CMFC - Audit Report / Information 2018

China Man-Made Fiber Corporation and Subsidiaries

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

For the convenience of readers and for information purpose only, the 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. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

Independent Auditor’s Audit Report

To CHINA MAN-MADE FIBER CORPORATION:

Audit opinions

We have audited the accompanying consolidated balance sheet of China Man-Made Fiber Co., Ltd. and subsidiary as of December 31, 2018 and 2017, and the related consolidated statement of income, consolidated statement of changes in shareholders equity, consolidated statement of cash flows, and Note of the consolidated financial statements (including major accounting policy) for the years then ended.

In our opinion based on our audit results and the audit reports offered by other accountants (please refer to other sections), the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of China Man-Made Fiber and subsidiaries as of December 31, 2018 and 2017, and the results of their consolidated operations and their consolidated cash flows for the years then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the International Financial Reporting Standards, International Accounting Standards, interpretation as well as related guidance translated by Accounting Research and Development Foundation endorsed by the Financial Supervisory Commission with the effective dates.

The basis for opinions

We conducted our audit in accordance with the Regulations Governing Auditing and Attestation of Financial statements by Certified Public Accountants and generally accepted auditing standards. Our responsibilities under those standards are further described in the responsibilities of auditors for the audit of the consolidated financial statements. We are independent of Chinese Gamer International Corporation in accordance with the Code of Ethics for certified public accountants in the part relevant to the audit of the financial statements of China Man-Made Fiber Co., Ltd. and its subsidiaries, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believed that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Points of attention

As stated in Note 3 of the consolidated financial statements, China Man-Made Fiber has since 2018 adopted the amended “Rules Governing the Preparation of Financial Statements by Securities Issuers”, “Regulations Governing the Preparation of Financial Reports by Public Banks”, “Regulations Governing the Preparation of Financial Reports by Securities Firms” and the International Financial Reporting Standards, International Accounting Standards and IFRIC Interpretations as endorsed by the FSC in 2018 and chosen not to re-edit the consolidated financial statements during the comparison periods. We did not revise the conclusions of our audit.

Key audit matter

Key audit matters are those matter that, in our professional judgment, were of most significant in our audit of the consolidated statements of China Man-Made Fiber Co., Ltd. and its subsidiaries in 2018. These matters were addressed in the content of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on those matters.

Key audit issues for the consolidated financial statements of China Man-Made Fiber and its subsidiaries for the year ended December 31, 2018 are stated as follows:

Authenticity of specific sales revenue

Notes to key audit matters

In 2018, the sales revenue of specific products of the Chemical Fibers of China Man-Made Fiber and its subsidiaries is NT$1,186,121 thousand, revenue of the Chemical Department to specific customers is NT$905,081 thousand, accounting for 5% of the total revenue. The gross profit of the specific products and customers shows significant growth over the previous year. Therefore, the authenticity of sales revenue of specific products from the Chemical Fibers and Chemical Departments of the Company and the subsidiaries is one of the key audit items.

Please refer to Note 4 (19) of the financial statements for the accounting policies on sales revenue recognition. Audit response

Understand and test the design and operating effectiveness of the internal control system of specified departments and sales revenue to customers of the Company and its subsidiaries.
Sampling inspection of the abovementioned sales revenue of specified departments and customers in accordance with IFRS 15, including the shipping, custom and collection documents, in order to test the authenticity of sales.
Sampling inspection of the circumstances of sales returns and discounts and the collection after the periods to confirm the reasonableness of revenue recognition.

Assessment of the expected credit loss from discounting and advances.

Notes to key audit matters

As stated in Note 15 of the financial statements, the amounts of net value of discounting and advances of the Company in 2018 and its subsidiaries and the expected credit loss recognized in 2018 are NT$452,594,552 thousand and NT$487,333 thousand, respectively, accounting for 62.78% of the total assets and 1.17% of the total revenue, respectively, which is significant to the consolidated financial statements. In addition, as stated in Note 5 (2) of the financial statements, the consideration taken by the Company and its subsidiaries in determining the expected credit loss involves the key estimates and judgments of its management, including the default probability and loss rate. For these reasons, expected credit loss of discounts and loans to the customers are determined as key audit matters.

The disclosures of the accounting policies, accounting estimates, and uncertainty of assumption related to the estimation of discount and loans to customers’ expected credit loss are specified in Note 4 (16) and Note 5 (2) and Note 15. Audit response

Understand and test the internal control system adopted by the Company and its subsidiaries for assessing the expected credit loss from discounting and advances.
Sampling inspection of each individual recognition of major expected credit loss from discounting and advances of the Company and its subsidiaries, in order to evaluate the reasonableness of collateral value used for expected credit loss.
For the comprehensive evaluation of the expected credit loss adopted by the Company and its subsidiaries, understand and test key parameters used in the impairment model (probability of default and loss given default) in order to evaluate the reasonableness of the expected credit loss meeting the current experience and economic situation.

Discount and loan interest income

Notes to key audit matters

As stated in Note 36 (1) of the financial report, income from discounting and advances in 2018 for the Company and its subsidiaries is NT$10,785,290 thousand, accounting for 25.96% of the total revenue, which is the main source of income. China Man-Made Fiber Co., Ltd. processed loan applications through an approval procedure along the line of corporate hierarchy. Applications, upon approval, will be registered into the loan system with information on the conditions of lending and related matters entered into the system manually. Loans will be released upon the final approval of the supervisors and interest income will be calculated automatically by the systems relevant to the conditions of lending on individual cases at the end of each month. China Man-Made Fiber Co., Ltd. and its subsidiaries highly rely on the computer system for the automatic calculation of interest income from discounts and loans to customers, which made the data input on the conditions of related lending cases and the computing logics for the accurate calculation of interest income from discounts and loans to customers essential. We therefore considered the interest income from discounts and loans to customers as a key audit matter.

The disclosures of the accounting policies, accounting estimates, and uncertainty of assumption related to the estimation of interest income from discount and loans to customers are specified in Note 4 (19) and Note 36 (1).

The responsive auditing process as follows:
Understand and examine the internal control of interest income from discount and loans to customer, including the understanding and testing of the internal control of the general computer system and the application system.
We checked the monthly interest income in the system, on a selective basis, with reference to the approved agreement on loans to determine the conditions of lending are congruent with the information used in the system for calculation of interest income. We also compared the interest income and the computing results from the system through a new round of calculation to examine no significant difference of the computing system of China Man-Made Fiber Co., Ltd. and its subsidiaries.

Other information

The financial statements of investees included in the consolidated financial statements of the Company and its subsidiaries adopting the equity method have not been audited by us. They are audited by other accountants. Therefore, we refer to the audited reports of other accountants in expressing our opinions in the consolidated statement regarding the investments by equity method and subsidiaries, affiliates, joint ventures and other comprehensive gains and losses. The investments adopting the equity method in the other auditors’ reports for years ended December 31, 2018 and 2017 are NT$1,228,959 thousand and NT$1,216,290 thousand, respectively. The gains and losses from subsidiaries, affiliates and joint ventures and other sources adopting the equity method in the other auditors’ reports for 2018 and 2017 are NT$88,436 thousand and NT$82,450 thousand, respectively. The information on investees in Note 51 of the consolidated financial statements is disclosed based on the reports from other accounting auditors.

We have audited and expressed an unqualified opinion and paragraphs stressing other key issues on the standalone financial statements of China Man-Made Fiber for the years ended December 31, 2018 and 2017.

Responsibilities of Management and Those in Charge with Governance of the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, Regulations Governing the Preparation of Financial Reports by Public Banks, and applicable IFRS, IAS,SIC, and IFRIC as recognized by the Financial Supervisory Commission, and for such internal control as the management determines is necessary to enable the preparation of the consolidated financial statements to be free from material misstatement whether due to fraud or error.

In preparing the consolidated financial statements, the management is responsible for assessing the ability of China Man-Made Fiber Co., Ltd. and its subsidiaries as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidate China Man-Made Fiber Co., Ltd. and its subsidiaries or to create operations, or has no realistic alternative but to do so.

Those in charge of governance (including the Auditing Committee) are responsible for overseeing the reporting process of China Man-Made Fiber Co., Ltd. and its subsidiaries.

Auditor’s Responsibilities for the Audit of the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue and auditor’s report. Reasonable assurance is a high level of assurance, but is not a guarantee that and audit conducted in accordance with the accounting principles generally

accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. If fraud or errors are considered materials, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the accounting principles generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also perform the following works:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design, and perform audit procedures responsive risks, and obtain evidence that is sufficient and appropriate to provide a basis of 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 internal control effective in China Man-Made Fiber Co., Ltd. and its subsidiaries.
Evaluate the appropriateness of accounting policies used and the reasonability of accounting estimates and related disclosures made by the management.
Conclude the appropriateness of the use of the going concern basis of accounting by the management, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on China Man-Made Fiber Co., Ltd. and its subsidiaries and its ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosure are inappropriate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause China Man-Made Fiber Co., Ltd. and its subsidiaries to cease to continue as a going concern.
Evaluate the overall presentation, structure, and content of the consolidated statements, including related notes, whether the consolidated statements represent the underlying transactions and events in a matter that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information or the entities or business activities with China Man-Made Fiber Co., Ltd. and its subsidiaries to express an opinion on the consolidated financial statements. The independent auditor is responsible for guiding, supervising, and implementing the audit of the China Man-Made Fiber Co., Ltd.; also, is responsible for forming an opinion on the audit of the China Man-Made Fiber Co., Ltd. and its subsidiaries.

We communicate with those in charge of 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 in charge of 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 in charge of governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of China Man-Made Fiber Co., Ltd. and its subsidiaries of 2018 and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communications.

Deloitte & Touche

CPA: Oscar Shih CPA: Hsu Wen-Ya

Securities and Futures Commission Approval No. Tai-Cai-Zheng (6) No. 0930128050

Securities and Futures Commission Approval No. Tai-Tsai-Cheng (6) No. 0920123784

March 22, 2019

China Man-Made Fiber Corporation and subsidiary Consolidated Balance Sheet

December 31, 2018 and 2017

Unit: NTD thousand

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December 31, 2018 December 31, 2017
Code Assets Amount % Amount %
Current assets
1100 Cash and cash equivalents (Note 3, 4, 6 and 40) $ 18,846,662 3 $ 18,417,172 3
1110 Due from Central Bank and lend to Banks (Note 3, 7 and 41) 31,768,897 4 30,121,642 4
1120 Financial assets through profit and/or loss with measuring for the faire values-current
(Note 3, 4, 8 and 40) 27,408,915 4 32,165,534 5
1180 Bonds and securities sold under repurchase agreements (Note 3, 4 and 9) 9,294,168 1 11,283,082 2
1201 Notes receivable (Note 3, 4 , 10, 40 and 41) 3,808,900 1 3,874,144 1
1202 Accounts receivable (Note 3, 4, 10 and 40) 8,714,558 1 8,784,120 1
1203 Other receivable (Note 3, 4, 10 and 40) 3,570,369 1 3,717,883 -
1260 Current income tax asset (Notes 4 and 37) 5,293 - 11,468 -
1270 Inventory (Note 4 and 11) 2,689,034 - 2,056,542 -
1280 Prepaid (Note 12) 1,031,737 - 1,140,101 -
1290 Non-current Assets Held for Sale - net (Note 4, 13 and 41) 769,610 - - -
1320 Other current assets (Note 3, 14 and 41) 617,749 - 432,953 -
1330 Notes discounted and loans – net (Note 3, 4, 15 and 40) 452,594,552 63 430,857,960 62
11XX Total current assets 561,120,444 78 542,862,601 78
Non-Current assets
1415 Financial assets at fair value through other comprehensive income- non-current (Note
3, 4, 16 and 41) 31,014,090 5 - -
1420 Financial assets available-for sales – non-current (Note 3, 4, 17 and 41) - - 33,000,612 5
1430 Held-to-maturity financial assets – non-current (Note 3, 4, 18 and 41) - - 85,542,095 13
1435 Financial assets on the basis of cost after amortization- non-current (Note 3, 4, 19 and
41) 100,462,761 14 - -
1450 Financial assets measured at cost- non-current (Note 3, 4 and 20) - - 324,966 -
1470 Investment by equity method (Note 4, 22 and 41) 1,241,811 - 1,220,689 -
1500 Real estates, plant and equipment - net (Notes 4, 23 and 41) 22,428,871 3 22,382,631 3
1600 Real estate investments - net (Note 4, 24 and 41) 1,435,382 - 2,070,792 -
1700 Intangible assets – net (Note 4 and 25) 192,246 - 190,332 -
1800 Deferred income tax assets – net (Notes 4 and 37) 1,073,938 - 934,542 -
1900 Other assets (Note 26 and 41) 1,937,399 - 3,199,960 1
14XX Total non-current assets 159,786,498 22 148,866,619 22
1XXX Total assets $ 720,906,942 100 $ 691,729,220 100
Code Liabilities and equity
Current liabilities
2110 Short-term loans (Note 27 and 41) $ 14,567,189 2 $ 11,729,448 2
2120 Short-term bills payable (Note 27) 2,357,704 - 2,033,074 -
2130 Bills and bonds sold under repurchase agreements (Note 4 and 28) 9,904,467 1 4,307,810 1
2140 Financial liabilities through profit and/or loss with measuring for the faire values-
- -
current (Note 4 and 8) 165,360 207,225
2190 Due to Central Bank and other banks (Note 29) 3,378,752 1 9,518,872 1
2201 Payable notes 44,392 - 19,626 -
2202 Accounts payable (Note 40) 2,163,033 - 2,056,316 -
2204 Other payables (Note 30 and 40) 12,768,486 2 13,775,007 2
2310 Current income tax liability (Notes 4 and 37) 386,857 - 257,114 -
2330 Long-term liability due in one year or one business cycle (Note 27, 32 and 41) 1,245,188 - 1,121,122 -
2350 Other current liabilities 438,932 - 402,324 -
2360 Customer deposits and remittances (Note 31 and 40) 587,720,906 82 565,854,229 82
21XX Total of current liabilities 635,141,266 88 611,282,167 88
Non-current liabilities
2540 Bonds payable (Note 32 and 40) 18,490,000 3 16,360,000 3
2550 Long-term loans (Note 27 and 41) 5,713,623 1 7,576,939 1
2600 Liability reserve (Note 4 and 33) 1,667,347 - 1,620,915 -
2620 Deposits received 585,515 - 420,808 -
2630 Deferred tax liabilities (Note 4 and 37) 1,021,567 - 1,021,022 -
2660 Other liabilities 6,836 - 47,978 -
25XX Total non-current liability 27,484,888 4 27,047,662 4
2XXX Total liabilities 662,626,154 92 638,329,829 92
Equity of the parent company (Note 34)
3110 Common stock capital 15,224,105 2 14,294,934 2
3210 Capital surplus 1,694,875 - 1,677,818 -
Retained earnings
3310 Legal reserve 718,272 - 638,873 -
3320 Special reserve 1,956,409 - 2,481,347 -
3330 Undistributed earnings 4,231,450 1 3,274,719 1
Other equity
3410 Exchange differences from the translation of financial statements of foreign
- -
operations ( 54,591 ) ( 41,611 )
3425 Unrealized gain or loss on financial assets at fair value through other
- - -
comprehensive profit or loss ( 129,103 )
3420 Unrealized loss on available-for-sale financial assets - - ( 169,191 ) -
3500 Treasury stock (Note 4) ( 1,227,909 ) - ( 1,227,909 ) -
31XX Total equity of the parent company 22,413,508 3 20,928,980 3
32XX Non-controlling interest (Note 34) 35,867,280 5 32,470,411 5
3XXX Total equity 58,280,788 8 53,399,391 8
4XXX Total Liabilities and Equity $ 720,906,942 100 $ 691,729,220 100
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The notes attached shall constitute an integral part of this consolidated financial statement.

(Refer to Auditor’s Report presented by Deloitte & Touche dated March 22, 2019)

Chairman: Kuei-Hsien Wang

Responsible Person: Ming-Shang Chuang

Accounting Supervisor: Guo-Hua Lin

China Man-Made Fiber Corporation and subsidiary Consolidated Income Statement

January 1 to December 31, 2018 and 2017

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Unit: NTD thousands, except Earnings Per Share (NTD)
2018 2017
Code Amount % Amount %
Revenue (Note 4)
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4010 Interest revenues (Note 36 and 40) 4050 Income from handling fees (Note 36) 4060 Shareholding in the affiliated companies and joint ventures under the equity method 4090 Gain (loss) on financial assets and liabilities at fair value through profit and loss (Note 36) 4100 Realized gain on available-for-sale financial assets 4105 Realized gain on financial assets at fair value through other comprehensive profit or loss 4160 Net sales revenue (Note 40) 4230 Investment property gains (Note 24) 4260 Exchange gain 4270 Other income (Note 36 and 40) 4XXX Total revenue Expenses 5010 Financial cost (Note 36 and 40) 5060 Service charges (Note 36) 5090 Bad debt expense and guaranty reserve (Note 10, 15 and 33) 5190 Cost of goods sold (Note 11 and 40) 5230 Operating expenses (Note 33 and 36) 5280 Impairment loss (Note 16, 19, 20, 23, 26 and 36) 5290 Exchange loss 5320 Other expenses 5XXX Total expenses 6100 Net profit before taxation 6200 Income tax expenses (Note 4 and 37) 6500 Net income Other comprehensive profit or loss 6610 The items that are not re-classified as profit or loss 6611 Determined Benefit Plan Reevaluation (Note 4 and 33) ( 6617 Evaluation of the capital gain from equity instrument at fair value through comprehensive income statement as other comprehensive income 6649 Income tax related to titles without reclassification (Notes 4 and 37) 6650 Items that may be re-classified subsequently under profit or loss 6651 Exchange differences from the translation of financial statements of foreign operations ( 6653 Unrealized valuation gains of available-for-sale financial assets 6659 Capital loss of debts instrument at fair value through comprehensive income statement as other comprehensive income ( 6689 Income tax related to items possibly be reclassified (Notes 4 and 37) ( 6600 Other comprehensive income (post-tax profit or loss) 6700 Total amount of comprehensive income of the current year Profit attributable to: 6810 Owners of parent 6820 Non-controlling interest 6800 The total comprehensive income belongs to 6910 Owners of parent 6920 Non-controlling interest 6900 Earnings per share (Note 38) 7000 Basic earnings per share 7100 Diluted earnings per share	$ 13,082,832 3,276,220 87,046 209,626 - 26,752 24,213,521 14,025 387,106 252,059 41,549,187 4,797,670 430,046 471,472 22,612,538 8,033,384 17,813 - 41,502 36,404,425 5,144,762 735,127 4,409,635 99,372 ) 83,359 37,634 21,621 3,462 ) - 13,948 ) - 17,410 ) 4,211 $ 4,413,846 $ 1,372,035 3,037,600 $ 4,409,635 $ 1,365,286 3,048,560 $ 4,413,846 $ 1.13 $ 1.13	31 8 - 1 - - 58 - 1 1 100 12 1 1 54 19 - - - 87 13 2 11 - ( - - - ( - ( - - - ( - - 11 3 8 11 3 8 11	$ 12,097,815 33 2,986,044 8 80,046 - 589,547 1 22,980 - - - 20,675,009 56 348,672 1 - - 238,213 1 37,038,326 100 4,076,588 11 537,465 2 1,124,932 3 19,353,963 52 7,290,875 20 89,958 - 319,544 1 38,057 - 32,831,382 89 4,206,944 11 743,253 2 3,463,691 9 33,121 ) - - - 3,845 - 29,276 ) - 19,571 ) - 260,543 1 - - 7,414 ) - 233,558 1 204,282 1 $ 3,667,973 10 $ 793,987 2 2,669,704 7 $ 3,463,691 9 $ 872,456 2 2,795,517 8 $ 3,667,973 10 $ 0.66 $ 0.66

The notes attached shall constitute an integral part of this consolidated financial statement.

Chairman: Kuei-Hsien Wang

(Refer to Auditor’s Report presented by Deloitte & Touche dated March 22, 2019) Responsible Person: Ming-Shang Chuang Accounting Supervisor: Guo-Hua Lin

China Man-Made Fiber Corporation and subsidiary Consolidated Statements of Changes in Shareholders’ Equity

January 1 to December 31, 2018 and 2017

Unit: NTD thousand

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Equity of the company
Other equity
Exchange Unrealized gain or
differences from loss on financial
Capital stock Retained earnings the translation of assets at fair value Unrealized gain
financial through other (loss) on
Undistributed statements of comprehensive available-for-sale Non-controlling
Code Common stock Capital surplus Legal reserve Special reserve earnings foreign operations profit or loss financial assets Treasury stock Total interest Total equity
A1 Balance as of January 1, 2017 $ 14,294,934 $ 1,681,992 $ 638,873 $ 2,481,347 $ 2,501,747 ( $ 25,319 ) $ - ( $ 284,967 ) ( $ 1,273,586 ) $ 20,015,021 $ 30,905,692 $ 50,920,713
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C7 Changes of the associates and joint ventures recognized under the Equity Method D1 2017 Profit D3 Other comprehensive net income in 2017 (after tax) D5 Total profit and loss in 2017 N1 Share-based payment transaction (Note 35) O1 Increase/ decrease in Non-controlling interest (Note 34) Z1 Balance as of December 31, 2017 A3 Effect of retroactive applicability and recompilation A5 Balance on January, 1 2018 after adjustment The 2017 appropriation and distribution of earnings B1 Legal reserve appropriated B5 Cash dividends B9 Stock dividends B17 Reversal of special reserve C7 Changes of the associates and joint ventures recognized under the Equity Method D1 2018 Profit D3 Other comprehensive net income in 2018 (after tax) D5 Total profit and loss in 2018 O1 Increase/ decrease in Non-controlling interest (Note 34) M1 Dividends distributed to the subsidiaries adjusted to the additional paid-in capital M7 Changes in the ownership equity on a subsidiary Q1 Equity instrument at fair value through other comprehensive income statement Z1 Balance at December 31, 2018	- ( - - - - - 14,294,934 - 14,294,934 - - 929,171 - - - - - - - - ( - $ 15,224,105	8,282 ) - - - 4,108 - 1,677,818 - 1,677,818 - - - - 5,532 - - - - 14,954 3,429 ) - $ 1,694,875	- - - - - - 638,873 - 638,873 79,399 - - - ( - - - - - - - - $ 718,272	- - - ( - - - 2,481,347 - 2,481,347 - ( - ( - ( 524,938 ) - ( - - ( - - - - - ( $ 1,956,409	- 793,987 21,015 ) ( 772,972 ( - - 3,274,719 ( 286,131 3,560,850 ( 79,399 ) 142,949 ) 929,171 ) 524,938 6,483 ) 1,372,035 25,235 ) ( 1,346,800 ( - - 199 43,335 ) $ 4,231,450 (	- - 16,292 ) 16,292 ) - - 41,611 ) - ( 41,611 ) ( - - - - - ( - 12,980 ) 12,980 ) - - - - $ 54,591 ) (	- - - - - - - ( 203,678 ) 203,678 ) - - - - 226 ) - 31,466 31,466 - - - 43,335 $ 129,103 )	- - 115,776 115,776 - - 169,191 ) ( 169,191 - ( - - - - - - - - - - - - $ - (	- ( - - - 45,677 - 1,227,909 ) - 1,227,909 ) - - ( - - - ( - - ( - - - - ( - $ 1,227,909 )	8,282 ) 793,987 78,469 872,456 49,785 - ( 20,928,980 251,644 21,180,624 - 142,949 ) - - 1,177 ) 1,372,035 6,749 ) 1,365,286 - 14,954 3,230 ) - $ 22,413,508	- ( 2,669,704 125,813 2,795,517 - 1,230,798 ) ( 32,470,411 297,263 32,767,674 - - ( - - - ( 3,037,600 10,960 3,048,560 36,818 14,228 - ( - $ 35,867,280	8,282 ) 3,463,691 204,282 3,667,973 49,785 1,230,798 ) 53,399,391 548,907 53,948,298 - 142,949 ) - - 1,177 ) 4,409,635 4,211 4,413,846 36,818 29,182 3,230 ) - $ 58,280,788

The notes attached shall constitute an integral part of this consolidated financial statement.

(Refer to Auditor’s Report presented by Deloitte & Touche dated March 22, 2019)

Chairman: Kuei-Hsien Wang

Responsible Person: Ming-Shang Chuang

Accounting Supervisor: Guo-Hua Lin

China Man-Made Fiber Corporation and subsidiary Consolidated Statements of Cash Flow

January 1 to December 31, 2018 and 2017

Unit: NTD thousand

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Code 2018 2017
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Cash flow from operating activities A10000 Current year net profit before taxation Profits and loss A20100 Depreciation expenses A20200 Amortization expenses A20300 Anticipated credit impairment/provision for bad debts A20400 Gain (loss) on financial assets and liabilities at fair value through profit and loss ( A20900 Interest expenses A21200 Interest revenue ( A21300 Dividend income ( A21800 Other provisions for liabilities ( A21900 Employee stock option compensation cost A22300 Shareholding in the affiliated companies and joint ventures under the equity method ( A22500 Loss on disposal and scrapping of property, plant and equipment A22700 Capital gain from disposition of investment property ( A23100 Gain on disposal of investments ( A23600 Financial assets impairment loss A23700 Loss in impairment of non-financial assets A24100 Unrealized foreign currency exchange loss ( A29900 Gain from disposition of subsidiaries A22900 Release of prepaid lease payments. Net change in operating assets and liabilities A91110 Due from Central Bank and lend to Banks ( A91120 Financial assets at fair value through profit and loss A91190 Accounts receivable A91250 Inventory ( A91260 Prepayments A91280 Other current assets A91290 Discounts and loans ( A91320 Other financial assets A92110 Bills and bonds sold under repurchase agreements A92120 Financial liabilities at fair value through profit and loss ( A92150 Due to Central Bank and other banks ( A92160 Payables ( A92280 Other current liabilities A92290 Customer deposits and remittances A92330 Other financial liabilities ( A92310 Employee benefit liabilities reserve ( A33000 Cash inflow from operating activities A33100 Interest received A33200 Dividends received A33300 Interest payment ( A33500 Income tax payment ( AAAA Net cash inflow from operating activities Cash flow from investing activities B00010 Acquisition of financial assets at fair value through other comprehensive profit or loss ( B00020 Disposal of financial assets at fair value through other comprehensive profit or loss (including redemption at maturity) B00040 Financial assets acquired on the basis of cost after amortization ( B00050 Financial assets on the basis of cost after amortization B00060 Held-to-maturity financial assets based on cost after amortization B00300 Acquisition of available-for-sale financial assets B00400 Disposition of available-for-sale financial assets B00900 Acquisition of held-to-maturity financial assets	$ 5,144,762 849,721 54,854 471,472 209,626 ) ( 4,797,670 13,082,832 ) ( 116,117 ) ( 2,437 ) - 87,046 ) ( 9,768 14,025 ) ( 26,752 ) ( 17,488 325 438,123 ) - ( 3,736 746,918 ) ( 6,728,283 ( 486,630 ( 632,492 ) ( 108,174 24,563 22,250,976 ) ( 38,030 ( 5,596,657 889,768 ) ( 6,140,120 ) ( 990,471 ) 36,773 21,866,677 41,307 ) ( 11,625 ) ( 554,948 13,143,072 191,884 4,683,191 ) ( 748,891 ) ( 8,457,822 553,576 ) 4,301,998 761,952,805 ) 45,650 746,586,250 - ( - - (	$ 4,206,944 909,229 78,973 1,124,932 589,547 ) 4,076,588 12,097,815 ) 75,320 ) 26,000 4,232 80,046 ) 1,189 348,672 ) 22,980 ) 61,487 28,471 845,584 1,690 ) 2,760 609,388 ) 7,386,974 ) 4,346,320 ) 529,813 ) 75,943 13,213 6,428,669 ) 35,342 ) 85,552 813,642 ) 2,098,856 ) 3,427,266 101,537 26,228,479 30,062 ) 75,200 ) 5,728,043 12,191,904 140,989 3,940,863 ) 520,129 ) 13,599,944 - - - - - 1,749,775 ) 7,336,761 748,721,306 )

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(Continued from previous page)
Code 2018 2017
B01000 Disposition of held-to-maturity financial assets $ - $ 258,565
B01100 Return of capital from held-to-maturity financial
assets - 676,269,904
B01300 Disposal of financial assets carried at cost - 37,116
B01800 Acquisition of investment under the equity method ( 9,843 ) -
B02300 Net cash inflow from disposition of subsidiaries - 119,009
B02700 Acquisition of property, plant and equipment ( 903,176 ) ( 773,002 )
B02800 Disposal of property, plant and equipment 5,789 35,628
B03800 Decrease in Refundable deposits 100,716 248,071
B04500 Acquisition of Intangible assets ( 56,595 ) ( 56,782 )
B05400 Acquisition of investment property ( 144,447 ) ( 22,798 )
B05500 Disposition of investment property 14,025 403,950
B06800 Decrease in other assets 25,228 60
B09900 Decrease (increase) in restricted assets ( 209,359 ) 31,871
BBBB Net cash outflow from investing activities ( 12,750,145 ) ( 66,582,728 )
Cash flow from financing activities
C00100 Increase of short-term loans 2,837,741 1,440,505
C00500 Increase in short-term notes payable 324,630 649,078
C01400 Issuance of financial bonds 2,130,000 5,500,000
C01500 Repayment of financial bonds - ( 1,500,000 )
C01600 Proceeds from long-term loan 3,716,000 4,006,000
C01700 Re-payments of long-term borrowings ( 5,455,250 ) ( 4,125,182 )
C03000 Increase in deposits received 164,707 31,564
C04500 Cash dividend released ( 142,949 ) -
C04800 Stock option exercised by the employees - 45,553
C05800 Change in non-controlling interest 61,819 ( 1,239,080 )
CCCC Net cash inflow from financing activities 3,636,698 4,808,438
DDDD Impact of changes in exchange rate on cash and cash
equivalents ( 3,462 ) ( 19,571 )
EEEE Current cash and cash equivalents decrease ( 659,087 ) ( 48,193,917 )
E00100 Balance of cash and cash equivalents, beginning of period 43,284,182 91,478,099
E00200 Balance of cash and cash equivalent, end of period $ 42,625,095 $ 43,284,182
Ending cash and cash equivalents adjustment
Code December 31, 2018 December 31, 2017
E00210 Cash and cash equivalents on the balance sheet $ 18,846,662 $ 18,417,172
E00220 The “Due from Central Bank and Banks” in compliance
with the definition of cash and cash equivalents under
IAS 7 14,484,265 13,583,928
E00230 The “bonds and securities sold under repurchase
agreements” that meet the definitions of cash and cash
equivalents under IAS 7 9,294,168 11,283,082
E00200 Balance of cash and cash equivalent, end of period $ 42,625,095 $ 43,284,182
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The notes attached shall constitute an integral part of this consolidated financial statement.

(Refer to Auditor’s Report presented by Deloitte & Touche dated March 22, 2019)

Chairman: Kuei-Hsien Wang Responsible Person: Ming-Shang Chuang Accounting Supervisor: Guo-Hua Lin

Notes to consolidated financial statement

January 1 to December 31, 2018 and 2017 (In Thousands of New Taiwan Dollars, Unless Otherwise Noted)

I. Company Profile
(I) China Man-made Fiber Corporation (hereinafter referred to as the Company or CMFC) was founded on May 11, 1955 in accordance with the Company Act and other related regulations. The Company was approved to be traded on the TWSE on December 2, 1963. Over the years after several rounds of increase and decrease in cash capital, the paid-in capital as of December 31, 2018 is NT$15,224,105 thousand.
(II) CMFC's main businesses are:
1. Manufacturing, processing and buying and selling of man-made fiber, cellophane, polyamine fiber, polyester fiber, chemicals and the raw materials.
2. Development, manufacturing and buying and selling of machinery used for the above products.
3. Manufacturing and buying and selling of ethylene glycol, ethylene oxide, nonylphenol, ethylene, liquefied petroleum gas and the related petrochemical industry products.
4. Lease and sale of national housing and commercial buildings constructed by commissioned contractors;
5. Distribution, sorting and storage of various products.
6. Management of supermarkets, trading of fresh foods, vegetables, fish, dried merchandise and various seasonings;
7. Manufacturing and sales of steam and industrial and commercial electricity by cogeneration (electricity shall not be sold to energy users).
8. Agency, distribution and contract bidding for installation of cogeneration and pollution control equipment.
9. Manufacturing and sales of oxygen, liquid oxygen, nitrogen, liquid nitrogen, air argon, liquid argon, carbon dioxide and compressed air.
10. Gas station.
(III) The consolidated financial statements are presented in the Company’s functional currency – New Taiwan Dollar.

II. Financial reporting date and procedures

The Board of Directors approved the consolidated financial statements for publication on March 18, 2019.

III. Application of new and revised standards and interpretation

(I) The Regulations Governing the Preparation of Financial Reports by Securities Issuers, the Regulations Governing the Preparation of Financial Reports by Public Banks, the Regulations Governing the Preparation of Financial Reports by Securities Firms and IFRS, IAS, IFRIC and SIC (referred to as IFRSs) recognized by and declared effective by the Financial Supervisory Commission (FSC) applicable to the Company.
Except the following description, major changes that will not impact the accounting policies of the consolidated company after the adoption of the Regulations Governing the Preparation of Financial Reports by Securities Issuers, the Regulations Governing the Preparation of Financial Reports by Public Banks, the Regulations Governing the Preparation of Financial Reports by Securities Firms and IFRSs recognized by and declared effective by the FSC:
IFRS 9 “Financial Instruments” and related amendment
- IFRS 9, “Financial Instruments” replaced IAS 39, “Financial Statements: Recognition and Measurement,” and was adopted in conjunction with other standards such as the amended IFRS 7, “Financial Instruments: Disclosure.” The new rules in IFRS 9 covered the classification, measurement and impairment of financial assets and general hedge accounting. Refer to Note 4 for further information on accounting principles.
- The consolidated company retroactively applied treatment of the classification, measurement and impairment of financial assets on January 1, 2018 and postponed the adoption of general hedge accounting for one year. Items removed on or before December 31, 2018 were not covered by IFRS9.

Classification, measurement and impairment of financial assets and liabilities

The consolidated company evaluated the classification of financial assets effective on January 1, 2018 for retroactive adjustment on the basis of the reality and circumstances of the day and elected not to recompile the statements for comparison. As of January 1, 2018, the categories and book value of financial assets to be measured under IAS 39 and IFRS 9 and the changes therein are specified below:

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Classification of measurement Book Value
Category of financial
assets IAS 39 IFRS 9 IAS 39 IFRS 9 Remark
Cash and cash At amortized cost Measured on the $18,417,172 $18,417,172
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Category of financial assets Cash and cash	IAS 39 At amortized cost	IFRS 9 Measured on the	IAS 39 $18,417,172	IFRS 9 $18,417,172	Remark
equivalents	(loans and	basis of cost after
	receivable)	amortization
Due from Central	At amortized cost	Measured on the	30,121,642	30,121,642
Bank and lend to	(loans and	basis of cost after
Banks	receivable)	amortization
Financial assets at fair	Measured at fair	Measured at fair	32,165,534	32,165,534
value through	values through	values through
profit and loss	profit and/or loss	profit and/or loss
Bonds and securities	At amortized cost	Measured on the	$11,283,082	$11,283,082
sold under	(loans and	basis of cost after
repurchase	receivable)	amortization
agreements
Notes receivable	At amortized cost	Measured on the	3,874,144	3,874,144
	(loans and	basis of cost after
	receivable)	amortization
Accounts receivable	At amortized cost	Measured on the	8,784,120	8,783,534	(9)
	(loans and	basis of cost after
	receivable)	amortization
Other receivables	At amortized cost	Measured on the	3,717,883	3,717,883
	(loans and	basis of cost after
	receivable)	amortization
Other current assets	At amortized cost	Measured on the	396,858	396,858
	(loans and	basis of cost after
	receivable)	amortization
Notes discounted and	At amortized cost	Measured on the	430,857,960	430,857,960
loans – net	(loans and	basis of cost after
	receivable)	amortization
Available-for-sale	Measured at fair	Measured at fair	13,800	13,800	(4)
financial assets	values through	values through
	other	profit and/or loss
	comprehensive
	income
		Measured at fair	32,986,812	32,986,812	(2)
		values through			(3)
		other
		comprehensive
		income
Held-to-maturity	Measured on the	Measured on the	84,761,833	84,752,656	(6)
financial assets	basis of cost after	basis of cost after
	amortization	amortization
		Measured at fair	780,262	785,439	(7)
		values through
		other
		comprehensive
		income
Financial assets carried	Financial assets	Measured at fair	324,966	935,232	(8)
at cost	carried at cost	values through
		other
		comprehensive
		income
Other assets	At amortized cost	Measured on the	2,101,672	2,101,672
	(loans and	basis of cost after
	receivable)	amortization
	Other assets	Measured at fair	900,335	900,335	(1)
		values through
		profit and/or loss

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Changes in the categories of financial assets measured retroactively under IFRS 9 as of January 1, 2018 are specified below:
Book value of Book value of Effect on retained Effect on other
December 31, 2018 December 31, 2018 earnings as of equity as of
(IAS 39) Reclassification Reevaluation (IFRS 9) January 1, 2018 January 1, 2018 Remark
Financial assets at fair $32,165,534 $- $- $32,165,534 $- $-
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value through profit and loss Add: Reclassification of available-for- sale financial assets (IAS 39) Plus: Reclassified from other assets (IAS 39) Financial assets at fair value through other comprehensive profit or loss -Debt instruments Add: Reclassification of available-for- sale financial assets (IAS 39) Plus: Reclassified from amortized cost (IAS 39) -Equity instruments Add: Reclassification of available-for- sale financial assets (IAS 39) Add: Reclassification on the basis of costs (IAS 39) Financial assets on the basis of cost after amortization Add: Reclassification of available-for- sale financial assets (IAS 39) Add: Reclassification of held-to- maturity financial assets (IAS 39) Add: Reclassification of loans and receivables (IAS 39) Total	- - 32,165,534 - - - - - - - - - - - $32,165,534	13,800 - 900,335 - 914,135 - - - 31,234,046 - 780,262 5,177 1,752,766 - 324,966 610,266 34,092,040 615,443 - - - - 84,761,833 ( 9,177 ) 509,554,533 (586) 594,316,366 ( 9,763) $629,322,541 $605,680	13,800 - - (4) 900,335 - - (1) 33,079,669 - - - - - 31,234,046 ( 19,079 ) 19,079 (2) 785,439 ( 256 ) 5,433 (7) 1,752,766 5,195 ( 5,195 ) (3) 935,232 - 610,266 (8) 34,707,483 ( 14,140) 629,583 - - - - - - (5) 84,752,656 ( 9,177 ) - (6) 509,553,947 (586) - (9) 594,306,603 ( 9,763) - $662,093,755 ($23,903) $629,583

The change in balance of impairment allowance from IAS 39 to IFRS 9 as of January 1, 2018 is as follows:

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The balance of provision
for impairment under IAS The balance of provision
Reconciliation sheet of provision for 39 and the amount for impairment under IFRS
impairment appropriated under IAS37 Reclassification Reevaluation 9 Remark
Loans and receivables (IAS 39) /
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Loans and receivables (IAS 39) /
Amortized cost (IFRS 9)
Accounts receivable	$612,392	$-	$586	$612,978	(9)
Discounts and loans	6,344,810	-	-	6,344,810
Available-for-sale financial assets	-	-	19,335	19,335	(2)、(7)
(IAS 39)/financial assets at fair
value through comprehensive
income statement (IFRS 9)
Held-to-maturity financial assets (IAS	-	-	9,177	9,177	(6)
39)/financial assets measured on
the basis of cost after amortization
(IFRS 9)
Commitment of financing and
guaranty liability
Liability reserve	269,937	-	56,773	326,710	(10)

(1) Financial instruments previously classified as loans and accounts receivable under IAS39 amounted to NTD900,335 thousand, but the cash flow from these is not solely for the payment of principal and the interest accrued from the outstanding amount of the principal. Under IFRS 9, this sum is classified as financial assets at fair value through income statements.

(2) Financial instruments-bonds previously classified as available-for-sale financial assets under IAS 39 amounted to NTD31,034,046 thousand, and the cash flow was wholly for the payment of principal and interest accrued from the outstanding amount of the principal at the time of initial recognition, and the mode of operation was to hold the financial assets for the collection of cash flow from contracts and the sale of the assets. Under IFRS 9, these financial assets were classified as financial assets at fair value through comprehensive income with the evaluation of anticipated credit impairment. The retrospective adoption resulted in a decrease of retained earnings amounting to NTD19,079 thousand and an increase of other equity amounting to NTD19,079 thousand as of January 1, 2018 through adjustment.
(3) The available-for-sale financial assets – stocks listed and not listed in TWSE (TPEx) and emerging stock market classified under IAS 39 – amounted to NTD 1,752,766 thousand, and were classified as financial assets measured at fair value through comprehensive income under IFRS 9.The retrospective adoption resulted in an increase of retained earnings amounting to NTD5,195 thousand and a decrease of other equity amounting to NTD5,195 thousand as of January 1, 2018 through adjustment.
(4) Beneficiary certificates classified as "Financial assets available for sale" according to IAS 39 amount to $13,800 thousand. The cash flow is not entirely the interest paid on the principal and the outstanding capital, and it is classified as the "Financial assets at fair value through profit or loss" according to IFRS 9.
(5) The cash flow from contracts of available-for-sale financial assets- debt instruments previously recognized under IAS 39 were wholly for the payment of principal and the interest accrued from the outstanding amount of the principal and the mode of operation is for collection of cash flow from contracts. These assets were measured on the basis of cost after amortization under the classification of IFRS 9.
(6) The held-to-maturity financial assets and bond investment measured on the basis of cost recognized under IAS 39 amounting to NTD84,761,833 thousand. The cash flow from contracts was wholly for the payment of principal and the interest accrued from the outstanding amount of the principal at the time of initial recognition and the mode of operation is the collection of cash flow from contracts. These assets were classified as financial assets measured on the basis of cost after amortization with evaluation of anticipated credit impairment under IFRS 9. The retrospective adoption resulted in a decrease of retained earnings by NTD9,177 thousand as of January 1, 2018 through adjustment.
(7) The held-to-maturity financial assets and bond investment on the basis of cost after amortization previously recognized under IAS 39 amounted to NTD780,262 thousand. The cash flow from contracts was wholly for the payment of principal and the interest accrued from the outstanding amount of the principal at the time of initial recognition and the mode of operation aimed at the collection of cash flow from contracts and the sale of financial assets, and these assets were classified as financial assets at fair value through comprehensive income with evaluation of anticipated credit impairment. The retrospective adoption resulted in a decrease of retained earnings by NTD256 thousand and an increase in other equity by NTD 5,433 thousand as of January 1, 2018 through adjustment.
(8) Stocks not listed in TWSE (TPEx) measured on the basis of costs under IAS 39 amounted to NTD324,966 thousand and were classified as financial assets at fair value through comprehensive income statement with a new round of measurement at fair value under IFRS 9.The retrospective adoption resulted in an increase in other equity by NTD610,266 thousand as of January 1, 2018 through adjustment.
(9) Receivables were previously classified as loans and receivables under IAS 39, and were classified as financial assets measured on the basis of cost after amortization with evaluation of anticipated credit impairment under IFRS 9. The retrospective adoption resulted in a decrease of retained earnings by NTD586 thousand as of January 1, 2018 through adjustment.
(10) The off-balance sheet credit commitment for debt provision is assessed as expected credit loss according to IFRS 9. The retrospective adoption resulted in a decrease of retained earnings by NTD56,773 thousand as of January 1, 2018 through adjustment.
IFRS 15 “Revenue from Contracts with Customers” and relating amendments

IFRS 15 regulates the recognition principle for revenue from contracts with customers, which will replace IAS 18 “Revenue”, IAS 11 “Construction Contracts” and relating interpretations. Refer to Note 4 for further information on accounting principles.

The Consolidated Company after adopting IFRS 15 has income recognized according to the following steps:

(1) Identifying contracts with customers;
(2) Identifying the performance obligations in the contracts;
(3) Determining the transaction price;
(4) Applying the transaction price to the performance obligations in the contracts; and
(5) Recognizing income upon fulfilling performance obligations;

(II) The Regulations Governing the Preparation of Financial Reports by Securities Issuers, the Regulations Governing the Preparation of Financial Reports by Securities Firms and the IFRSs recognized by the FSC

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The new / amended / revised standards or
interpretation IASB publication effective date (Note 1)
“2015 – 2017 annual improvement” January 1, 2019
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C The new / amended / revised standards or interpretation “2015 – 2017 annual improvement”	IASB publication effective date (Note 1) January 1, 2019
Amendments to IFRS 9 “Prepayment Features with	January 1, 2019 (Note 2)
Negative Compensation”
IFRS 16 “Leases”	January 1, 2019
IFRS 17 “Insurance Contracts”	January 1, 2019 (Note 3)
Amendments to IAS19 “Plan Amendment,	January 1, 2019
Curtailment or Settlement”
Amendments to IAS 28 “Long-term Interest in	January 1, 2019
Associates and Joint Ventures”
IFRIC 23 “Uncertainty under Income Tax	January 1, 2019
Treatments”

Note 1: Unless otherwise stated, the aforementioned new / revised / amended standards or interpretations become effective in the year after the respective date stated. Note 2: FSC permitted the consolidated company adoption of this amendment before January 1, 2018 Note 3: The plan amendment, curtailment, or settlement after Jan. 1, 2019 apply to this amendment. Further to the notes specified below, the aforementioned new / amended / revised standards and interpretations shall not cause significant change in the accounting policy of the companies in the consolidated financial statements:

IFRS 16 “Leases”

IFRS 16 is the accounting treatment of leases. The standard will replace IAS 17 Leases and IFRIC 4 Determining Whether an Arrangement Contains a Lease.

Definition of lease

At the adoption of IFRS 16 for the first time, the consolidated company only assesses the contracts signed (or changed) beyond January 1, 2019, to determine if they are (or included) lease on the basis of IFR S16, and does not reassess contracts determined as lease under IAS 17 and IFRIC 4, and treated these contracts in accordance with the transitional requirement of IFRS 16. The consolidated company is the lessee

At the adoption of IFRS 16 for the first time, all leases were recognized as tenancy right assets and leasehold liability except low value target of leases and short-term leases of which the expenses incurred were recognized under the straight-line method. The consolidated comprehensive income statement shall present the interest expenses incurred from the depreciations of the utilization of equity assets and leasehold liability under effective interest method. In the consolidated cash flow statement, the principal amount of the lease liability payment is classified as a financing activity and the interest payment is classified as an operating activity. Before adopting IFRS 16, contracts classified as operating leases recognize expenses based on the straight-line method. The difference from the amount paid due to the leveling rent is recognized as other payables. Cash flows from operation lease were presented as operating activities in the consolidated statement of cash flows.

Contracts classified as financing lease were recognized as leasehold assets and payable lease payment in the consolidated balance sheet.

The consolidated company elected to adjust the accumulated influence under IFRS 16 in retrospect as retained earnings on January 1, 2019, and does not recompile comparative information.

At present, the treatment of the agreements of operation leases under IAS 17 the leasehold liabilities will be measured on the basis of the leasehold liability as of January 1, 2019 on all tenancy right assets on the remainder of lease payment at the discount rate of the Lessee for additional loan on that day. Further to the estimation of the following expediency, the recognized tenancy right will be subject to assessment for impairment under IAS 36.

The following expedient methods are expected to be applicable to the consolidated company:

(1) Apply a single discount rate for the measurement of specific leasehold combinations with reasonable similarity.
(2) Lease to expire on or before December 31, 2019 will be treated as short-term lease.
(3) The initial cost will not be included in the measurement of tenancy right assets on January 1, 2019.
(4) Measuring leasehold liability, such as the determination of the term of leases, will be treated from hindsight.

The consolidated company is the lessor

In the transitional period, no adjustment of the lease of the Lessors while under IFRS 16 will be applicable from January 1, 2019.

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Predicted impacts on assets, liabilities and equity on January 1, 2019 are as follows:
Adjustments arising Adjustment of book
Book value of from initial value as of January
December 31, 2018 application 1, 2019
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Right-of-use assets Effect of assets Lease liabilities – current Lease liabilities – noncurrent Effect of liabilities	$ - $ - $ - - $ -	$ 1,159,418 $ 1,159,418 $ 190,036 969,382 $ 1,159,418	$ 1,159,418 $ 1,159,418 $ 190,036 969,382 $ 1,159,418

IFRIC 23 “Uncertainty under Income Tax Treatments”

IFRIC 23 clarified that if there is uncertainty in handling income tax, the combined business must assume that the taxation authorities could retrieve all information for review. If the income tax treatment as declared may possibly be accepted by the taxation authorities, the taxable income, taxation basis, the unconsumed taxable loss, unconsumed tax deduction, and determination of tax rate shall be congruent with the income tax treatment adopted at the time of income tax declaration. If the taxation authorities are unlikely to accept the income tax treatment in the declaration, the combined business shall adopt the most possible amount or anticipated value (adopt the method that could more likely forecast the ultimate result under uncertainty between the two) in evaluation. In case of change in reality and circumstance, the combined business shall reevaluate its judgment and evaluation.

Further to the above effects, the assessment of consolidated company on other IFRSs as of the day this consolidated financial statement was approved for release did not cause significant influence on the consolidated financial position and consolidated financial performance.

(III) The IFRSs released by the IASB but not yet approved and announcement effective by the Financial Supervisory Commission

The new / amended / revised standards or interpretation

Amendment to “Definition of a business” in IFRS 3 Amendment to IFRS 10 and IAS 28, “Sale or Contribution of Assets between an Investor and

IASB publication effective date (Note 1) January 1, 2020 (Note 2) Undefined

its Associate or Joint Venture and Investment in Associates”.

IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 and IAS 8 “Definition of January 1, 2020 (Note 3) Materiality”

Note 1: Unless otherwise stated, the aforementioned new / revised / amended standards or interpretations become effective in the year after the respective date stated.
Note 2: The amendment should be applied to the acquisition day in the reporting period for corporate mergers after January 1, 2020 and the acquisition of assets beyond that date.
Note 3: This amendment is with prospective application for the annual reporting period starting after January 1, 2020.

As of the release date of the consolidated financial report, the consolidated company continues to evaluate the impact on the financial position and performance from the abovementioned standards and interpretations, and the relevant impacts will be disclosed when the evaluation is completed.

IV. Summary of important accounting policies

(1) Statement of Compliance

This consolidated financial report is prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, the Regulations Governing the Preparation of Financial Reports by Public Banks, the Regulations Governing the Preparation of Financial Reports by Securities Firms and the IFRSs recognized by and declared effective by the FSC.

(2) Basis of Preparation

Except for the financial instruments on the basis of fair value and the recognition of net defined benefit liabilities on the basis of the present value of net defined benefit obligation net of the fair value of planned assets, this consolidated financial statement was compiled on the basis of historical cost.

The evaluation of fair value could be classified into Level 1 to Level 3 by the observable intensity and importance of related input value:

Level 1 input value: refers to the quotation of the same asset or liability in an active market as of the evaluation (before adjustment).
Level 2 input: Referred to as those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 input value: the unobservable input value of asset or liability.
(3) Current and non-current assets and liabilities Current assets including:
Assets held mainly for trading purpose:
Assets expected to be realized within 12 months after the balance sheet date; and
Cash and cash equivalents (not including those that are limited to exchange or repay liabilities exceeding 12 months after the balance sheet date). Current liabilities include:
Liabilities held for trading purposes;
The liabilities to be liquidated upon due within 12 months after the balance sheet date (those with long-term refinancing or payment term rearrangement completed from the balance sheet date to the financial reports approved and published date are also classified as current liabilities), and
Liabilities with the repayment deadline that cannot be unconditionally deferred to at least 12 months after the balance sheet date. Where the liabilities might be paid off at the discretion of the other party through the tools of the issuance equity, the classification would remain unaffected.

However, CMFC is engaged in construction projects through Taichung Commercial Bank and Taichung Bank Leasing, and the business cycle is longer than one year. Therefore, the assets and liabilities related to the business adopt the business cycle as the standard to be classified as current or non-current.

(4) Basis of consolidation

This consolidated financial statement contains the information of the financial statements of the Bank and its controlled entities (subsidiaries).

The consolidated income statement includes the results of a subsidiary up to the date of disposal. The subsidiaries’ financial statements have been properly adjusted to make the accounting policies consistent with the accounting policies of the consolidated company.

The transactions, account balances, income, expenses and losses among subsidiaries are written-off at the time of consolidation.

The non-controlling interests of the subsidiaries are expressed separately from the interests of the owners of the Company. - The comprehensive income was proportioned to the non controlling interest.

The total comprehensive incomes of the subsidiaries were non-controlling interest attributed to the Company’s owners and the non-controlling interest, to become the balance of loss even as the non-controlling interest.

Changes in the ownership equity on a subsidiary

When the changes of interest of the subsidiaries’ ownership by the Consolidated Company do not lead to the loss of control, it is disposed of as interest transactions. The book value of the Consolidated Company and non-controlling interest has been adjusted to reflect the changes of the relative interest of subsidiaries. The differential between the adjustment amount of non-controlling interest and the fair value of consideration received is directly recognized as interest and belongs to the owner of the Company.

When the consolidated company loses its control of the subsidiary, the profit or loss from the disposal is the difference between the following two items: (1) The fair value of the consideration received and the total remaining investment at fair value of the former subsidiary at the date of control loss, and (2) The assets (including goodwill) and liabilities and the total carrying amount of the non-controlling interest at the date of control loss of the former subsidiary. With respect to all amounts related to the subsidiary recognized by the consolidated company in other comprehensive profit loss, the accounting treatment is the same basis on which the consolidated company directly disposes of assets or liabilities.

The fair value of the remaining investment to a former subsidiary at the date of control loss is the amount of investment in an associate company and joint venture on initial recognition.

Please refer to Note 21 for the details, shareholding ratio, and business operation of the subsidiaries.

(5) Corporate Merger

Business combinations are accounted for using the acquisition method. Acquisition cost are expensed in the period in which the costs are incurred and the services are received.

Goodwill is measured as the difference between the consideration transferred at fair value, the amount of non-controlling interest and the acquisition-date fair value of the acquirer's previouslyheld equity interest in the acquiree, and the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after the re-measurement, the net of the acquisitiondate amounts of the identifiable assets acquired and the liabilities assumed still exceeds the total of the consideration transferred and the acquisition date fair value of the acquirer's previously-held equity interest in the acquiree, the difference is a bargain purchase in profit or loss and is immediately recognized in profit or loss.

The pre-existing ownership interests of acquiree and the non-controlling interests of proportionate share of net assets of the acquiree at acquisition date are measured at a proportionate share of recognized amount of identifiable assets of the acquiree. Other non-controlling interests are measured at fair value.

(6) Foreign currencies

When preparing the financial statements of each business entity of the consolidated company, the transactions in currencies other than the functional currency (the currency of the primary economic environment in which the entity operates) of the respective business entity (foreign currency) should be translated into the functional currency in accordance with the exchange rate on the transaction day.

Foreign currency monetary items are translated at the closing rate on each balance sheet date. Non-monetary items carried at fair value should be reported at the rate that existed when the fair values were determined. The foreign non-currency items measured at historical cost are translated in accordance with the exchange rate on the transaction date without the need for a translation again.

Exchange differences arising when monetary items are settled or when monetary items are translated at different rates are reported in profit or loss in the period, with the following exceptions.

With respect to the monetary items receivable or payable of foreign operations, the settlement is currently neither planned for foreseeable in the future (thus forming part of the reporting entity's net investment in a foreign operation). The exchange differences originally are recognized as other comprehensive income, and the disposal of net investment is re-classified from equity to income.

The exchange difference arising from the non-monetary assets or liabilities (such as, equity instruments) in foreign currency measured at fair value that are translated in accordance with the spot exchange rate at the balance sheet date is booked as a profit or loss. However, the exchange difference arising from the changes in fair value recognized as other comprehensive profit or loss should be booked in the “Other comprehensive profit or loss.”

When preparing the consolidated financial statements, the assets and liabilities of the consolidated company’s foreign operations should be translated into New Taiwan dollars in accordance with the exchange rate on the balance sheet date. Except for the translations at the exchange rate on the transaction date during a period which has sharp fluctuations, the other income and loss are translated at the the average exchange rate for the current period. The resulting exchange differences are recognized as other comprehensive income and are attributed to the owner of the Company and non-controlling interest.

(7) Bonds Purchased under Resell/Notes Issued under Repurchase Agreements

For underwritten bonds and securities that are sold under RP and RS agreements, recognize interest expense and interest income on the accrual basis between the purchase and sale dates and agreed RP and RS date; also, recognize RP (Debt) and bonds and securities sold under resell agreements between the sale and purchase dates.

(8) Inventories

Inventories include raw materials, supplies, work-in-progress, products contracted to be processed, finished goods and products. Inventory is valued in accordance with the lower of cost or net cash value. When comparing cost and net cash value, except for the homogeneous inventories, it is based on the itemized lower of cost or net cash value. Net realizable value refers to the estimated sale price under normal circumstances net of the estimated cost needed to complete the project and the estimated expenses needed to complete the sale. Inventory cost is determined by the weightedaverage method.

The construction inventories were stated at the cost invested actually. The cost for available-forsale housing and land was amortized based on weighted-average building coverage method, and stated at the lower of cost or net realizable value at the end of period.

(9) Investments in the affiliated company

The term “associate” as set forth herein denotes an enterprise, which has significant effect upon the Consolidated Company, but is not a subsidiary or a joint venture.

Consolidated company has the investment in an affiliated company handled in accordance with the equity method. Under the equity method, investments in the affiliated companies were originally recognized at cost; the book value after the acquisition date fluctuates along with the distribution of profit or loss from the affiliated company and other comprehensive profit or loss by the consolidated company. Additionally, the change in the interests the Consolidated Company’ holds in the associates was recognized pro rata to the shareholding percentages.

When associates issue new shares, if the Consolidated Company fails to subscribe stock share proportionally to their shareholding, resulting in changes in shareholding ratio and thus causing

changes in net equity investment, the increase or decrease amount should be adjusted to the additional paid-in capital – recognizing changes in net equity of associates under the equity method and investment under equity method. If the Consolidated Company’ did not subscribe to the new shares pro rata to the shareholding percentages and led to a decrease of the shareholding percentages subscribed to or obtained from the associate, nevertheless, the amount of other comprehensive income so recognized was reclassified pro rata to the decrease ratio in the associate. The accounting management was on the grounds same as the grounds the associate must comply with if it directly disposed assets or liabilities. If the aforementioned adjustment must be debited into capital reserve where the balance of capital reserve yielded by the investment in equity method, the difference was debited as retained earnings.

In the event that the Consolidated Company’’s shares of loss in the associates equal to or exceed its equity in the associates (including the book value of investment in the associates in equity method and other long-term interest of the Consolidated Company’ in the investment composition of the associates), the Consolidated Company’ discontinued recognition of the further losses. The Consolidated Company’ recognized extra losses and liabilities only in the event of occurrence of legal obligations, presumed obligations or within the scope that the Consolidated Company’ had made payment on behalf of the associate.

When assessing impairment, the consolidated company has the overall book value (including goodwill) of the investment deemed as a single asset when comparing the recoverable amount and the book amount in order to conduct impairment testing. The recognized impairment loss is an integral part of the book amount of the investment. Any reversal of the impairment loss can be recognized within the range of the recoverable amount of the subsequently increased investment.

Besides, all relevant amounts relevant to the associates recognized in other comprehensive income were managed on the accounting grounds same as the grounds which it should comply with if the associates directly disposed the relevant assets or liabilities.

The profit or loss resulting from the countercurrent, downstream and side-stream transactions between the consolidated company and the affiliated company is recognized in the consolidated financial statement within the range that is irrelevant to the consolidated company’s interest in the affiliated company.

(10) Property, plant and equipment

Real property, plant and equipment are recognized as costs, and they will be measured by the amount after the costs less the amount of accumulated depreciation and accumulated impairment losses afterwards.

Those real estate, plant buildings, equipment & facilities under construction were recognized at the amount of the costs after deducting the loss in the accumulated impairment. Cost includes professional service fees and loan costs that qualify for capitalization. When such assets are completed and reach expected use status, such assets will be classified to proper items under real property, plant and equipment and the provision of depreciation shall begin.

Proprietary land is not depreciated.

The depreciation of each material part of real estate, plants, and equipment should be appropriated independently in accordance with the useful year and a straight-line method. The Consolidated Company shall at least inspect the estimated service life, residual value and depreciation method by the day of the end of each fiscal year and postpone the effect of applying estimated accounting changes.

In the case of delisting real estate, plants, and equipment, the difference between the net disposal price and the book value of the asset is recognized in profit or loss.

(11) Investment property

Investment property is the real property held for purpose of earning of rental income or appreciation or both. Investment property includes lands held at present without determination of future use.

Investment property is measured on the basis of initial cost (including transaction cost) and subsequent measurement shall be based on the subtraction of accumulated depreciations and accumulated impairment from cost. The Consolidated Company has depreciation appropriated in accordance with the straight-line method

In removing investment property, the difference between the net proceeds of disposition and the book value shall be recognized as income.

(12) Goodwill

Goodwill from business combination is recorded at acquisition cost and subsequently measured at cost less accumulated impairment.

For impairment test purposes, goodwill is allocated to each cash-generating unit that benefits from the synergy of a business combination.

In testing assets for impairment, the Company compares the carrying amounts of operating segments (CGUs with allocated goodwill) to their recoverable amounts on a yearly basis (or when impairment indicators exist). CGUs with allocated goodwill arisen from company combination in the current year should be tested for impairment before the end of the year. When the recoverable amount of CGUs is below the carrying amount, an impairment loss should be recognized to reduce first the carrying amount of goodwill of the CGU, and then the carrying amounts of other assets of the CGU proportionately. Any impairment loss should be directly recognized as loss in the current period. Subsequent reversal of impairment loss is not allowed.

On disposal of the relevant CGU, the amount attributable to goodwill is included in the determination of the gain or loss on disposal.

(13) Intangible assets
Acquired separately

The intangible asset with limited useful life acquired separately was originally measured at cost and subsequently measured at cost, net of accumulated amortization and accumulated impairment losses. Intangible assets shall be subject to amortization under the straight-line method during its life span, and the estimation of life span, residual value and depreciation method shall be subject to review at least once a year and extend the effect of changes in applicable accounting policy. Intangible asset with indefinite useful lives is measured at cost net of accumulated impairment losses.

Derecognition

In removing intangible assets, the difference between the net proceeds of disposition and the book value shall be recognized as income.

(14) Impairment of tangible and intangible assets (except for goodwill).

The consolidated company at each balance sheet date is to assess whether there is any indication of the impairment occurring to the tangible and intangible assets (except for goodwill). If there is any indication of impairment occurring, the recoverable amount of the asset should be estimated. If the recoverable amount of an individual asset cannot be estimated, the consolidated company is to estimate the recoverable amount of the respective cash-generating unit. The common asset is amortized to each cash-generating unit in accordance with a consistent and reasonable sharing basis.

The intangible asset with indefinite useful lives and not yet available for use should be tested for impairment at least annually or should be tested when there is an indication of impairment.

The recoverable amount is the fair value net of cost or the value in use whichever is higher. When the recoverable amount of an individual asset or cash-generating unit is less than its book amount, the book amount of the asset or cash-generating unit should be reduced to its recoverable amount. The impairment loss is recognized in the profit or loss.

When the impairment loss was reversed subsequently, the book amount of the asset or cashgenerating unit is increased to the adjusted recoverable amount, but the increased book amount may not exceed the book amount of the asset or cash-generating unit without recognizing the impairment loss in prior periods (net of amortization or depreciation). The reversed impairment loss is recognized in the profit or loss.

(15) Available-for-sale noncurrent assets

Noncurrent assets are classified as noncurrent assets held-for-sale if their carrying amount is mainly recovered through a sale rather than through usage. The non-current assets complying with the classification must be available for immediate sale in the current state and the probability of the sale must be highly likely. When the appropriate level of the management commits to sell the plan asset and the sale is expected to be completed within one year from the date of classification, the probability of the sale is highly likely.

The classified held-for-sale non-current asset is measured at book amount or fair value net of the selling cost whichever is lower and stop the appropriate depreciation for such assets.

(16) Financial instruments

When the consolidated company has become a party to the instrument contract, the financial assets and financial liabilities are to be recognized in the consolidated balance sheet.

For the initial recognition of the financial assets and financial liabilities, if the financial assets or financial liabilities are not measured at fair value through profit or loss, it is measured at fair value plus transaction cost that is directly attributable to the acquisition or issuance of financial assets or financial liabilities. The transaction cost directly attributable to the acquisition or issuance of financial assets or financial liabilities that are measured at fair value through profit or loss is immediately recognized in the profit or loss.

Financial Assets

The customary transaction of financial assets is recognized and de-recognized in accordance with the trade date accounting. A customary transaction refers to the purchase or sale of financial assets and the delivery period is within the period prescribed by the regulations or customary market practice.

Classification of measurement 2018

The financial assets held by the consolidated company are financial assets at fair value through income statements, financial assets on the basis of cost after amortization, investment of debt instruments at fair value through other comprehensive income statements, and equity instruments at fair value through other comprehensive income.

A. Financial assets at fair value through profit and loss

Financial assets measured at fair value through profits or losses are financial assets that are mandatorily measured at fair value through profits or losses. Financial instruments designated at fair value through income statements included the investment of equity instruments not designated at fair value through other comprehensive income and those not conforming to the standard of debt instruments on the basis of cost after amortization or at fair value through other comprehensive income.

Financial asset measured at fair value through profit or loss is measured at fair value and the profit or loss generated from the secondary measurement is recognized as profit or loss (not includes any dividend or interest arising from the financial asset). Please refer to Note 44 for the determination of fair value.

B. Financial assets on the basis of cost after amortization

If the financial assets of the consolidated company met both of the following conditions, classify as financial assets on the basis of cost after amortization:

a. Financial assets held under particular mode of operation and the purpose of holding is for the collection of cash flow from contracts; and
b. Cash flow generated on particular dates deriving from the contacts and the cash flow is wholly for the payment of principal and interest accrued from the outstanding amount of the principal.
Financial assets on the basis of cost after amortization (including cash and cash equivalents and accounts receivable on the basis of cost after amortization) shall be determined for the total book value under the effective interest rate method after the initial recognition net of the cost of any impairment after amortization for measurement. Any exchange gains or loss will be recognized as income.
Interest income will be the product of effective interest rate and total book value of financial assets except under the following two conditions:
a. The interest income of financial assets procured or initiated under credit impairment will be the product of the effective interest rate after credit adjustment and the cost of financial assets after amortization.
b. Financial asset that has subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset.

Cash equivalents are time deposits within 3 months from the date of acquisition, with high liquidity, can be converted into cash with marginal risk on the change in value, and are used for the fulfillment of short-term commitment in cash settlement.

C. Debt instrument investments measured at fair value through other comprehensive income If the investment of debt instruments by the consolidated company met both the two conditions below, classify as financial instruments at fair value through comprehensive income:

a. Financial assets held under the particular mode of operation and the purpose of holding being for collection of cash flow from contracts; and
b. Cash flow generated on particular dates deriving from the contacts and the cash flow is wholly for the payment of principal and interest accrued from the outstanding amount of the principal.

Other investment of debt instruments at fair value through comprehensive income should be measured at fair value. Changes in the book value shall be recognized as income under the calculation of interest income under the effective interest rate method, and exchange gain and loss and impairment or reversal benefits shall be recognized as income. Other changes shall be recognized as other comprehensive income and reclassified as income at the disposition of investment.

D. Equity instrument investments measured at fair value through other comprehensive income The consolidated company may make an irrevocable choice at the time of initial recognition for designating the investment of equity instruments not available-for-sale and not recognized by the acquirer under corporate merger and acquisition or with consideration at fair value through other comprehensive income for measurement.

The investment of equity instruments at fair value through other comprehensive income is measured at fair value. Subsequent changes in fair value will be recognized as other comprehensive income and accumulated into other equity. In the disposition of assets, accumulated gains or loss shall be directly transferred to retained earnings without classification as income.

The dividend of the investment of equity instruments at fair value through other comprehensive income shall be recognized as income when the right of the consolidated company in the collection of dividends is ascertained, unless the dividend is obviously representing the recovery of the cost of investment in part. 2017

Financial assets are classified into four categories, including financial assets measured at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets, and loans and receivables. The said classification is determined depending on the nature and purpose of the financial assets initially recognized.

A. Financial assets at fair value through profit and loss

Financial assets measured at fair value through profit or loss includes held-for-sale and designated financial assets measured at fair value through profit or loss.

Financial assets are classified as held-for-sale when it meets one of the following criteria:

a. It is obtained mainly for the purpose of being sold in the short-term.
b. It became part of the identified financial instrument portfolio managed comprehensively at initial recognition and there is evidence of the short-term profitgenerating operation of the portfolio recently; or
c. It is a derivative (except for a financial guarantee contract or a designated and effective hedging derivative instrument).

If it meets one of the following factors and may provide more relevant information, it can be designated as measured at fair value through profit or loss at the initial recognition.

a. The designation can eliminate or significantly reduce the inconsistency of measurement or recognition; or

b. The financial assets, financial liabilities or both, according to a written risk management or investment strategy, are managed at fair value with the performance evaluated and the investment portfolio information provided to management within the consolidated company is also based on the fair value.

In addition, for the contract containing one or multiple embedded derivatives, the entire hybrid (combined) contract can be designated as a financial asset measured at fair value through profit or loss.

Financial asset measured at fair value through profit or loss is measured at fair value and the profit or loss generated from the secondary measurement is recognized as profit or loss. The gain or loss recognized in the profit or loss includes any dividend or interest arising from the financial asset (included in the investment received in the year).

If the financial asset measured at fair value through profit or loss is an equity investment without a market quote in an active market and the fair value cannot be reliably measured and the derivatives that are linked to the equity instrument without a market quote and the settlement must be completed with the equity instrument delivered, it is measured subsequently at cost, net of the impairment loss and it is individually booked as “Financial assets measured at cost.” If these financial assets can be measured subsequently at fair value reliably, it is measured again at fair value and the difference between the book amount and fair value is recognized in the profit or loss.

B. Held-to-maturity investments

Held-to-maturity investments are the non-derivative financial assets with fixed or determinable payment amount and scheduled maturity date and are not designated to be measured at fair value through profit or loss or available-for-sale, do not meet the definition of loans and receivables, and the consolidated company has the positive intention and ability to hold it to maturity. The government bonds and domestic and international corporate bonds and foreign government bonds with specific credit ratings that are invested by the consolidated company and the consolidated company has the positive intention and ability to hold it to maturity are classified as held-to-maturity investments.

The held-to-maturity financial assets after the initial recognition are measured at the amortized cost after deducting impairment losses in accordance with the effective interest method.

The effective interest method is applied to calculate the amortized cost of the debt instruments and have interest income amortized over the relevant periods. The effective interest rate meant for the estimated future cash collection amount (including paid or received all fees and points that are part of the overall effective interest rate, transaction cost and all other premiums or discounts) of the debt instruments in the expected duration or appropriate shorter period after the discount exactly equal to the interest rate of the net book amount initially recognized.）

C. Available-for-sale financial assets

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

The domestic and foreign listed/OTC stock, beneficiary certificates and government bonds held by the consolidated company are traded in an active market and are classified as available-for-sale financial assets that are measured at fair value at each balance sheet date.

The foreign exchange gains and losses arising from the changes in book value of the available-for-sale monetary financial assets, interest income calculated with the effective interest method and dividends of the available-for-sale equity investment are recognized in the profit or loss. The changes in the book value of the other available-for-sale financial assets are recognized in the other comprehensive profit or loss and are reclassified to the profit or loss upon disposal of the investment or when the impairment is confirmed.

The dividend of available-for-sale equity investments is recognized when the right to collection of the consolidated company is established.

If the available-for-sale financial asset is an equity investment without a market quote in an active market and the fair value cannot be reliably measured and the derivatives that are linked to the equity instrument without a market quote and the settlement must be completed with the equity instrument delivered, it is measured subsequently at cost, net of impairment loss, and it is individually booked as “Financial assets measured at cost.” If these financial assets can be measured subsequently at fair value reliably, they are measured again at fair value and the difference between the book amount and fair value is recognized in the “profit or loss” or “other comprehensive profit or loss.”

D. Loans and accounts receivable

Loans and receivables meant for non-derivative financial assets without a quote in an active market and with a fixed or determinable payment amount. Loans and receivables (including accounts receivable, cash and cash equivalents, and bond investments without an active market) are measured at the amortized cost after deducting the impairment losses in accordance with the effective interest method, except for the interest of short-term accounts receivable that is insignificant.

(2) Impairment of financial assets 2018

The consolidated company shall, on each balance sheet day, evaluate the financial assets on the basis of cost after amortization on the basis of anticipated credit loss (including accounts receivable), the investment of debt instruments at fair value through other comprehensive income, and loss from receivable rents and impairment of contract assets.

Discounts and loans, accounts receivable and receivable rents shall be recognized for provisions for loss on the basis of anticipated credit loss within the perpetuity of the assets. Other financial assets shall be evaluated for any significant increase of risk from the day of initial recognition. If none is found, recognize for provision for anticipated credit loss along a period of 12 months. If it is, recognize for provision of anticipated credit risk within the perpetuity of the assets.

Anticipated credit loss is the weighted average loss of credit on the basis of the weight of the risk of default. Anticipated credit loss in a period of 12 months means the expected loss of credit from the financial instruments within 12 months due to default. Anticipated credit loss with the perpetuity of the financial instruments means the expected loss of credit from the financial instruments within the perpetuity of these financial instruments.

Further to the aforementioned evaluation, refer to the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” for information on loan assets, and consider the financial position of the borrowers and any overdue accounts in principal or interest payments. In addition, evaluate the collaterals pledged for the security of the debts and the possibility of recovery of loan assets. As per the aforementioned requirements, non-performing assets shall be classified as loss, doubtful, substandard, special mentioned and normal by the status of the collaterals and the duration of delinquency. Appropriation of 100%, 50%, 10%, 2% and 1 % of the balances of the aforementioned loans as provision for loss shall be necessary. The aforementioned provision for loss shall be recognized in accordance with Letter Jin-Guan-Yin-Fa-Zi. No. 10010006830, which accounted for approximately 1% of the total loans. The appropriation for provision of property for loss shall be made at a ratio not falling below 1.5% as stated in Letter Jin-Guan-Yin-Guo-Zi. No. 10300329440, and appropriated at the higher amount of the aforementioned evaluation result and the ratio.

All impairment of financial assets is recognized through the reduction of the book value of the provisioned account. However, the provision for loss of investment of debt instruments at fair value through comprehensive income shall be recognized as other comprehensive income without the reduction of its book value.

2017

Except for the financial assets measured at fair value through profit or loss, the consolidated company examines whether there is an evidence of impairment occurring on the other financial assets at each balance sheet date. When there is objective evidence of one or more events occurring after the initial recognition of financial assets with a resulting loss to the future cash flow of the financial asset, the impairment of financial assets had already occurred.

For financial assets measured at the amortized cost, such as loans, discounts, exchange purchased and accounts receivable, the assets that are individually assessed without any impairment identified are collectively reassessed for impairment. The objective evidence of impairment of collective receivables may include the past collection experience of the consolidated company, increase in collective delayed payments and the observable changes in national or local economic conditions that correlate with default on receivables:

A. Significant financial difficulty of the issuer or debtors:
B. Breach of contract, such as, interest or principal payment delays or defaults;
C. The possibility of debtor’s entering bankruptcy or other financial reorganization is greatly increased; or
D Financial difficulties may cause the active market for financial asset to disappear.

Furthermore, according to the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans, the Bank evaluates the collectability of loaned assets according to the borrower’s financial condition and the repayment of principal and interest and also based on the evaluated value of the collateral provided for specific credit. According to the aforementioned requirement, non-performing loans shall be recognized as assets under the categories of loss, doubtful, substandard, special mention, and normal depending on the collaterals and overdue period. Accordingly, provision for loss at 100%, 50%, 10%, 2% and 1% shall be recognized as per the requirement of Financial Supervisory Commission Letter Jin-GuanYin-Fa-Zi No. 10010006830. If the provision for bad debts accounted for more than 1% of the total lending, the proportion for the provision for bad debts for real properties shall not fall below 1.5% pursuant to Letter Jin-Guang-Yin-Kuo-Zi No. 10300329440.

The impairment amount of the financial assets measured at amortized cost is the difference between the book value of the assets and the present value of the future cash flows discounted at the financial asset’s original effective interest rate.

If the financial assets being recognized after the amortization of the cost showed a decrease of the amount of impairment in subsequent periods, and the decreased amount of impairment is related to the events after the recognition for impairment, the impairment so recognized previously shall be directly reversed or via the adjustment of provision of accounts and recognized as profit or loss. However, the amount of such reversal shall not exceed the cost after amortization before the recognition of impairment on the day of recognition.

When the fair value of the available-for-sale equity investments below cost and the decline is significant or persistent, it will be deemed as an objective evidence of impairment.

When available-for-sale financial asset is impaired, the cumulative loss previously recognized in the other comprehensive profit or loss will be reclassified into profit or loss.

The impairment loss of the available-for-sale equity instruments that is already recognized in the profit or loss may not be reversed through the profit or loss. The fair value reversed amount after recognizing the impairment losses is recognized in the other comprehensive profit or loss. If the fair value of the available-for-sale financial assets increased in the subsequent period and the increase is objectively linked to an event occurring after the impairment is recognized, the impairment loss is reversed and recognized in the profit or loss.

For the objective evidence of impairment of other financial assets, please refer to the note on financial assets booked at the amortized cost.

The impairment amount of the financial assets measured at cost is the difference between the book value of the assets and the present value of the future cash flows discounted at the financial asset’s current market rate of return. The said impairment loss shall not be reversed in subsequent periods.

The impairment loss of all financial assets is directly deducted from the book value of the financial asset. However, the book value of the accounts receivable and loans is adjusted down by

the allowance for bad debt. The accounts receivable and loans that are concluded to be uncollectible are written off against the allowance account. The amount previously written off and collected subsequently is credited to the allowance account. Changes in the book amount of the allowance account are recognized in the profit or loss.

(3) The de-recognition of financial assets

The consolidated company has financial assets de-recognized only when the contractual rights from the cash flows of a financial asset becomes invalid or when the financial assets are transferred and almost all the risks and rewards of the asset ownership have been transferred to other enterprises.

By 2017, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received, receivable and the cumulative gain or loss that had been recognized in other comprehensive profit and loss and accumulated in equity is recognized in profit or loss. Since 2018, on derecognition of a financial asset measured at amortized costs in its entirety, the difference between the asset’s carrying amount and the consideration received is recognized in profit or loss. When particular debt instruments measured at fair value through comprehensive income is entirely removed, the total sum of any other accumulated gains or loss of the difference between book value and consideration recognized as other comprehensive income shall be recognized as income. When particular equity instruments measured at fair value through comprehensive income are entirely removed, the accumulated gains of loss shall be directly transferred to retained earnings without being classified as income.

Equity instruments

The debt and equity instruments issued by the consolidated company are classified as financial liabilities or equity pursuant to the contractual agreements and the definition of financial liabilities and equity instruments.

Equity instrument is any equity contract of the consolidated company after deducting all liabilities from the assets. Equity instruments issued by the consolidated company are recognized for an amount after deducting the direct issuing cost from the proceeds collected.

The Company’s equity retrieved is debited or credited to the equity. The Company’s equity purchased, sold, issued, or cancelled is not recognized in the profit or loss.

Financial Liabilities
(1) Subsequent measurement

All financial assets shall be measured under the effective interest rate method on the cost after amortization except under the following circumstances:

A. Financial liabilities at fair value through profit and loss

Financial liabilities measured at fair value through profit or loss includes held-for-sale. Financial liability measured at fair value through the profit or loss is measured at fair value and the profit or loss generated from the secondary measurement is recognized as a profit or loss. The gain or loss recognized in the profit or loss does not include any dividends or interest paid for the financial liability. Please refer to Note 44 for the determination of fair value.

If the financial liabilities at fair value through profit and loss before 2017 (inclusive) are:

a. Disposal of unquoted equity instruments of which the fair value cannot be reliably measured and is required to be delivered by the equity instrument.
b. Linked to unquoted equity instruments of which the fair value cannot be reliably measured and is required to be settled by the derived liabilities of the equity instruments, then they are separately classified as financial liabilities measured at cost on the balance sheet date. If these financial liabilities can subsequently be reliably measured at fair value, it is measured again at fair value and the difference between the book amount and the fair value is recognized in the profit or loss.
B. Financial guarantee contract 2018

The consolidated company issued financial guarantee contracts not at fair value through income statement with initial recognition to reflect provision for loss for anticipated credit impairment and the amount after amortization, whichever is higher. 2017

The financial guarantee contracts that are not measured at fair value through the profit or loss issued by the consolidated Company, after the initial recognition, are measured at cost after amortization. If specific amount shall be payable under contractual obligation under assessment, the optimal estimated amount and the amount after amortization under contractual obligation shall be measured, whichever is higher.

(2) De-recognition of financial liabilities

When de-recognizing financial liabilities, the difference between the book amount and the consideration paid (including any transferred non-cash assets or assumed liabilities) is recognized as profit or loss.

4. Derivatives

The derivative instruments signed by the consolidated company include forward foreign exchange contracts, currency swap contracts, and convertible bond asset swap contracts that are used to manage the interest rate and exchange rate risk of the consolidated company.

Upon signing the contracts, derivatives are recognized at fair value initially and then subsequently measured at fair value on the balance sheet date. The profit or loss resulting from the subsequent measurement is directly booked under the profit or loss. Then, the timing of recognizing the designated and effective hedging derivatives depends on the nature of the hedging relationship. When the fair value of the derivatives is positive, it is classified as a financial asset; when the fair value is negative, it is classified as a financial liability.

Before 2017 (inclusive), if the embedded derivatives were defined as risks and the characteristics of which are closely associated with the risks and characteristics of the master contract, and the omnibus contracts are financial assets or financial liabilities at fair value through income statements, such derivatives shall be construed as unitary derivatives. From 2018 onward, derivatives embedded in the master contract of the assets within the scope of IFRS 9 shall be classified on the basis of the overall contracts of the financial assets. If the derivatives are not embedded in the master contract of the assets within the scope of IFRS 9 (such as embedded in financial liabilities master contracts), and the embedded derivatives meet the definition of derivatives and the risks and characteristics of which are not closely associated with the risks and characteristics of the master contract and the omnibus contracts are not measured at fair value through income statement, such derivatives shall be construed as a unitary derivative.

(17) Provision for liabilities

The recognized liability reserve amount is with the risk and uncertainty of the obligation considered, and it is the optimum estimate of the expenditure required to settle the obligations on the balance sheet date. Provision for liabilities shall be measured based on the discount value of the estimated cash flow for the settlement of obligation.

(18) Treasury stock

Treasury stock was stated at cost and shown as a deduction in shareholders’ equity when the Company repurchased the stock, while it was stated at fair value if it was donation accepted by the Company.

The gains resulting from disposal of the treasury stock, if any, were higher than the book value, the difference thereof was stated under “capital surplus - treasury stock”. If gains were lower than the book value, the difference should first be offset against capital surplus from the same class of treasury stock transactions, and the remainder, if any, should be debited to retained earnings.

When the Company retired treasury stock, the treasury stock was written off, and against the “capital surplus – stock premium” and “capital stock” on a pro rata basis. When the book value of the treasury stock exceeded the total of the “capital stock” and “capital surplus-capital stock premium”, the difference was charged to capital surplus generated from the same class of treasury stock transactions and to retained earnings for any remaining amount. When the book value was lower than the total, the difference was credited to capital surplus arising from the same class of treasury stock transactions.

(19) Recognition of revenue

2018

The consolidated company, after identifying the performance obligations, had the transaction price amortized to each performance obligation and recognized as income when the performance obligations were fulfilled.

Contracts of which the time interval between the transfer of goods or services and the consideration is less than one year shall not have its major financial components, such as transaction price, adjusted.

Sales of products

The revenue from product sales is recognized as revenue and accounts receivable by the consolidated company at the time when the customer have set the prices and the right-of-use and are responsible for the resales and bear the risks of obsolete products.

When the material is supplied for processing, the ownership of the processed product is not transferred; therefore, the income is not recognized when the material is supplied.

Interest revenue

The interest income generated from financial assets is recognized when the economic benefit is likely to flow to the consolidated company and the amount of income can be reliably measured. Dividend revenues are recognized by the outstanding capital by the passage of time and the applicable effective interest rate on a accrual basis.

For a single or a group of similar financial asset that is reduced due to impairment losses, the subsequently recognized interest income is calculated in accordance with the interest rate that is used for the discounting of future cash flow when measuring the impairment loss.

Labor service provided

Labor service income is recognized at the time the service is provided.

Revenues yielded by the labor services rendered in accordance with the contract were recognized based on the progress degrees set forth under the contract.

Service fees and commission income

With respect to fee income and expense on the provision of loans or other services, the consolidated company allocates the transaction price to each contract obligation when customers contracts recognize the obligation and then recognizes the income upon fulfilling each performance obligation. Contracts of which the time interval between the services and the consideration is less than one year shall not have its major financial components, such as transaction price, adjusted.

Dividend income

Dividend income from investments is recognized when the shareholders’ right to receive payment is established; however, it is under the preconditions that the economic benefits associated with the transaction system are likely to flow into the consolidated company and the amount of revenues can be measured reliably.

2017

The revenue was recognized based on the consideration receivable or having been received, measured at fair values, deducted with estimated refunds, discounts claimed by customers or other similar allowances. Sales returns are appropriated reasonably in accordance with past experience and other factors.

Sales of products

The sale of goods is recognized as income at the time when the following conditions are fully fulfilled:

(1) The consolidated company has the significant risks and returns of the instruments transferred to the buyer.
(2) The consolidated company does not involve in the management of the instruments sold nor maintain effective control.
(3) The amount of income can be measured reliably.
(4) The transaction-related economic benefits is likely to flow to the consolidated company; and
(5) The transaction-related cost incurred or to be incurred can be measured reliably. When material is provided for processing, the significant risks and rewards related to the
ownership of the finished goods have not been transferred; therefore, the material provided for processing is not treated as sales.

Revenue generated from the sale of real property within the normal business scope is recognized when each real property is completed and delivered to the buyer. The guarantee and installment payments received prior to the recognition of the above revenue are included in the current liabilities of the consolidated balance sheet.

Concretely speaking, revenues of commodity sales were recognized when the commodities had been delivered with the legal ownership duly transferred.

The bonus points awarded to customer for the sale of goods under the consolidated company's customer loyalty programs are treated as multiple-element revenue model. The fair value of the received or receivable consideration of the original sales is allocated to awarded bonus points and the other components of the sales. The consideration allocated to the bonus points is measured at fair value (that is, the amount at which the bonus points can be sold separately). The consideration is not recognized as revenue in the original sales transaction but is deferred and recognized as revenue when the bonus points are redeemed and the obligations of the consolidated company have been fulfilled.

Interest revenue

Labor service provided

Labor service income is recognized at the time the service is provided.

Revenues yielded by the labor services rendered in accordance with the contract were recognized based on the progress degrees set forth under the contract.

Service fees and commission income

Service fee income and expense are recognized in a lump sum when the loan or other service is provided. If the service fees are earned for completing major projects, they are recognized on the completion of the major projects, such as, the syndicated loan service fee charged collected by the organizing bank. If the service fees income and expenses are earned or paid for the subsequent loan service, they are to be amortized over the service period depending on the materiality, or included for the calculation of loans and receivables’ effective interest rate.

Dividend income

(20) Leases

When the lease term is to have all risks and returns attached to the ownership of assets transferred to the lessee, it is classified as a financing lease. All other leases are classified as operating leases.

The consolidated company is the lessor

Under a financial lease, the amount to be collected from the lessee is recognized as lease receivables in accordance with the net lease investment of the consolidated company. Financial revenue is amortized into each accounting period to reflect the consolidated company’s fixed rate of return available for each respective period from the outstanding net lease investment.

The rental interest in the operational leasehold was recognized as profit within the duration of the relevant leasehold on the straight-line basis.

The consolidated company is the lessee

The financing leasehold was entered into account at the total amount of the current values of the lowest rental payments of various leasehold terms or fair value of the leasehold assets upon the starting date of leasehold, whichever is the lower. The rental liabilities payable were recognized simultaneously.

The implicit interest of the lease payment in each period is recognized as a financial expense for the current period. It can be capitalized if it can be directly classified into an asset that satisfies certain criteria.

Operating leases payments are recognized as expenses on the linear basis during the lease term.
(21) Employee benefits

Short-term employee benefits

Liabilities relating to short-term employee benefits are measured by the non-discounted amount of the expected payment in exchange for employee services.

Retirement benefits

The retirement benefit for the retirement plan is determined by the amount of the pension that should be paid during the period in which the employee provides the service, and is recognized as expenses for that period.

The determined cost of benefit for determined benefit retirement plan (including the cost of service, net interest, and reevaluation) is based on the actuary of projected unit method. The net interest arising from the cost of services (including current service costs and net defined benefit liabilities) is recognized as an employee benefits expense when incurred. The value of second measurement (including the profits and loss under actuary and the return on assets of the plan net or interest) shall be recognized as other comprehensive incomes and as retained earnings, if realized. No reclassification as profits and loss in subsequent periods.

Net defined benefit liability (asset) is the appropriation deficit (surplus) of the defined benefit pension plan. Net determined benefit asset shall not exceed the refund of the appropriated fund or decrease the present value of appropriation of fund in the future.

Employees preferential deposit benefit

The companies of the consolidated financial statements provide preferred deposit for the employees, including the offering of fixed amount preferred deposit at special rate for the employees currently in employment and for the payment to the retired employees and current employees at their retirement. The difference between the interest rate for the aforementioned preferred deposits and market rate shall fall within the scope of employee welfare.

According to the “Regulations Governing the Preparation of Financial Reports by Public Banks”, the interest from the preferred deposit for employees prearranged after retirement in excess of the interest under regular market rate shall be subject to actuarial calculation at the time of the retirement of the employees pursuant to IAS 19, “Employee Benefits” as recognized by FSC. However, the parameters for the assumptions in the actuarial calculation may be regulated by the competent authority, comply accordingly, if applicable.

Other long-term employee benefits

The accounting of long-term employee benefit and benefit after retirement is the same but related value under reevaluation shall be recognized as income.

(22) Income tax

Income tax expense is the sum of the current income tax and deferred income tax.

Income tax expenses in the current period

Additional income tax on unappropriated earnings is calculated in accordance with the provisions of the Income Tax Act of the Republic of China, to be recognized in the year of the shareholder resolution meeting.

The adjustment to prior period income tax payable is booked as current income tax.

Deferred tax

Deferred tax is computed in accordance with the temporary differences between the book value of assets and liabilities and the tax bases of taxable income. Deferred income tax liabilities are generally recognized for all taxable temporary differences. Deferred income tax assets are recognized when there is a likelihood to have taxable income available for income tax credit resulting from the expenses of deductable temporary differences and tax loss carryforwards.

The taxable temporary differences related to the investment in the equities of the subsidiaries, affiliates, and joint ventures are recognized as deferred income tax liabilities, except for those that the Consolidated Company can control the timing of reversing the temporary difference and the temporary difference is unlikely reversible in the foreseeable future. The deferred income tax asset arising from deductible temporary differences associated with such investment and equity is recognized within the range of earnings that are with sufficient taxable income to realize temporary differences and are expected to be reversed in the foreseeable future.

The book amount of deferred income tax asset must be reviewed at each balance sheet date. The book amount of those that no longer have any sufficient taxable income to recover all or part of the

asset, should be adjusted down. Those that are not originally recognized as deferred income tax assets should also be reexamined at each balance sheet date. The book amount of those that are likely to generate taxable income in the future for the recovery of all or part of its assets should be adjusted up.

Deferred income tax assets and liabilities are measured in accordance with the expected liability liquidation or the tax rate in the period when the asset is realized. The tax rate is based on the tax rate and tax laws that are legislated or substantively legislated at the balance sheet date. The measurement of deferred income tax liabilities and assets reflects the tax effect resulting from the book amount of the assets and liabilities expected to be recovered or liquidated at the balance sheet date.

Current and deferred income tax for the year

Current and deferred income taxes are recognized in the profit or loss, except for the current and deferred income taxes related to the items recognized in other comprehensive profit or loss or directly included in the equity are recognized in the other comprehensive profit or loss or directly included in the equity. If the current income tax or deferred income tax is resulting from a business consolidation, the income tax effect is included in the accounting process for consolidated company. (23) Employee stock option

Employee Stock Option (ESO) is based on the fair value of the equity instrument and the optimized estimation of projected entitlement as of the day of transfer and recognized as expense under the straight line method within the period of projected entitlement, and subject to adjustment of capital surplus simultaneously – ESO. If gain is realized as of the day of transfer, recognize as expenses in full amount as of the transfer day.

V. Major sources leading to major accounting judgments and uncertainties in estimate

When the accounting policies stated in Note IV adopted by the consolidated company, for the information that is hard to collect from other sources, the management should have the relevant judgments, estimates, and assumptions made in accordance with the historical experience and other relevant factors. Actual results may differ from the estimates.

The management will continue to review the estimates and basic assumptions. If the correction of estimates affects only the current period, it is recognized upon amendment. If the amended estimate affects both current and future periods, it is recognized in the current and future periods. Significant accounting judgments, estimates, and assumptions made by the consolidated company are described as follows:

(I) Judgment of the mode of operation under the classification of financial assets (applicable from 2018 onward)

The consolidated company assessed the mode of operation of the financial assets on the basis of the common management platform of a group of financial assets in order to achieve the designated business objective. All relevant evidence shall be considered in the evaluation, including the method for the measurement of asset performance, the risks affecting performance, and the method for determining remuneration to related managers, with the use of sound judgment. The consolidated company shall continue to evaluate whether the judgment of the mode of operation is appropriate, and based on this it shall keep track of financial assets on the basis of cost after amortization before maturity for removal and the investment of debt instruments at fair value through other comprehensive income so as to understand whether the evaluation of the disposition of assets is congruent with the business objective. If the operation was found to be in deviation from the course to the objective, the consolidated company shall postpone the classification of the acquisition of assets after adjustment.

(2) Evaluation of anticipated credit loss of loans and accounts receivable 2018

The consolidated company shall base this evaluation on the cash flow that could be collected from all contracts, and the difference from the evaluation of expected cash flow collected for the measurement of anticipated credit loss from the weighted average risk of default with consideration of foresight information at the original effective interest rate or the discounted effective interest rate after adjustment.

2017

Consolidated company shall include impairment of loans and receivable on a separate basis or in aggregate and estimate the future cash flows in accordance with the following methods:

1. Separate impairment:

If specific account amounted to NTD10 million or more after settlement showed signs of impairment with objective evidence, the consolidated company will consider whether collateral has been collected, the nature of the collaterals, the character of the case and experience in the past for assessing the perpetuity and estimate the cash flow in the future.

2. Overall impairment assessment:

If there is no objective evidence showing signs of impairment on loans and receivable of specific account after settlement, the consolidated company shall assess the impairment in aggregate by categorization. Consolidated company based on the book value of individual accounts in the groups to estimate the probability of default and the recovery rate for the evaluation of cash flow in the future.

The amount of impairment is based on the difference between the book value of the asset and the cash flow in the future of the assets at the initial effective interest under discount in measurement. If the actual future cash flows are less than expected, a material impairment loss may have resulted.

(III) Useful lives of property, plant and equipment and investment property

As stated in Note 4 (10) and (11), the consolidated company reviews the estimated useful life of the property, plant and equipment and investment property on each balance sheet date. Please refer to Note 23 and 24 for the useful lives of the property, plant and equipment and investment property. VI. Cash and cash equivalents

Cash and cash equivalents
Cash on hand Bank deposits Notes and checks for clearing Due to Central Bank and other banks		December 31, 2018 $ 4,333,984 2,968,670 5,715,928 5,828,080 $ 18,846,662		December 31, 2017
				$ 3,786,911 3,412,858 6,021,021 5,196,382 $ 18,417,172

(I) The cash and cash equivalent balance on the consolidated Statement of Cash Flow as of December 31, 2018 and 2017, respectively, and the related adjustments of the consolidated balance sheet are as follows:

ollows:
Cash and cash equivalents on the consolidated balance sheet The “Due from Central Bank and Banks” in compliance with the definition of cash and cash equivalents under IAS 7 approved by the FSC The “bonds and securities sold under repurchase agreements” that meet the definitions of cash and cash equivalents under IAS 7 approved by the FSC Cash and cash equivalents on the Consolidated Statement of Cash Flow	December 31, 2018 $ 18,846,662 14,484,265 9,294,168 $ 42,625,095	December 31, 2017
			$ 18,417,172 13,583,928 11,283,082 $ 43,284,182

(II) The amounts of certificate of deposit at other banks from the consolidated company used as the operation bond of Taichung Commercial Bank Securities Brokerage as of December 31, 2018 and 2017 are both NT$200,000 thousand, and they are trasnferred to the refundable deposit, as described in Note 26.

VII Due from Central Bank and lend to Banks

Reserve for deposits Reserve for deposits –checking account Reserve for deposits –demand account Financial Information Service Co., Ltd. – liquidated account Reserve for deposits in foreign currency Call loans to banks Reserve for trust funds compensation		December 31, 2018 $ 12,624,827 17,001,032 1,798,018 61,420 223,600 60,000 $ 31,768,897		December 31, 2017
				$ 12,171,562 16,396,414 1,020,959 53,586 429,121 50,000 $ 30,121,642

(I) The deposit reserve is the average balance of various deposits that are required to be deposited as reserve by Taichung Commercial Bank on a monthly basis, and it is deposited to the reserve account at the Central Bank in accordance with the required deposit reserve ratio. The demand account reserve can be used only for the monthly adjustment of the deposit reserve.
(II) The Reserve for trust funds compensation by Government bonds on the basis of cost after amortization on December 31, 2018 is stated at the par value of NTD 60,000 thousand. Please refer to Note 41 for details.

(III) The Reserve for trust funds compensation by Government bonds held to maturity on December 31, 2017 is stated at the par value of NTD 50,000 thousand. Please refer to Note 41 for details. VIII. Financial instrument at fair value through profit and loss

Financial assets at fair value through profit and loss Commercial papers Shares traded on the Taiwan Stock Exchange or OTC exchange Shares traded on foreign exchange or OTC exchange PEM Group Insurance policy assets Beneficiary certificate Corporate bond Open-end funds and money market instruments Assets swap agreement Foreign exchange contracts	December 31, 2018 $ 22,044,240 1,629,612 65,560 998,147 524,766 57,899 - 1,911,673 29,105	December 31, 2017
		$ 27,935,360 1,374,718 90,792 - 710,458 182,929 4,940 1,648,955 77,442

Financial assets at fair value through profit and loss Forward contract FX options contracts Interest rate derivatives Financial liabilities at fair value through profit and loss Foreign exchange contracts Forward contract FX options contracts Interest rate derivatives	December 31, 2018 $ 49,726 98,176 11 $ 27,408,915 $ 55,386 30,977 78,986 11 $ 165,360	December 31, 2017	December 31, 2017
			$ 57,188 82,462 290 $ 32,165,534 $ 98,478 25,612 82,845 290 $ 207,225

(I) The consolidated company financial derivative contract related to a foreign exchange rate is a nontrading operation performed for the purpose of providing customers with a hedging tool for the foreign exchange position generated from import/export and foreign exchange and hedging the risk from business and meeting the need for foreign exchange funds.
(II) The foreign exchange contracts which have not yet matured before December 31, 2018 and 2017 are specified as follows:

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December 31, 2018 December 31, 2017
Contract Amount Contract Amount
(NT$ thousand) Date of maturity (NT$ thousand) Date of maturity
Sold CNY 121,693 2019/01/11-2019/11/13 Sold CNY462,369 2018/01/26-2018/12/04
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HKD		162,378	2019/01/22-2019/03/05	HKD	209,761	209,761	2018/01/11-2018/02/26
EUR		3,000	2019/01/09	EUR	16,500		2018/01/05-2018/01/17
USD		42,219	2019/01/07-2019/12/04	GBP	8,500		2018/01/03-2018/01/09
JPY		3,671,053	2019/01/04-2019/01/07	USD	22,996		2018/01/04-2018/04/12
Bought	CNY	28,799	2019/01/28-2019/12/04	Bought	CNY	11,586	2018/03/27-2018/04/12
		NZD	2019/01/11	NZD		8,000	2018/01/11
7,000
ZAR		316,333	2019/01/11-2019/01/22	ZAR	28,2018		2018/01/04
AUD		15,000	2019/01/07-2019/01/22	AUD	8,000		2018/01/04
GBP		13,500	2019/01/04-2019/01/07	CAD	9,508		2018/01/04
USD		58,134	2019/01/04-2019/11/13	JPY	940,850		2018/01/05
				USD	118,149		2018/01/03-2018/12/04

(III) The forward contracts which have not yet matured before December 31, 2018 and 2017 are specified as follows:

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Contract Amount
Currency Date of maturity (NT$ thousand)
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	Currency	Date of maturity	Contract Amount (NT$ thousand)
December 31,
2018
Forward exchange	USD translated into	2019/01/02-2019/11/08	USD53,603/NTD1,620,267
sold	NTD
Forward exchange	EUR translated into	2019/02/12-2019/10/30	EUR3,215/NTD113,526
sold	NTD
Forward exchange	RMB translated into	2019/01/24	CNY1,000/NTD4,428
sold	NTD
Forward exchange	JPY translated into	2019/03/05-2019/12/04	JPY211,000/NTD57,484
sold	NTD

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Currency Date of maturity
Forward contract NTD translated into 2019/02/15
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Forward contract	Currency NTD translated into	Date of maturity 2019/02/15
bought	USD
Forward contract	EUR translated into	2019/01/12-2019/06/21
bought	USD
Forward contract	GBP translated into	2019/01/15-2019/05/17
bought	USD
Forward contract	JPY translated into	2019/01/23-2019/01/28
bought	USD
Forward contract	RMB translated into	2019/01/09-2019/12/25
bought	USD
Forward contract	USD translated into	2019/02/21-2019/06/24
bought	EUR
Forward contract	USD translated into	2019/03/12-2019/05/07
bought	GBP
Forward contract	Pound Sterling to	2019/02/15-2019/03/22
bought	Japanese Yen
Forward contract	USD translated into	2019/03/20-2019/06/28
bought	JPY
Forward contract	EUR translated into	2019/06/25
bought	JPY
December 31,
2017
Forward exchange	USD translated into	2018/01/02-2018/12/27
sold	NTD
Forward exchange	EUR translated into	2018/01/05-2018/03/16
sold	NTD
Forward exchange	RMB translated into	2018/01/24-2018/03/12
sold	NTD
Forward exchange	JPY translated into	2018/02/13-2018/07/11
sold	NTD
Forward exchange	CAD translated into	2018/01/18-2018/03/09
sold	NTD
Forward contract	NTD translated into	2018/01/04-2018/01/19
bought	USD
Forward contract	EUR translated into	2018/01/02-2018/06/07
bought	USD
Forward contract	RMB translated into	2018/03/27-2018/05/07
bought	USD
Forward contract	GBP translated into	2018/01/18-2018/03/29
bought	USD
Forward contract	JPY translated into	2018/01/22-2018/06/26
bought	USD
Forward contract	HKD translated into	2018/01/11
bought	USD
Forward contract	NZD translated into	2018/02/08
bought	USD
Forward contract	AUD translated into	2018/02/06
bought	USD
Forward contract	USD translated into	2018/01/18-2018/04/10
bought	GBP
Forward contract	USD translated into	2018/01/08-2018/03/29
bought	RMB
Forward contract	USD translated into	2018/01/08-2018/06/12
bought	EUR
Forward contract	USD translated into	2018/02/22-2018/05/17
bought	JPY
Forward contract	USD translated into	2018/03/15
bought	AUD

Contract Amount (NT$ thousand) NTD57,030/USD2,000

EUR17,700/USD20,771 GBP11,700 /USD15,167 JPY441,740/USD4,000 CNY88,843/USD12,982 USD22,660/EUR19,600 USD2,413/GBP1,900 GBP7,600/JPY1,097,730 USD17,000 /JPY1,880,498 EUR1,000/JPY125,910

USD115,951/NTD3,468,476 EUR1,394/NTD49,404 CNY3,170/NTD14,114 JPY160,575/NTD43,614 CAD389/NTD9,382 NTD29,822/USD1,000 EUR18,700/USD22,224 CNY29,785/USD4,277 GBP5,500/USD7,377 JPY1,935,589/USD17,300 HKD1,798/USD230 NZD1,000/USD736 AUD600/USD460 USD19,104/GBP14,250 CNY42,000/USD6,353 EUR25,050/USD29,717 JPY718,241/USD6,400 AUD2,000/USD1,533

Forward contract bought Forward contract bought	Currency USD translated into CAD JPY translated into EUR	Date of maturity 2018/03/29 2018/03/22-2018/03/23	Contract Amount (NT$ thousand)
			CAD629/USD500 JPY268,900/EUR2,000

(IV) As of December 31, 2018 and 2017, the consolidated company's asset exchange contracts amounted to NT$1,911,400 thousand and NT$1,648,300 thousand (both in thousand), respectively, with the interest rate range of 0.90% to 1.35% and 0.90% to 1.40%, respectively.
(V) As of December 31, 2018 and 2017, the consolidated company's contract values for foreign exchange options were NT$6,617,168 thousand (US$215,473 thousand) and NT$8,770,121 thousand (US$294,596 thousand), respectively.
(VI) As of December 31, 2018 and 2017, the consolidated company's interest rate structured commodity contracts amounted to NT$14,889 thousand and NT$43,434 thousand, respectively, with the interest rate range of 6.5% and 6.50% to 6.60%, respectively.
(VII) The PEM Group policy assets held by the consolidated company were originally classified as other financial assets in accordance with IAS 39. Please refer to Note 3 and Note 26 for its reclassification and the information of 2017.

IX. Bonds and securities sold under repurchase agreements

As of December 31, 2018 and 2017, the consolidated company's repurchase of coupons and bonds amounted NT$9,294,168 thousand and NT$11,283,082 thousand, with the interest rate range of 0.35%to 0.65% and 0.40% to 0.42%, and the re-sell amounts after the contract were NT$9,295,812 thousand and NT$11,284,292 thousand, respectively.

X. Notes receivable, accounts receivable and other receivables

D		December 31, 2017
( ( tes rece D
( ( ( D	( ( (	$ 2,610,983 791,111 3,128,384 1,656,114 1,135,207 180,644 ) 240,790 ) 116,245) $ 8,784,120 December 31, 2017
		$ 1,805,037 871,032 627,127 45,958

Others Less: Loss allowance Less: Loss allowance - Taichung Commercial Bank	D ( (	ecember 31, 2018 378,779 3,719,855 1,932 ) 147,554) $ 3,570,369	( (	December 31, 2017 541,309 3,890,463 1,932 ) 170,758) $ 3,717,773

(I) Accounts receivable 2018

The average credit period for the consolidated company's sales of goods is 30 to 90 days, and the accounts receivable are not interest-bearing. The unpaid balance 30 days over the credit period will incur an interest at 3% annual interest rate. The consolidated company only conducts transactions with the parties which have passed the internal credit check, and if necessary, shipment may be stopped and guarantee notes may be needed to mitigate the potential risk of financial losses caused by default. The consolidated company will use other publicly available financial information and historical transaction records to rate major customers. The consolidated company continuously monitors the credit risk exposure and the credit rating of the counterparty, and the total transaction amount is distributed to various customers with qualifying credit ratings. Every year, the management reviews and approves, based on their level of authorization, the credit limit of counterparties to manage the credit risk exposure.

In order to mitigate credit risk, the management of the consolidated company assigns dedicated personnel responsible for the decision on credit line, credit approval and other monitoring procedures to ensure that the overdue receivables are recovered and appropriate actions are taken. In addition, the consolidated company will review the recoverable amount of receivables on each balance sheet date to ensure that appropriate impairment loss has been appropriated for the uncollectible receivables. Under the circumstance, the Company’s management believes that the consolidated company’s credit risk is significantly reduced.

Except for Taichung Commercial Bank and its subsidiary, the consolidated company adopts the simplified approach of the IFRS 9 to recognize the loss allowance of receivables based on the expected credit loss of the duration. The full-lifetime expected credit losses are calculated using Provision Matrix, which considers the historical default records and current financial status, industry economic conditions, as well as GDP forecast and industry outlook. Due to the historical experience of credit losses of the consolidated companies, there is no significant difference in the loss patterns of different customer groups. Therefore, the provision matrix does not further distinguish the customer base, and only sets the expected credit loss rate based on the overdue days of receivables.

If there is evidence that the counterparty is facing serious financial difficulties and the consolidated company cannot reasonably expect the recoverable amount back, the consolidated company will directly write off the relevant accounts receivable, but will continue its recourses, and the amount recovered will be recognized in profit or loss.

The consolidated company (excluding Taichung Commercial Bank and its subsidiary) measures the notes receivable and the loss allowance of accounts in accordance with the provision matrix: December 31, 2018

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Overdue
Overdue 1 to Overdue 31 Overdue 61 over 120
Not overdue 30 days to 60 days to 120 days days Total
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Expected credit loss rate Total Book Value Allowance for loss (expected credit loss of (	0%~5% $ 2,589,952 71,475) (	13%~17% $ 804,132 103,445) (	65%~75% $ 82,066 53,418) (	75%~100% $ 154 154) (	100% $ 10,931 10,931)	- $3,487,235 ( 239,423)

the given duration) Cost after amortization $ 2,518,477 $ 700,687 $ 28,648 $ - $ - $3,247,812

Changes in the allowance loss of the accounts receivable are as follows:

Beginning balance (IAS 39) Retroactive application of IFRS 9 adjustments Beginning balance (IFRS 9) Add: Recover the bad debts that have been written off Add: Impairment loss appropriated in current period Less: Actual write-off amount in the current period Foreigncurrency translation differences Balance - ending		2018
	( (	$ 612,392 586 612,978 15,872 32,890 43,353 ) 71,851 ) $ 546,536

The loss allowance of the above-mentioned receivables include notes receivable, accounts receivable, other receivables and the loss allowance from non-loans transferred to collection. 2017

Credit policy for the consolidated companies is the same for 2017 and 2018. With respect to the assessment of allowance for bad debts of accounts receivables, the historical data have shown that accounts receivable over 360 days are unlikely to be recovered, and the consolidated company adopts a more conservative view for accounts receivable older than 360 days and recognizes them as 100% allowance for bad debts. As for the accounts receivable between 60 and 360 days, the previous default records are reviewed to analyze the current financial conditions, further estimating the amount that may not be recovered.

For the overdue accounts receivable on the balance sheet date that is without the allowance for bad debts appropriated by the consolidated company, since the credit quality has not been materially changed, the consolidated company’s management believes that the amount can be recovered; therefore, the consolidated company does not have any collateral or other credit enhancements collected for the protection of the accounts receivable.

Aging of accounts receivable as of December 31, 2017 is as follows:

0 to 60 days 61 to 90 days 91 to 180 days 181 to 360 days Total	December 31, 2017	December 31, 2017
		$ 2,955,766 1,989,113 113,326 3 $ 5,058,208

The information above is the aging analysis on the basis of date of account establishment. The consolidated company does not have cases that are past due without impairment. Receivables for allowance for doubtful accounts changes, information as below:

Balance as of January 1, 2017 Add: Bad debt expense – current period Less: Bad debts write-off Add: Recover the bad debts that have been written off Reclassification	Impairment loss that is individually evaluated $ 372,244 276,754 ( 158,190 ) 17,906 ( 101,644 )	Impairment under group assessment $ 104,989 - - - 101,644	Total
			$ 477,233 276,754 ( 158,190 ) 17,906 -

Foreigncurrency translation differences ( Balance as of December 31, 2017	127) ( $ 406,943	1,184) ( $ 205,449	1,311) $ 612,392

The allowance for bad debts of the above-mentioned receivables include notes receivable, accounts receivable, other receivables and the allowance for bad debts from non-loans transferred to collection.

(II) Changes in carrying amount of 2018 accounts receivable of Taichung Commercial Bank and its subsidiary:

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Anticipated credit Financial assets
Anticipated credit loss within the with credit Total
loss in 12 months perpetuity of the
financial assets impairment
Balance as of January 1, 2018 $ 59,913,373 $ 429,594 $ 302,897 $ 60,645,864
Converted as anticipated credit
loss within the perpetuity of
the financial assets ( 68,200 ) 68,250 ( 50 ) -
Converted as financial assets
with credit impairment ( 92,358 ) ( 22,337 ) 114,695 -
Converted as anticipated credit
loss in 12 months 30,898 ( 30,556 ) ( 342 ) -
Initiated or procured
receivables 7,277,784 12,086 74,539 7,364,409
Write-off bad debts ( 2,866 ) - ( 112,012 ) ( 114,878 )
de-recognition ( 8,817,972 ) ( 235,487 ) ( 102,244 ) ( 9,155,703 )
Other changes 854,173 4,910 37,173 896,256
Balance - ending $ 59,094,832 $ 226,460 $ 314,656 $ 59,635,948
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The above-mentioned receivables of Taichung Commercial Bank and its subsidiary as of December 31, 2018 include interbank deposits, the Central Bank deposits and interbank lending, bills and bonds purchased under resale agreements, notes receivable, credit card receivables, factoring, interest receivable, acceptance receivable, lease receivable, receivable from securities sold, receivable from securities delivered, other receivables, non-loans transferred to collection and refundable deposit. (III) Changes in allowance for bad debts of 2018 accounts receivable of Taichung Commercial Bank and its subsidiary:

bsidiary:
	cr	Anticipated edit loss in 12 months		Anticipated credit loss within the perpetuity of the financial assets		Financial assets with credit impairment	a	Impairment recognized in ccordance with IFRS 9	I B	mpairment difference recognized in accordance with the “Regulations Governing the Procedures for anking Institutions to Evaluate Assets and Deal with Non- performing/ Non- accrual Loans”		Total
Balance as of January 1, 2018		$ 106,947		$ 51,093		$ 162,048		$ 320,088		$ 46,904		$ 366,992
Changes in financial instruments recognized at the beginning of the period: Converted as anticipated credit loss within the perpetuity of the financial assets Converted as financial assets with credit impairment Converted as anticipated credit loss in 12 months Financial assets removed in current period Procured or initiated new financial assets Impairment difference recognized in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- performing/ Non-accrual Loans” Write-off bad debts Recovered amount after write-off bad debts Foreign exchange settlement and other changes	( ( ( ( (	966 ) 1,001 ) 3,508 85,315 ) 70,292 - 2,866 ) - 3,032 )	( ( (	985 1,356 ) 3,228 ) 45,073 ) 1,416 - - - 1,858	( ( ( (	19 ) 2,357 280 ) 5,558 ) 5,662 - 49,769 ) - 36,874	( (	- - 135,946) 77,370 - 52,635) - 35,700	(	- - - - - 55,612 62,243 ) 17,227 -	( (	- - - 135,946) 77,370 55,612 114,878) 17,227 35,700
Balance-ending		$ 87,567		$ 5,695		$ 151,315		$ 244,577		$ 57,500		$ 302,077

Allowance for bad debts for above-mentioned receivables includes allowance for bad debts for delinquent loans other than loans transferred from loans. Please refer to Note 26 for details. (IV) The accounts of receivable of Taichung Commercial Bank and its subsidiary as of December 31, 2017 are classified according to the credit risk characteristics of the products:

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Total receivables Allowance for bad debt
Item
December 31, 2017 December 31, 2017
Corporate
Individual banking $ 65,962 $ 18,835
evaluation of Consumer
With individual impairment banking 8,672 223
evidence of objective Others 258,909 141,899
impairment evaluation of Portfolio Corporate banking 9,051 1,901
Consumer
impairment banking 30,483 14,482
Without Corporate
individual Portfolio banking 2,809,370 36,763
objective evaluation of Consumer
evidence of impairment banking 980,249 7,403
impairment Others 56,483,168 73,018
Total 60,645,864 294,524
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The aforementioned receivables of the Taichung Commercial Bank and its subsidiaries as of March 31, 2017 covered due from banks, due from the Central Bank and call loans to banks, bonds and securities sold under repurchase agreements, note receivables, credit card proceeds receivables, receivable factoring, interest receivables, acceptance receivables, non-loan recognized as accounts for collection, and refundable security deposits.

The above-mentioned allowance for bad debts is disclosed in accordance with the IAS 39, based on the characteristics of credit risks. Taichung Commercial Bank has allocated 1% or more of Category One credit asset as allowance for bade debts in accordance with the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans and Jin-Guan-Yin-Fa-Zhi Document #10010006830 and added allowance for bad debts on December 31, 2017.

XI. Inventory

nventory
Merchandise Finished goods Work in process Raw materials Supplies	December 31, 2018 $ 1,143,707 838,475 148,893 483,756 74,203 $ 2,689,034	December 31, 2017
			$ 1,024,857 485,372 70,948 388,336 87,029 $ 2,056,542

(1) The inventories of finished goods included the finished goods, by-products, supplies in transit and commissioned processed goods produced by the Consolidated Company, primarily the finished goods produced by Kaohsiung petrifaction plant, ethylene glycol, and the finished goods of the polyester plant, polyester silk, et al.
(2) The total amount of housing properties for sales as of December 31, 2018 and 2017 were both NT$65,775 thousand. It was a joint venture between CMFC, Hung Chou Fiber Industry and Shan Fong Construction in 1997 to invest in a project in Sanchong District of New Taipei City. The project had been completed in 2000 and delivered to buyers. The consolidated company assessed that as of December 31, 2018, the net realizable value is zero.
(3) The consolidated company's cost of goods sold related to inventory in 2018 and 2017 was NT$22,612,538 thousand and NT$19,353,965 thousand, respectively. Cost of goods sold include

inventory losses of NT$4,520 thousand and NT$5,616 thousand, respectively, and the loss from work stoppage were NT$382,898 thousand and NT$573,517 thousand, respectively.

(4) As of December 31, 2018 and 2017, the allowance for inventory losses was NT$486,647 thousand and NT$491,519 thousand, respectively.

XII. Prepayments

XIII .	Pre-paid expenses Pre-paid material purchases Tax credit Available-for-sale noncurrent	December 31, 2018 $ 729,629 95,534 206,574 $ 1,031,737 assets December 31, 2018 $ 769,610	December 31, 2017
		assets	$ 759,521 141,779 238,801 $ 1,140,101 December 31, 2017 $ -
	Land for sale

(1) The board of CMFC resolved on August 9, 2016 that the Company wishes to sell part of the land of investment property in Yunlin spinning industrial park to make the assets more liquid. The land was classified as non-current assets available for sale. In 2017, it did not meet the conditions of being non-current assets available for sale and therefore was re-classified to an investment property. The board resolved in 2018 to again attempt to sell the property and actively sought buyers. Therefore, the land to be sold was re-classified to non-current assets available for sale. Please refer to Note 24.
(2) For the available-for-sale noncurrent assets furnished as the security for mortgage, please see Note 41.

XIV. Other current assets

41. her current assets
Restricted assets – bank deposits Others	December 31, 2018 $ 606,217 11,532 $ 617,749	December 31, 2017
			$ 396,858 36,095 $ 432,953

Restricted assets - Current. Referred to as the collateral ued by the consolidated company for custom duties of the Custom Bureau and inter-bank financing. Please refer to Note 41. XV. Discounting and advances - Net

Bills negotiated and discounts Overdraft Secured overdraft Accounts receivable financing Securities receivable financing Short-term loan Short-term secured loans Mid-term loans Mid-term secured loans Long-term loans Long-term secured loans	41 December 31, 2018 $ 475,822 1,061 10,031 80,862 866,372 43,046,052 December 31, 2018 $ 103,198,900 49,659,266 109,958,945 4,499,987 145,623,202	December 31, 2017
		$ 648,036 1,555 23,154 28,060 1,201,728 46,156,527 December 31, 2017
		$ 93,034,520 42,237,777 108,897,802 4,405,504 139,335,006

Delinquent Accounts Add: Adjustment of premium/discount Less: allowance for bad debt	(	December 31, 2018 1,662,082 459,082,582 44,071 6,532,101) $ 452,594,552	(	December 31, 2017 1,185,395 437,155,064 47,706 6,344,810 ) $ 430,857,960

(1) As of December 31, 2018 and 2017, the balance of loans and other credits with frozen interest rates at Taichung Commercial Bank was NT$1,640,185 thousand and NT$1,168,006 thousand, respectively. The interest receivables not recorded were NT$34,228 thousand and NT$30,298 thousand, respectively.
(2) In 2018 and 2017, Taichung Commercial Bank did not have the cases of translation of creditor's rights without prosecution.
(3) The changes in the total book value of 2018 discounting and advances of Taichung Commercial Bank and its subsidiary are shown as follows:

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Anticipated credit
Anticipated credit loss within the Financial assets with Total
loss in 12 months perpetuity of the credit impairment
financial assets
Balance as of January 1, 2018 $ 402,804,819 $ 32,188,249 $ 2,209,702 $ 437,202,770
Converted as anticipated credit loss
within the perpetuity of the financial
assets ( 7,160,622 ) 7,163,352 ( 2,730 ) -
Converted as financial assets with
credit impairment ( 1,835,301 ) ( 4,787,508 ) 6,622,809 -
Converted as anticipated credit loss in
12 months 7,142,086 ( 7,141,465 ) ( 621 ) -
Initiated or procured discount and loans 251,247,141 3,555,867 1,327,498 256,130,506
Write-off bad debts ( 20,366 ) ( 306,169 ) ( 707,249 ) ( 1,033,784 )
de-recognition ( 195,580,567 ) ( 14,245,972 ) ( 875,437 ) ( 210,701,976 )
Other changes ( 20,728,689 ) ( 1,084,623 ) ( 657,551 ) ( 22,470,863 )
Balance - ending $ 435,868,501 $ 15,341,731 $ 7,916,421 $ 459,126,653
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(4) Changes in allowance for bad debts of 2018 discounting and advances of Taichung Commercial Bank and its subsidiary:

and its subsidiary:
	A l	nticipated credit oss in 12 months	A	nticipated credit loss within the perpetuity of the financial assets		Financial assets with credit impairment		Impairment recognized in accordance with IFRS 9	t an	Differences in impairment recorded in accordance with the Regulations Governing he Procedures for Banking Institutions to Evaluate Assets d Deal with Non- performing/Non- accrual Loans		Total
Balance as of January 1, 2018		$ 1,644,957		$ 2,624,516		$ 490,440		$ 4,759,913		$ 1,584,897		$ 6,344,810
Changes in financial instruments recognized at the beginning of the period: Converted as anticipated credit loss within the perpetuity of the financial assets Converted as financial assets with credit impairment Converted as anticipated credit loss in 12 months Financial assets removed in current period Procured or initiated new financial assets Impairment difference recognized in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- performing/ Non- accrual Loans” Write-off bad debts Recovered amount after write-off bad debts Foreign exchange settlement and other changes	( ( ( ( (	15,810 ) 6,279 ) 376,160 1,035,356 ) 1,277,528 - 3 ) - 472,863 )	( ( ( (	16,855 442,489 ) 376,096 ) 1,590,753 ) 200,940 - 15,876 ) - 244,743	( ( ( (	1,045 ) 448,768 64 ) 172,658 ) 421,442 - 242,177 ) - 1,090,502	( (	- - - 2,798,767 ) 1,899,910 - 258,056 ) - 862,382	(	- - - - - 550,859 775,728) 706,691 -	( (	- - - 2,798,767 ) 1,899,910 550,859 1,033,784) 706,691 862,382
Balance - ending		$ 1,768,334		$ 661,840		$ 2,035,208		$ 4,465,382		$ 2,066,719		$ 6,532,101

(5) The discounting and advances of Taichung Commercial Bank and its subsidiary as of December 31, 2017 are classified according to the credit risk characteristics of the products:

Discounts and loans

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Total amount Allowance for bad debt
Item
December 31, 2017 December 31, 2017
Corporate
Individual $ 7,071,371 $ 1,855,412
banking
evaluation of
With individual Consumer
impairment 2,273,811 255,556
objective banking
evidence of Corporate
Portfolio 911,688 283,721
impairment banking
evaluation of
Consumer
impairment 2,177,833 278,992
banking
Without Corporate
individual Portfolio banking 221,343,141 1,632,665
objective evaluation of
Consumer
evidence of impairment 203,377,220 214,635
banking
impairment
Total 437,155,064 4,520,981
----- End of picture text -----

The aforementioned provision for bad debts is disclosed is calculated by the specific feature of the risk pursuant to IAS 39. The Bank has recognized provision for bad debts for Category 1 loan

assets of more than 1% in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” and Letter JinGuan-Yin-Fa-Zi No. 10010006830 and at a ratio not falling below 1.5% as stated in Letter Jin-GuanYin-Guo-Zi. No. 10300329440, and appropriated at the higher the amount of the aforementioned evaluation result and the ratio.

(6) Details and changes in allowance for bad debts of 2017 discounting and advances listed by accounts of Taichung Commercial Bank and its subsidiary:

Balance - beginning Provided in the current period Write-off of non-performing loans ( Collection of written off bad debt Exchange effects ( Balance - ending XVI.Financial assets at fair value through other comprehensive profit or loss Equity instrument investments measured at fair value through other comprehensive income Debt instrument investments measured at fair value through other comprehensive income	Balance - beginning Provided in the current period Write-off of non-performing loans ( Collection of written off bad debt Exchange effects ( Balance - ending XVI.Financial assets at fair value through other comprehensive profit or loss Equity instrument investments measured at fair value through other comprehensive income Debt instrument investments measured at fair value through other comprehensive income		2017
			$ 6,226,687 770,744 1,010,672 ) 391,827 33,776 ) $ 6,344,810 December 31, 2018
	Equity instrument investments measured at fair value through other comprehensive income Debt instrument investments measured at fair value through other comprehensive income
			$ 3,521,896 27,492,194 $ 31,014,090

(I) Equity instrument investments measured at fair value through other comprehensive income

Domestic publicly listed, OTC and Emerging Stock Board companies Non listed (OTC) domestic stock Overseas listed, OTC and non-listed companies	December 31, 2018	December 31, 2018
		$ 2,412,780 905,465 203,651 $ 3,521,896

The consolidated company invested in the aforementioned common shares of companies in line with its long-term investment strategic objective with the anticipation of return from long-term investment. The management of the consolidated company holds that the short-term fluctuation in the fair value of these investments shall be recognized as income or loss and is not congruent with the aforementioned long-term investment plan, therefore they chose to designate these investments as financial assets at fair value through other comprehensive income. The assets were originally classified as financial assets available for sale in accordance with IAS 39. Please refer to Note 1, 17 and 20 for its re-classification and the information of 2017.
Equity instruments measured at fair value through other comprehensive income used as pledge collateral. Please refer to Note Forty-One.
(II) Debt instrument investments measured at fair value through other comprehensive income

Corporate bond Government bonds Overseas bond		December 31, 2018
		$ 20,730,435 5,976,359 785,400 $ 27,492,194

The debt instruments held by the consolidated company are originally classified as financial assets available for sale and held-to-maturity in accordance with IAS 39. Please refer to Note 3, 17 and 18 for its re-classification and the information of 2017.

The consolidated company assessed the expected credit loss of debt instruments measured at fair value through other comprehensive income in 2018 and recognized a reversal of asset impairment at NT$3,820 thousand.
With respect to the credit risk management of debt instruments measured at fair value through comprehensive income and the assessment of impairment, please refer to Note 45.

XVII. Financial assets available for sale - 2017

Financial assets available for sale - 2017
Corporate bond Government bonds Domestic stocks Overseas stocks Beneficiary certificate Bonds and depository receipts		December 31, 2017
		$ 24,736,414 6,497,632 1,593,941 158,825 13,800 - $ 33,000,612

(I) Overseas publicly listed and OTC stocks and depository receipts denominated in foreign currencies:

USD	December 31, 2017
	$ 5,335

(II) As of December 31, 2017, the consolidated company has recognized the creditor's rights and depositary receipts available for sales as impairment losses after assessment.
(3) For the available-for-sale financial assets – noncurrent furnished as the security for mortgage, please see Note 41.

XVIII. Held-to-maturity financial assets - 2017

Held-to-maturity financial assets-2017
Overseas bond Government bonds Negotiable certificate of deposits issued by Central Bank Overseas bonds denominated in foreign currencies: USD RMB AUD ZAR		December 31, 2017
		$ 19,529,633 8,512,462 57,500,000 $ 85,542,095 December 31, 2017
		$ 483,962 750,000 61,000 70,000

(I) Overseas bonds denominated in foreign currencies:

(II) As of December 31, 2017, the face value of consolidated company's government bonds held-to-maturity with repurchase agreement was NT$2,200,000 thousand, and the foreign bonds held-to-maturity with repurchase agreement was NT$2,232,750thousand (equivalent to US$75,000 thousand).

(III) Please see Note 41 for the status on financial assets held-to-maturity provided as pledge collaterals.

XIX. Investment of debt instruments on the basis of cost after amortization

vestment of debt instruments on the basis of cost after amortization
Overseas bond Government bonds Negotiable certificate of deposits issued by Central Bank Corporate bond Debt instruments		December 31, 2018
		$ 21,361,293 13,123,603 55,500,000 11,418,843 9,511

llowance for losses eduction of provision for trust compensation reserve d refundable security deposits. seas bonds denominated in foreign currencies: USD RMB AUD ZAR	( (	101,412,891 105,129 ) 845,000 ) $ 100,462,761 December 31, 2018
		$ 571,613 510,000 61,000 70,000

Less:Allowance for losses Less: Deduction of provision for trust compensation reserve and refundable security deposits.

(I) Overseas bonds denominated in foreign currencies:
(II) Financial assets on the basis of cost were previously classified as held-to-maturity financial assets, available-for-sale financial assets and other assets under IAS 39. The detail of reclassification and information on 2017 was specified in Note 3, Note 17, and Note 18.
(III) As of December 31, 2018, the consolidated company held government bonds measured on the basis of cost after amortization and R/P foreign bonds at face value in the amounts of NTD 1,200,000 thousand and NTD 9,642,940 thousand (USD 314,000 thousand), respectively.
(IV) In 2018, the consolidated company recognized asset impairment amounting to NTD 21,308 thousand after the evaluation of anticipated credit loss of debt instruments measured on the basis of cost after amortization.
(V) With respect to the credit risk management of debt instruments carried at cost after amortization and the assessment of impairment, please refer to Note 45.
XX. Financial assets measured at cost- 2017

and the assessment of impairment, please refer to Note 45. ancial assets measured at cost- 2017
Domestic non-TSEC/non-GTSM listed shares Foreign non-public/non-OTC listed shares	December 31, 2017
		$ 314,515 10,451 $ 324,966

(I) The unlisted/OTC equity investment referred to above of the consolidated company is measured at cost less impairment losses on the balance sheet date, because a reasonable estimate of the fair value range is significant and the probability of a variety of estimates cannot be reasonably assessed, causing the consolidated company’s management to believe that the fair value cannot be reliably measured.
(II) The unlisted stocks and non-OTC stocks held by the consolidated company was recognized for impairment losses of NT$10,954 thousand in 2017 after evaluation.
XXI. Subsidiaries
(I) Subsidiaries included in the consolidated financial statements

The business entities of the consolidated financial statements are as follows:

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Percentage of
shareholdings
December December
Investor Name of Subsidiary Nature of the operation 31, 2018 31, 2017
China Man-Made Fiber Deh Hsing Investment General investment 100% 100%
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Investor China Man-Made Fiber	Name of Subsidiary Deh Hsing Investment	Nature of the operation General investment	December 31, 2018 100%	December 31, 2017 100%
Corporation	Co., Ltd.	business
	Chou Chin Industrial Co., Ltd.	Manufacturing and	50%	50%
		trading
	Pan Asia Chemical Corporation	Petrochemical business	49%	49%
	Reliance Securities Investment	Securities investment	50%	46%
	Trust Co., Ltd.	trust business
	Taichung Commercial Bank	Banking business	29%	29%
	Co.
	EUREKAINVESTMENT	General investment	100%	100%
	COMPANY LIMITED	business

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Percentage of
shareholdings
December December
Investor Name of Subsidiary Nature of the operation 31, 2018 31, 2017
Melasse Cosmetics and cleaning 100% 100%
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Investor	Name of Subsidiary Melasse	Nature of the operation Cosmetics and cleaning	December 31, 2018 100%	December 31, 2017 100%
		appliances
		manufacturing
Deh Hsing Investment Co., Ltd.	Xiang-Feng Development	General investment	100%	100%
		business
	IOLITE INVESTMENT Ltd.	General investment	100%	100%
		business
IOLITE INVESTMENT Ltd	Hammock (Hong Kong)	General investment	100%	100%
	Company Limited	business
	Precious Wealth	General investment	100%	-%
	International Limited	business
Hammock (Hong Kong)	Hebei Hanoshi Contact Lens	Manufacturing and	100%	100%
Company Limited	Co., Ltd.	trading
Xiang-Feng Development	Tou-Ming Industry	Real estate development	99%	99%
		and leasing industry
Tou-Ming Industry	Jin-Bang-Ge Industry	Real estate development	99%	99%
		and leasing industry
Chou Chin Industrial Co., Ltd.	GREENWORLD FOOD	Food manufacturing, and	96%	96%
	CO., LTD.	distribution and
		warehousing of
		beverages
	Chou Chang Corporation	Distribution and	63%	63%
		warehousing of
		beverages
	Pan-Feng Industry	Restaurant industry	100%	100%
	Bomy Enterprise	General investment	62%	62%
		business
	Yuju Universal Corporation	General investment	90%	90%
		business
Yuju Universal Corporation	Noble House Glory	Short-term	100%	100%
		accommodation
		service
Bomy Enterprise	Bomy Shanghai	Manufacturing and	99%	99%
		trading
Taichung Commercial Bank Co.	Taichung Commercial Bank	Taichung Commercial	100%	100%
	Insurance Broker Co., Ltd.	Bank Co., Ltd.
	Taichung Commercial	Leasing	100%	100%
	Bank Lease Enterprise
	Taichung Commercial Bank	Securities Brokerage	100%	100%
	Securities Co., Ltd.
Taichung Commercial	TCCBL Co., Ltd.	General investment	100%	100%
Bank Lease Enterprise		business
TCCBL Co., Ltd.	Taichung Bank Leasing	Financing Leasing and	100%	100%
	(Suzhou)	investments

The shareholding percentages of the above are based on the combined shareholding percentages.
The consolidated company has substantial control over Taichung Commercial Bank, so the Bank and its subsidiaries are included in the consolidated financial statements.
The consolidated company originally held 100% of Pan-Xu Investment's equity and then sold the entire equity for NT$137,360 thousand in March 2017, recognizing a gain of NT$1,690 thousand from the disposal of the subsidiary. Please refer to Note 39 for details.
The consolidated company invested US$300 thousand in Yuju Global in August 2017 and then re-invested in Noble House Glory, totaling JPY30,000 thousand, in September the same year.
The consolidated company invested US$375 thousand in Precious Wealth International Limited in April 2018.
The consolidated company participated in the cash capital increase of Taichung Commercial Bank in 2018 and added 32,246 shares thousand at the cost of NT$328,914 thousand. As the subscription did not follow the original shareholding percentage, there were changes to the shareholding percentage. The additional paid-in capital was decreased, resulting in a change of NT$3,429 thousand in the net value of equity of the affiliate company by equity method.

The consolidated company participated in the cash capital increase of De-Hsin Investment in 2018, adding 20,000 thousand shares at the cost of NT$200,000 thousand.
The consolidated company increased its investment in Reliance Securities in 2018 by 1,140 thousand shares at the cost of NT$10,262 thousand. As there were changes to the shareholding percentage of the consolidated company in Reliance Securities, the additional paid-in capital was changed, resulting in an increase of NT$5,532 thousand in the net value of equity of the affiliate company by equity method.
The consolidated company participated in the cash capital increase of Rui-Jia Investment in 2018, adding 1,250 thousand shares at the cost of NT$12,500 thousand.
(II) Information of the significant but non-controlling equity in subsidiaries

Non-controlling equity shareholding and voting right ratio

	Non-controlling equity shareholding and voting right ratio	Non-controlling equity shareholding and voting right ratio	Non-controlling equity shareholding and voting right ratio	Non-controlling equity shareholding and voting right ratio
Name of Subsidiary	Main places of business operations December 31, 2018 December 31, 2017 Taichung City 71% 71% Profit and loss distributed to the non-controlling equity Non-controlling interest 2018 2017 December 31, 2018 December 31, 2017 $ 2,992,649 $ 2,712,056 $ 34,031,312 $ 30,837,078 44,951 ( 42,352 ) 1,835,968 1,633,333 $ 3,037,600 $ 2,669,704 $ 35,867,280 $ 32,470,411
Taichung Commercial Bank Co. Name of Subsidiary Taichung Commercial Bank Co. Others Total
	2018 $ 2,992,649 44,951 $ 3,037,600		December 31, 2018 $ 34,031,312 1,835,968 $ 35,867,280	December 31, 2017
		(		$ 30,837,078 1,633,333 $ 32,470,411

The following summary of financial information of subsidiaries with significant non-controlling interests is prepared based on the amount before the inter-company cancelled transaction: Taichung Commercial Bank and its subsidiaries

Assets Liabilities Equity Equity attributable to: Owners of the Company Non-controlling interests of Taichung Commercial Bank Net revenue Net income Other comprehensive profit or loss Total comprehensive income Profit attributable to: Owners of the Company Non-controlling interests of Taichung Commercial Bank	December 31, 2018 $ 690,832,103 643,008,450 $ 47,823,653 $ 13,792,341 34,031,312 $ 47,823,653 2018 $ 11,689,424 $ 4,008,369 33,153 $ 4,041,522 $ 1,015,720 2,992,649	December 31, 2017	December 31, 2017
			$ 663,024,083 619,622,143 $ 43,401,940 $ 12,564,862 30,837,078 $ 43,401,940 2017 $ 11,394,755 $ 3,632,542 168,335 $ 3,800,877 $ 920,486 2,712,056

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2018 2017
$ 4,008,369 $ 3,632,542
2018 2017
The total comprehensive income
belongs to:
Owners of the Company $ 1,024,121 $ 963,142
Non-controlling interests of
Taichung Commercial Bank 3,017,401 2,837,735
$ 4,041,522 $ 3,800,877
Cash flows
Operating activities $ 8,293,638 $ 13,966,124
Investing activities ( 11,582,261 ) ( 66,024,253 )
finance activities 3,073,444 3,920,071
Impact of changes in exchange
rate on cash and cash
equivalents 180 ( 15,324 )
Net cash inflow (outflow) ( $ 214,999 ) ( $ 48,153,382 )
XX. Investment under the equity method
December 31, 2018 December 31, 2017
Investments in the affiliated
company $ 1,241,811 $ 1,220,689
Investments in the affiliated company
(I) The balance of the consolidated company's investments in associate companies:
December 31, 2018 December 31, 2017
A major affiliated company
Nan Chung Petrochemical
Corp. $ 1,228,959 $ 1,216,290
Individual non-dominant
associates
Wei-Kang International 3,298 4,399
Storm Model
Management 7,746 -
BONWELL 1,808 -
$ 1,241,811 $ 1,220,689
(II) A major affiliated company
Shareholding and voting right ratio
Nature of Main places of
the business December 31, December 31,
Company name operation operations 2018 2017
Nan Petroche Yunlin County 50% 50%
Chung Petrochemical mical
Corp. business
Summary financial information of Nan-Chung Petrochemical:
December 31, 2018 December 31, 2017
Total assets $ 3,263,392 $ 3,502,729
Total Liabilities 805,473 1,070,150
Equity 2,457,919 2,432,579
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The consolidated company’s shareholding ratio 50% Book value of investment $ 1,228,959 2018 Operating income - current $ 8,510,067 Net income $ 176,872 Current period other comprehensive income $ - Summarized information of individually immaterial associates. 2018 Share of the Consolidated Company Net income (loss) for the year ( $ 1,390 ) Current period other comprehensive income - Total comprehensive income ( $ 1,390 )				50% 1,216,290 2017 8,033,324 164,900 - 2017 $ 2,404 ) - $ 2,404 )
			$
			$ $
			$

			( (

(III) Summarized information of individually immaterial associates.

With respect to investments adopting the equity method and the consolidated company's share of profit or loss and the other comprehensive income, Wei-Kang International, Storm Model Management and Bonwell did not have audited financial reports, while the rest did offer audited financial reports. The management of the consolidated company believed that the un-audited companies should not have significant impact to the overall financial report.

(IV) Please see Note 41 for the status on investments adopting the equity method provided as pledge collaterals.

XXIII. Property, plant and equipment

collaterals. Property, plant and equipment
The book amount of each category Proprietary land House and Building Machine and Equipment Transportation Equipment Machinery and equipment Other equipment Construction in process and prepayment for machinery purchase	December 31, 2018 $ 11,027,579 2,402,440 4,881,688 49,466 71,025 426,411 3,570,262 $ 22,428,871	December 31, 2017
			$ 11,025,955 2,527,804 5,262,146 41,675 76,205 422,340 3,026,506 $ 22,382,631

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2018
Uncompleted
Land House and Building Machine and Equipment Transportation and communication equipment Miscellaneous equipment Machinery and equipment equipment pending construction and inspection Total
Cost
Balance - beginning $ 11,110,668 $ 4,847,156 $ 12,661,265 $ 133,874 $ 1,289,474 $ 416,958 $ 3,026,506 $ 33,485,901
Increase in current period 1,624 416 104,412 20,953 133,226 5,558 636,987 903,176
Decrease in current period - ( 1,267 ) ( 1,694,511 ) ( 5,490 ) ( 15,025 ) ( 27,123 ) ( 8,894 ) ( 1,752,310 )
Reclassification - 1,850 91,652 1,229 ( 2,280 ) 1,304 ( 84,337 ) 9,418
Foreign exchange impact amount - ( 3,342 ) ( 9,735 ) - ( 1,538 ) - - ( 14,615 )
Balance - ending 11,112,292 4,844,813 11,153,083 150,566 1,403,857 396,697 3,570,262 32,631,570
Accumulated depreciation
Balance - beginning - 2,136,068 6,956,334 91,104 837,635 338,841 - 10,359,982
Increase in current period - 125,681 570,906 13,168 125,526 12,657 - 847,938
Decrease in current period - ( 248 ) ( 1,464,589 ) ( 4,185 ) ( 14,002 ) ( 26,496 ) - ( 1,509,520 )
Reclassification - - - - - - - -
Foreign exchange impact amount - ( 2,160 ) ( 8,136 ) ( 5 ) ( 1,185 ) - - ( 11,486 )
Balance - ending - 2,259,341 6,054,515 100,082 947,974 325,002 - 9,686,914
Accumulated impairment
Balance - beginning 84,713 183,284 442,785 1,095 29,499 1,912 - 743,288
Increase in current period - - 325 - - - - 325
Decrease in current period - ( 43 ) ( 225,871 ) ( 77 ) - ( 1,242 ) - ( 227,233 )
Reclassification - - - - - - - -
Foreign exchange impact amount - ( 209 ) ( 359 ) - ( 27 ) - - ( 595 )
Balance - ending 84,713 183,032 216,880 1,018 29,472 670 - 515,785
Net - ending $ 11,027,579 $ 2,402,440 $ 4,881,688 $ 49,466 $ 426,411 $ 71,025 $ ,3,570,262 $ 22,428,871
2017
Transportation and communication Miscellaneous Machinery and equipment pending construction and Uncompleted
Land House and Building Machine and Equipment equipment equipment equipment inspection Total
Cost
Balance - beginning $ 11,106,494 $ 4,846,513 $ 12,603,445 $ 131,450 $ 1,190,131 $ 437,522 $ 2,601,554 $ 32,917,109
Increase in current period 80,728 43,330 63,960 10,213 133,451 2,547 438,773 773,002
Decrease in current period - ( 7,824) ( 30,834 ) ( 10,106 ) ( 39,761 ) ( 26,317 ) - ( 114,842 )
Reclassification - 4,724 15,462 2,317 6,001 3,206 5,866 37,576
Foreign exchange impact amount - 2,573 9,232 - ( 348 ) - ( 19,687 ) ( 8,230 )
Subsidiaries sold this period ( 76,554 ) ( 42,160 ) - - - - - ( 118,714 )
Balance - ending 11,110,668 4,847,156 12,661,265 133,874 1,289,474 416,958 3,026,506 33,485,901
Accumulated depreciation
Balance - beginning - 2,009,965 6,347,832 86,019 741,828 350,757 - 9,536,401
Increase in current period - 127,966 642,631 13,356 109,253 13,993 - 907,199
Decrease in current period - ( 808 ) ( 29,855 ) ( 8,271 ) ( 13,077 ) ( 25,932 ) - ( 77,943 )
Reclassification - - ( 23 ) - - 23 - -
Foreign exchange impact amount - ( 1,055 ) ( 4,251 ) - ( 369 ) - - ( 5,675 )
Subsidiaries sold this period - - - - - - - -
Balance - ending - 2,136,068 6,956,334 91,104 837,635 338,841 - 10,359,982
Accumulated impairment
Balance - beginning 84,713 173,018 425,530 1,095 28,162 1,912 - 714,430
Increase in current period - 10,100 17,056 - 1,315 - - 28,471
Decrease in current period - - ( 82 ) - - - - ( 82 )
Reclassification - - - - - - - -
Foreign exchange impact amount - 166 281 - 22 - - 469
Balance - ending 84,713 183,284 442,785 1,095 29,499 1,912 - 743,288
Net - ending $ 11,025,955 $ 2,527,804 $ 5,262,146 $ 41,675 $ 422,340 $ 76,205 $ 3,026,506 $ 22,382,631
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(I) Property and equipment of the consolidated company are appreciated in accordance with the straight line method over the useful years as follows:

ht line method over the useful years as follows:
House and Building
Buildings	20 to 60 years
Renovation engineering	8 to 29 years
Machine and Equipment	2 to 47 years
Transportation and communication equipment	2 to 15 years
Miscellaneous equipment	2 to 30 years
Machinery and equipment	5 years

(II) The unfinished project and the equipment to be inspected as of December 31, 2018 were the investments in the newly constructed cogeneration plant, and they are not yet available for operations.
(III) The consolidated company's pre-capitalized financial costs in 2018 and 2017 were NT$4,815,335 thousand and NT$4,101,038 thousand, respectively. The capialized financial costs for property, plants and equipment in 2018 and 2017 were NT$17,665 thousand and NT$24,450 thousand, respectively, and the capitalized annual interest rates were 1.85% and 1.94%.
(IV) The property, plant and equipment of the consolidated company as of 2018 and 2017 were recognized for impairment losses of NT$325 thousand and NT$28,471 thousand, respectively.
(V) Please see Note 41 for the status on property, plant and equipment provided as pledge collaterals.
XXIV. Investment property

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2018
Investment
property in
Land Buildings construction Total
Cost
Balance -
beginning $ 2,058,474 $ 54,985 $ 22,500 $ 2,135,959
Increase in current
period 26,697 53,960 63,790 144,447
Decrease in current
period ( 20,279 ) - - ( 20,279 )
Reclassification ( 769,610 ) ( 9,898 ) - ( 779,508 )
Balance - ending 1,295,282 99,047 86,290 1,480,619
Accumulated
depreciation
Balance -
beginning - 25,794 - 25,794
Increase in current
period - 1,783 - 1,783
Decrease in current
period - - - -
Reclassification - ( 1,434 ) - ( 1,434 )
Balance - ending - 26,143 - 26,143
Accumulated
impairment
Balance -
beginning 38,373 1,000 - 39,373
Increase in current
period - - - -
Decrease in current
period ( 20,279 ) - - ( 20,279 )
Reclassification - - - -
Balance - ending 18,094 1,000 - 19,094
Net - ending $ 1,277,188 $ 71,904 $ 86,290 $ 1,435,382
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2017

Co	Land	Land		Buildings $ 71,565 298 ( 16,878 ) - 54,985 201	Buildings $ 71,565 298 ( 16,878 ) - 54,985 201		Investment property in construction $ - 22,500 - - 22,500		Total 1,833,721 22,798 67,789 ) 347,229 2,135,959
	$ 1,762,156 - ( 50,911 ) 347,229 2,058,474					7		$ (
Bal Inc De Re Bal Ac


		Land - - - - - 38,373 - - - 38,373 2,020,101			Buildings 36,275 2,030 12,511 ) - 25,794 1,000 - - - 1,000 28,191	I	nvestment property in construction		Total
	$		$ ( $				$ - - - - - - - - - - $ 22,500		$ 36,275 2,030 ( 12,511 ) - 25,794 39,373 - - - 39,373 $ 2,070,792
Bal Inc De Re Bal Ac


Bal Inc De Re Bal Ne

	$			$

Investment property of the appreciated in accordance with the straight line method over the useful years as follows:

House and Building Buildings 30 to 60 years Renovation engineering 2 to 29 years

(I) In March 2018, the board of Chou Chin Industrial resolved to sell part of its investment property. The selling price was NT$14,025 thousand, with a gain of NT$14,025 thousand on the disposal of investment property.
(II) The fair values of the consolidated company's investment propertyas of December 31, 2018 and 2017 were NT$1,518,260 thousand and NT$3,299,011 thousand, of which NT$149,412 thousand and NT$84,152 thousand, respectively, were not appraised by independent appraisers. The rest were appraised by a professional appraiser, Zhi-Guang Yeh, of an independent appraisal company, Bao-Yuan Real Estate Appraisal on December 31, 2018 and 2017. The appraisal was based on the market evidence from the transaction prices of similar real estates, and the important assumptions and the fair value of the appraisal are as follows:

Asset earning power The overall capital interest rate during development	December 31, 2018 18% 2.09%	December 31, 2017
		18% 2.02%

(III) The Board of the Taichung Bank resolved to sell part of the investment property in 2017 and the proceeds of the sale amounted to NTD403,950 thousand, which resulted in capital gain of NTD348,672 thousand and land value increment tax amounting to NTD57,840 thousand.
(IV) Please refer to Note 13 for the re-classification of the consolidated company's investment property and non-current assets available for sale in 2018 and 2017.
(V) All investment in real estate owned by the Consolidated Company’ was in its own interests. Please see Note 41 for the status on investment property provided as pledge collaterals.

XXV. Intangible assets

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December 31, 2018 December 31, 2017
Goodwill $ 426,381 $ 426,381
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Business right Computer software Shell Royalty Less: accumulated impairment (	28,000 135,974 159,052 749,407 557,161 ) ( $ 192,246	28,000 134,060 159,052 747,493 557,161 ) $ 190,332

(I) With respect to the consolidated company acquiring the shareholding of its subsidiaries, goodwill is considered when the acquisition cost is higher than the net asset value. As of December 31, 2018, the accumulated impairment loss was NT$398,109 thousand.
(II) The intangible assets of the consolidated company is the assigned right of operation from Feng Sing Securities. The right of operation is intangible assets that the life span cannot be determined and no amortization is made. As of December 31, 2018, no impairment of such right of operation has been declared in the evaluation.
(III) Changes in the costs of computer software and Shell's royalty:

Cost Balance - beginning Increase in current period Amortization in the current period Reclassification Net exchange differences Balance - ending Accumulated impairment Balance - beginning Provided in the current period Balance - ending Net - ending			2018
		Royalties $ 159,052 - - - - 159,052 $ 159,052 - 159,052 $ -	Computer software $ 134,060 56,595 ( 54,854 ) 190 ( 17 ) 135,974 $ - - - $ 135,974		Total
			( (	( (	$ 293,112 56,595 54,854 ) 190 17 ) 295,026 $ 159,052 - 159,052 $ -

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2017
Royalties Computer software Total
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Cost Balance - beginning Increase in current period Amortization in the current period ( Reclassification Net exchange differences Balance - ending Accumulated impairment Balance - beginning Provided in the current period Balance - ending Net - ending	$ 167,938 - 8,886 ) ( - - ( 159,052 159,052 - 159,052 $ -	$ 142,703 56,782 70,087 ) ( 4,677 15 ) ( 134,060 - - - $ 134,060	$ 310,641 56,782 78,973 ) 4,677 15 ) 293,112 159,052 - 159,052 $ 134,060

In order to obtaining patent technologies required for the operations of ethylene glycol plant, CMFC signed an EO/EG patent agreement with Shell Research Limited. The authorized use of the patent lasts 5 years, starting the effective date of the agreement. However, due to the environmental concern of the construction site, the progress was seriously delayed. The follow-up negotiation with Shell Research enabled the continued use of patent, but royalty in full was recognized as impairment after assessment. CMFA later on updated the design and then constructed a new ethylene glycol plant following a revised cash capital increase. The Company signed a Shell EO/EG manufacturing process patent agreement (different from the manufacturing technologies originally signed as mentioned above) with Shell, and the total of the technical service fees of royalty according to the terms of contract was US$5,323 thousand.

XXVI. Other assets

Other assets
Refundable deposit PEM Group Insurance policy assets Prepaid lease payments - Land use rights Non-delinquent loans restated from loans-net Collected payment of shares underwritten and pending payments to be delivered Collections - Net	December 31, 2018 $ 1,778,156 - 157,406 1,111 726 - $ 1,937,399	December 31, 2017
			$ 2,101,672 900,335 164,419 21,606 11,928 - $ 3,199,960

(I) The time deposits and government bonds held to maturity deposited by the consolidated company as the security bond for provisional seizure at court and for business guarantee on December 31, 2018 and 2017 were NTD 985,000 thousand and NTD 1,217,800 thousand, which are stated as refundable deposits.
(II) Breakdown of PEM policy assets:

December 31, 2017 Repurchase products issued by PEM Group. $2,000,308 Less: accumulated impairment ( 1,099,973 ) $ 900,335

The consolidated company according to the resolution reached in the board meeting on May 6, 2009 has the “Private Equity Management Group (PEM Group) Structured Note Customer Interests Protection Program” defined for repurchasing PEM Group structured notes entirely from the investors with the insurance assets accepted in February, 2011.

The consolidated company assessed the assets value of policies issued by PEM group in 2017 and recognized an impairment loss of assets at NT$50,533 thousand.

(III) Non-loans transferred to collection - Breakdown of net:

nd recognized an impairment loss of assets at NT$50,533 thousand. Non-loans transferred to collection - Breakdown of net:
December 31, 2018 Non-delinquent loans restated from loans $ 5,343 Less: Allowance for bad debts - Taichung Commercial Bank (Note 10) ( 4,232 ) $ 1,111 Details of delinquent accounts, net are summarized as follows: December 31, 2018 Delinquent Accounts $ 3,104 Less: Allowance for bad debts - Collection (Note 20) ( 3,104) $ -	December 31, 2017
	$ 43,428 ( 21,822 ) $ 21,606 December 31, 2017
	(	$ 3,049 3,049) $ -

(IV) Details of delinquent accounts, net are summarized as follows:

XXVII. Borrowing

(I) Shot-term borrowings

Borrowing Shot-term borrowings
Secured loans - Secured loan Unsecured loans - Credit loan - Material procurement loan	December 31, 2018 $ 5,710,634 4,149,886 4,706,669 8,856,555 $ 14,567,189	December 31, 2017
			$ 4,803,354 3,977,585 2,948,509 6,926,094 $ 11,729,448

The interest rates of bank borrowings as of December 31, 2018 and 2017 were 1.20% to 5.70% and 1.00% to 6.27%, respectively.
Please refer to Note 41 for information on the above-mentioned collateral for borrowings.
(II) Short-term notes payable

Short-term notes payable
Short-term notes payable Less: Discount of short- term notes and bills payable	December 31, 2018 $ 2,360,000 ( 2,296) $ 2,357,704	December 31, 2017
	(	(	$ 2,035,000 1,926) $ 2,033,074

(III) Long-term borrowings

III) Long-term borrowings
Secured loans - Bank loans Less: Amount due in one year Long-term borrowings	December 31, 2018 $ 6,958,811 ( 1,245,188 ) $ 5,713,623	December 31, 2017
	(	(	$ 8,698,061 1,121,122 ) $ 7,576,939

As of December 31, 2018 and 2017, CMFC had long-term syndicate loans led by Taiwan Cooperative Bank at NT$2,699,500 thousand and NT$4,004,900 thousand, with the borrowing rate currently at 1.85%. Between January and July of 2018, the early repayment of principal was NT$400,000 thousand. CMFC will repay the borrowings periodically based on the loan agreement and a total of $905,400 thousand will be due in the next year. The land and buildings of Kaohsiung plant are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, CMFC had intermediate- and long-term borrowings from Taiwan Business Bank at NT$250,000 thousand, for both year, with the borrowing rate currently at 1.7%. Starting March 2019, CMFC will repay the borrowings periodically based on the loan agreement and a total of $17,200 thousand will be due in the next year. The land and buildings of headquarters in Taipei are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, CMFC had long-term borrowings from Mizuho Bank at NT$300,000 thousand, for both year, with the borrowing rate currently at 1.30%. CMFC originally planned to make repayments in one payment in December 2019, and now it has postponed the one-time payment to December 2020.
As of December 31, 2018 and 2017, CMFC had long-term borrowings from Land Bank of Taiwan at NT$74,461 thousand and NT$87,999 thousand, respectively, with the borrowing rate currently at 1.50%. CMFC has repaid the borrowings periodically based on the loan agreement and a total of $13,538 thousand will be due in the next year. The land and buildings of headquarters in Taipei are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, CMFC had long-term borrowings from Union Bank of Taiwan at NT$349,900 thousand and NT$499,600 thousand, respectively, with the borrowing rate currently between 1.56% and 1.59%. CMFC has originally planned to repay the borrowings periodically, starting May 2020, based on the loan agreement, and now it has schedule the repayments to start in May 2020. 106,000 thousand shares of Taichung Commercial Bank's stocks are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, CMFC had long-term borrowings from Bank of Panhsin at NT$500,000 thousand, for both year, with the borrowing rate currently at 1.55%. CMFC originally planned to make repayments in one payment in May 2019, and now it has postponed the one-time payment to June 2020. The job site and buildings in Sanchong District of New Taipei City are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, CMFC had long-term borrowings from Sunny Bank at NT$600,000 thousand, for both year, with the borrowing rate currently at 1.50%. CMFC originally planned to make repayments in one payment in August 2019, and now it has postponed the one-time payment to August 2020. 95,000 thousand shares of Taichung Commercial Bank's stocks are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, CMFC had long-term borrowings from Jih Sun Bank at NT$340,000 thousand and NT$500,000 thousand, respectively with the borrowing rate currently at 1.50%. CMFC originally planned to make repayments in one payment in October 2019, and now it has postponed the one-time payment to October 2020. 93,000 thousand shares of Taichung Commercial Bank's stocks are used as the collateral for the borrowing.
As of December 31, 2018, CMFC had long-term borrowings from Taiwan Cooperative Bank at NT$650,000 thousand, with the borrowing rate currently between 1.50%. CMFC will repay the borrowings periodically, starting February 2020, based on the loan agreement. The land and buildings in Yunlin are used as the collateral for the borrowing.

As of December 31, 2018, CMFC had taken a loan from Bank of Kaohsiung at NT$100,000 thousand, with the borrowing rate currently at 1.50%. A total of $100,000 thousand will be due in the next year, which will be repaid in one payment in November 2019.
11 As of December 31, 2018 and 2017, PACC had intermediate-term borrowings from Taiwan Cooperative Bank at NT$212,000 thousand and NT$356,000 thousand, respectively, with the borrowing rate currently at 1.70%. PACC will repay the borrowings periodically based on the loan agreement. The land and buildings of PACC's Kaohsiung plant are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, PACC had intermediate-term borrowings from Union Bank of Taiwan at NT$100,000 thousand and NT$150,000 thousand, respectively, with the borrowing rate currently at 1.61%. PACC has repaid the borrowings periodically based on the loan agreement and a total of $50,000 will be due in the next year. The shares of CMFC are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, PACC had intermediate-term borrowings from Bank of Panhsin at NT$90,000 thousand and NT$70,000 thousand, respectively, with the borrowing rate currently at 1.64%. PACC has repaid the borrowings periodically based on the loan agreement and a total of $20,000 thousand will be due in the next year.
As of December 31, 2018, CMFC had intermediat-term borrowings from Jih Sun Bank at NT$150,000 thousand, with the borrowing rate currently at 1.53%. PACC originally planned to make repayments in one payment in October 2019, and now it has postponed the one-time payment to October 2020. Shares of CMFC are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, Jin-Bang-Ge Industry had long-term borrowings from Taiwan Business Bank at NT$57,000 thousand, for both year, with the borrowing rate currently at 2.50%. Jin-Bang-Ge originally planned to make repayments in one payment in May 2017, and it has postponed the one-time payment to May 2019 and a total of $57,000 thousand will be due in the next year. The land on the Zhixing section in Wanhua are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, Chou Chin Industrial had long-term borrowings from Taiwan Business Bank at NT$60,000 thousand and NT$100,000 thousand, respectively, with the borrowing rate currently at 1.99%. Chou Chin Industrial has repaid the borrowings periodically based on the loan agreement and a total of $40,000 thousand will be due in the next year. The factories in Changhua, Dajia and Fugong are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, Chou Chin Industrial had long-term borrowings from Union Bank of Taiwan at NT$127,000 thousand and NT$101,000 thousand, respectively, with the borrowing rate currently between 1.70% and 1.89%. Chou Chin Industrial has repaid the borrowings periodically based on the loan agreement and a total of $32,000 thousand will be due in the next year. The bonds of Taichung Commercial Bank and shares of Hua Nan Financial Holdings are used as the collateral for the borrowing.
As of December 31, 2018 and 2017, Jeou Chang had long-term borrowings from Sunny Bank at NT$298,950 thousand and NT$309,000 thousand, respectively, with the borrowing rate currently between 2.02% and 2.03%. Jeou Chang has repaid the borrowings periodically based on the loan agreement and a total of $10,050 thousand will be due in the next year. The bonds of Taichung Commercial Bank are used as the collateral for the borrowing.
Please refer to Note 41 for information on the above-mentioned collateral for long-term borrowings.

XXVIII. Bills and bonds sold under repurchase agreements

Government bonds Overseas bond Post-period re-purchase a Government bonds	58 December 31, 2018 $ 1,200,036 8,704,431 $ 9,904,467 mount and interest rate are as follows: December 31, 2018 $ 1,200,797	December 31, 2017
		$ 2,202,581 2,105,229 $ 4,307,810 December 31, 2017
		$ 2,203,231

59 Overseas bond 8,768,302 $ 9,969,099 December 31, 2018 Government bonds 0.42%-0.52% Overseas bond 2.69%-2.90% Foreign bonds are valued in foreign currencies as follows: December 31, 2018 USD $ 283,440 XXIXDue to Central Bank and other banks December 31, 2018 Call loans to banks $ 2,874,850 Due to Chunghwa Post Co., Ltd. 503,276 Deposits of other banks 626 $ 3,378,752 XXX. Other payables December 31, 2018 Notes and checks in clearing $ 5,715,927 Payable expenses 2,167,311 Payable spot exchange settlement payment 1,912,669 Acceptances payable 845,279 Payable interest 561,466 Receivable accounts for settlement 476,395 Securities purchase payable 438,763 Equipment accounts payable 44,439 Account payable for underwriting 33,552 Others 572,685 $ 12,768,486 XXXI. Deposits and remittances December 31, 2018 Check deposits $ 9,765,880 Demand deposits 128,942,094 Current saving deposits 126,189,743 Time deposits 164,939,938 Time saving deposits 157,855,126 Remittances 28,125 $ 587,720,906 XXXII. Bonds payable December 31, 2018 Subordinate financial bonds $ 20,000,000 Less: Part owned by the consolidated company ( 1,510,000 )					2,114,799 $ 4,318,030 December 31, 2017
					0.37%-0.43% 1.68%-1.90% December 31, 2017 $ 70,716 December 31, 2017

					$ 9,007,150 511,474 248 $ 9,518,872 December 31, 2017

Bills with less than - - one year to maturity

$ 18,490,000

$ 16,360,000

(1) As approved by FSC’s Letter under Jin-Guan-Yin-Piao-Zi No. 10100305900 dated September 24, 2012, the Taichung Bank issued 1[st] term subordinate financial bonds November 13, 2012 upon the following terms and conditions:
Approved: NTD3,000,000 thousand.
Issued: NTD3,000,000 thousand.
Denomination: NTD1,000 thousand, issued at par value.
Duration: 7 years, matured on November 13, 2019.
Coupon rate: Fixed annual interest rate 2.1%.
Repayment Methods: repayment in lump sum upon maturity.
7.Payment of interest: interest paid per six months as of the date of issuance.
(2) As approved by FSC’s Letter under Jin-Guan-Yin-Piao-Zi No. 10200089330 dated April 8, 2013, the Taichung Bank issued 1[st] term and 2[nd] term subordinate financial bonds June 25 and December 16, 2013 upon the following terms and conditions:
Amount approved for issuance: NT$6,000,000 thousand.
Issued:
- (1) 1[st] term 2013: 2,500,000 thousand.
- (2) 2[nd] term 2013: 3,000,000 thousand.
Denomination:
- (1) 1[st ] term 2013: NTD 500 thousand, issued at par value.
- (2) 2[nd ] term 2013: NTD 500 thousand, issued at par value.
Duration:
- (1) 1[st] term 2013: 7 years, matured on June 26, 2020.
- (2) 2[nd] term 2013: 6 years, matured on December 16, 2019.
Bond interest rate:
- (1) 1[st] term 2013: the fixed annual rate of 2.1%.
- (2) 2[nd] term 2013: the fixed annual rate of 2.1%.
Repayment Methods: repayment in lump sum upon maturity.
Payment of interest: interest paid per six months as of the date of issuance.
(3) The company has been approved by Financial Supervisory Commission under Letter Jin-GuanYin-Piao-Zi No. 10400200460 dated August 26, 2015 for the issuance of no maturity non-cumulative subordinated financial debentures 1st term for 2015 on December 28 2015. The terms and conditions for issuance are shown below:
Amount approved for issuance: NT$1,500,000 thousand.
Amount issued: NT$1,500,000 thousand.
Face value: NT$10,000 thousand, issued at face value.
Maturity: no maturity date.
Bond interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 3.08%.
Principal retirement: executed in accordance with the regulations of issuance.
Interest payment: once annually from the issuing date.
(4) The Taichung Bank has been approved by Financial Supervisory Commission under Letter Jin-KuanYin-Piao-Zi No. 10500210950 dated September 2, 2016 for the issuance of no maturity noncumulative subordinated financial debentures 1st term and 2nd term and 3rd term for 2017 and 1st term for 2016 on March 28, May 18, August 28, 2017 and December 28, 2016. The terms and conditions for issuance are shown below:
Amount approved for issuance: NT$3,500,000 thousand.。
Issued:
- (1) 1[st] term 2016: 1,500,000 thousand.
- (2) 1[st] term 2017: 1,000,000 thousand.
- (3) 2[nd] term 2017: 500,000 thousand.

  - (4) 3[th] term 2017: 500,000 thousand.

Denomination:
- (1) 1[st ] term 2016: NTD 10,000 thousand, issued at par value.
- (2) 2017 Q1: NT$10,000 thousand, issued at face value.
- (3) 2[nd ] term 2017: NTD 10,000 thousand, issued at par value.
- (4) 3[rd ] term 2017: NTD 10,000 thousand, issued at par value.
Maturity: no maturity date.
Bond interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 3.08%.
Principal retirement: executed in accordance with the regulations of issuance.
Interest payment: once annually from the issuing date.
(5) The company has been approved by Financial Supervisory Commission under Letter Jin-GuanYin-Piao-Zi No. 10600229120 dated September 22, 2017 for the issuance of no maturity noncumulative subordinated financial debentures 1st term for 2018 and 4[th] , 5[th] term for 2017 on April 25, 2018 and December 5, December 27, 2017. The terms and conditions for issuance are shown below:
Amount approved for issuance: NT$5,000,000 thousand.
Issued:
- (1) 4[th] term 2017: 1,350,000 thousand.
- (2) 5[th] term 2017: 2,650,000 thousand.
- (3) 2018 Q1: NT$1,000,000 thousand.
Denomination:
- (1) 4[th ] term 2017: NTD 10,000 thousand, issued at par value.
- (2) 5[th ] term 2017: NTD 10,000 thousand, issued at par value.
- (3) 2018 Q1: NT$10,000 thousand, issued at face value.
Maturity: no maturity date.
Bond interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 3.08%.
Principal retirement: executed in accordance with the regulations of issuance.
Interest payment: once annually from the issuing date.
(6) The company has been approved by Financial Supervisory Commission under Letter Jin-GuanYin-Piao-Zi No. 10702156550 dated August 23, 2018 for the issuance of no maturity non-cumulative subordinated financial debentures 2nd term for 2018 on December 18, 2018. The terms and conditions for issuance are shown below:
Amount approved for issuance: NT$1,500,000 thousand.
Amount issued: NT$1,500,000 thousand.
Face value: NT$10,000 thousand, issued at face value.
Maturity: no maturity date.
Bond interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 3.08%.
Principal retirement: executed in accordance with the regulations of issuance.
Interest payment: once annually from the issuing date.

XXXIII. Provision for liabilities

I. Provision for liabilities
Employee benefit liabilities reserve Reserve for guarantee liability Provision for commitment of financing Allowance for contingency	December 31, 2018 $ 1,389,757 189,848 63,809 23,933 $ 1,667,347	December 31, 2017
			$ 1,350,978 243,637 - 26,300 $ 1,620,915

(I) Employee benefit liabilities reserve is detailed as follows:

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December 31, 2018 December 31, 2017
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Defined benefit liabilities Employees preferential deposit plan Other long-term employee benefit liabilities	$ 1,246,000 120,769 22,988 $ 1,389,757	$ 1,223,752 108,779 18,447 $ 1,350,978

1. Defined contribution plan

The pension system of the “Labor Pension Act” that is applicable to the Company and its subsidiaries of the consolidated company is a defined contribution pension plan subject to government management with an amount equivalent to 6% of the monthly salary appropriated and contributed to the personal account with the Bureau of Labor Insurance.

2. Defined benefit plan

The consolidated company’s pension system under the “Labor Standards Act” of the R.O.C. is a defined benefit pension plan. Pension payment is calculated in accordance with the years of service and the average salary six months prior to the authorized retirement date. The consolidated company has contributed to the employee pension fund monthly based on the total salaries to Labor Pension Reserve Supervisory Committee for deposit at the special account in the Bank of Taiwan bearing the title of the committee. If the balance of the special account before the end of the fiscal year is insufficient to settle the payment for employees qualified for retirement in the next fiscal year, the company shall make up the difference in lump sum by the end of March of the next fiscal year. The special account has been commissioned to the Bureau of Labor Fund of the Ministry of Labor Affairs for management. The company contained in the consolidated financial statements exercises no influence on the right of the bureau in its investment management strategy.

The amount of determined benefit plan recognized in the consolidated balance sheet is shown below:

hown below:
Present value of the defined benefit obligations The fair value of plan assets Appropriation shortage Net determined benefit liability	December 31, 2018 $ 2,222,641 ( 976,641 ) 1,246,000 $ 1,246,000	December 31, 2017
	(	(	$ 2,160,082 936,330 ) 1,223,752 $ 1,223,752

Change in net determined benefit liability is shown below

January 1, 2017 Service cost Current service cost Interest expenses (revenues) Recognized in the profit or loss Reevaluation Planned ROE (except the amount of net interest) Actuarial loss – change in the assumption of the census Actuarial gain – change in financial assumptions	Pr (	esent value of the defined benefit obligations $ 2,256,309 25,553 23,432 48,985 - 2,156 39,142 )	T ( ( (	he fair value of plan assets $ 968,168 ) - 10,143 ) 10,143) 797 - -	N b (	et determined enefit liability $ 1,288,141 25,553 13,289 38,842 797 2,156 39,142 )

Actuarial loss – adjustment through experience Recognized in the other comprehensive profit of loss Employer appropriation Planned asset payment Company account payment December 31, 2017 Service cost Current service cost Interest expenses (revenues) Recognized in the profit or loss Reevaluation Planned ROE (except the amount of net interest) Actuarial loss – change in the assumption of the census Actuarial loss – change in financial assumptions Actuarial loss – adjustment through experience Recognized in the other comprehensive profit of loss Employer appropriation Planned asset payment Company account payment December 31, 2018	Pr ( ( ( (	esent value of the defined benefit obligations 47,725 10,739 - 129,412 ) 26,538 ) 2,160,082 22,487 26,507 48,994 - 752 $ 31,299 68,280 100,331 - 76,731 ) 10,035 ) $ 2,222,641	T ( ( ( ( ( ( ( (	he fair value of plan assets 48 845 86,669 ) 127,805 - 936,330 ) - 11,569 ) 11,569) 27,208 ) - $ - - 27,208 ) 78,265 ) 76,731 - $ 976,641 )	N b ( ( ( ( ( (	et determined enefit liability 47,773 11,584 86,669 ) 1,607 ) 26,538 ) 1,223,752 22,487 14,938 37,425 27,208 ) 752 $ 31,299 68,280 73,123 78,265 ) - 10,035 ) $ 1,246,000

The pension fund system of the company contained in the consolidated financial statements is exposed to the following risks due to the “Labor Standards Act”:

(1) Investment risk: The Bureau of Labor Fund of the Ministry of Labor Affairs uses the labor pension fund for investment in domestic and foreign equity securities and debt securities, and as bank deposits through proprietary trade or commissioned third parties. However, the amount attributable to the planned asset of the consolidated company shall not fall below the interest rate offered by the banks in the regions or countries of investment for 2-year time deposit as return.
(2) Interest risk: the decline of the interest rate for government/corporate bonds will cause an increase in the present value of determined benefit obligation. However, the ROI of the debt of the planned assets will also increase accordingly. The effect of the two on net determined benefit liability is mutually offsetting.
(3) Salary risk: the calculation of the present value of determined benefit obligation is based on the salaries of the members in the plan of the future. As such, an increase of the salaries of the members of the plan is bound to increase the present value of determined benefit obligation.

The determined benefit obligation of the company contained in the consolidated financial statements is based on the actuarial calculation of the actuary and the major assumption as of the evaluation day is shown below:

shown below:
2018 China Man-Made Fiber Corporation Taichung Commercial Bank Reliance Securities Investment Trust Co., Ltd.	Discount rate 1.13% 1.13% 1.13%	The expected rate of increase in salaries
		2.25% 1.50% 2.00%

Pan Asia Chemical Corporation Chou Chin Industrial Co., Ltd. GREENWORLD FOOD CO., LTD. 2017 China Man-Made Fiber Corporation Taichung Commercial Bank Reliance Securities Investment Trust Co., Ltd. Pan Asia Chemical Corporation Chou Chin Industrial Co., Ltd. GREENWORLD FOOD CO., LTD.	Discount rate 1.13% 0.97% 0.98% Discount rate 1.25% 1.25% 1.25% 1.25% 1.07% 1.18%	The expected rate of increase in salaries
		2.75% 1.50% 1.50% The expected rate of increase in salaries
		2.25% 1.50% 2.00% 2.75% 1.50% 1.50%

In case of reasonable and possible change in the major actuarial assumptions, and other assumptions remained unchanged, the amount of increase (decrease) in the present value of determined benefit obligation will be:

bligation will be:
Discount rate Increase by 0.25% Decrease by 0.25% The expected rate of increase in salaries Increase by 0.25% Decrease by 0.25%	December 31, 2018 ( $ 60,202 ) $ 62,490 $ 61,005 ( $ 59,068 )	December 31, 2017
	( (	( (	$ 61,030 ) $ 63,449 $ 62,007 $ 59,944 )

Actuarial assumptions may be inter-related. The possibility of change in specific assumption is not high. The aforementioned sensitivity analysis may not be able to reflect the actual change in the present value of determined benefit obligation.

Prepaid amount for 1 year Average maturity of determined benefit obligation	December 31, 2018 $ 42,258 9~17 years	December 31, 2017 $ 70,688 10~19 years

3. Employees preferential deposit plan

Contingent liabilities included in the consolidated balance sheet due to employees' preferential deposit plan at Taichung Commercial Bank are shown as follows:

Present value of preferred deposit plan The fair value of plan assets Appropriation shortage	December 31, 2018 $ 120,769 - 120,769	December 31, 2017	December 31, 2017
			$ 108,779 - 108,779

Provision for liability – preferred deposit plan

$ 120,769

$ 108,779

Change in employee preferred deposit plan liability is shown below:

	Present value of the	Present value of the
		defined benefit	The fair value		of plan		Net determined
		obligations		assets			benefit liability
January 1, 2017		$ 93,544	$		-		$ 93,544
Service cost
Service costs from
previous period		15,231			-		15,231
Interest expenses		3,284			-			3,284
Recognized in the profit or
loss		18,515			-		18,515
Reevaluation
Actuarial loss – change in
the assumption of the
census		2,727			-			2,727
Actuarial loss – adjustment
through experience		18,810			-		18,810
Recognized in the other
comprehensive profit of
loss		21,537			-		21,537
Company account payment	(	24,817 )			-	(	24,817 )
December 31, 2017		108,779			-		108,779
Service cost
Service costs from
previous period		9,112			-			9,112
Interest expenses		3,855			-			3,855
Recognized in the profit or
loss		12,967			-		12,967
Reevaluation
Actuarial loss – change in
the assumption of the
census		6,076			-			6,076
Actuarial loss – adjustment
through experience		20,173			-		20,173
Recognized in the other
comprehensive profit of
loss		26,249			-		26,249
Company account payment	(	27,226 )			-	(	27,226 )
December 31, 2018		$ 120,769	$		-		$ 120,769
The employee preferred deposit		obligation of the Taichung		Commercial Bank is based on				the actuarial
calculation of professional actuary	and the major assumption as			of the evaluation		day is shown below:
	December 31, 2018				December		31, 2017
Discount rate		4.00%				4.00%
Return on deposited
fund		2.00%				2.00%
Excessive interest rate		2.00%				2.00%
The withdrawal rate of						4.50%
preferred deposits		4.00%

bligation will be:
Discount rate Increase by 0.25% Decrease by 0.25% The withdrawal rate of preferred deposits Increase by 0.25% Decrease by 0.25%	December 31, 2018 ( $ 2,858 ) $ 2,982 $ 3,099 ( $ 3,227 )	December 31, 2017
	( (	( (	$ 2,502 ) $ 2,608 $ 2,727 $ 2,838 )

Prepaid amount for 1 year The average maturity of employee preferred deposit obligation	December 31, 2018 $ - 10.1 years	December 31, 2017 $ 24,817 9.8 years

4. Other long-term employee benefits

The other long-term employee benefits of the consolidated company meant for the long-term disability benefits. The Company will issue pensions to the employees who die of sickness or accidents at work for reasons other than occupational hazards.

The consolidated company recognized long-term employee benefits in the consolidated comprehensive income statement for an amount of NTD (4,542) thousand and NTD 3,230 thousand in 2018 and 2017, respectively. The other long-term employee benefit liabilities reserve amounted to NTD 22,988 thousand and NTD 18,447 thousand as of December 31, 2017 and 2017, respectively.

(II) The breakdown and change of the secured collateral:

Reconciliation sheet of provision for guarantee liabilities

2018

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Impairment difference
recognized in
accordance with the
Anticipated credit loss in 12 months Anticipated credit perpetuity of the financial assets loss within the Financial assets impairment with credit accordance with recognized in Impairment IFRS 9 Banking Institutions to Evaluate Assets and the Procedures for “Regulations Governing Total
Deal with Non-
performing/ Non-accrual Loans”
Balance as of January 1, 2018 $ 161,287 $ 78,453 $ 112 $ 239,852 $ 3,785 $ 243,637
Changes in financial instruments recognized
at the beginning of the period:
Converted as anticipated credit loss
within the perpetuity of the
financial assets ( 82 ) 82 - - - -
Converted as financial assets with credit
impairment ( 1,071 ) ( 10 ) 1,081 - - -
Converted as anticipated credit loss in
12 months 2,682 ( 2,682 ) - - - -
Financial assets removed in current
period ( 127,962 ) ( 75,721 ) ( 6 ) ( 203,689 ) - ( 203,689 )
Procured or initiated new financial assets 91,123 592 8,075 99,790 - 99,790
Impairment difference recognized in
accordance with the “Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and Deal
with Non-performing/ Non-
accrual Loans” - - - - 8,030 8,030
Write-off bad debts - - - - - -
Recovered amount after write-off bad debts - - - - - -
Foreign exchange settlement and other changes ( 4,916 ) 1,037 45,959 42,080 - 42,080
Balance - ending $ 121,061 $ 1,751 $ 55,221 $ 178,033 $ 11,815 $ 189,848
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2017

2017
Balance - beginning Deposit in the current period Exchange differences Balance - ending		Amount
	(	$ 166,760 77,434 557 ) $ 243,637

Bad debt expense and guarantee liability provisions recognized in 2018 and 2017. (IV) The breakdown and change of the allowance for contingency: Reconciliation sheet of provisions for accidents 2018

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Impairment difference
recognized in
accordance with the
Anticipated credit loss in 12 months Anticipated credit perpetuity of the financial assets loss within the Financial assets impairment with credit recognized in with IFRS 9 Impairment accordance Banking Institutions to Evaluate Assets and the Procedures for “Regulations Governing Total
Deal with Non-
performing/ Non-accrual Loans”
Balance as of January 1, 2018 $ 11,240 $ 8,802 $ 3,086 $ 23,128 $ 3,172 $ 26,300
Changes in financial instruments recognized
at the beginning of the period:
Converted as anticipated credit loss
within the perpetuity of the
financial assets - - - - - -
Converted as financial assets with credit
impairment - - - - - -
Converted as anticipated credit loss in
12 months - - - - - -
Financial assets removed in current (
period ( 11,240 ) ( 8,802 ) ( 3,086 ) 23,128 ) - ( 23,128 )
Procured or initiated new financial assets 12,108 - - 12,108 - 12,108
Impairment difference recognized in
accordance with the “Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and Deal
with Non-performing/ Non-
accrual Loans” - - - - 8,653 8,653
Write-off bad debts - - - - - -
Recovered amount after write-off bad debts - - - - - -
Foreign exchange settlement and other
changes - - - - - -
Balance - ending $ 12,108 $ - $ - $ 12,108 $ 11,825 $ 23,933
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2017 Balance - beginning Deposit in the current period Balance - ending		Amount
		$ 300 26,000 $ 26,300

Other revenue except for interest income recognized in 2018 and 2017.

(IV) Changes in provisions for commitment of financing by item are shown below: Reconciliation sheet of commitments for financing 2018

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Impairment difference
recognized in accordance
Anticipated credit loss in 12 months Anticipated credit perpetuity of the financial assets loss within the Financial assets impairment with credit recognized in with IFRS 9Impairment accordance Evaluate Assets and Deal Banking Institutions to with the “Regulations the Procedures for Governing Total
with Non-performing/ Non-accrual Loans”
Balance as of January 1, 2018 $ 45,440 $ 9,183 $ 2,150 $ 56,773 $ - $ 56,773
Changes in financial instruments
recognized at the beginning of
the period:
Converted as anticipated credit
loss within the perpetuity of
the financial assets 1,703 ( 1,703 ) - - - -
Converted as financial assets
with credit impairment ( 6 ) ( 20 ) 26 - - -
Converted as anticipated credit
loss in 12 months 2,532 ( 2,532 ) - - - -
Financial assets removed in (
current period ( 20,131 ) ( 4,757 ) ( 2,150 ) 27,038 ) - ( 27,038 )
Procured or initiated new financial
assets 21,975 1,655 - 23,630 - 23,630
Impairment difference recognized in
accordance with the
“Regulations Governing
the Procedures for Banking
Institutions to Evaluate Assets
and Deal with Non-performing/
Non-accrual Loans” - - - - - -
Write-off bad debts
- - - - - -
Recovered amount after write-off
bad debts - - - - - -
Foreign exchange settlement and
other changes 10,256 214 ( 26 ) 10,444 - 10,444
Balance - ending $ 61,769 $ 2,040 $ - $ 63,809 $ - $ 63,809
PROVISION FOR BAD DEBTS AND GUARANTEE LIABILITIES IS SHOWN BELOW.
Equity
December 31, 2018 December 31, 2017
Authorized number of shares
(thousand shares) 1,680,000 1,470,000
Authorized capital $ 16,800,000 $ 14,700,000
Number of shares issued with
fully paid-in capital
(thousand shares) 1,522,410 1,429,493
Outstanding capital $ 15,224,105 $ 14,294,934
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PROVISION FOR BAD DEBTS AND GUARANTEE LIABILITIES IS SHOWN BELOW. XXXIV. Equity

(I) Paid-in capital

Common stock shares issued at NTD 10 Par and each share is entitled to one voting right and dividends.

As of December 31, 2017, CMFC's paid-in capital was $14,294,934 thousand, consisting of 1,429,493 thousand shares of common stock, with a par value of $10 per share.On June 12, 2018, the shareholder meeting resolved to recapitalize the undistributed earnings of NT$929,171 thousand to 92,017 shares (both in thousand), at a par value of NT$10 per share, all of which were common stocks. As of December 31, 2018, the paid-in capital of CMFC has increased to NT$15,224,105 thousand, consisting of 1,522,410 thousand shares of common stock at a par value of NT$10 per share.

(II) Capital surplus

) Capital surplus
For covering loss carried forward, payment in cash or capitalization as equity shares (1) Shares issued in excess of par value Corporate bond conversion premium The differences between carrying amount and market price of actual acquisition or disposal of shares in subsidiaries. Assets received Treasury stock transactions For covering loss carried forward only. Changes in the ownership equity on a subsidiary Transaction of treasury stock (cash dividends paid to subsidiaries) May not be used for any purpose. Employees’ stock options	December 31, 2018 $ 590,001 6,270 2,129 772,194 184,238 137,443 2,600 $ 1,694,875	December 31, 2017
			$ 590,001 6,270 2,129 772,194 182,135 122,489 2,600 $ 1,677,818

Such additional paid-in capital can be used to make up for losses; also, when the company is without any loss, it can be applied for cash distribution or capitalization. However, it is limited to a certain percentage of the annual paid-in capital for the purpose of capitalization.
(III) Retained earnings and Dividend Policy

According to the Articles of Incorporation of China Man-Made Fiber Corporation, the policy for the distribution of earnings stated that if there is a surplus after account settlement of the fiscal year, the company shall pay applicable taxes and cover loss carried forward, followed by the allocation of 10% of the remainder as legal reserve, and appropriate for special reserve or reverse special reserve. If there is still a balance, it will be pooled up with the undistributed earnings carried forward from previous years for distribution as shareholder dividend under a proposal prepared by the Board subject to the final approval of the General Meeting of Shareholders. For information on the policy of remuneration to employees, Directors, and Shareholders to the Articles of Incorporation, refer to Note 36 (7) employee benefit expense.

The Company’s dividend policy shall be drafted subject to the Company’s future investment environment and long-term financial planning, and also takes the shareholders' equity into consideration. The dividends shall be allocated in the form of cash dividend as the first priority per year, and may be allocated in the form of stock dividend, provided that the ratio of allocation of stock dividend shall be no more than 95% of the total dividends.

China Man-Made Fiber Corporation has a special reserve appropriated and reversed in accordance with FSC.Certificate.Issue.Tzi No. 1010012865 Letter, FSC.Certificate.Issue.Tzi No. 1010047490 Letter, and “Special reserve appropriation Q&A after the adoption of International Financial Reporting Standards (IFRSs).” If the amount debited to the other shareholders’ equity is reversed subsequently, the reversed amount can be distributed.

The legal reserve should be contributed until its balance reaches the Company’s total paid-in capital. The legal reserve may be applied to make up loss. If there is no loss, the amount of legal reserve in excess of the paid-in capital by 25% could be allocated as capital stock and paid out as cash dividend.

CMFC had after-tax loss in 2016 and the general meeting on June 8, 2017 resolved to not distribute earnings. The general meeting on June 12, 2018 resolved to distribute the 2017 earning as follows:

Legal reserve Special reserve Cash dividends Stock dividends	Earnings Distribution Proposal $ 79,399 ( 524,938 ) 142,949 929,171	Dividend Per Share (NTD)
		$ - - 0.10 0.65

The Company had resolved in the board meeting the earnings distribution of 2018 on March 18, 2019 as follows:

019 as follows:
Legal reserve Special reserve Cash dividends Stock dividends	Earnings Distribution Proposal $ 137,204 ( 20,283 ) 152,241 989,567	Dividend Per Share (NTD)
		$ - - 0.10 0.65

The proposal for the distribution of earnings in 2018 is pending on the resolution of the General Meeting of shareholders scheduled to be held in June 2019.

For the profit distribution resolved by CMFC's shareholder meeting, please check the Market Observation Post System.

(IV) Other equity
Exchange differences from the translation of financial statements of foreign operations

Balance - beginning The exchange differences yielded by net assets of overseas operating institutions Balance - ending		2018 $ 41,611 ) 12,980 ) $ 54,591 )		2017
	( ( (		( ( (	$ 25,319 ) 16,292 ) $ 41,611 )

Unrealized gain or loss on financial assets at fair value through other comprehensive profit or loss

oss
Beginning balance (IAS 39) Effect of retroactive applicability IFRS 9 Beginning balance (IFRS 9) Change in tax rate Accrued in current year Unrealized gain or loss Equity instruments The shares of profit and/or loss at equity method over the associates The accumulated gain/loss from the disposition of equity instruments will be transferred to retained earnings. Balance - ending		2018
	( ( ( (	$ - 203,678 ) 203,678 ) - 31,466 226 ) 43,335 $ 129,103 )

Unrealized gain (loss) on available-for-sale financial assets

Unrealized gain (loss) on available-for-sale financial assets
Balance as of January 1, 2017 Accrued in current year Unrealized gain or loss Share of subsidiaries using the equity method Balance as of December 31, 2017 Balance as of January 1, 2018 (IAS 39) Effect of retroactive applicability IFRS 9 Balance as of January 1, 2018 (IFRS 9)		*2017*
	( ( (	$ 284,967 ) 67,520 48,256 $ 169,191 ) $ 169,191 ) 169,191 $ -

(V) Treasury stock

The details and changes of the treasury stocks of CMFC in 2018 and 2017 are shown as follows:

Cause Number of shares as of January 1, 2017 Increase in current period Decrease in current period Number of shares as of December 31, 2017 Number of shares on January 1, 2018 Increase in current period Decrease in current period Number of shares on December 31, 2018	Transferring stocks to employees (Thousand Shares) 5,689 - ( 5,689 ) - - - - -	Shares of parent company held by subsidiaries (in thousand shares) 291,815 - - 291,815 291,815 18,969 - 310,784	Total (thousand shares)	Total (thousand shares)
	(		(	297,504 - 5,689 ) 291,815 291,815 18,969 - 310,784

CMFC transferred 5,689 thousand of shares to employees for the year ended 2017, and the cost of the transfer was NT$45,677 thousand.
As of December 31, 2018 and 2017, CMFC shares held by the subsidiaries are as follows: Number of shares

held (thousand

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Name of Subsidiary shares) Book Value Market Value
December 31, 2018
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Pan Asia Chemical Corporation 236,096 Deh Hsing Investment Co., Ltd. 10,491 Chou Chin Industrial Co., Ltd. 55,514 Chou Chang Corporation (subsidiary of Chou Chin Industrial CO., LTD.) 8,683	$ 971,926 25,787 195,060 35,136 $ 1,227,909	$ 1,180,972 107,005 264,890 33,656 $ 1,586,523

December 31, 2017 Pan Asia Chemical Corporation 221,686 Deh Hsing Investment Co., Ltd. 9,850 Chou Chin Industrial Co., Ltd. 52,126 Chou Chang Corporation (subsidiary of Chou Chin Industrial CO., LTD.) 8,153	$ 971,926 25,787 195,060 35,136 $ 1,227,909	$ 1,103,456 99,982 247,504 31,447
		$ 1,482,389

According to the Securities and Exchange Act, the treasury stocks held by CMFC shall not be pledged, nor shall they be entitled to dividends distribution and voting rights. Shares of CMFC held by its subsidiaries shall be considered as treasury stocks, and except for the provisions of Article 167 and 179 of the Company Act, the rest share the same rights as the general shareholders.

(VI) Non-controlling interest

shareholders. I) Non-controlling interest
Beginning balance (IAS 39) Effect of retroactive applicability IFRS 9 Beginning balance (IFRS 9) Adjusted non-controlling interest of dividends distributed to subsidiaries The number of shares attributed to non-controlling interests Net income Reevaluation of determined benefit plan Unrealized gain (loss) on available-for-sale financial assets Financial assets at fair value through other comprehensive profit or loss Exchange differences from the translation of financial statements of foreign operations Cash dividends paid by subsidiaries Subsidiaries repurchase, cancel and transfer treasury stocks Change in non-controlling interest Balance - ending		2018 $ 32,470,411 297,263 32,767,674 14,228 3,037,600 25,672 ) - 27,114 9,518 1,066,594 ) - 1,103,412 $ 35,867,280		2017
	( (		( ( (	$ 30,905,692 - 30,905,692 - 2,669,704 8,261 ) 137,353 - 3,279 ) 1,291,145 ) 17,776 42,571 $ 32,470,411

XXXV. Share-based payment agreement Employee stock option plan

CMFC awarded 900 units, 2,743 units and 2,046 units of employee stock options based on three employee stock option plans in November 2017, with each unit being allowed to subscribe for 1000

shares of common stocks. Given to employees who meet specific conditions as laid out by the Company including China Man-Made Fiber Corporation. The term of stock option is 1 day. The holders of certificates may exercise the stock options granted during the term of stock option. The exercise price of the stock options was $8.18, $8.17 and $7.78, respectively.

Employee stock option information is as below:

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

2017
Employees’ stock options Unit (Thousands)
Outstanding stock options –
-
beginning
Vested this year 5,689
Waived during the year -
Implemented this current year ( 5,689 )
Overdue in the current year -
Outstanding stock options –
-
ending
Executable at end of year -
Weighted-average fair value
of stock options granted
during the year $ 0.74
----- End of picture text -----

CMFC adopted the Black-Scholes model for the employee stock options issued in November 2017, and the input values used in the evaluation model are as follows:

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

November 2017 November 2017 November 2017
----- End of picture text -----

	November 2017	November 2017	November 2017
Grant-date price	NT$ 8.86	NT$ 8.86	NT$ 8.86
Exercise price	NT$ 8.18	NT$ 8.17	NT$ 7.78
Expected	22.288%	22.288%	22.288%
fluctuation
rate
Duration	1 day	1 day	1 day
Expected dividend	0%	0%	0%
rate
Risk-free interest	0%	0%	0%
rate

The remuneration cost of CMFC recognized in 2017 is NT$4,232 thousand. XXXVI. Business units in continuing operation income

Income from continuing operations department includes the following items

(I) Interest income and expense

nterest income and expense
Interest revenue Discount and loan interest income Due from bank and interbank offered interest income Security investment interest income Others		2018 $ 10,785,290 141,778 1,517,886 637,878 $ 13,082,832		2017
				$ 10,212,314 172,953 1,222,691 489,857 $ 12,097,815

Financial costs Deposits Interest expenses Central Bank and interbank interest expense Bond issuance interest expense Interest expense on borrowings Other Interest expenses Less: Recognized cost of property, plant and equipment (Note 23) (II) Fee income and expense Income from handling fees Brokerage fee revenue Trust business income Loan service fee income Commission income for bank guarantee Other service fee revenue Service charges Commission expense ( Inter-bank service fee ( Other service fee expenses ( (		(	$ 3,250,146 186,754 373,299 246,130 44,709 4,101,038 24,450 ) $ 4,076,588 2017
( ( ( (	( ( ( (	$	1,437,263 769,961 312,790 121,771 344,259 2,986,044 375,504 ) 33,016 ) 128,945 ) 537,465 ) 2,448,579



		$

(III) Gain (loss) on financial assets and liabilities at fair value through profit and loss 2018 2017 The realized gain (loss) of financial assets and liabilities measured at fair value through profit or loss Commercial papers $ 146,516 $ 141,078 Stock ( 8,762 ) 36,275 Beneficiary certificate ( 77,018 ) 112,530 Bonds ( 27 ) ( 34 ) Derivatives 18,344 410,785 79,053 700,634 Commercial papers $ 3,046 $ 3,256 Stock 190,069 89,181 Beneficiary certificate ( 48,167 ) 36,408 PEM Group Insurance policy assets 14,456 - Bonds ( 15 ) 96 Open-end funds and money market instruments 230 16 Derivatives ( 29,046) ( 240,044) 130,573 ( 111,087 ) $ 209,626 $ 589,547	(III) Gain (loss) on financial assets and liabilities at fair value through profit and loss 2018 2017 The realized gain (loss) of financial assets and liabilities measured at fair value through profit or loss Commercial papers $ 146,516 $ 141,078 Stock ( 8,762 ) 36,275 Beneficiary certificate ( 77,018 ) 112,530 Bonds ( 27 ) ( 34 ) Derivatives 18,344 410,785 79,053 700,634 Commercial papers $ 3,046 $ 3,256 Stock 190,069 89,181 Beneficiary certificate ( 48,167 ) 36,408 PEM Group Insurance policy assets 14,456 - Bonds ( 15 ) 96 Open-end funds and money market instruments 230 16 Derivatives ( 29,046) ( 240,044) 130,573 ( 111,087 ) $ 209,626 $ 589,547	(III) Gain (loss) on financial assets and liabilities at fair value through profit and loss 2018 2017 The realized gain (loss) of financial assets and liabilities measured at fair value through profit or loss Commercial papers $ 146,516 $ 141,078 Stock ( 8,762 ) 36,275 Beneficiary certificate ( 77,018 ) 112,530 Bonds ( 27 ) ( 34 ) Derivatives 18,344 410,785 79,053 700,634 Commercial papers $ 3,046 $ 3,256 Stock 190,069 89,181 Beneficiary certificate ( 48,167 ) 36,408 PEM Group Insurance policy assets 14,456 - Bonds ( 15 ) 96 Open-end funds and money market instruments 230 16 Derivatives ( 29,046) ( 240,044) 130,573 ( 111,087 ) $ 209,626 $ 589,547
	( ( (	$ 141,078 36,275 112,530 34 ) 410,785 700,634 $ 3,256 89,181 36,408 - 96 16 240,044) 111,087 ) $ 589,547

(IV) Impairment reversal gain (loss)

(IV) Impairment reversal gain (loss)
Capital gain/loss on reversal of debts instrument at fair value through comprehensive income statement as other comprehensive income Impairment of debt instruments measured on the basis of cost after amortization ( Impairment loss of assets on PEM policies Net profit of financial assets measured at cost Impairment loss of property, plant and equipment ( ( (V) Other income Dividend income Management fee income Rental revenue Gain from liquidation of subsidiaries (Note 39) Others (VI) Depreciation and amortization Property, plant, and equipment expenses Depreciations of Investment Property Intangible assets amortization expenses Total Consolidation of depreciation expenses based on functions Operating cost Operating expenses Consolidation of amortization expenses based on functions Operating cost Operating expenses	2018 $ 3,820 21,308 ) - - 325 ) $ 17,813 ) 2018 $ 116,117 32,824 37,204 - 65,914 $ 252,059 2018 $ 847,938 1,783 54,854 $ 904,575 $ 611,281 238,440 $ 849,721 $ 731 54,123 $ 54,854			2017
		( ( ( (	$	- - 50,533 ) 10,954 ) 28,471 ) 89,958 ) 2017
			$

				$ 75,320 32,901 24,197 1,690 104,105 $ 238,213 2017
				$ 907,199 2,030 78,973 $ 988,202 $ 668,259 240,970 $ 909,229 $ 9,633 69,340 $ 78,973

(VII) Employee benefits expenses

2018

018	018	018	018
Operating cost Operating expenses Total Salary & wage $ 588,310 $ 3,501,679 $ 4,089,989 Labor insurance and national health insurance 57,035 215,918 272,953 645,345 3,717,597 4,362,942 Pension expenses Defined contribution pension plan 23,293 99,625 122,918 Defined benefit plan (Note 33) 4,615 32,810 37,425 27,908 132,435 160,343 Other employee benefits expenses 39,151 244,296 283,448 Total employee benefits expenses $ 712,404 $ 4,094,328 $ 4,806,733 2017 Operating cost Operating expenses Total Salary & wage $ 575,664 $ 3,135,730 $ 3,711,394 Labor insurance and national health insurance 55,266 212,228 267,494 630,930 3,347,958 3,978,888 Pension expenses Defined contribution pension plan 22,069 100,109 122,178 Defined benefit plan (Note 33) 4,956 33,886 38,842 27,025 133,995 161,020 Other employee benefits expenses 35,674 220,041 255,715 Total employee benefits expenses $ 693,629 $ 3,701,994 $ 4,395,623 The Company appropriated 1% to 5% and no more than 0.3% of the earnings before taxation before the deduction of remuneration to the employees, Directors and Supervisors of the same year. The Board approved the remuneration to employees and Directors and Supervisors in 2018and 2017 on March 18, 2019 and March 23, 2018, and were specified as follows: Estimate on ratio				Total
	Remuneration to employees Remuneration to directors/supervisors	2018 1.0% 0.3%	2017
			1.0% 0.3%

Estimate on ratio
	2018	2017
Remuneration to	1.0%	1.0%
employees
Remuneration to	0.3%	0.3%
directors/supervisors

Amount

Remuneration to employees Remuneration to directors/supervisors		2018 $ 13,673 $ 4,102		2017 $ 8,185 $ 2,456

If there are still changes in the amount specified in the consolidated financial statement after announcement, proceed to the accounting of change and adjusted for booking in the next fiscal year.

The actual amount for remuneration to employees, Directors and Supervisors in 2017 and 2016 did not vary from the amount recognized in the individual financial statements of 2017 and 2016.

For further information on the appropriation of remuneration to the employees and Directors and Supervisors by the Board of China Man-Made Fiber Corporation in 2019 and 2018, visit the “MOPS” website of Taiwan Stock Exchange Corporation.

XXXVII. Continuing department income tax

(I) Income tax recognized in profit or loss

The major components of income tax expense are as follows:

2018 Income tax expenses in the current period Accrued in current year $ 807,023 Additional levy on undistributed earnings 20,662 Prior year adjustment 8,367 Land revaluation increment tax 292 Deferred tax Accrued in current year 35,255 Change in tax rate ( 136,472) Income tax expense recognized in the profit or loss $ 735,127 The adjustments of 2018 and 2017 accounting income and the income t 2018 Income before tax from continuing operations $ 5,144,762 Income tax expense of net income before tax at the statutory tax rate $ 1,028,952 Non-deductible expenses and losses for tax purposes 21,458 Non-taxable income ( 177,990 ) ( Additional levy on undistributed earnings 20,662 Land revaluation increment tax 292 Income tax expense of prior years adjusted in the current year 8,367 Unrecognized loss carryforward ( 12,389 ) Unrecognized deductible temporary differences ( 18,488 ) Change in tax rate ( 136,472 ) Effect of variation in taxation rates on the consolidation of the group and individual entities. 735 Income tax expense recognized in the profit or loss $ 735,127

The individuals in Republic of China Income Tax Law is applicable to the consolidated companies; applicable tax rate in 2017 is 17%. In February, 2018, the Income Tax Law in the R.O.C. was amended and, starting from 2018, the corporate income tax rate was adjusted from 17% to 20%. In addition, the tax rate applicable to the undistributed earnings for 2018 will be reduced from 10% to 5%; the tax rate applicable to subsidiaries in China will be 25%.

(II) Income tax recognized in the other comprehensive profit or loss

(II) Income tax recognized in the other comprehensive profit or loss
2018 Deferred tax Accrued in current year － Reevaluation of determined benefit plan $ 48,464 － Unrealized gain or loss on financial assets at fair value through other comprehensive profit or loss ( 10,830 ) － Unrealized gain (loss) on available-for-sale financial assets - Income tax benefits recognized in the other comprehensive profit or loss $ 37,634 (III) Current income tax asset and liability December 31, 2018 Current income tax asset Tax refund receivable $ 5,293 Current Tax Liability Payable income tax $ 386,857			2017
	$ 3,845 - ( 7,414 ) ( $ 3,569 ) December 31, 2017
		$ 11,468 $ 257,114

(III) Current income tax asset and liability

(IV) Deferred income tax assets and liabilities

Changes in the deferred income tax assets and liabilities are as follows: 2018

2018
Deferredincometaxassets Temporary difference Property, plant and equipment Inventory Defined benefit pension plans Allowance for bad debt Unrealized loss from structured note indemnity Others Loss credit	Balance, beginning of year $ 37,238 9,484 241,109 330,787 192,655 ( 3,683) 807,590 126,952 $ 934,542	Recognized in the profit or loss ( $ 2,449 ) 1,674 19,756 41,735 31,106 37,789 129,611 ( 27,849 ) $ 101,762	Recognized in the other comprehensive profit of loss $ - - 48,464 - - ( 10,830) 37,634 - $ 37,634	Balance, end of year $ 34,789 11,158 309,329 372,522 223,761 23,276 974,835 99,103 $ 1,073,938
	(	( (	(		$ 34,789 11,158 309,329 372,522 223,761 23,276 974,835 99,103 $ 1,073,938

Deferredtax liabilities Temporary difference Allowance for land increment value tax 2017 Deferredincometaxassets Temporary difference Property, plant and equipment Inventory Defined benefit pension plans Allowance for bad debt Unrealized loss from structured note indemnity Others Loss credit Allowance for land increment value tax Others	$ 1,021,022 $ 1,021,022 Balance, beginning of year $ 37,238 9,484 245,051 374,046 184,028 ( 7,869 ) 841,978 128,259 $ 970,237 $ 1,021,022 95 $ 1,021,117	$ 545 $ 545 Recognized in the profit or loss $ - - ( 7,787 ) ( 43,259 ) 8,627 11,600 ( 30,819 ) ( 1,307 ) ( $ 32,126 ) $ - ( 95 ) ( $ 95 )	$ - $ - Recognized in the other comprehensive profit of loss $ - - 3,845 - - ( 7,414 ) ( 3,569 ) - ( $ 3,569 ) $ - - $ -	$ 1,021,567 $ 1,021,567 Balance, end of year	$ 1,021,567 $ 1,021,567 Balance, end of year
	(	( ( ( ( ( ( (	( ( (	(	$ 37,238 9,484 241,109 330,787 192,655 3,683) 807,590 126,952 $ 934,542 $ 1,021,022 - $ 1,021,022

(V) Deductible temporary differences and unused deduction of loss for deferred income tax assets are not recognized in the balance sheet.

Deductible temporary differences Defined benefits plan Allowance to reduce inventory to market	December 31, 2018 $ - 282,592 $ 282,592	December 31, 2017	December 31, 2017
			$ 148,582 282,592 $ 431,174

(VI) Unused losses credit related information

Unused losses credit related information
Loss deduction as at December 31, 2018: Uncredited balance $ 11,511 5,211 476,968 $ 493,690	Last year of credit
	2020 2022 2023

(VII) Income tax audit
Approved by the Company up to 2016.
The Taichung Commercial Bank was audited up to the year 2016.

The Taichung Commercial Bank Insurance Broker Co., Ltd. was audited up to the year of 2016.
The Taichung Commercial Bank Lease Enterprise was audited up to the year of 2016.
TCB Securities was approved until 2016.
The Pan Asia Chemical Corporation was audited up to the year 2016.
Approved by De-Hsin Investment up to 2016.
Approved by Reliance Securities Investment Trust up to 2017.
Approved by Chou Chin Industrial up to 2016.
Approved by Ge Ling up to 2016.
Approved by Jeou Chang up to 2016.
Approved by Rui-Jia Investment up to 2016.
Approved by Xiang-Feng Development up to 2016.
Approved by Mélasse up to 2017.
Approved by Pan-Feng Industry up to 2016.
Approved by Tou-Ming Industry up to 2016.
Approved by Jin-Bang-Ge Industry up to 2016.

XXXVIII. Earnings per share

Basic earnings per share Diluted earnings per share		2018 $ 1.13 $ 1.13		2017 $ 0.66 $ 0.66

When calculating earnings per share, the impact of the stock dividend had been retroactively adjusted. The payment date of bonus shares is on September 4, 2018. The net income and weighted average common stock shares used for calculating earnings per share are as follows:

Basic earnings per share Diluted earnings per share		Cum-dividend $ 0.70 $ 0.70		Unit: NTD per share Ex-dividend $ 0.66 $ 0.66

The earnings and weighted average common stock shares used in calculating the earnings per share are as follows:

Net income

are as follows: Net income
Net profit attributable to the company QuantityUnit: Thousand Shares Weighted average common stock shares used to calculate basic earnings per share Effect of dilutive potential common stock: Remuneration to employees Weighted average common stock shares used to calculate diluted earnings per share	$	2018 1,372,035 2018 1,211,626 1,508 1,213,134	2017 $ 793,987 2017 1,206,324 806 1,207,130

If the consolidated company may choose to have the employee compensation distributed via a stock or cash dividend, calculate the diluted earnings per share, assuming that the bonus to employees is with a stock dividend distributed, with the weighted average number of shares outstanding included when the potential common stock has a diluted effect. When diluted EPS is calculated in the next year resolves

the number of share distribution for employee compensation, the dilution effect is also considered for such potential common shares.

XXXIX. Disposal of subsidiaries

The consolidated company disposed of a subsidiary, Pan-Xu Investment, on March 27, 2017 to an interested party, Midea Company (Please refer to Note 40). The total amount of disposal is NT$137,360 thousand, with a gain of NT$1,690 thousand. The consolidated company had completed the disposal as of December 31, 2017, losing control of the subsidiaries.

(I) Analysis of assets and liabilities which are not in control

Current assets Cash and cash equivalents Non-Current assets Property, plant and equipment-net Current liabilities Payables Net assets disposed of from disposal of subsidiaries Consideration collected Net assets disposed of Disposal profit ash inflow from disposition of subsidiaries Consideration received in cash and cash equivalents Less: Balance of cash and cash equivalents disposed of		Amount
	(	$ 18,351 118,714 1,395 ) $ 135,670 Amount
	(	$ 137,360 135,670 ) $ 1,690 Amount
	(	$ 137,360 18,351 ) $ 119,009

(II) Gain from disposal of subsidiaries
(III) Net cash inflow from disposition of subsidiaries

XL. Related Party Transactions

(I) Name and affilation of related parties

Name Affiliation Investors with control Investors with control Affiliated enterprises Affiliated enterprises Affiliated enterprises Affiliated enterprises Substantial related party Substantial related party Substantial related party Substantial related party

Chung Chien Investment Co., Ltd. Pan Asia Investment Co., Ltd. Nan Chung Petrochemical Corp. Wei-Kang International BONWELL PRADISE Co., Ltd Storm Model Management Hua Nan Financial Holding Hua Nan Bank Hua Nan Insurance TAIWAN FILAMENT WEAVING DEVELOPMENT CO., LTD.

Hsu Tian Investment Co., Ltd TA YI DEVELOPMENT CO., LTD. Midea Formosa Imperial Wineseller Corp. Formosawine Vintners Corporation Da Fa Investment Company

Substantial related party Substantial related party Substantial related party Substantial related party Substantial related party Substantial related party

Name Affiliation Sheng Jen Knitted Textiles Co., Ltd. Substantial related party Tai Yi Investment Substantial related party Reliance Consolidated Securities Co., Ltd. Substantial related party Wang Wan Chin Education Foundation Substantial related party Chao-Qing Investment Substantial related party Peng Hsu Investment Company Substantial related party Sheng Yuan Zhe Investment Substantial related party Taichung Commercial Bank Cultural and Substantial related party Educational Foundation, Taichung Commercial Bank Workers’ Welfare Commission

Ho Yang Management Consultant Co., Ltd.

27 people including the spouse of the chairman of Taichung Commercial Bank (Note 1)
49 people including the spouse of directors of Taichung Commercial Bank (Note 2)
6 persons including Chen-Yuan Chen
19 people including the spouse of the assistant general manager of Taichung Commercial Bank
101 persons including Chien-Hung Lin
35 persons including Wang Kuei-Hsien

Legal director of Taichung Commercial Bank

Spouses and kin at the second tier under the Civil Code of Chairman and President of the Taichung Commercial Bank
Spouse and children of Director of TCB
Key managers of Taichung Commercial Bank
Spouse and children of the Vice President of TCB

Mangers of Taichung Bank

Directors and general manager of CMFC and their spouses and children

Note 1: Chairman Chin-Yuan Lai of Taichung Bank resigned on June 26, 2018. The standing committee of the Board elected Ming-Hsiung Huang as the new Chairman of Taichung Bank on June 27, 2018. Chairman Ming-Hsiung Huang later resigned for health reasons on July 12, 2018. The standing committee of the Board elected Kuei-Fong Wang as the new Chairman on the same day.
Note 2: Representative Huang Ching-Tai of Hsu Tian Investment Co., Ltd., an Institutional Director of Taichung Bank, resigned on April 20, 2018. Hsu Tian Investment appointed Lai-Hsiang Tsai as the Representative on April 27, 2018. Representative Chin-Yuan Lai of Hsu Tian Investment Co., Ltd., an Institutional Director of Taichung Bank, resigned on June 26, 2018. The vacancy is yet to be appointed by Hsu Tian Investment Co., Ltd.
(II) Important transactions between the Company and related parties:
Purchases

Name Nan Chung Petrochemical Corp.		2018 $ 4,246,032		2017 $ 3,976,276

The terms and conditions of the Consolidated Company’s purchase from said related parties are as same as that to the general suppliers. The general suppliers apply the A/R settlement 1 month~2 months.

Bank deposits and interest revenue

2018 2017 Name Balance - ending Interest revenue Balance - ending Interest revenue Hua Nan Bank $ 111,807 $ 181 $ 106,293 $ 121 3. Payable accounts from related parties Name December 31, 2018 December 31, 2017 Payable accounts and notes Nan Chung Petrochemical Corp. $ 342,359 $ 468,898

Payable accounts from related parties

4. Loan

2018

Unit: NTD thousand

	Type	Nu acco na stak	mber of unts or me of eholder	M Balanc	aximum e in Current Period	Bal	ance - ending	Performa	nce	No- erforming loans	Int	erest revenue		Collateral Contents	tra a no	Difference in ding conditions nd terms with n-stakeholders
								Normal loans	p
Custo emplo Reside Other l	mer loans to yees ntial mortgage loans oans Type	9 acco 27 acc Lee O Ni OO Chu O You O Chen Liu O loans loans	unts ounts O O O OO O Number account name stakehol	$ of s or of der O O r of s or of der s s O	4,317 109,451 2,817 1,500 4,500 4,300 7,000 2,176 Maximum Balance i Current Period	$ n n	2,911 83,660 2,685 - - - 4,000 2,044 Balance - ending	$ 2,911 83,660 2,685 - - - 4,000 2,044 Perfor	ma	$ - - - - - - - - nce	$ g	44 1,032 43 8 31 15 54 31 Interest reven	ue ue	Credit loans Real estate 〃〃〃〃〃〃 Collateral Contents	NT	N/A 〃〃〃〃〃〃〃 Difference in trading conditions and terms with non- stakeholders
								Normal loans	rma	No- performing loans
	Customer loans to employees Residential mortgage Other loans Type		Yang OO Chung OO Lin OO Liang OO Chen OO Huang OO Chuang O Chuang O Chiu OO Tsai OO Huang OO Lee OO Lin OO Numbe account name stakehol		$ 1,298 14,387 38,000 3,053 4,000 1,830 1,487 1,769 3,826 3,642 2,500 3,600 1,500 Maximum Balance i Current Period		$ 846 12,230 19,000 1,002 - 1,701 - 1,620 3,534 1,529 - - - Balance - ending	$ 846 12,230 19,000 1,002 - 1,701 - 1,620 3,534 1,529 - - - 2017 Perfo		$ - - - - - - - - - - - - - nce		$ 16 206 337 23 54 30 24 22 53 43 26 17 2 Interest reven		Real estate 〃〃〃〃〃〃〃〃〃〃〃〃 Unit: Collateral Contents		N/A 〃〃〃〃〃〃〃〃〃〃〃〃 D thousand Difference in trading conditions and terms with non- stakeholders
								Normal loans		No- performin loans
	Customer loans to employees Residential mortgage Other loans		10 account 21 account ○○ Chen Ni OO Ni OO You OO Chu OO Meng ○○ Lee OO Huang OO Chiu OO ○○ Liu Yang OO ○○ Chen Chang ○○ ○○ Chen Liang OO ○○ Chen Zhuang O Tsai OO ○○ Tseng Chiu OO Chung ○○ oo Lin Lee OO		$ 4,110 59,882 5,000 3,500 1,440 4,300 3,500 9,209 10,947 2,500 1,600 2,305 1,743 7,100 1,773 4,000 4,970 3,000 1,917 3,831 500 4,114 15,211 2,600 1,500		$ 2,817 52,562 5,000 1,500 1,440 4,300 3,500 - 2,817 2,500 1,600 2,176 1,298 3,000 - 4,000 3,053 3,000 1,769 3,642 - 3,826 14,387 1,600 1,500	$ 2,817 52,562 5,000 1,500 1,440 4,300 3,500 - 2,817 2,500 1,600 2,176 1,298 3,000 - 4,000 3,053 3,000 1,769 3,642 - 3,826 14,387 1,600 1,500		$ - - - - - - - - - - - - - - - - - - - - - - - - -		$ 42 647 75 27 15 63 24 150 48 2 - 33 22 50 12 20 45 - 24 76 6 58 234 30 17		Credit loans Real estate 〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃		N/A 〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃〃

Unit: NTD thousand

According to Articles 32 and 33 of the Banking Act of the Republic of China, no non-secured credit loans shall be granted to any party interested with the Bank’s staff, unless they are consumer loans and loans extended to the Government Apparatus; secured credit loans shall be granted under sufficient collateral and the terms of such credit extension shall not be more favorable than those offered to other customers in the same category.

Deposit

Deposit
Taichung Commercial Bank Workers’ Welfare Commission Reliance Consolidated Securities Co., Ltd. Taichung Commercial Bank Cultural and Educational Foundation Formosa Imperial Wineseller Corp. Yu Hwei Technology Co., LTD. Hsu Tian Investment Co., Ltd Ho Yang Management Consultant Co., Ltd. Others			2018	Interest Expenses		2017
	B	alance - ending	Interest Rate Collars %		Balance - ending	Interest Rate Collars %	Interest Expenses
		$ 141,566 - 8,232 2,393 4 11,888 34,828 242,116 $ 441,027	0.01~5.09 - 0.01~1.09 0.08 0.01 0.01~0.43 0.01 0.00~5.09	$ 7,367 - 88 - - 86 1 3,847 $ 11,389	$ 141,943 14,323 8,220 270 72 37,263 234,093 234,093 $ 436,184	0.01～5.09 0.08～0.80 0.01～1.09 0.08 0.08 0.01～0.08 0.00～5.09 0.00～5.09	$ 7,232 106 88 - - 33 3,839 3,839 $ 11,298

With the exception of the interest rate for bank clerks’ deposits on December 31, 2018 and 2017 were 5.09% respectively, the other interest rates are not materially different from those offered to general customers.

6. Financial bonds payable

Taichung Bank has entrusted KGI Securities acting as the financial consultant in bond offering for its issuance of the 1st term in 2015, 1st term in 2016, 1[st] , 2[nd] , 3[rd] 4[th] and 5[th] term in 2017 of perpetual nonaccumulative subordinated bank debentures.

As of December 31, 2018, the financial bonds of Taichung Bank Company subscribed by the related parties through the underwriters are as follows:

==> picture [335 x 28] intentionally omitted <==

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

Subscription
Trading Counterpart amount Session
Hsu Tian Investment $ 4,000,000 1st term in 2015, 1st term in 2016, 1st and 5th term in
----- End of picture text -----

Trading Counterpart Hsu Tian Investment	Subscription amount $ 4,000,000	Session 1st term in 2015, 1st term in 2016, 1st and 5th term in
Co., Ltd.		2017, 1st term and 2ndterm in 2018 of perpetual non-
		accumulative subordinated debentures
Other related parties	1,041,000	2ndterm in 2013, 1st term in 2017, 4th term in 2017, 1st
		term and 2nd term in 2018 of perpetual non-
		accumulative subordinated debentures

As of December 31, 2018 and 2017, Taichung Bank should pay bond interest from bank debentures to the aforementioned related parties amounting to NTD35,399 thousand, and NTD 24,829 thousand, respectively. The interest expenses as of December 31, 2018 and 2017 amounted to NTD 154,530 thousand and NTD 80,191 thousand, respectively.

7. Transactions of property

The Consolidated Company purchased the funds managed by Reliance Securities Investment Trust Co., Ltd. at the price of NT$28,532 thousand in 2017, and sold the fund NT$59,765 thousand, at the price of NT$60,234 thousand, and, therefore, generated the gain from disposal, NT$469 thousand. The transaction price for the funds purchased from or sold to the related parties was determined based on the market value of the funds published on the date of transaction.

Chou Chin Industrial disposed of its subsidiary, Pan-Xu Investment, in March 2017 to Midea Company. The total amount of disposal is NT$137,360 thousand, based on the price reasonableness report provided by experts, and the gain from the disposal is NT$1,690 thousand. Please see Note 39.

(III) Rewards to management

The 2018 and 2017 total remuneration to directors and the other management are as follows:

Short-term employee benefits Retirement benefits Other long-term employee benefits		2018 $ 250,985 2,950 25 $ 253,960		2017
				$ 290,536 2,579 60 $ 293,175

The salaries and remunerations to directors and other key management were determined by the Salary Committee in accordance with the personal performances and trends in the markets:

XLI. Pledged assets

The consolidated company provides assets as operation bonds, collaterals for bank borrowings, guarantee for repurchase agreement, guarantee for overdraft limit, margin for financial derivatives, guarantee for import duty and guarantee for hiring foreign workers (list them based on the book value):

Notes receivable Due to Central Bank and other banks Restricted assets - Bank borrowings (list other current assets) Available-for-sale financial assets Financial assets at fair value through other comprehensive profit or loss Held-to-maturity financial assets Investment of debt instrument on the basis of cost after amortization – government bonds Investment under the equity method Available-for-sale noncurrent assets Investment property Property, plant and equipment Land House and Building XLII. Significant undertakings o	December 31, 2018 $ 2,277,240 200,000 606,217 - 186,865 - 845,000 122,896 769,610 1,090,166 3,179,986 530,813 r contingencies	December 31, 2017
		$ 2,299,020 200,000 396,858 139,829 - 1,067,800 - 121,629 - 1,869,757 3,179,986 554,201

In addition to the undertaking for financial products specified in Notes 8, 9 and 28, the company have had the following undertakings or contingent liabilities until December 31, 2018 and 2017:

(I) Guarantee notes issued by CMFC:

uarantee notes issued by CMFC:
Banking facility Advance payment and performance bond	December 31, 2018 $ 14,676,846 320,000 $ 14,996,846	December 31, 2017
			$ 13,242,634 320,000 $ 13,562,634

(II) As of December 31, 2018 and 2017, the consolidated company had opened unused credit line of letter of credit at NT$1,976,370 thousand and NT$2,280,772 thousand, respectively.
(III) CMFC and Air Liquide Far Eastern signed a gas purchase agreement, which specified the minimum purchase volume of oxygen and nitrogen. The monthly purchase is about NT$13,800 thousand, with adjustments made every April in accordance with the customer price index. The purchase volume of oxygen and nitrogen is based on the contract price. The purchase agreement has a term of 240 months. The agreement will be automatically renewed for 36 months upon expiration if neither party has objection. A 24-month notice is required for the termination of the agreement. Both parties agreed on July 1, 2014 as the effective date of the agreement.
(IV) Taichung Commercial Bank has other commitments:

Undisbursed credit committee (exclusive of credit cards) Credit card committee Guarantee payments Trust liabilities Balance of application for L/C Lease contract commitments	December 31, 2018 $ 152,638,816 10,507,270 18,335,961 65,770,665 4,140,679 1,803,183	December 31, 2017
		$ 158,951,848 12,810,379 18,693,022 62,673,911 3,900,545 1,161,518

(IV) The balance sheet and trust property catalogue of the trust account is disclosed pursuant to Article 17 of the “Enforcement Rules of Trust Enterprise Act” as follows:

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Balance Sheet of Trust Accounts
December 31, 2018
Trust assets Amount Trust liabilities Amount
Bank deposits $ 1,945,793 Payable securities in
custody $ 7,021,865
Short-term 52,565,072 Trust capital 58,748,800
investment
Structured product 2,369,583 Net income 2,001,849
investment
Real estate Deferred carry-over ( 2,001,849 )
Land 1,745,119
House and 123,233
Building
Securities in custody 7,021,865
Total trust assets $ 65,770,665 Total trust liabilities $ 65,770,665
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Property Catalogue of Trust Accoun December 31, 2018 Investment Bank deposits Short-term investment Structured product investment Real estate Land House and Building Securities in custody	ts	Amount
		$ 1,945,793 52,565,072 2,369,583 1,745,119 123,233 7,021,865 $ 65,770,665

Income Statement of Trust Accounts 2018 Amount Interest revenue Dividend income Trust expenses Administration expenses ( Taxation ( Income before taxation Income tax expenses Income after taxation	Income Statement of Trust Accounts 2018 Amount Interest revenue Dividend income Trust expenses Administration expenses ( Taxation ( Income before taxation Income tax expenses Income after taxation	Amount
	( (	$ 2,777,593 33,056 808,648 ) 152 ) 2,001,849 - $ 2,001,849

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Balance Sheet of Trust Accounts
December 31, 2017
Trust assets Amount Trust liabilities Amount
Bank deposits $ 1,575,084 Payable securities in
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Short-term investment Structured product investment Real estate Land House and Building Securities in custody Total trust assets	custody 50,348,720 Trust capital 1,894,932 Money trust Real estate trust 1,564,319 Net income 116,531 Deferred carry-over ( 7,174,325 $ 62,673,911 Total trust liabilities	$ 7,174,325 53,818,736 1,680,850 1,795,915 1,795,915) $ 62,673,911

Property Catalogue of Trust Accounts December 31, 2017

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Investment Amount
Bank deposits $ 1,575,084
Short-term investment 50,348,720
Structured product 1,894,932
investment
Real estate
Land 1,564,319
House and Building 116,531
Securities in custody 7,174,325
$ 62,673,911
Income Statement of Trust Accounts
2017
A m o u n t
Amount
Interest revenue $ 2,541,642
Dividend income 27,644
Trust expenses
Administration expenses ( 769,410 )
Taxation ( 3,961 )
Income before taxation 1,795,915
Income tax expenses -
Income after taxation $ 1,795,915
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(VI) Leasing contracts and capital expenditure commitments maturity analysis

The consolidated company’s leasing contract commitments include operating leases and financing leases.

The operating lease commitment meant for the minimum lease payment of the consolidated company as a lessee or lessor under the irrevocable operating lease.

The financing lease commitment meant for the future total lease payment and its present value of the consolidated company as a lessee under the financing lease conditions or the total lease investment amount or the present value of the minimum lease receivable of the lessor under the financing lease condition.

Capital expenditure commitment refers to the contract signed for the capital expenditures paid to receive architecture and equipment.

The maturity of the commitments of the lease agreements and capital expenditure of the companies in the consolidated financial statements are analyzed below: December 31, 2018

December 31, 2018
Lease contract commitments Operating lease expense (lessee) Operating lease income (lessor) Gross financial lease income (lessor) Present value of financial lease income (lessor) Capital expenditure commitments Total	L	ess than 1 year $ 248,988 1,809 1,543,078 1,362,538 117,104 $ 3,273,517		1 ~5 years $ 274,050 1,305 1,102,103 1,006,172 104,725 $ 2,488,355	M	ore than 5 year $ 540 - - - - $ 540		Total
								$ 523,578 3,114 2,645,781 2,368,710 221,829 $ 5,763,012

December 31, 2017

December 31, 2017
Lease contract commitments Operating lease expense (lessee) Operating lease income (lessor) Gross financial lease income (lessor) Present value of financial lease income (lessor) Capital expenditure commitments Total	L	ess than 1 year $ 288,672 2,591 1,172,616 1,071,907 196,012 $2,731,798		1 ~5 years $ 221,016 2,580 503,097 478,437 108,657 $ 1,313,787	More than 5 year $1,620 - - - - $1,620		Total
							$ 511,308 5,171 1,675,713 1,550,344 304,669 $ 4,047,205

XLIII. Other matters

The distributors for PACC provided certificates of deposits valued at NT$2,000 thousand to PACC and also provided performance bond from bank valued at NT$2,000 thousand.

XLIV Financial instruments

(I) Fair value information- Financial instruments that are not measured at fair value

With the exception of the following, the book value of financial instruments not at fair value through income statement approximated its fair value or the fair value of which could not be measured with reliability. The fair value is not disclosed.

December 31, 2018

December 31, 2018
Financial Assets Investment of debt instruments on the basis of cost after amortization Financial Liabilities Financial liabilities based on cost after amortization: - Financial bonds payable December 31, 2017 Financial Assets Held-to-maturity investments Financial Liabilities Financial liabilities on the basis of cost after amortization: - Financial bonds payable	Book Value		Fair v	alue
		Level 1	Level 2	Level 3	Total
	$ 101,247,761 20,000,000 Book Value	$ 65,891,744 -	$ 32,453,053 20,098,746 Fairva	$ - - lue	$ 98,344,797 20,098,746
		Level 1	Level 2	Level 3	Total
	$ 86,559,895 17,500,000	$ 66,020,623 -	$ 19,472,844 17,662,353	$ - -	$ 85,493,467 17,662,353

(II) Information on fair value – financial instruments at fair value on repetition.

Fair value bracket

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December 31, 2018
Level 1 Level 2 Level 3 Total
Financial assets at fair value
through profit and loss
Derivatives $ - $ 2,088,691 $ - $ 2,088,691
Commercial papers 22,044,240 - - 22,044,240
Listed stocks – domestic and
emerging stock 1,629,612 - - 1,629,612
Foreign TSEC/GTSM listed
shares 65,560 - - 65,560
Beneficiary certificates of
funds 524,766 - - 524,766
Domestic corporate bonds 57,899 - - 57,899
Others - 998,147 - 998,147
Financial assets at fair value
through other comprehensive
profit or loss
Equity investment
- Listed stocks – domestic
and emerging stock $ 2,412,780 $ - $ - $ 2,412,780
- Foreign TSEC/GTSM
listed shares 194,778 - - 194,778
- Domestic non-listed (OTC)
stocks - - 905,465 905,465
- Foreign TSEC/GTSM
unlisted shares - - 8,873 8,873
Debt instrument
- Domestic corporate bonds 20,730,435 - - 20,730,435
- Domestic government bonds 5,976,359 - - 5,976,359
- Overseas bond - 785,400 - 785,400
Financial liabilities at fair value
through profit and loss
Derivatives - 165,360 - 165,360
Reconciliation of financial instruments at Level 3 fair value:
Financial assets at fair value through other
comprehensive profit or loss
Financial Assets Equity instruments Debt instruments Total
Balance, beginning of year $ 978,480 $ - $ 978,480
Recognized in the other
comprehensive income (Unrealized
gain or loss on financial assets at
fair value through other
comprehensive profit or loss) ( 60,352 ) - ( 60,352 )
- Purchase ( 868 ) - ( 868 )
- Capital reduction and return of
share capital ( 2,922 ) - ( 2,922 )
Balance, end of year $ 914,338 $ - $ 914,338
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Financial instruments at fair value December 31, 2017
through profit or loss Level 1 Level 2 Level 3 Total
Non-derivative financial instruments
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Non-derivative financial instruments
Assets
Financial assets at fair value
through profit and loss
Stock investment	$ 1,465,510	$	-	$	-	$	1,465,510
Bond investment	182,929		-		-		182,929
Others	28,650,758		-		-		28,650,758
Available-for-sale financial assets
Stock investment	1,752,766		-		-		1,752,766
Bond investment	31,234,046		-		-		31,234,046
Others	13,800		-		-		13,800
Derivatives
Assets
Financial assets at fair value
through profit and loss	-		1,866,337		-		1,866,337
Liabilities
Financial liabilities at fair value
through profit and loss	-		207,225		-		207,225
Reconciliation of financial instruments	at Level 3 fair	value:	None.
In 2018 and 2017, there was no transfer of fair values		measures in Level I and Level II.

Evaluation techniques and an input value of Level 2 fair value measurement Categories of financial instruments

Evaluation techniques and input values The bid price in active markets is not taken as fair value.

Non-derivatives Derivatives Options Contracts

Model Evaluation Method: The prices of execution of all contracts, market fluctuation and maturity, interest rate, and exchange rate were taken as parameters for evaluation, and were subject to evaluation using the close-box model.

Cash flow discount method: Estimate the future cash flow on the basis of observable forwards rate and the forwards contracts entered into, and subject to discount on the basis that could reflect the risk discount rate for respective counterparties.

FX swap contracts, and forwards contracts

The calculation of the closing price of convertible bonds on the day of net bond value: net bond value shall be discounted through the adjustment of risk discount on the basis of the TAIBIR on short-term Taiwan bills compiled at TDCC on the basis of the future cash flow of convertible bonds.

Assets swap agreement

Structured products Interest rate derivatives Quotation of counterparties.

Techniques and input value for measurement of Level 3 fair value Categories of financial

instruments Evaluation techniques and input values Unlisted/OTC Market multiple method: The fair value of the subject matter may be evaluated by comparison with the bid price of the stocks in the industry in the active market with liquidity discount ratio taken into account and the corresponding net value of multiples.

The measurement of Level 3 fair value is the sensitivity analysis of the reasonable substituted assumption of fair value
The significant unobservable input value under the market multiple method adopted by the
consolidated company is the liquidity discount ratio. When the ratio increases, the fair value of the investment decreases. Sensitivity analysis is compiled as follows:

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Risk factors Changes Effects
Liquidity Discount Ratio 10% ( $ 53,540 )
(III) Categories of financial instruments
December 31, 2018 December 31, 2017
Financial Assets
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Measured at fair values through profit
and/or loss
Measured at fair value through income
under compulsion
$ 27,408,915
$ 32,165,534
Available-for-sale financial assets (Note 1)
-
33,325,578
Held-to-maturity investments
-
85,542,095
Loans and accounts receivable (Note 2)
-
509,554,533
Financial assets on the basis of cost after
amortization (Note 3)
631,445,242
-
Financial assets at fair value through other
comprehensive profit or loss
Equity investment
3,521,896
-
Debt instrument
27,492,194
-
Financial Liabilities
Measured at fair values through profit
and/or loss
165,360
207,225
Based on cost after amortization (Note 4)
658,939,255
634,773,251

Note 1: The balance covers the balance of available-for-sale financial assets and financial assets on the basis of cost.
Note 2: The balance include cash and cash equivalent, the Central Bank deposits and interbank lending, bills and bonds purchased under resale agreements, notes receivables and accounts, other receivables, net discounts and lending, restricted assets, refundable deposits and loans and receivables at amortized cost.
Note 3: The balance include cash and cash equivalent, the Central Bank deposits and interbank lending, bills and bonds purchased under resale agreements, notes receivables and accounts, other receivables, net discounts and lending, financial assets at amortized cost - Non-current, restricted assets, refundable deposits and other financial assets at amortized cost.
Note 4: The balance include short-term loans, short-term notes payable, repurchase coupons andbonds liabilities, the Central Bank and interbank deposits, bills payable and accounts, other payables, deposits and remittances, bills payable (including those with one-year to

maturity), long-term borrowings (including those with one-year to maturity), refundable deposits and other financial liabilities measured at amortized cost.

XLV. Purpose and policy of financial risk management

The China Man-Made Fiber Co., Ltd.’s financial management department shall provide services to each business unit, to plan and coordinate operations in the domestic and international financial markets, and to monitor and manage the consolidated company’s operation-related financial risks with the internal risk report, with the risk exposure analyzed in accordance with the degree and breadth of risks. The risks include market risk, credit risk and liquidity risk.The financial risks associated with the consolidated company mainly come from the key subsidiary, Taichung Commercial Bank.

The consolidated company’s financial risk management objective is to achieve business objectives, the overall risk tolerance and legal restrictions in order to reach the balance of risks and returns. The main operating risks faced by the consolidated company include the credit risk on and off the financial statements, market risks (including interest rates, foreign exchange rates, equity securities and instrument price risks) and liquidity risks.

The consolidated company have the related risk management policies defined and approved by the Board of Directors in order to effectively identify, measure, monitor, and control credit risk, market risk and liquidity risk.

The Board of Directors is the highest decision-making unit of the consolidated company and assumes the ultimate responsibility for risk management. The consolidated company has established a Risk Management Commission and Risk Management Department responsible for granting risk authority and the relevant authorities to the relevant departments to ensure the successful operation of risk management. The Committee’s functions are specified as follows:

(1) Review of risk management projects.
(2) The review and discussion on risk limit.
(3) Review of motions for institutionalization of risk management.
(4) Periodical report to the Board of Directors

The commissioners of the Risk Management Committee shall set the various risk management indicators by nature of business and functions of departments and Risk Management Dept. report them to the Risk Management Committee for high-ranking supervisors’ reference in decision making.

(I) Market risk
Source and definition of market risk

Bonds, notes, loans and other similar financial products held or issued by the consolidated company may experience changes in the fair value on the balance sheet date due to changes in market interest rates.

Market risk management policy

The consolidated company’s market risk management objective is to develop a sound and effective market risk management mechanism that is compatible with the Company’s business scale, nature and complexity in order to ensure that the Company’s risks can be properly managed and effectively identify, measure, monitor, control market risks; also, establish a balance between the tolerable risk level and the expected rate of return.

Market risk management process
(1) Identification and Measurement

Before the promotion and operation of new products, business activities, processes and systems, the relevant market risk should be assessed through appropriate procedures and determine whether the risk exposure is within the range of risk tolerance included for consideration. The consolidated company’s responsible business units shall use business analysis or product analysis to verify the source of market risk and define market risk factors for each financial instrument as appropriate specifications.

Market risk measurement can be processed with a variety of effective measurement methods in order to properly measure risk, including but not limited to the following methods: statistical basis measurement method, sensitivity analysis, and scenario analysis. The Risk Management Department should measure the risk position daily and regularly; also, conduct stress tests regularly to measure the possible extraordinary loss amount of current positions under the simulated extreme situations or historically extreme situations.

(2) Monitoring and reporting

The Risk Management Department should regularly report and make suggestions to the Risk Management Committee and the Board of Directors on the Bank’s overall market risk management, including the Bank’s market risk positions, risk level, profit and loss, using excess of limit and market risk management related compliance. The Business Department has defined the relevant rules governing excess of limit, stop-loss mechanism and operating procedure for excess of limit in order to effectively control the market risk. The excess of limit or exception occurring shall be reported immediately in order to exercise responsive measures.

4. Exchange rate risk

The consolidated company manages its exchange risk by limit control whereby the limits of respective currencies during daytime trade and nighttime trade were set with the upper limit of the maximum exposure in foreign exchange authorized to personnel of different ranks for control. The upper limit for particular counterparty has also been set. The result of the monitoring and control was reported to the Risk Management Committee and the Board for discussion. Sensitivity analysis

Assuming that the other variables remain constant, if the USD/NTD, CNY/NTD, and AUD/NTD exchange rate was relatively valued/devalued by 3%, the Company and its subsidiaries’ net income before tax as of December 31, 2018 and 2017 decreased/increased by NTD 14,150 thousand and NTD 7,399 thousand; the equity increased/decreased by NTD 47,853 thousand and NTD 42,139 thousand, respectively.

5. Interest rate risk

Interest rate risk refers to the changes in interest rates that cause changes in the fair value of the consolidated company’s interest rate or losses. The main sources of risk include deposit and loan and interest-rate related marketable securities.

Entities in CMFC borrow funds at floating interest rates, thus the exposure to interest rate risk. Taichung Commercial Bank adopts a gap management approach to the interest rate risk, setting indicators for monitoring and regularly reports the results to the asset and liability management committee and the board, and makes necessary adjustments according to the overall operating conditions of the Company.

Sensitivity analysis

Assuming that the other variables remain constant, if the yield curve goes up/down by 100 points, the consolidated company’s net income before tax as of December 31, 2018 and 2017 increased/decreased by NTD 903,726 thousand and NTD 956,971 thousand; the equity decreased/increased by NTD 2,280,815 thousand and NTD 1,934,612 thousand, respectively.

6. Other price oriented risks.

CMFC is exposed to equity price risk due to the investments in publicly traded and OTC securities. The equity investments (except for financial assets at fair value through profit or loss) are not held for trading and are considered strategic. CMFC has not actively traded such investments. The equity price risk of CMFC is mainly on the petrochemical industry equity instruments in Taiwan's exchange. Taichung Commercial Bank adopts a limit management approach to the equity price risk, ensuring that personnel at all levels conduct their transactions within an authorized amount. Stop-loss measures are also implemented, and the monitoring results are regularly presented to the risk management committee and the board for discussion.

Sensitivity analysis

Assuming that the other variables remain constant, if the equity securities price up/down by 15%, the Company and its subsidiaries’ net income before tax as of December 31, 2018 and 2017 increased/decreased by NTD 316,943 thousand and NTD 195,085 thousand; the equity decreased/increased by NTD 664,655 thousand and NTD 733,017 thousand, respectively.

7. Sensitivity analysis is compiled as follows:

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December 31, 2018
The main Affected amount
risk Magnitude changes Equity Profit and loss
Exchange USD/NTD, CNY/NTD, and AUD/NTD valued $ 47,853 $ 14,150
rate risk by 3%, respectively.
USD/NTD, CNY/NTD, and AUD/NTD ( 47,853 ) ( 14,150 )
decreased by 3%, respectively.
Interest rate Interest rate curve rises 100BPS ( 2,280,815 ) 903,726
risk Interest rate curve drops 100BPS 2,280,815 ( 903,726 )
Other price 664,655 316,943
oriented Equity securities price increased by 15 %.
risks.
Equity securities price decreased by 15%. ( 664,655 ) ( 316,943 )
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December 31, 2017
The main Affected amount
risk Magnitude changes Equity Profit and loss
Exchange USD/NTD, CNY/NTD, and AUD/NTD valued $ 42,139 ( $ 7,399 )
rate risk by 3%, respectively.
USD/NTD, CNY/NTD, and AUD/NTD ( 42,139 ) 7,399
decreased by 3%, respectively.
Interest rate Interest rate curve rises 100BPS ( 1,934,612 ) 956,971
risk Interest rate curve drops 100BPS 1,934,612 ( 956,971 )
Other price 733,017 195,085
oriented Equity securities price increased by 15 %.
risks.
Equity securities price decreased by 15%. ( 733,017 ) ( 195,085 )
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(II) Credit risk

1. Source and definition of credit risk

Credit risk refers to the financial loss inflicted on the consolidated company due to the nonperformance of contractual obligations by the customers or the counterparties. The sources of credit risk covered on and off balance sheet items. On the sheet risk, exposure to the consolidated company mainly comes from discount, loans, credit cards, due from and call loans to banks, acceptance, debt instruments, and derivatives. Off the sheet items are financial guarantee, L/C and undertaking of loans that also exposed the consolidated company to credit risk.

2. Credit risk management policies:

In order to mitigate credit risk, the management of the consolidated company assigns dedicated personnel responsible for the decision on credit line, credit approval and other monitoring procedures to ensure that the overdue receivables are recovered and appropriate actions are taken. In addition, the consolidated company will review the recoverable amount of receivables on each balance sheet date to ensure that appropriate impairment loss has been appropriated for the uncollectible receivables. Accordingly, the consolidated company’s management believes that the consolidated company’s credit risk is significantly reduced.

The consolidated company continues to assess the financial condition of the customers of accounts receivable.

Except for the major customer Company A of the consolidated company, the consolidated company does not have a significant credit exposure to any single counterparty or any group counterparty with similar characteristics. When the counterparty is an affiliated company, the consolidated company has it defined as a counterparty with similar characteristics. The concentration

of credit risk of Company A in 2018 and 2017 accounted for 0.5% and 0.5%, respectively, of the total monetary assets.

The consolidated company will evaluate credit carefully to grant loans and guarantees. The loans secured by collateral accounted for about 79% of the total loans on December 31, 2018. The proportion of financing guarantee and collateral held by commercial L/C was approximately 41%, because the collateral required by loans, loaning commitments or guarantees usually referred to cash, inventory, marketable securities or other property. In the event of the trading counterpart’s or the other party’s default, the consolidated company was entitled to perform compulsory execution against the collateral or other guarantees to effectively reduce the credit risk, provided that the fair value of collateral would not be taken into consideration when the maximum credit exposure was disclosed.

3. Credit risk management procedures

Notes to the credit risk management procedures and methods of assessment of the consolidated company by businesses:

(1) Loans (including commitments of financing and guarantees)

2018

A. Judgment of significant increase of credit risk after initial recognition

The consolidated company evaluated the change in the default risk inherent to its loan assets within the perpetuity of these assets on each reporting day to determine if the credit risk increased significantly after initial recognition. For evaluation, the consolidated company considers the information (including prospective information) for justifying the significant increase of credit risk after the initial recognition. The major indicators for consideration are:

Quantified indicators

a. Changes in external TCRI credit rating

TCRI ratings of companies listed at TWSE or TPEx corresponding to external ratings for downgrading the level to non-investment grade, which determined that the credit risk increased significantly after initial recognition.

b. Information on delinquency

If the contracts turned delinquent for more than 1 month, it could be determined that the credit risk inherent to the financial assets has increased significantly.

Quality indicators

a. Unfavorable change at present or as forecast to the operation, financial position or economic condition that significantly affected the debtors in performing their obligations in retirement of loans.
b. The actual or forecasted significant change in operational results of the debtors.
c. The credit risk of other financial instruments of particular debtor increased significantly.
B. Definition of default and financial assets with credit impairment

The consolidated company defined the agreement on financial assets as identical with the determination of credit impairment of financial assets. If any of the following are applicable, it could be determined that the financial asset has turned default with credit impairment: Quantified indicators

a. Changes in external TCRI credit rating

The TCRI ratings of companies listed at TWSE or TPEx rated as DEFAULT implied that credit impairment occurred after initial recognition.

b. Information on delinquency

If the proceeds from contracts turned delinquent for more than 3 months, it could be determined that credit impairment occurred to the financial assets after initial recognition.

Quality indicators

If there is evidence implying that the borrower is unable to pay the contract amount, or indicating severe financial hardship of the borrower, such as:

a. The debtor has gone bankrupt or had declared bankruptcy or financial restructuring.
b. Other financial instrument contracts of the debtors have turned default.

c. Due to the economic or contractual reasons related to the financial hardship of the debtors, the creditors gave the debtor a leeway which would otherwise not be considered for the borrowers and declared as non-performing loans.
- The aforementioned default and credit impairment will be defined as applying to all
- financial assets held by the combined companies, and such definition is congruent with the financial assets relevant to the internal purpose of credit risk management and applied to the model for the evaluation of related impairments.
C. Measurement of anticipated credit loss

The consolidated company classified loan assets into the following combinations by the purpose of the loan, the nature of the industry, type of collaterals, and the mode of financing for the purpose of assessing anticipated credit loss:

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Product portfolio
Corporate Finance Corporate Finance-secured
Operation Corporate Finance-non-secured
House loan
Personal, other, secured
Consumer banking Personal, other, unsecured
business Credit loans
Cash card
Credit card
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The consolidated company measured the provision for loss of financial assets that have no significant increase in credit risk after initial recognition on the basis of anticipated credit loss over a period of 12 months. The provision for loss of financial assets that have significant increases in credit risk after initial recognition shall be measured on the basis of anticipated credit loss within the perpetuity of the financial assets.

For the measurement of anticipated credit loss, the consolidated company considers the probability of default (PD) of the debtors in 12 months ahead and the perpetuity of the loans, and includes into the Loss Given Default (LGD), then multiplies by Exposure at Default (EAD). The effect of the time value of currency is also considered in this calculation.

The probability of default is the ratio of loss in case the particular debtor acted in default. The PD and LGD adopted by Taichung Bank in the assessment of loans is based on the internal historical information of the product portfolios (such as the experience in credit loss), and also the observable information at present and the prospective macroeconomic performance in grouping the products for separate evaluation.

The consolidated company assessed the EAD by a direct evaluation method for different groups of products. In assessing the commitment of financing in 12 months and the anticipated credit loss within the perpetuity of the assets, Taichung Bank adopted the direct assessment method for different groups and considered the portion of drawdown within 12 months after the reporting day of the commitment of financing and the anticipated renewal period to determine the EAD of anticipated credit loss. Consideration of prospective information

In assessing anticipated credit loss, the consolidated company adopted the economic factors affecting credit risks and that were relevant to anticipated credit loss, and takes prospective information into account. Prospective information is the “Economic Signal” released by the National Development Council of the ROC that served as the standard for the overall economic performance of Taiwan and relevant signals as the indicators. The signal system is classified as the expansion phase, contraction phase, and level phase. The consolidated company will based on the judgment of economic performance to adjust the probability of default and incorporate this information into the assessment of overall anticipated credit risk.

(2) Debt instrument

The consolidated company will consider the historical record on the rate of default at different levels from external rating institutions, and the financial position of the debtors at present, to assess the

anticipated credit loss of the investment of debt instruments for 12 months in the future or the anticipated credit loss within the perpetuity of the instruments.

The securities held by the consolidated company shall be recognized for anticipated credit loss for a period of 12 months or within the perpetuities of the securities. The consolidated company shall determine the quality of securities as follows:

2018

A. Judgment of significant increase of credit risk after initial recognition
The consolidated company shall assess the changes in the default risk of the investment of debt
instruments within the perpetuity of the instruments on each reporting day to determine if there is any significant increase of credit risk after initial recognition. For evaluation purpose, the information for justifying the significant increase of credit risk after initial recognition in consideration shall include the following indicators:

Quantified indicators

a. At the time of initial recognition, the credit rating of the issuers is at investment grade and higher. However, on the financial reporting day, the credit rating of the issuers fell to non-investment grade.
b. The credit rating of the issuers of the debt instruments for investment was non-investment grade on the initial day of recognition and such status remained unchanged.
c. If the credit rating of the issuers is at non-investment grade and further decline on the reporting day to certain extent.

Quality indicators

a. The credit rating of the issuers indicated that credit risk has increased significantly.
b. The fair value of the investment of debt instrument underwent unfavorable significant change on the reporting day.
B. Definition of default and financial assets with credit impairment

If any of more of the following are applicable to the investment of debt instrument, it could be determined that the financial assets were default with credit impairment.

Quantified indicators

a. The debt instruments were bonds with credit impairment at the time of investment.
b. The credit rating of the issuers or the debt instruments for investment fell to the default level on the reporting day.

Quality indicators

a. The issuers revised the conditions for the issuance of the debt instruments or failed to pay principal or interest as the conditions of issuance due to financial hardship.
b. Discontinuation of operation, petition for restructuring, bankruptcy, dissolution, the disposition of major assets of the company that significant affected continued operation of the issuers or the guarantors.

Measurement of anticipated credit loss

a. For the measurement of anticipated credit loss, the consolidated company considers the probability of default (PD) of the debtors for 12 months in the future and the perpetuity of the loans, and includes into the Loss Given Default (LGD), then multiplies by Exposure at Default (EAD). The effect of the time value of currency is also considered in this calculation.
b. Compare the default risk of debt instruments on the reporting day and the default risk of debt instruments at the time of initial recognition, and consider the information for justifying the significant increase of default risk after initial recognition to determine if the credit risk of the financial instruments has significantly increased after initial recognition.
(a) For “normal credit risk” category, estimate the anticipated amount of loss on the basis of PD in one year.
(b) For “significant increase of credit risk” category, consider the perpetuity of the assets and calculated the PD in respective perpetuity of the assets to evaluate the cash flow from contracts in relevant periods (which is the EAD). Adopt the cash flow method to evaluation the anticipate amount of credit loss. If it is impossible to assess the cash flow in relevant periods, use the EAD of the current period for the calculation.

  - (c) For “abnormal credit risk,” the PD is 100% thereby the PD for the perpetuity of respective assets will not be necessary, but just consider the amount that could be recovered and asses the amount of overall credit loss.

  - (d) The PD of debt instrument has adopted the numerical value released by credit rating institutions at regular intervals, which insinuates the possibility of market fluctuation in the future.

Credit risk hedge or mitigation policy
(1) Collateral

Among the policies and procedures taken by the consolidated company addressing to loan operation for the reduction of credit risk, the request for collaterals from the borrowers is most common mean. The consolidated company has established the procedures for the scope of collaterals, the appraisal of the collaterals, the management and disposition of the collaterals for the protection of right of debts. The preservation of the right of debts and collaterals clause is explicitly stated in the loan agreement thereby the credit limit and term of loan could be condensed, or the loans shall be deemed immediately due in the event of credit risk. This will help to reduce credit risk.

The consolidated company paid close attention to the value of the collaterals for the financial instruments, and considered the financial assets necessary for recognition of credit impairment. Information on financial assets with credit impairment and collaterals with slight potential loss is shown below:

shown below:
Impaired financial assets: Discounts and loans Accounts receivable Guarantee and L/C Debt instruments Total financial assets with impairment		Total Book Value		Provision for impairment		Total exposure (cost after amortization)		Fair value of collaterals
		$ 7,916,421 314,656 418,070 74,444 $ 8,723,591	( ( ( ( (	$ 2,035,208 ) 151,315 ) 55,221 ) 74,444 ) $ 2,316,188 )		$ 5,881,213 163,341 362,849 - $ 6,407,403		$ 5,881,213 105,184 301,416 - $ 6,287,813

(2) Control of credit risk limit and credit risk concentration.

For avoiding the over-concentration of risk, the consolidated company has set the credit limit of transactions with particular counterparty and particular group in its policy and procedure for lending. In the policies and procedures for investment and equity investment risk control, limit has also been set for particular party (enterprise) or particular affiliate (group) enterprises in investment. For the control of the concentration of risk of all assets, the consolidated company has set the credit limit by industry, group enterprise, country, pledge of stocks as collaterals to monitor the concentration of risk of the assets. In addition, monitoring and control of particular counterparty, group enterprise, affiliate, industry, nationality, and the country of final risk through system integration for the control of concentration of relevant risks.

(3) The reinforcement of other credit

The set-off clause has been explicitly stated in the loan agreements whereby all deposits of the borrowers at the consolidated company shall be set off for covering the liabilities in the event of credit problem to reduce credit risk.

Maximum exposure of credit risk for the consolidated company

The maximum credit risk exposure of the assets stated in the consolidated balance sheet without the consideration of collaterals or other reinforced credit instruments approximate their book value. The amount of maximum credit risk exposure related to the items off the consolidated balance sheet (without the consideration of collaterals or other reinforced credit instruments and the maximum risk amount is irrevocable) is shown below:

Irrevocable undertaking of loan The available credit limit after the activation of revolving credit of credit card Receivable guarantees The balance of opened but unused letter of credit	December 31, 2018 $ 5,810,795 273,680 18,335,961 4,140,679	December 31, 2017
		$ 5,930,487 400,251 18,693,022 3,900,545

The management of the consolidated company holds that the credit risk exposure of off balance sheet items could be controlled and minimized in continuation under evaluation because the consolidated company has adopted a strict evaluation process with routine evaluation after approval.

Credit risk concentration of the consolidated company

Where financial instrument transactions are apparently concentrated on one person, or most of the multiple trading counterparts of financial instruments are engaged in similar business activities and possess similar economic characteristics and thereby the effects of economic or other conditions to their ability to perform the contracts are similar, the concentration of credit risk arises accordingly. The characteristics of credit risk concentration include the nature of business activities conducted by debtors. The consolidated company did not concentrate any transactions on one single customer or trading counterpart, other than similar counterparts, industrial type, and regions. The amount of contract based on concentrated credit risk:

on concentrated credit risk:
Counterpart Private enterprise Natural person Others Industrial type Natural person Manufacturer Commerce Real estate Construction industry Commercial and industrial service business Financial and insurance business Warehousing and information Others Region Domestic Territory of Asia Territory of America Others	December 31, 2018 $ 261,140,346 223,436,581 1,931,734 $ 486,508,661 December 31, 2018 $ 223,436,581 91,638,350 60,759,475 53,991,855 18,082,362 13,378,876 11,905,926 8,000,887 5,314,349 $ 486,508,661 December 31, 2018 $ 454,099,851 15,694,693 11,766,992 4,947,125 $ 486,508,661	December 31, 2017
		$ 253,892,806 208,625,896 3,481,286 $ 465,999,988 December 31, 2017
		$ 208,625,896 92,452,926 61,284,519 48,803,678 18,458,346 11,897,472 10,542,246 6,832,246 7,102,659 $ 465,999,988 December 31, 2017
		$ 436,182,646 12,316,303 11,639,378 5,861,661 $ 465,999,988

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Collateral December 31, 2018 December 31, 2017
Non-secured $ 78,629,858 $ 82,327,447
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Secured Secured by property Secured by Letter of Guarantee Secured by Chattel Secured by bonds Notes receivable Secured by stocks Others	363,656,359 17,201,082 6,148,543 12,411,927 1,851,735 3,585,658 3,023,499 $ 486,508,661	342,096,578 17,531,354 5,478,037 8,587,494 2,473,386 4,064,966 3,440,726 $ 465,999,988

7. Information on credit risk quality

The consolidated company concludes that certain financial assets held by the consolidated company, such as cash and cash equivalents, due from the Central Bank and other banks, financial assets measured at fair value through profit or loss, bonds and securities sold under repurchase agreements, refundable deposits, operating bond, and settlement and clearing funds, because the counterparties are with good credit rating, are with low credit risks. In addition to the aforementioned, the credit quality of the other financial assets is analyzed as follows:

December 31, 2018

(1) Discounts and loans and receivables credit quality analysis

				Dis	countsandloans
Stage 1			Stage 2 Credit loss within the perpetuity of financial assets $ 3,019,498 12,318,911 3,322 15,341,731 661,840 ) - $ 14,679,891		Stage 3	a th t E a	Impairment difference recognized in ccordance with e “Regulations Governing he Procedures for Banking Institutions to valuate Assets and Deal with Non- performing/ Non- ccrual Loans” $ - - - - - 2,066,719) $ 2,066,719 )		Total
Anticipated credit loss in 12 months					Credit loss within the perpetuity of financial assets
(	$ 227,802,578 208,024,931 40,992 435,868,501 1,768,334 ) - $ 434,100,167	(		( (	$ 5,573,360 2,343,305 244 ) 7,916,421 2,035,208 ) - $ 5,881,213	( (		( (	$ 236,395,436 222,687,147 44,070 459,126,653 4,465,382 ) 2,066,719 ) $ 452,594,552

101

				Acc	ounts receivable					Total 9,999,166 1,424,909 48,211,873 59,635,948 244,577 ) 57,500) 59,333,871
Stage 1			Stage 2		Stage 3	Impairment difference recognized in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- performing/ Non- accrual Loans”
Anticipated credit loss in 12 months			Credit loss within the perpetuity of financial assets		Credit loss within the perpetuity of financial assets
(	$ 9,583,734 1,355,009 48,156,089 59,094,832 87,567 ) - $ 59,007,265	(	$ 194,095 32,364 1 226,460 5,695 ) - $ 220,765 Irrev	( oc	$ 221,337 37,536 55,783 314,656 151,315 ) - $ 163,341 able undertakingof l	( ( oa	$ 57,500) $ 57,500 ) n	( (	$

									$

	Stage 1		Stage 2		Stage 3	Impairment difference recognized in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/ Non- accrual Loans”				Total
Anticipated credit loss in 12 months			Credit loss within the perpetuity of financial assets		Credit loss within the perpetuity of financial assets
(	$ 5,545,278 248,450 5,793,728 53,686 ) $ 5,740,042 -	(	$ 17,067 - 17,067 741 ) $ 16,326		$ - - - - -		$ - - - - -		(	$ 5,562,345 248,450 5,810,795 54,427 ) $ 5,756,368

102

				Creditcard com	mi	ttee
	Stage 1			Stage 2	R	Stage 3	Impairment difference recognized in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- performing/ Non- accrual Loans”				Total
	Anticipated credit loss in 12 months	C t	r h fi	edit loss within e perpetuity of nancial assets		Credit loss within the perpetuity of financial assets
( (	$ 10,458,065 10,458,065 8,083 ) - $ 10,449,982	(	$	49,205 49,205 1,299 ) - 47,906		$ - - - - $ - eceivable guarante	es	$ - - - - $ -	(	$	10,507,270 10,507,270 9,382 ) - 10,497,888

			$							$

	Stage 1			Stage 2 Credit loss within the perpetuity of inancial assets $ 39,246 39,246 1,751 ) - $ 37,495		Stage 3	Impairment difference recognized in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- performing/ Non- accrual Loans” $ - - - ( 11,815 ) ( $ 11,815 )				Total
	Anticipated credit loss in 12 months		f		C t	redit loss within he perpetuity of financial assets
	$ 17,878,645 17,878,645 121,061 ) - $ 17,757,584		(		(	$ 418,070 418,070 55,221 ) - $ 362,849	( (			( (	$ 18,335,961 18,335,961 178,033 ) 11,815) $ 18,146,113

103

			The payment	of	opened butunu	sedletterofcredit	sedletterofcredit
	Stage 1		Stage 2		Stage 3	Impairment difference recognized in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- performing/ Non- accrual Loans” $ - - - ( 11,825) ( $ 11,825 )			Total
	Anticipated credit loss in 12 months	f	Credit loss within the perpetuity of inancial assets	f	Credit loss within the perpetuity of inancial assets
(	$ 4,140,679 4,140,679 12,108 ) - $ 4,128,571		$ - - - - $ -		$ - - - - $ -		$ - - - 11,825) $ 11,825 )	( (	$ 4,140,679 4,140,679 12,108 ) 11,825) $ 4,116,746

(2) Credit quality analysis on investment of debt instruments

fairvaluethrougho	th	ercomprehensive profitor loss	ercomprehensive profitor loss	ercomprehensive profitor loss
Stage 2 Credit loss within the perpetuity of financial assets $ - - - - - $ -		Stage 3 redit loss within the perpetuity of financial assets $ - - - - - $ -		Total
	C
			$27,507,719 - 27,507,719 ( 15,525 ) - $27,492,194

104

Product category (Note) Investment grade bonds Non-investment grade bonds Other (Central Bank NCD) Total Book Value Provision for impairment Required impairment recognized in accordance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- performing/ Non- accrual Loans” Total	Fin	ancial assets on the basis	ofcost after amortization
	Stage 1 Anticipated credit loss in 12 months $ 45,838,446 55,500,000 101,338,446 ( 30,685 ) - $ 101,307,761	Stage 2 Credit loss within the perpetuity of financial assets $ - - - - - - $ -	Stage 3 Credit loss within the perpetuity of financial assets $ - 74,444 - 74,444 ( 74,444 ) - $ -		Total
	(		(	(	$ 45,838,446 74,444 55,500,000 101,412,890 105,129 ) - $ 101,307,761

Note: Bond rating is based on Moody's, Fitch, S&P and Taiwan Ratings, in order to obtain the current credit ratings.

The consolidated company's debt instruments are financial assets at fair value through other comprehensive income and financial assets measured at amortized cost: December 31, 2018

December 31, 2018
Total Book Value Loss allowance Cost after amortization Fair value adjustment	Me o	asured at fair values through ther comprehensive income $ 27,368,778 15,525 ) 27,353,253 123,416 $ 27,476,669	M (	easured on the basis of cost after amortization
	(			$ 101,352,890 105,129 ) 101,247,761 - $ 101,247,761

The current credit risk evaluation approach of the Consolidated Company and the total carrying amount of debt instrument investments with various credit ratings are shown as below:

Credit rating	Definition	Basis for recognizing expected credit losses Anticipated credit loss in 12 months Lifetime expected credit loss (no credit impairment) Lifetime expected credit loss (with credit impairment) Direct write-off	Expected credit loss rate 0.00%~0.46%	Total book value of December 31,2018
				Measured at fair values through other comprehensive income Measured on the basis of cost after amortization
Normal (Stage 1) Abnormal (Stage 2) Default (Stage 3) Write-off	The debtors’ credit risk is low and also has sufficient capability to pay off contractual cash flows. Significant increase of credit risk after initial recognition Evidence of credit impairment There is evidence that the debtor is facing serious financial difficulties and the consolidated company cannot reasonably expect recovery.			$ 27,368,778 $101,352,890

105

With respect to the consolidated company's debt instrument investments at fair value through other comprehensive income and measured at amortized cost, the information regarding the changes in loss allowance based on credit risk ratings are summarized as follows:

		Credit rating
	Normal (12-month expected credit loss) $ - 19,336 19,336 - - - $ - 2,799 ) - 1,012 ) $ 15,525 $ - 9,177 9,177 - - - 22,732 994 ) - 230 ) $ 30,685	Abnormal (lifetime expected credit loss and no credit impairment) $ - - - - - - $ - - - - $ - $ - - - - - - - - - - $ -	Breach of contract (lifetime expected credit loss and with credit impairment)
( ( ( (				$ - - - - - - $ - - - - $ - $ - 74,444 74,444 - - - - - - - $ 74,444

106

December 31, 2017

(1) Discounts and loans and receivables credit quality analysis

December 31, 2017		Not-overd	ueimpaired-free posit	ion amount		Overdue unimpaired position amount (B)	Impaired position amount (C)	Total (A)+(B)+(C)	Appropriatedl	ossamount(D)	Net (A)+(B)+ (C)-(D)
	Level 1	Level 2	Level 3	Level 4	Subtotal (A)				With individual objective evidence of impairment	Without individual objective evidence of impairment
Items on the statement
Receivable Accounts receivable Credit card Others	$ 2,194,227 189,771 49,221,490	$ - 160,008 527,280	$ - 142,874 190,056	$ - 229,601 9,371,752	$ 2,194,227 722,254 59,310,578	$ 416,756 55,562 184,393	$ - 21,842 351,235	$ 2,610,983 799,658 59,846,206	$ 240,790 13,108 164,232	$ - 7,129 110,055	$ 2,370,193 779,421 59,571,919
Discounts and loans	190,047,376	129,319,121	59,509,230	17,108,270	395,983,997	28,736,364	12,434,703	437,155,064	2,673,681	1,847,300	432,634,083

(2) The credit quality analysis on the consolidated company’s not-overdue impairment-free discounts and loans depends on the credit quality of customers. Not-overdue impaired-free position amount

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December 31, 2017 Level 1 Level 2 Level 3 Level 4 Total
Consumer banking
Residential mortgage loans $ 17,452,411 $ 18,015,723 $ 11,394,153 $ 3,638,300 $ 50,500,587
Cash card - - 9 53 62
Small credit loans 95,952 195,876 240,162 148,764 680,754
Others (secured) 72,032,518 36,863,301 13,928,751 4,281,135 127,105,705
Others (non-secured) 4,551,581 3,328,866 1,155,305 219,866 9,255,618
94,132,462 58,403,766 26,718,380 8,288,118 187,542,726
Corporate Finance
Secured 63,256,970 44,524,672 19,962,146 4,883,537 132,627,325
Non-secured 32,657,944 26,390,683 12,828,704 3,936,615 75,813,946
95,914,914 70,915,355 32,790,850 8,820,152 208,441,271
Total $ 190,047,376 $ 129,319,121 $ 59,509,230 $ 17,108,270 $ 395,983,997
(3) Marketable securities investment credit quality analysis
December 31, 2017 Level 1 Not-overdue imLevel 2 paired-free position amount Level 3 Subtotal (A) position amount unimpaired Overdue (B) Impaired position amount (C) (A)+(B)+(C) Total Amount (NTD) Loss already recognized Net (A)+(B)+(C)-(D)
Available-for-sale financial
assets
Bond investment $ 31,234,046 $ - $ - $ 31,234,046 $ - $ 62,945 $ 31,296,991 $ 62,945 $ 31,234,046
Equity investment 1,465,334 - 287,432 1,752,766 - - 1,752,766 - 1,752,766
Others 13,800 - - 13,800 - 14,416 28,216 14,416 13,800
Held-to-maturity financial
assets
Bond investment 27,813,845 228,250 - 28,042,095 - - 28,042,095 - 28,042,095
Others 57,500,000 - - 57,500,000 - - 57,500,000 - 57,500,000
Other financial assets
Equity investment - - 573,786 573,786 - - 573,786 242,820 324,966
Others - - - - - 2,000,308 2,000,308 1,099,973 900,335
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107

(4) Overdue impairment-free financial assets but aging analysis

Borrower’s processing delays and other administrative reasons may cause financial assets to become overdue but not impaired. According to the consolidated company’s internal risk management rules, financial assets that are overdue for less than 90 days are usually not considered impaired, unless it is evidenced.

The aging analysis on the consolidated company’s overdue impairment-free financial assets:

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December 31, 2017
Less than one
Item month overdue 1~3 months overdue Total
Receivable
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Accounts receivable Credit card Others Discounts and loans Consumer banking Residential mortgage loans Cash card Small credit loans Others (secured) Others (non-secured) Corporate Finance Secured Non-secured	$12,919 41,207 132,766 $186,892 $ 3,810,453 16 69,369 10,864,150 1,037,303 15,781,291 8,932,285 3,969,105 12,901,390 $28,682,681	$403,837 14,355 51,627 $469,819 $ 3,065 - - 46,508 3,630 53,203 360 120 480 $53,683	$416,756 55,562 184,393 $656,711 $ 3,813,518 16 69,369 10,910,658 1,040,933 15,834,494 8,932,645 3,969,225 12,901,870 $28,736,364

(III) Liquidity risk

The consolidated company's current liability exceeds its current assets of NT$74,020,822 thousand The consolidated company currently has unused borrowing limit sufficient to meet all contractual obligations, so there is no liquidity risk with being unable to raise funds to perform contractual obligations.

The Taichung Commercial Bank’s Liquidity Ratios on December 31, 2018 and 2017 were both 23% and 26%. The Bank’s capital and working funds are sufficient to perform all contractual obligations. Therefore, there is no liquidity risk arising from the failure to raise funds to perform contractual obligations. The Taichung Bank’s basic management policy is to coordinate the maturity date of assets and liabilities and interest rates and to control gaps.

The Taichung Commercial Bank’s basic operating management policy is to match up assets and liabilities maturity and interest rate and control the unmatched gap. Due to the uncertainty and classification of trade conditions, the maturity date of assets and liabilities and interest rate are usually not fully matched up; this gap may cause a potential gain or loss.

Non-derivative financial liabilities maturity analysis

The analysis on the cash outflow of the consolidated company’s non-derivative liabilities is based on the remaining period from the consolidated balance sheet date to the contract maturity date as follows: The amount in the statements is based on the contractual cash flows; therefore, the amount of some items disclosed is not consistent with the respective items on the consolidated balance sheet.

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December 31, 2018 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 year More than 1 year T o t a l
Due to Central Bank
and other banks $ 2,934,764 $ 99,224 $ 730 $ 344,034 $ - $ 3,378,752
Bills and bonds sold
under repurchase
agreements 4,752,462 5,216,637 - - - 9,969,099
Shot-term borrowings 2,553,828 4,003,128 5,628,549 2,267,684 114,000 14,567,189
Short-term notes
payable 950,000 1,010,000 400,000 - - 2,360,000
Long-term borrowings - 234,035 341,060 2,219,993 4,163,723 6,958,811
Payables 12,378,337 1,135,185 351,632 572,278 360,947 14,975,911
Customer deposits and
remittances 52,195,290 74,868,276 80,769,714 145,026,424 234,834,202 587,720,906
Financial bonds
payable - - - 6,000,000 14,000,000 20,000,000
Other matured capital
outflow items 951,130 575,750 88,682 146,016 552,259 2,313,837
Due to Central Bank
and other banks $ 6,833,937 $ 2,332,875 $ 730 $ 351,330 $ - $ 9,518,872
Bills and bonds sold
under repurchase
agreements 3,269,968 1,048,062 - - - 4,318,030
Shot-term borrowings 3,129,619 4,773,798 2,527,327 1,278,818 19,886 11,729,448
Short-term notes
payable 1,075,000 779,648 179,514 - - 2,034,162
Long-term borrowings 94 229,924 347,043 544,061 7,576,939 8,698,061
Payables 12,647,568 1,550,102 930,040 445,469 277,770 15,850,949
Customer deposits and
remittances 56,008,764 78,911,344 82,901,024 136,222,247 211,810,850 565,854,229
Financial bonds
payable - - - - 17,500,000 17,500,000
Other matured capital
outflow items 102,570 24,245 43,764 88,620 345,760 604,959
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Derivative financial liabilities maturity analysis

1. Derivative instruments cleared and settled at net value

The consolidated company’s derivatives that are settled and cleared at net value include: Foreign exchange derivatives: Exchange rate options.

It is concluded that the contractual maturity is the essential element to understand all derivative financial instruments listed on the consolidated balance sheet. The amount in the statements is based on the contractual cash flows; therefore, the amount of some items disclosed is not consistent with the respective items on the consolidated balance sheet. Financial liabilities cleared and settled at net amount maturity analysis:

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December 31, 2018 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 year More than 1 year Total
Derivative financial
liabilities at fair value
through profit and loss
deriForeign exchange vatives $ 4,976 $ 19,442 $ 19,717 $ 11,987 $ - $ 56,122
Total $ 4,976 $ 19,442 $ 19,717 $ 11,987 $ - $ 56,122
December 31, 2017 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 year More than 1 year Total
Derivative financial
liabilities at fair value
through profit and loss
Foreign exchange
derivatives $ 7,329 $ 15,383 $ 11,840 $ 10,541 $ - $ 45,093
Total $ 7,329 $ 15,383 $ 11,840 $ 10,541 $ - $ 45,093
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109

Derivatives cleared and settled at total value

The consolidated company’s derivatives that are settled at total value include: Foreign exchange derivatives: Forward foreign exchange and foreign exchange swaps.

Illustrate the consolidated company’s derivatives that are settled at total value in accordance with the remaining period from the consolidated balance sheet date to the contract maturity date. It is concluded that the contractual maturity is the essential element to understand all derivative financial instruments listed on the consolidated balance sheet. The amount in the statements is based on the contractual cash flows; therefore, the amount of some items disclosed is not consistent with the respective items on the consolidated balance sheet. Financial liabilities cleared and settled at total value maturity analysis:

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December 31, 2018 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 year [More than 1 ] year Total
Derivative financial
liabilities at fair
value through profit
and loss
Foreign exchange
derivatives
- Cash outflow $ 3,489,472 $ 1,284,922 $ 672,246 $ 373,458 $ - $ 5,820,098
- Cash inflow 3,441,202 1,267,212 662,755 365,797 - 5,736,966
Subtotal of cash
outflow 3,489,472 1,284,922 672,246 373,458 - 5,820,098
Subtotal of cash
inflow 3,441,202 1,267,212 662,755 365,797 - 5,736,966
Net cash flow ( $ 48,270 ) ( $ 17,710 ) ( $ 9,491 ) ( $ 7,661 ) $ - ( $ 83,132 )
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December 31, 2017 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 year More than 1 year Total
Derivative financial
liabilities at fair value
through profit and loss
Foreign exchange
derivatives
- Cash outflow $ 2,128,439 $ 1,688,533 $ 821,104 $ 1,610,312 $ - $ 6,248,388
- Cash inflow 2,114,153 1,673,724 792,260 1,544,154 - 6,124,291
Subtotal of cash outflow 2,128,439 1,688,533 821,104 1,610,312 - 6,248,388
Subtotal of cash inflow 2,114,153 1,673,724 792,260 1,544,154 - 6,124,291
Net cash flow ( $ 14,286 ) ( $ 14,809 ) ( $ 28,844 ) ( $ 66,158 ) $ - ( $ 124,097 )
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(IV) The maturity analysis of items not on the statement

The analysis on the maturity date of the items not on the consolidated company’s balance sheet in accordance with the remaining period from the consolidated balance sheet date to the contract maturity date. For financial guarantee contracts issued, the earliest time period that maximum amounts of the guarantee may be requested for guarantee performance. The amount in the statements is based on the contractual cash flows; therefore, the amount of some items disclosed is not consistent with the respective items on the consolidated balance sheet.

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December 31, 2018 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 year More than 1 year Total
Uundisbursed credit committee $ 12,176,189 $ 24,525,708 $ 30,931,999 $ 65,838,590 $ 29,673,600 $ 163,146,086
Ooutstanding letters of credit amount 1,557,248 2,428,724 143,161 11,546 - 4,140,679
Receivable 6,264,671 3,749,910 858,950 1,659,683 5,802,747 18,335,961
guarantees
Lease contract commitments 1,803,183 - - - - 1,803,183
Total $ 21,801,291 $ 30,704,342 $ 31,934,110 $ 67,509,819 $ 35,476,347 $ 187,425,909
December 31, 2017 0 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 year More than 1 year Total
Uundisbursed credit committee $ 10,996,343 $ 23,429,412 $ 31,811,704 $ 70,695,877 $ 39,336,499 $ 176,269,835
Ooutstanding letters of credit amount 1,130,285 2,565,045 187,700 17,515 - 3,900,545
Receivable 7,714,616 3,948,429 677,445 1,778,351 4,574,181 18,693,022
guarantees
Lease contract commitments 1,161,518 - - - - 1,161,518
Total $ 21,002,762 $ 29,942,886 $ 32,676,849 $ 72,491,743 $ 43,910,680 $ 200,024,920
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110

(V) Cash flow risk estimated under interest rate changes

The future cash flow of assets and liabilities estimated based on mobile interest rate held and borne by the Consolidated Company might fluctuate and even generate risk due to the market interest rate changes. However, upon evaluation, the Consolidated Company, in practice, tends to control the net liquidity gap to reduce the cash flow risk resulting from the interest rate changes.

XLVI. Information on transfer of financial assets

Transferred financial assets not being removed in all

In the routine transaction of the consolidated company, financial assets did not qualified under all the conditions have been transferred. Most are debt securities with R/P agreement or equity securities lent under the securities lending agreement. The cash flows from the contract of the aforementioned transactions received by the consolidated company have been transferred to a third party and reflected related liabilities of the consolidated company in the responsibility of repurchasing the financial assets already transferred at fixed price in the future. For this type of transactions, the consolidated company cannot use, sell or pledge the financial assets already transferred within the effective period of the trade, but the consolidated company shall still assume interest risk and credit risk and is not being removed in whole. The table below shows the financial assets not qualified under all conditions and related financial liabilities:

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December 31, 2018
Book value of Book value of Fair value of Fair value of
Category of financial transferred related financial transferred related financial Net fair value
assets financial assets liabilities financial assets liabilities position
Financial assets on the
basis of cost after
amortization
R/P agreement $ 10,895,694 $ 9,904,467 $ 10,708,019 $ 9,904,467 $ 803,552
December 31, 2017
Book value of Book value of Fair value of Fair value of
Category of financial transferred related financial transferred related financial Net fair value
assets financial assets liabilities financial assets liabilities position
Held-to-maturity
financial assets
R/P agreement $ 4,658,926 $ 4,307,810 $ 4,674,084 $ 4,307,810 $ 366,274
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XLVII. Offsetting of financial assets and liabilities

The consolidated company does not have transactions of offsetting financial instruments specified by IAS 32.42 as recognized by the FSC. The financial assets and liabilities related to such type of transactions are expressed in net on the balance sheet. The consolidated company has transactions that are or are similar to net settled master netting arrangements but do not meet the offsetting criteria. The above transactions are settled on a net basis after offsetting financial assets with financial liabilities if both parties of the transaction choose to use net settlement; the above transactions are settled on a gross basis if both parties do not choose to use net settlement.However, if one party breaches the contract, the counterparty can choose to use net settlement.

December 31, 2018

Financial Assets Derivatives Reverse repurchase and securities borrowing agreement Total	f	Gross amounts of recognized inancial assets $ 2,088,691 9,294,168 $ 11,382,859	l	Gross amounts of recognized financial iabilities offset in the balance sheet $ - - $ -	Net amounts of financial assets presented in the balance sheet $ 2,088,691 9,294,168 $ 11,382,859		Related amoun the balan	ts ce	not offset in sheet Cash collateral received $ - - $ -		Net
							Financial instruments $ - 9,294,168 $ 9,284,168
											$ 2,088,691 -
											$ 2,088,691

111

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Related amounts not offset in
Gross amounts Net amounts of the balance sheet
Gross amounts of recognized financial
of recognized financial assets liabilities Cash
Financial Liabil financial offset in the presented in the Financial collateral
ities liabilities balance sheet balance sheet instruments pledged Net
Derivatives $ 165,360 $ - $ 165,360 $ - $ - $ 165,360
Repurchase and
securities
lending
agreement 9,904,467 - 9,904,467 9,904,467 - -
Total $ 10,069,827 $ - $ 10,069,827 $ 9,904,467 $ - $ 165,360
December 31, 2017
Gross amounts Related amounts not offset in
of recognized the balance sheet
financial Net amounts of
Gross amounts liabilities offset financial assets Cash
of recognized in the balance presented in the Financial collateral
Financial Assets financial assets sheet balance sheet instruments received Net
Derivatives $ 1,866,337 $ - $ 1,866,337 $ - $ - $ 1,866,337
Reverse
repurchase
and
securities
borrowing
agreement 11,283,082 - 11,283,082 11,283,082 - -
Total $ 13,149,419 $ - $ 13,149,419 $ 11,283,082 $ - $ 1,866,337
Gross amounts Related amounts not offset in
of recognized Net amounts of the balance sheet
Gross amounts financial assets financial assets Cash
Financial Liabil of recognized offset in the presented in the Financial collateral
ities financial assets balance sheet balance sheet instruments received Net
Derivatives $ 207,225 $ - $ 207,225 $ - $ - $ 207,225
Repurchase and
securities
lending
agreement 4,307,810 - 4,307,810 4,307,810 - -
Total $ 4,515,035 $ - $ 4,515,035 $ 4,307,810 $ - $ 207,225
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112

XLVIII. Information to be disclosed pursuant to Article 16 of the “Regulations Governing the Preparation of Financial Reports by Public Banks” (I) Asset quality

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December 31, 2018 December 31, 2017
Item Allowance Allowance
NPL
NPL amount Allowance for bad debt NPL amount NPL rate Allowance for bad debt
Total amount rate Total amount
Type (Note 1) for bad debt coverage rate (Note 1) (Note 2) for bad debt coverage rate
(Note 2) (Note 3) (Note 3)
Corporate Secured 980,023 152,938,946 0.64% 1,471,243 150.12% 910,179 147,076,012 0.62% 1,533,082 168.44%
banking Non-secured 350,210 83,415,828 0.42% 3,126,240 892.68% 307,442 82,250,188 0.37% 2,642,552 859.53%
Residential loans (Notemortgage 4) 277,102 57,027,677 0.49% 915,184 330.27% 267,038 56,022,201 0.48% 969,098 362.91%
Cash card - 40 - 5 - 32 3,157 1.01% 2,120 6,625.00%
Consumer
Small credit loans
banking (Note 5) 5,417 872,621 0.62% 90,357 1,668.03% 8,312 782,564 1.06% 39,158 471.10%
O t h e r s Secured 395,286 150,125,230 0.26% 577,436 146.08% 301,228 139,104,500 0.22% 965,759 320.61%
(Note 6) Non-secured 46,306 13,835,868 0.33% 351,238 758.52% 50,887 10,714,714 0.47% 193,041 379.35%
Total amount 2,054,344 458,216,210 0.45% 6,531,703 317.95% 1,845,118 435,953,336 0.42% 6,344,810 343.87%
December 31, 2018 December 31, 2017
Allowance
Item
Balance of Allowance Balance of for bad
Allowance Allowance
NPL amount receivable NPL rate for bad debt NPL amount receivable NPL rate debt
Type accounts for bad debt coverage rate accounts for bad debt coverage
rate
Credit card 4,710 749,434 0.63% 27,453 582.87% 8,507 797,032 1.07% 32,560 382.74%
Non-recourse factoring (Note 7) - 133,277 - 12,165 - - 1,656,114 - 28,350 -
NPL or non-performing receivable accounts exempted from report
December 31, 2018 December 31, 2017
Total non-performing Total non-performing
Total NPL exempted from Total NPL exempted from
receivable accounts exempted receivable accounts exempted
report from report report from report
Amount exempted from report upon debt
negotiation and performance (Note 8) 2,896 1,376 6,940 1,780
Performance of debt clearance program and
rehabilitation program (Note 9) 9,103 17,680 7,481 16,613
Total 11,999 19,056 14,421 18,393
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113

Note 1: The NPL amount is recognized according to "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans". The credit card NPL is recognized based on that provided under the Letter Jin-Guan-Yin (4) Zi No. 0944000378 dated July 6, 2005.
Note 2: Non-performing loan ratio = Non-performing loan/total loan amount. Non-performing credit card ratio = Non-performing amount/accounts receivable balance
Note 3: NPL Coverage Ratio = Allowance for bad debt appropriated for loans/Non-performing amount. Non-performing credit card receivables coverage ratio = Allowance for bad debt appropriated for credit card receivables/non-performing amount.
Note 4: Borrowers apply for residential mortgage loans for the purpose of purchasing or building residences or decorating houses. The loans shall be secured by the residence purchased (owned) by the borrower himself/herself, or his/her spouse or minor children in full, and the mortgage shall be pledged to the financial institution.
Note 5: Small credit loans mean those provided in the Letter under Jin-Guan-Yin (4) Zi No. 09440010950 dated December 19, 2005 and those other than small loans by credit cards/cash cards.
Note 6: The “Other” consumer finance refers to the secured or unsecured consumer finance loans other than the “residential mortgage loans”, “cash cards”, and “small credit loans”, excluding credit cards.
Note 7: According to the Letter under Jin-Guan-Yin (5) Zi No. 094000494 dated July 19, 2005, factoring without recourse shall be recognized as NPL within three months after the factoring Consignee or insurance company confirms that no compensation should be granted.
Note 8: Total NPL exempted from report upon debt negotiation and performance and the balance of total non-performing receivable accounts exempted from report upon debt negotiation and performance were disclosed pursuant to the Letter under Jin-Guan-Yin (1) Zi No. 09510001270 dated April 25, 2006.
Note 9: The balance of total NPL exempted from report upon performance of debt clearance program and rehabilitation program and balance of total non-performing receivable accounts exempted from report upon performance of debt clearance program and rehabilitation program were disclosed pursuant to the Letter under Jin-Guan-Yin (1) Zi No. 09700318940 dated September 15, 2008.

(II) Status of credit risk concentration

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December 31, 2018; Unit: NT$ thousand
Percentage of net
Rank Total amount of
value as of
(Note Business type of company or group (Note 2) outstanding loans
December 31,
1) (Note 3) 2018
1 Group A 016811 Real estate lease and sale $ 2,460,000 5.14%
2 Group B 010892 Noodle products manufacturing 2,321,274 4.85%
3 Group C 016700 Real estate development 2,286,478 4.78%
4 Group D 015500 Accommodation service 2,151,855 4.50%
5 Group E 012411 Iron and steel manufacturing 1,937,578 4.05%
6 Group F 016700 Real estate development 1,333,917 2.79%
7 Group G 014612 Wholesale of bricks, tiles, sand, 1,258,337 2.63%
rocks, cement and other products
8 Group H 016700 Real estate development 1,099,800 2.30%
9 Group I 016700 Real estate development 1,095,680 2.29%
10 Group J 012203 plastic shell and components 1,073,192 2.24%
manufacturing
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114

December 31, 2017 Unit: NT$ in thousand

Rank (Note 1)	Business type of company or group (Note 2)	Total amount of outstanding loans (Note 3)	% of the total equity as of December 31, 2017
1	Group C 016700 Real estate development	$ 3,148,737	7.25%
2	Group B 010892 Noodle products manufacturing	2,625,197	6.05%
3	Group E 012411 Iron and steel manufacturing	1,796,162	4.14%
4	Group K 012699 other electronic parts and components manufacturing without classification	1,776,807	4.09%
5	Group D 015500 Accommodation service	1,704,281	3.93%
6	Group L 016700 Real estate development	1,577,529	3.63%
7	Group F 016700 Real estate development	1,428,583	3.29%
8	Group G 014612 Wholesale of brick and tiles, gravels, cement, and their products.	1,327,851	3.06%
9	Group H 016700 Real estate development	1,171,800	2.70%
10	Group M 016700 Real estate development	1,141,157	2.63%

Note 1: The top ten enterprises other than public or state enterprises were identified according to rank of the total balance of loans to these enterprises. If the account refers to a group, the loan to the group should be identified and summed up, and disclosed in the form of “code” and “business type”. In the case of group, the business type of the group with the maximum exposure should be disclosed. The business type shall be specified in “detailed item” according to the business classification defined by Directorate General of Budget, Accounting and Statistics (e.g. Company (Group) A, real estate development).
Note 2: The enterprises mean those defined in Article 6 of “Supplementary Rules of TSEC’s Criteria for Reviewing Listing of Marketable Securities”.
Note 3: The balance of total credit extension means the total balance of the various loans (including import negotiation, export negotiation, discount, overdraft, short-term loans, short-term secured loans, receivable securities financing, mid-term loans, mid-term secured loans, longterm loans, long-term secured loans, Delinquent loans), inward remittances, factoring without recourse, Acceptances receivable and guarantee payments.

(III) Interest rate sensitivity information

Interest rate sensitivity assets and liabilities analysis data (NTD) December 31, 2018

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Unit: NTD thousand, %
Item 1 to 90 days (inclusive) 91 to 180 days (inclusive) 181 days to 1 year (inclusive) Over 1 year Total
Interest rate
sensitivity assets 473,227,441 6,893,149 11,984,930 83,634,023 575,739,543
Interest rate
sensitivity 160,487,053 284,562,819 97,600,888 7,323,668 549,974,428
liabilities
Interest rate
sensitivity gap 312,740,388 ( 277,669,670 ) ( 85,615,958 ) 76,310,355 25,765,115
Net value 47,823,653
Interest rate sensitivity assets and liabilities rate 104.68%
Interest rate sensitivity gap and net worth rate 53.87%
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115

December 31, 2017

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Unit: NTD thousand, %
Item 1 to 90 days (inclusive) 91 to 180 days (inclusive) 181 days to 1 year (inclusive) Over 1 year Total
Interest rate
sensitivity assets 462,435,741 6,503,542 8,109,517 77,217,728 554,266,528
Interest rate
sensitivity 151,989,766 276,148,497 90,493,177 13,711,029 532,342,469
liabilities
Interest rate
sensitivity gap 310,445,975 ( 269,644,955 ) ( 82,383,660 ) 63,506,699 21,924,059
Net value 43,401,940
Interest rate sensitivity assets and liabilities rate 104.12%
Interest rate sensitivity gap and net worth rate 50.51%
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Note: 1. The table specifies the amount in NTD (exclusive of foreign currencies) of Taichung Bank Head Office and local branches.
Interest rate sensitivity assets and liabilities mean the assets and liabilities with interest of which the income or cost varies depending on the interest rate.
Interest rate sensitivity gap=Interest rate sensitivity assets - Interest rate sensitivity liabilities.
Interest rate sensitivity gap=Interest rate sensitivity assets - Interest rate sensitivity liabilities.
Ratio of interest-rate-sensitive assets to liabilities = Interest-rate-sensitive assets ÷ Interestrate-sensitive liabilities (denominated in NT$)

Interest rate sensitivity assets and liabilities analysis data (USD)

December 31, 2018

Unit:USD thousand; %

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1 to 90 days 91 to 180 days 181 days to 1 year
Item Over 1 year Total
(inclusive) (inclusive) (inclusive)
Interest rate
1,063,068 256,810 20,502 457,260 1,797,640
sensitivity assets
Interest rate
sensitivity 831,067 738,109 192,424 - 1,761,600
liabilities
Interest rate
232,001 ( 481,299 ) ( 171,922 ) 457,260 36,040
sensitivity gap
Net value 1,557,266
Interest rate sensitivity assets and liabilities rate 102.05%
Interest rate sensitivity gap and net worth rate 2.31%
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December 31, 2017

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Unit:USD thousand; %
1 to 90 days 91 to 180 days 181 days to 1 year
Item Over 1 year Total
(inclusive) (inclusive) (inclusive)
Interest rate
902,199 339,282 39,210 404,801 1,685,492
sensitivity assets
Interest rate
sensitivity 525,683 954,563 142,981 - 1,623,227
liabilities
Interest rate
376,516 ( 615,281 ) ( 103,771 ) 404,801 62,265
sensitivity gap
Net value 1,457,909
Interest rate sensitivity assets and liabilities rate 103.84%
Interest rate sensitivity gap and net worth rate 4.27%
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116

Note: 1. This table reports the total amount, in US$, held by the headquarters and domestic branches of Taichung Commercial Bank, its international financial business branches and overseas branches, excluding contingent assets and contingent liabilities.
Interest rate sensitivity assets and liabilities mean the assets and liabilities with interest of which the income or cost varies depending on the interest rate.
Interest rate sensitivity gap=Interest rate sensitivity assets - Interest rate sensitivity liabilities.
Ratio of interest-rate-sensitive assets to liabilities = Interest-rate-sensitive assets ÷ Interestrate-sensitive liabilities (denominated in US$)

(IV) Profitability:

Profitability:
Un	it: %
	Item	December 31,2018	December 31,2017
Return on assets	Before Income Tax	0.69	0.67
	After Income Tax	0.60	0.57
ROE	Before Income Tax	10.17	10.07
	After Income Tax	8.79	8.57
Net	profit rate	37.55	35.10

Note: 1. ROA = Income before (after) taxation/Average total assets

ROE=Income before (after) taxation / Average net worth
Profit (loss) rate = Income after taxation/income-net
Income before (after) taxation means the income accumulated from January of the

current year until the current quarter

(V) Analysis on maturity of assets and liabilities

Analysis of maturity structure of NTD December 31, 2018

Unit: NTD thousand

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Remaining balance to maturity
Total 181 days to 1
0 to 10 days 11 to 30 days 31 to 90 days 91 to 180 days More than 1 year
year
Main capital
inflow upon 619,398,838 97,398,772 34,941,879 31,135,311 55,245,416 98,133,621 302,543,839
maturity
Main capital
outflow upon 742,326,833 29,605,923 35,688,786 81,243,268 105,947,813 196,715,151 293,125,892
maturity
Gap (122,927,995) 67,792,849 ( 746,907 ) ( 50,107,957) ( 50,702,397 ) ( 98,581,530) 9,417,947
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December 31, 2017

Unit: NTD thousand

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Remaining balance to maturity
Total 181 days to 1
0 to 10 days 11 to 30 days 31 to 90 days 91 to 180 days More than 1 year
year
Main capital
inflow upon 598,141,237 109,914,586 30,498,374 29,468,061 51,262,425 88,329,183 288,668,608
maturity
Main capital
outflow upon 710,537,090 36,411,396 37,325,982 88,778,387 108,514,499 171,244,522 268,262,304
maturity
Gap ( 112,395,853 ) 73,503,190 ( 6,827,608 ) ( 59,310,326 ) ( 57,252,074 ) ( 82,915,339 ) 20,406,304
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Note: The table only specifies the amount in NTD (exclusive of foreign currencies) of Taichung Bank Head Office and local branches.

117

Analysis of maturity structure of USD December 31, 2018

Unit: USD thousand

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Remaining balance to maturity
Total 0 to 30 days 31 to 90 days 91 to 180 181 days to 1 More than 1
days year year
Main capital
inflow upon 2,035,175 272,430 298,059 257,196 77,992 1,129,498
maturity
Main capital
outflow upon 2,857,122 602,245 811,276 484,962 812,641 145,998
maturity
Gap ( 821,947 ) ( 329,815 ) ( 513,217 ) ( 227,766 ) ( 734,649 ) 983,500
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December 31, 2017

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Unit: USD thousand
Remaining balance to maturity
Total 0 to 30 days 31 to 90 days 91 to 180 181 days to 1 More than 1
days year year
Main capital
inflow upon 2,057,206 472,931 288,565 317,306 100,961 877,443
maturity
Main capital
outflow upon 2,875,529 557,042 748,449 554,700 839,630 175,708
maturity
Gap ( 818,323 ) ( 84,111 ) ( 459,884 ) ( 237,394 ) ( 738,669 ) 701,735
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Note: 1. The table specifies the total amount in USD of Taichung Bank Head Office, local branches and International Banking Branch. Unless otherwise provided, it shall be stated at the Book Value, and it is not necessary to include any accounts that are not stated in the table (e.g. negotiable certificates of deposit, bonds or stocks scheduled to be issued).

Where offshore assets account for more than 10% of the Bank’s total assets, it is necessary to provide supplementary disclosure.

XLIX. Capital risk management

The consolidated company manages capital to ensure the Group’s enterprises to maximize shareholder’s returns by optimizing the balance of debt and equity under the precondition of continuing operation.

The capital structure of the consolidated company consists of the net debt (borrowings less cash and cash equivalents) and the interests (equity, capital reserve, retained earnings and other equity items) of the Company's owners.

The consolidated company is not required to comply with other external capital requirements.

The management of the consolidated company re-examines the Group’s capital structure on a quarterly basis, including considering various capital costs and the related risks. The consolidated company based on the suggestions of management has the overall capital structure balanced by paying dividends, issuing new shares, buying back shares and issuing new debts or paying back old debts.

118

L. Information about foreign exchange of foreign currency financial assets and liabilities

The information about foreign currency financial assets and liabilities rendering material effect on the Consolidated Company:

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December 31, 2018
Other foreign
USD RMB JPY AUD Euro currencies Total
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Cash and cash equivalents
$ 3,068,439
$ 1,078,324
$ 514,590
$ 465,958
$ 1,310,534
$ 807,162
$ 7,245,007
Due from Central Bank and lend to Banks
61,420
223,600
-
-
-
-
285,020
Financial assets at fair value through profit and loss
1,144,719
-
-
-
-
11
1,144,730
Financial assets at fair value through other
comprehensive profit or loss
980,178
-
-
-
-
-
980,178
Discounts and loans
34,421,321
1,266,246
351,738
216,969
470,514
655,638
37,382,426
Accounts receivable
4,731,102
2,460,502
251,121
11,470
150,493
85,759
7,690,447
Held-to-maturity financial assets
17,538,248
2,280,163
-
1,322,022
-
148,932
21,289,365
Other financial assets
-
3,202
-
-
-
-
3,202
Other assets
140,863
-
-
-
-
-
140,863
Foreign currency financial liabilities
Due to Central Bank and banks
1,074,850
-
-
-
-
-
1,074,850
Shot-term borrowings
377,733
2,039,436
-
-
-
-
2,417,169
Customer deposits and remittances
44,331,207
3,556,606
664,068
2,336,307
506,670
1,610,067
53,004,925
Financial liabilities at fair value through profit and loss
71,504
-
-
-
-
10
71,514
Payables
1,288,299
232,846
92,118
6,612
1,208,131
116,473
2,944,479
Bills and bonds sold under repurchase agreements
8,704,431
-
-
-
-
-
8,704,431
Liability reserve
29,944
-
-
-
-
-
29,944
Other liabilities
205,768
11,418
-
-
1,360
2,127
220,673

			December 31,2017
USD RMB $ 3,561,323 $ 1,225,919 53,586 91,300 210,043 - 158,825 - 32,528,042 1,260,225 5,143,858 1,853,624 14,520,384 3,424,197 900,335 - 758,488 - 2,828,150 - 312,585 1,398,923 43,392,506 3,263,127 71,728 - 2,926,385 172,634 2,105,229 - 6,674 - 96,007 64,612 ency exchange (realized and unrealized) in o disclose all exchange gains or losses bas		JPY AUD $ 658,529 $ 110,926 - - - - - - 295,904 406,267 117,420 19,623 - 1,416,042 - - - - - - - - 788,466 2,159,266 - - 71,286 7,683 - - - - 113 - 2018 and 2017 were NT$387,106 thousan ed impact significance.		Euro $ 259,379 - - - 491,123 511,021 - - - 178,000 472,269 - 448,365 - - 4,112 d and NT$(319,544)	Other foreign currencies Total $ 340,996 $ 6,157,072 337,821 482,707 290 210,333 - 158,825 867,454 35,849,015 76,434 7,721,980 169,010 19,529,633 - 900,335 - 758,488 - 3,006,150 - 1,711,508 1,354,753 51,430,387 290 72,018 302,777 3,929,130 - 2,105,229 - 6,674 44,528 209,372 thousand, respectively. Due to the wide	Total

119

LI. Disclosures

Loans tooans tons tos to too others:thers:ers:rs:s:

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. Loans tooans tons tos to too others:thers:ers:rs:s: Unit: NTD thousand, unless otherwise noted
Item No.(Note 1) Lender Borrower Transaction (Note 2) title Are they related parties current period Maximum balance – (Note 3) Balance - (Note 8) ending The actual disbursed amounts Interest CollarsRate Nature of Loan(Note 4) TransactiBusiness (Amount Noon of te 5) term loan (Note offering short-necessary for Reasons 6) for bad debtAmount of allowance Name Collateral Value Limit of loan to particular borrower (Note 7) Total limit of financing (Note 7) Remark
1 Taichung Mi Qi Ji, Ltd. Other No $ 170,000 $ - $ - 6.50% Necessary for $ - Working capital $ - Real estate $ 171,396 $ 185,896 $ 743,582 Note
Commercial receivables offering short- 9
Bank Lease term loan
Enterprise
2 Taichung Chang Hong 〃〃 50,000 21,989 21,989 4%-10% 〃 - 〃 226 Real estate 29,079 185,896 743,582 〃
Commercial International
Bank Lease Development
Enterprise Co., Ltd.
3 Taichung Yuan Mao 〃〃 100,000 - - 4%-10% 〃 - 〃 - Stock 63,180 185,896 743,582 〃
Commercial Construction Co., Ltd.
Bank Lease
Enterprise
4 Taichung Yan Xin Construction 〃〃 95,654 64,170 64,170 4%-10% 〃 - 〃 661 Real estate 58,613 185,896 743,582 〃
Commercial Co., Ltd.
Bank Lease
Enterprise
5 Taichung General Energy 〃〃 50,000 23,476 23,476 4%-10% 〃 - 〃 190 Refundabl 5,000 185,896 743,582 〃
Commercial Solutions e deposits
Bank Lease
Enterprise
6 Taichung Yi Lei Construction 〃〃 65,000 63,050 63,050 4%-10% 〃 - 〃 649 Real estate 65,161 185,896 743,582 〃
Commercial Co., Ltd.
Bank Lease
Enterprise
7 Taichung Huang Chao Golden 〃〃 30,000 16,696 16,696 4%-10% 〃 - 〃 110 Refundabl 6,000 185,896 743,582 〃
Commercial Hall Inc. e deposits
Bank Lease
Enterprise
8 Taichung Yuanli Engineering 〃〃 50,000 35,678 35,678 4%-10% 〃 - 〃 367 N/A - 185,896 743,582 〃
Commercial Co., Ltd.
Bank Lease
Enterprise
9 Taichung Kuang Ming Shipping 〃〃 100,000 100,000 - 4%-10% 〃 - 〃 - Refundabl 20,000 185,896 743,582 〃
Commercial e deposits
Bank Lease
Enterprise
10 TCCBL Co., Ltd. EVER MERIT 〃〃 73,704 18,426 18,426 5.25% 〃 - 〃 184 Stock 61,911 78,223 312,890 Note
(B.V.I.) TRADING LIMITED 10
11 TCCBL Co., Ltd. LEAGUE 〃〃 30,710 7,678 7,678 4%-10% 〃 - 〃 46 Refundabl 3,071 78,223 312,890 〃
(B.V.I.) INTERNATIONAL LI e deposits
MITED
12 TCCBL Co., Ltd. TCT CAPITAL 〃〃 49,136 - - 4%-10% 〃 - 〃 - Refundabl 4,914 78,223 312,890 〃
(B.V.I.) CO., LTD e deposits
13 TCCBL Co., Ltd. CROSS 〃〃 42,994 28,867 28,867 4%-10% 〃 - 〃 258 Refundabl 3,071 78,223 312,890 〃
(B.V.I.) BORDER PROFITS L e deposits
IMITED
14 TCCBL Co., Ltd. TCT CAPITAL 〃〃 49,136 49,136 49,136 4%-10% 〃 - 〃 442 Refundabl 4,914 78,223 312,890 〃
(B.V.I.) CO., LTD e deposits
15 Taichung Sanyuan Construction Loan by 〃 169,936 - - 10% 〃 - Capital - Real estate 1,783,693 291,216 291,216 Note
Commercial (Qingdao) mandate Expenditures 11
Bank Leasing Development
(Suzhou) Ltd. Co., Ltd.
16 Taichung Zhangjiajie Zhongjun 〃〃 26,832 26,832 26,832 9.6% 〃 - 〃 402 Real estate 241,086 291,216 291,216 〃
Commercial Real Estate
Bank Leasing
(Suzhou) Ltd.
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120

Note 1: The column for numbering is elaborated below:
- (1) Fill in 0 for the issuer.
- (2) The investees are sequentially numbered from 1 and so forth.
Note 2: The receivables-affiliates, receivables-related parties, shareholders accounts, prepayments, temporary payments and others as stated in book shall be filled in here if they are classified as financing. Note 3: Maximum balance of financing a third party in current period.
Note 4: Specify if the nature of financing is for business transactions or short-term financing is necessary.
Note 5: If the nature of financing is for business transactions, specify the amount of business transactions. The amount of business transactions shall be the amount of business conducted between the lender and the beneficiary of financing.
Note 6: If it is necessary for short-term financing, specify the reasons and the beneficiary of financing and the use of the fund, such as: retirement of loans, procurement of equipment, and working capital.
Note 7: Specify the Procedure for Financing Third Parties and the upper limit of financing in favor of particular beneficiary and the total limit of financing, and also the method for the calculation of the upper limit of financing in favor of particular beneficiary and the total limit of financing in the space provided in this field.
Note 8: For public companies proposed the lending of funds before the Board for resolution case by case pursuant to Article 14-1 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”, the amount approved by the Board but not yet being drawn shall still be included in the amount for announcement for the disclosure of risk being assumed. If the loans are being retired in the future, disclose the outstanding balance to reflect the adjustment of risk. For public companies proposed the lending of funds before the Board for resolution case by case pursuant to Article 14-2 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies” whereby the Board resolved to authorize the Chairman to effect the drawdown or in revolving credit in tranches within specific limit and in the year, the amount and the limit approved by the Board shall still be announced as the outstanding balance. In subsequent retirement of loans, repeated drawdown shall still be considered and the amount and the limit approved by the Board shall still be announced as the outstanding balance.
Note 9: The loaning of TCB Leasing Co., Ltd. to a particular enterprise shall be up to 10% of the net worth of the Company. The total amount of loaning of funds shall not exceed 40% of the net worth of TCB Leasing Co., Ltd.
Note 10: The loaning of TCCBL Co., Ltd. (B.V.I.) to a particular enterprise shall not exceed 10% of the net worth of TCCBL Co., Ltd. (B.V.I.) The total amount of loaning of funds shall not exceed 40% of the net worth of TCCBL Co., Ltd. (B.V.I.).
Note 11: The loaning of TC Bank Financing and Leasing (Suzhou) Co., Ltd. to a particular enterprise shall be up to 40% of the net worth of the Company. The total amount of loaning of funds shall not exceed 40% of the net worth of Taichung Commercial Bank Finance Lease (Suzhou) Co., Ltd.
Endorsements/guarantees to others:

										Unit: NTD thousand, un	Unit: NTD thousand, un	less other	wisenoted
		Endorsed/	Guaranteed						Accumulated amount f		Guarantee d	Guarantee and	Guarantee
Item No.	Name of Endorser/Guarantor	Company name	Affiliation	Limit of endorsement/guarantee to a single enterprise (Note 1)	Maximum balance in current period (Note 3)	Balance- ending	The actual amounts disbursed	Endorsement/guarantee with collateral	o endorsement/guarantee in proportion to the net worth stated in the financial statements of the most recent period	Upper limit of endorsement/guarantee (Note 2)	an endorsement of parent company to subsidiary (Note 4)	endorsement by subsidiary to parent company (Note4)	and endorsement in Mainland China (Note 4)
1	Chou Chin Industrial Co., Ltd.	GREENWORLD FOOD CO., LTD.	Subsidiary of Chou Chin Industrial Co., Ltd.	$ 654,029	$ 15,000	$ 15,000	$ -	$ -	1.15	$ 1,308,183	－	－	－
2	Taichung Commercial Bank Lease Enterprise	TCCBL Co., Ltd.	Subsidiaries of Taichung Commercial Bank	11,153,738	2,510,000	1,221,512	377,733	-	66.99	18,859,563	－	－	－
2	Taichung Commercial Bank Lease Enterprise	Taichung Commercial Bank Leasing (Suzhou) Ltd.	Subsidiaries of Taichung Commercial Bank	11,153,738	2,083,830	2,083,830	1,282,320	-	114.28	18,859,563	－	－	Ｙ

Note 1: Chou Chin Industrial stipulated in its Operating Procedures for Endorsement Guarantee that its endorsement guarantee for an enterprise shall not exceed 50% of the net value of the latest financial statements. If the guarantee is for business transaction relationships, the amount shall not exceed the total transaction in the most recent year. Taichung Bank Leasing stipulated in its Operating Procedures for Endorsement Guarantee that its endorsement guarantee for an enterprise shall not exceed six times the net value of the latest financial statements.
Note 2: Chou Chin Industrial stipulated in its Operating Procedures for Endorsement Guarantee that its total endorsement guarantee shall not exceed the net value of the latest financial statements. Taichung Bank Leasing stipulated in its Operating Procedures for Endorsement Guarantee that its total endorsement guarantee shall not exceed ten times the net value of the latest financial statements.
Note 3: The highest balance of endorsements and/or guarantees in the current year.
Note 4: For guarantee and endorsement from parent company to subsidiaries, from subsidiaries to parent company, and to Mainland China, as in the case of TWSE/GTSW-listed companies, fill in Y.

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3. Holding of marketable securities at the end of the period Unit: Thousand shares / NT$ in thousand
Holder of Ending
Securities Type and Name of Securities Affiliation with Securities Issuer Account Title Quantity Book Value Shareholding % Market Value Remark
China Man- Shares traded on the Taiwan
Made Fiber Stock Exchange or OTC
Corporation exchange
Taiwan Business Bank N/A Financial assets mandatorily 57,390 $ 593,987 1 $ 593,987
measured at fair value through profit
or loss- current
First Financial Holding Yung Shin Global Holding ″″ ″″ 1,853279 37,06610,979 -- 37,06610,979
Oriental Union Chemical ″ ″ 500 12,900 - 12,900
Corporation (OUCC)
Hua Nan Financial Holding CHINA MAN-MADE FIBER Equity instrument investments 60,581 1,060,161 1 1,060,161 1,148 thousand
CORPORATION is its corporate measured at fair value through other shares pledged
director. comprehensive income- non-current
Maxigen Biotech Inc.Taiwan Tea Corporation N/A″ ″″ 15,000569 231,75013,178 12 231,75013,178
Shares traded on foreign
exchange or OTC exchange
Citigroup Inc. N/A Financial assets mandatorily 41 65,560 - 65,560
measured at fair value through profit
or loss- current
Domestic Emerging Stock Board
JiMicron Technology N/A Equity instrument investments 270 3,482 - 3,482
measured at fair value through other
comprehensive income- non-current
Non listed (OTC) domestic stock
EVERSOL CORP. N/A Financial assets mandatorily 3,450 - 1 -
measured at fair value through profit
or loss- current
Sunny Bank N/A Equity instrument investments 2,309 21,792 - 21,792
measured at fair value through other
comprehensive income- non-current
Formosa Imperial Wineseller Affiliate ″ 1,900 - 10 -
Corp.
China Man- Non listed (OTC) domestic stock
Made Fiber
Corporation
TAIWAN FILAMENT CHINA MAN-MADE FIBER Equity instrument investments 11,542 $ 33,472 20 $ 33,472
WEAVING DEVELOPMENT CORPORATION is its corporate measured at fair value through other
CO., LTD. director. comprehensive income- non-current
WK Technology Fund N/A ″ 598 7,174 3 7,174
Pu Shih Joint Venture(??) ″ ″ 682 3,683 2 3,683
Minchali Metal Industrial ″ ″ 7,193 91,348 3 91,348
Co., Ltd.
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Holder of Ending Remark
Securities Type and Name of Securities Affiliation with Securities Issuer Account Title Quantity Book Value Shareholding % Market Value
TWSE ″ ″ 1,232 89,500 - 89,500
Everterminal Co., Ltd. ″ ″ 298 3,118 - 3,118
China Trade & Development ″ ″ 756 - 1 -
Corp.
Chia Hsin Food and Synthetic ″ ″ 103 - - -
Fiber Co., Ltd.
Taitung Business Bank ″ ″ 4,027 - 1 -
Non-listed (OTC) overseas stock
UNFON CONSTRUCTION Affiliate Equity instrument investments 3,250 8,873 18 8,873
CO., LTD (Hong Kong) measured at fair value through other
comprehensive income- non-current
Beneficiary certificate
Reliance Wealth Bond Fund Fund managed by Reliance Financial assets mandatorily 6,403 69,056 - 69,056
Securities Investment Trust Co., Ltd. measured at fair value through profit
or loss- current
Reliance emerging stock portfolio ″ ″ 4,531 45,669 - 45,669
fund
The RSIT First Digital Fund ″ ″ 1,842 47,911 - 47,911
Reliance Da-Fa Fund ″ ″ 1,505 38,284 - 38,284
Reliance Taiwan Main Stream ″ ″ 3,042 51,047 - 51,047
Small & Medium Cap Fund
Yuanta Shanghai and Shenzhen N/A ″ 1,500 16,110 - 16,110
China Man-Made Domestic corporate bonds
Fiber Corporation
Taichung Commercial Bank Subsidiar of China Man-Made Fiber Debt instrument investments 110,000 110,000 - 110,000
financial bonds Corporation measured at fair value through other
comprehensive income- non-current
Deh Hsing Shares traded on the Taiwan
Investment Stock Exchange or OTC
Co., Ltd. exchange
China Man-Made Fiber Parent company of Deh Hsing Equity instrument investments 10,491 $ 107,005 - $ 107,005
Corporation Investment Co., Ltd. measured at fair value through other
comprehensive income- current
Non listed (OTC) domestic stock
Unicon Vision Corp. N/A Equity instrument investments 1,293 15,196 - 15,196
measured at fair value through other
comprehensive income- current
Formosa Imperial Wineseller Affiliate ″ 2,000 - 10 -
Corp.
Wan Tai Lease Co., Ltd. N/A ″ 628 - 3 -
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Holder of Ending Remark
Securities Type and Name of Securities Affiliation with Securities Issuer Account Title Quantity Book Value Shareholding % Market Value
Beneficiary certificate
Reliance emerging stock portfolio Fund managed by Reliance Securities Financial assets mandatorily 2,004 20,196 - 20,196
fund Investment Trust Co., Ltd. measured at fair value through
profit or loss- current
Reliance Wealth Bond Fund ″ 〃 458 4,942 - 4,942
The RSIT First Digital Fund ″ 〃 67 1,746 - 1,746
Pan Asia Shares traded on the Taiwan Stock
Chemical Exchange or OTC exchange
Corporation
China Man-Made Fiber Corporation Parent company of Pan Asia Chemical Equity instrument investments 236,096 2,408,182 16 2,408,182 77,954 thousand
Corporation measured at fair value through other shares pledged
comprehensive income- non-current
Yuan Ji Solar Technology N/A 〃 2,322 15,096 1 15,096
Domestic Emerging Stock Board
JiMicron Technology N/A Equity instrument investments 440 5,738 1 5,738
measured at fair value through other
comprehensive income- non-current
Pan Asia Non listed (OTC) domestic stock
Chemical
Corporation
TWSE N/A Equity instrument investments 254 $ 18,509 - $ 18,509
measured at fair value through other
comprehensive income- non-current
Chung Chien Investment Co., Ltd. Affiliate 〃 12,000 25,440 18 25,440
Chung Shing Textile Co., Ltd. N/A 〃 120 - - -
Domestic corporate bonds
Taichung Commercial Bank financial Subsidiary of China Man-Made Fiber Debt instrument investments 200,000 200,000 - 200,000
bonds Corporation measured at fair value through other
comprehensive income- non-current
Reliance Non listed (OTC) domestic stock
Securities
Investment Trust
Co., Ltd.
Taiwan Futures Exchange N/A Equity instrument investments 1,169 89,803 - 89,803
measured at fair value through other
comprehensive income- non-current
Beneficiary certificate
THE RSIT ENHANCED MONEY Fund managed by Reliance Securities Financial assets mandatorily 1,023 12,221 - 12,221
MARKET FUND Investment Trust Co., Ltd. measured at fair value through
profit or loss- current
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Holder of Securities Type and Name of Securities Affiliation with Securities Issuer Account Title Quantity Book Value Ending Shareholding % Market Value Remark
Reliance Da-Fa FundThe RSIT First Digital FundReliance Chinese Selected Growth Equity Fund ″″″ ″″″ 160205815 4,0735,3218,030 --- 4,0735,3218,030
Reliance Taiwan Main Stream Small & ″ ″ 262 4,400 - 4,400
Medium Cap Fund Reliance emerging stock portfolio fund ″ ″ 965 9,726 - 9,726
Yuanta S&P 500 single-day leveraged 1X N/A ″ 25 365 - 365
inverse
Shin Kong Multi-Asset ″ ″ 100 825 - 825
Chou Chin Shares traded on the Taiwan Stock Exchange or
Industrial Co., Ltd. OTC exchange
Taiwan Business Bank N/A Equity instrument investments 965 9,993 - 9,993
measured at fair value through
other comprehensive income-
current
Chou Chin Shares traded on the Taiwan Stock Exchange or
Industrial Co., Ltd. OTC exchange
Taichung Commercial Bank Co. China Man-Made Fiber Corporation Equity instrument investments 6,044 $ 61,649 - $ 61,649
measured at fair value through
other comprehensive income-
current
China Man-Made Fiber Corporation Parent of Chou Chin Industrial ″ 55,514 566,247 4 566,247 45,000 thousand shares
Co., Ltd. pledged
Hua Nan Financial Holding CHINA MAN-MADE FIBER ″ 18,430 322,528 - 322,528 9,530 thousand shares
CORPORATION is its corporate pledged
director.
Non listed (OTC) domestic stock
Sunny Bank N/A Equity instrument investments 1,154 10,413 - 10,413
measured at fair value through
other comprehensive income-
non-current
Beneficiary certificate
Reliance Wealth Bond Fund Fund managed by Reliance Securities Financial assets mandatorily 916 10,000 - 10,000
Investment Trust Co., Ltd. measured at fair value through
profit or loss- current
Reliance Taiwan Main Stream Small & ″ ″ 111 2,000 - 2,000
Medium Cap Fund
Domestic corporate bonds
Taichung Commercial Bank financial bonds Subsidiary of China Man-Made Debt instrument investments 850,000 850,000 - 850,000 750,000 thousand
Fiber Corporation measured at fair value through shares pledged
other comprehensive income-
current
Chou Chang Shares traded on the Taiwan Stock Exchange or
Corporation OTC exchange
Taichung Commercial Bank Co. Subsidiary of China Man-Made Equity instrument investments 12,073 123,142 - 123,142 10,000 thousand shares
Fiber Corporation measured at fair value through pledged
other comprehensive income-
non-current
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Holder of Securities	Type and Name of Securities	Affiliation with Securities Issuer	Account Title		Ending			Remark
				Quantity	Book Value	Shareholding %	Market Value
Chou Chang Corporation	China Man-Made Fiber Corporation Non listed (OTC) domestic stock Hsin Tung Yang Chou Chin Industrial Co., Ltd. Domestic corporate bonds	Ultimate parent of Chou Chin Industrial Co., Ltd. N/A The investor evaluating Chou Chang Corporation under equity method	″ 8,683 Equity instrument investments measured at fair value through other comprehensive income- non-current 64 ″ 404		88,569 $ 691 2,603	1 - 1	88,569 $ 691 2,603	4,000 thousand shares pledged
	Taichung Commercial Bank financial bonds	Subsidiary of China Man-Made Fiber Corporation	Debt instrument investments measured at fair value through other comprehensive income- current	350,000	350,000	-	350,000	350,000 thousand shares pledged

Note: Taichung Commercial Bank and its subsidiaries are exempt from disclosure due to that they are in the financial, insurance and securities businesses.

Cumulative amount of the same marketable securities purchased or sold reaching NT$300 million or more than 20% of the Paid-in sharescapital. Unit: NTD thousand\ thousand shares

Buyer/Seller	Type and Name of Securities	Account Title	Trading Counterpart	Affiliatio n	Begi	nning	Bo	ught		Sold			End of	period (Note1)
					Shares (in Thousand shares)	Amount	Shares (in Thousand shares)	Amount	Shares (in Thousand shares)	Amount	Cost	Gain (loss) from disposal	Shares (in Thousand shares)	Amount
China Man- Made Fiber Corporation	Taichung Commercial Bank common stocks	Investments adopting the equity method / consolidated and individual	Subscriptio n of capital increase	Subsidiar ies	735,234	$ 9,719,925	32,246	$ 328,914	-	$ -	$ -	$ -	785,861	$10,688,164

Note 1: The number of shares at the end of period includes stock dividends allocated in the period. The amount at the end of period includes the profit and loss and the other comprehensive income of subsidiaries, associate companies and joint venture adopting the equity method.

Acquisition amount of real estate reaching NT$300 million or more than 20% of the Paid-in sharescapital (None)
Amount on disposal of real estate reaching NT$300 million or more than 20% of the Paid-in sharescapital (None)

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7. Amount on purchase from and sale to related parties reaching NT$100 million or more than 20% of the Paid-in sharescapital Unit: NTD thousand
Status Distinctive terms and conditions of trade and the reasons Receivable (payable) accounts/notes Remark
Purchaser/Seller Trading Counterpart Affiliation Purchase (sale) Amount total purchase (sale) amount Percentage in Duration Unit Price Duration Balance Percentage in total receivable (payable)
% accounts/notes %
China Man-Made Fiber Nan Chung Petrochemical China Man-Made Fiber Corporation Purchase $ 4,246,032 23% 30~60 days Not distinctive 30~90 days ( $ 342,359 ) ( 18% )
Corporation Corp. Investee valued under equity method for the
general
transactions
China Man-Made Fiber Pan Asia Chemical Subsidiary of China Man-Made Sale ( 972,682 ) 5% 30~60 days 〃〃 109,064 4%
Corporation Corporation Fiber Corporation
Pan Asia Chemical China Man-Made Fiber Parent company of Pan Asia Purchase 972,682 64% 30~60 days 〃〃 ( 109,064 ) 74%
Corporation Corporation Chemical Corporation
Chou Chin Industrial GREENWORLD FOOD Subsidiary of Chou Chin Industrial Sale ( 1,110,182 ) 44% A/C 120 days - - 172,591 59%
Co., Ltd. CO., LTD. Co., Ltd.
GREENWORLD Chou Chin Industrial Parent company of GREENWORLD Purchase 1,110,182 80% A/C 120 days - - ( 172,591 ) ( 86% )
FOOD CO., LTD. Co., Ltd. FOOD CO., LTD.
8. Accounts receivable-related party reaching NT$100 million or more than 20% of the Paid-in sharescapital. Unit: NTD thousand
Overdue receivables with
Receivables with related
Company of receivables on book Counterpart Trading Affiliation Balance of receivables with related party Turnover Rate Amount related partMode y party after period collection Amount of allowance for bad debt
of Processing
China Man-Made Fiber Pan Asia Chemical Subsidiary of China Man-Made $ 109,064 8.03 $ - － $ 90,106 $ -
Corporation Corporation Fiber Corporation
Chou Chin Industrial GREENWORLD A subsidiary of Chou Chin Industrial 172,591 5.72 - － 129,561 -
Co., Ltd. FOOD CO., LTD. Co., Ltd.
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Transactions in engaging in derivative financial instruments. (Note 8)

127

10. Other information: Amount of the business relationship and major transactions between parent company and subsidiaries and among subsidiaries:

Unit: NTD thousand

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Transactions
Item No. Trader’s name Counterparty Relationship with trader Percentage in consolidated
(Note 1) (Note 2) Title Amount (Note 3) Terms and conditions total revenue or total assets
(Note 4)
2018
0 China Man-Made Fiber Pan Asia Chemical 1 Sales revenue $ 972,682 No significant difference from the 2%
Corporation Corporation general customer
0 China Man-Made Fiber Pan Asia Chemical 1 Accounts receivable 109,064 No significant difference from the -
Corporation Corporation general customer
0 China Man-Made Fiber Taichung Commercial Bank 1 Cash and cash 47,136 No significant difference from the -
Corporation Co. equivalents general customer
1 Taichung Commercial Bank Reliance Securities 3 Customer deposits and 166,258 No significant difference from the -
Co. Investment Trust Co., Ltd. remittances general customer
1 Taichung Commercial Bank Chou Chin Industrial 3 Interest Expenses 31,209 No significant difference from the -
Co. Co., Ltd. general customer
1 Taichung Commercial Bank Taichung Commercial Bank 3 Customer deposits and 1,124,787 No significant difference from the -
Co. Insurance Broker Co., Ltd. remittances general customer
1 Taichung Commercial Bank Taichung Commercial Bank 3 Income from handling 200,000 No significant difference from the -
Co. Insurance Broker Co., Ltd. fees general customer
1 Taichung Commercial Bank Taichung Commercial 3 Customer deposits and 139,351 No significant difference from the -
Co. Bank Lease Enterprise remittances general customer
2 Chou Chin Industrial Co., Ltd. GREENWORLD FOOD 3 Sales revenue 1,110,182 No significant difference from the 3%
CO., LTD. general customer
2 Chou Chin Industrial Co., Ltd. GREENWORLD FOOD 3 Accounts receivable 172,591 No significant difference from the -
CO., LTD. general customer
2 Chou Chin Industrial Co., Ltd. GREENWORLD FOOD 3 Other income 119,336 No significant difference from the -
CO., LTD. general customer
2 Chou Chin Industrial Co., Ltd. GREENWORLD FOOD 3 Other receivables 51,828 No significant difference from the -
CO., LTD. general customer
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Note 1: The information about transactions between parent company and subsidiaries shall be numbered and noted in the following manner in the box of numbers: 1. 0 is for the Parent Company.

Subsidiaries are numbered from number 1.

Note 2: The relationship with the trade party is classified into three categories as follows:

Parent Company to subsidiaries.
Subsidiaries to Parent Company.
Subsidiaries to subsidiaries.

Note 3: Written-off upon consolidation.

Note 4: For computing the ratio of trade amount to total sales revenue or total assets, if it is for asset and liability account, the computation is based on the ratio of ending balance to total consolidated assets; however, if it is for income and expense account, the computation is based on the ratio of interim cumulative amount to total consolidated revenue.
Note 5: Major transactions refer to transactions with amount of NTD30,000 thousand and shall be subject to disclosure.

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11. Information about the investee’s name, location….. Unit: NTD thousand
Investor Investor Location Major Business Lines Current period-endingInitial Investment Amount Previous period-ending Quantity Equity Ownership by the Company Percentage % Book Value Current period net gain (loss) of the investee Investment gain (loss) recognized in current period Remark
China Man-Made Fiber Taichung Commercial Bank Co. Taichung City Banking business $ 6,355,643 $ 6,026,729 785,861 22 $ 10,688,164 $ 4,008,369 $ 894,873 294,000
Corporation thousand shares
pledged
Pan Asia Chemical Corporation Taipei City Petrochemical business 968,472 968,472 118,918 44 968,868 247,122 98,840
Nan Chung Petrochemical Corp. Yunlin County Petrochemical business 1,000,002 1,000,002 100,000 50 1,228,959 176,872 88,436 10,000 thousand
shares pledged
Deh Hsing Investment Co., Ltd. Taipei City General investment business 1,350,000 1,150,000 135,000 100 1,299,536 8,617 7,633
Reliance Securities Investment Trust Taipei City Securities investment trust business 6,295 6,295 922 3 11,767 ( 17,464 ) ( 515 )
Co., Ltd.
Chou Chin Industrial Co., Ltd. Changhua County Manufacturing and trading 176,430 176,430 27,742 46 297,468 122,295 53,985
EUREKA INVESTMENT Taipei City General investment business 37,500 25,000 3,750 100 35,410 ( 354 ) ( 354 )
COMPANY LIMITED
Melasse Taipei City Cosmetics and cleaning appliances 14,500 14,500 1,450 50 14,450 660 330
manufacturing
Pan Asia Chemical Taichung Commercial Bank Taichung City Banking business 1,347,834 1,281,391 201,964 6 2,740,295 4,008,369 231,891
Corporation
Reliance Securities Investment Trust Taipei City Securities investment trust business 15,738 15,738 979 3 12,525 ( 17,464 ) ( 548 )
Co., Ltd.
Melasse Taipei City Cosmetics and cleaning appliances 14,500 14,500 1,450 50 14,750 660 330
manufacturing
Taichung Commercial Bank Taichung Commercial Bank Lease Taichung City Leasing industry 1,800,000 1,800,000 185,000 100 1,858,956 81,821 81,821
Co. Enterprise
Taichung Bank Insurance Agency Taichung City Insurance agency 6,000 6,000 128,600 100 1,828,479 360,429 360,420
Co., Ltd.
Taichung Commercial Bank Taichung City Securities business 1,500,000 1,500,000 150,000 100 1,383,843 219 219
Securities Co., Ltd.
Reliance Securities Investment Trust Taipei City Securities investment trust business 120,000 120,000 12,000 38 153,423 ( 17,464 ) ( 6,716 )
Co., Ltd.
Taichung Commercial TCCBL Co., Ltd. British Virgin Financing, leasing and investments. 893,373 893,373 30,000 100 782,226 21,246 21,246
Bank Lease Enterprise Islands
TCCBL Co., Ltd. Taichung Bank Leasing (Suzhou) Suzhou Financing Leasing and investments 893,373 893,373 186,329 100 728,040 8,660 8,660
Deh Hsing Investment Taichung Commercial Bank Co. Taichung City Banking business 86,017 82,468 10,787 - 152,744 4,008,369 12,415 4,500 thousand
Co., Ltd. shares pledged
Pan Asia Chemical Corporation Taipei City Petrochemical business 150,612 150,612 12,558 5 216,592 247,122 11,590
Reliance Securities Investment Trust Taipei City Securities investment trust business 20,162 9,900 1,716 6 21,939 ( 17,464 ) ( 323 )
Co., Ltd.
Chou Chang Corporation Taichung City Distribution and warehousing of 44,000 44,000 4,000 15 37,161 16,136 2,277
beverages
Chou Chin Industrial Co., Ltd. Changhua County Manufacturing and trading 10,243 10,243 1,482 3 32,344 122,295 3,069
Xiang-Feng Development Taipei City General investment business 283,000 200,000 28,300 100 266,380 ( 3,496 ) ( 3,496 )
Wei-Kang International Taipei City Retail 5,000 5,000 300 30 3,298 ( 3,670 ) ( 1,101 )
IOLITE COMPANY Ltd.Storm Model Management SamoaTaipei City General investment businessGeneral Advertising Services 502,5798,000 410,104- 16,005200 10040 452,4377,747 (( 11,3152,544 )) (( 11,315254 ))
IOLITE COMPANY Ltd. Hammock (Hong Kong) Hong Kong General investment business 470,685 378,540 15,000 100 421,723 ( 11,277 ) ( 11,277 )
Company Limited
Hammock (Hong Kong) Hebei Hanoshi Contact Lens Hebei Province Manufacturing and trading 470,685 378,540 15,000 100 422,290 ( 11,014 ) ( 11,014 )
Company Limited Co., Ltd.
Precious Wealth Samoa General investment business 10,969 - 375 100 11,489 ( 14 ) ( 14 )
International imited
Hammock (Hong Kong) Hebei Hanoshi Contact Lens Hebei Province Manufacturing and trading 470,685 378,540 15,000 100 422,290 ( 11,014 ) ( 11,014 )
Company Limited Co., Ltd.
Xiang-Feng Development Tou-Ming Industry Taipei City Real estate trading and leasing industry 221,900 168,900 22,190 99 205,905 ( 3,289 ) ( 3,287 )
Tou-Ming Industry Jin-Bang-Ge Industry Taipei City Real estate trading and leasing industry 152,000 152,000 15,200 99 138,595 ( 2,917 ) ( 2,898 )
Chou Chin Industrial GREENWORLD FOOD CO., LTD. Taichung City Food manufacturing, and distribution and 233,348 233,348 17,508 90 29,226 54,514 49,864
Co., Ltd. warehousing of beverages
Chou Chang Corporation Taichung City Distribution and warehousing of 307,977 307,977 13,054 48 121,292 16,135 7,784
beverages
Pan-Feng Industry Taipei City Restaurant industry 14,897 14,897 1,500 100 1,849 ( 2,875 ) ( 2,875 )
Bomy Enterprise British Virgin General investment business 223,248 223,248 10,000 49 125,739 ( 24,173 ) ( 11,694 )
Islands
Yuju Universal CorporationBONWELL PARISE Co., Ltd. SamoaSamoa General investment businessInternational trade 24,5731,832 13,568- 81060 9040 23,1231,808 (( 1,91186 )) (( 1,72035 ))
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129

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Investor	Investor	Location	Major Business Lines	Initial Invest	ment Amount	EquityO	wnershipbyt	he Company	Current period net gain (loss) of the investee	Investment gain (loss) recognized in current period Remark
				Current period-ending	Previous period-ending	Quantity	Percentage %	Book Value
Yuju Universal Corporation	Noble House Glory	Japan	Short-term accommodation service	24,345	8,193	1,800	100	23,175	( 1,773 )	( 1,773 )
GREENWORLD FOOD CO., LTD. Bomy Enterprise	Chou Chang Corporation Bomy Enterprise Bomy Shanghai	Taichung City British Virgin Islands Shanghai City	Distribution and warehousing of beverages General investment business OEM, production and marketing of canned vegetable and fruit juice, and beverages	1,470 52,306 638,972	1,470 52,306 638,972	51 2,650 1,985	- 13 99	328 33,333 277,014	16,135 ( 24,173 ) ( 24,355 )	- ( 3,100 ) ( 24,173 )
Chou Chang Corporation	GREENWORLD FOOD CO., LTD.	Taichung City	Food manufacturing, and distribution and warehousingof beverages	11,224	11,224	1,133	6	6,390	54,514	3,350

(III) Information about investment in Mainland China:

Names of investees in China, major business lines, paid-in capitals, method of investment, facts of outward and inward remittances, profit and/or loss in investments, shareholding percentages, book values of investment at end of the term, investment profit and/or loss having been remitted back, limits of investment in China

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Unit: NTD thousand and foreign currency thousand
Investment Remittance or The Accumulated
Investee Major Business Lines Paid-in capital investment Mode of Taiwan in accumulation Amount remitted from at beginning of the Regain during the current period accumulation at ending Amount remitted from Taiwan in Current period net gain (loss) of the investee Company’ s Investment Direct or Indirect current period (Note (loss) recognized in Investment gain Investment at end Book Value of year remitted amount back to Taiwan
present term Remittance Regain of the present term Holding 3) Investment
Ratio % income
Bomy Shanghai OEM, production and $ 645,000 Through a third $ 638,972 $ - $ - $ 638,972 ( $ 24,355 ) ( 62% ( $ 14,993 ) ( $ 170,530 $ -
marketing of canned ( USD 20,000 ) region ( USD 19,850 ) ( USD 19,850) USD 808 ) (Note 1) USD 497 ) ( USD 5,552)
vegetable and fruit juice, Investment to (Note 4) (2)C
and beverages establish
companies
Re-investment
Chou Chin Manufacturing, processing 30,746 〃 14,486 - - 14,486 - 49% - - -
Shanghai and sale of modem, PC, ( USD 1,001 ) ( USD 450 ) ( USD 450) (Note 2)
computer shell and related
metal stamping, interface,
main frame and fiber
optical system appliances
Hebei Hanoshi Manufacturing and trading 470,685 〃 378,540 92,145 - 470,685 ( 11,014 ) 100% ( 11,014 ) 422,290 -
Contact Lens ( USD 15,000 ) ( USD 12,000 ) ( USD3,000) ( USD 15,000) ( RMB2,363 ) ( RMB2,363 ) ( RMB 77,172)
Co., Ltd. (2)B
Taichung Financing Leasing and 893,373 〃 893,373 - - 893,373 8,600 29% 2,511 ( 211,106 -
Bank Leasing investments ( RMB 186,329 ) ( RMB 186,329 ) ( RMB186,329) ( RMB1,900 ) (Note 3) RMB 551 ) ( RMB 47,206)
(Suzhou) (2)B
Amount accumulated, remitted from Taiwan for
investment in Mainland China at the end of the Investment Amount Approved by Investment Mainland China Investment Ceiling As Regulated by
current term Commission of MOEA Investment Commission of MOEA (Note 4)
$ 2,017,516 $2,201,806
(US$35,300 and RMB186,329) （US$41,300 and RMB186,329） $ 2,719,775
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130

Note 1: The consolidated shareholding calculated based on the reinvestment by Chou Chin Industrial Co., Ltd. and GREENWORLD FOOD CO., LTD. through Bomy Enterprise. Note 2: The consolidated shareholding calculated based on the reinvestment by Chou Chin Industrial Co., Ltd. and Chou Chang Corporation through a third area.

Note 3: Percentage of comprehensive cross holding of Taichung Bank Leasing through investment in companies in the third region.
Note 4: Recognized as gains or losses on investment in current period:
(1) Please note if the investee is still under preparation and there was no investment gain or loss.
(2) The basis of recognition of investment income is classified into following three types, which should be marked out:
A. Financial statements audited and audited and attested by an international accounting firm that has a cooperative relationship with a certified public accounting firm registered in the Republic of China.
B. Financial statements audited and attested by the independent accounts of the parent company.
C. Others: Shanghai Bomy Food conducts analytical procedures based on the provisions of the Standards on Auditing No. 20 regarding the determination of key composition.
Note 5: The ceiling calculated by the applicant, Chou Chin Industrial Co., Ltd. Taichung Commercial Bank Lease Enterprise and Deh Hsing Investment Co., Ltd. according to the “Regulations Governing the Review of Investment or Technical Cooperation in Mainland China" of Investment Commission, MOEA.
Note 6: The foreign currency, if any, has been translated into NTD (USD1=NT$30.72, USD1=NT$30.15, CNY1=NT$4.47, CNY1=$4.56) at the foreign exchange rate-ending and average foreign exchange rate prevailing on the date of the financial statement.

131

With Mainland China, major transactions, and other prices, payment conditions, unrealized gains and losses that happened directly or indirectly through the third region by the investment company.
- (1) Input amounts, percentages, balance, & percentages of relevant payable at end of the term. (None)
- (2) Sales amounts, percentages, balance, & percentages of relevant receivables at end of the term. (None)
- (3) Amount of property transaction and amount of the profit and/or loss so incurred. (None)
- (4) Balance and purposes of endorsements/guarantees or collateral provided at end of the term. (See page 121 for details)
- (5) The highest balance of fund financing balance at end of the term, range of interest rates and total amount of interest in the current term. (None)
- (6) Other transactions having significant effect upon profit and/or loss or financial standing of the current term, e.g., provision or acceptance of services. (None)
LII. Segment information
(1) Revenues and operating results of segments

Chemical Industry Dept. Chemical Fiber Department Bank departments Other Depts. Total		Department i	Department i	ncome 2017 $ 12,473,340 5,793,367 15,286,755 3,484,864 $ 37,038,326		Gain(loss)fro	m operation	m operation
		2018 $ 14,765,426 7,023,347 16,315,947 3,444,467 $ 41,549,187				2018 $ 348,099 157,303 ) 4,759,883 194,083 $ 5,144,762		2017
					(		( (	$ 578,932 326,115 ) 4,355,212 401,085 ) $ 4,206,944

Revenues reported above are generated from transactions with external customers. There were no inter-departmental sales generated on 2018 and 2017.

Interests of department refer to profits earned by each department, excluding the amounts from associate companies or joint venture recognized by using the equity method, rental income, interest income, disposal of real property, plant and equipment, income from disposal of investments, exchange income, valuation income of financial products, interest expense and income tax expenses. The measured figures are provided for main decision makers to allocate resources to segments and evaluate the performance of each segment.

(2) Departmental total assets

Departmental total assets
Segment assets Chemical Industry Dept. Chemical Fiber Department Construction Dept. Bank departments Others Total segment assets		December 31, 2018 $ 4,843,231 1,507,185 990,778 690,832,103 22,733,645 $ 720,906,942		December 31, 2017
				$ 5,247,741 1,779,870 1,304,003 663,024,083 20,373,523 $ 691,729,220

132

AI assistant

CMFC — Audit Report / Information 2018

51899_rns_2018-11-14_b0f80958-d6e1-4d17-a8ab-42327ad5a31d.pdf

China Man-Made Fiber Corporation and Subsidiaries

Independent Auditor’s Audit Report

To CHINA MAN-MADE FIBER CORPORATION:

Audit opinions

The basis for opinions

Points of attention

Key audit matter

Other information

Responsibilities of Management and Those in Charge with Governance of the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Auditor’s Responsibilities for the Audit of the Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

China Man-Made Fiber Corporation and subsidiary Consolidated Balance Sheet

China Man-Made Fiber Corporation and subsidiary Consolidated Income Statement

January 1 to December 31, 2018 and 2017

China Man-Made Fiber Corporation and subsidiary Consolidated Statements of Changes in Shareholders’ Equity

China Man-Made Fiber Corporation and subsidiary Consolidated Statements of Cash Flow

January 1 to December 31, 2018 and 2017

Notes to consolidated financial statement

II. Financial reporting date and procedures

Classification, measurement and impairment of financial assets and liabilities

(12) Goodwill

C. Available-for-sale financial assets

(2) De-recognition of financial liabilities

4. Derivatives

1. Separate impairment:

2. Overall impairment assessment:

(III) Useful lives of property, plant and equipment and investment property

VII Due from Central Bank and lend to Banks

XI. Inventory

Discounts and loans

XXVI. Other assets

1. Defined contribution plan

2. Defined benefit plan

3. Employees preferential deposit plan

4. Other long-term employee benefits

Reconciliation sheet of provision for guarantee liabilities

2018

(II) Capital surplus

XXXV. Share-based payment agreement Employee stock option plan

Amount

(I) Income tax recognized in profit or loss

Net income

XL. Related Party Transactions

4. Loan

2018

6. Financial bonds payable

7. Transactions of property

(III) Rewards to management

XLI. Pledged assets

Property Catalogue of Trust Accounts December 31, 2017

December 31, 2017

XLIII. Other matters

XLIV Financial instruments

(I) Fair value information- Financial instruments that are not measured at fair value

December 31, 2018

4. Exchange rate risk

5. Interest rate risk

Sensitivity analysis

6. Other price oriented risks.

Sensitivity analysis

7. Sensitivity analysis is compiled as follows:

(II) Credit risk

1. Source and definition of credit risk

2. Credit risk management policies:

3. Credit risk management procedures

(1) Loans (including commitments of financing and guarantees)

Quantified indicators

b. Information on delinquency

Quality indicators

b. Information on delinquency

Quality indicators

Quantified indicators

Quality indicators

Quantified indicators

Quality indicators

Measurement of anticipated credit loss

7. Information on credit risk quality

December 31, 2018

CMFC Audit Report / Information 2018