accounted for using the equity method

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

1) Investment in subsidiaries

A subsidiary is an entity that is controlled by the Corporation.

Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Corporation’s share of the profit or loss and other comprehensive income of the subsidiary. The Corporation also recognizes the changes in the Corporation’s share of equity of subsidiaries attributable to the Corporation.

Changes in the Corporation’s ownership interest in a subsidiary that do not result in the Corporation losing control of the subsidiary are equity transactions. The Corporation recognizes directly in equity any difference between the carrying amount of the investment and the fair value of the consideration paid or received.

When the Corporation’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary, the Corporation continues recognizing its share of further losses, if any.

Any excess of the cost of acquisition over the Corporation’s share of the net fair value of the identifiable assets and liabilities of a subsidiary 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 Corporation’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The Corporation assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the investee’s financial statements as a whole. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Corporation recognizes reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortization or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

When the Corporation loses control of a subsidiary, it recognizes the investment retained in the former subsidiary at its fair value at the date when control is lost. The difference between the fair value of the retained investment plus any consideration received and the carrying amount of previous investment at the date when control is lost is recognized as a gain or loss in profit or loss. Besides, the Corporation accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required had the Corporation directly disposed of the related assets or liabilities.

Profits or losses resulting from downstream transactions are eliminated in full only in the parent company only financial statements. Profits and losses resulting from upstream transactions and transactions between subsidiaries are recognized only in the parent company only financial statements and only to the extent of interests in the subsidiaries that are not related to the Corporation.

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2) Investment in associates and joint ventures

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

The Corporation 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 Corporation’s share of the profit or loss and other comprehensive income of the associate and joint venture. The Corporation also recognizes the changes in the Corporation’s share of the equity of associates and joint venture attributable to the Corporation. The Corporation’s equity in the investees’ net income or net loss is calculated using the treasury share method when investees also have investments in the Corporation (reciprocal holding).

Any excess of the cost of acquisition over the Corporation’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.

When the Corporation subscribes for additional new shares of an associate and a joint venture at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Corporation’s proportionate interest in the associate and joint venture. The Corporation records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in the capital surplus from investments in associates and joint ventures accounted for using the equity method. If the Corporation’s ownership interest is reduced due to its additional subscription of the new shares of associate and joint venture, the proportionate amount of the gains 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 Corporation’s share of losses of an associate and a joint venture equals or exceeds its interest in that associate and joint venture, the Corporation discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Corporation 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 is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is 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.

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The Corporation 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 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 Corporation 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 Corporation continues to apply the equity method and does not remeasure the retained interest.

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

g. Property, plant and equipment

Property, plant and equipment are initially measured at cost subsequently 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 their 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.

h. Investment properties

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

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.

i. 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;
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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 such an intangible asset first meets the recognition criteria listed above. Subsequent to initial recognition, such intangible assets 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.

j. Impairment of tangible and intangible assets

At the end of each reporting period, the Corporation 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 Corporation 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.

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.

k. Financial instruments

Financial assets and financial liabilities are recognized when the Corporation 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 FVTPL) 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 FVTPL are recognized immediately in profit or loss.

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1) Financial assets

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

a) Measurement categories

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

i. Financial assets at FVTPL

Financial assets at FVTPL are financial assets mandatorily designated as at FVTPL, and include investments in equity instruments that do not meet the criteria of financial assets at amortized cost or investments in equity instruments at FVTOCI.

Financial assets at FVTPL are subsequently measured at fair value, and any dividends, interest earned and remeasurement gains or losses on such financial assets are recognized in other gains or losses. Fair value is determined in the manner described in Note 26.

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 investments, notes receivable and accounts receivable (including related parties), other receivables, other financial assets (included in other current assets) and guarantee 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.
A financial asset is credit impaired when one or more of the following events have occurred:
i) Significant financial difficulty of the issuer or the borrower;

ii) Breach of contract, such as a default; or

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iii) It is becoming probable that the borrower will enter bankruptcy or undergo a financial reorganization.
iii. Investments in equity instruments at FVTOCI

On initial recognition, the Corporation 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.

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 Corporation’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

b) Impairment of financial assets

The Corporation recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables).

The Corporation always recognizes lifetime expected credit losses (ECLs) for trade receivables. For all other financial instruments, the Corporation 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 Corporation 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.

For internal credit risk management purposes, the Corporation determines that the following situations indicate that a financial asset is in default (without taking into account any collateral held by the Corporation):

i. Internal or external information show that the debtor is unlikely to pay its creditors.
ii. When a financial asset pasts the expiration date of contract unless the Corporation has reasonable and corroborative information to support a more lagged default criterion.

The impairment loss of all financial assets which are held by the Corporation is recognized in profit or loss by a reduction in their carrying amounts through a loss allowance account.

c) Derecognition of financial assets

The Corporation 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.

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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 a debt instrument at FVTOCI, 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 for the financial liabilities at FVTPL, 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.

Financial liabilities held for trading are stated at fair value, and any remeasurement gains or losses on such financial liabilities are recognized in other gains or losses.

Fair value is determined in the manner described in Note 26.

b) Derecognition of 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 Corporation enters into foreign exchange forward contracts to manage its exposure to foreign exchange rate risks.

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.

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.

l. Hedge accounting

The Corporation 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.

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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 related 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.

The Corporation 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 (from the period in which 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.

m. 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 Corporation’s obligations.

n. Revenue recognition

The Corporation 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 Corporation 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 Corporation 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.

o. Leases

2019

At the inception of a contract, the Corporation assesses whether the contract is, or contains, a lease.

1) The Corporation as lessor

All leases are classified as operating leases.

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Lease payments from operating leases are recognized as income on a straight-line basis over the terms of the relevant leases. Initial direct costs incurred in obtaining operating leases are added to the carrying amounts of the underlying assets and recognized as costs on a straight-line basis over the lease terms.

When a lease includes both land and building elements, the Corporation assesses the classification of each element separately as a finance or an operating lease based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the lessee. The lease payments are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of a contract. If the allocation of the lease payments can be made reliably, each element is accounted for separately in accordance with its lease classification. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease unless it is clear that both elements are operating leases; in which case, the entire lease is classified as an operating lease.

2) The Corporation as lessee

The Corporation recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are recognized as expenses on a straight-line basis over the lease terms.

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made before the commencement date. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments and variable lease payments which depend on an index or a rate. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Corporation uses the lessee’s incremental borrowing rate.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term, or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Corporation remeasures the lease liabilities with a corresponding adjustment to the right-of-use assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss.

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods in which they are incurred.

2018

All leases are classified as operating leases.

1) The Corporation as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

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2) The Corporation as lessee

Operating lease payments are recognized as expenses on a straight-line basis over the lease term.

3) Leasehold land for own use

If the allocation of the lease payments can be made reliably, each element is accounted for separately in accordance with its lease classification. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease unless it is clear that both elements are operating leases; in which case, the entire lease is classified as an operating lease.

p. Government grants

Government grants are not recognized until there is reasonable assurance that the Corporation 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 Corporation recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Corporation 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.

q. 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. 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 Corporation’s defined benefit plans.

r. Taxation

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

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1) Current tax

According to the Income Tax Law, an additional tax on unappropriated earnings 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 or 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 Corporation 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 recognized only 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 profit 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 Corporation 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.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Corporation’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.

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

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
		2019 $ 730 1,525,292 1,526,022 1,835,932 - 1,835,932 $ 3,361,954	2018 $ 2,182 1,299,318 1,301,500 8,766,032 1,003,293 9,769,325 $ 11,070,825

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
	2019 2018 0.00%-2.14% 0.00%-2.45% 1.01%-1.115% 0.50%-1.115% - 0.50%-0.60%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets-current Financial assets mandatorily classified as at FVTPL Non-derivative financial assets Mutual funds Derivative financial assets (not under hedge accounting) Foreign exchange forward contracts		December 31	December 31
		2019 $ 320,367 304 $ 320,671	2018 $ 478,786 23 $ 478,809 (Continued)

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Financial assets-non-current Financial assets mandatorily classified as at FVTPL Non-derivative financial assets Domestic unlisted ordinary shares Financial liabilities (included in other current liabilities) Financial liabilities held for trading Derivative financial liabilities (not under hedge accounting) Foreign exchange forward contracts		December 31	December 31
		2019 $ 617,612 $ 2,483	2018 $ 671,565 $ 79 (Concluded)

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

December 31, 2019

			Notional Amount
Transaction	Currency	Maturity Date	(In Thousands)
Buy	USD/NTD	2020.01.06-2020.03.16	USD11,000/$330,810
	JPY/NTD	2020.02.25-2020.09.25	JPY600,000/$165,910
Sell	RMB/USD	2020.01.13	RMB14,022/USD$2,000
December 31, 2018
			Notional Amount
Transaction	Currency	Maturity Date	(In Thousands)
Buy	USD/NTD	2019.01.04-2019.01.22	USD5,000/$153,480

The Corporation 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

Investments in equity instruments at FVTOCI Domestic listed shares Domestic unlisted shares		December	31
		2019 $ 29,083 13,585 $ 42,668	2018 $ 18,673 12,318 $ 30,991

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 Corporation’s strategy of holding these investments for long-term purposes.

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In June 2018, after the Corporation acquired an additional 15% interest in Yue Ki Industrial, the shareholding ratio increased to 15.08% and one of the seats in the board of directors was obtained by the Corporation. This transaction was deemed as the Corporation’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 Corporation began exercising significant influence over Yue Ki Industrial. The Corporation reclassified a gain of $507 thousand from other equity to retained earnings when the Corporation began exercising significant influence over Yue Ki Industrial.

Dividends of $675 thousand and $743 thousand were recognized during 2019 and 2018, respectively. Those dividends are all related to investments held at the end of the reporting period.

9. FINANCIAL ASSETS AT AMORTIZED COST

Bonds Less: Allowance for impairment loss		December 31	December 31
		2019 $ 801,389 (32,776) $ 768,613	2018 $ 970,015 (1,994) $ 968,021

a. The range of coupon rates of bonds was 0.86%-4.34% and 0.86%-4.8% per annum as of December 31, 2019 and 2018, respectively.
b. Refer to Note 10 for information relating to their credit risk management and impairment.

10. CREDIT RISK MANAGEMENT FOR INVESTMENTS IN DEBT INSTRUMENTS

Investments in debt instruments were classified as at amortized cost.

Gross carrying amount Less: Allowance for impairment loss Amortized cost		December 31	December 31
		2019 $ 801,389 (32,776) $ 768,613	2018 $ 970,015 (1,994) $ 968,021

The Corporation 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 Corporation’s exposures and its external credit ratings are continuously monitored. The Corporation 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 initial recognition.

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The Corporation 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 Corporation’s current credit risk grading framework comprises the following categories:

Credit Rating Performing No rating	Description The counterparty has a low risk of default and a strong capacity to meet contractual cash flows The bonds do not have credit rating	Basis for Recognizing Expected Credit Losses (ECLs)
		12-month ECLs Lifetime ECLs - not credit-impaired

The gross carrying amounts of debt instrument investments by credit category and the corresponding expected loss rates were as follows:

December 31, 2019

Expected Credit Rating Credit Loss Rate Performing 0.0769%- 0.6221% No rating 20.6080% December 31, 2018	Gross Carrying Amount
	At Amortized Cost $ 651,389 150,000

Expected Credit Rating Credit Loss Rate Performing 0.00%-0.6221%	Gross Carrying Amount
	At Amortized Cost $ 970,015

The movements of the allowance for impairment loss of investments in debt instruments at amortized cost were as follows:

Balance at January 1, 2019 Financial assets purchased (a) Derecognition (b) Change in risk parameters (c) Change in exchange rates or others Balance at December 31, 2019	Credit Rating
	Performing (12-month ECLs) No rating (Lifetime ECLs - Not Credit- impaired) $ 1,994 $ - 12,007 - (12,142) - - 30,912 5 - $ 1,864 $ 30,912 (Continued)

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Balance at January 1, 2018 Financial assets purchased (a) Derecognition (b) Change in exchange rates or others Balance at December 31, 2018	Credit Rating
	Performing (12-month ECLs) No rating (Lifetime ECLs - Not Credit- impaired) $ 5,298 $ - 6,008 - (9,457) - 145 - $ 1,994 $ - (Concluded)

a. During 2019, the Corporation purchased principal guaranteed notes of $1,930,041 thousand and correspondingly increased the loss allowance for investments rated as performing of $12,007 thousand. During 2018, the Corporation purchased principal guaranteed notes of 953,382 thousand and bonds of $250,000 thousand and correspondingly increased the loss allowance for investments rated as performing of $6,008 thousand.
b. Investments in principal guaranteed notes of $1,930,041 thousand and bonds of $175,460 thousand were expired and redeemed during 2019, with a consequential reduction in the loss allowance for investments rated as performing of $12,142 thousand; and investments in negotiable certificates of deposit of $700,000 thousand, principal guaranteed notes of $1,482,007 thousand and bonds of $459,203 thousand were expired and redeemed during 2018, with a consequential reduction in the loss allowance for investments rated as performing of $9,457 thousand.
c. As the Corporation disposed of its subsidiary, Gatetech Technology, in November 2019, the Corporation assessed the lifetime ECLs of its debt investments held in Gatetech Technology and correspondingly increased the expected credit losses by $30,912 thousand.

11. FINANCIAL INSTRUMENTS FOR HEDGING

Financial assets Cash flow hedges - spot rate Cash flow hedges - foreign exchange forward contracts Financial liabilities (included in other current liabilities) Cash flow hedges - foreign exchange forward contracts		December 31	December 31
		2019 $ 398,424 440 $ 398,864 $ 6,884	2018 $ 218,956 - $ 218,956 $ -

The Corporation’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.

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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 Corporation 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 Corporation’s own credit risk on the fair value of the foreign exchange forward contracts and foreign currency banknote, 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. During 2019 and 2018, hedging instruments at fair value and transferred to initial carrying amount of hedged items are detailed in Note 19(e).

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

December 31, 2019

Hedging Notional Amount Forward Rate Line Item in Instruments Currency (In Thousands) Maturity (Note) Balance Sheet Cash flow hedge Forecast purchases - spot rate JPY/NTD JPY1,443,566/ NTD405,538 2020.02.25- 2020.12.15 0.2799-0.2828 Financial assets for hedging Forecast purchases - foreign exchange forward contracts RMB/USD RMB28,005/ USD4,000 2020.01.13 6.9980-7.0110 (USD1:RMB) Financial assets for hedging Forecast purchases - foreign exchange forward contracts JPY/NTD JPY1,664,000/ NTD464,661 2020.01.15- 2020.11.16 0.2752-0.2815 Other current liabilities Forecast purchases - foreign exchange forward contracts USD/NTD USD4,000/ NTD120,415 2020.01.13 30.1000-30.1050 (USD1:NTD) Other current liabilities		Carrying Am	ount Change in Value Used for Calculating Hedge Liability Ineffectiveness $ - $ (5,690 ) - 352 (6,333 ) (5,066 ) (551) (441) $ (6,884) $ (10,845)
		Asset $ 398,424 440 - - $ 398,864

Note: JPY1: NTD, unless stated otherwise.

		Accumulated
		Gains or Losses
	Change in	on Hedging
	Value Used for	Instruments in
	Calculating	Other Equity
	Hedge	Continuing
Hedged Item	Ineffectiveness	Hedges
Cash flow hedges
Forecast purchases	$ 10,845	$ (10,845)
December 31, 2018

Notional Amount Forward Rate Line Item in Hedging Instruments Currency (In Thousands) Maturity (NTD/JPY) Balance Sheet Cash flow hedge Forecast purchases - spot rate JPY/NTD JPY787,044/NTD211,954 2019.01.15- 2019.04.3 0.2690-0.2706 Financial assets for hedging		Carrying Amount Change in Value Used for Calculating Hedge Asset Ineffectiveness $ 218,956 $ 5,601

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Hedged Item Cash flow hedges Forecast purchases Comprehensive Income Impact Cash flow hedges Forecast purchases	Change in Value Used for Calculating Balance in Other Equity Hedge Ineffectiveness Continuing Hedges $ (5,601) $ 5,601 Hedging Gains Recognized in OCI	Change in Value Used for Calculating Balance in Other Equity Hedge Ineffectiveness Continuing Hedges $ (5,601) $ 5,601 Hedging Gains Recognized in OCI	Change in Value Used for Calculating Balance in Other Equity Hedge Ineffectiveness Continuing Hedges $ (5,601) $ 5,601 Hedging Gains Recognized in OCI
	For the year Ended December 31
		2019 $ 503	2018 $ 19,728

The Corporation 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 material purchased.

12. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

At amortized cost Notes and accounts receivable Less: Allowance for impairment loss		December 31	December 31
		2019 $ 727,983 (8,485) $ 719,498	2018 $ 468,861 (13,717) $ 455,144

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 Corporation’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 Corporation’s different customer base.

The aging of receivables was as follows:

0 days 1-60 days 61-90 days More than 90 days Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost		December 31	December 31
		2019 $ 676,172 23,121 1,233 27,457 727,983 (8,485) $ 719,498	2018 $ 436,696 13,987 9,042 9,136 468,861 (13,717) $ 455,144

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

Balance at January 1 Add: Net remeasurement of loss allowance Less: Net remeasurement of loss allowance Balance at December 31	2019 $ 13,717 - (5,232) $ 8,485	2018 $ 4,105 9,612 - $ 13,717

13. INVENTORIES

Finished goods Work in progress Raw materials Materials in transit		December 31	December 31
		2019 $ 1,815,455 29,259 1,693,380 164,143 $ 3,702,237	2018 $ 1,231,361 40,528 1,452,357 278,896 $ 3,003,142

The costs of inventories recognized as cost of goods sold for the years ended December 31, 2019 and 2018 were $22,077,293 thousand and $21,945,077 thousand, respectively. The cost of goods sold for the year ended December 31, 2019 included inventory write-downs of $12,389 thousand.

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in subsidiaries Investments in associates Investments in joint ventures		December 31	December 31
		2019 $ 7,218,147 15,640,057 2,830,313 $ 25,688,517	2018 $ 9,671,444 20,405,478 2,568,646 $ 32,645,568

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a. Investments in subsidiaries

Name of Subsidiaries Listed companies Kian Shen Unlisted companies Alliance Investment & Management Sino Diamond Motors China Motor Investment COC Tooling & Stamping Hwa Wei Holdings China Engine Hwa Chung Motors Gatetech Technology		December 31	December 31
		2019 $ 2,046,653 1,277,471 1,155,029 871,654 786,792 579,673 429,196 71,679 - 5,171,494 $ 7,218,147	2018 $ 2,048,431 1,639,695 2,451,369 1,159,432 761,596 771,520 463,630 63,913 311,858 7,623,013 $ 9,671,444

Name of Subsidiaries Listed company Kian Shen Unlisted companies Alliance Investment & Management Sino Diamond Motors China Motor Investment COC Tooling & Stamping Hwa Wei Holdings China Engine Hwa Chung Motors Gatetech Technology	Proportion of Ownership and Voting Rights
	December 31
	2019 2018 43.87% 43.87% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 49.76% 49.76% 40.00% 40.00% 52.10% 52.10% 100.00% 100.00% - 56.53%

Although the Corporation’s equity interests in Kian Shen and COC Tooling & Stamping each did not exceed 50%, the Corporation still retained control over these investees. Thus, Kian Shen and COC Tooling & Stamping were included in the Corporation’s consolidated financial statements.

Although the Corporation’s proportion of ownership of investments accounted for using the equity method in Hwa Wei Holdings was less than 50%, it was still considered a subsidiary of the Corporation since the combined shareholding proportion of the Corporation and its subsidiaries in Hwa Wei Holdings exceeded 50% of its outstanding ordinary shares.

In order to strengthen the Corporation’s capital structure and focus on the development of its business, the Corporation resolved in the board of directors’ meeting to fully dispose of 56.53% interest in its subsidiary, Gatetech Technology, to non-related party, which resulted in the recognition of a gain on disposal of the investment amounting to $71,314 thousand on November 13, 2019 (calculated as the disposal price of $415,097 thousand less the carrying amount of its disposed of equity investments of $309,028 thousand and the exchange differences on translating the financial statements of foreign operations of $(34,755) thousand).

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The Corporation’s subsidiary, Sino Diamond Motors, resolved to adjust its organizational structure in the board of directors’ meeting in November 2019 on behalf of its shareholders’ meeting; and separately implemented a capital reduction in both shares and cash, with the record date for the capital reduction set as November 30, 2019. The capital reduction in shares pertains to the return of the shares of China Engine held by Sino Diamond Motors to the Corporation. In addition, $965,022 thousand was returned to the shareholders during the capital reduction in cash, which led to a change in the Corporation’s shareholding proportion in China Engine. In accordance with Interpretation 2012-301 issued by the Accounting Research and Development Foundation, organizational restructuring of entities under common control is deemed as the Corporation having a shareholding proportion of 52.10% in China Engine from the start.

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

b. Investments in associates

Associates Material associates Yulon Associates that are not individually material		December 31	December 31
		2019 $ 7,110,438 8,529,619 $ 15,640,057	2018 $ 11,476,319 8,929,159 $ 20,405,478

1) Material associates

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

The Corporation held 16.80% of interest in Yulon as of December 31, 2019 and 2018.

The Corporation exercises significant influence over Yulon and applies the equity method of accounting because the Corporation and Yulon share the same president of the board of directors even though the Corporation holds less than 20% of 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 value (Level 1) of investments in associates with available published price quotations is summarized as follows:

Name of Associate Yulon		December 31	December 31
		2019 $ 5,126,561	2018 $ 4,772,553

The above associate is accounted for using the equity method.

As Yulon adjusted the organizational structure of its Group by carrying out a business combination of entities under common control, the consolidated financial statements of Yulon and its subsidiaries for the year ended December 31, 2018 were restated.

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The summarized financial information below represents amounts shown in the associates’ financial statements prepared in accordance with IFRSs, and reflects the adjustments made when the equity method of accounting was applied.

Yulon

Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to predecessors’ interests under common control Non-controlling interests Proportion of the Corporation’s ownership Equity attributable to the Corporation Cross shareholdings Carrying amount Operating revenue Net profit (loss) for the year Other comprehensive loss Total comprehensive income (loss) for the year Dividends received from Yulon		December 31	December 31
	2019 2018 (Restatement) $ 231,944,241 $ 221,698,791 81,947,302 98,161,768 (230,116,188) (207,661,949) (26,694,204) (27,774,636) 57,081,151 84,423,974 - (564,712) (11,244,743) (12,122,134) $ 45,836,408 $ 71,737,128 16.80% 16.80% $ 7,700,516 $ 12,051,837 (590,078) (575,518) $ 7,110,438 $ 11,476,319 For the Year Ended December 31
		2019 $ 85,800,574 $ (24,533,477) (304,732) $ (24,838,209) $ 175,693	2018 (Restatement) $ 88,115,701 $ 3,847,036 (687,796) $ 3,159,240 $ 152,092

2) Aggregate information of associates that are not individually material

The Corporation’s share of: Net profit for the year Other comprehensive income (loss) Total comprehensive income for the year	For the Year Ended	For the Year Ended	December 31
		2019 $ 306,312 69,762 $ 376,074	2018 $ 732,703 (40,014) $ 692,689

All the associates are accounted for using the equity method.

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In June 2018, the Corporation injected capital of $35,178 thousand and acquired 8% interest of Uni-Calsonic Corporation, which led to an increase in its shareholding from 23.2% to 31.2%.

In June 2018, the Corporation acquired 29% of interest 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 Corporation exercised significant influence over Fujian Spicer and Tai-Ya Investment.

In January 2019, the Corporation disposed of 20.01% interest in Sin Jang to Sin Gan and recognized a gain on disposal of the investment amounting to $1,347 thousand (calculated as the disposal price of $103,475 thousand less the carrying amount of the disposed of equity investments of $102,206 thousand and the exchange differences on translating the financial statements of foreign operations of $78 thousand).

In March 2019, the Corporation disposed of 24.67% interest in Sin Gan to Taiwan Acceptance and recognized a loss on disposal of the investment amounting to $1,862 thousand (calculated as the disposal price of $105,824 thousand less the carrying amount of the disposed of equity investments of $105,860 thousand and the exchange differences on translating the financial statements of foreign operations of $(1,826) thousand).

In June 2019, the Corporation disposed of 43.85% interest in Yulon IT to Yulon and recognized a loss on disposal of the investment amounting to $1,100 thousand (calculated as the disposal price of $17,860 thousand less the carrying amount of the disposed of equity investments of $18,960 thousand).

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

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

c. Investments in joint ventures

Joint ventures that are not individually material		December 31	December 31
		2019 $ 2,830,313	2018 $ 2,568,646

Aggregate information of joint ventures that are not individually material

The Corporation’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
		2019 $ 821,936 (105,368) $ 716,568	2018 $ 859,377 (52,262) $ 807,115

All joint ventures are accounted for using the equity method.

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

15. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2018 Additions Disposals Reclassifications Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Disposals Impairment losses Depreciation expenses Reclassifications Balance at December 31, 2018 Carrying amounts at December 31, 2018 Cost Balance at January 1, 2019 Additions Disposals Reclassifications Balance at December 31, 2019 Accumulated depreciation and impairment Balance at January 1, 2019 Disposals Impairment losses Depreciation expenses Balance at December 31, 2019 Carrying amounts at December 31, 2019	Land $ 665,075 - - - $ 665,075 $ 665,075 $ 665,075 - - - $ 665,075 $ 665,075	Land Improvements $ 86,689 - - 8,362 $ 95,051 $ 76,773 - - 1,821 5,346 $ 83,940 $ 11,111 $ 95,051 - - 1,380 $ 96,431 $ 83,940 - - 1,481 $ 85,421 $ 11,010	Buildings $ 3,085,417 929 (448 ) 33,131 $ 3,119,029 $ 2,749,236 (448 ) - 72,607 (5,346) $ 2,816,049 $ 302,980 $ 3,119,029 - (12,828 ) 37,265 $ 3,143,466 $ 2,816,049 (12,828 ) - 60,527 $ 2,863,748 $ 279,718	Machinery $ 21,369,884 332 (332,003 ) 583,077 $ 21,621,290 $ 19,547,403 (332,003 ) 148,360 649,566 - $ 20,013,326 $ 1,607,964 $ 21,621,290 98,555 (1,101,071 ) 927,787 $ 21,546,561 $ 20,013,326 (1,100,590 ) 45,374 637,506 $ 19,595,616 $ 1,950,945	Other Equipment $ 1,104,530 24,088 (180,957 ) 74,023 $ 1,021,684 $ 854,585 (145,933 ) - 46,178 - $ 754,830 $ 266,854 $ 1,021,684 41,296 (80,848 ) 46,694 $ 1,028,826 $ 754,830 (62,052 ) - 52,691 $ 745,469 $ 283,357	Construction in Progress $ 571,039 885,553 - (699,753) $ 756,839 $ - - - - - $ - $ 756,839 $ 756,839 1,190,031 - (1,123,514) $ 823,356 $ - - - - $ - $ 823,356	Total $ 26,882,634 910,902 (513,408 ) (1,160) $ 27,278,968 $ 23,227,997 (478,384 ) 148,360 770,172 - $ 23,668,145 $ 3,610,823 $ 27,278,968 1,329,882 (1,194,747 ) (110,388) $ 27,303,715 $ 23,668,145 (1,175,470 ) 45,374 752,205 $ 23,290,254 $ 4,013,461

All the property, plant and equipment of the Corporation were for own use.

As a result of the declining sales in the market for several types of vehicles, the estimated future cash flows expected to arise from related equipment had decreased. Thus, the Corporation recognized impairment losses of $45,374 thousand and $148,360 thousand for the years ended December 31, 2019 and 2018, respectively. The Corporation determined the recoverable amount of the relevant assets on the basis of their value in use. The discount rates used in measuring value in use were 3.47%-4.44% and 6.047%-6.69% per annum, respectively.

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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 3-20 years Buildings 3-55 years Machinery 3-15 years Other equipment 3-15 years

16. INVESTMENT PROPERTIES

Cost
Balance at January 1, 2018

Reclassification

Balance at December 31, 2018

Accumulated depreciation and impairment
Balance at January 1, 2018

Depreciation expenses

Balance at December 31, 2018

Carrying amount at December 31, 2018

Cost
Balance at January 1, 2019

Reclassification

Balance at December 31, 2019

Accumulated depreciation and impairment
Balance at January 1, 2019

Depreciation expenses

Balance at December 31, 2019

Carrying amount at December 31, 2019

$ 1,291,013

1,160
$ 1,292,173
$ 469,555

19,013
$ 488,568
$ 803,605
$ 1,292,173

110,388
$ 1,402,561
$ 488,568

17,688
$ 506,256
$ 896,305

The investment properties were leased out for 4 to 20 years, with an option to extend the lease periods. The lease contracts contain market review clauses in the event that the lessees exercise their options to extend. The lessees do not have bargain purchase options to acquire the investment properties at the expiry of the lease periods.

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The maturity analysis of lease payments receivable from the leasing of investment properties under operating leases as of December 31, 2019 was as follows:

				December 31,	December 31,
					2019
Year	1			$	43,337
Year	2				39,380
Year	3				35,746
Year	4				26,033
Year	5				23,201
Later	than	5	years		143,857
				$	311,554

The future minimum lease payments of non-cancellable operating lease commitments as of December 31, 2018 are as follows:

	December 31,
	2018
Not later than 1 year	$ 34,564
Later than 1 year and not later than 5 years	49,260
	$ 83,824

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

The fair values of investment properties of the Corporation were $1,306,464 thousand and $1,309,661 thousand as of December 31, 2019 and 2018, respectively. Investment properties as of December 31, 2019 were appraised by the Corporation’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. In 2018, except for some of the Corporation’s investment properties which were appraised by an independent valuer on the balance sheet date, the remaining investment properties were appraised by the Corporation’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 the assumptions used in 2018 include a discount rate of 3.04% and a capitalization rate of 2.24%.

17. OTHER PAYABLES

Payable for salaries or bonuses Payable for taxes Payable for warranties Provisions for employee benefit Others		December 31	December 31
		2019 $ 810,422 217,741 174,702 125,623 493,881 $ 1,822,369	2018 $ 883,618 172,940 216,086 145,560 420,227 $ 1,838,431

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18. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Corporation 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.

b. Defined benefit plans

The defined benefit plan adopted by the Corporation 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 Corporation contribute 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 Corporation 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 Corporation 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 Corporation has no right to influence the investment policy and strategy.

The amounts included in the balance sheets in respect of the Corporation’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
		2019 $ 2,086,713 (1,460,045) $ 626,668	2018 $ 2,141,575 (1,413,261) $ 728,314

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, 2018
$ 2,083,628
$ (1,156,703)

Service cost
Past service cost
47,004
-
Current service cost
37,109
-
Net interest expense (income)

26,045

(14,571)

Recognized in profit or loss

110,158

(14,571)

Remeasurement
Return on plan assets
-
(31,651)
Actuarial loss
Changes in financial assumptions
28,530
-
Experience adjustments

4,219

-

Recognized in other comprehensive income

32,749

(31,651)

Net Defined
Benefit
Liabilities
$ 926,925
47,004
37,109

11,474

95,587

(31,651)
28,530

4,219

1,098
(Continued)

42 -

Present Value
of the Defined
Benefit
Obligation
Fair Value of
the Plan Assets
Contributions from the employer
$ -
$ (256,109)
Benefits paid
(45,773)
45,773
Portion of benefits paid by the Corporation

(39,187)

-

Balance at December 31, 2018

2,141,575
(1,413,261)

Service cost
Past service cost
36,999
-
Current service cost
32,088
-
Net interest expense (income)

24,037

(15,943)

Recognized in profit or loss

93,124

(15,943)

Remeasurement
Return on plan assets
-
(46,730)
Actuarial loss
Changes in financial assumptions
80,747
-
Experience adjustments

7,493

-

Recognized in other comprehensive income

88,240

(46,730)

Contributions from the employer
-
(152,311)
Benefits paid
(168,200)
168,200
Portion of benefits paid by the Corporation

(68,026)

-

Balance at December 31, 2019
$ 2,086,713
$ (1,460,045)

Net Defined
Benefit
Liabilities
$ (256,109)
-

(39,187)

728,314
36,999
32,088

8,094

77,181

(46,730)
80,747

7,493

41,510

(152,311)
-

(68,026)
$ 626,668
(Concluded)

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 December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 44,421 5,817 6,084 20,412 $ 76,734	2018 $ 54,439 3,186 11,059 26,323 $ 95,007

The disbursement amounts of defined benefit plans of subsidiaries and associates were $447 thousand and $580 thousand in 2019 and 2018, respectively.

Through the defined benefit plans under the Labor Standards Law, the Corporation 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.
43 -
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 are as follows:

Discount rate Expected rate of salary increase	December 31
	2019 2018 0.75% 1.125% 1.25% 1.25%

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
		2019 $ (54,323) $ 56,360 $ 55,005 $ (53,287)	2018 $ (56,527) $ 58,707 $ 57,486 $ (55,626)

The sensitivity analysis 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	December 31
		2019 $ 103,537 10.8 years	2018 $ 152,817 11.1 years

19. 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
		2019 1,800,000 $ 18,000,000 553,620 $ 5,536,203	2018 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 the right to dividends.

44 -

2) Capital reduction in cash

For the purposes of adjusting its capital structure and enhancing the return on shareholders’ equity, the Corporation resolved in its board of directors’ meeting on March 27, 2019 and subsequently in the shareholders’ meeting in June 2019 to implement a capital reduction in cash through the return of share proceeds to shareholders. The total capital reduction amounted to $8,304,305 thousand, which represented the cancellation of 830,431 thousand shares (capital reduction ratio was 60%). After the capital reduction, the amount of paid-in capital was $5,536,203 thousand. The capital reduction was approved by the FSC on July 23, 2019. In addition, the record date of the capital reduction, which was set as August 8, 2019, had been approved by the board of directors in August 2019 and the change in registration was completed on August 19, 2019.

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
		2019 $ 5,183,923 1,184,920 4,666 2,225 38,384 $ 6,414,118	2018 $ 5,183,923 1,184,920 4,666 2,225 27,899 $ 6,403,633

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 interests in subsidiaries resulting from equity transactions other than actual disposals or acquisitions, or from changes in capital surplus of subsidiaries accounted for using the 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 21.

45 -

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 2018 and 2017 were approved in the shareholders’ meetings in June 2019 and 2018, respectively, were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For For Year 2018 Year 2017 $ 359,300 $ 410,564 2,352,886 2,491,292	Dividends Per Share (NT$)
		For For Year 2018 Year 2017 $ 1.7 $ 1.8

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

The Corporation proposed to not distribute any dividends due to the net loss incurred in 2019.

The appropriations of earnings for 2019, which were proposed in the board of directors’ meeting on March 26, 2020, are subject to the resolution of the shareholders in their meeting to be held in June 2020.

d. Special reserves

Balance at January 1 Reversals Disposal of subsidiaries and associates Disposal of property, plant and equipment Balance at December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 1,046,967 (17,308) (5) $ 1,029,654	2018 $ 1,051,658 (4,691) - $ 1,046,967

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e. Other equity items

1) Exchange differences on translating the financial statements of foreign operations

For the Year Ended	For the Year Ended	December 31
2019 $ (653,816) (380,878) 36,503 $ (998,191) For the Year Ended		2018 $ (485,118) (168,698) - $ (653,816) December 31
2019 $ 117,177 12,081 169,331 181,412 (82,027) $ 216,562 For the Year Ended		2018 $ 273,866 (7,335) (154,319) (161,654) 4,965 $ 117,177 December 31
	2019 $ 20,997 - (5,155) 5,557 354 756 (41,721) $ (19,968)	2018 $ (12,253) 382 9,889 5,893 17,086 33,250 - $ 20,997

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20. REVENUE

Revenue from contracts with customers Revenue from sale of goods Vehicles revenue Materials revenue Services revenue Rental income		December 31	December 31
		2019 $ 22,064,113 3,815,283 25,879,396 424,910 60,718 $ 26,365,024	2018 $ 22,425,585 3,701,225 26,126,810 412,069 47,093 $ 26,585,972

21. NET PROFIT (LOSS)

Net profits (loss) are concluded as follows:

a. Depreciation and amortization

For the Year Ended 2019 An analysis of depreciation by function Operating costs $ 660,099 Operating expenses 110,744 $ 770,843 An analysis of amortization by function Operating costs $ 5 Operating expenses 37,333 $ 37,338 An analysis of amortization of intangible assets by function Research and development expenses $ 57,762 b. Rental income and operating expenses directly related to investment properties For the Year Ended 2019 Rental income from investment properties $ 54,186 Direct operating expenses from investment properties that generated rental income $ 21,636	For the Year Ended	For the Year Ended	December 31
			2018 $ 674,126 115,059 $ 789,185 $ - 39,692 $ 39,692 $ 40,591 December 31
		2019 $ 54,186 $ 21,636	2018 $ 43,274 $ 21,549

48 -

c. Employee benefits expense

Short-term benefits Post-employment benefits Defined contribution plans Defined benefit plans An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 2,324,855 50,762 76,734 $ 2,452,351 $ 1,241,364 1,210,987 $ 2,452,351	2018 $ 2,440,062 47,732 95,007 $ 2,582,801 $ 1,280,346 1,302,455 $ 2,582,801

d. Employees’ compensation and remuneration of directors

According to the Articles of Incorporation of the Corporation, the Corporation accrued employees’ compensation and remuneration of directors 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. Due to the net loss before income tax for the year ended December 31, 2019, the Corporation did not accrue employees’ compensation and remuneration of directors. The employees’ compensation and remuneration of directors for the year ended December 31, 2018, which were approved by the Corporation’s board of directors in March 2019, are as follows:

Accrual rate

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

If there is a change in the amounts after the annual 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 financial statements for the years ended December 31, 2018 and 2017.

49 -

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

22. INCOME TAXES

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 prior years Deferred tax In respect of the current year Adjustments for prior years Adjustments to deferred tax attributable to changes in tax rates and laws Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2019 $ 358,522 (10,063) 348,459 124,541 - - 124,541 $ 473,000	2018 $ 180,568 (79,247) 101,321 176,693 74,625 (49,639) 201,679 $ 303,000

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

Profit (loss) before tax Income tax expense calculated at the statutory rate (20%) Tax-exempt income Income tax on unappropriated earnings Investment credits Effect of tax rate changes Unrecognized deductible temporary differences Adjustments for prior years’ tax 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
		2019 $ (1,992,573) $ (398,515) 956,946 - (83,612) - 8,244 (10,063) $ 473,000	2018 $ 3,895,999 $ 779,200 (509,165) 112,790 (67,833) (49,639) 42,269 (4,622) $ 303,000

The Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings was reduced from 10% to 5%.

50 -

b. Income tax recognized in other comprehensive income

Deferred tax In respect of the current year Remeasurement of defined benefit plans Cash flow hedges Effect of change in tax rate Total income tax recognized in other comprehensive income	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 8,302 (101) - $ 8,201	2018 $ 219 (3,946) 5,473 $ 1,746

c. Current tax assets and liabilities

Current tax assets Tax refund receivable (included in other current assets) Current tax liabilities Income tax payable		December 31	December 31
		2019 $ 63,432 $ 245,152	2018 $ 69,798 $ 28,148

d. Deferred tax assets and liabilities

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

For the year ended December 31, 2019

Deferred tax assets Temporary differences Defined benefit plans Other payables Inventories Others Deferred tax liabilities Temporary differences Investments accounted for using the equity method Others	Opening Balance Recognized in Profit or Loss Recognized in Other Compre- hensive Income $ 121,415 $ (28,620) $ 8,302 71,275 (11,210) - 24,415 2,477 - 13,200 1,916 (1,501) $ 230,305 $ (35,437) $ 6,801 $ 116,538 $ 89,104 $ - 1,400 - (1,400) $ 117,938 $ 89,104 $ (1,400)	Other $ - - - 4,213 $ 4,213 $ - - $ -	Closing Balance $ 101,097 60,065 26,892 17,828
			$ 205,882
			$ 205,642 -
			$ 205,642

51 -

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 Others	Opening Balance Recognized in Profit or Loss Recognized in Other Compre- hensive Income $ 136,961 $ (20,856) $ 5,310 55,862 15,413 - 23,150 1,265 - 21,922 (6,558) (2,164) 237,895 (10,736) 3,146 74,405 (74,405) - $ 312,300 $ (85,141) $ 3,146 $ - $ 116,538 $ - - - 1,400 $ - $ 116,538 $ 1,400	Closing Balance $ 121,415 71,275 24,415 13,200 230,305 - $ 230,305 $ 116,538 1,400 $ 117,938

e. Deductible temporary differences for which no deferred tax assets have been recognized in the balance sheets

Deductible temporary differences		December 31	December 31
		2019 $ 1,522,882	2018 $ 1,481,664

f. Income tax assessments

The income tax returns of the Corporation through 2017 have been assessed by the tax authorities.

23. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share Diluted earnings (loss) per share	Unit: NT$ Per Share For the Year Ended December 31	Unit: NT$ Per Share For the Year Ended December 31	Unit: NT$ Per Share For the Year Ended December 31
		2019 $ (2.38) $ (2.38)	2018 $ 2.64 $ 2.63

52 -

The earnings (loss) and weighted average number of ordinary shares outstanding used in the computation of earnings (loss) per share are as follows:

Net Profit (loss) for the Year

Profit (loss) of the Corporation	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ (2,465,573)	2018 $ 3,592,999

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

Weighted average number of ordinary shares used in the 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 Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended	For the Year Ended	December 31
		2019 1,051,879 (15,655) 1,036,224 - 1,036,224	2018 1,384,051 (20,599) 1,363,452 1,801 1,365,253

When calculating EPS, the Corporation considers the shares which associates hold as the treasury shares to reduce the outstanding shares.

If the Corporation offered to settle compensation paid to employees in cash or shares, the Corporation 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. Due to the net loss after tax for the year ended December 31, 2019, the Corporation did not compute the diluted loss per share with anti-dilutive effects by assuming that employees’ compensation would be distributed in the form of shares.

24. DISPOSAL OF SUBSIDIARY - WITH LOSS OF CONTROL

In order to strengthen the Corporation’s capital structure and focus on the development of its business, the Corporation, Sino Diamond Motors and Alliance Investment & Management disposed of 72.81% interest in its subsidiary, Gatetech Technology, to a non-related party. The disposal was completed on November 30, 2019, on which date control of Gatetech Technology passed to the acquirer. For details about the disposal of Gatetech Technology, refer to Note 28 to the Corporation’s consolidated financial statements for the year ended December 31, 2019.

25. CAPITAL MANAGEMENT

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

53 -

26. FINANCIAL INSTRUMENTS

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

The management believes the carrying amounts of financial assets and financial liabilities that are not measured at fair value recognized in the 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, 2019 Financial assets Financial assets at FVTPL Domestic unlisted securities Mutual funds Derivative financial instruments Financial assets at FVTOCI Domestic listed securities Domestic unlisted securities Financial assets for hedging Non-derivative financial instruments Derivative financial instruments Financial liabilities Financial liabilities at FVTPL Financial liabilities for hedging (included in current liabilities) Derivative financial instruments (included in other current liabilities)	Level 1 $ - 320,367 - $ 320,367 $ 29,083 - $ 29,083 $ 398,424 - $ 398,424 $ - $ -	Level 2 $ - - - $ - $ - - $ - $ - - $ - $ - $ -	Level 3 $ 617,612 - 304 $ 617,916 $ - 13,585 $ 13,585 $ - 440 $ 440 $ 2,483 $ 6,884	Total $ 617,612 320,367 304 $ 938,283 $ 29,083 13,585 $ 42,668 $ 398,424 440 $ 398,864 $ 2,483 $ 6,884

54 -

December 31, 2018

Financial assets Financial assets at FVTPL Domestic unlisted securities Mutual funds Derivative financial instruments Financial assets at FVTOCI Domestic listed securities Domestic unlisted securities Financial assets for hedging Non-derivative financial instruments Financial liabilities Financial liabilities at FVTPL Derivative financial instruments (included in other current liabilities)	Level 1 $ - 478,786 - $ 478,786 $ 18,673 - $ 18,673 $ 218,956 $ -	Level 2 $ - - - $ - $ - - $ - $ - $ -	Level 3 $ 671,565 - 23 $ 671,588 $ - 12,318 $ 12,318 $ - $ 79	Total $ 671,565 478,786 23 $ 1,150,374 $ 18,673 12,318 $ 30,991 $ 218,956 $ 79

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

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

For the year ended December 31, 2019

Financial Assets
Equity
Instruments at
FVTPL
Derivative
Financial
Instruments at
FVTPL
Equity
Instruments at
FVTOCI
Derivative
Financial
Instruments
for Hedging
Balance at January 1
$ 671,565
$ 23
$ 12,318
$ -

Recognized in profit or loss
(53,953)
281
-
-
Recognized in other
comprehensive income

-

-

1,267

440

Balance at December 31
$ 617,612
$ 304
$ 13,585
$ 440

Total
$ 683,906
(53,672)

1,707
$ 631,941

55 -

Financial Liabilities
Derivative
Financial
Instruments at
FVTPL
Derivative
Financial
Instruments for
Hedging
Balance at January 1
$ 79
$ -

Recognized in profit or loss
2,404
-
Recognized in other comprehensive loss

-

6,884

Balance at December 31
$ 2,483
$ 6,884

For the year ended December 31, 2018
Financial Assets
Equity
Instruments
at FVTPL
Derivative
Financial
Instruments
at FVTPL
Equity
Instruments
at FVTOCI
Balance at January 1
$ 703,983 $ - $ 16,444
Recognized in profit or loss
(32,418)
23
-
Recognized in other
comprehensive loss
-
-
(3,519)
Sales

-

-

(607)

Balance at December 31
$ 671,565
$ 23
$ 12,318

Financial Liabilities
Derivative
Financial
Instruments at
FVTPL
Derivative
Financial
Instruments for
Hedging
Balance at January 1
$ 2,954
$ 12,362

Recognized in profit or loss
(2,875)
-
Recognized in other comprehensive
income

-
(12,362)

Balance at December 31
$ 79
$ -

Total
$ 79
2,404

6,884
$ 9,367
Total
$ 720,427

(32,395)

(3,519)

(607)
$ 683,906
Total
$ 15,316
(2,875)
(12,362)
$ 79

3) Valuation techniques and inputs applied for Level 3 fair value measurement
a) 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.
56 -
b) Domestic unlisted equity securities to which the market approach was applied: The fair values of domestic unlisted shares were determined with reference to the share prices of listed companies with similar businesses as the Corporation. The material unobservable inputs are as follows:

Operating income ratio P/B ratio Discount rate for lack of marketability	December 31
	2019 2018 0.92-2.85 times 0.79-3.26 times 0.78-6.19 times 1.05-4.49 times 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 P/B ratio 0.1 time increase 0.1 time decrease		December	31
		2019 $ 42 $ (42) $ 62,946 $ (62,946)	2018 $ 38 $ (38) $ 68,223 $ (68,223)

c. Categories of financial instruments

Financial assets FVTPL Mandatorily at FVTPL Financial assets for hedging Financial assets at amortized cost (Note 1) Financial assets at FVTOCI Financial liabilities Amortized cost (Note 2) FVTPL (included in other current liabilities) Held for trading Derivative instruments in designated hedge accounting relationships (included in other current liabilities)	December 31
	2019 2018 $ 938,283 $ 1,150,374 398,864 218,956 6,839,997 14,601,038 42,668 30,991 4,929,373 4,550,881 2,483 79 6,884 -

Note 1: The balances included financial assets measured at amortized cost, which comprised cash and cash equivalents, notes receivable and accounts receivable (including related parties), other receivables, other financial assets (included in other current assets), debt investments and guarantee deposits (included in other non-current assets).
Note 2: The balances included financial liabilities measured at amortized cost, which comprised notes payable and accounts payable (including related parties), other payables and deposits received (included in other non-current liabilities).
57 -

d. Financial risk management objectives and policies

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

1) Market risk

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

a) Foreign currency risk

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

Sensitivity analysis

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

The following table details the Corporation’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 only 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 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 Impact	USD Impact	USD Impact
For the Year Ended December 31
	2019 2018 $ (4,354) $ (2,895) JPY Impact
For the Year Ended December 31
	2019 2018 $ 70 $ 1,289 $ (8,577) $ (2,190) RMB Impact
For the Year Ended December 31
	2019 $ (3,494) $ (1,206)	2018 $ (4,626) $ -

58 -

b) Interest rate risk

The carrying amount of the Corporation’s financial assets and financial liabilities with exposure to interest rate risk at the end of the reporting period was as follows.

Cash flows interest rate risk Financial assets Sensitivity analysis		December 31	December 31
		2019 $ 3,863,517	2018 $ 11,372,479

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 Corporation’s pre-tax profit for the years ended December 31, 2019 and 2018 would increase/decrease by $9,659 thousand and $28,431 thousand, respectively.

The Corporation’s sensitivity to interest rates decreased during the current year mainly due to the decrease in variable rate asset instruments.

c) Other price risk

The Corporation 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, 2019 and 2018 would have decreased by $16,018 thousand and $23,939 thousand, respectively, as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income would have decreased by $1,454 thousand and $934 thousand, respectively, as a result of the changes in fair value of financial assets at FVTOCI.

2) Credit risk

The amounts of financial assets will be potentially impacted if the counterparties 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 Corporation believes the risk is low because the trading parties are creditworthy banks, brokers and dealers.

3) Liquidity risk

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

59 -

27. TRANSACTIONS WITH RELATED PARTIES

Besides information disclosed elsewhere in the other notes, details of transactions between the Corporation 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.

Le Wen Investment Co., Ltd.

Yulon Management Company Ltd.

Mitsubishi Corporation (Taiwan) Ltd.

Mitsubishi Motors Philippines Corporation

Mitsubishi Motors Thailand

Mitsubishi Corporation Technos

Shye Shyang Mechanical Industrial Co., Ltd.

Fuzhou Samuel Mechanical and Electrical Co., Ltd.

Uni-Calsonic Corp.

Yulon Motor Co., Ltd.

Fortune Motors Co., Ltd. (Fortune Motors)

ROC Spicer Ltd. (ROC-Spicer)

Uni-Auto Parts Manufacture Co., Ltd. (Uni-Auto Parts)

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

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

Yulon IT Solutions Inc.

Sinjang Co., Ltd.

Tokio Marine Newa Insurance Co., Ltd.

Hong Shuo Cultural Enterprises, Co., Ltd.

Hsiang Shuo Enterprises

Sinqual Technology Co., Ltd.

Yufong Property Management Co., Ltd.

Taiwan Acceptance Corporation

Yue Sheng Industrial Co., Ltd.

Related Party Category

Investors that have significant influence
over the Corporation
Investors that have significant influence
over the Corporation
Investors that have significant influence
over the Corporation
Investors that have significant influence
over the Corporation
Subsidiary of investors that have
significant influence over the
Corporation
Subsidiary of investors that have
significant influence over the
Corporation
Subsidiary of investors that have
significant influence over the
Corporation
Subsidiary of investors that have
significant influence over the
Corporation
Subsidiary of investors that have
significant influence over the
Corporation
The Corporation is its major
management authority
The Corporation is its major
management authority
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
(Continued)

60 -

Related Party Name
Y-Teks Co., Ltd.

Yulon Energy Service Co., Ltd.

Yue Ki Industrial Co., Ltd.

Carplus Auto Leasing Corporation

Hsieh-Shin Motors Co., Ltd.

Yu Rich Financial Services Company

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)

Kian Shen Corporation (Kian Shen)

COC Tooling & Stamping Co., Ltd.

Y. M. Hi-Tech Industry Ltd.

China Engine Corporation (China Engine)

Gatetech Technology Inc. (“Gatetech Technology”)

Gatetech (Suchou) Technology Co., Ltd.

Ling Wei Motor Co., Ltd. (“Ling Wei”)

Brilliant Insight International Consultancy Service Co., Ltd.
Greentrans Corporation

Sino Diamond Motors Corporation (“Sino Diamond
Motors”)

Hwa-Lin Investments Ltd.

Hwa-Wei Holdings Corporation Ltd.

Fujian Rui Hua Consulting Co., Ltd.

Jiangsu Greentrans Automotive Parts Co., Ltd.

South East (Fujian) Motor Corporation Ltd.

Fujian Benz Automotive Co., Ltd.

China Engine (Fujian)

Yuanchuang Industrial Investment Consulting Co., Ltd.

Automotive Research & Testing Center

Related Party Category

Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary (Note 1)
Subsidiary (Note 1)
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Joint Venture
Joint Venture
Joint Venture
Substantive related party
Substantive related party (Note 2)
(Concluded)

Note 1: The Corporation became a non-related party since December 2019.

Note 2: The Corporation became a non-related party since August 2018.

61 -

b. Operating transactions

1) Sales of goods

For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
2019 2018 $ 17,577,745 $ 17,454,487 3,956,366 4,398,207 17,228 21,003 21,551,339 21,873,697 490,665 387,222 105,293 127,786 11,881 28,113 $ 22,159,178 $ 22,416,818 For the Year Ended December 31
2019 2018 $ 1,727,775 $ 1,513,357 1,411,501 1,714,457 136,951 136,719 1,548,452 1,851,176 1,036,595 1,030,536 330,554 326,661 638 772 $ 4,644,014 $ 4,722,502 For the Year Ended December 31
	2019 $ 214,652	2018 $ 190,038

2) Purchases of goods

3) Technical services expenses

62 -

4) Development expenses

Line Items Related Party Category/Name Research and development expenses Investors that have significant influence over the Corporation Subsidiaries Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 47,981 - 38 $ 48,019	2018 $ 53,493 2,164 186 $ 55,843

5) Acquisitions of property, plant and equipment

Line Items Related Party Category/Name Property, plant and Associates equipment Subsidiaries The Corporation is its major management authority	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 100,917 5,431 1,580 $ 107,928	2018 $ 30,621 3,235 7,349 $ 41,205

6) Disposals of property, plant and equipment

Related Party Category/Name Subsidiaries Ling Wei Others		Proceeds	Proceeds	Gain (Loss) on Disposal (Included in other income and other expense) For the Year Ended December 31 2019 2018 $ (1,063) $ (1,981) 515 - $ (548) $ (1,981)	Gain (Loss) on Disposal (Included in other income and other expense) For the Year Ended December 31 2019 2018 $ (1,063) $ (1,981) 515 - $ (548) $ (1,981)	Gain (Loss) on Disposal (Included in other income and other expense) For the Year Ended December 31 2019 2018 $ (1,063) $ (1,981) 515 - $ (548) $ (1,981)
		For the Year Ended December 31			For the Year Ended December 31
		2019 $ 11,756 515 $ 12,271	2018 $ 10,294 - $ 10,294		2019 $ (1,063) 515 $ (548)	2018 $ (1,981) - $ (1,981)

63 -

7) Receivables from related parties

Line Items Related Party Category/Name Trade receivables from Associates related parties Fortune Motors Shung Ye Motor Others Subsidiaries Investors and subsidiaries of the investors that have significant influence over the Corporation Joint ventures Others		December 31	December 31
		2019 $ 900,173 256,873 1,149 1,158,195 99,908 7,538 2,174 47 $ 1,267,862	2018 $ 796,615 284,533 3,777 1,084,925 140,257 13,624 2,450 - $ 1,241,256

8) Loans to related parties

Line Items Related Party Category/Name Other receivables Subsidiaries Sino Diamond Motors Line Items Related Party Category/Name Interest revenue Subsidiaries Sino Diamond Motors		December 31	December 31
	2019 2018 $ 600,148 $ 700,169 For the Year Ended December 31
		2019 $ 6,759	2018 $ 5,548

The Corporation provided financing to its subsidiary, Sino Diamond Motors, at rates comparable to market interest rates. For the years ended December 31, 2019 and 2018, the financing provided to its subsidiary were all unsecured loans.

9) Prepayments

Line Items Related Party Category/Name Prepayments Investors and subsidiaries of the investors that have significant influence over the Corporation Subsidiaries Joint ventures		December 31	December 31
		2019 $ 6,260 1,009 79 $ 7,348	2018 $ 13,976 1,782 - $ 15,758

64 -

10) Payables to related parties

Line Items Related Party Category/Name Trade payables to Associates related parties Uni-Auto Parts ROC-Spicer Others Investors and subsidiaries of the investors that have significant influence over the Corporation Mitsubishi Motors Corp. Others Subsidiaries Kian Shen Others The Corporation is its major management authority Joint ventures		December 31	December 31
		2019 $ 147,613 100,743 192,333 440,689 92,215 39,110 131,325 130,142 109,700 239,842 68,622 6,662 $ 887,140	2018 $ 75,239 86,961 239,873 402,073 91,480 76,081 167,561 58,298 68,145 126,443 58,864 5,742 $ 760,683

11) Contract liabilities

Line Items Related Party Category/Name Other current liabilities Subsidiaries China Engine Others Associates		December 31	December 31
		2019 $ 20,515 1,404 21,919 1,688 $ 23,607	2018 $ - 5,465 5,465 75 $ 5,540

12) Acquisitions of financial assets

For the year ended December 31, 2018

Related Party
Category/Name	Line Items	Underlying Assets	Purchase Price
Subsidiaries
Gatetech Technology	Financial assets at amortized	2-year secured	$ 150,000
	cost	corporate bond

The outstanding payables to related parties were not guaranteed and would be paid in cash. The Corporation received guarantees from some of the receivables from related parties. For the years ended December 31, 2019 and 2018, no loss allowance was recognized for trade receivables from related parties.

65 -

Except for the accounts receivable from Y.M. Hi-Tech Industry Ltd. whose prices and payment periods are based on the contract terms, other transactions with related parties have the same pricing and payment terms as of those for third parties. For lease contracts entered into with related parties, rental prices were determined by reference to market, and had general payment terms.

The Corporation signed a contract with Mitsubishi Motor Corp, refer to Note 28 for the details.

c. Compensation of key management personnel

Short-term employee benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 63,933 569 $ 64,502	2018 $ 95,917 820 $ 96,737

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

28. ASSETS PLEDGED AS COLLATERAL

The following assets were provided as the tariff of importing vehicle parts and materials and escrows:

Pledged deposits (included in other current assets)		December 31	December 31
		2019 $ 103,139	2018 $ 82,698

29. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Significant commitments and contingencies of the Corporation as of December 31, 2019 were as follows:

a. The Corporation issued guarantee notes amounting to $4,233,424 thousand which had been pledged as collateral for loans from banks and other financial organizations and for government grants; unused letters of credit amounted to $45,858 thousand.
b. The Corporation entered into agreements with Mitsubishi Motor 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	Paymentt Method
				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.
66 -

30. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

December 31, 2019

		Foreign			Carrying
		Currency	Exchange Rate		Amount
Foreign currency assets
Monetary items
JPY	$	1,480,139	0.2760	$	408,518
RMB		80,791	4.3050		347,804
USD		6,130	29.9800		183,783
Non-monetary items
Investments accounted for using the equity
method
EUR		84,261	33.5900		2,830,313
RMB		88,648	4.3050		381,631
Foreign currency liabilities
Monetary items
JPY		661,861	0.2760		182,674
December 31, 2018
		Foreign			Carrying
		Currency	Exchange Rate		Amount
Foreign currency assets
Monetary items
RMB	$	118,237	4.4720	$	528,756
JPY		868,049	0.2782		241,491
USD		5,181	30.7150		159,137
Non-monetary items
Investments accounted for using the equity
method
EUR		72,973	35.2000		2,568,646
RMB		83,148	4.4720		371,839
Foreign currency liabilities
Monetary items
JPY		544,481	0.2782		151,475

For the years ended December 31, 2019 and 2018, net foreign exchange losses (realized and unrealized) were $12,381 thousand and $5,282 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.

67 -

31. SEPARATELY DISCLOSED ITEMS

Excluding items disclosed in Notes 7, 11, 26 and Tables 1 to 8, there are no other separately disclosed items.

68 -

TABLE 1

CHINA MOTOR CORPORATION AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2019 (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 (Note 1)	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	$ 600,000	$ 600,000	1	Short-term financing	$ -	Working capital	$ -	-	$ -	$ 1,162,262	$ 7,748,412
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	66,111 (US$ 1,200 thousand and RMB 7,000 thousand) 88,896 (US$ 1,960 thousand and RMB 7,000 thousand) 107,029 (US$ 3,570 thousand) 30,135 (RMB 7,000 thousand)	- - - -	- - - -	- - - -	Short-term financing Short-term financing Short-term financing Short-term financing	- - - -	Working capital Working capital Working capital Working capital	- - - -	- - - -	- - - -	1,162,262 1,162,262 1,162,262 1,162,262	7,748,412 7,748,412 7,748,412 7,748,412
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	430,500 (RMB 100,000 thousand) 43,050 (RMB 10,000 thousand) 43,050 (RMB 10,000 thousand) 43,050 (RMB 10,000 thousand) 43,050 (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	- - - - -	- - - - -	- - - - -	1,162,262 1,162,262 1,162,262 1,162,262 1,162,262	7,748,412 7,748,412 7,748,412 7,748,412 7,748,412
3	Sichuan Huafeng Hanwei	Sichuan Lingwei Tianjin Hwahong Guangzhou Huayou Motor Maintenance	Other receivables Other receivables Other receivables	Yes Yes Yes	43,050 (RMB 10,000 thousand) 43,050 (RMB 10,000 thousand) 43,050 (RMB 10,000 thousand)	- - -	- - -	- - -	Short-term financing Short-term financing Short-term financing	- - -	Working capital Working capital Working capital	- - -	- - -	- - -	1,162,262 1,162,262 1,162,262	7,748,412 7,748,412 7,748,412

(Continued)

69 -

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Year (Note 1)	Ending Balance (Note 1)	Actual Borrowing Amount (Note 1)	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	$ 129,150 (RMB 30,000 thousand) 129,150 (RMB 30,000 thousand)	$ - -	$ - -	- -	Short-term financing Short-term financing	$ - -	Working capital Working capital	$ - -	- -	$ - -	$ 1,162,262 1,162,262	$ 7,748,412 7,748,412
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	43,050 (RMB 10,000 thousand) 43,050 (RMB 10,000 thousand) 129,150 (RMB 30,000 thousand) 129,150 (RMB 30,000 thousand)	43,050 (RMB 10,000 thousand) - 86,100 (RMB 20,000 thousand) 86,100 (RMB 20,000 thousand)	- - - -	- - - -	Short-term financing Short-term financing Short-term financing Short-term financing	- - - -	Working capital Working capital Working capital Working capital	- - - -	- - - -	- - - -	1,162,262 1,162,262 1,162,262 1,162,262	7,748,412 7,748,412 7,748,412 7,748,412
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	215,250 (RMB 50,000 thousand) 86,100 (RMB 20,000 thousand) 86,100 (RMB 20,000 thousand) 86,100 (RMB 20,000 thousand) 129,150 (RMB 30,000 thousand)	86,100 (RMB 20,000 thousand) - 86,100 (RMB 20,000 thousand) 86,100 (RMB 20,000 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	- - - - -	- - - - -	- - - - -	1,162,262 1,162,262 1,162,262 1,162,262 1,162,262	7,748,412 7,748,412 7,748,412 7,748,412 7,748,412
6	Dongguan Huayi	Dongguan Huashun	Other receivables	Yes	215,250 (RMB 50,000 thousand)	86,100 (RMB 20,000 thousand)	-	-	Short-term financing	-	Working capital	-	-	-	1,162,262	7,748,412
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	86,100 (RMB 20,000 thousand) 43,050 (RMB 10,000 thousand) 43,050 (RMB 10,000 thousand) 43,050 (RMB 10,000 thousand)	86,100 (RMB 20,000 thousand) - - -	43,050 (RMB 10,000 thousand) - - -	3.915 - - -	Short-term financing Short-term financing Short-term financing Short-term financing	- - - -	Working capital Working capital Working capital Working capital	- - - -	- - - -	- - - -	1,162,262 1,162,262 1,162,262 1,162,262	7,748,412 7,748,412 7,748,412 7,748,412

Note 1: Translated at the exchange rates of US$1:NT$29.98 and RMB1:NT$4.305 on December 31, 2019.

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

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

(Concluded)

70 -

TABLE 2

CHINA MOTOR CORPORATION AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2019 (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	Dongguan Huayi Tianjin Hwarui Guangzhou Huayou Motor Maintenance Sichuan Huafeng Hanwei	Subsidiary Subsidiary Subsidiary Subsidiary	20% of the Corporation’s issued capital, $1,107,241 thousand 20% of the Corporation’s issued capital, $1,107,241 thousand 20% of the Corporation’s issued capital, $1,107,241 thousand 20% of the Corporation’s issued capital, $1,107,241 thousand	$ 430,500 (RMB 100,000 thousand) 430,500 (RMB 100,000 thousand) 215,250 (RMB 50,000 thousand) 215,250 (RMB 50,000 thousand)	$ 430,500 (RMB 100,000 thousand) 430,500 (RMB 100,000 thousand) - -	$ - - - -	$ - - - -	1.1 1.1 - -	50% of the Corporation’s issued capital, $2,768,102 thousand 50% of the Corporation’s issued capital, $2,768,102 thousand 50% of the Corporation’s issued capital, $2,768,102 thousand 50% of the Corporation’s issued capital, $2,768,102 thousand	No No No No	No No No No	Yes Yes Yes Yes

Note: Translated at the exchange rate of RMB1:NT$4.305 on December 31, 2019.

71 -

TABLE 3

CHINA MOTOR CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2019

(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, 2019		Note
				Number of Shares (In Thousands)	Carrying Amount (Note 2)	Percentage of Ownership (%)	Fair Value
China Motor Corporation	Beneficiary certificates Franklin Templeton SinoAm Money Market Fubon Chi Hsiang Money Market Fund The RSIT Enhanced Money Market Hua Nan Phoenix Money Market Fund Sinopac Money Market Fund Paradigm Pion Money Market Prudential Financial Money Market Fund Cathay Taiwan Money Market Fund UPAMC James Bond Money Market Fund CTBC Hua Win Money Market Fund Shares Shye Shyang Machinery Industrial Myson Century, Inc. Taiwan Aerospace NORM Pacific Automation Corp. Carnival Com2B (Cayman) Corp.	- - - - - - - - - - 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 - 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 Fair value through other comprehensive income financial assets - non-current	4,867 3,205 4,201 1,856 2,167 2,610 1,906 2,423 612 657 9,009 4,705 811 128 95 2,000	$ 50,518 50,468 50,467 30,292 30,280 30,280 30,275 30,250 10,270 7,267 617,612 28,134 11,847 1,738 949 -	- - - - - - - - - - 10.00 7.84 0.60 0.45 0.05 4.44	$ 50,518 50,468 50,467 30,292 30,280 30,280 30,275 30,250 10,270 7,267 617,612 28,134 11,847 1,738 949 -

(Continued)

72 -

Holding Company Name	Type and Name/Issuer of Marketable Security	Relationship with the Holding Company	Financial Statement Account		December	31, 2019		Note
				Number of Shares (In Thousands)	Carrying Amount (Note 2)	Percentage of Ownership	Fair Value
Kian Shen KSIHK Alliance Investment & Management Hwa Lin Brilliant Insight International	Corporate bonds Taiwan Acceptance Corp. Morgan Stanley Gatetech Technology Evergreen Marine Corporation Crédit Agricole Corporate and Investment Bank SA Fonterra Co-operative Group Ltd. Deutsche Bank Aktiengesellschaft, Singapore Branch Beneficiary certificates FSITC Money Market Fund Shares Beijing NTN-SEOHAN Driveshaft 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. Principal guaranteed notes President Securities 100% Principle Guaranteed Note Beneficiary certificates Taishin Ta-Chong Money Market	Associate - - - - - - - - - - - - - - - - -	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 Financial assets at fair value through profit or loss - current Fair value through other comprehensive income financial assets - non-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 Amortized cost financial assets - current Financial assets at fair value through profit or loss - current	- - - - - - - 101 - 6,327 3,248 1,275 789 65 696 - - 74	$ 248,452 129,060 119,088 99,922 86,034 43,040 43,017 18,003 32,019 (RMB 7,438 thousand) 100,996 68,801 19,849 5,844 2,678 3,288 7,860 8,556 1,057	- - - - - - - - 9.00 15.07 3.45 4.05 3.60 0.54 0.85 - - -	$ - - - - - - - 18,003 32,019 100,996 68,801 19,849 5,844 2,678 3,288 - - 1,057

Note 1: Refer to Tables 7 and 8 for the information of investments in subsidiaries and associates.

Note 2: Translated at the exchange rate of RMB1:NT$4.305 on December 31, 2019.

(Concluded)

73 -

TABLE 4

CHINA MOTOR CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED OR DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2019

(In Thousands of New Taiwan Dollars)

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition (Note 1)	Acquisition (Note 1)		Disposal	Disposal		Other Adjustment (Note 2)	Ending	Balance
					Number of Shares	Amount	Number of Shares	Amount	Number of Shares	Amount	Carrying Amount	Gain on Disposal		Number of Shares	Amount
China Motor Corporation	Shares Gatetech Technology	Investments accounted for using the equity method	Syncmold Enterprise Corporation	-	29,278	$ 311,858	3,216	$ -	32,494	$ 415,097	$ 309,028	$ 71,314	$ (2,830)	-	$ -

Note 1: Share dividends distributed by the Corporation.

Note 2: Including profit or loss and adjustments in shareholders’ equity of the investee.

74 -

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, 2019

(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)	Note
			Purchase/ Sale	Amount	% to Total (Note)	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total (Note)
China Motor Corporation (“CMC”) Sino Diamond Motors Kiah Shen COC	Fortune Motors Shung Ye Motor Mitsubishi Corp. Uni Auto Parts Manufacture Kian Shen ROC-Spicer Shye Shyang Machinery Industrial COC Yueki Uni-Calsonic Taiwan Mitsubishi Corp. Fortune Motors Shung Ye Motor Mitsubishi Motor Corp. China Motor Corporation Yueki China Motor Corporation Yulon Yulon	Equity-method investee Equity-method investee Director of CMC Equity-method investee Subsidiary Equity-method investee Director of Shye Shyang Machinery Industrial Subsidiary Equity-method investee Equity-method investee Subsidiary of director of CMC Equity-method investee Equity-method investee Director of CMC Parent company Equity-method investee Parent company Equity-method investee Equity-method investee	Sale Sale Purchase Purchase Purchase Purchase Purchase Purchase Purchase Purchase Purchase Sale Sale Purchase Sale Purchase Sale Sale Purchase	$ (17,577,745) (3,956,366) 1,411,501 712,857 620,589 479,473 325,031 315,567 161,538 150,096 134,846 (1,995,300) (701,838) 1,109,771 (620,589) 163,915 (315,567) (234,143) 167,641	(67) (15) 8 4 4 3 2 2 1 1 1 (69) (24) 66 (50) 17 (26) (19) 26	Collect after 15-60 days of delivery Collect after 15-60 days of delivery Pay after 7 days of cargo ship out 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 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 15-45 days of delivery Collect after 7-45 days of delivery Pay after 10 days of cargo ship out Collect after 45 days of the month of delivery Net 105 days from the end of the month of when invoice is issued Collect after 45 days of the month of delivery Collect after 45 days of the month of delivery Net 75 days from the end of the month of when invoice is issued	$ - - - - - - - - - - - - - - - - - - -	- - - - - - - - - - - - - - - - - - -	$ 900,173 256,873 (39,110) (147,613) (130,142) (100,743) (68,017) (63,890) (38,073) (30,092) - 83,168 2,920 - 130,142 (61,728) 63,890 34,648 (29,122)	45 13 (1) (5) (4) (3) (2) (2) (1) (1) - 87 3 - 69 (23) 11 6 (12)

(Continued)

75 -

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)	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total (Note)
Y. M. Hi-Tech China Engine Donggun Huashun	Yulon Yulon Hua-Chuang Automobile Information Technical Center South Eastern (Fujian) Motor	Equity-method investee Equity-method investee Equity-method investee Equity-method investee	Sale Purchase Sale Purchase	$ (120,135) 117,485 (148,972) 101,197	(38) 39 (48) 95	Collect after 45 days of the month of delivery Net 75 days from the end of the month of when invoice is issued Net 90 days from the end of the month of when invoice is issued Cash before delivery	$ - - - -	- - - -	$ 13,682 (59,854) 2,019 (21)	29 (42) 4 (4)

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

(Concluded)

76 -

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, 2019

(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 Kian Shen	Fortune Motors Shung Ye Motor China Motor Corporation	Equity-method investee Equity-method investee Parent company	$ 900,173 256,873 130,142	20.72 14.62 6.59	$ - - -	- - -	$ 900,173 256,873 130,142	$ - - -

77 -

TABLE 7

CHINA MOTOR CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2019 (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, 2019	As of December 31, 2019	As of December 31, 2019	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2019	December 31, 2018	Number of Shares (In Thousands)	%	Carrying Amount
China Motor Corporation Kian Shen Kian Shen Investment Alliance Investment & Management Sino Diamond Motors	Yulon Kian Shen Fortune Motors Sino Diamond Motors Tokio Marine Newa Insurance Alliance Investment & Management Daimler Vans Hong Kong Ltd. ROC-Spicer CMI COC Hwa Wei Hua-Chuang Automobile Information Technical Center Uni Auto Parts Manufacture Shung Ye Motor Gatetech Technology (Note) China Engine Uni-Calsonic Yueki Industrial Co., Ltd. Sin Gan Sin Jiang Enterprises Tai-Ya Investment Hwa Chung Motors Yulon IT Solutions Kian Shen Investment KSIHK Hua-Chuang Automobile Information Technical Center Greentrans Investment Gatetech Technology Hua-Yu Hua-Chuang Automobile Information Technical Center China Engine Gatetech Technology Brilliant Insight International Shung Ye Motors Fortune Motors	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 British Virgin Islands Hong Kong Taipei, Taiwan Samoa Taoyuan, Taiwan Samoa Taipei, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taoyuan, Taiwan Taipei, Taiwan Taipei, Taiwan	Manufacture and sale of vehicles The production of frame 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 vehicle Overseas investment on 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 Investment Investment Product design Investment Aluminum-magnesium alloy casting industry Overseas investment on 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	$ 3,835,585 344,800 2,132,826 2,192,724 955,941 1,200,030 2,011,363 675,896 1,402 412,125 1,202 1,028,013 109,813 391,142 - 625,978 105,806 109,396 - - 79,505 328,900 - 328,888 US$ 25,907 thousand 473,760 344,369 - 1,489,334 473,760 11,000 - 22,000 180 24	$ 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	262,228 32,201 132,117 151,067 61,511 183,000 46,566 145 40 33,565 40 56,600 13,032 29,668 - 87,999 6,084 2,936 - - 2,242 8,790 - 10,296 25,907 26,715 11,200 - 36,943 26,715 1 - 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 - 52.10 31.20 15.08 - - 29.00 100.00 - 100.00 100.00 8.14 100.00 - 100.00 8.14 - - 100.00 0.02 -	$ 7,110,438 2,046,653 4,473,144 1,155,029 2,052,069 1,277,471 2,830,313 539,198 871,654 786,792 579,673 - 375,791 394,906 - 429,196 137,393 105,857 - - 69,630 71,679 - 4,054,883 RMB 918,124 thousand - 222,457 - 674,934 - 5 - 19,372 217 18	$ (24,465,408) 289,942 1,229,380 (342,513) 967,571 (329,726) 2,532,931 155,470 (254,735) 124,391 (424,548) (13,237,822) 17,078 83,286 18,000 (155,080) 25,987 (125,045) 17,070 8,263 (15,906) 7,766 (4,366) 386,230 RMB 73,725 thousand (13,237,822) (35,237) 18,000 (22,897) (13,237,822) (155,080) 18,000 (1,865) 83,286 1,229,380	$ (4,132,080) 127,352 515,462 (291,753) 199,032 (333,011) 821,936 45,137 (254,735) 61,993 (169,819) (502,338) 2,536 33,299 10,270 (40,583) 8,127 (18,877) 4,211 1,654 (4,613) 7,766 (1,915) - - - - - - - - - - - -	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 Subsidiary Equity-method investee Subsidiary Subsidiary Subsidiary Equity-method investee Subsidiary Subsidiary Subsidiary Equity-method investee Equity-method investee

(Continued)

78 -

Investor Company	Investee Company	Location	Main Business and Product	Investment Amount	Investment Amount	As of December 31, 2019	As of December 31, 2019	As of December 31, 2019	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2019	December 31, 2018	Number of Shares (In Thousands)	%	Carrying Amount
Hua-Yu Gatetech Technology GH China Engine CMI Hwa Chung Motors COC	Hwa-Lin GH GI Advance Power Investment Advance Power Machinery Hwa Wei holdings Ling Wei Greentrans Y. M. Hi-Tech Shye Shinn	British Virgin Islands Samoa Samoa Mauritius Miaoli, Taiwan British Virgin Island Taipei, Taiwan Taipei, Taiwan Taoyuan, Taiwan British Virgin Islands	Overseas investment on production and service industries Investment Investment Reinvestment and sales Manufacture of vehicles and parts Overseas investment on production and service industries Sales of second-hand vehicles Sales of motorcycles and parts Steel cutting Investment	US$ 37,229 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	33,393 - - 3,750 500 60 3,608 1,000 4,250 968	100.00 - - 100.00 100.00 60.00 100.00 100.00 85.00 100.00	$ 585,036 - - 94,052 10,787 869,509 32,949 10,588 66,434 39,756	$ (24,446) 11,885 11,885 969 688 (424,548) 7,415 236 8,386 1,020	$ - - - - - - - - - -	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

Note: Gatetech Technology had been disposed of in November 2019.

(Concluded)

79 -

TABLE 8

CHINA MOTOR CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2019 (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, 2019 (Note 1)	Investment Flows	Investment Flows	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2019 (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, 2019 (Note 1)	Accumulated Repatriation of Investment Income as of December 31, 2019 (Note 1)
					Outflow	Inflow
South Eastern (Fujian) Motor 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 Fujian Spicer Shenyang 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 Manufacture of vehicles’ key components, drive axle assembly and engine parts series products Manufacture and sales of automobile transmission, shafts, mechanical transmission, shafts and components	$ 4,137,240 (US$ 138,000 thousand) 449,700 (US$ 15,000 thousand) 9,640,330 (EUR 287,000 thousand) 374,750 (US$ 12,500 thousand) 533,044 (US$ 17,780 thousand) 1,019,320 (US$ 34,000 thousand) 413,280 (RMB 96,000 thousand) 179,880 (US$ 6,000 thousand) 335,776 (US$ 11,200 thousand) 881,690 (RMB 204,806 thousand) 369,916 (RMB 85,927 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 Go directly to the mainland to invest The Corporation indirectly owns these investees through investment company registered in a third region	$ 1,034,310 (US$ 34,500 thousand) 224,850 (US$ 7,500 thousand) 1,564,152 (EUR 46,566 thousand) 149,900 (US$ 5,000 thousand) 84,993 (US$ 2,835 thousand) - 45,779 (US$ 1,527 thousand) 16,189 (US$ 540 thousand) 335,776 (US$ 11,200 thousand) 323,934 (US$ 10,805 thousand) 78,248 (US$ 2,610 thousand)	$ - - - - - - - - - - -	$ - - - - - - - - - - -	$ 1,034,310 (US$ 34,500 thousand) 224,850 (US$ 7,500 thousand) 1,564,152 (EUR 46,566 thousand) 149,900 (US$ 5,000 thousand) 84,993 (US$ 2,835 thousand) - 45,779 (US$ 1,527 thousand) 16,189 (US$ 540 thousand) 335,776 (US$ 11,200 thousand) 323,934 (US$ 10,805 thousand) 78,248 (US$ 2,610 thousand)	$ (1,606,099) 3,876 5,065,866 (EUR 146,370 thousand) 710,250 (RMB 158,822 thousand) (152,727) (RMB -34,152 thousand) 441,774 (RMB 98,787 thousand) (52,312) (RMB -11,698 thousand) - (35,201) 84,764 (22,629) (US$ -732 thousand)	25.00 38.03 16.23 17.55 15.35 17.55 21.94 3.95 100.00 29.00 20.25	$ (401,525) 1,938 825,656 (EUR 23,856 thousand) 284,100 (RMB 63,529 thousand) (53,454) (RMB -11,953 thousand) 176,710 (RMB 39,515 thousand) (26,156) (RMB -5,849 thousand) - (35,201) 24,596 (4,583) (US$ -148 thousand)	$ 1,325,589 188,079 2,828,379 (EUR 84,203 thousand) 1,824,246 (RMB 423,751 thousand) 537,231 (RMB 124,792 thousand) 854,260 (RMB 198,434 thousand) 215,202 (RMB 49,989 thousand) 32,019 (RMB 7,438 thousand) 222,408 381,631 70,782 (US$ 2,361 thousand)	$ 780,170 (US$ 26,023 thousand) - 397,806 (EUR 11,843 thousand) 483,959 (RMB 112,418 thousand) 152,982 (RMB 35,536 thousand) - - - - - -

(Continued)

80 -

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital (Note 1)	Method of Investment	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2019 (Note 1)	Investment Flows	Investment Flows	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2019 (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, 2019 (Note 1)	Accumulated Repatriation of Investment Income as of December 31, 2019 (Note 1)
							Outflow	Inflow
Zhejiang Kangda Motor Industry And Trading Fujian Rui Hua Guangzhou Huayou Motor Maintenance (Note 4) Sichuan Huafeng Hanwei (Note 4) Tianjin Hwarui Dongguan Huayi Sichuan Lingwei (Note 4) Dongguan Huashun Tianjin Hwahong Guangzhou Huayou Motor Sales (Note 4) Gatech Suzhou (Note 5)	Sales of vehicles and parts Consultation and services 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 Aluminum-magnesium alloy casting industry		$ 172,200 (RMB 40,000 thousand) 101,932 (US$ 3,400 thousand) 384,044 (US$ 12,810 thousand) 399,633 (US$ 13,330 thousand) 240,440 (US$ 8,020 thousand) 133,411 (US$ 4,450 thousand) - 107,625 (RMB 25,000 thousand) 129,150 (RMB 30,000 thousand) 185,115 (RMB 43,000 thousand) 728,514 (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		$ 36,216 (US$ 1,208 thousand) 101,932 (US$ 3,400 thousand) 335,746 (US$ 11,199 thousand) 399,633 (US$ 13,330 thousand) 232,675 (US$ 7,761 thousand) 126,426 (US$ 4,217 thousand) - - - - 607,605 (US$ 20,267 thousand)	$ - - - - - - - - - - -	$ - - - - - - - - - - -	$ 36,216 (US$ 1,208 thousand) 101,932 (US$ 3,400 thousand) 335,746 (US$ 11,199 thousand) 399,633 (US$ 13,330 thousand) 232,675 (US$ 7,761 thousand) 126,426 (US$ 4,217 thousand) - - - - 607,605 (US$ 20,267 thousand)	$ - 1,550 8,824 (62) (4,289) (20,669) (40) (RMB -9 thousand) (11,846) (RMB -2,649 thousand) (3,627) (RMB -811 thousand) 7,652 (RMB 1,711 thousand) 11,868	- 100.00 100.00 100.00 100.00 100.00 - 100.00 100.00 100.00 -	$ - 1,550 8,824 (62) (4,289) (20,669) (40) (RMB -9 thousand) (11,846) (RMB -2,649 thousand) (3,627) (RMB -811 thousand) 7,652 (RMB 1,711 thousand) 11,868	$ - 89,859 36,793 56,220 199,164 80,474 - 77,843 (RMB 18,082 thousand) 127,152 (RMB 29,536 thousand) 13,053 (RMB 3,032 thousand) -	$ - - - - - - - - - - -

Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2019 (Note 1)		Investment Amount Authorized by Investment Commission, MOEA (Note 1)			Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$5,874,586 (US$143,777 thousand and EUR46,566 thousand)		$6,993,843 (US$218,195 thousand and EUR13,467 thousand)			$23,245,237

(Continued)

81 -

Note 1: Translated at the exchange rates on December 31, 2019: US$1:NT$29.98, RMB1:NT$4.305, EUR1:NT$33.59.

Note 2: Translated at the average exchange rates for the year ended December 31, 2019: US$1:NT$30.912, RMB1:NT$4.472, EUR1:NT$34.61.

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: In November 2018, Sichuan Huafeng Hanwei, Sichuan Lingwei, Guangzhou Huayou Motor Maintenance and Guangzhou Huayou Motor Sales resolved to dissolve their respective companies. As of December 31, 2019, except for the annulment of Sichuan Lingwei which had been completed in July 2019, the remaining companies have not completed their respective liquidation procedures. The liquidation of Sichuan Huafeng Hanwei had been completed in February 2020.
Note 5: Gatetech Suzhou had been disposed of in November 2019.

(Concluded)

82 -

CHINA MOTOR CORPORATION

SCHEDULE OF THE STATEMENTS OF IMPORTANT ACCOUNTING ITEMS

Statement
Statement of Assets, Liabilities and Equity
Statement of cash and cash equivalents
Statement of inventories
Statement of changes in property, plant and equipment
Statement of changes in accumulated depreciation of property, plant and equipment
Change of investments accounted for using the equity method
Statement of accounts payable
Statement of Profit and Loss
Statement of operating revenue
Statement of operating costs
Statement of operating expenses
Statement of analysis of employee benefits expense, depreciation and amortization by function

Schedule
Number/
Reference

1
2
Note 15
Note 15
3
4
5
6
7

8

83 -

SCHEDULE 1

CHINA MOTOR CORPORATION

STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Except Amounts Shown in the Notes)

Item Period Rate Cash Cash on hand Checking accounts and demand deposits Foreign currency demand deposits (Note) Cash equivalents Time deposits 2017.09.17-2020.11.11 1.01%-1.115%	Amount $ 730 1,324,215 201,077 1,526,022 1,835,932 $ 3,361,954

Note: Including JPY15,434 thousand, US$5,257 thousand, EUR2 thousand and RMB9,094 thousand, at exchange rates of JPY1=$0.276, US$1=$29.98, EUR1=$33.59 and RMB1=$4.305.

84 -

SCHEDULE 2

CHINA MOTOR CORPORATION

STATEMENT OF INVENTORIES DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars)

Item Finished goods Work in progress Vehicle body parts Raw materials Materials in transit		Amount
		Cost (Note) Net Realizable Value $ 1,815,455 $ 2,951,231 29,259 76,179 1,629,799 1,648,884 63,581 63,581 164,143 164,143 $ 3,702,237 $ 4,904,018

Note: Allowance for loss on inventory valuation included $38,655 thousand in finished goods, $33,835 thousand in work in progress and $61,973 thousand in vehicle body parts.

85 -

SCHEDULE 3

CHINA MOTOR CORPORATION

CHANGES IN INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Except Unit Price)

Investee Company Listed shares Yulon Kian Shen Unlisted shares Fortune Motors Daimler Vans Hong Kong Ltd. Tokio Marine Newa Insurance Alliance Investment & Management Sino Diamond Motors China Motor Investment COC Tooling & Stamping Hwa Wei Holdings ROC-Spicer China Engine Shung Ye Motor Fujian Spicer Uni Auto Parts Manufacture Uni-Calsonic Yue Ki Industrial Co., Ltd. Hwa Chung Motors Tai-Ya Investment Hua-Chuang Automobile Information Technical Center Gatetech Technology Sin Gan Sin Jiang Enterprises Yulon IT Solutions	Balance, December 31, 2018 (Note 1) Adjustment on Initial Shares (In Thousands) Amount Application of IFRS 16 262,228 $ 11,476,319 $ - 32,201 2,048,431 - 13,524,750 - 132,117 4,276,471 (19,503 ) 46,566 2,568,646 - 61,511 1,766,730 - 183,000 1,639,695 - 278,167 2,451,369 - 40 1,159,432 - 33,565 761,596 - 40 771,520 - 145 700,244 - 87,999 463,630 - 28,228 384,354 - 7,308 371,839 - 13,032 373,815 - 6,084 136,670 - 2,936 121,062 - 8,790 63,913 - 2,242 77,137 - 56,600 497,612 - 29,278 311,858 - 7,074 101,801 - 8,568 100,549 - 8,332 20,875 - 19,120,818 (19,503) $ 32,645,568 $ (19,503)	Increase in 2019(Note 2) Shares (In Thousands) Amount - $ - - - - - - - - - - - - - - - - - - - - - - - - 1,440 - - - - - - - - - - - - - - - 3,216 - - - - - - - - $ -	Decrease in 2019(Notes 1 and 3) Share of Profit or Loss of Subsidiaries, Realized (Unrealized) Gain on Shares (In Thousands) Amount Associates and Joint Ventures Transactions with Associates - $ 175,693 $ (4,132,081 ) $ - - 57,963 127,352 - 233,656 (4,004,729) - - 277,445 515,462 2,458 - 454,901 821,936 - - 44,053 199,032 - - - (333,010 ) - 127,100 965,022 (291,753 ) - - - (254,735 ) - - 37,257 61,993 - - - (169,819 ) - - 208,785 45,137 - - - (45,083 ) - - 15,438 33,299 - - - 24,596 - - - 2,536 - - 6,327 8,127 - - - (18,877 ) - - - 7,766 - - - (4,613 ) - - - (502,338 ) 4,662 32,494 309,028 10,270 - 7,074 105,860 4,211 - 8,568 102,206 1,654 - 8,332 18,960 (1,915) - 2,545,282 113,876 7,120 $ 2,778,938 $ (3,890,853) $ 7,120	Share Equity Adjustments (Note 4) $ (58,107 ) (71,167) (129,274) (24,299 ) (105,368 ) 130,360 (29,214 ) (39,565 ) (33,043 ) 460 (22,028 ) 2,602 10,649 (7,309 ) (14,804 ) (560 ) (1,077 ) 3,672 - (2,894 ) 64 (13,100 ) (152 ) 3 - (145,603) $ (274,877)	Balance, December 31, 2019 Shares in Thousand Percentage of Ownership Amount 262,228 16.80 $ 7,110,438 32,201 43.87 2,046,653 9,157,091 132,117 41.93 4,473,144 46,566 32.45 2,830,313 61,511 20.57 2,052,069 183,000 100.00 1,277,471 151,067 100.00 1,155,029 40 100.00 871,654 33,565 49.76 786,792 40 40.00 579,673 145 29.00 539,198 87,999 52.10 429,196 29,668 39.98 394,906 7,308 29.00 381,631 13,032 15.00 375,791 6,084 31.20 137,393 2,936 15.08 105,857 8,790 100.00 71,679 2,242 29.00 69,630 56,600 17.25 - - - - - - - - - - - - - 16,531,426 $ 25,688,517	Market Price(Note 5)	Market Price(Note 5)
	Shares (In Thousands) 262,228 32,201 132,117 46,566 61,511 183,000 278,167 40 33,565 40 145 87,999 28,228 7,308 13,032 6,084 2,936 8,790 2,242 56,600 29,278 7,074 8,568 8,332	Shares (In Thousands) - - - - - - - - - - - - 1,440 - - - - - - - 3,216 - - -	Shares (In Thousands) - - - - - - 127,100 - - - - - - - - - - - - - 32,494 7,074 8,568 8,332		Shares in Thousand Percentage of Ownership 262,228 16.80 32,201 43.87 132,117 41.93 46,566 32.45 61,511 20.57 183,000 100.00 151,067 100.00 40 100.00 33,565 49.76 40 40.00 145 29.00 87,999 52.10 29,668 39.98 7,308 29.00 13,032 15.00 6,084 31.20 2,936 15.08 8,790 100.00 2,242 29.00 56,600 17.25 - - - - - - - -	Unit Price (NT$) $19.55 56.20	Total Amount $ 5,126,561 1,809,717 6,936,278

Note 1: In accordance with the Interpretation 2012-301 issued by the Accounting Research and Development Foundation, organizational restructuring of entities under common control is deemed as the Corporation having a shareholding proportion of 52.10% in China Engine from the start.

Note 2: Issuance of share dividends.

Note 3: Except for the capital reduction of Sino Diamond Motors and return of share proceeds of 965,022 thousand and the disposals of Gatetech Technology, Sin Gan, Sin Jiang Enterprises and Yulon IT Solutions, the remaining pertains to the issuance of cash dividends.

Note 4: Including the capital surplus of investees, unappropriated earnings of investees, exchange differences on translating the financial statements of foreign operations, unrealized valuation gain (loss) on financial assets at fair value through other comprehensive income of investees and gains (losses) on hedging instruments.

Note 5: The unit price was calculated by the closing price as of December 31, 2019.

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SCHEDULE 4

CHINA MOTOR CORPORATION

STATEMENT OF ACCOUNTS PAYABLE DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars)

Company Name Daimler Trucks Asia Taiwan Ltd. Wu Shiang Industrial Co., Ltd. Lioho Machine Works, Ltd. Tai Yue Electric Co., Ltd. Tailing Motor Co., Ltd. Shihlin Electric & Engineering Corporation Ta Yih Industrial Co., Ltd. Others (Note)	Amount $ 304,591 83,444 81,912 74,304 68,639 59,963 51,075 1,488,326 $ 2,212,254

Note: The amount of individual customer in others does not exceed $50,000 thousand of the account balance.

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SCHEDULE 5

CHINA MOTOR CORPORATION

STATEMENT OF OPERATING REVENUE FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars)

Item Number Net sales Domestic sales Four-wheel vehicles Commercial vehicles 36,958 Passenger cars 9,965 Two-wheel vehicles 8,241 Others Vehicle body parts Spring steel Equipment Foreign sales Four-wheel vehicles 854 Materials Royalties Other sales revenue Service revenue Lease revenue	Amount $ 16,202,687 5,159,582 21,362,269 459,848 3,367,787 267,103 23,536 3,658,426 25,480,543 241,996 148,164 8,693 398,853 25,879,396 424,910 60,718 485,628 $ 26,365,024

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SCHEDULE 6

CHINA MOTOR CORPORATION

STATEMENT OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars)

Item
Cost of goods sold
Balance, beginning of year

Raw materials purchased
Usage of indirect materials
Cost of goods sold of materials
Transferred to other costs
Raw materials and vehicle body parts, end of year

Usage of direct materials
Direct labor
Manufacturing expenses

Manufacturing costs
Work in progress, beginning of year
Work in progress, end of year

Cost of finished goods
Finished goods, beginning of year
Tax of goods
Others
Finished goods, end of year
Transferred to other expenses
Original equipment manufacturer

Cost of goods sold of finished goods
Cost of goods sold of vehicle body parts
Inventories write-downs
Others

Total cost of goods sold
Other operating costs

Total operating costs

Amount
$ 1,777,372
17,476,804
115,035
2,688,036
84

1,919,496
14,531,525
677,583

1,478,394
16,687,502
69,405

63,094
16,693,813
1,278,439
3,175,613
217,784
1,854,110
56,819

51,884
19,402,836
2,688,036
12,389

25,968
22,077,293

108,512
$ 22,185,805

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SCHEDULE 7

CHINA MOTOR CORPORATION

STATEMENT OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars)

Items Personnel expenses Development expenses Test tools expenses Depreciation Advertisement Labor service expense Welfare Export expense Others (Note)	Selling and Marketing Expenses General and Administrative Expenses Research and Development Expenses $ 93,055 $ 294,047 $ 823,885 3,095 - 241,208 1,495 1,080 117,891 7,012 56,332 47,400 90,725 6,359 - 6,342 51,896 4,796 - 34,914 - 24,695 - - 67,860 172,215 225,104 $ 294,279 $ 616,843 $ 1,460,284	Total $ 1,210,987 244,303 120,466 110,744 97,084 63,034 34,914 24,695 465,179 $ 2,371,406

Note: The amount of each item in others does not exceed 5% of the account balance.

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SCHEDULE 8

CHINA MOTOR CORPORATION

STATEMENT OF ANALYSIS OF EMPLOYEE BENEFITS EXPENSE, DEPRECIATION AND AMORTIZATION BY FUNCTION FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

Employee benefits expense Salary Labor and health insurance Pension Board compensation Other employee benefits Depreciation Amortization			For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
			2019	Total $ 2,098,307 160,414 127,496 4,890 61,244 $ 2,452,351 $ 770,843 $ 95,100			2018
		Amount of Operating Costs $ 1,060,882 84,672 62,974 - 32,836 $ 1,241,364 $ 660,099 $ 5	Amount of Operating Expenses $ 1,037,425 75,742 64,522 4,890 28,408 $ 1,210,987 $ 110,744 $ 95,095			Amount of Operating Costs $ 1,092,943 83,261 70,712 - 33,430 $ 1,280,346 $ 674,126 $ -	Amount of Operating Expenses $ 1,105,260 72,810 72,027 24,570 27,788 $ 1,302,455 $ 115,059 $ 80,283	Total $ 2,198,203 156,071 142,739 24,570 61,218 $ 2,582,801 $ 789,185 $ 80,283

Note 1: For the years 2019 and 2018, the Corporation’s average number of employees was 2,071 and 2,074, respectively, which included 8 non-employee directors for both years.

Note 2: The average amount of employee benefit expense for the years ended December 31, 2019 and 2018 was $1,186 thousand and $1,238 thousand, respectively.
Note 3: The average employee salary expense for the years ended December 31, 2019 and 2018 was $1,017 thousand and $1,064 thousand, respectively.

Note 4: Average employee salary expense in 2019 decreased by 4.42% from the previous year.

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AI assistant

CMC — Annual Report 2019

51979_rns_2019-12-26_ddff316e-5c64-4a62-89bb-384b3e50273a.pdf

China Motor Corporation

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Revenue Recognition

Other Matter

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

Auditors’ Responsibilities for the Audit of the Financial Statements

Notice to Readers

CHINA MOTOR CORPORATION

BALANCE SHEETS DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

CHINA MOTOR CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

CHINA MOTOR CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings (Loss) Per Share)

CHINA MOTOR CORPORATION

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

CHINA MOTOR CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

CHINA MOTOR CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In Thousands of New Taiwan Dollars)

CHINA MOTOR CORPORATION

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

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

Definition of a lease

The Corporation as lessee

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

h. Investment properties

1) Financial assets

m. Provisions

n. Revenue recognition

2) The Corporation as lessee

2018

2) The Corporation as lessee

3) Leasehold land for own use

1) Current tax

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31, 2019

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

9. FINANCIAL ASSETS AT AMORTIZED COST

10. CREDIT RISK MANAGEMENT FOR INVESTMENTS IN DEBT INSTRUMENTS

December 31, 2019

11. FINANCIAL INSTRUMENTS FOR HEDGING

December 31, 2019

12. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

13. INVENTORIES

14. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

a. Investments in subsidiaries

Yulon

15. PROPERTY, PLANT AND EQUIPMENT

16. INVESTMENT PROPERTIES

17. OTHER PAYABLES

18. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

b. Defined benefit plans

19. EQUITY

2) Capital reduction in cash

b. Capital surplus

e. Other equity items

20. REVENUE

21. NET PROFIT (LOSS)

c. Employee benefits expense

d. Employees’ compensation and remuneration of directors

Accrual rate

22. INCOME TAXES

b. Income tax recognized in other comprehensive income

c. Current tax assets and liabilities

d. Deferred tax assets and liabilities

For the year ended December 31, 2018

23. EARNINGS (LOSS) PER SHARE

Net Profit (loss) for the Year

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

24. DISPOSAL OF SUBSIDIARY - WITH LOSS OF CONTROL

CMC Annual Report 2019