TA YIH — Annual Report 2018

Jul 5, 2019

Stock code: 1521

TA YIH INDUSTRIAL CO.,LTD.

2018 ANNUAL REPORT

Address: No. 11, Xinxin Road, Anping Industrial Zone, Tainan City Telephone: (06)2615151 June 18, 2019 Printed

Designated information reporting website:https://sii.twse.com.tw Website for inquiry for this year:

Stock Exchange Public Information Observatory :http://mops.twse.com.tw Company website: http://www.tayih-ind.com.tw

1. Company Spokesman

Name: Wang Honggi

Title: Senior Assistant General Manager, Finance department Contact Telephone: (06)2615151 ext. 220 Email: chi@tayih-ind.com

2. Company Acting Spokesman

Name : Wang Junhao Title : Assistant General Manager, Chairman office Contact Telephone: (06)2615151 ext. 248 Email: king@tayih-ind.com.tw

3. Address and telephone of Company and factory

Address of Company and factory: No. 11, Xinxin Road, Anping Industrial Zone, Tainan City Telephone: (06)2615151

4. Contact information of agency handling shares transfer

Name: CTBC Bank

Address: No.83, 5th Floor, Section 1, Chongqing South Road, Taipei Website : www.ctbcbank.com Telephone: (02)66365566

5. Contact information of the certified public accountant for the most recent annual financial report

Name of accounting firm: Deloitte Taiwan Independent accountant: Accountant Liao Hongru, Accountant Li Jizhen Address: No. 189, 13th Floor, Section 1, Yongfu Road, Tainan City Website : www.deliotte.com.tw Telephone: (06)2139988

6. Name of any exchanges where the company's securities are traded

offshore: None

Method by which to access information on said offshore securities: None

7. Website of company: http://www.tayih-ind.com.tw

Table of Contents

1‧To the shareholders’ report	1
2‧Introduction of the Company	3
2-1.Date of Establishment	3
2-2.Company milestones	3
3‧Corporate Governance Report	6
3-1.Organizational system	6
3-2.Information on the company's directors, supervisors, general manager, assistant	8
general managers, deputy assistant general managers, and the supervisors of all
the company’s divisions and branch units
3-3.Remuneration paid during the most recent fiscal year to directors, supervisors,	17
the general manager, and assistant general managers
3-4.The state of the company's implementation of corporate governance	26
3-5.Information on CPA professional fees	52
3-6.Information on replacement of certified public accountant	53
3-7.Where the company's chairman, general manager, or any managerial officer in	53
charge of finance or accounting matters has in the most recent year held a
position at the accounting firm of its certified public accountant or at an
affiliated enterprise of such accounting firm
3-8.Any transfer of equity interests and/or pledge of or change in equity interests by	53
a director, supervisor, managerial officer, or shareholder with a stake of more
than 10 percent during the most recent fiscal year or during the current fiscal
year up to the date of publication of the annual report
3-9.Relationship information, if among the company's 10 largest shareholders any	55
one is a related party or a relative within the second degree of kinship of
another
3-10.The total number of shares and total equity stake held in any single enterprise	56
by the company, its directors and supervisors, managers, and any companies
controlled either directly or indirectly by the company
4‧Information on capital raising activities	57
4-1.Company Capital and shares	57
4-2.The section on company debts	62
4-3.The section on preferred shares	62
4-4.The section on global depository receipts	62
4-5.The section on employee share subscription warrants	62
4-6.The section on "new restricted employee shares”	62
4-7.The section on acquisition (including mergers, acquisitions, and demergers)	62
4-8. The section on implementation of the company's capital allocation plans	62
5‧An overview of operations	63
5-1.A description of the business	63
5-2.An analysis of the market as well as the production and marketing situation	65
5-3.The number of employees employed for the 2 most recent fiscal years, and	71
during the current fiscal year up to the date of publication of the annual report,
their average years of service, average age, and education levels
5-4.Disbursements for environmental protection	71
5-5.Labor relations	71
5-6.Important contracts	74
6‧The company's financial status	76
6-1.Condensed balance sheets and statements of comprehensive income for the past	76
5 fiscal years
6-2. Financial analyses for the past 5 fiscal years	78
6-3. Supervisors' or audit committee's report for the most recent year's financial	83
statement

6-4. Financial statement for the most recent fiscal year	84
6-5. A parent company only financial statement for the most recent fiscal year,	142
certified by a CPA
6-6. If the company or its affiliates have experienced financial difficulties in the	199
most recent fiscal year or during the current fiscal year up to the date of
publication of the annual report, the annual report shall explain how said
difficulties will affect the company's financial situation
7．Analysis of its financial position and financial performance, and risks	199
7-1. Review and analysis of financial status	199
7-2. Review and analysis of financial performance	200
7-3. Analysis of cash flow	200
7-4. The effect upon financial operations of any major capital expenditures during	201
the most recent fiscal year
7-5. The company's reinvestment policy for the most recent fiscal year, the main	201
reasons for the profits/losses generated thereby, the plan for improving
re-investment profitability, and investment plans for the coming year
7-6.Risk analysis and evaluation	202
7-7. Other important matters	204
8‧Special items	205
8-1. Information related to the company's affiliates	205
8-2. Where the company has carried out a private placement of securities during the	206
most recent fiscal year or during the current fiscal year up to the date of
publication of the annual report
8-3.The subsidiaries holding or disposal of the company’s shares in the company	206
during the most recent fiscal year or during the current fiscal year up to the date
of publication of the annual report
8-4. Additional description of other matters	206
9．If any of the situations listed in Article 36, paragraph 3, subparagraph 2 of the	206
Securities and Exchange Act, which might materially affect shareholders' equity or
the price of the company's securities, has occurred during the most recent fiscal year
or during the current fiscal year up to the date of publication of the annual report,
such situations shall be listed one by one

‧ 1 The shareholders’report

1-1.2018 Business Report:

1-1-1.Review of business performance:

The Company's net operating income for 2018 was NT$ 5,703,811,000, a decrease of NT$ 493,579,000 (decreased by 8%) compared with NT$ 6,197,390,000 in 2017. In terms of net profit before tax, it was NT$ 370,802,000 in 2018, a decrease of NT$ 215,169,000 compared with NT$ 585,971,000 in 2017(a decrease of 36.7%). In terms of net profit after tax, it was NT$ 319,207,000 in 2018, a decrease of NT$180,157,000 from the NT$ 499,364,000 in 2017, and an after-tax surplus of NT$4.19 per share.

Unit: NT$ thousands

Year of occurrence	2018	2017	Increase or decrease in amount	Increase or decrease %
Net operatingincome	5,703,811	6,197,390	(－) 493,579	(－) 8.0%
Net income	277,019	504,164	(－) 227,145	(－) 45.1%
Netprofit before tax	370,802	585,971	(－) 215,169	(－) 36.7%
Netprofit after tax	319,207	499,364	(－) 180,157	(－) 36.1%
Earningsper share($)	4.19	6.55	(－) 2.36	(－) 36.0%

• 1-1-2.Budget implementation: No financial forecast was released for 2018.

1-1-3.Analysis of financial revenue and expenditure and profitability:

• (1)Financial structure

Debt to assets ratio: 46.45%

Long-term capital accounted for real estate, plant and equipment ratio: 217.84%

• (2)Profitability

Return on assets：8.84％

Return on assets：16.87％

Return on equity：5.60％ Earnings per share: 4.19

• 1-1-4.Status of research and development

• (1)Research and development expenses for the past 2 years

In 2017, the expenses was NT$ 206, 026,000, which accounted for 3.32% of the net operating income. In 2018, the expenses was NT$ 205,809,000, which accounted for 3.61% of the net operating income.

• (2)On-going research and development projects:

• ①Research on the mass production of night driving adaptive lighting system (ADB).

• ②Research on the mass production of linear fiber optic light guiding components.

• ③SOCKET LED can be replaced by new light source, and the research on the mass production of locomotive high beam and low beam light and car signal light.

• ④Study of mass production of tunnel-type mapping visual taillights.

1-2. Summary of 2019 Business Plan:

1-2-1.Operating Guidelines

• (1)Active development of overseas business to ensure business growth.

• (2)Reinforcement of automated production technology to increase production efficiency.

• (3)Improve quality management and satisfy client requirements.

• (4)Improve organization and nurture internationalized talents.

• (5)Protect the environment, employee health and fulfill social responsibilities.

1-2-2.Expected Sales Figures and Basis

• (1)Expected Sales Figures: Approximately 430,000-440,000 vehicles sold domestically. (2)Basis: In accordance with the vehicle factory plan.

• 1-2-3.Important sales and marketing policies

• (1)Expand product market to ensure business growth.

• (2)Lower mould cost and increase precision. Seek mould orders.

• (3)Improve lamp simulation technology to increase product competitiveness.

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(4)Introduce intelligence system to improve production capacity and stabilize quality.

• 1-3.The future development strategy of the company:

• 1-3-1.Increase product added value and seek domestic and export orders from domestic clients to increase turnover.

• 1-3-2.Combine Fuzhou Koito Tayih Automotive to expand Chinese market. Actively develop overseas markets such as North America. Continue to seek lamp and mould business from Koito group.

• 1-3-3.Research ADB lamp new technology and new craftsmanship.

• 1-3-4.Develop energy saving and carbon reduction and pollution prevention. Implement green environmental protection concepts to achieve low consumption and low emission targets.

• 1-4.Impact of external competitive environment, legislative environment and overall operating environment:

The vehicle sales market in Taiwan was impacted on annuity revolution, the China-US trade war and lowered global economic growth in 2018. The momentum of domestic consumption weakened. 435,000 new vehicles were sold in the full year, representing a slight decrease from 2017. In an environment where the general market decreases and the market of imported vehicles increases, the Company’s domestic turnover represented 49% of total turnover in 2018, representing a decrease of 4% from 2017. In the export market, orders for new model lamps and moulds from the US market increased. Export percentage increased from 47% in 2017 to 51% in 2018.

Looking forward to 2019, due to lowered global economic growth rate and continued China-US trade war, the domestic economy will continue to be slow, which may impact the momentum of the vehicle market. However, domestic vehicle plants will launch multiple new models of domestic vehicles, which is expected to bring a buying trend. Total domestic vehicle sale is expected to be maintained at the level of 435,000 of last year. In the US and Japan, in addition to continuous pursuit of subcontracting business from Koito, the company will also continue to develop North American market to get more orders for lamps and moulds of new vehicle models. In addition, the Company will continue all types of cost rationalization activities. We believe that the income and profit of this year will be better than the same period in the last year.

In the future, in addition to implementing and strengthening corporate governance and enterprise social responsibilities, the Company will also reinforce operating management, actively invest in research, development and innovation to build continuous competitive advantages for the Company. It will also continue its philosophy of ethical and sustainable operation. With the support of all shareholders and leadership of the operating team, we will ensure stable growth in the Company’s operation in order to take care of all employees and create maximum benefit for the shareholders. We strongly hope that all shareholders can continue to support, encourage and guide us.

We wish all shareholders health and all the best!

Chairman：Wu Chun I

2

‧ 2 Introduction of the Company

• 2-1.Date of Establishment: January 28, 1976

• 2-2.Company milestones

• 2-2-1.Where, during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, the company’s merger and acquisition: None.

• 2-2-2.Where, during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, the reinvestment in subsidiaries: please refer to page 205 for details.

• 2-2-3.Where, during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, the company’s merger and acquisition: re-organization of the company: None.

• 2-2-4.Where, during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, in which a major quantity of shares belonging to directors, supervisors, or shareholders holding greater than a 10 percent stake in the company is transferred or otherwise changes hands: None.

• 2-2-5.Where, during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, any change in managerial control; any material change in operating methods or type of business; and any other matters of material significance that could affect shareholders' equity: None.

• 2-2-6.Other information:

1976		The company established Da Yih Industrial Co., Ltd. in 1964. Due to business
		expansion, it was renamed Da Yih Industrial Co., Ltd. in 1976, with its capital
		increased to NT $10,000,000 and employs 200 employees.
1979		The new Anping plant was completed and production, and entered the domestic
		auto parts OEM market.
1980		The capital was increased to NT$ 50,000,000.
1981		Signed a technical cooperation treaty with Japan's Stanley Electric Co., Ltd.
1982		The capital was increased to NT$ 105,000,000.
1983	February	The construction of the new office building was completed and the capital was
		further increased to NT$135,000,000.
1984		Achieved the CNS mark from Bureau of standards, Metrology and Standards,
		Ministry of Economic Affairs.
1985		The capital was further increased by NT$ 165,000,000.
1986		In cooperation with Yulon Motor Co., which developed the Feeling X-101 car
		model, the Company designed the car lights for Feeling X-101.
1987		The technical cooperation with Japan's Stanley Electric Co., Ltd. terminated.
1988	May	Joint venture with Japan Koito Manufacturing Co., Ltd., the capital was
		increased to NT$ 220,000,000.
1989		Designed the car lights for Yulon Motors’ 303 series.
1990	May	Integrate the Toyota Production System (TPS) with the Corporate Synergy
		Development Center and Kuozui to reduce costs and improve production
		methods, and inventories were reduced by 47%.
	July	The expansion of the investment plant was set up at No. 9 Xinxin Road, and the
		headlamp factory was rationalized with consistent operations was re-established
		and incorporated into the BMC mirror production.
	September	The plastics factory is completed with rapid change of molding machine and the
		operation of one person handling three machines.
1991	February	Established a painting factory.
	August	The capital was expanded to NT$268,000,000.
	December	The mold NC EDM equipment was introduced to improve the precision of mold
		processing. Another 3,100 sq ft of land and factory were purchased for the
		headlight factory.
1992	May	Multi-color forming machine is integrated into the rear lamp production factory,
		and the development of the multi-color mold.
		Established Chao Wei company with Nanzhong Company to produce mirrors
		for headlights.
	September	It participated in the National Unity Circle event organized by the Corporate
		Synergy Development Center and was awarded the Excellent Organization
		Award and Golden Tower Award for both the Production and Non-Production
		Cooperation Group. The capital was expanded to NT$289,180,000.
	October	Won the "Q1 Quality Award" from Ford Lio Ho Motor Company.

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1993

The second set of BMC forming equipment was imported and the capital was expanded to NT$450,000,000.

1994 April

The Securities and Exchange Commission approved the public offering of shares, and the capital was expanded to NT$500,000,000 in September.

1995 September The cash increase of NT$49,000,000 for employees to subscribe for the shares, the amount of capital increased to NT$630,000,000. October

Received the Labor Safety and Health Automatic Inspection Excellence Award from the provincial government and the Industry Bureau awarded the 84th National Quality Month Quality Manufacturer Award.

1996 February Obtained ISO 9002 International Quality Assurance System certification from the Bureau of Standards, Metrology & Inspection, M.O.E.A. March Signed a technical cooperation contract with VALEO from France. June Signed a technical cooperation contract. With BOSCH from Gernany. 1997 January Acquired the highest honor of the Sanyang System, " Top Ji-Jun Memorial Award ". March It has been certified by Aerospace Industrial Development Corporation and Corporate Synergy Development Center and has officially become a cooperative factory of Aerospace Industry. October The company's stock is listed on the market.

Signed the technical cooperation with the US LUMINATOR company and the agency contract in Asia.

1998 March Achieved the German TUV QS 9000/ISO 9001 International Quality Assurance System Certification. July The capital was expanded to NT$693,000,000. October The headlamp factory is included in the automated BMC mirror clean room production line, which greatly increases the mirror production capacity. 1999 July Signed a technical cooperation contract with the LUMINATOR company in the United States. August The capital was expanded to NT$762,300,000. 2000 January Received the Best Presentation Award for Revitalizing Competitive Advantage of China Motor Corporation. 2001 February Established the Optoelectronics department for research and develop optical components. 2002 July Become a qualified supplier of track lamps by Siemens (SIEMENS). December Achieved the German TUV ISO 14001 and OHSAS 18001 Certified Occupational Safety certification. 2003 May Established a demonstration machine and began to import qualified track lighting suppliers. 2004 December Achieved the German TUV TS 16949 Quality certification. 2005 March Awarded the Excellent Quality Award of Yulon Nissan Motor Co., Ltd. November Introduce the headlights store design and promote the rear lead production system. 2006 January Won the 2005 best performance award from the China Motor Corporation. February Won the overall cost advantage award of the excellent manufacturer of Yulon Nissan Automobile Cooperation Factory System. April Won the 2006 Special Contribution award from Ford Lio Ho Motor Company Auto 2006 and the 2005 Output Excellence Award from Kuozui Motors. August Achieved the 3C certification of the mainland regulations. September Certified as a qualified supplier by Daimler-Chrysler's Northeast Asia. November Achieved the Japanese JIPM TPM Awards. 2007 March Won the overall cost advantage award of the excellent manufacturer of Yulon Nissan Automobile Cooperation Factory System. Received the Excellent Supplier Award from Ford Lio Ho Motor Company. April Won the Kuozui Motors Original Price Plan award. 2008 January Won the VA/VE and the excellent supplier of China Motor Corporation. February Awarded the Excellent Performance Award by Yulon Nissan Motor Co., Ltd. March Won the silver medal of the excellent manufacturer of Ford Lio Ho Motor Company. April Started to resell automotive lamps to Suzuki, Mitsubishi and Mazda in Japan. 2009 February Introduce an automatic steering headlamp (AFS) production line. December It was awarded the A-level manufacturer by the third-party safety and health

4

• management system of the Kuozui Motors.

• 2010 January Won the excellent supplier of China Motor Corporation. February Awarded the Excellent Quality Award of Yulon Nissan Motor Co., Ltd. March Won the silver medal of the excellent manufacturer of Ford Lio Ho Motor Company.

• April Won the Kuozui Motors Original Price Plan award. August Sales of remote flashlight to the United States started.

• 2011 January Won the excellent supplier of China Motor Corporation. February Awarded the Excellent Quality Award of Yulon Nissan Motor Co., Ltd. April Won the Kuozui Motors Original Price Plan award. Won the silver medal of the excellent manufacturer of Ford Lio Ho Motor Company.

• 2012 February Won the excellent supplier of China Motor Corporation. Won the VA/VE and the excellent supplier of China Motor Corporation.

• April Won the silver medal of the excellent manufacturer of Ford Lio Ho Motor Company. Won the first quality award from Luxgen, Yulon Motor Company.

• November Registered as a traffic safety and health family of the Ministry of Labor.

• 2013 January Received the energy-saving model award of China Motor Corporation. March Won the 2012 Kuozui Motors Original Price Plan award. April Won the silver medal of the excellent manufacturer of Ford Lio Ho Motor Company.

• October Production of LED headlights. November Appraised as the senior store over 30 years by the Tainan City Business Association.

• 2014 February Won the excellent supplier of China Motor Corporation. April Received the overall outstanding performance award of Luxgen, Yulon Motor Company.

• September Production of LED fog light and resale to Japan.

• 2015 February Won the excellent supplier of China Motor Corporation. Won the A-level rating of TQ Evaluation of China Motor Corporation.

• March Awarded the Excellent Quality Award of Yulon Nissan Motor Co., Ltd. April Won the 2014 Kuozui Motors Original Price Plan award. Received the overall outstanding performance award of Luxgen, Yulon Motor Company.

• November Won the best supplier for electric equipment of FCA..

• 2016 March Won the excellent supplier of China Motor Corporation. Won the AA-level rating of TQ Evaluation of China Motor Corporation.. Awarded the Excellent Quality Award of Yulon Nissan Motor Co., Ltd.

• April Won the Kuozui Motors Best quality award Won the Kuozui Motors VA best performance award. Received the overall outstanding performance award of Luxgen, Yulon Motor Company.

• 2017 February Awarded the Excellent Design and Development Award of Yulon Nissan Motor Co., Ltd.

• April Won the Kuozui Motors Best quality award Won the Kuozui MotorsTTT best performance award. Received the overall outstanding performance award of Luxgen, Yulon Motor Company.

• July Won the Taiwan Region Quality Award from Nissan Motor Co., Ltd.

• 2018 February Won the Toyota Motor Corporation Taiwan Region Contribution Award March Won the excellent supplier of China Motor Corporation. Received the Yulon Nissan Motor Company's Design and Development Excellence Award and the Improved Skills Award

• March Received the overall outstanding performance award of Luxgen, Yulon Motor Company.

• 2019 March Won the excellent supplier of China Motor Corporation. April Won the Kuozui Motors VA best performance award. Won the Kuozui Motors’ original price improvement award. Won the YAMAHA Technology Development Excellence Global Award.

5

‧ 3 Corporate Governance Report

3-1.Organizational system

3-1-1.Organization

							Shareholders’ meeting	Shareholders’ meeting	Shareholders’ meeting	Shareholders’ meeting	Shareholders’ meeting	Shareholders’ meeting	Shareholders’ meeting
																		Supervisor
							Board of Directors
																		The remuneration committee
																		The auditorial room
							Chairman
																		Vice chairman
							General manager
							Vice general manager
Production			department	Technical department		Machine mold function		Quality assurance function		Business department								Management department
		Production management department										Business department				Chairman office				General manager
		Production factory 1										Supplies department								ffi Occupational safety and health office
		Production factory II										Opto- electronics department		Finance department
		Production factory III
		Production and technical developme

6

3-1-2.Business operations of major departments

Department	Operations of major departments
The remuneration committee	Establishing and periodically reviewing the performance goals for the directors, supervisors, and managerial officers and the policies, systems, standards, and structure for their compensation and periodically reviewing and establishing the remunerations of the directors, supervisors, and managerial officers.
The auditorial room	Ensure that the internal control system operates efficiently, strengthen corporate governance, and establish enterprise risk assessment and risk management mechanisms.
General manager office	Planning and implementation of management policies, integration and maintenance of information systems, personnel, education and training, services, welfare, functional operation of various departments and audit and implementation of internal control.
Occupational safety and health office	Safety and heatlh management
Chairman office	The preparation of the board of directors, the preparation of overseas business report materials, and the translation of foreign documents.
Finance department	Planning and execution of accounting operations, cost management, fund scheduling and budget control.
Business department	Development of domestic and overseas business.
Materials department	Procurement planning and implementation of materials, equipment, and miscellaneous.
Optoelectronics department	Development andproduction of all except for headlights.
Qualityassurance department	Qualitytargetplanningand execution
Machine mold factory	Development andproduction of mold and frames.
Design Department I	The design of new headlights for domestic market (including the Koito Group).
Design Department II	The design of new headlights for overseas(includingHua-chuangAutomobile).
Developmentpromotion department	Inspection tools for newlydevelopedproduct,scheduleplanning,and testing.
Production management department	Material requirements andproduction schedules.
Production factoryI	Productgrouping.
Production factoryII	Production of components.
Production factoryIII	Production of components.
Production and technical development department	New equipment, planning and integration of new technology method, equipment and fixture planning and implementation.

7

• 3-2.Information on the company's directors, supervisors, general manager, assistant general managers, deputy assistant general managers, and the supervisors of all the company’s divisions.

3-2-1.Information of directors and supervisors April 20, 2019

Title (Note 1)	Nationali ty or place of registrati on	Name	Gender	Elect Date	Term	First time When elected Date (Note 2)	Shares holding when elected	Shares holding when elected	Current Number of shares held	Current Number of shares held	Shares held by spouse and minor children currently	Shares held by spouse and minor children currently	Shares held under other’s name	Shares held under other’s name	Major experience (education) (Note 3)	Holding a concurrent post The Company or the other company Position	For those who are the spouses of or are supervisors within the second degree of kinship.	For those who are the spouses of or are supervisors within the second degree of kinship.	For those who are the spouses of or are supervisors within the second degree of kinship.
							Number of shares	sharehol ding ratio	Number of shares	sharehol ding ratio	Number of shares	share holdi ng ratio	Num ber of share s	share holdi ng ratio			Title	Name	Relatio n
Director	Republic of Taiwan	Dingwan Investment Industrial Co., Ltd.		June 14,2017	3 years	June 12, 2014	10,000	0.01%	10,000	0.01%	－	－	－	－	－	－	－	－	－
Chairman	Republic of Taiwan	Chairman：Wu Jun I (Representative of Dinwan)	Male	June 14,2017	3 years	June 15, 1988	1,254,488	1.65%	1,254,488	1.65%	396,821	0.52%	－	－	Chairman of the company. TYC Brother Industrial Co., Ltd. Supervisor.	Tayih Kenmos Auto Parts Co., Ltd. Chairman. Fuzhou Koito Tayih Automotive Lamp Co., Ltd. Vice Chairman. TYC Brother Industrial Co., Ltd. Director.	Director Director	You Qing Liang Wu Yu Xian	Brother- in-law Father and son
Director	Japan	Koito Manufacturing Co., Ltd.		June 14,2017	3 years	June 15, 1988	24,774,750	32.50%	24,774,750	32.50%	－	－	－	－	－	－	－	－	－
Vice chairman	Japan	Watanabe Masami (Representative of Koito Manufacturing Co., Ltd.)	Male	June 14,2017	,3 years	June 15, 1988	－	－	－	－	－	－	－	－	Fuzhou Koito Tayih Automotive Lamp Co., Ltd. Chairman. Vice general manager Applied Chemistry Department, University of Yamanashi.	－	－	－	－
Director	Japan	Iida Yuki (Representative of Koito Manufacturing Co. Ltd.)	Male	June 14,2017	3 years	June 15, 1988	－	－	－	－	－	－	－	－	Hubei Xiaohao Auto Lamp Company Director, General manager Fuzhou Koito Tayih Automotive Lamp Co., Ltd. General Manager Fuzhou Koito Tayih Automotive Lamp Co.,	－	－	－	－

8

Title (Note 1)	Nationali ty or place of registrati on	Name	Gender	Elect Date	Term	First time When elected Date (Note 2)	Shares holding when elected	Shares holding when elected	Current Number of shares held	Current Number of shares held	Shares held by spouse and minor children currently	Shares held by spouse and minor children currently	Shares held under other’s name	Shares held under other’s name	Major experience (education) (Note 3)	Holding a concurrent post The Company or the other company Position	For those who are the spouses of or are supervisors within the second degree of kinship.	For those who are the spouses of or are supervisors within the second degree of kinship.	For those who are the spouses of or are supervisors within the second degree of kinship.
							Number of shares	sharehol ding ratio	Number of shares	sharehol ding ratio	Number of shares	share holdi ng ratio	Num ber of share s	share holdi ng ratio			Title	Name	Relatio n
Director	Japan	Yamamoto Hideki (Representative of KoitoManufacturin Co., Ltd.)	Male	June 14,2017	3 years	June 15, 1988	－	－	－	－	－	－	－	－	Master in Mechanical Engineering, Meiji University	Vice general manager	－	－	－
Director	Republic of Taiwan	Wu Yuxian	Male	June 14,2017	3 years	June 12,2014	25,101	0.03%	25,101	0.03%	－	－	－	－	Supervisor of the Company Loyola Marymount University MBA	Director of Tayih Kenmos Auto Parts Co., Ltd.	Chairman	Wu Junyi	Father and son
Director	Republic of Taiwan	Yuanhong Investment Co., Ltd.		June 14,2017	3 years	June 14,2017.	746,000	0.98%	746,000	0.98%	－	－	－	－	－	－	－	－	－
Director	Republic of Taiwan	You Qingliang (Representative ofYuan Hong)	Male	June 14,2017	3 years	June 28, 2002	－	－	－	－	－	－	－	－	Senior Assistant General Manager of the Company	Vice general manager of the Company	Chairman	Wu Junyi	Brother- in-law
Director	Republic of Taiwan	Wu Chengyuan (Representative ofYuan Hong)	Male	June 14,2017	3 years	June 14,2017	－	－	－	－	－	－	－	－	Special assistant of the company Master of Economics, University of South California	Senior Assistant General Manager of the Company	－	－	－
Independent director	Republic of Taiwan	Wu Wan I	Male	June 14,2017	3 years	June 14,2017	－	－	－	－	－	－	－	－	Director and Deputy General Manager of Toyota Tsusho Corporation	Deputy General Manager of Ken-Hama Co., Ltd.	－	－	－
Independent director	Republic of Taiwan	Chen Xiu Feng	Femal e	June 14,2017	3 years	June 14,2017	－	－	－	－	－	－	－	－	Master of Laws, University of Washington, USA Masterof Laws,	Associate Professor, Department of Business	－	－	－
Supervisor	Republic of Taiwan	Guo Qi Min Investment Co., Ltd.	－	June 14,2017	3 years	June 14,2017	1,257,601	1.65%	1,257,601	1.65%	－	－	－	－	－	－	－	－	－

9

Title (Note 1)	Nationali ty or place of registrati on	Name	Gender	Elect Date	Term	First time When elected Date (Note 2)	Shares holding when elected	Shares holding when elected	Current Number of shares held	Current Number of shares held	Shares held by spouse and minor children currently	Shares held by spouse and minor children currently	Shares held under other’s name	Shares held under other’s name	Major experience (education) (Note 3)	Holding a concurrent post The Company or the other company Position	For those who are the spouses of or are supervisors within the second degree of kinship.	For those who are the spouses of or are supervisors within the second degree of kinship.	For those who are the spouses of or are supervisors within the second degree of kinship.
							Number of shares	sharehol ding ratio	Number of shares	sharehol ding ratio	Number of shares	share holdi ng ratio	Num ber of share s	share holdi ng ratio			Title	Name	Relatio n
Supervisor	Republic of Taiwan	Geng Bowen (Representative of Guoqimin)	Male	June 14,2017	3 years	June 14,2017	－	－	－	－	－	－	－	－	Independent director of TYC Brother Industrial Co., Ltd. Professor of Department of Institute of Informatiom, National Cheng Kung University	Supervisor of Tayih Kenmos Auto Parts Co., Ltd.	－	－	－
Supervisor	Japan	Hideharu Konagay	aMale	June 14,2017	3 years	June 12, 2008	－	－	－	－	－	－	－	－	Graduate School of Fundamental Science and Engineering,	－	－	－	－
Supervisor	Republic of Taiwan	Yiheng Investment Co., Ltd.	－	June 14,2017	3 years	June 12,2014	33,000	0.04%	33,000	0.04%	－	－	－	－	－	－	－	－	－
Supervisor	Republic of Taiwan	Lin Qian (Representative of Yiheng Co., Ltd.)	Male	June 14,2017	3 years	June 14,2017	－	－	－	－	－	－	－	－	Chairman of the company Director of Fuzhou Koito Tayih Automotive Lamp Co., Ltd. Supervisor of Elitech Technology Co., Ltd. Vice general manager of the Company	－	－	－	－

Note 1: The institutional shareholder shall list the name and representative of the institutional shareholder (as a representative of the institutional shareholder, the name of the institutional shareholder shall be indicated) and shall be listed in the following table 1.

Note 2: When filling in as the first timer serving as a director or supervisor of the company, do remark if there is any interruption.

Note 3: The experience related to the current position, if it has been with the certification accounting firm or related company during the pre-existing period, should state the title and responsibilities.

10

(1)Table 1: Major shareholders of institutional shareholders

		April 20,2019 Shareholdingratio Shareholding more than10% Top 10 Shareholding more than10% Shareholding more than10% Shareholding more than10%
Name of institutional	Major shareholders of institutional shareholders	Shareholdingratio
Dingwan Investment	Wu Ma Hui-Er	Shareholding more than10%
	Wu Chun I
	Wu Yu Xian
	Wu Zhen Yi
Koito Manufacturing	Toyota Motor Corporation	Top 10
	Japan Master Trust Bank,Ltd.(trust account)
	Sumitomo Mitsui BankingCorporation
	Nippon Life Insurance Company
	Japan Trustee Services Bank,Ltd.(trust account)
	JPMC OPPENHEIMER JASDEC LENDING ACCOUNT
	Bank of Tokyo-Mitsubishi UFJ,Ltd.
	Dai-ichi Life Insurance Co.,Ltd.
	JP MORGAN CHASE BANK 385632
	DENSO CORPORATION
Yuan Hong Investment	Wu ChengYuan	Shareholding more than10%
	Wu ChengHong
	Wu Tian Ling
Guo Qi Min Investment	Wu Chun I	Shareholding more than10%
	WangLi Xia
	Wu Guo Zhen
	WuQi Zhen
	Wu Min Zhen
Yi Heng Investment Co.,	Wu Chun I	Shareholding more than10%
	Wu Ma Hui-Er
	Wu Chun Liang
	Wu Cai LiangWen
	Wu Chun I
	WangLi Xia

Note 1: The directors and supervisors are representatives of institutional shareholders and should fill in the name of the institutional shareholder.

Note 2: The name of the principal shareholder of the institutional shareholder (whom holds the top ten shareholding) and its shareholding ratio. If the majority shareholders are institutional shareholders, they should fill in table 2.

11

(2)Table 2: Major shareholders of institutional shareholders

	April 20,2019	April 20,2019
Name of the Institution(note 1)	Major shareholder of Institutions(note 2)	Note
Toyota Motor Corporation	Japan Trustee Services Bank,Ltd.(trust account	Top 10
	Toyota Industries Corporation
	Japan Master Trust Bank,Ltd.
	Nippon Life Insurance Company
	State Street Bank & Trust Company (Standing Attorney, Inc. Mizuho Bank,Settlement Sales Department)
	DENSO CORPORATION
	JP Morgan Morgan Chase Bank (Standing Attorney Mizuho Bank, Ltd. Settlement Sales Department)
	Mitsui Sumitomo Insurance Co.,Ltd
	Asset Management Services Trust Bank Ltd.
	Tokio Marine & Nichido Fire Insurance Co.,Ltd.
Japan Master Trust Bank,Ltd.(trust account)	Due to the localpractice restrictions,it is notpossible toprovide.	－
Sumitomo Mitsui BankingCorporation	Stock companyMitsui Sumitomo Finance Co.,Ltd.	100%
Nippon Life Insurance Company	Due to the localpractice restrictions,it is notpossible toprovide.	－
Japan Trustee Services Bank,Ltd.(trust account)	Due to the localpractice restrictions,it is notpossible toprovide.	－
JPMC OPPENHEIMER JASDEC LENDING ACCOUNT	Due to the local practice restrictions, it is not possible to provide.	－
Bank of Tokyo-Mitsubishi UFJ,Ltd.	Mitsubishi UFJ Finance Corporation	100%
Dai-ichi Life Insurance Co.,Ltd.	Dai-ichi Life Holdings	100%
JP Morgan Chase Bank 385632	Due to the localpractice restrictions,it is notpossible toprovide.	－
DENSO CORPORATION (DENSO CORPORATION Nippon Denpa)	Toyota Motor Corporation	Top 10
	Toyota Industries Corporation
	Japan Master Trust Bank,Ltd.(trust account)
	Japan Trustee Services Bank,Ltd.(trust account)
	Towa Real Estate Co.,Ltd.
	Nippon Life Insurance Company
	DENSO Employee HoldingSystem Association
	Aisin Seiki Co.,Ltd.
	Mitsui Sumitomo Insurance Co.,Ltd
	Japan Trustee Services Bank, Ltd.(trust account 5)

Note 1: If the main shareholder of the above table is an institutional shareholder, then name of the institutional shareholder should be filled in.

Note 2: The name of the main institutional shareholder (whom holds the top ten shareholding) and its shareholding ratio.

12

(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and

(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and	(3)Whether the directors and supervisors have more than five years of work experience in business, legal, financial or corporate business, and
meet the following: April 20, 2019
Conditions	Have more than five years of work experience and the following professionalqualifications			In line with independence (Note 1)										The number of public companies the independent director is concurrently serving as independent director
Name	An instructor or higher in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the company in a public or private junior college, college, or university.	A judge, public prosecutor, attorney, certified public accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the business of the company.	Have work experience in the area of commerce, law, finance, or accounting, or otherwise necessary for the business of the company.	1	2	3	4	5	6	7	8	9	10
Chairman：Wu Chun I(Note 2)			V	V					V	V		V		0
Vice chairman: Watanabe Masami(note 3)			V	V		V	V		V	V	V	V		0
Director: Wu Yu Xian			V	V		V		V	V	V		V	V	0
Dirctor: You Qing Liang (note 4)			V	V		V		V	V	V		V		0
Director: Iida Yuki(note 3)			V	V		V	V		V	V	V	V		0
Director: Yamamoto Hideki (note 3)			V	V	V	V	V		V	V	V	V		0
Chairman：Wu Chun Yuan(Note 4)			V	V		V	V	V	V	V	V	V		0
Independent director: Wu Wan Yi			V	V	V	V	V	V	V	V	V	V	V	0
Independent director: Chen Xiu Feng	V	V	V	V	V	V	V	V	V	V	V	V	V	0
Supervisor: Geng Bo Wen (note 5)	V		V	V	V	V	V	V	V	V	V	V		1
Supervisor: Hideharu Konagaya			V	V	V	V	V	V	V	V	V	V	V	0
Supervisor: LinQian(note 6)			V	V		V	V	V	V	V	V	V		0

Note 1: Directors and supervisors during the two years before being elected and during the term of office, meet any of the following situations, please tick the appropriate corresponding boxes:

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

(2) Not a director or supervisor of the company or any of its affiliates.The same does not apply, however, in cases where the person is an independent director of the company,

13

its parent company, or any subsidiary in which the company holds, directly or indirectly, more than 50 percent of the voting shares;

• (3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders;

• (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs;

• (5) Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranks as of its top five shareholders;

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

• (7) Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof provided that this restriction does not apply to any member of the compensation committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Compensation Committees of Companies whose Stock is Listed on the TWSE or Traded on the GTSM”;

• (8) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company;

• (9) Not been a person of any conditions defined in Article 30 of the Company Law; and

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

• Note 2: Representative of Dingwan Investment Industrial Co., Ltd. is Wu Chun I.

• Note 3: Representatives of Koito Manufacturing Co., Ltd. are Watanabe Masami, Iida Yuki and Yamamoto Hideki.

Note 4: Institutional representatives of Yuanhong Investment Co., Ltd. are You Qingliang and Wu Chenyuan.

Note 5: Representative of Guo Qi Min Investment Co., Ltd. is Geng Bo Wen..

Note 6: Representative of Yi Heng Investment Co., Ltd. is Lin Qian.

14

3-2-2.Information on the company's directors, supervisors, general manager, assistant general managers, deputy assistant general managers, and the supervisors of all the company’s divisions. April 20, 2019

Job title (Note 1)	Nationali ty	Name	Gende r	Elect Date	When elected	When elected	Shares held by spouse and minor children currently	Shares held by spouse and minor children currently	Shares held under other nominees	Shares held under other nominees	Major work experience (educational background) (Note 2)	Holding a concurrent post in other companies	For those who are the spouses of or are managers within the second degree of kinship.	For those who are the spouses of or are managers within the second degree of kinship.	For those who are the spouses of or are managers within the second degree of kinship.
					Number of shares	shareholding ratio	Number of shares	shareholding ratio	Number of shares	shareholding ratio			Title	Name	Relation
General manager	Republic of China	Feng Shi Zhong(Note 3)	Male	2019.04.01	－	－	－	－	－	－	Director and Vice general manager of Fuzhou Koito Tayih Automotive Lamp Co., Ltd.		－	－	－
Vice general manager	Republic of China	You Qingliang	Male	1998.07.31	－	－	－	－	－	－	Senior Assistant General Manager of the Company	Supervisor of Elitech Technology Co., Ltd.	－	－	－
Vice general manager	Japan	Yamamoto Hideki	Male	2016.04.01	－	－	－	－	－	－	Master of Mechanical Engineering, Meiji University, Japan	None	－	－	－
Senior Assistant General Manager	Republic of China	Chen Jin Wen	Male	2016.01.01	－	－	－	－	－	－	Master of Power Mechanical Engineering, Tsing Hua University	None	－	－	－
Senior Assistant General Manager	Republic of China	Wang Hong Gi	Male	2016.01.01	－	－	－	－	－	－	Department of Accounting, Tunghai University	Supervisor of Fuzhou Koito Tayih Automotive LampCo., Ltd.	－	－	－
Senior Assistant General Manager	Republic of China	Zhang Zao Wen	Male	2016.01.01	－	－	－	－	－	－	Masters of Electro-optical, National Formosa University	None	－	－	－

15

Senior Assistant General Manage	Republic of China	Chen Jun Hong	Male	2016.01.01	－	－	－	－	－	－	Department of Mechanical engineering, National Pingtung University of Science and Technology	None	－	－	－
Senior Assistant General Manager	Republic of China	Zuan Zhi Qing	Male	2016.01.01	－	－	－	－	－	－	Master of Chemical Engineering, Chung Yuan University	None	－	－	－
Senior Assistant General Manager	Republic of China	Wang Jun Hao	Male	2016.01.01	－	－	－	－	－	－	Japanese Culture and Language Institute	None	－	－	－
Senior Assistant General Manager	Republic of China	Wu Cheng Yuan	Male	2016.01.01	－	－	－	－	－	－	Chairman of the company Master of Economics, University of South California	None	－	－	－
Senior Assistant General Manager	Republic of China	Zhuang Chao Qin	Male	2016.01.04	730	0.00	－	－	－	－	Department of Mechanical engineering, Southern Taiwan University of Science and Technology	None	－	－	－
Senior Assistant General Manager	Republic of China	Xu Rui Pin	Male	2016.01.04	－	－	－	－	－	－	Master of Business Administration, Tunghai University	None	－	－	－

Note 1: The information including the general manager, deputy general manager, associates, department and branch directors, and where the position is equivalent to the general manager, deputy general manager or associate, regardless of the title, should be disclosed.

Note 2: The experience related to the current position, if it has been with the certification accounting firm or related company during the pre-existing period, should state the title and responsibilities.

Note 3: On March 15, 2019, the board of directors resolved that General Manager Li Wang Gen retired and appointed Deputy General Manager Feng Shi Zhong as the new general manager, beginning on April 1, 2019.

16

• 3-3.Remuneration paid during the most recent fiscal year to directors, supervisors, the general manager, and assistant general managers:

• 3-3-1.Remuneration of directors (including independent directors) (with any one of the following circumstances, name and gratuities should be disclosed):

  • (1)A company that has posted after-tax deficits in the parent company only financial reports within the two most recent fiscal years shall disclose the remuneration paid to individual directors and supervisors. This requirement, however, shall not apply if the company has posted net income after tax in the parent company only financial report for the most recent fiscal year and such net income after tax is sufficient to offset the accumulated deficits. Those who have adopted international financial reporting standards, for the past two years, individual or individual financial reports which experienced posted after-tax deficits, and the names and remuneration of directors should be disclosed individually. However, this requirement shall not apply if the posted income after tax for the most recent fiscal year and such income after tax is insufficient to offset the accumulated deficits. The 2017 and 2018 annual reports of the company did not have any deficits after tax.

  • (2)If any director has had insufficient director shareholding percentage for 3 consecutive months or longer during the most recent fiscal year, it shall disclose the remuneration of individual directors: The Company did not have this situation in 2018.

  • (3)A company that has had an average ratio of share pledging by directors in excess of 50 percent in any 3 months during the most recent fiscal year shall disclose the remuneration paid to each individual director having a ratio of pledged shares in excess of 50 percent for each such month: There is no such situation in the Company in 2018.

  • (4)If the total amount of remuneration received by all of the directors in their capacity as directors of all of the companies listed in the financial reports exceeds 2 percent of the net income after tax, and the remuneration received by any individual director exceeds NT$15 million, the company shall disclose the remuneration paid to that individual director: There is no such situation in the Company in 2018.

17

3-3-2.Remuneration of directors (including the independent directors) (aggregate remuneration information with the names indicated for each

remuneration range): December 31, 2018 Unit: NT$ thousands

Title	Name	Remuneration of directors	Remuneration of directors	Remuneration of directors	Remuneration of directors	Remuneration of directors	Remuneration of directors	Remuneration of directors	Remuneration of directors	The ratio of the summation of A, B, C and D to the net profit after tax. (Note 10)	The ratio of the summation of A, B, C and D to the net profit after tax. (Note 10)	Part-time employees receive relevant remuneration	Part-time employees receive relevant remuneration	Part-time employees receive relevant remuneration	Part-time employees receive relevant remuneration	Part-time employees receive relevant remuneration	Part-time employees receive relevant remuneration	Part-time employees receive relevant remuneration	Part-time employees receive relevant remuneration	The ratio of the summation of A, B, C ,D, E, F and G to the net profit after tax. (Note 10)	The ratio of the summation of A, B, C ,D, E, F and G to the net profit after tax. (Note 10)	Whether a remuneration is received from a subsidiary company (Note 11)
		Remunera tion (A) (Note 2)		Resignation Pensions (B)		Remunerati on of directors (C) (Note 3)		Business execution expenses (D) (Note 4)				Compensation and bonuses payable and special allowances (E) (Note 5)		Resignation Pensions (F)		Employee compensation (G) (Note 6)
		The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company	All companies in the financial report (Note 7)	The Company		All companies in the financial report (Note 7)		The Company	All companies in the financial report (Note 7)
																Cash amount	Amount of shares	Cash amount	Amount of shares
Chairman	Wu Chun I (Representative of Din Wan)	－	－	－	－	－	－	690	690	0.2%	0.2%	12,155	12,155	54	54	－	－	－	－	4.0%	4.0%	None
Vice chairman	Watanabe Masami (Representative of Koito Manufacturing Co.,Ltd.)
Director	Wu Yu Xian
Director	You Qing Liang (Representative of Yuan Hong)

18

Director	Iida Yuki (Representative of Koito Manufacturing Co.,Ltd.)
Director	Yamamoto Hideki (Representative of Koito Manufacturing Co.,Ltd.)
Director	Wu ChengYuan (Representative of Yuan Hong)
Independent director	Wu Wan Yi
Independent director	Chen Xiu Feng
*Other than disclosure in the above table,Directors remunerations earned by providingservices(e.g.providingconsultingservices as a non-employee)to the Companyin the most recent fiscalyear: None

Director (including independent directors) remuneration level table

Range of remuneration paid to each director of the company	Name of directors	Name of directors	Name of directors	Name of directors
	Total remuneration(A+B+C+D)		Total remuneration(A+B+C+D+E+F+G)
	The Company (note 8)	All companies in the financial report (Note9)	The Company (note 8)	All companies in the financial report (Note9)
Under NT$ 2,000,000	Wu Chun I, Watanabe Masami, Wu Yu Xian, You Qing Liang, Iida Yuki, Yamamoto Hideki, Wu Cheng Yuan, Wu Wan Yi, Chen Xiu Feng	Wu Chun I, Watanabe Masami, Wu Yu Xian, You Qing Liang, Iida Yuki, Yamamoto Hideki, Wu Cheng Yuan, Wu Wan Yi, Chen Xiu Feng	Watanabe Masami, Wu Yu Xian, Iida Yuki, Yamamoto Hideki, Wu Cheng Yuan, Wu Wan Yi, Chen Xiu Feng	Watanabe Masami, Wu Yu Xian, Iida Yuki, Yamamoto Hideki, Wu Cheng Yuan, Wu Wan Yi, Chen Xiu Feng
NT $ 2.000.000(included) ～NT$ 5,000,000 (excluded)	－	－	Wu Cheng Yuan, You Qingliang	Wu Cheng Yuan, You Qingliang
NT$5,000,000(included) ～NT$10,000,000(excluded)	－	－	Wu Chun I	Wu Chun I

19

NT$10,000,000(included) ～NT$15,000,000(excluded)	－	－	－	－
NT$15,000,000(included) ～NT$30,000,000(excluded)	－	－	－	－
NT$30,000,000(included) ～NT$50,000,000(excluded)	－	－	－	－
NT$50,000,000(included) ～NT$100,000,000(excluded)	－	－	－	－
Over NT$ 100,000,000	－	－	－	－
Total	9	9	9	9

• Note 1: The names of the directors shall be separately listed (the institutional shareholder shall list the names of the institutional shareholders and the representative separately), and the amount of each payment shall be disclosed. If the director is also the general manager or deputy general manager, this form and the table 3 should be filled out. (5) or 3. (6).

• Note 2: Refers to the remuneration of directors in the most recent fiscal year (including directors' remuneration, job allowance, severance pay, various bonuses, and awards etc.). Note 3: To fill in the amount of directors' remuneration distributed by the board of directors in the most recent year.

• Note 4: Refers to the relevant business execution expenses of the directors in the most recent fiscal year (including transport expenses, special expenses, various allowances, lodging, company car and other supplies, etc.). In the case of the provision of housing, motor vehicles and other means of transport or exclusive individuals expenses, the nature and cost of the assets provided, the actual or at a fair market price, rent, petrol and other payments should be disclosed. If driver is provided, take note to state the salary of the driver paid by the company, and this payment shall not be included in the remuneration.

• Note 5: Refers to the salary of the directors who are also an employees(including the general manager, the vice general manager and other managers and employees) in the most recent fiscal year, which includes the salary, job allowance, severance payment, various bonuses, incentives, transport expenses, special expenses, subsidies, dormitories, company car rentals and so on. In the case of the provision of housing, motor vehicles and other means of transport or exclusive individuals expenses, the nature and cost of the assets provided, the actual or at a fair market price, rent, petrol and other payments should be disclosed. If driver is provided, take note to state the salary of the driver paid by the company, and this payment shall not be included in the remuneration.

• Note 6: Refers to the director, also an employee, (including the general manager, deputy general manager, other managers and employees) who has obtained employee compensation (including stocks and cash) in the most recent fiscal year, and should disclose the amount of compensation paid by the board of directors in the most recent fiscal year. For those who are not able to make an estimation, shall propose the calculation based on the actual distribution of the preceding year, and fill up table 3. (7).

• Note 7: The total amount of remuneration paid by all companies shown in the consolidated report (including the Company) to the directors of the Company should be disclosed. Note 8: The total amount of remuneration the company paid to each director, the names of the directors should be revealed in the respective range of remuneration. Note 9: The total amount of remuneration paid by all companies shown in the consolidated report (including the Company) to the directors of the Company should be disclosed. Note 10: After-tax net profit refers to the net profit after tax in the most recent fiscal year; if the international financial reporting standard has been adopted, the net profit after tax is the net profit after tax of individual or individual financial report in the most recent fiscal year.

• Note 11: 1.This column should clearly state the amount of remuneration the directors received from the transfer of investment in the subsidiary.

• 2.If a director of a company receives remuneration from a subsidiary other than an investment enterprise, the remuneration received should be merged into column I of the remuneration table, and rename that column as "all investment business".

• 3.Remuneration refers to the remuneration and compensation (including remuneration of employees, directors or supervisors) paid to the directors who are also the directors, supervisors or other managers of the investment business other than its subsidiary, and business execution expenses of the directors, supervisors or managers.

20

• 3-3-3.Remuneration of independent directors (with any one of the following circumstances, name and gratuities should be disclosed):

• (1)A company that has posted after-tax deficits in the parent company only financial reports within the two most recent fiscal years shall disclose the remuneration paid to the supervisors. This requirement, however, shall not apply if the company has posted net income after tax in the parent company only financial report for the most recent fiscal year and such net income after tax is sufficient to offset the accumulated deficits. Those who have adopted international financial reporting standards, for the past two years, individual or individual financial reports which experienced posted after-tax deficits, and the names and remuneration of directors should be disclosed individually. However, this requirement shall not apply if the posted income after tax for the most recent fiscal year and such income after tax is sufficient to offset the accumulated deficits. The 2017 and 2018 annual reports of the company did not have any deficits after tax.

• (2)If any supervisor has had insufficient shareholding percentage for 3 consecutive months or longer during the most recent fiscal year, it shall disclose the remuneration of supervisor: The Company did not have this situation in 2018.

• (3)A company that has had an average ratio of share pledging by supervisor in excess of 50 percent in any 3 months during the most recent fiscal year shall disclose the remuneration paid to each individual supervisor having a ratio of pledged shares in excess of 50 percent for each such month: There is no such situation in the Company in 2018.

• (4)If the total amount of remuneration received by all of the supervisors in their capacity as supervisors of all of the companies listed in the financial reports exceeds 2 percent of the net income after tax, and the remuneration received by any individual supervisor exceeds NT$15 million, the company shall disclose the remuneration paid to that individual supervisor: There is no such situation in the Company in 2018.

December 31, 2018 Unit: NT$ thousands

Title	Name	Remuneration of Supervisors	Remuneration of Supervisors	Remuneration of Supervisors	Remuneration of Supervisors	Remuneration of Supervisors	Remuneration of Supervisors	The ratio of the summation of A, B, and C to the net profit after tax. (Note 8)	The ratio of the summation of A, B, and C to the net profit after tax. (Note 8)	Whether a remuneration is received from a subsidiary company (Note 9)
		Remunera tion (A) (Note 2)		Compensa tion (B) (Note 3)		Business execution expenses (C) (Note 4)
		The Company	All companies in the financial report (Note 5)	The Company	All companies in the financial report (Note 5)	The Company	All companies in the financial report (Note 5)	The Company	All companies in the financial report (Note 5)
Supervisor	Geng Bo Wen (Representative of Guo Qi Min)	－	－	－	－	960	960	0.3%	0.3%	None

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Supervisor	Lin Qian (Representative of Yi HengCo., Ltd.)
Supervisor	Hideharu Konagaya

Range of remuneration paid to the supervisors

Range of remuneration paid to the supervisors
Range of remuneration paid to each supervisor of the company	Name of Supervisor
	Total remuneration(A+B+C)
	The Company (note 6)	All companies in the financial report(Note 7)D
Under NT$ 2,000,000	Geng Bo Wen, Hideharu Konagaya, Lin Qian	Geng Bo Wen, Hideharu Konagaya, Lin Qian
NT$2,000,000(included) ～NT$5,000,000(excluded)	－	－
NT$5,000,000(included) ～NT$10,000,000(excluded)	－	－
NT$10,000,000(included) ～NT$15,000,000(excluded)	－	－
NT$15,000,000(included) ～NT$30,000,000(excluded)	－	－
NT$30,000,000(included) ～NT$50,000,000(excluded)	－	－
NT$50,000,000(included) ～NT$100,000,000(excluded)	－	－
Over NT$100,000,000	－	－
Total	3	3

• Note 1: The names of the supervisors shall be separately listed (the institutional shareholder shall list the names of the institutional shareholders and the representative separately), and the amount of each payment shall be disclosed.

• Note 2: Refers to the remuneration of supervisors in the most recent fiscal year (including supervisors' remuneration, job allowance, severance pay, various bonuses, and awards etc.).

• Note 3: To fill in the amount of supervisors' remuneration distributed by the board of supervisors in the most recent year.

• Note 4: Refers to the relevant business execution expenses of the supervisors in the most recent fiscal year (including transport expenses, special expenses, various allowances, lodging, company car and other supplies, etc.). In the case of the provision of housing, motor vehicles and other means of transport or exclusive individuals’expenses, the nature and cost of the assets, the actual or at a fair market price, rent, petrol and other payments should be disclosed. If driver is provided, take note to state the salary of the driver paid by the company, and this payment shall not be included in the remuneration.

• Note 5: The total amount of remuneration paid by all companies shown in the consolidated report (including the Company) to the supervisors of the Company should be disclosed.

• Note 6: The total amount of remuneration the company paid to each supervisor, the names of the supervisors should be revealed in the respective range of remuneration.

• Note 7: The total amount of remuneration paid by all companies shown in the consolidated report (including the Company) to the supervisors of the Company should be disclosed.

• Note 8: After-tax net profit refers to the net profit after tax in the most recent fiscal year; if the international financial reporting standard has been adopted, the net profit after tax is the net profit after tax of individual or individual financial report in the most recent fiscal year.

• Note 9:1.This column should clearly state the amount of remuneration the supervisors received from the transfer of investment in the subsidiary.

• 2.If the supervisors of a company receive remuneration from a subsidiary other than an investment enterprise, the remuneration received should be merged into

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column I of the remuneration table, and rename that column as "all investment business".

• 3.Remuneration refers to the remuneration and compensation (including remuneration of employees, directors or supervisor) paid to the supervisors who are also the directors, supervisors or other managers of the investment business other than its subsidiary, and business execution expenses of the directors, supervisors or managers.

• 3-3-5.Remuneration of General manager and deputy general manager(disclose separately)name and method of remuneration) ： No case of 3-3-1, so there is no need of disclosure.

3-3-6.Remuneration of general manager and deputy general manager(aggregate information with names indicated for each remuneration range) ：

December 31, 2018 Unit: NT$ thousands

Title	Name	Salary (A) (Note 2)	Salary (A) (Note 2)	Retirement allowance (B)	Retirement allowance (B)	Bonuses and special allowances (C) (Note 3)	Bonuses and special allowances (C) (Note 3)	Employee compensation (D) (Note 4)	Employee compensation (D) (Note 4)	Employee compensation (D) (Note 4)	Employee compensation (D) (Note 4)	The ratio of the summation of A, B, and D to the net profit after tax.	The ratio of the summation of A, B, and D to the net profit after tax.	Is there any remuneration from other invested businesses apart from subsidiaries (Note 9)
		The Company	All companies in the financial report (Note 5)	The Company	All companies in the financial report (Note 5)	The Company	All companies in the financial report (Note 5)	The Company		All companies in the financial report (Note 5)		The Company	All companies in the financial report (Note 5)
								Cash amount	Amount of shares	Cash amount	Amount of shares
General manager	Li Wan Gen	6,352	6,352	80	80	5,999	5,999	－	－	－	－	3.9%	3.9%	None
Vice general manager	You Qing Liang
Vice general manager	Yamamoto Hideki
Vice general manager	Feng Shi Zhong

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Range of remuneration paid to general manage and deputy general manager

The Company Range of remuneration paid to general manage and deputy general manager	Names ofgeneral manage and deputy general manager	Names ofgeneral manage and deputy general manager
	The Company (note 6)	All companies in the financial report(Note 7)E
Under NT$2,000,000	Yamamoto Hideki	Yamamoto Hideki
NT$ 2,000,000 (included) ～NT$ 5,000,000 (excluded)	Li Wan Gen, You Qing Liang, Feng Shizhong	Li Wan Gen, You Qing Liang, Feng Shizhong
NT$5,000,000(included) ～NT$10,000,000(excluded)	－	－
NT$10,000,000(included) ～NT$15,000,000(excluded)	－	－
NT$15,000,000(included) ～NT$30,000,000(excluded)	－	－
NT$30,000,000(included) ～NT$50,000,000(excluded)	－	－
NT$50,000,000(included) ～NT$100,000,000(excluded)	－	－
Over NT$100,000,000	－	－
Total	4	4

• Note 1: The names of the general manager and the deputy general manager should be separately listed, and disclose the summarized the amount of each payment. If the director is also the general manager or deputy general manager, this form and the table 3 should be filled out. (1) or 3. (2).

• Note 2: To fill in the remuneration, job allowance and severance allowance of the general manager and the deputy general manager.

• Note 3: To list of the various bonuses, incentives, transport allowances, special allowances, various allowances, dormitory, car and other supplies and other remuneration of general manager and deputy general manager of the most recent fiscal year. In the case of the provision of housing, motor vehicles and other means of transport or exclusive individuals’expenses, the nature and cost of the assets, the actual or at a fair market price, rent, petrol and other payments should be disclosed. If driver is provided, take note to state the salary of the driver paid by the company, and this payment shall not be included in the remuneration.

• Note 4: To list the amount of compensation (including stocks and cash) assigned to the general manager and deputy general manager by the board of directors in the most recent fiscal year. For those who are not able to make an estimation, shall propose the calculation based on the actual distribution of the preceding year, and fill up table 3. (7). Note 8: After-tax net profit refers to the net profit after tax in the most recent fiscal year; if the international financial reporting standard has been adopted, the net profit after tax is the net profit after tax of individual or individual financial report in the most recent fiscal year.

• Note 5: The total amount of remuneration paid by all companies shown in the consolidated report (including the Company) to the supervisors of the Company should be disclosed.

• Note 6: The total amount of remuneration the company paid to the general manager and the deputy general manager, the names of the general manager and the deputy general manager should be revealed in the respective range of remuneration.

• Note 7: The total amount of remuneration paid by all companies shown in the consolidated report (including the Company) to the general manager and the deputy general manager of the Company should be disclosed.

• Note 8: After-tax net profit refers to the net profit after tax in the most recent fiscal year; if the international financial reporting standard has been adopted, the net profit after tax is the net profit after tax of individual or individual financial report in the most recent fiscal year.

• Note 9: 1.This column should clearly state the amount of remuneration the general manager and the deputy general manager received from the transfer of investment in the subsidiary.

• 2.If the general manager and the deputy general manager, of a company receives remuneration from a subsidiary other than an investment enterprise, the remuneration received should be merged into column I of the remuneration table, and rename that column as "all investment business".

• 3.Remuneration refers to the remuneration and compensation (including remuneration of employees, directors or supervisors) paid to the general manager and the deputy general manager who are also the directors, supervisors or other managers of the investment business other than its subsidiary, and business execution expenses of the directors, supervisors or managers.

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3-3-7.The 2017 employee profit sharing granted to the management team.

December 31,2018 NT$ thousands

	Title	Name	Stock dividends Amount	Cash: dividends Amount	Total	Proportion of total amount to net profits after tax(%)
Managers	General manager	Li Wan Gen	0	0	0	0.00%
	Vice general manager	You Qing Liang
	Vice general manager	Yamamoto Hideki
	Vice general manager	Feng Shi Zhong
	Senior Assistant General Manager	Chen Jin Wen
	Senior Assistant General Manager	ZhangZao Wen
	Senior Assistant General Manager	Chen Jun Hong
	Assistant General Manager	Zuan Zhi Qing
	Assistant General Manager	Wu Cheng Yuan
	Assistant General Manager	Wang Jun Hao
	Assistant General Manager	Xu Rui Pin
	Assistant General Manager	ZhuangChaoQin
Financial officer	Senior Assistant General Manager	Wang Hong Gi

3-3-8.Compare and analyze the total remuneration as a percentage of net income stated in the parent company only financial reports or individual financial reports, paid by this company and by all consolidated entities (including this company) for the most recent 2 fiscal years to each of this company's directors, supervisors, general managers, and assistant general managers, and describe the policies, standards, and packages for payment of remuneration, the procedures for determining remuneration, and its linkage to business performance and future risk exposure:

NT$ thousands

Year of occurrence	Item	The Company	Consolidated report	Comparative analysis and explanation
2017	Remuneration - Director Supervisor General manager, deputy general manager Total	14,805 940 15,097	14,805 940 15,097
		30,842	30,842
	Proportion of total remuneration to net profit after tax	6.2%	6.2%
2018	Remuneration - Director Supervisor General manager, deputy general manager Total	12,899 960 12,431	12,899 960 12,431
		26,290	26,290
	Proportion of total remuneration to net profit after tax	8.2%	8.2%
	Differences	Increase 2%	Increase 2%

Policies, standards and combinations for payment of emoluments, procedures for setting emoluments, and correlations with business performance and future risks:

The remuneration of the directors and supervisors of the Company shall be determined by the board of directors in accordance with the provisions of Article 26 of the Articles of Corporation and in accordance with the general standards of the industry. The directors of the Company are paid for the execution of the company's business. The amount depends on the value of the company's participation in the operation and the value of the

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contribution. As for the independent directors, the directors' meeting will set a fixed remuneration, and all directors and supervisors will not participate in the company's profit distribution. The standard of manager's remuneration payment depends on the performance of the individual's performance and the contribution to the overall operation of the company, taking into account the market rate. The procedures for paying salary, besides considering the overall operational performance, future industry business risks and development trends, the individual participation and the contribution of the individual performance and contribution to company performance, will be given reasonable compensation. Relevant performance appraisal and reasonableness of remuneration are reviewed by the Remuneration Committee and the Board of Directors, and the remuneration system is reviewed at times, depending on the actual operating conditions and relevant laws and regulations, in order to balance the company's sustainable management and risk control.

3-4. The state of the company's implementation of corporate governance:

3-4-1.Board of Directors: The participation of the Supervisor in the operation of the Board: (1)The board of directors held 5 meetings(A) in 2018 and the attendance of the directors and supervisors is as follows:

	directors and supervisors is as follows:
Title	Name	Actual attendance B	By proxy Actual attendance	Actual Rate of Attendance B/A	Note
Chairman	Wu Chun I (Representative of Din Wan)	5	0	100%
Vice chairman	Watanabe Masami (Representative of Koito ManufacturingCo., Ltd.)	5	0	100%
Director	Wu Yu Xian	3	1	60%
Director	You Qing Liang (Representative of Yuan Hong)	5	0	100%
Director	Iida Yuki (Representative of Koito ManufacturingCo., Ltd.)	1	4	20%
Director	Yamamoto Hideki (Representative of Koito ManufacturingCo., Ltd.)	5	0	100%
Director	Wu Chengyuan (Representative of Yuan Hong)	5	0	100%
Independent director	Wu Wan Yi	3	2	60%
Independent director	Chen Xiu Feng	5	0	100%
Supervisor	Geng Bo Wen (Representative of Guo Qi Min)	1	0	20%
Supervisor	Hideharu Konagaya	3	0	60%
Supervisor	Lin Qian (Representative of Yi HengCo., Ltd.)	2	0	40%

The attendance of the independent directors attending the meeting of the board of directors in 2018:

directors in 2018:
Date of Board of Directors’ meeting	Wu Wan Yi	Chen Xiu Feng
2018.03.22	By proxy	Attended inperson
2018.05.11	By proxy	Attended in person
2018.06.11	Attended in person	Attended in person
2018.08.09	Attended in person	Attended in person
2018.11.12	Attended in person	Attended in person

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• (2)Other noteworthy matters:

• ①When a board meeting is convened to consider any matter submitted to it pursuant to Article 14-3 of the Securities and Exchange Act, an independent director has a dissenting or qualified opinion, it shall be noted in the minutes of the meeting of the board the date, the session, the content of the meeting, opinions of the independent directors and the company’s treatment of the independent director’s opinions.

  • ❶Matters listed in Article 14.3 of the Securities and Exchange Act:

Board of Directors Date and session	Article 14.3 of the Securities and Exchange Act Matters as listed	Independent director opinion	The Company's response to the opinions of independent directors
March 22, 2018 (15th session the 4thmeeting)	Adoption of the proposal made by the remuneration committee	No objection or reserved opinion	Not applicable
	Donation of related party.	No objection or reserved opinion	Not applicable
May 11, 2018 (15th session the 5thmeeting)	None	None	Not applicable
June 11, 2018 (15th session the 6thmeeting)	None	None	Not applicable
August 9, 2018 (15th session the 7thmeeting)	None	None	Not applicable
November 12, 2018 (15th session the 8thmeeting)	Adoption of the proposal made by the remuneration committee	No objection or reserved opinion	Not applicable

• ❷Other than the preceding matters, written record of the objection or retained opinion of the independent directors: No such situation.

• ②When the directors evade due to conflict of interests, the directors shall state the name of the directors, the content of the proposal, the reasons for the avoidance of interests and the participation in the voting, as shown in the following table. If the motion concerns the interest of any directors present during the meeting of the board, the master of ceremony will once again remind the involved parties to evade the meeting (the directors, independent directors, managers and other attendees and those present) before the motion is read out.

Board of Directors Date and session	Content of Motion	Name of directors	Reason for avoidance	Participation in voting
March 22, 2018 (15th session the 4thmeeting )	Discussion for the directors and managers the year-end bonuses of 2017 and the remuneration for 2018	Wu Chun I, You Qing Liang, Wu Cheng Yuan	Content of Motion involves the remuneration of the 3 persons	All three persons evaded during discussion and voting, and did not act as other agents to exercise their voting rights. The case was approved by the chairman in consultation with all other attending directors except for those directors evaded in accordance with the regulations.
	Donation to related party of Wu Jinmao Memorial Culture and Education Foundation	Wu Chun I	The chairman of the related party is the same person as Wu Chun I	Has already evaded during discussion and voting, and has not acted as an agent to exercise voting rights. The case was approved by the chairman of the company, except for the other directors who evaded during the discussion and voting.
May 11, 2018 (15th session the	None	None	None	Not applicable

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5th meeting)
June 11, 2018 (15th session the 6thmeeting)	None	None	None	Not applicable
August 9, 2018 (15th session the 7thmeeting)	None	None	None	Not applicable
November 12, 2018 (15th session the 8thmeeting)	Discussion of remuneration of the directors and managers for 2019	Wu Chun I, You Qing Liang, Wu Cheng Yuan	Content of Motion involves the annual income of the 3 persons	All three persons evaded during discussion and voting, and did not act as other agents to exercise their voting rights. The case was approved by the chairman in consultation with all other attending directors except for those directors evaded in accordance with the regulations.

  - ③The objectives of strengthening the functions of the Board of Directors in the current and most recent fiscal years (such as setting up an audit committee, improving information transparency, etc.) and assessment of the performance:

     - ❶Strengthening the functions of the board of Directors

        - ⒶThe company provides real time information on various courses (such as corporate governance studies) organized by the China Corporate Governance Association or relevant organizations to the board of directors for further study, so as to enhance their professional skills for corporate governance.

        - ⒷIn order to strengthen the independence operation of the Board of Directors, the Company has established two independent directors in 2017, namely Mr. Wu Wanyi and Madam Chen Xiufeng. The two independent directors have relevant professional knowledge of accounting and financial analysis and can give advice to the Board regarding business, internal control and finance.

        - ⒸThe Code of Practice for Corporate Governance and the Code of Practice for Corporate Social Responsibility were adopted in March 2017.

     - ❷To improve information transparency:

        - ⒶThe Company entrusts Deloitte Touche Tohmatsu Limited to certify on a regular basis. The information required by the decree can be disclosed in a correct and timely manner, and a designated person is responsible for the collection and disclosure of company information.

        - ⒷThe Company has established a spokesperson and acting spokesperson system to ensure that all major information can be promptly disclosed.

        - ⒸThe Company's website has set up a stakeholder area which links to the public information observatory for shareholders and stakeholders to refer to the financial business of the company.

• 3-4-2.The operation of the audit committee or the supervisor's participation in the operation of the board:

• (1)Information regarding the operation of the Audit Committee: The Company has not set up an audit committee.

• (2)The participation of the Supervisor in the operation of the Board:

  • ①The board of directors held 5 meetings(A) in 2018 and the attendance is as follows:

	follows:
Title	Name	Actual attendance B	By proxy Times	Actual Rate of Attendance B/A	Note
Supervisor	Geng Bo Wen (Representative of Guo Qi Min)	1	0	20%
Supervisor	Hideharu Konagaya	3	0	60%

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	Supervisor	Lin Qian (Representative of Yi HengCo., Ltd.)	2	0	40%

• ②Other noteworthy matters:

• ❶The composition and responsibilities of the supervisor:

  • ⒶThe communication between the supervisor and the company's employees and shareholders (eg communication channels, methods): If necessary, the supervisor can directly communicate with the employees and shareholders.

  • ⒷCommunication between the supervisor and the internal audit supervisor and accountant (for example, communication related the finances and business of the company):

    • ⓐThe audit supervisor submits an audit report to the supervisor upon completion of the audit the following month, and the supervisor has no objection.

    • ⓑThe audit supervisor attends the regular board of directors and reports on the audit business. The supervisor has no objections.

    • ⓒIf necessary, the supervisor may communicate with the Certified Public accountant.

• ❷When the supervisor has any opinion during the meeting of board of directors, the minute shall record the date, time of the board meeting, the content of the proposal, the outcome of the resolution of the board of directors and the company's handling of the opinions of the supervisor:

Board of Directors Date and session	The proposal of the supervisor	Board of Directors The resolution of the proposal.	The company's handling of the supervisor's opinion.
March 22, 2018 (15th session the 4th meeting)	The supervisors did not express their opinions regardingall the motions.	Not applicable	Not applicable
May 11, 2018 (15th session the 5th meeting)	The supervisors did not express their opinions regardingall the motions.	Not applicable	Not applicable
June 11, 2018 (15th session the 6thmeeting)	The supervisors did not express their opinions regardingall the motions.	Not applicable	Not applicable
August 9, 2018 (15th session the 7thmeeting)	The supervisors did not express their opinions regardingall the motions.	Not applicable	Not applicable
November 12, 2018 (15th session the 8thmeeting)	The supervisors did not express their opinions regardingall the motions.	Not applicable	Not applicable

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3-4-3.Taiwan Corporate Governance implementation as required by the Taiwan Financial Supervisory Commission:

Items			Implementation status	Taiwan Corporate Governance implementation as required by the Taiwan Financial SupervisoryCommission:
	Yes	No	Description of summary
1.Does Company follow “Taiwan Corporate Governance Implementation” to establish and disclose its corporate governance practices?	V		The company has established a code of practice for corporate governance in March 2017 and disclosed it on the company's website.	There is no significant difference from the Code of Practice for Corporate Governance.
2.Shareholder structure and shareholders’ right. (1)Does the company have Internal Operating procedures for handling shareholders' suggestions, concerns, disputes and litigation matters? If yes, have these procedures been implemented accordingly? (2)Does the company possess a list of the major shareholders and beneficial owners of these major shareholders? (3)Has the company built and execute a risk management system and “firewall” between the Company and its affiliates? (4)Has the company established internal rules prohibiting insider trading on undisclosed information?	V V V V		(1)In order to ensure the interests of shareholders, the company has a spokesperson and acting spokesperson system to handle the shareholders' suggestions, concerns and disputes. The litigation matters are referred to the company's legal counsel. (2)The major shareholders are in a position to inform the Company of the increase or decrease of equity, pledge and decontamination according to the regulations. The Company also regularly updates the information of the ultimate controller of the major shareholders and keeps abreast of its final controller list. (3)The Company has established appropriate internal risk control mechanisms and firewalls, pursuant to the rules for specific companies or groups related business operations and financial transactions, supervision measures for subsidiaries, rules of endorsement and guarantee, loans to others and guidelines for acquisition or disposition of assets. Business relations between affiliated enterprises have been evaluated by an independent third party to prevent violations of unlawful transactions. (4)Besides the internal control system, the Company has established operating procedures for the prevention of insider trading, and has established an ethical code of conduct in March, 2016, which prohibits insiders from making personal gains through the use of company property,information or byvirtue of theirposition.	(1)There is no significant difference from the Code of Practice for Corporate Governance. (2)There is no significant difference from the Code of Practice for Corporate Governance. (3)There is no significant difference from the Code of Practice for Corporate Governance. (4)There is no significant difference from the Code of Practice for Corporate Governance.
3.Composition and responsibilities of Board of Directors (1)Has the Companyestablished a		V	(1)The board of directors of the companyhas notyet set a diversified	(1)There is no significant difference from

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diversification policy for the composition of its board of Directors and has it been implemented accordingly? (2)Has the Company establish other functional committees besides the Compensation Committee and Audit Committee? (3)Has the Company set performance assessment rules and methods for the BOD and does it perform this evaluation every year? (4)Does regularly evaluate the independence of the Certified Public Accountant?	V	V V	policy on the composition of its members. It is already under discussion. The operation of the board of directors of the company, due its its operational type and development needs, besides the professional background, professional skills and industry experience, should also be equipped with knowledge, skills and literacy to carry out the business so as to achieve a diversity of members. (2)The Company has set up a remuneration committee in December, 2011 and other functional committees will be set up depending on future needs. (3)The Company has not yet established a performance appraisal method for the Board of Directors. However, in the internal control system of the Company, evaluation of the operation and management of the board of directors is carried out on a regular basis, and it will be set up depending on future needs. (4)According to the provisions of Article 29, Paragraph 3 of the “Corporate Governance Best Practice Principles for TWSE/TPEx”, in December 2018, the Finance Department of the Company referred to the independence of Article 47 of the “Certified Public Accountant Act” and set up an independent evaluation project for accountants, which includes whether the accountant has direct or significant indirect financial interest relationship with the company base on the “Integrity, Justice, Objectivity and Independence” of the Bulletin 10 of The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, whether the accountant has financing or guarantee behavior with the company or the directors of the company, whether the accountant has close business relationship with the company and potential employment relationship, etc., reviewing the independence of the company's appointed Certified public accountants on different aspects and the evaluation is found in line with the criteria as set by the company. This proves that the Certified Public Accountant is able to serve as the independent accountant for the company, and the results of this assessment together with the accountant's resume and independence statement (not violated) The Ethics Code of Bulletin No. 10) is reported to the Board of Directors in March of the 2019.	the Code of Practice for Corporate Governance. (2)The Company has not set up any functional committee, but it is now being discussed. (3)There is no significant difference from the Code of Practice for Corporate Governance. (4)There is no significant difference from the Code of Practice for Corporate Governance.
4.Does the company have a dedicated unit/staff member in charge of the Company' corporategovernance	V		The chairman's office, general manager's office and finance department of the company are responsible for handling and promotion of corporate governance related business. The main responsibilities are as follows:	There is no significant difference from the Code of Practice for Corporate Governance.

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affairs (including but not limited to providing information required for director/supervisor's operations, convening board/shareholder meetings in compliance with the law, apply for/change company registry, and producing meeting minutes of board/shareholder meetings)?			1.Propose the agenda of the Board of Directors meeting and to notify the directors seven days prior to the designated date of meeting. Convene the meeting and provide information for the meeting. Notify the Board members to abstain from certain motions if conflict of interest is anticipated before the meeting 2.The annual registration date of the shareholders' meeting shall be made according to the law and the notice of the meeting, the handbook and the proceedings shall be filed before the deadline, and any changes must be registered after any amendments of the Articles of Incorporation or the re-election of the directors. 3.Review the annual corporate governance evaluation indicators issued bythe Corporate Governance Center.
5.Does the Company have other important information for better understanding the Company’s corporate governance system (including but not limited to interests and rights of employees, care for employees, relation with investors, relation with suppliers, relation with interested parties, continuing education of directors and supervisors, execution of risk management policies and risk measuring standards, execution of customer policies, liability insurance for the Company’s directors and supervisors)?	V		In addition to maintaining good communication with investors, employees, consumers, suppliers, and distributors through the Chairman's mailbox, labor conferences, procurement, finance, and other dedicated units, the company has set up stakeholder areas on the company's website. It serves as a conduit for communication with stakeholders (see note) and is appropriately responded to by the spokespersons on important corporate social responsibility issues of concern to stakeholders.	There is no significant difference from the Code of Practice for Corporate Governance.
6.Has the company appointed a professional stock affairs agency for shareholders affairs?	V		The Company authorized China Trust as stock service agency to handle shareholder transactions since 1997.	There is no significant difference from the Code of Practice for Corporate Governance.
7.Information disclosure (1)Has the Company established a corporate website to disclose information regarding its finance, business and corporate governance status? (2) Does the Company use other information disclosure to channels	V V		(1)The Company discloses its financial, business and corporate governance information on its website. (2)The company adopts other methods of information disclosure: ①The companyhas set upan English website.	(1)There is no significant difference from the Code of Practice for Corporate Governance. (2)There is no significant difference from the Code of Practice for Corporate

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(eg. Maintaining an English website, designating staff to handle information collection and disclosure, appointing spokespersons, webcasting investors conference etc)?			②The Company has dedicated a person responsible for the collection and disclosure of company information. ③The Company has established the spokesperson system, one spokesperson and an acting spokesperson as required by the regulations. The communication channel of the spokesperson is very smooth, and the shareholders can call or write to express their opinions or inquiries about the company's business. ④Has disclosed the information of the investor conference on the website.	Governance.
8. Does the Company have other important information for better understanding the Company’s corporate governance system (including but not limited to interests and rights of employees, care for employees, relation with investors, relation with suppliers, relation with interested parties, continuing education of directors and supervisors, execution of risk management policies and risk measuring standards, execution of customer policies, liability insurance for the Company’s directors and supervisors)?	V		Other important information for better understanding the company governance: 1. Maintenance the Interests and rights of employees: ①Handling employee health insurance and labor insurance, and providing group insurance for employees (medical insurance and accident insurance) at no cost. ②In 2018, provided the staff with free regular health checkups and arranged inspection at the factory by the Sin-lau Hospital. ③Provide relevant medical counseling to employees by arranging doctors to station in the factory on a monthly basis. ④Establish a staff welfare committee to handle various employee benefits (such as emergency assistance, wedding and funeral celebrations, and bonuses for three festivals). ⑤Funding for the activities of the Colleague Badminton Club in 2018. ⑥Provide the colleagues free flu vaccine injection. ⑦Sign up special domestic stores and to provide complete and high-quality consumer information to the colleagues. ⑧A monthly pension is provided in accordance with the law. ⑨Enhance the professional knowledge of employees and provide on-the-job training for employees. ⑩To avoid the hardships of travelling, free dormitory are provided for employees whom stay far away. ⑪To guarantee the basic human rights of female employees, measures for sexual harassment prevention, appeal and punishment were set up in 2004. ⑫To create a friendly workplace environment, a special room is allocated for breast feeding (or collection milk) for female employees. ⑬To uphold the health of non-smoking colleagues, smoking is completelybanned in the factory,and onlydesignatedplaces are	There is no significant difference from the Code of Practice for Corporate Governance.

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allowed for smoking. ⑭ A labor-management meeting is held every two months in 2018 to coordinate labor-management relations and to promote labor-management cooperation. 2. Investor Relations: the stakeholders’ area was set up on the website to specifically deal with shareholder proposals. 3. Supplier Relationship: good relations with suppliers are maintained at all times, no disputes and no litigations. It also has a friendship club for organizing fellowships, dinners and golf every year. 4. Relations with stakeholders: stakeholders shall communicate with the Company and put forward proposals to protect their due legal rights and interests. 5. Status of the annual training for directors and supervisors in 2018: please note in detail. 6. Execution of risk management policy and risk measuring standards: various internal regulations are established legally for various risk management and evaluation. 7. Execution of customer policies: stable and good relations with customers are maintained with the view of creating profits. 8. Liability insurance for the Company’s directors and supervisors: liability insurance for directors and supervisors will be covered by end of June, 2019. 9. Information Security Risk Management:: In recent years, the company has continued to improve its information security and strengthen its defense capabilities. In addition to complying with international security standards, all information operations must comply with domestic and international information security regulations. After confirmation in 2018, it has not infringed on customer privacy or loss of customers information. In order to enhance the information security management, the company assigns the information security management section to be responsible for the company's security governance and management, with the hope of constructing a comprehensive security defense capability and good information security awareness among colleagues. The internal control is carried out every year by the audit room and the accountant, and no deficiency was founded in 2018. 9. Please specify the measures adopted by the Company to improve the items listed in the corporate governance review result from Taiwan Stock Exchange's Corporate Governance Center and the improvement plans for items yet to be improved: ▲ Improved situation: Indicator 1.3: Does the company have more than one-third of the directors (including at least one independent director) attending the shareholders' meeting and

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revealing the attendance list in the proceedings? Improvements: More than one-third of the directors (including at least one independent director) attended the 2018 shareholders' meeting and disclosed the attendance list in the proceedings. Indicator 1.5: Does the company develop energy conservation and carbon reduction, greenhouse gas reduction, reduction of water consumption or other waste management policies? Improvements:The annual quantitative management objectives for clear energy conservation and carbon reduction, greenhouse gas reduction, reduction water consumption or other waste management policies have been disclosed in the 2018 annual report, and measures to achieve the goals have been described. ▲Suggestions and measures for priority improvement Indicator 1.10: Does the company upload the English version of the handbook of the shareholders’ meeting and the supplementary information of the meeting 21 days prior to the meeting of the shareholders' meeting? Proposed improvement: The company will upload the English version of the handbook and supplementary information 21 days prior to the 2019 shareholders’ meeting. Indicator 1.11: Does the company upload the English version of the annual report 7 days prior to the shareholders' meeting? Proposed improvement: The company will upload the English version of the annual report 7 days prior to the shareholders' meeting. Indicator 2.9: Does the company disclose in its annual report the opinions of independent directors on the major resolutions of the board of directors and the company's handling of the opinions of independent directors? Proposed improvement: The company will disclose in its 2019 annual report the opinions of independent directors on the major resolutions of the board of directors and the company's handling of the opinions of independent directors. Indicator 2.12: Does the company set up a remuneration committee and more than half of the members are independent directors? Proposed improvement: The Company will set up the Remuneration Committee with more than half of the members being independent directors by the end of June of 2019.. Indicator 2.15: Does the company disclose the communication between the independent director and the internal audit supervisor and accountant (for example, communication related the finances and business of the company) on the website of the company? Proposed improvement: The company will disclose the communication between the independent director and the internal audit supervisor and accountant on the website of the company by the end of June, 2019. Indicator 2.26: Has the company insured for all the directors and supervisors the directors' liability insurance and report to the board of directors? Proposed improvement: The Company will insure for all the directors and supervisors the liability insurance by the end of June of 2019 and report it to the board of directors. Indicator 3.5: Is the annual financial report (including financial statements and notes) disclosed on the company website or the public information observatory in English? Proposed improvement: The company will disclose it on the company's website or public information observatory by the end of June, 2019. Indicator 3.16: Does the company's annual report and website disclose the list of major shareholders, including shareholders with a stake of 5 percent or greater, or the names of the top ten shareholders, specifying the number of shares and stake held by each shareholder on the list ? Proposed improvement: The company will disclose it in the annual report and on the company's website by the end of June, 2019.

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Note: Status of education of directors and supervisors:

Name of director/supervisor	Name of director/supervisor	Date	Organizer	Organizer	Course	Course	Hours
Wu Chun I Chairman		2018/11/08	Taiwan Corporate Governance Association		Enterprise Risk Control/Crisis Management Cases and Practice Discussion and		3
		2018/05/08	Taiwan Corporate Governance Association		Perspective key messages hidden in financial statements		3
Director :Wu Yu Xian		2018/11/08	Taiwan Corporate Governance Association		Enterprise Risk Control/Crisis Management Cases and Practice Discussion and		3
		2018/05/08	Taiwan Corporate Governance Association		Perspective key messages hidden in financial statements		3
Geng Bo Wen		2018/11/08	Taiwan Corporate Governance Association		Enterprise Risk Control/Crisis Management Cases and Practice Discussion and		3
		2018/05/08	Taiwan Corporate Governance Association		Perspective key messages hidden in financial statements		3
Independent director: Wu Wan Yi		2018./02/27	Jin Yi Co., Ltd.		Toyota Production Method (TPS)		5
		2018/04/27	Stock exchange		2018 Seminar of prevention of Insider Trading Guides		3
Independent director: Chen Xiu Feng		2018/01/13	Taipei Bar Association		Corporate governance trends and conflicts and reconciliation of labor relations		3
		2018/04/20	Chien Yeh Law Offices and KPMG Taowan		The influence of the change of supervisors' responsibility on corporate governance, the understanding of the 2108 new labor law, and the risk derived from the income tax filings from CRS		3.5
		2018/04/27	Stock exchange		2018 Seminar of prevention of Insider Trading Guides		3
Note: Stakeholder communication
Identification	Important issues			Communication channels, response methods and communication frequency		Unit responsible for feedback
Shareholder/investors	Financial information Operational status Investment plans			Shareholders’ meeting (once per annum) Shareholders’ meeting report (once per annum) Investor conference (not regular)		Spokesperson: Wang Hong Gi Senior Assistant General Manage Telephone: 06-2615151#220 Email: chi@tayih-ind.com
Employee	Salary and welfare Occupational safety and health environmentLabor relationship Centripetal spirits			Human resource department (Not regular) Employee Welfare Committee meeting (Once every two weeks) Company internal website (not regular) Morning meeting (Quarterly) Safety and Health Committee meeting (Once every two weekss)		HR manager: Wang Rui Yuan Telephone: 06-2615151#216 Email: g00131i@tayih-ind.com.tw
Customer	Operational status Investment plans Productqualityand safety			Telephone (not regular) Email(not regular) Customer visit or factoryaudit)(not regular)		Sales and purchasing manager: Wu Chen Yuan senior assist general manager Telephone: 06-2615151#245 Email: mikewu@tayih-ind.com.tw
Supplier	Management of Suppliers Product quality and safety Operational status			Customer visit or factory audit)(not regular) Telephone (not regular) Email(not regular)

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3-4-4.Composition, duties and operation of the remuneration committee:

(1)Establishment of the committee: The Company has set up a remuneration committee on December 26, 2011, and has adopted the “Regulations for the Organization of Salary Compensation Committee”.

(2)Information on the members of the 3rd Committee:

Identity (Note 1)	Conditions	Have more than five years of work experience and the following professionalqualifications	Have more than five years of work experience and the following professionalqualifications	Have more than five years of work experience and the following professionalqualifications	In line	In line	with independence (Note 2)	with independence (Note 2)	with independence (Note 2)	with independence (Note 2)	with independence (Note 2)	with independence (Note 2)	The number of public companies the member of the remuneration committee is concurrently serving remuneration committee	Note (Note 3)
	Name	An instructor or higher in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the company in a public or private junior college, college, or university.	A judge, public prosecutor, attorney, certified public accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the business of the company.	Have work experience in the area of commerce, law, finance, or accounting, or otherwise necessary for the business of the company.	1	2	3	4	5	6	7	8
Independent director	Wu Wan Yi			V	V	V	V	V	V	V	V	V	0
Others	Han Jing San		V	V	V	V	V	V	V	V	V	V	0
Others	Zhou Mei Ling			V	V	V	V	V	V	V	V	V	0

Note 1: Please fill in as a director, independent director or others.

• Note 2: Any members during the previous two years being elected and during the term of office, meets any of the following situations, please tick the appropriate corresponding boxes:

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

• (2) Not a director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary in which the company holds, directly or indirectly, more than 50 percent of the voting shares;

• (3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders;

• (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs;

• (5) Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranks as of its top five shareholders;

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

• (7) Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof.

• (8)There is none of the sections of Article 30 of the Companies Act.

• Note 3: If the identity is a director, please indicate whether it meets the requirements of Article 6(5) of the “Regulations governing the Appointment and Exercise of Powers by the Remuneration committee of a company whose stock is listed on the Stock Exchange or traded over the counter”.

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(3)Committee duties:

• ①Establish and regularly review the policies, systems, standards and structures for performance evaluation and salary remuneration of directors, supervisors and managers.

• ②Regularly assess and determine the salary remuneration of directors, supervisors and managers.

• (4)Information regarding the operation of the Audit Committee:

• ①The remuneration committee comprised of 3 members.

• ②The term of office of the current members: June 14, 2017 to June 13, 2020.

• ③The remuneration committee held 2 meetings (A), the qualifications and the attendance is as follows:

Title	Name	Actual attendance B	By proxy	Actual Rate of Attendance B/A (Note)	Note
Convener	Wu WanYi	2	0	100%
Committee member	Han JingSan	2	0	100%
Committee member	Zhou Mei Ling	2	0	100%

Other noteworthy matters:

• 1.When the Board of Directors does not adopt or amend the recommendations of the Remuneration Committee, it shall state the date and time of the Board of Directors, the content of the proposal, the results of the resolutions of the Board of Directors and the company's handling of the opinions of the Remuneration Committee (eg the salary remuneration approved by the Board of Directors is better than the recommendations of the Remuneration Committee) , should explain the difference and the reasons):

Board of Directors Date and session	The remuneration committee Committee member	Content of Motion and the follow up	The resolution of the proposal.	The salary passed by the board of directors is better than the recommendations made by the remuneration committee.
2018.03.22 (15th session the 4th meeting)	2018.02.09 (3rd session the 2nd meeting)	1. Discussion of the year-end bonuses for the the directors and managers for 2017 and the remuneration for 2018 2. Discussion of the distribution of compensation for 2018	As Wu Chun I, You Qing Liang, Wu ChengYuan are the three persons whose interests are involved, they avoided the discussion and voting, and did not act on behalf of other directors. The case was approved by the chairman in consultation with all other attending directors except for those directors evaded in accordance with the regulations.	No differences
2018.11.12 (15th session the 8thmeeting)	2018.10.29 (3rd session the 3th meeting)	Discussion of remuneration of the directors and managers for 2019	As Wu Chun I, You Qing Liang, Wu Cheng Yuan are the three persons whose interests are involved, they avoided the discussion and voting, and did not act on behalf of other directors. The case was approved by the chairman in consultation with all other attending directors except for those directors evaded in accordance with the regulations.	No differences

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• 2.The resolution of the Remuneration Committee, if the member has objections or reservations and has a record or written statement, shall state the date, session, content of the proposal, the opinions of all members and the treatment of the members' opinions:

The remuneration committee Date and session	Content of Motion and the follow up	The resolution of the proposal.	The Company's response to the opinions of independent directors
2018.02.09 (3rd session the 2ndmeeting)	1.Discussion of the year-end bonuses for the the directors and managers for 2017 and the remuneration for 2018 2. Discussion of the distribution of compensation for 2018.	All directors passed the proposal	Brought to the board of directors and all directors passed the proposal.
2018.10.29 (3rd session the 3th meeting)	Discussion of remuneration of the directors and managers for 2019	All committee members passed.	Brought to the board of directors and all directors passed the proposal.

Note:

• (1) If the any member of the remuneration committee quit before the end of the year, the date of resignation shall be indicated in the remarks column. The actual attendance rate (%) shall be calculated based on the number of meetings of the remuneration committee during their employment and their actual attendance.

• (2) Before the end of the year, if the remuneration committee is re-elected, the members of the new and old remuneration committees shall be filled in, and indicate the member is new or old, and also indicate if the member is newly elected or re-elected and the re-election date. The actual attendance rate (%) shall be calculated based on the number of meetings of the remuneration committee during their employment and their actual attendance.

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3-4-5.The state of the company's performance of corporate social responsibilities: systems and measures that the company has adopted withrespect to environmental protection, community participation, contribution to society, service to society, social and public interests, consumer rights and interests, human rights, safety and health, and other corporate social responsibilities and activities, and the state of implementation

Items			Implementation status	Differences and Causes of Corporate Social Responsibility Codes with Listed Companies
	Yes	No	Description of summary
1. Implementation of Corporate governance (1)Does the company set up corporate social responsibility policies or systems and review the effectiveness of implementation? (2)Does the company regularly hold social responsibility education and training? (3)Does the company designate a special (or part-time) unit for promoting corporate social responsibility, which is authorized by the board of directors to handle high-level management and report to the board of directors? (4)Does the company set up a reasonable salary remuneration policy, and combine the employee performance appraisal system with the corporate social responsibility policy, and establish a clear and effective reward and disciplinary system?	V V V V		(1)The company has established a corporate social responsibility policy or system. (2)Besides organizing classes for different levels and professional education and training, the company regularly organizes occupational safety and health training for employees and suppliers in the factory. (3)The promotion unit of the company's corporate social responsibility shall be executed by the general manager's office, the chairman's office, and the safety and health office. The company shall implement relevant corporate governance regulations, planning of human resource system, participation in social welfare, set up company safety, environmental protection and energy conservation measures and implement the government related saving and carbon reduction plan. (4)Article 31 of the Articles of Association of the Company stipulates that if the company makes a profit in the current year, it shall set aside no less than 1% for employee compensation. In order to encourage the employees to work with the company to create operational performance and achieve the goal of sustainable operation, the company provides competitive compensation, and introduces, through a fair and perfect performance management system, the company's overall goals and colleagues' individual work goals. The supervisor and colleagues must set individual performance targets at the beginning of the year. At the end of the year, the supervisors will assess the performance of the subordinates and the achievement of the target. The company will reward, train and provide various career development opportunities according to the performance of colleagues. For those potential colleagues, through an open and transparent promotion mechanism, by training and education, the company will entrust them with more responsibilities and relatively better salary compensation, in order to strive for the overall development of the organization.	(1)There is no significant difference from the Code of Practice for Social responsibilities. (2)There is no significant difference from the Code of Practice for Social responsibilities. (3)There is no significant difference from the Code of Practice for Social responsibilities. (4)There is no significant difference from the Code of Practice for Social responsibilities.

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			①The salary structure of the company: ❶Basic salary: The salary is based on the employee's past experience, ability and the value of the job. It does not vary according to gender, age, nationality or ethnicity. ❷Performance bonus: Calculation is based on monthly business performance and the individual performance. ❸Year end bonus: Calculation is based on the overall business performance and the individual performance. ②Salary adjustment: ❶Performance standard: Salaries are adjusted in accordance with the operating performance of the company and the individual performance. ❷Promotion criteria: When employees are promoted and praised, their salaries will also be adjusted to encourage talents.
2. Developing a sustainable environment (1)Is the company committed to improving the utilization efficiency of various resources and using recycled materials with low impact on the environment? (2)Does the company establish a suitable environmental management system based on its industrial characteristics?	V V		(1)The Company sets up an ad hoc group to improve the utilization efficiency of various resources, reducing the consumption of energy and resources, and actively reduce the amount of raw materials and waste to reduce the impact on the environment. (2)Besides complying with domestic environmental safety and security regulations, the company is also in line with international environmental safety regulations, and international standards, implementing the environmental safety management system, and at the same time obtaining the ISO14001 environmental management system and OHSAS18001 occupational safety and health management system on December 31, 2002. Both certifications are valid till December 31, 2020. The company also sets up environmental safety policy as follows: The company was established in 1964 and produced locomotive lights, mainly for domestic and foreign motorcycles and automobile factories. Since its establishment, the company has been adhering to the business philosophy of “contributing to the society, seeking the common interests of customers, employees, all partners and shareholders, achieving coexistence and co-prosperity of sustainable management” and “continuous improvement, enhancing international competitiveness and fully satisfying customers. The business policy of “demand” is to produce high quality products to supply customers' needs.	(1)There is no significant difference from the Code of Practice for Social Responsibilities. (2)There is no significant difference from the Code of Practice for Social responsibilities.

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(3)Does the company pay attention to the impact of climate change on operational activities, and implement greenhouse gas inventory, set up corporate energy conservation and carbon and greenhouse gas reduction strategies?	V		In order to protect the environment, employees’ health and fulfill social responsibility, under the guidelines of the Environmental and Safety and Health Management System, we are committed to: ①Follow the regulations: Ensure that the company's operations and production activities comply with the Environmental, Safety and Health Act and not to use banned substances that are harmful to the environment. ②Continuous improvement: Continue to improve on energy conservation, waste reduction, pollution prevention, etc., and ensure that no banned substances that are harmful to the environment are being used in the design and manufacturing process. Continue to implement improvements on disease and injury preventions, implement workplace health management, and create a safe, bright, healthy and comfortable workplace. ③Full participation To create a double win interaction between all employees, customers, contractors, suppliers and the external world, and to jointly protect the environment and reduce the risk of occupational disasters. ④Sustainable management: Implementing the energy management mechanism and the sustainable use of resources, and gradually embed the concept of green environmental protection in planning and manufacturing of products. (3)The company established a safety and health office in 2014, which is responsible for environmental protection, safety and setting up health policy and promotion and implementation of related business, and established a company-wide safety and health committee to assist in the promotion and implementation of various environmental safety regulations and activities. ①Sets up various environmental management methods internally for employees to follow and implement: ❶Measures for the Management of Air Pollutant Emissions ❷Measures for Management of Wastewater Discharge ❸Measures for Waste Management ❹Measures management for Monitoring Environmental Safety ②Since the beginning of 2009, the CO2 reduction and VOC volatile organic matter reduction activities have been carried out, and the reduction ofpower andgas consumption required forproduction of	(3)There is no significant difference from the Code of Practice for Social responsibilities.

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			each finished product have been improved by 3% to 5% per year. ③Please note in detail in the performance in recent years and the goals for 2019.
3. Maintenance of Social Welfare (1)Does the company set up relevant management policies and procedures in accordance with relevant laws and regulations and international human rights conventions?	V		(1) ①Human rights policy: The company's human rights policy is to abide by the local laws and regulations of Taiwan, and to comply with the standards of the International Labor Organization basic conventions, to treat the current employees, contractual and temporary staff as well as interns with dignity and respect. ②Human rights concerns and practices: ❶To provide a safe and health working environment: ⒶZero disaster as the management goal. ⒷAnalyze and manage specific ethnic groups to prevent potential health risks by analyzing health check results and work-related factors. ⒸPromote health enhancing activities based on employee needs, encourage them to participate freely, and implement healthy living. ❷Eliminate unlawful discrimination to ensure equal job opportunities. Comply with Taiwan laws, international regulations and corporate human rights policies, and implement internal relevant laws and regulations. ❸Prohibition of child labor: The company only accepts applicants who have reached the age of 18, and the company must double check to ensure that there is no omission. ❹Prohibition of forced labor: Do not force or coerce any unwilling person to conduct labor services. ❺Assist employees in maintaining physical and mental health and work-life balance: Provide diversified activities such as arts and culture, sports, family participation and parent-child interaction, and also expand the interpersonal interaction of colleagues through community participation. ③Human rights risk mitigation measures: In order to mitigate the risks of human rights,the companyhas	(1)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies.

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(2)Does the company establish channels for employees’ complaints and treatment of these complaints properly? (3)Does the company provide a safe and healthy working environment for employees and regularly implement safety and health education for employees? (4)Has the Company established a mechanism for regular communication with employees and use reasonable measures to notify employees of operational changes which may cause significant impact to employees?	V V V		been actively implementing specific improvement plans in recent years to create a quality, safe and bright working environment. ④Human rights protection education and training practices: ❶Provide follow-up and propaganda of relevant laws and regulations during the training of newcomers. ❷Establishment and promotion of sexual harassment prevention standards. ❸Provide a complete series of occupational safety training. (2)The company has allocated a chairman mailbox and the stakeholder section on the company's website. Any employee or stakeholder may appeal or express opinions through these two channels to promote labor and capital harmony and create a double win between the company and its employees. (3)Besides the occupational safety and health management system OHSAS 18001 and environmental management systemenvironmental management system ISO14001the company has long been committed to providing employees with safety and health by establishing a comfortable and bright working environment. ①In terms of physical health, regular employee health checks are conducted every year, and through various aspects of health education information, employees can better grasp their own health status and have knowledge and methods of self-health management. ②Arrange doctors to station in the factory on a monthly basis to provide consulting services related to employee health. ③In terms of mental health, the company organizes various types of spiritual supplement-related education and training courses from time to time to help adjust the work pressure of employees. ④In terms of work safety, through hazard prediction, the company is able to early detect the potential hazard problems, false alarm event proposals and other activities in the workplace. ⑤Furthermore, through education training and case propaganda, the emergency response ability and the safety concept of the employees are strengthen, and reduce accidents caused by unsafe behavior. (4) The Company organizes a staff welfare committee meeting every two months. The meeting provides appropriate communication and channels for employees. If there are major operational changes, the company will also inform the employees in advance through this meeting.	(2)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies. (3)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies. (4)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies.

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(5)Has the Company established effective career development training plans? (6)as the Company set polices and consumer appeal procedures in its R&D, purchasing, production, operations, and service processes? (7)Does the Company follow regulations and international standards in the marketing and labelling of its products and services? (8)Does the company evaluate environmental and social track records before engaging with potential suppliers? (9)Does the Company’s contracts with major suppliers include termination clauses if they violate CSR policy and cause significant environmental and social impact?	V V V V V		(5) The Education and Training Committee of the Company has a complete training plan for the development of all colleagues every year, so that they can perform tasks in their existing positions, and at the same time, they may acquire the skills needed for promotion and for coping with the new work. (6) The company's products are mainly sold to major automobiles locally and overseas. Therefore, the Quality Assurance Department is responsible for the after-sales service. In addition, the company's website also has a stakeholder area to provide consumers with complaints. (7) The products produced by the company are in compliance with the requirements of the car manufacturer, and meet the international safety regulations such as Taiwan TAS, European ECE, American FMVSS, Japan JIS, Mainland 3C and Australian ADR, effectively maintaining and ensuring vehicle safety. In the event of a customer complaint, the product replacement is first provided free of charge, and then the problem of the customer is resolved within the shortest time. (8) In order to enable suppliers to work together to enhance corporate social responsibility, the corporate social responsibility has been included in the evaluation of the qualifications of new suppliers. (9) In future, the company will strengthen its signing with major suppliers depending on the actual situation. If the supplier violates the corporate social responsibility policy and has significant impact on the environment and society, the company will issue a warning and request a deadline for improvement. If the circumstances are serious, the companywill not cease cooperation.	(5)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies. (6)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies. (7) There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies. (8)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies.. (9)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies.
4. Enhanced information disclosure (1)Does the Company disclose relevant and reliable CSR information on its website and the Taiwan Stock Exchange website?	V		(1) The Company has disclosed relevant and reliable CSR information on its website and the Taiwan Stock Exchange website.	There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies.
5. If the company has established its corporate social responsibility code of practice according to “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies ” please describe the operational status and differences: The Company has established a Code of Practice for Corporate Social Responsibilityand the overall operation has not much difference from the Code.
6. Other important information to facilitate better understanding of the company’s implementation of corporate social responsibility: ①Donation to the Wu Jin Mao Memorial Culture and Education Foundation. ②Donation to MingHui Social Welfare CharityFoundation

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③ Donation to Commerce Development Research Institute

④ Donation to China Body, Mind and Soul Advanced Association.

⑤ Donation cars designated for long term care to Chi Mei Hospital.

⑥ Sponsored the An Ping Industry the Hungry Ghost festival praying ceremony.

⑦ Sponsored the 2018 Earth Spirit Cultural Festival.

⑧ Sponsored the 13th Youth Conference organized by the Young Monte Jade.

⑨ Donation to Friend of Police association of the Republic of Taiwan

⑩ Donation to Friend of Police Tainan association.

⑪ Presented the winter suits to the Taekwondo school team of the National Pei-men Senior Agricultural and Vocational School. ⑫ Donated to the Tainan Philharmonic Orchestra.

1. Other information regarding “Corporate Responsibility Report ” which is verified by certifying bodies: The company has not prepared a corporate social responsibility report, and will prepare it according to laws and practices in the future, and will be verified by relevant verification agencies.

Note: Energy conservation and carbon reduction performance and target

Items	Performance of 2017	Performance of 2018	Lower than the previous period	Plans of 2019	Lower than the previous period	Methods of achieving the goal:
Reduction of business waste	49Kg /Million revenue	48.37Kg /million revenue	1.3%	47.89Kg /million revenue	1.0%	1. Strengthen the inspection of waste recycle condition. 2. Study the greatest defects and work on the original source to reduce the defect cause so as to reduce the amount of waste.
Reduction of CO2 emission	2951Kg /million revenue	2388Kg /million revenue	19.1%	2316Kg /million revenue	3.0%	1. Improve the performance of various types of electrical equipment, and review the discontinuation or abolition of non-essential equipment to reduce electricity consumption. 2. Continue to inspect electricity usage and pick out unreasonable power for improvement.
Reduction of VOC volatile organic emissions	4.7Kg /million revenue	4.69Kg /million revenue	0.2%	4.64Kg /million revenue	1.1%	Strengthen inspection to avoid improper use and dispersion of volatile organic solvents. 1. New development parts without painting design 2. Reduction of poor painting project 3. Improve spraying technology

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3-4-6.Fulfilling the integrity management situation and adopting measures:

Items			Implementation status	Differences and reasons for the integrity management code of the listed company
	Yes	No	Description of summary
1. Establishment of Corporate Conduct and Ethics Policy and Implementation Measures (1)Does the company express its commitment to integrity management policies and practices in its regulations and external correspondence, as well as the commitment of the board of directors and management to actively implement business policies? (2)Does the company set up a plan to prevent dishonesty, and specify operating procedures, behavior guidelines, disciplinary and grievance systems for violations in each program, and implement them? (3)Does the company adopt preventive measures for the business activities of the Article 7-2 of the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies” or other business activities with high risk of dishonesty?	V V V		(1)The contracts signed by the Company in the course of its operation are based on the principle of good faith and mutual benefit to sign a reasonable contract and actively fulfill the contractual commitments. The Company has set up in the rules of procedure of the Board of Directors that the directors may not participate in the discussion and voting and should evade when the content of discussion is harmful to the interests of the company. (2)The employee's work rules stipulate that employees shall not receive any improper benefits in the course of engaging in commercial activities, and the new employees shall be informed during the education and training. (3)The ethical code of conduct and employee work rules set by the company have established a reasonable and clear reward and punishment system to prevent the occurrence of unlawful behavior of employees.	(1)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies (2)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies (3)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies
2. Corporate Conduct and Ethics Implementation (1)Does the company assess the integrity record of the transaction party and specify the terms of good faith in the contract with the transactionpartner?	V		(1)The company will consider the legality of the business party and whether there is a record of dishonesty before having contacts with the business party, and avoid trading with those who have dishonest records.	(1)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies

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(2)Does the company set up a special (part-time) unit that promotes the integrity management of the company under the board of directors, and regularly reports its implementation to the board of directors? (3)Does the company set up a policy to prevent conflicts of interest, provide a proper complaint channel, and its implementation? (4)Does the company establish effective accounting and internal control systems for the implementation of policies, and the internal auditors audit such execution and compliance regularly or appoints the CPA to carry out the audit?. (5)Does the company regularly hold education training internally and externally of the corporate integrity management?	V V V V		(2)The operation of the part-time affairs of the general manager's office and the auditing office shall report to the board of directors. (3)The directors and related personnel of the Company will evade their direct or indirect interest in the execution of their business. (4)The Company carries out the inspection of the accounting and the internal control system through the internal auditors, certified public accountant, and self-evaluation in accordance with the law, and reports the results to the Board of Directors. (5)The integrity management has been included in the education and training for the new comer.	(2)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies (3)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies (4)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies (5)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies
3. Status of implementation of reporting of malpractices (1)Does the company provide incentives and means for employees to report malpractices and provide channels for reporting malpractices? Does the company assign designated personnel to investigate the report malpractice? (2)Has the company set up any standard procedures or confidential measures for handling reported malpractices? (3)Does the companyassure the	V V V		(1)The employee code of conduct has clearly defined the reward and discipline system, and the personnel unit and the audit office will handle the related matters. (2)The employee code of conduct and the internal control system have included the relevant procedures and confidentiality mechanisms for investigations of reported malpractices. (3)The companywill enforceprotective measures to assure that thegood	(1)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies (2)There is no significant difference from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies (3)There is no significant difference

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employees who reported on the malpractices that they will not be prosecuted for making such reports?			faith informer will not be retaliated against.	faith informer will not be retaliated against.	from the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed companies
4. Enhanced information disclosure (1) Has the company disclosed its integrity principles and progress onto its website and MOPS?	V		(1)The company has on its website company’s integrity principles.	www.tayih-ind.com.twdisclosed the	There is no significant difference from the Code of Practice for Integritymanagement.
5. If the company has its own code of conduct in accordance with the Ethical Corporate Management Best Principles for TWSE/GTSM Listed Companies, please describe the difference between its operation and the Code: The Companyhas notyet established theprinciples,but will do so when the need arises in future.
6. Other important information to facilitate better understanding of the company’s corporate conduct and ethics compliance practices (e.g. review the company’s corporate conduct and ethics policy): The company has "employee work rules", which clearly regulates for not accepting gifts, not accepting kickbacks, not accepting commissions, and not leaking confidentiality regarding production or business; and implementing regulations regarding corporate governance based on internal control and auditingsystems.

3-4-7.If the company has established a corporate governance code and related regulations, it should disclose its mode of inquiry:

• (1)In order to implement corporate governance, the company has established relevant regulations for corporate governance as follows: ① Articles of Incorporation

② Directors election regulations

③ Shareholders’ meeting Rules and Procedures

④ Rules and procedures of the Meeting of Board of Directors

⑤ Operating procedures of Acquisition or Disposal of Assets

• ⑥ Operating procedures of Fund lending

⑦ Operating procedure of Endorsement and Guarantee

• ⑧ Compensation Committee Chapter

⑨ Code of Ethical Behavior

⑩ Corporate Governance Best Practice Principles

⑪ Corporate Social Responsibility Principles ⑫ Rules Governing the Scope of Powers of the Independent directors

• (2)The above-mentioned methods for inquiring about corporate governance: As disclosed in the MOPS and the company's website.

• 3-4-8.Other key information conductive to the understanding of the implementation of integrity management: None

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3-4-9.The status of the implementation of the internal control system shall be disclosed: (1)Statement of Internal Control System ：

TA YIH INDUSTRIAL CO., LTD.

Statement of Internal Control System

The 2018 internal control system of the Company, based on the results of the self-assessment, would like to state the following:

1. The Company is aware that the establishment, implementation and maintenance of the internal control system is the responsibility of the board of directors and managers of the Company, the Company has already established the system. The purpose is to provide reasonable results in terms of operational effectiveness and efficiency (including profitability, performance and ensure the safety of assets, etc.), reporting reliability, in time, transparency, to provide reasonable assurance that complies with relevant regulations and relevant laws, and that compliance with relevant laws and regulations is achieved.

2. The internal control system has its inherent limitations. Regardless of how perfect the design is, an effective internal control system can only provide reasonable assurance of the achievement of the above three objectives; and, due to changes in the environment and conditions, the effectiveness of the internal control system may change. However, the company's internal control system is equipped with a self-monitoring mechanism, and once the fault is identified, the company will take corrective action.

3. 3.The Company judges whether the design and implementation of the internal control system is effective based on the judged item of the effectiveness of the internal control system as stipulated in the “Regulations Governing Establishment of Internal Control Systems by Public Companies” (hereinafter referred to as “Regulations”). The internal control system judgment project used in the “Regulations” is based on the process of management control, which divides the internal control system into five components: 1. Control environment, 2 risk assessment, 3. control operations, 4. Information and communication, and 5. Monitoring operations. Each component also includes several items. Please refer to the “Regulations” for the above mentioned items.

4. The Company has adopted the above mentioned items of the internal control system to evaluate the effectiveness of the design and the implementation of the internal control system.

5. Based on the results of the preceding assessment, the Company believes that the internal control system (including supervision and management of subsidiaries) of the Company as on December 31, 2018, including understanding the effectiveness of operations and the achievement of efficiency goals. The design and implementation of the internal control system, such as timely, transparent and in compliance with relevant regulations and relevant laws and regulations, is effective and can reasonably ensure the achievement of the above objectives.

6. This statement will become the main content of the company's annual report and public statement, and will be made public. If the contents of the above disclosure are illegal or fake, it will conflict with legal liabilities of Articles 20, 32, 171 and 174 of the Securities Exchange Law.

7. This statement was approved by the board of directors of the Company on March 15, 2019. None of the 8 directors present objected, the rest agreed to the content of the statement and hereby declared so.

TA YIH INDUSTRIAL CO., LTD.

Chairman: Wu Chun-I

General manager: Li Wan Gen

• (2)Where a CPA has been hired to carry out a special audit of the internal control system, furnish the CPA audit report: there is no such situation.

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• 3-4-10.For the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, disclose any sanctions imposed in accordance with the law upon the company or its internal personnel, any sanctions imposed by the company upon its internal personnel for violations of internal control system provisions, principal deficiencies, and the state of any efforts to make improvements: None.

• 3-4-11.Significant resolutions of a shareholders meeting or a board of directors meeting during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report:

(1)Implementation of important resolutions of the shareholders’meeting

Date of meeting	Summary of important proposals	Result of resolution(election)	Review of the implementation of the resolution
2018.06.11	1. Recognized the business report and financial statements of 2017	Passed by voting.	To be announced after the resolution by the shareholders’ meeting.
	2. To acknowledge the earnings distribution of 2017. Dividends: Cash dividends of NT$ 5.2 per share	Passed by voting.	Distribute according to the resolution of the shareholders' meeting. The Board of Directors was convened on June 11, 2018, and the resolution was to set on July 11, 2018 as the benchmark date for the interest-bearing, and July 30, 2018 as the issue date, and all will be distributed byJuly30,2018.

(2)Important resolutions of the board:

	(2)Important resolutions of the board:
Date of meeting	Summary of important proposals
2018.03.22	1. Adoption of the proposal of 2017 distribution of employee compensation Employee compensation is 1%,calculated as NT$5,918,799,and distributed as cash.
	2. Proposal of distribution of surplus of 2017. Bonus of shareholders: Cash dividends of NT$5.2per share.
2018.06.11	1. Set July11, 2018 as the date for calculation of interest of dividends, and July30, 2018 as the issue
2019.03.15	1. Proposal of distribution of compensation for employee for 2018 Employee compensation is 1%,calculated as NT $3,745,340,and distributed as cash.
	2. Proposal of distribution of surplus of 2018. Bonus of shareholders: Cash dividends of NT$ 3.8per share.
	3. Proposal of dismissal and appointment of the General manager Li Wan Gen→FengShi Zhong
	4. Proposal of changing CPA Liao HongRu,Li Ji Zhen→Li Ji Zhen,YangChao Jin

• 3-4-12.Where, during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, a director or supervisor has expressed a dissenting opinion with respect to a material resolution passed by the board of directors, and said dissenting opinion has been recorded or prepared as a written declaration, disclose the principal content thereof: No such situation

• 3-4-13.A summary of resignations and dismissals, during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, of the company's chairman, general manager, principal accounting officer, principal financial officer, chief internal auditor, and principal research and development officer :No such situation.

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• 3-5.Information of CPA professional fees:

3-5-1.Information of the CPA:

Year of occurrence	Accounting firm	Name of accountant	Accountant inspection period	Note
2018	Deloitte Touche Tohmatsu Limited	Liao Hong Ru Li Ji Zhen	January 1, 2018 - December 31, 2018

• 3-5-2.Information of the range of fees of the public accountant

			Currency : NT$ thousands	Currency : NT$ thousands
	Range Item fee	Audit fee	Nonpublic expenses	Total
1	Under Nt$ 2000		280	280
2	NT$2,000(included)～NT$4,000(excluded)	2,940		2,940
3	NT$ 4,000(included)～NT$ 6,000(excluded)
4	NT$ 6,000(included)～NT$ 8,000(excluded)
5	NT$ 8,000(included)～NT$ 10,000(excluded)
6	Above NT$ 10,000(included)

• 3-5-3.When non-audit fees paid to the certified public accountant, to the accounting firm of the certified public accountant, and/or to any affiliated enterprise of such accounting firm is one quarter or more of the audit fees paid thereto, the amounts of both audit and non-audit fees as well as details of non-audit services shall be disclosed:None. The Amount of audit and non-audit Fee paid in 2018 and Content of Non-Audit Services are listed in the table below.

Currency: NT$ thousands

Certified public accountant Name of accountingfirm	Accountant Name	Public expenses	Nonpublic expenses	Nonpublic expenses	Nonpublic expenses	Nonpublic expenses	Nonpublic expenses	Accountant Accountant inspection period	Note
			Design of system	Business registration	Human resourc es	Others	Subtotal
Deloitte Touche Tohmatsu Limited	Liao Hong Ru, Li Ji Zhen	2,940 NT$ thousands	－	－	－	280 NT$ thousan	3,220 NT$ thousands	January 2018 ~ December 2018
Note		Content of other services: 1. Transfer pricing report 2. Others Total				~~d~~ 280 NT$ thousands 0 NT$ thousands 280 NT$ thousands

Note: The non- audit fees should be listed separately according to the service items. If the “others” of the non-audit fees reach 25% of the total non-audit fees, the service contents should be listed in the remarks column.

• 3-5-4.When the company changes its accounting firm and the audit fees paid for the fiscal year in which such change took place are lower than those for the previous fiscal year, the amounts of the audit fees before and after the change and the reasons shall be disclosed.

• 3-5-5.When the audit fees paid for the current fiscal year are lower than those for the previous fiscal year by 15 percent or more, the reduction in the amount of audit fees, reduction percentage, and reason(s) therefor shall be disclosed: It is not applicable as the audit fees of 2018 is not lower than the previous year by 15% or more.

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• 3-6.Information on replacement of certified public accountant: If the company has replaced its certified public accountant within the last 2 fiscal years or any subsequent interim period, it shall disclose the following information:

• The approval of CPA Chang by the board of directors On March 15, 2019 ： The internal job responsibilities of the Deloitte & Touche have been adjusted, in that CPA Liao Hong Ru and CPA Li Ji Zhen have been replaced by CPA Li Ji Zhen and CPA Yang Chao Jin.

• 3-6-1.Regarding the former certified public accountant:None.

• 3-6-2.Regarding the successor accountant:None.

• 3-6-3.Reply of the former accountant to the provisions of Article 10, paragraph 6, subparagraph 1 and subparagraph 2.3 of the Guidelines: Not applicable:None.

• 3-7.Where the company's chairman, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its certified public accountant or at an affiliated enterprise of such accounting firm: No such situation.

• 3-8.Any transfer of equity interests and/or pledge of or change in equity interests (during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report) by a director, supervisor, managerial officer, or shareholder with a stake of more than 10 percent during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report. Where the counterparty in any such transfer or pledge of equity interests is a related party, disclose the counterparty's name, its relationship between that party and the company as well as the company's directors, supervisors, and ten-percent shareholders, and the number of shares transferred or pledged. 3-8-1.Changes in shareholder's equity of directors, supervisors, managers and shareholders whose shareholdings exceeding 10%:

Job title	Name	2018	2018	As of the year till 2019.04.20	As of the year till 2019.04.20
		Number of shares held Increase (Decrease) ratio	Number of shares Increase (Decrease) ratio	Number of shares held Increase (Decrease) ratio	Number of shares Increase (Decrease) ratio
Director Chairman	Ding Wan Industrial Co., Ltd. Wu Chun-I (Representative for Din Wan Investment Co., Ltd.)	0 0	0 0	0 0	0 0
Director cum principal shareholder Vice chairman Director Director cum vice general manager	Koito Manufacturing Co., Ltd. Watanabe Masami (Representative of Koito Manufacturing Co., Ltd.) Iida Yuki (Representative of Koito Manufacturing Co., Ltd.) Yamamoto Hideki (Representative of Koito Manufacturing Co., Ltd.)	0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0
Director	Wu Yu Xian	0	0	0	0
Supervisor Director cum vice general manager Director	Yuan Hong Investment Co., Ltd. Yu Ching Liang (Representative of Yuan Hong Investment Co., Ltd.) Wu Cheng Yuan(Representative of Yuan Hong Investment Co., Ltd.)	0 0 0	0 0 0	0 0 0	0 0 0
Independent director	Wu Wan Yi	0	0	0	0
Independent director	Chen Xiu Feng	0	0	0	0
Supervisor	Guo Qi Min Investment Co., Ltd.	0	0	0	0

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Supervisor	Gen Bo Wen (Guo Qi Min Investment Co., Ltd.)	0	0	0	0
Supervisor Supervisor	Yi Heng Investment Co., Ltd. Lin Qian(Representative of Yi Heng Co., Ltd.)	0 0	0 0	0 0	0 0
Supervisor	Hideharu Konagaya	0	0	0	0
Principal shareholder	Da Wei Investment Enterprise Co., Ltd.	0	(700,000)	0	0
General manager	Li Wan Gen(note 3)	0	0	0	0
General manager	FengShi Zhong(Note 3)	0	0	0	0
Senior Assistant General Manager	Chen Jin Wen	0	0	0	0
Senior Assistant General Manager	Wang Hong Gi	0	0	0	0
Senior Assistant General Manager	Zhang Zao Wen	0	0	0	0
Assistant General Manager	Chen Chun Hong	0	0	0	0
Assistant General Manager	Zuan Zhi Qing	0	0	0	0
Assistant General Manager	Wang Jun Hao	0	0	0	0
Assistant General Manager	Wu Cheng Yuan	0	0	0	0
Assistant General Manager	Xu Rui Pin	0	0	0	0
Assistant General Manager	Zhuang Chao Qin	0	0	0	0

Note 1: Shareholders holding more than 10% of the company's shares should be indicated as principal shareholders and listed separately.

Note 2: The related parties of equity transfer or equity pledge should still be listed in the table below. Note 3: On March 15, 2019, the board of directors resolved that General Manager Li

Wang Gen retired and appointed Deputy General Manager Feng Shi Zhong as the new general manager, beginning on April 1, 2019.

3-8-2.Information regarding the counterparty of share transfer is a related party: None.

3-8-3.Information regarding the counterparty of share pledge is a related party: The counterparty of the equity pledge has no relationship.

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3-9.Relationship information, if among the 10 largest shareholders any one is a related party, or is the spouse or a relative within the second degree of kinship of another: 2019.04.20

Nate (note 1)	Shares owned	Shares owned	Shares held by spouse and minor children currently	Shares held by spouse and minor children currently	Shares held under other nominees	Shares held under other nominees	Relationship information, if among the top 10 largest shareholders any one is a related party, or is the spouse or a relative within the second degree of kinship of another: (Note	Relationship information, if among the top 10 largest shareholders any one is a related party, or is the spouse or a relative within the second degree of kinship of another: (Note	Note
	Number of shares	shareholding ratio	Number of shares	shareholding ratio	Number of shares	shareholding ratio	3) Name	Relationship
Koito Manufacturing Co., Ltd. Representative: Oshima Masahiro	24,774,750	32.50%	－	－	－	－	－	－
Da Wei Investment Enterprise Co., Ltd. Representative: Wu Chun I	22,523,880	29.55%	－	－	－	－	Wu Chun I Representative of Guo Qi Mi Investment Co., Ltd : Wu Chun Ji Representative of Yuan Hong Investment Co., Ltd.Wu Chun Liang	Same person Brothers Brothers Husband and wife
Cathay Life Insurance Representative: Huang Diao Gui	2,996,000	3.93%	－	－	－	－	－	－
Guo Qi Min Investment Co., Ltd. Representative : Wu Chun Ji	1,257,601	1.65%	－	－	－	－	Representative of Da Wei Investment Enterprise Co., Ltd.: Wu Chun I Wu Chun I Representative of Hong Yuan Investment Co., Ltd.：Wu Chun Liang Wu Ma Hui-er	Brothers Brothers Brothers Brother and sister in law
Wu Chun I	1,254,488	1.65%	396,821	0.52%	－	－	Representative of Da Wei Investment Enterprise Co., Ltd.: Wu Chun I Representative of Guo Qi Min Investment Co., Ltd : Wu Chun Ji Representative of Yuan Hong Investment Co., Ltd.: Wu Chun Liang Wu Ma Hui-er	Same person Brothers Brothers Husband and wife
Jin Hao Investment Co., Ltd. Representative： Huang Yao De	795,000	1.04%	－	－	－	－	－	－

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Yuan Hong Investment Co., Ltd. Representative： Wu Chun Liang	746,000	0.98%	－	－	－	－	Representative of Da Wei Investment Enterprise Co., Ltd.: Wu Chun I Wu Chun I Representative of Guo Qi Min Investment Co., Ltd : Wu Chun Ji Wu Ma Hui-er	Brothers Brothers Brothers Brother and sister in law
Dong An Investment Co., Ltd.Representative： Huang Mao Hsiung	539,000	0.71%	－	－	－	－	－	－
Taiwan Life Insurance Co., Ltd. Representative : Huang Si Guo	411,000	0.54%	－	－	－	－	－	－
Wu Ma Hui-er	396,821	0.52%	1,254,488	1.65%	－	－	Representative of Da Wei Investment Enterprise Co., Ltd.: Wu Chun I Representative of Guo Qi Min Investment Co., Ltd : Wu Chun Ji Wu Chun I Representative of Hong Yuan Investment Co.,Ltd.：Wu Chun Liang	Husband and wife Husband and brother Husband and wife Husband and brother

Note 1: All the top ten shareholders should be listed, and those who are institutional shareholders should list the name of the institutional shareholder and the name of the representative separately.

Note 2: The calculation of the shareholding ratio refers to the calculation of the shareholding ratio in the name of the shareholder, the spouse, the minor child or other nominees. Note 3: The shareholders listed in the previous disclosure, including institutional and natural persons, shall disclose their relationship with each other in accordance with the issuer's financial reporting standards.

3-10.The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company: Unit : Share; %	3-10.The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company: Unit : Share; %	3-10.The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company: Unit : Share; %	3-10.The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company: Unit : Share; %	3-10.The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company: Unit : Share; %	3-10.The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company: Unit : Share; %	3-10.The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company: Unit : Share; %
Transfer of Investment (Note)	Investment of Company		Directors, supervisors, managers and investments directlyor indirectlycontrollingthe business		Comprehensive investment
	Number of shares	% shareholding	Number of shares	% shareholding	Number of shares	% shareholding
British Virgin Islands Ta Yih International Investment	50,000	100﹪	－	－	50,000	100﹪

Note: The company adopts the equity method of investment.

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4. Information of Capital raising

4-1.Company capital and share

4-1-1.Source of shares

(1)Formation of Equity

			2019.04.20 Unit: NT thousands	2019.04.20 Unit: NT thousands	2019.04.20 Unit: NT thousands	2019.04.20 Unit: NT thousands	2019.04.20 Unit: NT thousands	2019.04.20 Unit: NT thousands	2019.04.20 Unit: NT thousands
Year	Month	Issue price (NT $)	Approved share capital		Paid-in capital		Note
			Number of shares	Amount	Number of shares	Amount	Source of equity	Those who paid with property other than cash	Date of approval and license number
1976	2	1,000	10,000	10,000	10,000	10,000	Cash increment 10,000	－	－
1979	5	1,000	20,000	20,000	20,000	20,000	Cash increment 10,000	－	－
1980	8	1,000	50,000	50,000	50,000	50,000	Cash increment 30,000	－	－
1981	8	1,000	75,000	75,000	75,000	75,000	Cash increment 2,500 Capital reserve to capital increase 22,500	－	－
1982	7	1,000	105,000	105,000	105,000	105,000	Cash increment 30,000	－	－
1983	12	1,000	135,000	135,000	135,000	135,000	Cash increment 30,000	－	－
1985	11	1,000	165,000	165,000	165,000	165,000	Cash increment 21,000 Cash reserve to capital increase 9,000	－	－
1988	6	1,000	220,000	220,000	220,000	220,000	Cash increment 55,000	－	1988.07.25 MOEAIC Cert. No. 4192
1991	4	1,000	250,000	250,000	250,000	250,000	Surplus convert to capital increase 30,000	－	1991.04.11 MOEAIC Cert. No. 2459
1991	8	1,000	268,000	268,000	268,000	268,000	Surplus convert to capital increase 18,000	－	1991.12.13 MOEAIC Cert. No.9210
1992	7	1,000	289,180	289,180	289,180	289,180	Surplus convert to capital increase 21,180	－	1992.08.17 MOEAIC Cert. No. 5667
1993	11	10	45,000,000	450,000	45,000,000	450,000	Surplus convert to capital increase 61,256 Capital reserve to capital increase 99,564	－	1993.11.29 MOEAIC Cert. No. 7750
1994	9	10	50,000,000	500,000	50,000,000	500,000	Surplus convert to capital increase 30,000 Capital reserve to capital increase 20,000	－	1994.09.27 MOEAIC Cert. No. 5944
1995	9	10	63,000,000	630,000	63,000,000	630,000	Cash increment 49,000 Surplus convert to capital increase 51,000 Capital reserve to capital increase 30000	－	1995.09.25 MOEAIC Cert. No. 114340
1998	8	10	69,300,000	693,000	69,300,000	693,000	, Surplus convert to capital increase 63,000	－	1998.08.26 MOEAIC Cert. No. 123965
1999	8	10	76,230,000	762,300	76,230,000	762,300	Surplus convert to capital increase 69,300	－	1999.08.27 MOEAIC Cert. No. 131554

Note 1: The annual data for the year ending should be filled to the date of publication of the annual report. Note 2: The capital increase section should be filled with the effective (approved) date and certificate number.

57

Note 3: If shares have been issued at less than par value, such information shall be prominently indicated.

Note 4: Where equity contributions have been made by conversion of monetary claims against the company, or by

the contribution of technical know-how required by the company, indicate this fact, and note the class and dollar amount of the shares paid for in this manner. Note 5: Prominently indicate any instance of private placement.

(2)Classes of shares: 2019.04.20

Classes of shares	Approved share capital	Approved share capital		Note
	Circulatingshares	Unissued shares	Total
Common shares	76,230,000	0	76,230,000	Listed stock

Note: Indicate whether the stock is listed at the stock exchange market or listed company at the over the counter market stocks (It should be marked if it is restricted to be listed or traded on the counter).

• (3)In the case of the issuance of securities by the self-registration, the relevant information on the approved amount, the scheduled issuance and the issued securities shall be disclosed:

The Company does not issue of securities by self-registration, so it does not apply.

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4-1-2.Structure of shareholders 2019.04.20

Structure of shareholders	Government institution	Financial institution	Other institutions	Foreign institution And outsider	Individual	Total
Amount
Number ofpeople	0	4	47	26	6,244	6,321
Number of shares held	0	3,543,210	27,926,481	25,621,292	19,139,017	76,230,000
% shareholding	0.00%	4.65%	36.63%	33.61%	25.11%	100.00%

Note: The first listed (over the counter) company and emerging stock company should disclose the proportion of the shares held by the mainland; the mainland capital refers to the people, institutions, organizations and other institutions in the mainland or a company invested by the mainland people in a third region as stipulated in Article 3 of the Measures for Mainland People's Investment in Taiwan.

4-1-3.Dispersion of equity ownership:

(1)Common shares: 2019.04.20

Gradingof shareholding	Number of shareholders	Number of shares held	% shareholding
1 to 999	1,574	111,207	0.15%
1,000 to 5,000	4,048	7,840,971	10.29%
5,001 to 10,000	389	3,094,620	4.06%
10,001 to 15,000	116	1,461,642	1.92%
15,001 to 20,000	65	1,197,600	1.57%
20,001 to 30,000	50	1,256,178	1.65%
30,001 to 50,000	35	1,373,000	1.80%
50,001 to 100,000	20	1,372,000	1.80%
100,001 to 200,000	9	1,308,681	1.72%
200,001 to 400,000	6	1,916,382	2.51%
400,001 to 600,000	2	950,000	1.25%
600,001 to 800,000	2	1,541,000	2.02%
800,000 to 1,000,000	0	0	0.00%
Above 1,000,0001	5	52,806,719	69.26%
Total	6,321	76,230,000	100.00%

(2)Preferred shares: The Company does not issue preferred shares.

4-1-4.List of principal shareholders 2019.04.20

.List ofprincipal shareholders		2019.04.20
Name of Principal shareholder	Number of shares held	% shareholding
Koito ManufacturingCo.,Ltd.	24,774,750	32.50%
Da Wei Investment Enterprise Co	22,523,880	29.55%
CathayLife Insurance	2,996,000	3.93%
GuoQi Min Investment Co.,Ltd.	1,257,601	1.65%
Wu Chun I	1,254,488	1.65%
Jin Hao Investment Co.,Ltd.	795,000	1.04%
Yuan HongInvestment Co.,Ltd.	746,000	0.98%
DongAn Investment Co.,Ltd.	539,000	0.71%
Taiwan Life Insurance Co.,Ltd.	411,000	0.54%
Wu Ma Hui-er	396,821	0.52%

Note: The total number of shares held is more than 5% or the proportion of shares accounts for the top ten shareholders.

59

4-1-5.(1)Price per share, net worth, surplus, dividends and related information in the last two

years

years
Item	Year		2017	2018	The year till March 31,2019 (Note 8)
Per share price (Note 1)	Highest		87.40	83.0	65.50
	Lowest		77.00	51.0	51.30
	Average		81.60	72.06	57.18
Net value per share (Note 2)	Before distribution		25.38	24.25	25.85
	After distribution		20.18	—	—
Earnings per share	Weighted average number of shares		76,230,000	76,230,000	76,230,000
	Earningsper share(note 3)		6.55	4.19	1.50
Dividend per share	Cash dividends		5.2	—	—
	Stock grants	Allotment of	—	—	—
		Allotment of	—	—	—
	Accumulated unpaid		—	—	—
Investment compensation Analysis	Price to earningration(note 5)		12.46	17.20	9.53
	Price to dividend ratio(note 6)		15.69	—	—
	Cash dividendyield(note7)		6.37	—	—

When carrying out a capital increase out of earnings or capital reserves, it shall disclose information on market price and cash dividends per share adjusted retroactively for the post-increase number of shares.

• Note 1: The highest and lowest market prices for each year are listed, and the average market price for each year is calculated based on the annual transaction value and volume.

• Note 2: Using the number of the outstanding issued shares at year end as the basis and fill in the details based on the resolution passed by the shareholders' meeting regarding distribution in the following year.

• Note 3: If it is necessary to make adjustments retroactively due to situations such as issuance of bonus shares, the earnings per share before and after the adjustments should be listed.

• Note 4: If the conditions of the equity issuance require that dividends not yet distributed for the year be accumulated and paid out in a later year with positive earnings, the dividends that have been accumulated up to the current year and not yet distributed shall be disclosed separately.

• Note 5: Price-earnings ratio ＝ Year’s average per share closing price / earnings per share.

Note 6: Price-dividend ratio ＝ Year’s average per share closing price / cash dividend per share.

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

• Note 8: The net value per share and earnings per share should be filled in with the information of the account audited (audited) in the most recent quarter of the annual report date; the remaining columns should be filled up to the date of publication of the annual report.

4-1-6.Dividend policy and implementation status:

Considering the future capital needs and long-term financial planning, if the company makes a surplus after the final accounts, besides paying the tax on profit income and making up the losses of the previous year, a provision of 10% is the statutory surplus reserve and a special surplus reserve is provided for the amount of the shareholders' equity deduction in the current year. If there is any balance, more than 50% of the accumulated undistributed surplus in the previous year shall be allocated as shareholder dividends, and the cash dividend portion shall not be lower than the 50% of the total shareholder's dividends. The dividend distribution ratio and cash dividend distribution ratio of the preceding paragraph shall be proposed to the board of directors the case of surplus distribution and submitted to the shareholders' general meeting for resolution.

The dividend policy as above was approved by the board of directors meeting on March 18, 2016, and was passed by the shareholders' meeting on June 13, 2016.

The proposed distribution of cash dividends of NT$3.8 per share by the board of directors has yet to be approved at the shareholders' meeting.

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• 4-1-7.Effect of the proposed stock dividends to be adopted by the Shareholders' Meeting on the operating performance and earnings per share: Not applicable

• 4-1-8.Employee bonus and remuneration to Directors and Supervisors:

• (1)Percentages and ranges of employee bonus and remuneration to Directors and Supervisors, as specified in the Company's Articles of Association

  • ①Employee compensation: According to Article 31 of the Articles of Association of the Company:

    • If the Company has profit in a given year, it shall distribute no less than 1% as employee bonus and the board of directors shall decide to distribute it as stock or cash. However, if the Company has accumulated losses, such profit shall first go towards offsetting such accumulated losses, and the employee's remuneration will be paid according to the proportion of the preceding paragraph.

  • ②Percentages and ranges of remuneration of Directors and Supervisors: The remuneration of directors, supervisors and the general manager is based on the general standard of the industry.

• (2)The basis for estimating the amount of employee, director, and supervisor compensation, for calculating the number of shares to be distributed as employee compensation, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period:

   - ①For the current period, the basis for estimating the employee's compensation and the actual distribution amount are calculated, and when there is a difference between the estimated amount and the estimated number: if there is profit every year, no less than one percent shall be distributed as employee compensation and the board of directors shall decide to distribute it as stock or cash. However, if the Company has accumulated losses, such profit shall first go towards offsetting such accumulated losses, and the employee's remuneration will be paid according to the proportion of the preceding paragraph. At the end of the year, if there is no significant change in the distribution amount as resolved by the board of directors, after being reported to the shareholders' meeting, the accounting estimates are treated and adjusted in the resolution of the shareholders' meeting.
  
   - ②For the current period, the basis for estimating the compensation of the directors and supervisors and the actual distribution amount are calculated, and when there is a difference between the estimated amount and the estimated number: There is no issue of remuneration of directors and supervisors in this current period.
  
   - ③In the current period, the accounting basis for the calculation of the number of shares distributed to the employees and the actual distribution amount is different from the estimated number of shares: There is no distribution of shares to the employees in the current period.
  

• (3)The distribution of compensation as passed by the board of directors:

   - ①Employee compensation:
  
      - ❶Distribution of employee compensation: Cash NT$ 3,745,340.
  
      - ❷If there is a difference between the employee's remuneration and the annual estimated amount, the difference, reason and treatment shall be revealed:
  
         - In 2019, the Board of Directors proposed to distribute the 2018 employees' compensation of NT$ 3,745,340 and there is no difference between the employee's compensation as set in the 2018 financial statements.
  
   - ②Distribution of remuneration for the directors and supervisors: There is no distribution of remuneration for the directors and supervisors.
  
   - ③The proportion of the employee's remuneration distributed as stock and the total net profit after tax and the total amount of employee compensation in the current period: there is no distribution of stock to
  

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the employee.

  - (4)The actual distribution of employee bonus and Director/Supervisor compensation for the previous fiscal year (with an indication of the number, value, and stock price, of the shares distributed), and, if there is any discrepancy between the actual distribution and the recognized employee bonuses and Director/Supervisor compensation, additionally the discrepancy, cause, and how it is treated:

     - ①The actual distribution of the employees’ compensation of the previous

        - year: Cash of NT$ 5,918,799.

     - ②If there is a difference between the distribution of the employee's remuneration and the recognized amount, the difference, reason and treatment shall be revealed:

        - NT$ 5,918,799 and there is no difference between the employees'

        - compensation as recognized in the 2017 financial statements.

     - ③The actual distribution of compensation for the directors and supervisors of the previous year: There is no distribution of compensation for the directors and supervisors.

     - ④If there is a difference between the distribution of the remuneration of the directors and supervisors and the recognized amount, the difference, reason and treatment shall be revealed: There is no such situation.

• 4-1-9.Stock buyback: The Company does not buy back the company shares, therefore it is not applicable.

• 4-2.Issuance of corporate bonds: None

• 4-3.Issuance of Preferred Stocks: None.

• 4-4.Handling of overseas depositary receipts: The Company does not issue overseas depositary receipts, so it is not applicable.

• 4-5.Exercise of Employee Stock Option Plan (ESOP): None.

• 4-6.Restricting employee rights of getting new shares: None

• 4-7.Mergers, Acquisitions or Issuance of New Shares for Acquisition of Shares of other companies: None.

• 4-8.Implementation of Capital Allocation Plan: None.

• (1) Project content:

The company does not issue or privately raise securities, so it is not applicable.

• (2)Implementation: ①The Company does not issue or privately raise securities, so it is not applicable.

• ②The company does not acquire or transfer other companies, expand or build new real estate, plant and equipment, so it is not applicable.

• ③The company does not use of funds for the transfer investment of other companies, so it does not apply.

• ④The company does not use funds for replenishing operating capital or paying off liabilities, so it is not applicable.

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5. An overview of operations

5-1.Business content

5-1-1.Scope of business

• (1)The main contents of the company's business:

• ①Business operation includes the manufacturing, sales of automobiles, motorcycles and spare parts, as well as import and export trading.

• ②Manufacturing, processing and sales of parts for both aviation aircraft and ships.

• ③Manufacturing, processing and sales of transportation machinery and its parts.

• ④Manufacturing, sales, processing of machines, molds and related equipment for lighting, and import and export of trading.

• ⑤CD01020 Manufacturing of rail vehicle and its parts.

• ⑥F114080 Wholesales of rail vehicle and its parts.

• ⑦C805050 Manufacturing of industrial plastic products.

• ⑧CE01030 Manufacturing of optical instruments.

• ⑨F113030 Wholesales business of precision instrument.

• (2)The proportion of the company's business:

• Presently, the company's main business is concentrated in items (1) and (4), which accounts for more than 85% of the business.

• (3)The company's current products (service): lamps and molds for automobiles and motorcycles.

• (4)New products (services) planned by the company:

• ①High-pixel ADB headlight optical system module.

• ②Tunnel-type visual mapping taillights.

• ③Low-cost multi-eye LED projection and reflective headlights.

• ④Replaceable SOCKET LED far/near lights for motorcycles and indicative car lights.

5-1-2.Industry overview:

• (1)The present situation and development of the industry:

• The channels of automotive component sales can be divided as the provision for the use of OEM and ODM markets, and for provision of the after sales maintenance of the AM and OES markets. Due to the stringent quality requirements and control of the original auto parts, coupled with the problem of transportation, and the saturation of the domestic automobile market and it is not easy to expand the domestic demand market, hence, the local auto parts manufacturers are actively expanding their exports. Some companies have managed to become the global spare parts OEM of the international automobiles companies, exporting relatively more competitive products like headlights, metal sheets for the car body, automotive electronics, rims and bumpers.

• (2)Connection of the upstream, mid-stream and the downstream industry: Automotive components are used by automotive manufacturers and maintenance factories for parts replacement. The materials can be divided into metal and non -metal components, including petrochemical, glass, steel, rubber, motor and electronics industries which cover quite an extensive range of industries. The following picture shows the upstream, middle and downstream industry correlation of the automotive components industry:

63

Mid-stream

Upstream

Downstream

Plastic Automobile iSteel industry d Spare parts of manufacturers Petrochemical automobiles iGlass d Maintenance factories of iElectrical d automobiles iElectronics d i d

• (3)Various development trends of products and competition: Development trends

  • ①To improve the efficiency of the LED light source, and reduce the cost, and the continuous integration of LED into automobile headlights. Due to competition, the near and high beam lights are converted from monocular projection optical systems to multi-eye, and the physical appearance is more attractive.

  • ②Issues of safe driving are being discussed continuously around the world, besides the ADB night-time smart road driving control and safety aid like sequential directional lights, more active functions will be added to the car lights in the future to provide a safer environment for both the drivers and the pedestrians.

  • ③Due to the market demand of all-LED and smart lamps, research and development are carried out on the electronic control functions of lamps and vehicles, and the continuous growth of technology, in order to compete with international manufacturers.

  • ④In order to differentiate the car headlights, innovations of the styling and additional functions are continued so as to increase the value added to the luminaires.

• Competition situation:High-end products compete for technical capabilities, and medium and low-end products compete for cost.

• 5-1-3.Technology and R&D overview:

• (1)Research and development expenses incurred for the most recent year and up to the date of publication of the annual report:

date of publication of the annual report:	date of publication of the annual report:	date of publication of the annual report:	date of publication of the annual report:
Unit: NT thousands
Year of occurrence	2018	2017	As of the year 2019.03.31
Cost of research and development	205,809	206,026	48,471

• (2)Technology or products that have been successfully developed in the most recent year and up to the date of publication:

• ①Minimized (12 X 30mm) matrix LED high/low beam projection PES system.

• ②Tunnel-type mapping visual taillight optical module.

• ③Shaped matrix LED high/low beam projection type PES system.

• 5-1-4.Long-term and short-term business development plans:

• Short-term:

• ①Visit the customers regularly and secure the quotation information regarding the development of new models.

• ②To develop orders of FCA front fog light and expand the sales turnover in North America.

• ③To improve the design process to reduce costs and improve the quality of the molds,

64

and to secure orders the mold orders of the Koito Group.

• ④Research and development of ADB electronic control system and to expand the sales turnover.

Long-term:

• ①To expand the overseas business and ensure performance growth.

• ②Develop new technologies, new products, find new customers, and to increase turnover.

• ③To strengthen the design and development of new products for Fuzhou Koito Ta Yih.

• ④To improve LED optical design and research and development capabilities of

electronic component, and shorten the development time of new products.

5-2.The market, production and sales overview

• 5-2-1.Market analysis

• (1)Sales of major commodities (services) (providing) region:

The company mainly focuses on OEM customers, and its sales regions mainly include Taiwan, Japan, China and the United States.

• (2)Market shares: 80% in Taiwan.

• (3)The future supply and demand and the growth of the market:

• ①As the international economic growth tends to be more conservative, the car factory and the lamp factory will be more work closely to enhance the market competitiveness, and phasing out the weak and the strong remains is a new opportunity for Ta Yih.

• ②The popularization of LED headlamps in the future and the characteristics of high-degree-of-freedom design have pushed forward the competitive advantage of Ta Yih, the next round of Advanced Driving Beam (ADB), Ta Yih has made strategic alliances with the car factory-car light source factory-electronic control factory to start the preliminary pilot mass production.

• ③Although the domestic car market has stagnated, but Ta Yih has globalization, and has grown steadily by cooperating with the Japan Koito Manufacturing Co., Ltd.

• (4)Competitive niche:

• ①Quality: Actively promote various quality improvement activities. From design, development, production to shipment, we have achieved the total comprehensive quality management. The quality has reached the international first-class level presently and achieved high appraisal and consistent recognition from customers.

• ②Cost:

• ❶Actively promote the low price reduction activities, from the globalization and localization of key materials, improvement of VA/VE to production efficiency and management efficiency, produce good results.

• ❷Strengthen the profitability of the company by the construction of a complete original price management function and establishing a reasonable cost structure for the product.

• ③Delivery: With accurate delivery and excellent rapid design and development capabilities, and working with the automobiles manufacturers to change with trends and competing with each other leaves Ta Yih the only choice among the automobile manufacturers.

• (5)Advantages and disadvantages of the development of the prospects, and the countermeasures:

• ①Advantages

65

• ❶Through the cooperation of design with Koito Group, the design technology and talent development can be strengthened.

• ❷Expand the integration of technology with the Koito Group, allocation of resources and cooperation, and expand the mainland, North America and other markets.

• ❸The participation of the each car maker in the development of cars for the Asia and the global, as well as the production and sales strategies of Koito Group, Ta Yih also participated in the development, production and sales of international division of lamps.

• ❹The light molds that are exported to the United States, Japan, the mainland, South Africa and Southeast Asia won the praises of the customers; from now on, Tai Yih is committed to quality improvement, and to expand the export market.

• ②Disadvantages and countermeasures Disadvantage: Increase in cost. Countermeasure :

• ❶VA/VE。

• ❷Globalization and localization of raw materials and spare parts.

• ❸Expand the scope of the supply chain, and integrate with the collaboration system of Fuzhou Koito Ta Yih, to optimize the adjustment on both sides of the straits and to source for low cost parts to be sold back to Taiwan.

• ❹Instructions of Koito Group's centralized purchasing system, and to maintain and reduce the purchasing prices of materials.

• ❺Pre-orders of raw materials.

• ❻Rationalize the structure and material of the molds, and reuse of idle stock.

• ❼Improvement of team work through the TPS activities and to increase productivity and production efficiency.

• ❽Continue to reduce defects, reduce energy consumption, reduce the amount of consumables, and reduce production costs.

5-2-2.Important application of major products and production processes:

• (1)Important application of major products

Major products	Important application
①Lighting for cars	For the car assembling industry.
②Lighting for motorcycles	For motorcycle assembling industry

66

(2)Production of major products ①Manufacturing process of headlight:

①M	anufacturing process of headlight:	anufacturing process of headlight:	anufacturing process of headlight:	anufacturing process of headlight:	anufacturing process of headlight:	anufacturing process of headlight:	anufacturing process of headlight:	anufacturing process of headlight:	anufacturing process of headlight:	anufacturing process of headlight:	anufacturing process of headlight:
Spare parts manufacturing process		PC 、 GL Lamp housing coating		PC forming 、 UV hardening hardening			BMC forming 、 BMC steaming				SPC steaming
Assembling process
						Fast addition				of nut cap
						Assembly of reflection mirror and base
						Coatingof adhesive
						Assembly of light housing and RS
						Pressing
						Assembly of bulb and wire
						Airtight testing
						Assembly of cover and exhaust pipe
						Light test
						Shipment inspection
						Packaging

②Manufacturing process of identification lamps (except for small lamps):

②M	②M	anufacturing process of identification lamps(except for small lamps):	anufacturing process of identification lamps(except for small lamps):	anufacturing process of identification lamps(except for small lamps):	anufacturing process of identification lamps(except for small lamps):
Spare parts manufacturing process		Lamp housing forming 、 coating base formin g formin g
	Spare parts manufacturing process		Lamp housing forming 、 coating		base formin g formin g

67

					of	of			、 coating of	、 coating of
Assembling process
							Hot embedding of screws
							Lock reflective lens and heat shield
	Ultras onic vibrat ion		Rub bing the		hot plate
										Ultrasonic processing
							Cover of ligh housing
							Assemblyof wire
							Tighten
							Airtight test
							Drain pipe, seal decorative strip
							Lightingtest
							Inspection of physical appearance
							Packaging and put into basket

68

③Manufacturing process of small lights

==> picture [438 x 433] intentionally omitted <==

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

Lamp base
Spare housing
parts forming forming
、 、
manufacturing
process coating coating
of of
Locking of Tighten after
Stamping the iron piece
screw bolt framing
Pack heat Locking of ligh
Riveting the iron wire
shield housing
Ultrasonic
Riveting the handle
processing
Assembling
process Airtight test Locking of screw bolt
Assembly of wire and
Tighten
light bulb
Inspection of physical
appearance
Packaging and put into
basket
----- End of picture text -----

(3) Supply status of the major raw materials:

Items	Supplyarea
PMMA	Local(Chi Mei)
ABS	Local(Chi Mei)
PP	Local(Dynachem,Toyota Tsusho Corporation,Ginar TechnologyEngineeringPlastics)
AAS	Local(Ginar,Chi Mei)
BMC	Local(Wah HongIndustrial Corp.)
PC	Local(Chi Mei,Toyota Tuosho Corporation),overseas(SABIC from HongKong)
PET+PBT	Foreign(SABIC from HongKong)

69

• (4)Setting forth the names of any suppliers (clients) that have supplied (sold) 10 percent or more of the company's procurements (sales) in the preceding 2 fiscal years, and the monetary amount and the proportion of such procurements (sales) as a percentage of total procurements (sales), and explaining the reason for any change in the amount:

• ①Setting forth the names of any suppliers that have supplied 10 percent or more of the company's procurements in the preceding 2 fiscal years, and the monetary amount and the proportion of such procurements : Unit: NT thousands

		2017	2017			2018	2018			Till the first quarter of 2019	Till the first quarter of 2019
Item	Name	Amount	Net annual net purchase ratio (%)	Relationship with the issuer	Name	Amount	Net annual net purchase ratio (%)	Relationship with the issuer	Name	Amount	Net purchase ratio as of the previous quarter of the current year (%)	Relationship with the issuer
1	Company A	840,345	19	None	Company A	899,956	23	None	Company A	189,365	19	None
2	Company B	518,362	11	None	Company B	416,079	10	None	Company C	90,811	9	None
	Others	3,132,305	70	-	Others	2,671,586	67	-	Others	706,610	72	-
Net purchases		4,491,012	100	-	Net purchases	3,987,621	100	-	Net purchases	986,786	100	-

Reasons for the increase or decrease of the purchase amount:

The Company maintains a stable cooperative relationship with the suppliers, and the proportion of purchases is adjusted according to the quality, price and conditions of the company's demand.

②A list of any clients accounting for 10 percent or more of the company's total sales) amount in sold to each, the percentage of total sales accounted for by each:	②A list of any clients accounting for 10 percent or more of the company's total sales) amount in sold to each, the percentage of total sales accounted for by each:	②A list of any clients accounting for 10 percent or more of the company's total sales) amount in sold to each, the percentage of total sales accounted for by each:	②A list of any clients accounting for 10 percent or more of the company's total sales) amount in sold to each, the percentage of total sales accounted for by each:	②A list of any clients accounting for 10 percent or more of the company's total sales) amount in sold to each, the percentage of total sales accounted for by each:	②A list of any clients accounting for 10 percent or more of the company's total sales) amount in sold to each, the percentage of total sales accounted for by each:	②A list of any clients accounting for 10 percent or more of the company's total sales) amount in sold to each, the percentage of total sales accounted for by each:	②A list of any clients accounting for 10 percent or more of the company's total sales) amount in sold to each, the percentage of total sales accounted for by each:	②A list of any clients accounting for 10 percent or more of the company's total sales) amount in sold to each, the percentage of total sales accounted for by each:	the 2 most recent fiscal years, the amounts Unit: NT thousands	the 2 most recent fiscal years, the amounts Unit: NT thousands	the 2 most recent fiscal years, the amounts Unit: NT thousands	the 2 most recent fiscal years, the amounts Unit: NT thousands
		2017				2018				Till the firstquarter of 2019
Item	Name	Amount	Net annual sales of goods (%)	Relationship with the issuer	Name	Amount	Net annual sales of goods (%)	Relationship with the issuer	Name	Amount	Net sales ratio as of the previous quarter of the current year (%)	Relationship with the issuer
1	Company A	1,559,161	25	Director cum principal shareholder	Company B	1,300,844	23	None	Company B	507,814	35	None
2	Company B	1,506,958	25	None	Company C	1,260,518	22	None	Company C	361,721	25	Director cum principal shareholder
3	Company C	1,010,790	16	None	Company A	1,250,831	22	Director cum principal shareholder	Company A	272,237	18	None
	Others	2,120,481	34	-	Others	1,891,618	33	-	Others	323,641	22	-
Net sales		6,197,390	100	-	Net sales	5,703,811	100	-	Net sales	1,465,413	100	-

Reasons for changes in sales volume:

Due to the results of the company's consideration of market trends, product demand, research and development technology, profits and contracts with customers.

70

(5) Production value in the most recent two years: Unit : each/NT$ thousands

Year of occurrence		2017			2018
Majorproducts	Production	Yield	Value	Production	Yield	Value
Lights	7,500,000	7,016,494	2,887,480	7,800,000	6,005,490	2,471,424
Molds	1,036	564	497,655	1,036	591	521,118
Others	－	－	43,958	－	－	80,874
Total	7,501,036	7,017,058	3,429,093	7,801,036	6,006,081	3,073,416

(6) Sales volume in the last two years: Unit : each/NT$ thousands

Year of occurrence	2017	2017	2017	2017	2018	2018	2018	2018
Major products	Domestic sales		Export		Domestic sales		Export
	Sales volume	Sales value	Sales volume	Sales value	Sales volume	Sales value	Sales volume	Sales value
Lights	4,130,883	2,564,424	9,402,995	2,431,213	3,163,388	1,991,425	12,685,252	2,497,395
Molds	80	232,299	234	343,319	153	398,484	185	205,098
Others	－	466,931	－	159,204	－	408,842	－	202,567
Total	4,130,963	3,263,654	9,403,229	2,933,736	3,163,541	2,798,751	12,685,437	2,905,060

• 5-3.The number of employees employed for the 2 most recent fiscal years, and during the current fiscal year up to the date of publication of the annual report, their average years of service, average age, and education levels (including the percentage of employees at each level) :

	average age, and education levels (including the percentage of	average age, and education levels (including the percentage of	employees	at each level) :	at each level) :
				Unit: person/year
	Year of occurrence		2017	2018	As of the year 2019.03.31
	Number of employees	Salesperson	15	13	15
		Management staff	353	360	351
		Factory personnel	549	540	527
		Total	917	913	893
	Average age		40	40	40
	Average serviceyears		11	11	11
	The educational background breakdown	PhD.	0	0	0
		Master degree	87	98	96
		College	421	425	414
		Senior high school	327	315	314
		Below senior high school	82	75	69

• 5-4. Disbursements for environmental protection

• 5-4-1.Total losses (including damage awards) and fines for environmental pollution for the 2 most recent fiscal years, and during the current fiscal year up to the date of publication of the annual report: None.

• 5-4-2.The measures (including corrective measures) and possible disbursements to be made in the future: Not applicable.

5-5. Labor relations

• 5-5-1.Any employee benefit plans, continuing education, training, retirement systems, and the status of their implementation, and the status of labor-management agreements and measures for preserving employees' rights and interests:

• (1)Implementation of employee benefits:

  • ①All employees participate in labor insurance, national health insurance and group insurance:

All employees of the company participate in labor insurance and national health insurance. All employees of the company are free to participate in group

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insurance. The insurance coverage is personal life insurance (disability payment, death payment, etc.) and accidental injury death payment.

②Regular health inspection for the employees:

To ensure the health of the employees, the company not only provides regular free health inspections, but also provides special health checks to certain operators. In 2018, the Sin-lau Hospital is arranged to carry out health inspections for the employees at the factory.

• ③Free dormitory for employees who stay far away.

• ④Purchase games and fitness equipment and provide the employees to use at no cost.

⑤Provide employee meal allowance, set up a restaurant for employees to dine, and have a sales department for colleagues.

⑥Subsidize the year-end annual dinner and sponsor the lottery prizes.

⑦Provide the colleagues free flu vaccine injection.

⑧Set up a breast feeding room for female worker to breast feed after birth.

⑨To arrange for a doctor to visit the company monthly and to provide medical advice and assistance to colleagues.

• ⑩Engage a legal consultant to provide colleagues with legal advice and services at any time.

• ⑪For those on business trips, their travel insurance shall be covered by the company.

• ⑫Establish a staff welfare committee to handle employee welfare matters: The Company established the Staff Welfare Committee on July 8, 1980, which is responsible for the welfare of all employees. At present, there are 26 members, except for one of the designated member (executor of business), which is appointed by the company, the rest are elected among the workers. Meeting is held every two months, and an extraordinary meeting will be held when needed, discussing the employee's fringe benefits, and to ensure that the committee is doing a good job.

Weekday activities include:

❶Issuing birthday monetary gifts for employees and vouchers for mother's day.

• ❷Issuing monetary gifts for the Dragon Boat Festival, Mid-Autumn Festival and the Spring Festival, and holds a year-end annual dinner party and to provide gifts and monetary gifts.

❸Issue monetary gifts for new weds employees, and subsidies for funerals.

❹Issue employee hospitalization condolences for injuries.

❺Issue maternity grant

❻Subsidize employees' domestic tourism and the parent and child tourism.

❼Sponsor the activities of the colleagues’ badminton club.

❽Organize various ball games and other socializing events.

  - ❾Sign up special domestic stores and to provide complete and high-quality consumer information to the colleagues.

• (2)Implementation of continuous study and training for employee

• ①Continuously cultivate talents, assist colleagues to grow, and improve the quality of human resources

• ②In order to implement the company's education and training concepts and fully utilize its functions, the company's education and training system is divided as:

  • ❶In-plant training: The annual company's education and training program is drawn up by the company's human development department. The company's supervisors or colleagues who receive training outside are appointed as lecturers, and the knowledge of the company's colleagues is passed on.

    • ⒶTraining for new comers

    • ⒷStrata training: distinguish between managerial level, section class, group level etc.

    • ⒸProfessional training: distinguish between talent development, safety environment, production, quality, original price, development and other types of courses.

  • ❷Off-site and overseas training: In addition to the planned education and training in the factory, the staff of each department may send personnel to participate in training courses sponsored by various off-site training institutions.

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❸On job training: Each department of the company develops departmental training programs every year. The heads of the departments or the peers who have been trained will be appointed as lecturers, and are responsible for the passing on the knowledge.

In 2018, a total of 60 in-plant training courses were conducted, with 170 hours of training and there were 1,721 participants. In 2019, a total of 64 people participated in 39 training courses outside the factory.

In addition, in order to improve the language proficiency and human quality standards of all colleagues, English and Japanese courses are conducted to equip the staff to meet the needs at work and further explore the international market to achieve sustainable management.

• (3)Implementation of retirement system:

In order to ensure a stabilize life for the employees after retirement, the company established the retirement scheme for employees according to law, and established the Labor Retirement Reserve Supervision Committee on August 25, 1987, and set a retirement reserve of 2% per month based on the total salary, which is deposited in a special account at the Bank of Taiwan. This is for protecting the rights and interest of the laborers, and by the end of each year, if the balance of the account is insufficient to pay the amount of the pension calculated in accordance with the above-mentioned retirement conditions for the next year, the difference will be set at the end of March of the following year.

Since July 1st, 2005, the Republic of China has adopted a new government retirement system in parallel with the old. Employees who choose the pension system with the Labor Pensions Regulations are required to pay 6% of their monthly salary to the individual pension account of the Labor Insurance Bureau. Those who wish to pay voluntarily, and the voluntary payment rate is deducted from the employee’s monthly salary to the individual pension account of the Labor Insurance Bureau.

Base on thee applicable provisions of the Labor Pensions, the Regulations of the company are as follows:

• ①Voluntary retire :

• Employees meeting any one of the following conditions may opt for voluntary retire (In accordance with the regulations, the person who chooses the labor pension regulations):

• ❶Those who have worked for more than 15 years and have reached the age of 55.

• ❷Those who have worked for more than 25 years.

• ❸Ｔhose who have worked for more than 10 years, and have reached the age of 60.

• ②Forced retirement:

The company may not force its employee to retire if the employee does not meet any of the following circumstances

• ❶Have reached 65 years

• ❷Workers who are at a loss of mind or physically disabled to carry the job. The age specified in the first paragraph of the preceding paragraph, for workers capable of handling dangerous or physically fit for special tasks, shall be submitted to the central competent authority for approval and adjustment, but they must not be less than 55 years old.

• ③Criteria for pension grant:

• ❶The working years before and after the application of Labor Standard Acts, and continuing to apply the Labor Standard Acts pension requirement in accordance with the Labor Pensions Ordinance, the pension given is based on the standards in accordance with Articles 84-2 and 55 of the Labor Standard Acts.

• ❷Those who have the working years of the preceding paragraph and who are forced to retire in accordance with Article 35, paragraph 1 (2) of the Labor Standards Law, loss of mind or physically disabled due to carrying out their duties, in accordance with Article 55, Item 1 of the Labor Standards Law, the provisions will be an addition of 20%.

• ❸For employee who is the subject to the pension provisions of the Labor

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Pensions Regulations, the company pays a 6% of the monthly salary of the employees’ personal pension accounts.

• ④Payment of pension:

The company shall pay the employee's pension and pay it within 30 days from the employee's retirement date.

• (4)Reduce the incidence of occupational disasters among employees: In order to establish a zero-disaster, zero accident, healthy and comfortable working environment, the company passed the OHSAS-18001 Occupational Safety and Health Management System Certification in December of 2002, and promised that the company's operation and production activities continue to meet the requirements of the government's occupational safety and health regulations. The company will continue to implement disease and injury prevention, and implementation of workplace health management to ensure employees' physical and mental health The annual safety and health activities for 2018 :

• ①Zero disaster activities

  • ❶Continue inspection of internal safety and health, and improvement.

  • ❷Security of Contracting – the sign board management and the correspondence to the changes of operating instructions.

  • －

  • ❸To ensure safety of mechanical equipment Implementation of safety management standards for machinery equipment procurement and engineering contracting.

  • ❹The reinforcement of the job instructions - its content must contain safety-related regulations or hints.

  • ❺With the concept of a security tree, the security status of the entire company is instantly displayed in all workplaces.

• ②Promotion of physical and mental health

  • Continuous improvements on "illness due to abnormal work load, human-induced hazards, prevention of workplace malpractices".

• ③Prevention of fire and disasters

  • ❶Management of fire prevention of high risk fire and explosion areas.

  • ❷Maintenance and improvement of fire safety facilities.

  • ❸Management of hot work.

• ④Educational training: implementation in accordance with the 2018 annual planning of safety and health training course.

(5)Other important agreements: None

• 5-5-2.Any loss sustained as a result of labor disputes in the most recent fiscal year, and during the current fiscal year up to the date of publication of the annual report, an estimate of losses likely to be incurred in the future, and indicate mitigation measures to be taken: The relationship between the company's labor and management is still harmonious, because the leaders at all levels of the company take care of their colleagues, and take the initiative to discover problems and solve problems at any time, and all management rules and regulations concerning employee rights and interests are in accordance with the provisions of the Labor Law, so in the recent year and up to the end of the annual report, there is no labor disputes or labor agreement, and the company will continue to work on reducing labor disputes, maintain labor and capital harmony, and create a double win for both. In the case of active promotion and implementation of various employee welfare measures, there should be no loss due to labor disputes.

5-6.Important contracts:

Supply/sales contracts, technical cooperation contracts, engineering/construction contracts, long-term loan contracts, and other contracts that would affect shareholders' equity, where said contracts were either still effective as of the date of publication of the annual report, or expired in the most recent fiscal year:

Nature of the contract	Litigant	The commencement date of the contract	Major content	The restrictive clauses
Technical cooperation	USA WAVIEN	May 16,2003 ～May31, 2021	Scope of technological offers And related rights and obligations	－

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Technical cooperation	Koito Manufacturing Co., Ltd.	April 23, 2016 ～April 22, 2019 April 23, 2019～ April 22, 2022	Scope of technological offers And related rights and obligations	－
Technology transfer	Fuzhou Koito Ta Yih Automotive Lamp	January 1, 2017～ December 31, 2019	Scope of technological offers And related rights and obligations	－
Technology transfer	National Cheng KungUniversity	January 15, 2014～ January14, 2021	Scope of technological offers And related rights and obligations	－

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6. Financial status:

6-1.The recent five-year simplified balance sheet and consolidated income statement

6-1-1.Information of the condensed balance sheet and consolidated income statement

－ － Adopts the international financial reporting standards consolidated

(1)Condensed balance sheet of the most recent five years Unit: NT$ thousands

Year of occurrence Items Current assets	Year of occurrence Items Current assets	Financial information of the most recent five years (note)	Financial information of the most recent five years (note)	Financial information of the most recent five years (note)	Financial information of the most recent five years (note)	Financial information of the most recent five years (note)	As of the year 2019.03.31 Financial information
		2014	2015	2016	2017	2018
		1,980,774	2,221,994	2,061,395	2,308,382	2,003,960	1,912,211
Investment accounted for		334,954	368,596	404,770	412,253	406,241	394,796
Property, plants and		998,574	982,411	1,028,495	1,010,568	966,815	986,875
Intangible assets		－	－	－	－	－	－
Other non-current assets		98,381	82,899	145,884	56,480	75,025	87,407
Total net assets		3,412,683	3,655,900	3,640,544	3,787,683	3,452,041	3,381,289
Current	Before	1,436,900	1,572,744	1,495,416	1,577,498	1,345,910	1,167,501
liabilities	After distribution	1,764,689	1,953,894	1,891,812	1,973,894	－	－
Non-current liabilities		287,359	295,784	291,826	275,160	257,526	243,435
Total	Before	1,724,259	1,868,528	1,787,242	1,852,658	1,603,436	1,410,936
liabilites	After distribution	2,052,048	2,249,678	2,183,638	2,249,054	－	－
Equity Attributed to Shareholders of the Parent Company							1,970,353
	of the Parent	1,688,424	1,787,372	1,853,302	1,935,025	1,848,605
Share capital		762,300	762,300	762,300	762,300	762,300	762,300
Capital reserv	e	60,472	60,472	60,472	60,472	60,605	60,736
Reserved	Before	846,094	952,100	1,046,069	1,134,859	1,054,592	1,168,702
earnings	After distribution	518,305	570,950	649,673	738,463	－	－
Other equity		19,558	12,500	-15,539	-22,606	-28,892	-21,385
Treasurystock		－	－	－	－	－	－
Non controllinginterest		－	－	－	－	－	－
Total equity	Before	1,688,424	1,787,372	1,853,302	1,935,025	1,848,605	1,970,353
	After distribution	1,360,635	1,406,222	1,456,906	1,538,629	－	－

Note: Except for the financial information of the first quarter of 2019, which has been reviewed by the accountant, the financial information of each of the above years has been verified by an accountant.

(2)The condensed comprehensive income statement of the most recent five years

Unit: NT$ thousands

Year of occurrence Items	Financial	information	of the most recent five years (note)	of the most recent five years (note)	of the most recent five years (note)	As of the year March 31, 2019 Financial
	2014	2015	2016	2017	2018
Operatingrevenue	4,962,422	5,731,553	5,900,257	6,197,390	5,703,811	1,465,413
Operating grossprofit	889,868	973,896	1,021,242	1,081,191	830,987	282,584
Operatingnet income	387,620	442,551	458,566	504,164	277019	150,565
Non-operating income and expenses	64,135	90,384	121,455	81,807	93,783	-2,227
Netprofit before tax	451,755	532,935	580,021	585,971	370,802	148,338
Netprofit after tax	372,091	449,612	497,308	499,364	319,207	114,110
Other comprehensive profit and loss (net after tax)	717	-22,875	-50,228	-21,245	-9,364	7,507
Current comprehensive profit and loss	372,808	426,737	447,080	478,119	309,843	121,617
Net income attribute to the shareholder of the parent	372,091	449,612	497,308	499,364	319,207	114,110

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Net profit attributable to non-controllinginterests	－	－	－	－	－	－
Comprehensive profit and loss attributed to the shareholders of theparent company	372,802	426,737	447,080	478,119	309,843	121,617
Comprehensive profit and loss attributed to non- controlling interest	－	－	－	－	－	－
Earning per share(NT$)	4.88	5.90	6.52	6.55	4.19	1.50

Note: Except for the financial information of the first quarter of 2019, which has been reviewed by the accountant, the financial information of each of the above years has been verified by an accountant.

6-1-2.Information of condensed balance sheet and consolidated income statement

• Adopt the International Financial Reporting Standards - individual

(1)Condensed balance sheet of the most recent five years

Unit: NT$ thousands

		Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Year of occurrence		Financial information of the most recent fiveyears(note)
Items		2014	2015	2016	2017	2018
Current assets		1,979,559	2,220,769	2,060,237	2,307,356	2,002,940
Investment accounted for		336,169	369,821	405,928	413,279	407,261
Property, plants and		998,574	982,411	1,028,495	1,010,568	966,815
Intangible assets		－	－	－	－	－
Other non-current assets		98,381	82,899	145,884	56,480	75,025
Total net assets		3,412,683	3,655,900	3,640,544	3,787,683	3,452,041
	Before	1,436,900	1,572,744	1,495,416	1,577,498	1,345,910
Current
liabilities	After	1,764,689	1,953,894	1,891,812	1,973,894	－
Non-current liabilities		287,359	295,784	291,826	275,160	257,526
		1,724,259	1,868,528	1,787,242	1,852,658	1,603,436
Total
liabilities	After	2,052,048	2,249,678	2,183,638	2,249,054	－
Equity Attributed to
Shareholders of the Parent		1,688,424	1,787,372	1,853,302	1,935,025	1,848,605
Company
Capital stocks		762,300	762,300	762,300	762,300	762,300
Capital reserv	e	60,472	60,472	60,472	60,472	60,605
Reserved	Before	846,094	952,100	1,046,069	1,134,859	1,054,592
earnings	After	518,305	570,950	649,673	738,463	－
Other equity		19,558	12,500	-15,539	-22,606	-28,892
Treasurystock		－	－	－	－	－
Non-controllinginterest		－	－	－	－	－
	Before	1,688,424	1,787,372	1,853,302	1,935,025	1,848,605
Total equity
	After	1,360,635	1,406,222	1,456,906	1,538,629	－

Note: The financial information of the above years is certified by an accountant.

(2)The condensed comprehensive income statement of the most recent five years

	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Year of occurrence Items	Financial information of the most recent fiveyears
	2014	2015	2016	2017	2018
Operatingrevenue	4,962,422	5,731,553	5,900,257	6,197,390	5,703,811
Operating grossprofit	889,868	973,896	1,021,242	1,081,191	830,987
Net income	387,654	442,586	458,614	504,211	277,060
Non-operatingincome and expenses	64,101	90,349	121,407	81,760	93,742
Netprofit before tax	451,755	532,935	580,021	585,971	370,802
Netprofit after tax	372,091	449,612	497,308	499,364	319,207

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Other comprehensive profit and loss (net after tax)	717	-22,875	-50,228	-21,245	-9,364
Current total comprehensive income	372,808	426,737	447,080	478,119	309,843
Earningsper share(NT $)	4.88	5.90	6.52	6.55	4.19

Note: The financial information of the above years is certified by an accountant.

6-1-3.The name of the certified public accountant in the past five years and the verification

opinions

opinions
Year of	2014	2015	2016	2017	2018
Accountant Name	Liao HongRu	Liao HongRu	Liao Hong	Liao HongRu	Liao HongRu
	GongJun Ji	GongJun Ji	Li Ji Zhen	Li Ji Zhen	Li Ji Zhen
Checked	Unqualified opinion	Unqualified	Unqualified	Unqualified	Unqualified

6-2.Financial analysis for the past five years

6-2-1.Financial analysis －adopts international financial reporting standard－Consolidated:

Year (Note 1) Item analysed(note 2)		Financial analysis		of the most recent fiveyears			As of the year 2019.03.31
		2014	2015	2016	2017	2018
Financial structure (%)	Debt to asset ratio:	50.53	51.11	49.09	48.91	46.45	41.73
	Long term fund to property, plant and	197.86	212.05	208.57	218.71	217.84	218.74
Debt service ability	Current ratio	137.85	141.28	137.85	146.33	148.89	163.79
	Quick ratio	83.10	88.34	81.07	83.78	73.88	83.64
	Interest coverage folds	563.58	514.42	811.09	578.88	443.48	463.11
Operational ability	Account receivables’ turnover rate (times)	5.19	5.37	5.35	5.80	6.16	7.08
	Average sales days	70	68	68	63	59	52
	Inventoryturnover rate(times)	6.81	6.93	7.30	6.95	5.87	6.04
	Accountpayables turnover	4.37	4.80	5.03	5.33	5.76	6.72
	Average sales days	54	53	50	53	62	60
	Property,plants and equipment	5.11	5.79	5.87	6.08	5.77	5.92
	Turnover rate of total assets(times)	1.50	1.62	1.62	1.67	1.58	1.72
Profittability	Return on assets(%)	11.30	12.75	13.65	13.47	8.84	13.40
	Return of eguity (%)	20.64	25.87	27.32	26.36	16.87	23.92
	Proportion of pre-tax profit to paid upcapital(%)	59.26	69.91	76.09	76.87	48.64	19.46
	Net income margin(%)	7.50	7.84	8.43	8.06	5.60	7.79
	Earningsper share(NT$)	4.88	5.90	6.52	6.55	4.19	1.50
Cash flow	Cash flow ratio	25.84	30.63	32.49	36.85	33.67	-6.53
	Fund flow adequacyratio	86.59	78.05	84.15	77.83	79.47	77.84
	Cash reinvestment ratio(%)	2.81	4.60	2.98	4.93	1.51	-1.96
Leverage	Operational leverage	1.86	1.87	1.92	1.85	2.41	1.63
	Financial leverage	1.00	1.00	1.00	1.00	1.00	1.00

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Reasons for changes in various financial ratios in the past two years: (If the increase or decrease is less than 20%, the analysis may be exempted)

Reasons for changes in the interest coverage folds: Mainly due to the reduction of pre-tax net profit of the current year. Reasons for changes in the assets return ratio: Mainly due to the reduction of after tax profits of the current year Reasons for changes in the rate of return on equity: mainly due to the reduction in after-tax profits for the current year. Reasons for the changes in the ratio of net profit before tax to the amount of paid-in capital: mainly due to the reduction in net profit before tax for the current year.

Reasons for changes in the net profit margin: mainly due to the reduction in after-tax profits for the current year. Reasons for changes in the earnings per share: mainly due to the reduction in the after tax profit for the current year. Reasons for changes in cash reinvestment ratio: mainly due to the decrease in net cash flow from operating activities for the current year.

Operational leverage: mainly due to the decrease in operating profit for the year compared to the previous period.

Note 1 ： Exceptfor the financial information of the first quarter of 2019, which has been reviewed by the accountants,the financial information of the past years has been certified by an accountant. 。

Note 2: The calculation formula is as follows:

1. Financial structure

2. (1) Ratio of liabilities to assets. = total liabilities / total assets.

3. (2)Ratio of long-term capital to property, plant and equipment= (total equity + non-current liabilities) / net property, plant and equipment.

4. Debt service ability:

5. (1) Current ratio = Current asset/current liabilities

6. (2)Quick ratio= (Current assets-stock-prepaid expenses)/current liabilities.

7. (3) Interest coverage folds = Earnings before income tax and interest expenses /current interest expenses

8. Operational ability:

9. (1) Accounts receivables (including accounts receivable and notes receivable due to business) turnover rate= Net sales/average receivables for each period (including accounts receivable and notes receivable due to business)

10. (2) Average days for cash receipts= 365/account receivables turnover rate

11. (3) Inventory turnover rate = Cost of goods sold / average inventory

12. (4) Payables (including accounts payable and bills payable due to business) turnover rate = cost of goods sold / average payables for each period (including accounts payable and notes payable due to business).

13. (5) Average days for sales of goods = 365/stock turnover rate

14. (6) Turnover rate for property, plant and equipment = Net sales / average net of real estate, plant and equipment

15. (7)Total assets’ turnover rate=Net sales/average of total assets

16. Profitability

17. (1) Assets return ratio = [After-tax profit and loss + interest expense × (1 - tax rate)] / average total assets.

18. (2) Equity return ratio = Net income/Average equity

19. (3) Net Margin = Net Income / Net Sales

20. (4) Earnings per share= (Net Income Attributable to Shareholders of the Parent - Preferred Stock Dividend) / Weighted Average Number of Shares Outstanding

21. Cash flow

22. (1) Cash Flow Ratio = Net Cash Provided by Operating Activities / Current Liabilities

23. (2) Cash Flow Adequacy Ratio = Five-year Sum of Cash from Operations / Five-year Sum of Capital Expenditures, Inventory Additions, and Cash Dividend

24. (3) Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends)/ (Gross Property, Plant and Equipment + Long-term Investments + Other Noncurrent Assets + Working Capital) (Note 5)

Note: When analyzing the cash flow analysis, special attention should be paid to the following:

1. Net cash flow from operating activities refers to the net cash inflows from operating activities in the cash flow statement.

2. Capital expenditure refers to the number of cash outflows per year of capital investment.

3. The increase in inventory is only included when the ending balance is greater than the beginning balance. If the inventory is reduced at the end of the year, it is calculated as zero.

4. Cash dividends include cash dividends for ordinary shares and preferred shares.

5. Gross property, plant and equipment refers to the total amount of property, plant and equipment before deducting accumulated depreciation.

6. Leverage

7. (1) Operating Leverage = (Net Sales - Variable Cost) / Income from Operations (note 6)

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(2) Financial Leverage = Income from Operations / (Income from Operations - Interest Expenses)

• Note 3: The formula for calculating the earnings per share, the following should be paid when measuring:

• 1.It is based on the weighted average number of ordinary shares, not based on the number of shares issued at the end of the year.

• 2.Where there is a cash increase or treasury stock trader, the weighted average number of shares shall be calculated taking into account the circulation period.

• 3.The surplus or capital increase being transferred to capital increase will be retrospectively adjusted according to the proportion of capital increase when calculating the earnings per share of the previous year and the semi-annual period, and there is no need to consider the issue period of the capital increase.

• 4.If the preferred shares are non-convertible accumulated preferred shares, their annual dividends (whether issued or not) shall be the after-tax net profit reducing, or increasing after-tax net loss. If the preferred stock is non-cumulative, in the case of net profit after tax, the preferred stock dividend shall be deducted from the net profit after tax; if it is a loss, it shall not be adjusted.

• Note 4: When analyzing the cash flow analysis, special attention should be paid to the following items when measuring:

• 1.Net cash amount of operating activities refers to the net cash inflow of business activities in the cash flow statement.

• 2.Capital expenditure refers to the number of cash outflows of capital investment per year.

• 3.The increase in inventory is only included when the ending balance is greater than the beginning balance. If the inventory is reduced at the end of the year, it is calculated as zero.

• 4.Cash dividends include cash dividends for ordinary shares and preferred shares.

• 5.Gross property, plant and equipment refers to the total amount of property, plant and equipment before deducting accumulated depreciation.

• Note 5: The issuer shall classify various operating costs and operating expenses into fixed and variable terms according to their nature. If it involves any estimation or subjective judgment, they shall pay attention to their rationality and maintain the consistency.

• Note 6: If the company's stock has no par value or a par value other than NT$10, the calculation of the aforesaid capital ratio will be based on the equity ratio of the balance sheet to the parent company.

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6-2-2.Financial Analysis - Adopting International Financial Reporting Standards - Individuals:

Individuals:	Individuals:
Year (Note 1) Item analysed(note 2)		Financial analysis of the most recent fiveyears
		2014	2015	2016	2017	2018
Financial structure (%)	Debt to asset ratio:	50.53	51.11	49.09	48.91	46.45
	Long term fund to property, plant and Equipment Ratio	197.86	212.05	208.57	218.71	217.84
Debt service ability	Current ratio	137.77	141.20	137.77	146.27	148.82
	Quick ratio	83.01	88.26	80.99	83.71	73.80
	Interest coverage folds	565.58	514.42	811.09	578.88	443.48
Operational ability	Account receivables’ turnover rate(times)	5.19	5.37	5.35	5.80	6.16
	Average sales days	70	68	68	63	59
	Inventoryturnover rate(times)	6.81	6.93	7.30	6.95	5.87
	Accountpayables turnover rate(times)	4.37	4.80	5.03	5.33	5.76
	Average sales days	54	53	50	53	62
	Property, plants and equipment turnover rate (times)	5.11	5.79	5.87	6.08	5.77
	Turnover rate of total assets(times)	1.50	1.62	1.62	1.67	1.58
Profittability	Return on assets(%)	11.30	12.75	13.65	13.47	8.84
	Return of equity (%)	22.64	25.87	27.32	26.36	16.87
	Proportion of pre-tax profit to paid up capital (%)	59.26	69.91	76.09	76.87	48.64
	Net income margin(%)	7.50	7.84	8.43	8.06	5.60
	Earningsper share(NT$)	4.88	5.90	6.52	6.55	4.19
Cash flow	Cash flow ratio	25.84	30.63	32.49	36.85	33.67
	Fund flow adequacyratio	99.34	78.07	84.17	77.84	82.36
	Cash reinvestment ratio(%)	2.81	4.60	2.98	4.93	1.51
Leverage	Operational leverage	1.86	1.87	1.92	1.85	2.41
	Financial leverage	1.00	1.00	1.00	1.00	1.00
Reasons for changes in various financial ratios in the past two years: (If the increase or decrease is less than 20%, the analysis may be exempted) Reasons for changes in the interest coverage folds: Mainly due to the reduction of pre-tax net profit of the current year. Reasons for changes in the assets return ratio: Mainly due to the reduction of after tax profits of the current year Reasons for changes in the rate of return on equity: mainly due to the reduction in after-tax profits for the current year. Reasons for the changes in the ratio of net profit before tax to the amount of paid-in capital: mainly due to the reduction in net profit before tax for the current year. Reasons for changes in the net profit margin: mainly due to the reduction in after-tax profits for the current year. Reasons for changes in the earnings per share: mainly due to the reduction in the after tax profit for the current year. Reasons for changes in cash reinvestment ratio: mainly due to the decrease in net cash flow from operating activities for the current year. Operational leverage: mainly due to the decrease in operating profit for the year compared to the previous period.

Note 1: The financial information of the above years has been certified by an accountant.

Note 2: The calculation formula is as follows:

1. Financial structure

2. (1) Ratio of liabilities to assets. = total liabilities / total assets.

3. (2)Ratio of long-term capital to property, plant and equipment= (total equity + non-current liabilities) / net property, plant and equipment.

4. Debt service ability:

5. (1) Current ratio = Current asset/current liabilities

6. (2)Quick ratio= (Current assets-stock-prepaid expenses)/current liabilities.

7. (3) Interest coverage folds = Earnings before income tax and interest expenses /current interest expenses

8. Operational ability:

9. (1) Accounts receivables (including accounts receivable and notes receivable due to business) turnover rate= Net sales/average receivables for each period (including accounts receivable and notes receivable due to business)

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• (2) Average days for cash receipts= 365/account receivables turnover rate

• (3) Inventory turnover rate = Cost of goods sold / average inventory

• (4) Payables (including accounts payable and bills payable due to business) turnover rate = cost of goods sold / average payables for each period (including accounts payable and notes payable due to business).

• (5) Average days for sales of goods = 365/stock turnover rate

• (6) Turnover rate for property, plant and equipment = Net sales / average net of real estate, plant and equipment

• (7)Total assets’ turnover rate=Net sales/average of total assets

• Profitability

• (1) Assets return ratio = [After-tax profit and loss + interest expense × (1 - tax rate)] / average total assets.

• (2) Equity return ratio = Net income/Average equity

• (3) Net Margin = Net Income / Net Sales

• (4) Earnings per share= (Net Income Attributable to Shareholders of the Parent - Preferred Stock Dividend) / Weighted Average Number of Shares Outstanding

• Cash flow

• (1) Cash Flow Ratio = Net Cash Provided by Operating Activities / Current Liabilities

• (2) Cash Flow Adequacy Ratio = Five-year Sum of Cash from Operations / Five-year Sum of Capital Expenditures, Inventory Additions, and Cash Dividend

• (3) Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends)/ (Gross Property, Plant and Equipment + Long-term Investments + Other Noncurrent Assets + Working Capital) (Note 5)

• Leverage

• (1) Operating Leverage = (Net Sales - Variable Cost) / Income from Operations (note 6)

• (2) Financial Leverage = Income from Operations / (Income from Operations - Interest Expenses)

• Note 3: The formula for calculating the earnings per share, the following should be paid when measuring:

• 1.It is based on the weighted average number of ordinary shares, not based on the number of shares issued at the end of the year.

• 2.Where there is a cash increase or treasury stock trader, the weighted average number of shares shall be calculated taking into account the circulation period.

• 3.The surplus or capital increase being transferred to capital increase will be retrospectively adjusted according to the proportion of capital increase when calculating the earnings per share of the previous year and the semi-annual period, and there is no need to consider the issue period of the capital increase.

• 4.If the preferred shares are non-convertible accumulated preferred shares, their annual dividends (whether issued or not) shall be the after-tax net profit reducing, or increasing after-tax net loss. If the preferred stock is non-cumulative, in the case of net profit after tax, the preferred stock dividend shall be deducted from the net profit after tax; if it is a loss, it shall not be adjusted.

• Note 4: When analyzing the cash flow analysis, special attention should be paid to the following items when measuring:

• 1.Net cash amount of operating activities refers to the net cash inflow of business activities in the cash flow statement.

• 2.Capital expenditure refers to the number of cash outflows of capital investment per year.

• 3.The increase in inventory is only included when the ending balance is greater than the beginning balance. If the inventory is reduced at the end of the year, it is calculated as zero.

• 4.Cash dividends include cash dividends for ordinary shares and preferred shares.

• 5.Gross property, plant and equipment refers to the total amount of property, plant and equipment before deducting accumulated depreciation.

• Note 5: The issuer shall classify various operating costs and operating expenses into fixed and variable terms according to their nature. If it involves any estimation or subjective judgment, they shall pay attention to their rationality and maintain the consistency.

• Note 6: If the company's stock has no par value or a par value other than NT$10, the calculation of the aforesaid capital ratio will be based on the equity ratio of the balance sheet to the parent company.

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6-3.The review report by the supervisor on the financial report of the most recent fiscal year.

Supervisors’ Review Report

The consolidated financial report and individual financial report of 2018 prepared by the board of directors have been audited by LEE CHI CHEN and LIAO HUNG JU, the CPAs of Deloitte & Touche. We have also reviewed the reports as mentioned above and the business report of 2018 and the statement of earning distribution and believe that the reviewed reports and documents are prepared in accordance with the Company Act and applicable laws. The Supervisors’ Report is hereby submitted for approval.

This is hereby submitted to 2019 Annual Meeting of Shareholders of Ta Yih Industrial Co., Ltd.

TA YIH INDUSTRIAL CO., LTD.

Supervisor ： KONAGAYA HIDEHARU

Supervisor ： KEN BO WEN

Supervisor ： LIN CHIEN

Mar. 19, 2019

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6-4. Financial statement for the most recent fiscal year

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

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

Very truly yours,

Ta Yih Industrial Co., Ltd.

By

JUN YI WU Chairman March 15, 2019

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Ta Yih Industrial Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Ta Yih Industrial Co., Ltd. (the “Company”) and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”).

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matter

Key audit matter is the matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements for the year ended December 31, 2018. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

Key audit matter in the audit of the Group’s consolidated financial statements for the year ended December 31, 2018 is as follows:

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Sales Revenue from Hub Warehouse

Ta Yih Industrial Co., Ltd. mainly manufactures and sells automobile and locomotive lamps. The Company also sells its products to overseas markets. The sales pattern of overseas markets depends on the sales delivery from hub warehouse. Ta Yih Industrial Co., Ltd. usually relies on the statements or other information from the external custodians of hub warehouse when making important strategic decisions. The inventory change related to the delivery from hub warehouse is used as the basis for recognizing revenue, and the sales revenue is recognized when the customer picks up the goods (transfer of risks and rewards).

The sales revenue generated from the hub warehouse was $1,003,125 thousand for the year ended December 31, 2018, which accounted for 18% of the total operating revenue. Considering the fact that trading volume of revenue from the hub warehouse is significant to the consolidated financial statements of Ta Yih Industrial Co., Ltd. for the year ended December 31, 2018; therefore, the revenue recognition of the sales from hub warehouse needs to be verified through multiple internal controls and has been identified as a key audit matter.

Our audit procedures performed in respect of the above key audit matter included the following:

1. We sampled and examined the effectiveness of continuous operation of the relevant controls during the fiscal year.

2. We sampled and inventoried the stock of goods in hub warehouse. And then, checked the estimated amounts in accordance with the actual hub warehouse amounts, and compared the results through physical observation.

3. We confirmed the appropriateness of the hub warehouse revenue by sampling the sales revenue from shipment of hub warehouse and checked the corresponding documents, such as export declarations and bills of lading.

Other Matter

We have also audited the standalone financial statements of Ta Yih Industrial Co., Ltd. as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified opinion.

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

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

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that

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an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

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

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

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

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

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

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

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine a matter that was of most significance in the audit of the consolidated financial statements for the year ended December 31, 2018 and is therefore the key audit matter. We describe this matter in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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The engagement partners on the audit resulting in this independent auditors’ report are Hung-Ju Liao and Chi-Chen Li.

Deloitte & Touche Taipei, Taiwan Republic of China

March 15, 2019

Notice to Readers

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

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

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

Ta Yih Industrial Co., Ltd. and Subsidiaries

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

ASSETS CURRENT ASSETS Cash (Notes 3, 4 and 6) Notes receivable (Notes 3, 4 and 7) Accounts receivable (Notes 3, 4, 7 and 17) Accounts receivable from related parties (Notes 3, 4, 7, 17 and 23) Other receivable (Notes 3, 4 and 7) Other receivables from related parties (Notes 3, 4, 7 and 23) Inventories (Notes 4, 5 and 8) Prepayments (Note 23) Other current assets (Notes 4, 12 and 19) Total current assets NON-CURRENT ASSETS Investments accounted for using the equity method (Notes 4 and 10) Property, plant and equipment (Notes 4, 11, 23 and 24) Deferred tax assets (Notes 4 and 19) Other non-current assets (Notes 3, 4 and 12) Total non-current assets		December 31, 2018 Amount % $ 114,260 3 6,609 - 572,455 17 207,591 6 4,193 - 48,599 1 785,969 23 223,668 7 40,616 1 2,003,960 58 406,241 12 966,815 28 35,820 1 39,205 1 1,448,081 42		December 31, 2017 Amount % $ 182,479 5 6,975 - 766,580 20 278,472 8 8,734 - 47,236 1 862,116 23 124,697 3 31,093 1 2,308,382 61 412,253 11 1,010,568 27 34,042 1 22,438 - 1,479,301 39

TOTAL $ 3,452,041 100 $ 3,787,683 100

LIABILITIES AND EQUITY CURRENT LIABILITIES Contract liabilities-current (Notes 3,4 and 17 ) Notes payable (Note 13) Notes payable to related parties (Notes 13 and 23) Accounts payable (Note 13) Accounts payable to related parties (Notes 13 and 23) Other payables (Note 14) Other payables to related parties (Notes 14 and 23) Current tax liabilities (Notes 4 and 19) Deferred revenue-current (Note 3) Other current liabilities (Note 14) Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities (Notes 4 and 19) Net defined benefit liabilities (Notes 4,5, and 15) Other non-current liabilities (Note 14) Total non-current liabilities Total liabilities EQUITY ATTRIBUTED TO OWNERS OF THE COMPANY (Note 16) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity attributable to owners of the Company TOTAL		December 31, 2018 Amount % $ 323,019 9 185,813 6 6,437 - 484,440 14 43,089 1 223,564 7 68,737 2 10,575 - - - 236 - 1,345,910 39 119,909 3 135,020 4 2,597 - 257,526 7 1,603,436 46 762,300 22 60,605 2 583,285 17 68,264 2 403,043 12 1,054,592 31 (28,892) (1) 1,848,605 54 $ 3,452,041 100		December 31, 2017
				Amount % $ - - 235,402 6 15,038 - 661,204 18 59,909 2 273,818 7 76,909 2 55,118 2 199,085 5 1,015 - 1,577,498 42 113,351 3 159,372 4 2,437 - 275,160 7 1,852,658 49 762,300 20 60,472 2 533,348 14 68,264 2 533,247 14 1,134,859 30 (22,606) (1) 1,935,025 51 $ 3,787,683 100

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

89

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

Ta Yih Industrial Co., Ltd. and Subsidiaries

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

OPERATING REVENUE (Notes 4, 17 and 23) OPERATING COSTS (Notes 8, 18 and 23) GROSS PROFIT UNREALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES REALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 7, 18 and 23) Selling and marketing expenses General and administrative expenses Research and development expenses Expected credit gain Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES (Notes 4, 18 and 23) Other income Other gains and losses Share of profit of associates Total non-operating expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 19) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans (Note 15)		2018 Amount % $ 5,703,811 100 4,872,472 85 831,339 15 (4,565) - 4,213 - 830,987 15 180,785 3 171,839 3 205,809 4 (4,465) - 553,968 10 277,019 5 97,040 1 (5,626) - 2,369 - 93,783 1 370,802 6 51,595 1 319,207 5 (8,033) -		2017
				Amount % $ 6,197,390 100 5,126,223 83 1,071,167 17 (1,276) - 11,300 - 1,081,191 17 194,125 3 176,876 3 206,026 3 - - 577,027 9 504,164 8 112,649 2 (51,424) (1) 20,582 - 81,807 1 585,971 9 86,607 1 499,364 8 (17,082) - (Continued)

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Ta Yih Industrial Co., Ltd. and Subsidiaries

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

Income tax benefit relating to items that will not be reclassified subsequently to profit or loss (Notes 4 and 19) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations Income tax benefit relating to items that may reclassified subsequently to profit or loss (Notes 4 and 19) Other comprehensive loss for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR NET PROFIT ATTRIBUTABLE TO: Owners of the Company TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Company EARNINGS PER SHARE (New Taiwan dollars, Note 20) Basic Diluted		2018 Amount % $ 4,955 - (3,078) - (7,998) - 1,712 - (6,286) - (9,364) - $ 309,843 5 $ 319,207 6 $ 309,843 5 $ 4.19 $ 4.18		2017
				Amount % $ 2,904 - (14,178) - (8,495) - 1,428 - (7,067) - (21,245) - $ 478,119 8 $ 499,364 8 $ 478,119 8 $ 6.55 $ 6.54
		$		$
		$		$
		$		$

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

(Concluded)

91

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

Ta Yih Industrial Co., Ltd. and Subsidiaries

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

BALANCE AT JANUARY 1, 2017 Appropriation of the 2016 earnings (Note 16) Legal reserve Cash dividends distributed by the Company - NT$ 5.2 per share Net profit for the year ended December 31, 2017 Other comprehensive loss for the year ended December 31, 2017, net of income tax Total comprehensive income (loss) for the year ended December 31, 2017 BALANCE AT DECEMBER 31, 2017 Appropriation of the 2017 earnings (Note 16) Legal reserve Cash dividends distributed by the Company - NT$ 5.2 per share Unclaimed cash dividends overdue transferred to capital surplus Net profit for the year ended December 31, 2018 Other comprehensive loss for the year ended December 31, 2018, net of income tax Total comprehensive income (loss) for the year ended December 31, 2018 BALANCE AT DECEMBER 31, 2018		Share Capital Shares Amount Capital Surplus 76,230 $ 762,300 $ 60,472 - - - - - - - - - - - - - - - 76,230 762,300 60,472 - - - - - - - - 133 - - - - - - - - - 76,230 $ 762,300 $ 60,605		Retained Earnings Legal Reserve Special Reserve Unappropriated Earning $ 483,964 $ 68,264 $ 493,841 49,384 - (49,384) - - (396,396) - - 499,364 - - (14,178) - - 485,186 533,348 68,264 533,247 49,937 - (49,937) - - (396,396) - - - - - 319,207 - - (3,078) - - 316,129 $ 583,285 $ 68,264 $ 403,043	Other Equity Exchange Differences on Translating Foreign Operations $ (15,539) - - - (7,067) (7,067) (22,606) - - - - (6,286) (6,286) $ (28,892)	Total Equity $ 1,853,302 - (396,396) 499,364 (21,245) 478,119 1,935,025 - (396,396) 133 319,207 (9,364) 309,843 $ 1,848,605
		Shares 76,230 - - - - - 76,230 - - - - - - 76,230

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

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

Ta Yih Industrial Co., Ltd. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Expected credit loss reversed on trade receivables Impairment loss recognized on trade receivables Net gain on fair value changes of financial assets at fair value through profit or loss Finance costs Interest income Share of profits of associates Loss on disposal of property, plant and equipment, net Loss on disposal of available-for-sale financial assets, net Provision for loss on inventories Unrealized gain on transactions with associates Realized gain on transactions with associates Net loss (gain) on foreign currency exchange Changes in operating assets and liabilities: Notes receivable Accounts receivable Accounts receivable from related parties Other receivables Other receivables from related parties Inventories Prepayments Other current assets Contract liabilities Notes payable Notes payable to related parties Accounts payable Accounts payable to related parties Other payables Other payables to related parties Deferred revenue Other current liabilities Net defined benefit liabilities Other non-current assets Cash generated from operations Interest received Dividends received Interest paid Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at fair value through profit or loss Proceeds from sale of financial assets at fair value through profit or loss Purchase of available-for-sale financial assets Proceeds from sale of available-for-sale financial assets	2018 $ 370,802 151,702 (4,465) - (10) 838 (362) (2,369) 424 - - 4,565 (4,213) (7,262) 397 200,831 77,953 4,541 (965) 76,147 (98,971) (710) 123,934 (49,589) (8,601) (177,843) (18,221) (50,254) (8,172) - (779) (32,385) 210 547,173 362 - (838) (93,504) 453,193 (50,000) 50,010 - -	2017 $ 585,971 172,095 - 1,965 - 1,014 (496) (20,582) 329 326 713 1,276 (11,300) 4,348 (6,506) 41,600 (22,690) (993) (9,823) (264,078) 125,614 (5,377) - 35,622 1,694 (9,800) (11,970) (11,124) (2,404) 65,219 (699) (31,784) 229 628,389 496 14,716 (1,014) (61,338) 581,249 - - (75,000) 74,674 (Continued)

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Ta Yih Industrial Co., Ltd. and Subsidiaries

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

Proceeds from sale of debt investment with no active market Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrease in refundable deposits Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayments of short-term borrowings Refunds of guarantee deposits received Cash dividends Unclaimed cash dividends overdue transferred to capital surplus Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH CASH AT THE BEGINNING OF THE YEAR CASH AT THE END OF THE YEAR	2018 $ - (122,834) - (7,919) 5,613 (125,130) 718,400 (718,400) (50) (396,396) 133 (396,313) 31 (68,219) 182,479 $ 114,260	2017 $ 10,000 (77,814) 30 (5,428) 7,546 (65,992) 724,136 (724,136) - (396,396) - (396,396) (88) 118,773 63,706 $ 182,479

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

(Concluded)

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Ta Yih Industrial Co., Ltd. and Subsidiaries

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

1. GENERAL INFORMATION

Ta Yih Industrial Co., Ltd. (the “Company”) was incorporated in 1964. It was formerly known as Ta Yih Industrial Corp. and changed to the present name in 1976. The Company mainly sells, manufactures and processes automobile parts, motorcycle parts, railway vehicle parts, transportation machineries, industrial plastic parts, as well as invests in related industries.

The Company’s shares have been traded on the Taiwan Stock Exchange since October 1997.

The consolidated financial statements are presented in the Company’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors and authorized for issue on March 15, 2019.

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

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

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Company and entities controlled by the Company (collectively, the “Group”) accounting policies:

• 1) IFRS 9 “Financial Instruments” and related amendments

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

Classification, measurement and impairment of financial assets

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

The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the

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Group’s financial assets and financial liabilities as of January 1, 2018.

	MeasurementCategory	MeasurementCategory			Carrying Amount	Carrying Amount
Financial Assets	IAS 39	IFRS 9		IAS 39		IFRS 9	Remark
Cash	Loans and receivables	Amortized cost		$ 182,479		$ 182,479	a
Notes receivable, accounts	Loans and receivables	Amortized cost		1,107,997		1,107,997	a
receivable and other
receivables
Refundable deposits	Loans and receivables	Amortized cost		14,573		14,573	a
		Carrying				Carrying
		Amount			Amount as of
		as of January 1,			January 1, 2018
Financial	Assets	2018 (IAS 39)	Reclassifications			(IFRS 9)	Remark
Amortized cost		$ -
Add: Reclassification	from loans and	-	$	1,305,049
receivables (IAS 39)
		-		1,305,049	$	1,305,049	a
Total		$ -	$	1,305,049	$	1,305,049

• a) Cash, notes receivable, accounts receivable, other receivables and refundable deposits that were previously classified as loans and receivables under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9.

• 2) IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Refer to Note 4 for related accounting policies.

The Group elected only to retrospectively apply IFRS 15 to contracts that were not complete as of January 1, 2018 and recognize the cumulative effect of the change in retained earnings on January 1, 2018.

The impact on assets, liabilities and equity as of January 1, 2018 from the initial application of IFRS 15 is set out below:

Carrying Amount as of January 1, 2018 (IAS 18 ) Deferred revenue $ 199,085 Contract liabilities - current - Total effect on liabilities $ 199,085	Adjustments Arising from Initial Application Carrying Amount as of January 1, 2018 (IFRS 15) $ (199,085) $ - 199,085 199,085 $ - $ 199,085

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

New, Amended or Revised Standards and Interpretations	Effective Date
(the “New IFRSs”)	Announced by IASB (Note 1)
Annual Improvements to IFRSs 2015-2017 Cycle	January 1, 2019
Amendments to IFRS 9 “Prepayment Features with Negative	January 1, 2019 (Note 2)
Compensation”
IFRS 16 “Leases”	January 1, 2019
Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”	January 1, 2019 (Note 3)
Amendments to IAS 28 “Long-term Interests in Associates and Joint	January 1, 2019
Ventures”
IFRIC 23 “Uncertainty over Income Tax Treatments”	January 1, 2019

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.

• Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

• IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, and a number of related interpretations.

Definition of a lease

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

The Group as lessee

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

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

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The Group will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.

The Group as lessor

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

Anticipated impact on assets and liabilities

Right-of-use assets Total effect on assets Lease liabilities - current Lease liabilities - non-current Total effect on liabilities	Carrying Amount as of December 31, 2018 $ - $ - $ - - $ -	Adjustments Arising from Initial Application Adjusted Carrying Amount as of January 1, 2019 $ 25,543 $ 25,543 $ 25,543 $ 25,543 $ 11,289 $ 11,289 14,254 14,254 $ 25,543 $ 25,543	Adjustments Arising from Initial Application Adjusted Carrying Amount as of January 1, 2019 $ 25,543 $ 25,543 $ 25,543 $ 25,543 $ 11,289 $ 11,289 14,254 14,254 $ 25,543 $ 25,543
			$ 25,543
			$ 11,289 14,254
			$ 25,543

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

• c. The IFRSs issue but not yet endorsed and issued into effect by FSC

Effective Date New IFRSs Announced by IASB (Note 1) Amendments to IFRS 3 “Definition of a Business” January 1, 2020 (Note 2) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020 (Note 3)

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• Note 2: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

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

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

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

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

• b. Basis of preparation

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

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

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• 3) Level 3 inputs are unobservable inputs for the asset or liability.

• c. Classification of current and non-current assets and liabilities

Current assets include:

• 1) Assets held primarily for the purpose of trading;

• 2) Assets expected to be realized within 12 months after the reporting period; and

• 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

• 1) Liabilities held primarily for the purpose of trading;

• 2) Liabilities due to be settled within 12 months after the reporting period; and

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

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

• d. Basis of consolidation

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

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

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Refer to Note 9 and Table 3 for detailed information on subsidiaries (including percentages of ownership and main businesses).

• e. Foreign currencies

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

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

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

For the purposes of presenting consolidated financial statements, the investments of the Group’s foreign operations (including subsidiaries and associates in other countries that use currencies which are different from the Company) are translated into the New Taiwan dollar using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income.

• f. Inventories

Inventories consist of raw materials, supplies, finished goods and work in progress and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at the standard cost on the balance sheet date. The difference between actual costs and normal standard costs is allocated in proportion to inventory and operational costs on fiscal year-end, in order to approach the amount of weighted-average cost.

• g. Investments in associates

An associate is an entity over which the Group has significant influence and which is neither a subsidiary nor an interest in a joint venture.

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

Under the equity method, investments in an associate is initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of the equity of associates.

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

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

• h. Property, plant and equipment

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

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

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

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

• i. Impairment of tangible assets and assets related to contract costs

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

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

Before the Group recognizes an impairment loss from assets related to contract costs, any impairment loss on inventories related to the contract applicable under IFRS 15 shall be recognized in accordance with applicable standards. Then, impairment loss from the assets related to the contract costs is recognized to the extent that the carrying amount of the assets exceeds the remaining amount of consideration that the Group expects to receive in exchange for related goods or services less the costs which relate directly to providing those goods or services and which have not been recognized as expenses. The assets related to the contract costs are then included in the carrying amount of the cash-generating unit to which they belong for the purpose of evaluating impairment of that cash-generating unit.

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

• j. Financial instruments

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

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

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1) Financial assets

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

• a) Measurement categories

2018

Financial assets are classified into the following categories: Financial assets at FVTPL and financial assets at amortized cost.

• i. Financial assets at FVTPL

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

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial asset.

• ii. Financial assets at amortized cost

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

• i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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

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

• i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and

• ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

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2017

Financial asset is classified as loans and receivables.

Loans and receivables

Loans and receivables (including accounts receivable (including related parties), notes receivable (including related parties), other receivables (including related parties), cash, and refundable deposit (classified under other non-current assets)) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

• b) Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including accounts receivable), investments in equity instruments that are measured at FVTOCI.

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

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

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

2017

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

Financial assets at amortized cost, such as accounts receivable, are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience with collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

For a financial asset at amortized cost, the amount of the impairment loss recognized is the difference between such an asset’s carrying amount and the present value of its estimated future

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cash flows, discounted at the financial asset’s original effective interest rate.

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

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

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

• c) Derecognition of financial assets

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

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

2) Financial liabilities

• a) Subsequent measurement

All financial liabilities are measured at amortized cost using the effective interest method.

• b) Derecognition of financial liabilities

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

• k. Revenue recognition

2018

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

For contracts where the period between the date on which the Group transfers a promised good or - 104 -

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

1) Revenue from the sale of goods

Revenue from the sale of goods comes from sales of car lamps and molds. Sales of goods are recognized as revenue and accounts receivable when the goods are delivered to the customer’s specific location because it is the time when the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence.

The Group does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

• 2) Royalty revenue

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement and provided that it is probable that the economic benefits will flow to the Group and that the amount of revenue can be measured reliably. Royalty arrangements that are based on sales are recognized with reference to the underlying arrangement.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

• 1) Revenue from the sale of goods

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

• a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• c) The amount of revenue can be measured reliably;

• d) It is probable that the economic benefits associated with the transaction will flow to the Group; and

• e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

• 2) Royalty revenue

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement and provided that it is probable that the economic benefits will flow to the Group and that the amount of revenue can be measured reliably. Royalty arrangements that are based on sales are recognized with reference to the underlying arrangement.

• l. Borrowing costs

Borrowing costs directly attributable to an acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

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Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

• m. Employee benefits

• 1) Short-term employee benefits

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

• 2) Retirement benefits

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

Defined benefit costs (including service cost, net interest and remeasurement) under defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost, past service cost, as well as gains and losses on settlements) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Company’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

• 3) Other long-term employee benefits

Other long-term employee benefits are accounted for in the same way as the accounting required for defined benefit plans except that remeasurement is recognized in profit or loss.

• n. Taxation

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

• 1) Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

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

• 2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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

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

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

3) Current and deferred tax for the year

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

a. Write-down of inventories

The net realizable value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realizable value is based on current market conditions and historical experience with product sales of a similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value.

• b. Recognition and measurement of defined benefit plans

The net defined benefit liabilities (assets) and the resulting defined benefit costs under the defined benefit pension plans are calculated using the projected unit credit method. Actuarial assumptions comprise the discount rates, rates of employee turnover, future salary increases, etc. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of related expenses and liabilities.

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6. CASH

Cash on hand Checking accounts and demand deposits		December 31	December 31
		2018 $ 1,297 112,963 $ 114,260	2017 $ 693 181,786 $ 182,479

7. NOTES RECEIVABLE, ACCOUNTS RECEIVABLE (INCLUDING RELATED PARTIES), AND OTHER RECEIVABLES (INCLUDING RELATED PARTIES)

Notes receivable At amortized cost Gross carrying amount - operating Less: Allowance for impairment loss Accounts receivable At amortized cost Gross carrying amount Less: Allowance for impairment loss Accounts receivable from related parties Gross carrying amount Less: Allowance for impairment loss Other receivables Travel fee receivables Tariff refund receivables Others		December 31 2018 2017 $ 6,724 $ 7,121 115 146 $ 6,609 $ 6,975 $ 576,807 $ 773,902 4,352 7,322 $ 572,455 $ 766,580 $ 207,808 $ 280,153 217 1,681 $ 207,591 $ 278,472 $ 339 $ 6,904 1,554 1,013 2,300 817 $ 4,193 $ 8,734 (Continued)
		2018 $ 6,724 115 $ 6,609 $ 576,807 4,352 $ 572,455 $ 207,808 217 $ 207,591 $ 339 1,554 2,300 $ 4,193

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Other receivables from related parties Royalty receivables Others		December 31 2018 2017 $ 48,599 $ 47,164 - 72 $ 48,599 $ 47,236 (Concluded)
		2018 $ 48,599 - $ 48,599

In 2018

The average credit period of sales of goods was 60 to 90 days. No interest was charged on accounts receivable.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

The Group writes off a trade receivables when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables based on the Group’s provision matrix.

December 31, 2018

Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost			N	o indication of de	**fault of debtor **		271 to 365 Days T 57.04%～ 87.72% $ 2,783 (2,441) $ 342	he debtor has defaulted 100% $ 391 (391) $ -	Total $ 791,339 (4,684) $ 786,655
		Not Past Due 0%～5% $ 788,009 (1,844) $ 786,165	Less than 60 Days 0.9% $ 30 (1) $ 29	61 to 90 Days 0.9%～5.85% $ 126 (7) $ 119	91 to 180 Days 5.85%～ 16.85% $ - - $ -	181 to 270 Days 16.85%～ 57.04% $ - - $ -

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The movements of the loss allowance of trade receivables were as follows:

Balance at January 1, 2017 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2017 per IFRS 9 Less: Net remeasurement of loss allowance Balance at December 31, 2018 In 2017	2018 $ 9,149 -
	9,149 (4,465)
	$ 4,684

The Group applied the same credit policy in 2018 and 2017.

The average credit period of sales of goods was 60 to 90 days, and 90 to 180 days for related parties. Allowance for impairment loss was recognized based on the estimated irrecoverable amounts determined by reference to the aging of receivables, past default experience of the counterparties and analysis of their current financial positions.

As of December 31, 2017 the balance of notes receivable that was not past due and impaired (based on the number of past due days from the end of credit term).

The aging of receivables (based on the number of days from the invoice date and including related parties) was as follows:

Up to 60 days 61 - 90 days 91 - 120 days More than 120 days	December 31, 2017 $ 958,318 59,911 16,540 19,286
	$ 1,054,055

The movements of the allowance for doubtful trade receivables were as follows:

Accounts receivable Balance at January 1, 2017 Add: Impairment losses recognized on receivables Balance at December 31, 2017 Notes receivable Balance at January 1, 2017 Add: Impairment losses recognized on receivables Balance at December 31, 2017	Individually Assessed for Impairment $ 391 - $ 391 $ - - $ -	Collectively Assessed for Impairment $ 6,781 1,831 $ 8,612 $ 12 134 $ 146	Total $ 7,172 1,831
			$ 9,003
			$ 12 134
			$ 146

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8. INVENTORIES

Merchandise Finished goods Work in progress Raw materials		December 31	December 31
		2018 $ 84,116 317,302 206,200 178,351 $ 785,969	2017 $ 192,637 348,219 146,428 174,832 $ 862,116

The costs of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 were $4,872,472 thousand and $5,126,223 thousand, respectively. The cost of goods sold included inventory write-down for the year ended December 31, 2017 of $713 thousand.

9. SUBSIDIARIES

Subsidiaries included in the consolidated financial statements

Investor Investee Nature of Activities The Company Ta Yih International Investment Co., Ltd. (BVI) Investment	Proportion of Ownership (%)
	**December 31 **
	2018 2017 100 100

10. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Material associates Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd.		December 31	December 31
		2018 $ 406,241	2017 $ 412,253

As of December 31, 2018 and 2017, The Company’s percentage of ownership and voting rights in Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd. was 49%

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

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Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd.

Current assets Non-current assets Current liabilities Non-current liabilities Equity Proportion of the Group’s ownership Equity attributable to the Group Unrealized gain or loss with associates Carrying amount Operating revenue Net profit for the year Total comprehensive income for the year Dividends received from Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd.		December 31	December 31
		2018 2017 $ 2,402,310 $ 2,445,075 1,123,316 565,756 (2,665,526) (2,043,508) (15,639) (111,309) $ 844,461 $ 856,014 49% 49% $ 413,786 $ 419,446 (7,545) (7,193) $ 406,241 $ 412,253 For the Year Ended December 31
		2018 $ 3,045,038 $ 4,835 $ 4,835 $ -	2017 $ 2,872,211 $ 42,003 $ 42,003 $ 14,716

Refer to Table 4 “Information on Investments in Mainland China” for the nature of activities, principal places of business and countries of incorporation of the associates.

The investments in associates accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2018 and 2017 were based on the associates’ financial statements which have been audited for the same years.

11. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Balance at December 31, 2017 Accumulated depreciation Balance at January 1, 2017 Depreciation expenses Disposals Balance at December 31, 2017 Carrying amount at December 31, 2017	Land $ 601,050 - - $ 601,050 $ - - - $ - $ 601,050	Buildings $ 235,131 535 - $ 235,666 $ 198,271 5,367 - $ 203,638 $ 32,028	Machinery Equipment $ 915,320 113,062 (4,268) $ 1,024,114 $ 730,840 50,168 (3,920) $ 777,088 $ 247,026	Molding Equipment Transportation Equipment $ 277,799 $ 15,038 13,723 2,886 (410) (127) $ 291,112 $ 17,797 $ 161,077 $ 10,470 73,950 1,812 (410) (127) $ 234,617 $ 12,155 $ 56,495 $ 5,642	Other Equipment Total $ 358,102 $ 2,402,440 24,321 154,527 (986) (5,791) $ 381,437 $ 2,551,176 $ 273,287 $ 1,373,945 40,798 172,095 (975) (5,432) $ 313,110 $ 1,540,608 $ 68,327 $ 1,010,568 (Continued)

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Cost Balance at January 1, 2018 Additions Disposals Balance at December 31, 2018 Accumulated depreciation Balance at January 1, 2018 Depreciation expenses Disposals Balance at December 31, 2018 Carrying amount at December 31, 2018	Land $ 601,050 - - $ 601,050 $ - - - $ - $ 601,050	Buildings $ 235,666 20,835 - $ 256,501 $ 203,638 5,889 - $ 209,527 $ 46,974	Machinery Equipment $ 1,024,114 35,408 (20,370) $ 1,039,152 $ 777,088 53,277 (19,981) $ 810,384 $ 228,768	Molding Equipment Transportation Equipment $ 291,112 $ 17,797 13,591 4,300 (268) - $ 304,435 $ 22,097 $ 234,617 $ 12,155 53,779 2,714 (268) - $ 228,128 $ 14,869 $ 16,307 $ 7,228	Other Equipment $ 381,437 34,239 (6,729) $ 408,947 $ 313,110 36,043 (6,694) $ 342,459 $ 66,488	Total $ 2,551,176 108,373 (27,367) $ 2,632,182 $ 1,540,608 151,702 (26,943) $ 1,665,367 $ 966,815

(Concluded)

• a. Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings
Main buildings	40 - 60 years
Factory and other buildings	5 - 40 years
Machinery equipment	3 - 12 years
Molding equipment	2 - 3 years
Transportation equipment	5 - 12 years
Other equipment	3 - 8 years

• b. Refer to Note 24 for the carrying amount of property, plant and equipment pledged as collateral for bank borrowings by the Group.

12. OTHER ASSETS

Current Input tax Tax refund receivable Payment on behalf of others Non-current Refundable deposits Prepayments for properties, plant and equipment		December 31	December 31
		2018 $ 30,481 8,813 1,322 $ 40,616 $ 16,879 22,326 $ 39,205	2017 $ 30,586 - 507 $ 31,093 $ 14,573 7,865 $ 22,438

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13. NOTES PAYABLE AND ACCOUNTS PAYABLE (INCLUDING RELATED PARTIES)

Notes payable and accounts payable were both resulted from operating activities.

The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

14. OTHER LIABILITIES

Current Other payables Payables for salaries or bonuses Payables for molding equipment Payables for annual leave Payables for employee’s compensation Payables for utilities expense Others Other payables to related parties Payables for royalty Payables for inspection expense Others Other current liabilities Receipts under custody Non-current Other non-current liabilities Provision for employee benefits Guarantee deposits received		December 31	December 31
		2018 $ 158,847 18,558 17,831 9,665 4,489 14,174 $ 223,564 $ 64,427 4,036 274 $ 68,737 $ 236 $ 2,407 190 $ 2,597	2017 $ 193,002 25,264 17,390 11,743 4,756 21,663 $ 273,818 $ 71,248 3,097 2,564 $ 76,909 $ 1,015 $ 2,197 240 $ 2,437

Provision for employee benefits is the estimate of long-term bonus for senior employees.

15. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

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b. Defined benefit plans

The defined benefit plans adopted by the Company of the Group in accordance with the Labor Standards Law is operated by the government of the Republic of China (“ROC”). Pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. The Company contribute amounts equal to 5% and 8% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee and a manager pension fund administered by the manager pension fund managing committee. Pension contributions are deposited respectively in the Bank of Taiwan and Taiwan Business Bank in the committee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy.

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

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities Movements in net defined benefit liabilities were as follows: Present Value of the Defined Benefit Obligation Balance at January 1, 2017 $ 367,984 Service cost Current service cost 5,504 Net interest expense (income) 4,600 Recognized in profit or loss 10,104 Remeasurement Return on plan assets (excluding amounts included in net interest) - Actuarial loss - changes in demographic assumptions 8,611 Actuarial loss - experience adjustments 7,834 Recognized in other comprehensive income 16,445 Contributions from the employer - Benefits paid (22,190) Balance at December 31, 2017 372,343

December 31 2018 2017 $ 371,377 $ 372,343 (236,357) (212,971) $ 135,020 $ 159,372 Fair Value of the Plan Assets Net Defined Benefit Liabilities (Assets) $ (193,910) $ 174,074 - 5,504 (2,465) 2,135 (2,465) 7,639 637 637 - 8,611 - 7,834 637 17,082 (39,423) (39,423) 22,190 - (212,971) 159,372 (Continued)

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Present Value of the Defined Benefit Obligation Fair Value of the Plan Assets Service cost Current service cost $ 4,913 $ - Net interest expense (income) 4,654 (2,736) Recognized in profit or loss 9,567 (2,736) Remeasurement Return on plan assets (excluding amounts included in net interest) - (5,104) Actuarial loss - changes in demographic assumptions 6,897 - Actuarial loss – changes in financial assumptions 4,890 - Actuarial loss - experience adjustments 1,350 - Recognized in other comprehensive income 13,137 (5,104) Contributions from the employer - (39,216) Benefits paid (23,670) 23,670 Balance at December 31, 2018 $ 371,377 $ (236,357)

Net Defined Benefit Liabilities (Assets) $ 4,913 1,918 6,831 (5,104) 6,897 4,890 1,350 8,033 (39,216) - $ 135,020 (Concluded)

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

Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 4,561 116 1,561 593 $ 6,831	2017 $ 5,071 141 1,724 703 $ 7,639

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

• 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

• 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plans’ debt investments.

• 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by

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qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate Expected rate of salary increase	December 31
	2018 2017 1.125% 1.250% 2.000% 2.000%

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

Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase 0.25% increase 0.25% decrease		December 31	December 31
		2018 $ (9,875) $ 10,264 $ 9,990 $ (9,961)	2017 $ (10,272) $ 10,686 $ 10,412 $ (10,061)

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

Expected contributions to the plans for the next year Average duration of the defined benefit obligation		December 31	December 31
		2018 $ 6,610 10.9 years	2017 $ 11,873 11.3 years

16. EQUITY a. Shares capital Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Ordinary shares Shares issued Ordinary shares	76,230
	$ 762,300
	76,230
	$ 762,300

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

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b. Capital surplus

Issuance of ordinary shares Capital surplus from gain on disposal of assets Donations (dividends expired)		December 31	December 31
		2018 $ 56,330 4,142 133 $ 60,605	2017 $ 56,330 4,142 - $ 60,472

Such capital surplus from issuance of ordinary shares and donations may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year).

Capital surplus from gain on disposal of assets may only be used to offset a deficit.

c. Retained earnings and dividends policy

Under the dividends policy as set forth in the amended Articles, where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on the distribution of employees’ compensation and remuneration of directors and supervisors before and after amendment, refer to Note 18(e) ”Employees’ compensation and remuneration of directors and supervisors for 2018 and 2017”.

In order to take the future needs of funding and long-term financial plan into consideration, when the board of directors drafts the surplus distribution, more than 50% of accumulated unappropriated earnings will be allocated as shareholders’ dividends, and the cash dividends shall not be lower than the 50% of the shareholders’ dividends. The said proportion of allocation of dividends and cash dividends shall be resolved by the resolution of the shareholders in their meeting.

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

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

The appropriations of earnings for 2017 and 2016 were approved in the shareholders’ meetings on June 11, 2018 and June 14, 2017, respectively, as follows:

Legal reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2017 2016 $ 49,937 $ 49,384 396,396 396,396	Dividends Per Share (NT$)
		For the Year Ended December 31
		2017 2016 $ 5.2 $ 5.2

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The appropriations of earnings for 2018 were proposed by the Company’s board of directors on March 15, 2019. The appropriations were as follows:

	Appropriation of	Appropriation of	Dividends Per	Dividends Per
		Earnings		Share (NT$)
Legal reserve	$	31,921
Cash dividends		289,674	$	3.8

The appropriations of earnings for 2018 are subject to the resolution of the shareholders in their meeting to be held on June 18, 2019.

17. REVENUE

Revenue from contracts with customers Revenue from sale of goods		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 5,703,811	2017 $ 6,197,390

• a. Contract information

Revenue from sale of goods

The Group’s primary products are car lamps and molds. Car lamps and molds are sold at their respective fixed amounts as agreed in the contracts. Revenue from sale of goods is recognized when the Group has transferred to the buyer the significant risks and rewards of ownership of the goods.

• b. Contract balances

Accounts receivables (including related parties) (Note 7) Contract liabilities - current Deferred revenue	December 31, 2018 $ 780,046 $ 323,019

The changes in the balance of contract assets and contract liabilities primarily result from the timing differences between the Group’s performance and the respective customer’s payment.

Revenue of the reporting period recognized from the beginning contract liabilities and from the performance obligations which were satisfied in the previous period is as follows:

	For the Year
	Ended December
	31, 2017
From the beginning contract liabilities
Sale of goods	$ 199,085

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b. Disaggregation of revenue

Type of goods Car lamps Molds Others		December 31	December 31
		2018 $ 4,488,820 603,582 611,409 $ 5,703,811	2017 $ 4,995,637 575,618 626,135 $ 6,197,390

18. PROFIT BEFORE INCOME TAX

a. Other income

Bank deposit interest income Royalty revenue Others b. Other gains and losses Loss on disposal of financial assets Available-for-sale financial assets Fair value changes of financial assets and financial liabilities Financial assets classified as at FVTPL Interest on bank loans Net foreign exchange gains (losses) Royalty expense Loss on disposal of property, plant and equipment Others Information about capitalized interest was as follows: Capitalized interest Capitalization rate		For the Year Ended December 31	For the Year Ended December 31
		2018 2017 $ 362 $ 496 86,639 102,985 10,039 9,168 $ 97,040 $ 112,649 For the Year Ended December 31
		2018 2017 $ - $ (326) 10 - (838) (1,014) 30,097 (12,952) (27,955) (29,389) (424) (329) (6,516) (7,414) $ (5,626) $ (51,424) For the Year Ended December 31
		$ (5,626
		For the Year
		2018 $	2017 - $ 195 - 0.79%～1.20%

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c. Depreciation

Property, plant and equipment An analysis of depreciation by function Operating costs Operating expenses		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 151,702 $ 137,498 14,204 $ 151,702	2017 $ 172,095 $ 155,301 16,794 $ 172,095

d. Employee benefits expense

Short-term benefits Salaries Directors’ remuneration Labor and health insurance Others Post-employment benefits Defined contribution plans Defined benefit plans (Note 15) Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 567,805 690 54,072 25,871 648,438 22,289 6,831 29,120 $ 677,558 $ 446,339 231,219 $ 677,558	2017 $ 601,413 611 53,768 25,475 681,267 21,780 7,639 29,419 $ 710,686 $ 471,313 239,373 $ 710,686

e. Employees’ compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of the Company, the Company accrued employees’ compensation at the rates of no less than 1% of net profit after offsetting previous fiscal deficits, and before income tax, and employees’ compensation. The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2018 and 2017, which were approved by the Company’s board of directors on March 15, 2019 and March 22, 2018, respectively, were as follows:

Accrual rate

Employees’ compensation - cash	For the Year Ended December 31
	2018 2017 1% 1%

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Amount

Employees’ compensation	For the Year Ended December 31
	2018 2017 $ 3,746 $ 5,919

Remuneration of directors and supervisors was not issued over the years.

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

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

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

• f. Gains or losses on foreign currency exchange

Foreign exchange gains Foreign exchange losses		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 59,217 (29,120) $ 30,097	2017 $ 37,082 (50,034) $ (12,952)

19. INCOME TAX

• a. Major components of tax expense recognized in profit or loss

Current tax In respect of the current period Income tax on of unappropriated earnings Adjustment for prior periods Deferred tax In respect of the current period Adjustments to deferred tax attributable to changes in tax rates and laws Income tax expense recognized in profit or loss		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 50,352 3,885 (14,089) 40,148 7,540 3,907 $ 51,595	2017 $ 84,919 2,934 (13,958) 73,895 12,712 - $ 86,607

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

Profit before tax Income tax expense calculated at the statutory rate Unrecognized deductible temporary differences Income tax on unappropriated earnings Adjustments for prior years’ tax Income tax expense recognized in profit or loss		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 370,802 $ 74,160 (12,361) 3,885 (14,089) $ 51,595	2017 $ 585,971 $ 99,615 (1,984) 2,934 (13,958) $ 86,607

In 2017, the applicable corporate income tax rate used by company of the Group in the ROC was 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings has been reduced from 10% to 5%.

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

• b. Income tax recognized in other comprehensive income

Deferred tax Effect of change in tax rate Remeasurement of defined benefit plans Exchange differences on translating foreign operations In respect of the current year: Remeasurement of defined benefit plans Exchange differences on translating foreign operations		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 3,348 106 1,607 1,606 $ 6,667	2017 $ - - 2,904 1,428 $ 4,332

• c. Current tax assets and liabilities

Current tax assets (classified under other current assets) Tax refund receivable Current tax liabilities Income tax payable		December 31	December 31
		2018 $ 8,813 $ 10,575	2017 $ - $ 55,118

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d. Deferred tax assets and liabilities

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

For the year ended December 31, 2018

Deferred Tax Assets Temporary differences Allowance for reduction of inventory to market Unrealized gain or loss with associates Long-term employee benefit liability Defined benefit plans Payables for annual leave Unrealized exchange losses Exchange differences on translating the financial statements of foreign operations Deferred Tax Liabilities Temporary differences Unappropriated earnings of associates Unrealized exchange gains Land value tax	Opening Balance Tax Rate Change (Recognized in Profit or Loss) Tax Rate Change (Recognized in Other Comprehensive Income) Recognized in Profit or Loss Recognized in Other Comprehensive Income $ 1,285 $ 227 $ - $ (563) $ - 1,223 216 - 70 - 374 66 - 41 - 27,093 1,433 3,348 (6,477) 1,607 2,956 522 - 88 - 512 90 - (602) - 599 - 106 - 1,606 $ 34,042 $ 2,554 $ 3,454 $ (7,443) $ 3,213 $ 36,615 $ 6,461 $ - $ (869) $ - - - - 966 - 76,736 - - - - $ 113,351 $ 6,461 $ - $ 97 $ -	Closing Balance $ 949 1,509 481 27,004 3,566 - 2,311
		$ 35,820
		$ 42,207 966 76,736
		$ 119,909

For the year ended December 31, 2017

Deferred Tax Assets Temporary differences Allowance for reduction of inventory to market Unrealized gain or loss with associates Declared export gross profit Long-term employee benefit liability Defined benefit plans Payables for annual leave Unrealized exchange losses Exchange differences on translating the financial statements of foreign operations	Opening Balance $ 1,164 2,927 7,812 334 29,593 2,785 - - $ 44,615	Recognized in Profit or Loss $ 121 (1,704 ) (7,812 ) 40 (5,404 ) 171 512 - $ (14,076)	Recognized in Other Comprehen- sive Income $ - - - - 2,904 - - 599 $ 3,503	Closing Balance $ 1,285 1,223 - 374 27,093 2,956 512 599 $ 34,042 (Continued)

• 124 -

Deferred Tax Liabilities Temporary differences Unappropriated earnings of associates Unrealized exchange gains Exchange differences on translating the financial statements of foreign operations Land value tax	Opening Balance $ 37,664 315 829 76,736 $ 115,544	Recognized in Profit or Loss $ (1,049 ) (315 ) - - $ (1,364)	Recognized in Other Comprehen- sive Income $ - - (829 ) - $ (829)	Closing Balance $ 36,615 - - 76,736
				$ 113,351

(Concluded)

e. Income tax assessments

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

20. EARNINGS PER SHARE

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

Net Profit for the Year

Net profit for the year Shares Weighted average number of ordinary shares used in computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share		For the Year Ended December 31 2018 2017 $ 319,207 $ 499,364 Unit: In Thousands of Shares For the Year Ended December 31 2018 2017 76,230 76,230 87 105 76,317 76,335
		2018 76,230 87 76,317

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

• 125 -

21. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Group consists of net debt (cash) and equity of the Group. The Group is not subject to any externally imposed capital requirements.

22. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments not measured at fair value

The carrying amounts of the Group’s financial instruments that are not measured at fair value, such as cash, accounts receivable (including related parties), refundable deposits (classified under other non-current assets, accounts payable (including related parties), and guarantee deposit received (classified under other non-current liabilities) approximate their fair values.

• b. Categories of financial instruments

Financial assets Loans and receivables (1) Financial assets at amortized cost (2) Financial liabilities Financial liabilities at amortized cost (3)	December 31
	2018 2017 $ - $ 1,305,049 970,586 - 1,012,270 1,322,520

• 1) The balances include loans and receivables measured at amortized cost, which comprise cash, notes and accounts receivable (including related parties), other receivables (including related parties), and refundable deposits (classified under other non-current assets).

• 2) The balances include financial assets at amortized cost, which comprise cash, notes and accounts receivable (including related parties), other receivables (including related parties), and refundable deposits (classified under other non-current assets).

• 3) The balances include financial liabilities at amortized cost, which comprise notes and accounts payable (including related parties), other payables (including related parties), and guarantee deposit received (classified under non-current liabilities)

• c. Financial risk management objectives and policies

The Group’s major financial instruments include equity and debt investments, accounts receivable, and accounts payable.

The Group’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks are market risk (including currency risk and interest rate risk), credit risk and liquidity risk.

• 126 -

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

a) Foreign currency risk

The Group had foreign currency sales and purchases, which exposed the Group to foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities exposed to foreign currency risk at the end of the reporting period are set out in Note 25.

Sensitivity analysis

The Group was mainly exposed to the USD, CNY and JPY.

The following table details the Group’s sensitivity to an increase and decrease of 1% in the functional currency against the relevant foreign currencies. The sensitivity analysis included only outstanding foreign currency denominated monetary items. A positive number below indicates an increase in pre-tax profit. For a 1% weakening of the functional currency against the relevant foreign currencies, there would be an equal and opposite impact on pre-tax profit, and the balances below would be negative.

Profit or loss Profit or loss Profit or loss	USD Impact
	For the Year Ended December 31
	2018 2017 $ 2,759 $ 2,787 CNY Impact
	For the Year Ended December 31
	2018 2017 $ 1,043 $ 595 JPY Impact
	For the Year Ended December 31
	2018 2017 $ 957 $ 1,143

Exchange rate fluctuations are mainly attributable to the exposure on outstanding cash, accounts receivable, other receivables and accounts payable in foreign currency which were not hedged at the end of the reporting period.

In management’s opinion, sensitivity analysis was unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period did not reflect the exposure during the period. Sales quoted in the USD, CNY, and JPY change with the fluctuation of client’s order.

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b) Interest rate risk

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

Cash flow interest rate risk Financial assets	December 31
	2018 2017 $ 112,344 $ 176,500

As of December 31, 2018 and 2017, there were no floating interest rate liabilities in the consolidated financial statements. Hence, no significant interest rate risk was identified.

• 2) Credit risk

Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk, which would cause a financial loss to the Group due to the failure of the counterparty to discharge its obligation and due to the financial guarantees provided by the Group, could be equal to the total of the carrying amount of the respective recognized financial assets as stated in the balance sheets.

The Group’s credit risk primarily arose from sales of the top 3 clients, which contributed more than 10% of the operating revenue in the statements of comprehensive income. The total percentages of accounts receivable (include related parties) from the above clients for the years ended December 31, 2018 and 2017 were 59% and 53%, respectively.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

All of the financial liabilities of the Group had original maturities of less than three months. Because equity was greater than liabilities in the Group’s capital structure, and the unused bank quotas and working capital were abundant, there was no material liquidity risk.

23. TRANSACTIONS WITH RELATED PARTIES

Details of transactions between the Company and other related parties are disclosed below.

• a. Related party name and category

Related Party Name	Related Party Category
Koito Manufacturing Co., Ltd.	Investors with significant influence over the
	Company
Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd	Associates
Guangzhou Koito Automotive Lamp Co., Ltd.	Subsidiary of Koito Manufacturing Co., Ltd.
India Japan Lighting Private Limited	Subsidiary of Koito Manufacturing Co., Ltd.
	(Continued)

• 128 -

Related Party Name

Related Party Category

PT. Indonesia Koito Subsidiary of Koito Manufacturing Co., Ltd. Thai Koito Company Limited Subsidiary of Koito Manufacturing Co., Ltd. Hubei Koito Automotive Lamp Co., Ltd. Subsidiary of Koito Manufacturing Co., Ltd. TYC Brother Industrial Co., Ltd. Substantive related party Dbm Reflex of Taiwan Co., Limited Substantive related party Mai Huang Enterprise Co., Ltd. Substantive related party Juoku Technology Co., Ltd. Substantive related party Ta Yih Investment Co., Ltd. Substantive related party Ta Yih International Hotel Co., Ltd. Substantive related party Nai Yi Entertainment Company Ltd. Substantive related party Kenmos Auto Parts ( USA ) LLC Substantive related party Wu Jinmao Culture and Education Foundation Substantive related party

(Concluded)

b. Sales of goods

Related Party Category/Name Investors with significant influence over the Company Koito Manufacturing Co., Ltd. Associates Subsidiary of Koito Manufacturing Co., Ltd. Substantive related party		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,250,831 235,265 25,646 2,557 $ 1,514,299	2017 $ 1,559,161 127,706 138,854 8,659 $ 1,834,380

The prices of sales of goods with related parties did not have substantive difference compared to non-related parties, except the prices of sales of goods with associates were added based on the costs. The collection term of domestic sales with related parties is 90 days, the collection term of export sales with related parties apart from associates, according to the term of individual transaction is 120 to 180 days, and the collection term does not have substantive difference compared to non-related parties.

The unrealized gains of sales with associates for the years ended December 31, 2018 and 2017 were $ 7,545 thousand and $7,193 thousand, respectively, and had been recognized as a reduction of investments accounted for using the equity method.

c. Purchases of goods

Related Party Category/Name Investors with significant influence over the Company Associates Subsidiary of Koito Manufacturing Co., Ltd. Substantive related party		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 278,565 2,870 602 33,044 $ 315,081	2017 $ 275,263 3,476 331 67,323 $ 346,393

The payment term and price of goods purchased do not have substantive difference between related and non-related parties. The payment term for related parties depends on individual transaction, which is normally 90 days, and does not have substantive difference from non-related parties.

• 129 -

d. Receivables from related parties (excluding loans to related parties)

Line Item Related Party Category/Name Accounts receivable Investors with significant influence over the Company Koito Manufacturing Co., Ltd. Associates Subsidiary of Koito Manufacturing Co., Ltd. Substantive related party Less:Allowance for impairment loss Other receivables Associates Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd.		December 31	December 31
		2018 $ 147,783 57,875 - 2,150 207,808 217 $ 207,591 $ 48,599	2017 $ 171,406 66,367 36,340 6,040 280,153 1,681 $ 278,472 $ 47,236

The outstanding trade receivables from related parties are unsecured.

e. Payables to related parties (excluding loans from related parties)

Line Item Related Party Category/Name Notes Payable Substantive related party Accounts Payable Investors with significant influence over the Company Koito Manufacturing Co., Ltd. Associates Substantive related party Other Payables Investors with significant influence over the Company Koito Manufacturing Co., Ltd. Associates Substantive related party		December 31	December 31
		2018 $ 6,437 $ 41,820 636 633 $ 43,089 $ 68,463 109 165 $ 68,737	2017 $ 15,038 $ 55,002 353 4,554 $ 59,909 $ 74,345 2,564 - $ 76,909

The outstanding payables from related parties are unsecured.

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f. Prepayments

Line Item Related Party Category/Name Prepayments in advance Subsidiary of Koito Manufacturing Co., Ltd. Substantive related party Prepaid expenses Investors with significant influence over the Company		December 31	December 31
		2018 $ - - 2,444 $ 2,444	2017 $ 89 4,293 - $ 4,382

• g. Acquisitions of property, plant and equipment

Related Party Category/Name Investors with significant influence over the Company Koito Manufacturing Co., Ltd.		Purchase Price	Purchase Price
		For the Year Ended December 31
		2018 $ 6,584	2017 $ -

h. Other transactions with related parties

1) Rental expenses

The Group entered into a contract with substantive related party to rent land, factory and a plant from March 1, 2014 to December 31, 2020. The total rental expenses were $5,887 thousand and $6,636 thousand for the years ended December 31, 2018 and 2017, respectively.

2) Royalty expenses

The Group entered into a royalty expense contract with its investor with significant influence - Koito Manufacturing Co., Ltd. from April 23, 2016 to April 22, 2019. The royalty expenses were $103,562 thousand and $112,494 thousand for the years ended December 31, 2018 and 2017, respectively, and had been recognized as operating costs and general and administrative expenses.

3) Examination expenses

The Group entrusted its investor with significant influence - Koito Manufacturing Co., Ltd. for assistance on the examination of the headlight products. The examination expenses were $22,469 thousand and $21,313 thousand the years ended December 31, 2018 and 2017, respectively, and had been recognized as selling and marketing expenses.

4) Royalty revenue

The Group entered into a royalty revenue contract with its associate - Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd. from January 1, 2014 to December 31, 2019. The royalty revenues were $77,763 thousand and $91,726 thousand for the years ended December 31, 2018 and 2017, respectively, and had been recognized as other income of non-operating income and expenses. According to the contract, 50% of the royalty revenue should be paid to its investor with significant influence - Koito Manufacturing Co., Ltd. which amounted to $27,955 thousand and $29,389 thousand for the years ended December 31, 2018 and 2017, respectively, and had been recognized as other gains and losses, net of non-operating income and expenses.

• 131 -

The Group entered into a contract with subsidiary of Koito Manufacturing Co., Ltd - Hubei Koito Automotive Lamp Co., Ltd. from December 25, 2015 to December 24, 2020. The royalty revenues were $8,876 thousand and $11,259 thousand for the years ended December 31, 2018 and 2017, respectively, and had been recognized as other income of non-operating income and expenses.

i. Donations

Related Party Category/Name Substantive related party		Purchase Price	Purchase Price
		For the Year Ended December 31
		2018 $ 800	2017 $ -

• j. Compensation of key management personnel

Short-term employee benefits Post-employment benefits		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 21,566 128 $ 21,694	2017 $ 25,297 207 $ 25,504

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

24. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings:

Property, plant and equipment, net Land Buildings Machinery equipment	December 31, 2017 $ 596,826 21,846 1,226
	$ 619,898

• 132 -

25. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

December 31, 2018

		Foreign			Carrying
	Currencies		Exchange Rate		Amount
Financial assets
Monetary items
USD	$	9,460	30.71	$	290,509
CNY		29,305	4.473		131,082
JPY		548,611	0.2780		152,514
Non-monetary items
Investments accounted for using the equity
method
CNY		92,460	4.475		413,786
Financial liabilities
Monetary items
USD		475	30.71		14,597
CNY		5,987	4.473		26,780
JPY		204,352	0.2780		56,810
December 31, 2017
		Foreign			Carrying
	Currencies		Exchange Rate		Amount
Financial assets
Monetary items
USD	$	10,065	29.70	$	298,882
CNY		18,814	4.549		85,583
JPY		887,611	0.2633		233,708
Non-monetary items
Investments accounted for using the equity
method
CNY		92,095	4.555		419,446
Financial liabilities
Monetary items
USD		678	29.70		20,145
CNY		5,727	4.549		26,053
JPY		453,621	0.2633		119,438

• 133 -

The carrying amount of investments accounted for using the equity method does not contain the reduction of unrealized gains.

The significant realized and unrealized foreign exchange gains (losses) were as follows:

Foreign Currencies USD CNY JPY	For the Year Ended December 31	For the Year Ended December 31
	2018 Exchange Rate Net Foreign Exchange Gains (Losses) 30.14 (USD:NTD) $ 13,289 4.551 (CNY:NTD) (4,516) 0.2730 (JPY:NTD) 21,324 $ 30,097	2017
		Exchange Rate Net Foreign Exchange Gains (Losses) 29.72 (USD:NTD) $ (14,693) 4.551 (CNY:NTD) (2,163) 0.2633 (JPY:NTD) 3,904 $ (12,952)

26. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees:

• 1) Financing provided to others (None)

• 2) Endorsements/guarantees provided (None)

• 3) Marketable securities held (excluding investments in subsidiaries, associates and joint ventures) (None)

• 4) Marketable securities acquired and disposed of at costs or prices of at least NT$ 300 million or 20% of the paid-in capital (None)

• 5) Acquisition of individual real estate at costs of at least NT$ 300 million or 20% of the paid-in capital (None)

• 6) Disposal of individual real estate at prices of at least NT$ 300 million or 20% of the paid-in capital (None)

• 7) Total purchases from or sales to related parties amounting to at least NT$ 100 million or 20% of the paid-in capital (Table 1)

• 8) Receivables from related parties amounting to at least NT$ 100 million or 20% of the paid-in capital (Table 2)

• 9) Trading in derivative instruments (None)

• 10) Information on investees (Table 3)

• b. Information on investments in mainland China

• 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area (Table 4)

• 134 -

• 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses (Table 5):

• a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period

• b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period

• c) The amount of property transactions and the amount of the resultant gains or losses

• d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes

• e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds

• f) Other transactions that have a material effect on the profit or loss for the year or on the financial position, such as the rendering or receipt of services

27. SEGMENT INFORMATION

• a. Segment revenue, results, total assets and liabilities

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. The Group is considered one segment by the chief operating decision maker. The basis for such measurement is the same as that for the preparation of financial statements. Refer to the consolidated statements of comprehensive income for the related segment revenue and operating results.

• b. Revenue from major products and services

The following is an analysis of the Group’s revenue from continuing operations by its major products and services.

Car lamps Molds Others		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 4,488,820 603,582 611,409 $ 5,703,811	2017 $ 4,995,638 575,618 626,134 $ 6,197,390

• 135 -

• c. Geographical information

The Group mainly operates in one principal geographical area - Taiwan.

The Group’s revenue from continuing operations from external customers by location of operations and information about its non-current assets by location of assets are detailed below.

Taiwan Japan China USA Others Taiwan		Revenue from External Customers	Revenue from External Customers
		For the Year Ended December 31
		2018 2017 $ 2,798,751 $ 3,263,654 1,273,168 1,571,812 293,600 173,540 1,126,914 851,894 211,378 336,490 $ 5,703,811 $ 6,197,390 Non-current Assets
		December 31
		2018 $ 1,395,382	2017 $ 1,430,686

Non-current assets exclude financial instruments and deferred tax assets.

• d. Information about major customers

Single customers contributing 10% or more to the Group’s revenue were as follows:

Customer A Customer B Investors with significant influence over the Company		For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,300,884 1,260,518 1,250,831 $ 3,812,233	% 23 22 22 67	2017 $ 1,506,958 1,010,790 1,559,161 $ 4,076,909	% 24 16 25 65

• 136 -

TABLE 1

Ta Yih Industrial Co., Ltd. And Subsidiaries

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

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

Buyer	Related Party	Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
The Company	Koito Manufacturing Co., Ltd. Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd	Investors with significant influence over the Company Associates accounted for using the equity method	Sales Purchases Sales	$(1,250,831) 278,565 (235,265)	(22) 7 (4)	90 days 90 days 120 to 160 days	No significant differences No significant differences Cost plus pricing	No significant differences No significant differences 120 to 160 days. Generally 90 days.	Accounts receivable $ 147,783 Accounts payable (41,820) Accounts receivable 57,875	19 (8) 7

• 137 -

TABLE 2

Ta Yih Industrial Co., Ltd. And Subsidiaries

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

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

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
The Company	Koito Manufacturing Co., Ltd.	Investors with significant influence over the Company	$ 147,783	7.8	$ -	－	$ 147,783	$ 144

• 138 -

TABLE 3

Ta Yih Industrial Co., Ltd. And Subsidiaries

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

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As of	December 31, 2018	December 31, 2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares	%	Carrying Amount
The Company	Ta Yih International Investment Co., Ltd.	Omar Hodge Building, Wickhams Cay I P.O. Box 362, Road Town, Tortola, British Virgin Islands	Investment	$ 1,367	$ 1,367	50,000	100	$ 1,020	$ (37)	$ (37)

Note: Information on investments in mainland China, refer to Table 4.

• 139 -

TABLE 4

Ta Yih Industrial Co., Ltd. And Subsidiaries

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

Investee Company	Main Businesses and Products	Paid-in Capital	Method of Investment	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2017 (Note 5)	Remittance of Funds	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2018	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 1)	Carrying Amount as of December 31, 2018 (Note 1)	Accumulated Repatriation of Investment Income as of December 31, 2018 (Note 4)
						Outward		Inward
Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd	Importing, exporting and sale of automobile lamps in mainland China	USD $9 million (Note 2) (NTD $276,390 thousand) (Note 3)	Entrusting Ta Yih International Investment Co., Ltd. which was established in third region to invest in mainland China. Items referred to Rule No. 84022220 issued by the Investment Commission, MOEA.		$ 42,470	$	-	$ -	$ 42,470	$ 4,835	49	$ 2,369	$ 406,241	$ 238,605
										Stipulated (Note 6)
Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2018				Investment Amount Authorized by The Investment Commission, MOEA			Upper Limit on the Amount of Investment by The Investment Commission, MOEA			Stipulated (Note 6)
$ 42,470				USD$4.41 million (Note 2) (NTD$135,431 thousands) (Note 3)			$1,848,605×60%＝$1,109,163

Note 1 ： Amount was recognized based on the audited financial statements.

Note 2 ： On January 18, 1996, the Investment Commission, MOEA approved the investment of US$2.5 million (including cash investment of US$1.76 million and machinery investment of US$740,000) through the approval of the Rule No. 84022220. On February 20, 2001, according to the Rule No. 90003791, approved by the Investment Commission, MOEA, the Company entrusted Ta Yih Investment Co., Ltd. which was established in the third region to invest US$500,000 on machinery equipment. However, there was still US$150,000 left unpaid. Therefore, the amount of capital owned by Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd was only US$2.85 million. However, at the end of November 2005, the Company transferred 51% of the investment to Koito Manufacturing Co., Ltd. In December 2007, Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd resolved to issue share dividends from capital surplus of US $2.45 million, of which the investment amount belonged to the Company was US$2.45 million × 49% = US$1.205 million, and had been approved by the Investment Commission, MOEA on March 24, 2008. In August 2008, the Company applied for issuing share dividends from capital surplus of US$1.5 million, of which the amount of investment belonged to the Company was US$1.5 million × 49% = US$735,000, and had been approved by the Investment Commission, MOEA on August 6, 2008. In May 2010, the Company applied for issuing share dividends from capital surplus of US$2.2 million, of which the amount of investment belonged to the Company was US$2.2 million × 49% = US$1.078 million. As of December 31, 2018, the paid-in capital of Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd was US$9 million. The registration was completed in July 2010 and had been approved by the Investment Commission, MOEA on November 30, 2010.

Note 3 ： The amount in the table should be shown in NTD (exchange rate was 30.71 at reporting date).

Note 4 ： Inward cash dividends.

Note 5 ： The original amount of investment was 86,673 (in thousands of NTD$). 51% equity of Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd was sold for 44,203 (in thousands of NTD$).

Note 6 ： The upper limit according to “Principle of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission, MOEA on August 29, 2008.

• 140 -

TABLE 5

Ta Yih Industrial Co., Ltd. And Subsidiaries

SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD PARTY, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES

FOR THE YEAR ENDED DECEMBER 31, 2018

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

Investee Company	Transaction Type	Purchase/Sale	Price	Transaction Details	Transaction Details	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Unrealized Gain	Note
		Amount		Payment Terms	Comparison with Normal Transactions	Ending Balance	%
Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd	Sales Royalty revenue	$ 235,265 77,763	Cost plus pricing According to the contract	120 to 160 days Every 160 days.	90 days N/A	Accounts receivable $ 57,875 Other receivables 48,599	7 92	$ 4,565

• 141 -

6-5. A parent company only financial statement for the most recent fiscal year, certified by a CPA

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Ta Yih Industrial Co., Ltd.

Opinion

We have audited the accompanying standalone financial statements of Ta Yih Industrial Co., Ltd. (the “Company”), which comprise the standalone balance sheets as of December 31, 2018 and 2017, and the standalone statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the standalone financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying standalone financial statements present fairly, in all material respects, the standalone financial position of the Company as of December 31, 2018 and 2017, and its standalone financial performance and its standalone cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

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

Key Audit Matter

Key audit matter is the matter that, in our professional judgment, was of most significance in our audit of the standalone financial statements for the year ended December 31, 2018. This matter was addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

Key audit matter in the audit of the Company’s standalone financial statements for the year ended December 31, 2018 is as follows:

142

Sales Revenue from Hub Warehouse

Ta Yih Industrial Co., Ltd. mainly manufactures and sells automobile and locomotive lamps. The Company also sells its products to overseas markets. The sales pattern of overseas markets depends on the sales delivery from hub warehouse. Ta Yih Industrial Co., Ltd. usually relies on the statements or other information from the external custodians of hub warehouse when making important strategic decisions. The inventory change related to the delivery from hub warehouse is used as the basis for recognizing revenue, and the sales revenue is recognized when the customer picks up the goods (transfer of risks and rewards).

The sales revenue generated from the hub warehouse was $1,003,125 thousand for the year ended December 31, 2018, which accounted for 18% of the total operating revenue. Considering the fact that trading volume of revenue from the hub warehouse is significant to the standalone financial statements of Ta Yih Industrial Co., Ltd. for the year ended December 31, 2018; therefore, the revenue recognition of the sales from hub warehouse needs to be verified through multiple internal controls and has been identified as a key audit matter.

Our audit procedures performed in respect of the above key audit matter included the following:

1. We sampled and examined the effectiveness of continuous operation of the relevant controls during the fiscal year.

2. We sampled and inventoried the stock of goods in hub warehouse. And then, checked the estimated amounts in accordance with the actual hub warehouse amounts, and compared the results through physical observation.

3. We confirmed the appropriateness of the hub warehouse revenue by sampling the sales revenue from shipment of hub warehouse and checked the corresponding documents, such as export declarations and bills of lading.

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

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

In preparing the standalone financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the supervisors, are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Standalone Financial Statements

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

143

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

1. Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

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

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

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

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

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine a matter that was of most significance in the audit of the standalone financial statements for the year ended December 31, 2018 and is therefore the key audit matter. We describe this matter in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

144

The engagement partners on the audit resulting in this independent auditors’ report are Hung-Ju Liao, and Chi-Chen Li.

Deloitte & Touche Taipei, Taiwan Republic of China

March 15, 2019

Notice to Readers

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

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

145

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Ta Yih Industrial Co., Ltd.

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

ASSETS CURRENT ASSETS Cash (Notes 3, 4 and 6) Notes receivable (Notes 3, 4 and 7) Accounts receivable (Notes 3, 4, 7 and 16) Accounts receivable from related parties (Notes 3, 4, 7, 16 and 22) Other receivable (Notes 3, 4 and 7) Other receivables from related parties (Notes 3, 4, 7 and 22) Inventories (Notes 4, 5 and 8) Prepayments (Note 22) Other current assets (Notes 4, 11 and 18) Total current assets NON-CURRENT ASSETS Investments accounted for using the equity method (Notes 4 and 9) Property, plant and equipment (Notes 4, 10, 22 and 23) Deferred tax assets (Notes 4 and 18) Other non-current assets (Notes 3, 4 and 11) Total non-current assets TOTAL		December 31, 2018 Amount % $ 113,240 3 6,609 - 572,455 17 207,591 6 4,193 - 48,599 1 785,969 23 223,668 7 40,616 1 2,002,940 58 407,261 12 966,815 28 35,820 1 39,205 1 1,449,101 42 $ 3,452,041 100		December 31, 2017 Amount % $ 181,453 5 6,975 - 766,580 20 278,472 8 8,734 - 47,236 1 862,116 23 124,697 3 31,093 1 2,307,356 61 413,279 11 1,010,568 27 34,042 1 22,438 - 1,480,327 39 $ 3,787,683 100

LIABILITIES AND EQUITY CURRENT LIABILITIES Contract liabilities - current (Notes 3,4 and 16 ) Notes payable (Note 12) Notes payable to related parties (Notes 12 and 22) Accounts payable (Note 12) Accounts payable to related parties (Notes 12 and 22) Other payables (Note 13) Other payables to related parties (Notes 13 and 22) Current tax liabilities (Notes 4 and 18) Deferred revenue - current (Note 3) Other current liabilities (Note 13) Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities (Notes 4 and 18) Net defined benefit liabilities (Note 4, 5, and 14) Other non-current liabilities (Note 13) Total non-current liabilities Total liabilities EQUITY ATTRIBUTED TO OWNERS OF THE COMPANY (Note 15) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity attributable to owners of the Company TOTAL		December 31, 2018 Amount % $ 323,019 9 185,813 6 6,437 - 484,440 14 43,089 1 223,564 7 68,737 2 10,575 - - - 236 - 1,345,910 39 119,909 3 135,020 4 2,597 - 257,526 7 1,603,436 46 762,300 22 60,605 2 583,285 17 68,264 2 403,043 12 1,054,592 31 (28,892) (1) 1,848,605 54 $ 3,452,041 100		December 31, 2017
				Amount % $ - - 235,402 6 15,038 - 661,204 18 59,909 2 273,818 7 76,909 2 55,118 2 199,085 5 1,015 - 1,577,498 42 113,351 3 159,372 4 2,437 - 275,160 7 1,852,658 49 762,300 20 60,472 2 533,348 14 68,264 2 533,247 14 1,134,859 30 (22,606) (1) 1,935,025 51 $ 3,787,683 100

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

146

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

Ta Yih Industrial Co., Ltd.

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

OPERATING REVENUE (Notes 4, 16 and 22) OPERATING COSTS (Notes 8,17, and 22) GROSS PROFIT UNREALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES REALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES REALIZED GROSS PROFIT OPERATING EXPENSES (Notes 7, 17 and 22) Selling and marketing expenses General and administrative expenses Research and development expenses Expected credit gain Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES (Notes 4, 17 and 22) Other income Other gains and losses Share of profit of subsidiaries and associates Total non-operating expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 18) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans (Note 14)		2018 Amount % $ 5,703,811 100 4,872,472 85 831,339 15 (4,565) - 4,213 - 830,987 15 180,785 3 171,798 3 205,809 4 (4,465) - 553,927 10 277,060 5 97,036 1 (5,626) - 2,332 - 93,742 1 370,802 6 51,595 1 319,207 5 (8,033) -		2017
				Amount % $ 6,197,390 100 5,126,223 83 1,071,167 17 (1,276) - 11,300 - 1,081,191 17 194,125 3 176,829 3 206,026 3 - - 576,980 9 504,211 8 112,646 2 (51,424) (1) 20,538 - 81,760 1 585,971 9 86,607 1 499,364 8 (17,082) - (Continued)

147

Ta Yih Industrial Co., Ltd.

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

Income tax benefit relating to items that will not be reclassified subsequently to profit or loss (Notes 4 and 18) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations Income tax benefit relating to items that may be reclassified subsequently to profit or loss (Notes 4 and 18) Other comprehensive loss for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR EARNINGS PER SHARE (New Taiwan dollars, Note 19) Basic Diluted		2018 Amount % $ 4,955 - (3,078) - (7,998) - 1,712 - (6,286) - (9,364) - $ 309,843 5 2018 $ 4.19 $ 4.18		2017
				Amount % $ 2,904 - (14,178) - (8,495) - 1,428 - (7,067) - (21,245) - $ 478,119 8 2017 $ 6.55 $ 6.54
		$		$

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

(Concluded)

148

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Ta Yih Industrial Co., Ltd.

STANDALONE STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Dividends Per Share)

BALANCE AT JANUARY 1, 2017 Appropriation of the 2016 earnings (Note 15) Legal reserve Cash dividends distributed by the Company - NT$5.2 per share Net profit for the year ended December 31, 2017 Other comprehensive loss for the year ended December 31, 2017, net of income tax Total comprehensive income loss for the year ended December 31, 2017 BALANCE AT DECEMBER 31, 2017 Appropriation of the 2017 earnings (Note 15) Legal reserve Cash dividends distributed by the Company - NT$ 5.2 per share Unclaimed cash dividends overdue transferred to capital surplus Net profit for the year ended December 31, 2018 Other comprehensive loss for the year ended December 31, 2018, net of income tax Total comprehensive income loss for the year ended December 31, 2018 BALANCE AT DECEMBER 31, 2018		Share Capital Shares Amount Capital Surplus 76,230 $ 762,300 $ 60,472 - - - - - - - - - - - - - - - 76,230 762,300 60,472 - - - - - - - - 133 - - - - - - - - - 76,230 $ 762,300 $ 60,605		Retained Earnings Legal Reserve Special Reserve Unappropriated Earning $ 483,964 $ 68,264 $ 493,841 49,384 - (49,384) - - (396,396) - - 499,364 - - (14,178) - - 485,186 533,348 68,264 533,247 49,937 - (49,937) - - (396,396) - - - - - 319,207 - - (3,078) - - 316,129 $ 583,285 $ 68,264 $ 403,043	Other Equity Exchange Differences on Translating Foreign Operations $ (15,539) - - - (7,067) (7,067) (22,606) - - - - (6,286) (6,286) $ (28,892)	Total Equity $ 1,853,302 - (396,396) 499,364 (21,245) 478,119 1,935,025 - (396,396) 133 319,207 (9,364) 309,843 $ 1,848,605
		Shares 76,230 - - - - - 76,230 - - - - - - 76,230

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

149

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Ta Yih Industrial Co., Ltd.

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

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Expected credit loss reversed on trade receivables Impairment loss recognized on trade receivables Net gain on fair value changes of financial assets at fair value through profit or loss Finance costs Interest income Share of profits of subsidiaries and associates Loss on disposal of property, plant and equipment, net Loss on disposal of available-for-sale financial assets, net Provision for loss on inventories Unrealized gain on transactions with associates Realized gain on transactions with associates Net loss (gain) on foreign currency exchange Changes in operating assets and liabilities: Notes receivable Accounts receivable Accounts receivable from related parties Other receivables Other receivables from related parties Inventories Prepayments Other current assets Contract liabilities Notes payable Notes payable to related parties Accounts payable Accounts payable to related parties Other payables Other payables to related parties Deferred revenue Other current liabilities Net defined benefit liabilities Other non-current assets Cash generated from operations Interest received Dividends received Interest paid Income tax paid Net cash generated from operating activities	2018 $ 370,802 151,702 (4,465) - (10) 838 (358) (2,332) 424 - - 4,565 (4,213) (7,262) 397 200,831 77,953 4,541 (965) 76,147 (98,971) (710) 123,934 (49,589) (8,601) (177,843) (18,221) (50,254) (8,172) - (779) (32,385) 210 547,214 358 - (838) (93,504) 453,230	2017 $ 585,971 172,095 - 1,965 - 1,014 (493) (20,538) 329 326 713 1,276 (11,300) 4,348 (6,506) 41,600 (22,690) (993) (9,823) (264,078) 125,614 (5,377) - 35,622 1,694 (9,800) (11,970) (11,124) (2,404) 65,219 (699) (31,784) 229 628,436 493 14,716 (1,014) (61,338) 581,293 (Continued)

• 150 -

Ta Yih Industrial Co., Ltd.

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

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at fair value through profit or loss Proceeds from sale of financial assets at fair value through profit or loss Purchase of available-for-sale financial assets Proceeds from sale of available-for-sale financial assets Proceeds from sale of debt investment with no active market Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrease in refundable deposits Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Repayments of short-term borrowings Refunds of guarantee deposits received Cash dividends Unclaimed cash dividends overdue transferred to capital surplus Net cash used in financing activities NET INCREASE (DECREASE) IN CASH CASH AT THE BEGINNING OF THE YEAR CASH AT THE END OF THE YEAR	2018 $ (50,000) 50,010 - - - (122,834) - (7,919) 5,613 (125,130) 718,400 (718,400) (50) (396,396) 133 (396,313) (68,213) 181,453 $ 113,240	2017 $ - - (75,000) 74,674 10,000 (77,814) 30 (5,428) 7,546 (65,992) 724,136 (724,136) - (396,396) - (396,396) 118,905 62,548 $ 181,453

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

(Concluded)

• 151 -

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

Ta Yih Industrial Co., Ltd.

1. GENERAL INFORMATION

Ta Yih Industrial Co., Ltd. (the “Company”) was incorporated in 1964. It was formerly known as Ta Yih Industrial Corp. and changed to the present name in 1976. The Company mainly sells, manufactures and processes automobile parts, motorcycle parts, railway vehicle parts, transportation machineries, industrial plastic parts, as well as invests in related industries.

The Company’s shares have been traded on the Taiwan Stock Exchange since October 1997.

The standalone financial statements are presented in the Company’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The standalone financial statements were approved by the Company’s board of directors and authorized for issue on March 15, 2019.

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

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

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

• 1) IFRS 9 “Financial Instruments” and related amendments

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

Classification, measurement and impairment of financial assets

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

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

• 152 -

		MeasurementCategory	MeasurementCategory		Carrying Amount	Carrying Amount	Carrying Amount
Financial Assets		IAS 39	IFRS 9		IAS 39		IFRS 9	Remark
Cash		Loans and receivables	Amortized cost	$	181,453	$	181,453	a
Notes	receivable,	Loans and receivables	Amortized cost		1,107,997		1,107,997	a
accounts receivable
and	other receivables
Refundable deposits		Loans and receivables	Amortized cost		14,573		14,573	a
			Carrying Amount		Carrying Amount
			as of January 1,		as of January 1,
	Financial Assets		2018 (IAS 39)	Reclassifications		2018 (IFRS	9)	Remark
Amortized cost			$ -
Add:	Reclassification from loans and		-	$ 1,304,023
	receivables (IAS 39)
			-	1,304,023		$ 1,304,023		a
Total			$ -	$ 1,304,023		$ 1,304,023

• a) Cash, notes receivable, accounts receivable, other receivables and refundable deposits that were previously classified as loans and receivables under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9.

• 2) IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Refer to Note 4 for related accounting policies.

The Company elected only to retrospectively apply IFRS 15 to contracts that were not complete as of January 1, 2018 and recognize the cumulative effect of the change in retained earnings on January 1, 2018.

The impact on assets, liabilities and equity as of January 1, 2018 from the initial application of IFRS 15 is set out below:

		Carrying		Carrying
	Amount as of		Adjustments	Amount as of
	January 1,		Arising from	January 1,
		2018	Initial	2018
		(IAS 18 )	Application	(IFRS 15)
Deferred revenue	$	199,085	$ (199,085)	$ -
Contract liabilities - current		-	199,085	199,085
Total effect on liabilities	$	199,085	$ -	$ 199,085

• 153 -

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

New, Amended or Revised Standards and Interpretations Effective Date (the “New IFRSs”) Announced by IASB (Note 1) Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019 Amendments to IFRS 9 “Prepayment Features with Negative January 1, 2019 (Note 2) Compensation” IFRS 16 “Leases” January 1, 2019 Amendments to IAS 19 “Plan Amendment, Curtailment or January 1, 2019 (Note 3) Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint January 1, 2019 Ventures” IFRIC 23 “Uncertainty over Income Tax Treatments” January 1, 2019

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.

Note 3: The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 “Leases”, IFRIC 4 “Determining Whether an arrangement contains a Lease”, and a number of related interpretations.

Definition of a lease

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

The Company as lessee

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

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

• 154 -

The Company expects to apply the practical expedient that will account for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.

The Company as lessor

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

Anticipated impact on assets and liabilities

		Carrying	Adjustments	Adjustments		Adjusted
	Amount as of		Arising from			Carrying
	December 31,			Initial	Amount as of
		2018	Application		January 1, 2019
Right-of-use assets	$	-	$	25,543	$	25,543
Total effect on assets	$	-	$	25,543	$	25,543
Lease liabilities - current	$	-	$	11,289	$	11,289
Lease liabilities - non-current		-		14,254		14,254
Total effect on liabilities	$	-	$	25,543	$	25,543

Except for the above impact, as of the date the standalone financial statements were authorized for issue, the Company assessed that the application of other standards or interpretations would not have a material effect on the Company’s financial position and financial performance.

c. The IFRSs issue but not yet endorsed and issued into effect by FSC

Effective Date New IFRSs Announced by IASB (Note 1) Amendments to IFRS 3 “Definition of a Business” January 1, 2020 (Note 2) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020 (Note 3)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

Note 2: The Company shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

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

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

• 155 -

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

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

• b. Basis of preparation

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

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

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• 3) Level 3 inputs are unobservable inputs for the asset or liability.

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

• c. Classification of current and non-current assets and liabilities

Current assets include:

• 1) Assets held primarily for the purpose of trading;

• 2) Assets expected to be realized within 12 months after the reporting period; and

• 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

• 1) Liabilities held primarily for the purpose of trading;

• 2) Liabilities due to be settled within 12 months after the reporting period; and

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

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

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d. Foreign currencies

In preparing the standalone financial statements of the Company, transactions in currencies other than the Company’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

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

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

For the purposes of presenting standalone financial statements, the investments of the Company’s foreign operations (including subsidiaries and associates in other countries that use currencies which are different from the Company) are translated into the New Taiwan dollar using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income.

e. Inventories

Inventories consist of raw materials, supplies, finished goods and work in progress and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at the standard cost on the balance sheet date. The difference between actual costs and normal standard costs is allocated in proportion to inventory and operational costs on fiscal year-end, in order to approach the amount of weighted-average cost.

• f. Investments in subsidiaries

The Company uses the equity method to account for its investments in subsidiaries.

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

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

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

• g. Investments in associates

An associate is an entity over which the Company has significant influence and which is neither a subsidiary nor an interest in a joint venture.

The Company uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate is initially recognized at cost and adjusted

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thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the associate. The Company also recognizes the changes in the Company’s share of the equity of associates.

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

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Company’ standalone financial statements only to the extent that interests in the associate are not related to the Company.

• h. Property, plant and equipment

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

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

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

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

• i. Impairment of tangible assets and assets related to contract costs

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

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

Before the Company recognizes an impairment loss from assets related to contract costs, any impairment loss on inventories related to the contract applicable under IFRS 15 shall be recognized in accordance with applicable standards. Then, impairment loss from the assets related to the contract costs is recognized to the extent that the carrying amount of the assets exceeds the remaining amount of consideration that the Company expects to receive in exchange for related goods or services less the costs which relate directly to providing those goods or services and which have not been recognized as expenses. The assets related to the contract costs are then included in the carrying amount of the cash-generating unit to which they belong for the purpose of evaluating impairment of that cash-generating unit.

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset,

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cash-generating unit or assets related to contract costs is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset, cash-generating unit or assets related to contract costs in prior years. A reversal of an impairment loss is recognized in profit or loss.

• j. Financial instruments

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

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

• 1) Financial assets

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

• a) Measurement categories

2018

Financial assets are classified into the following categories: Financial assets at FVTPL and financial assets at amortized cost.

• i. Financial assets at FVTPL

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

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial asset.

• ii. Financial assets at amortized cost

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

• i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash, accounts receivable at amortized cost (including related parties), notes receivable (including related parties), other receivables (including related parties), and refundable deposits (classified under other non-current assets), are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss.

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Exchange differences are recognized in profit or loss.

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

• i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and

• ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

2017

Financial asset is classified as loans and receivables.

Loans and receivables

Loans and receivables (including accounts receivable (including related parties), notes receivable (including related parties), other receivables (including related parties), cash, and refundable deposit (classified under other non-current assets)) are measured using the effective interest method at amortized cost less any impairment, except for short-term receivables when the effect of discounting is immaterial.

• b) Impairment of financial assets

2018

The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including accounts receivable), investments in equity instruments that are measured at FVTOCI.

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

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

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

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2017

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

Financial assets at amortized cost, such as accounts receivable, are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience with collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with defaults on receivables.

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

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

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

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

• c) Derecognition of financial assets

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

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

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• 2) Financial liabilities

• a) Subsequent measurement

All financial liabilities are measured at amortized cost using the effective interest method.

b) Derecognition of financial liabilities

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

• k. Revenue recognition

2018

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

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

• 1) Revenue from the sale of goods

Revenue from the sale of goods comes from sales of car lamps and molds. Sales of goods are recognized as revenue and accounts receivable when the goods are delivered to the customer’s specific location because it is the time when the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence.

The Company does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

• 2) Royalty revenue

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement and provided that it is probable that the economic benefits will flow to the Company and that the amount of revenue can be measured reliably. Royalty arrangements that are based on sales are recognized with reference to the underlying arrangement.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

• 1) Revenue from the sale of goods

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

• a) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

• b) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

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• c) The amount of revenue can be measured reliably;

• d) It is probable that the economic benefits associated with the transaction will flow to the Company; and

• e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

2) Royalty revenue

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement and provided that it is probable that the economic benefits will flow to the Company and that the amount of revenue can be measured reliably. Royalty arrangements that are based on sales are recognized with reference to the underlying arrangement.

l. Borrowing costs

Borrowing costs directly attributable to an acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

m. Employee benefits

1) Short-term employee benefits

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

• 2) Retirement benefits

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

Defined benefit costs (including service cost, net interest and remeasurement) under defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost, past service cost, as well as gains and losses on settlements) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Company’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

• 3) Other long-term employee benefits

Other long-term employee benefits are accounted for in the same way as the accounting required for defined benefit plans except that remeasurement is recognized in profit or loss.

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n. Taxation

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

1) Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

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

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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

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

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

3) Current and deferred tax for the year

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

a. Write-down of inventories

The net realizable value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realizable value is based on current market conditions and historical experience with product sales of a similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value.

• b. Recognition and measurement of defined benefit plans

The net defined benefit liabilities (assets) and the resulting defined benefit costs under the defined benefit pension plans are calculated using the projected unit credit method. Actuarial assumptions comprise the discount rates, rates of employee turnover, future salary increases, etc. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of related expenses and liabilities.

6. CASH

Cash on hand Checking accounts and demand deposits		December 31	December 31
		2018 $ 1,297 111,943 $ 113,240	2017 $ 693 180,760 $ 181,453

7. NOTES RECEIVABLE, ACCOUNTS RECEIVABLE (INCLUDING RELATED PARTIES), AND OTHER RECEIVABLES (INCLUDING RELATED PARTIES)

Notes receivable At amortized cost Gross carrying amount - operating Less: Allowance for impairment loss Accounts receivable At amortized cost Gross carrying amount Less: Allowance for impairment loss		December 31 2018 2017 $ 6,724 $ 7,121 115 146 $ 6,609 $ 6,975 $ 579,807 $ 773,902 4,352 7,322 $ 572,455 $ 766,580 (Continued)
		2018 $ 6,724 115 $ 6,609 $ 579,807 4,352 $ 572,455

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Accounts receivable from related parties At amortized cost Gross carrying amount Less: Allowance for impairment loss Other receivables Travel fee receivables Tariff refund receivables Others Other receivables from related party Royalty receivables Others		December 31 2018 2017 $ 207,808 $ 280,153 217 1,681 $ 207,591 $ 278,472 $ 339 $ 6,904 1,554 1,013 2,300 817 $ 4,193 $ 8,734 $ 48,599 $ 47,164 - 72 $ 48,599 $ 47,236 (Concluded)
		2018
		$ 207,808 217 $ 207,591 $ 339 1,554 2,300 $ 4,193 $ 48,599 - $ 48,599

In 2018

The average credit period of sales of goods was 60 to 90 days. No interest was charged on accounts receivable.

The Company applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Company’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Company’s different customer base.

The Company writes off a trade receivables when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation. For trade receivables that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables based on the Company’s provision matrix.

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December 31, 2018

Expected credit loss rate Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost		No indication of default of debtor	No indication of default of debtor		271 to 365 Days 57.04%～ 87.72% $ 2,783 (2,441) $ 342	The debtor has defaulted 100% $ 391 (391) $ -	Total $ 791,339 (4,684) $ 786,655
	Not Past Due 0%～5% $ 788,009 (1,844) $ 786,165	Less than 60 Days 61 to 90 Days 0.9% 0.9%～5.85% $ 30 $ 126 (1) (7) $ 29 $ 119	91 to 180 Days 5.85%～ 16.85% $ - - $ -	181 to 270 Days 16.85%～ 57.04% $ - - $ -

The movements of the loss allowance of trade receivables were as follows:

Balance at January 1, 2017 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2017 per IFRS 9 Less: Net remeasurement of loss allowance Balance at December 31, 2018	2018 $ 9,149 - 9,149 (4,465) $ 4,684

In 2017

The Company applied the same credit policy in 2018 and 2017.

The average credit period of sales of goods was 60 to 90 days, and 90 to 180 days for related parties. Allowance for impairment loss was recognized based on the estimated irrecoverable amounts determined by reference to the aging of receivables, past default experience of the counterparties and analysis of their current financial positions.

As of December 31, 2017, the balance of notes receivable that was not past due and impaired (based on the number of past due days from the end of credit term).

The aging of receivables (based on the number of days from the invoice date and including related parties) was as follows:

Up to 60 days 61 - 90 days 91 - 120 days More than 120 days	December 31, 2017 $ 958,318 59,911 16,540 19,286 $ 1,054,055

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The movements of the allowance for doubtful trade receivables were as follows:

Accounts receivable Balance at January 1, 2017 Add: Impairment losses recognized on receivables Balance at December 31, 2017 Notes receivable Balance at January 1, 2017 Add: Impairment losses recognized on receivables Balance at December 31, 2017	Individually Assessed for Impairment $ 391 - $ 391 $ - - $ -	Collectively Assessed for Impairment $ 6,781 1,831 $ 8,612 $ 12 134 $ 146	Total $ 7,172 1,831
			$ 9,003
			$ 12 134
			$ 146

8. INVENTORIES

Merchandise Finished goods Work in progress Raw materials		December 31	December 31
		2018 $ 84,116 317,302 206,200 178,351 $ 785,969	2017 $ 192,637 348,219 146,428 174,832 $ 862,116

The costs of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017 were $4,872,472 thousand and $5,126,223 thousand, respectively. The cost of goods sold included inventory write-down for the year ended December 31, 2017 of $713 thousand.

9. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in subsidiaries Investments in associates		December 31	December 31
		2018 $ 1,020 406,241 $ 407,261	2017 $ 1,026 412,253 $ 413,279

a. Investments in subsidiaries

Ta Yih International Investment Co., Ltd. (BVI)		December 31	December 31
		2018 $ 1,020	2017 $ 1,026

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As of December 31, 2018 and 2017, The Company’s percentage of ownership and voting rights in Ta Yih International Investment Co., Ltd. (BVI) was 100%

• b. Investments in associates

Material associates Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd.		December 31	December 31
		2018 $ 406,241	2017 $ 412,253

In December 31, 2018 and 2017, The Company’s percentage of ownership and voting rights in Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd. was 49%

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

Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd.

Current assets Non-current assets Current liabilities Non-current liabilities Equity Proportion of the Company’s ownership Equity attributable to the Company Unrealized gain or loss with associates Carrying amount Operating revenue Net profit for the year Total comprehensive income for the year Dividends received from Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd.		December 31	December 31
		2018 2017 $ 2,402,310 $ 2,445,075 1,123,316 565,756 (2,665,526) (2,043,508) (15,639) (111,309) $ 844,461 $ 856,014 49% 49% $ 413,786 $ 419,446 (7,545) (7,193) $ 406,241 $ 412,253 For the Year Ended December 31
		2018 $ 3,045,038 $ 4,835 $ 4,835 $ -	2017 $ 2,872,211 $ 42,003 $ 42,003 $ 14,716

Refer to Table 3 “Information on Investees” and Table 4 “Information on Investments in Mainland China” for the nature of activities, principal places of business and countries of incorporation of the associates.

The investments in subsidiaries and associates accounted for using the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2018 and 2017 were based on the subsidiaries and associates’ financial statements which have been audited for the same years.

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10. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Balance at December 31, 2017 Accumulated depreciation Balance at January 1, 2017 Depreciation expenses Disposals Balance at December 31, 2017 Carrying amount at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Balance at December 31, 2018 Accumulated depreciation Balance at January 1, 2018 Depreciation expenses Disposals Balance at December 31, 2018 Carrying amount at December 31, 2018	Land $ 601,050 - - $ 601,050 $ - - - $ - $ 601,050 $ 601,050 - - $ 601,050 $ - - - $ - $ 601,050	Buildings $ 235,131 535 - $ 235,666 $ 198,271 5,367 - $ 203,638 $ 32,028 $ 235,666 20,835 - $ 256,501 $ 203,638 5,889 - $ 209,527 $ 46,974	Machinery Equipment $ 915,320 113,062 (4,268) $ 1,024,114 $ 730,840 50,168 (3,920) $ 777,088 $ 247,026 $ 1,024,114 35,408 (20,370) $ 1,039,152 $ 777,088 53,277 (19,981) $ 810,384 $ 228,768	Molding Equipment Transportation Equipment $ 277,799 $ 15,038 13,723 2,886 (410) (127) $ 291,112 $ 17,797 $ 161,077 $ 10,470 73,950 1,812 (410) (127) $ 234,617 $ 12,155 $ 56,495 $ 5,642 $ 291,112 $ 17,797 13,591 4,300 (268) - $ 304,435 $ 22,097 $ 234,617 $ 12,155 53,779 2,714 (268) - $ 288,128 $ 14,869 $ 16,307 $ 7,228	Other Equipment $ 358,102 24,321 (986) $ 381,437 $ 273,287 40,798 (975) $ 313,110 $ 68,327 $ 381,437 34,239 (6,729) $ 408,947 $ 313,110 36,043 (6,694) $ 342,459 $ 66,488	Total $ 2,402,440 154,527 (5,791) $ 2,551,176 $ 1,373,945 172,095 (5,432) $ 1,540,608 $ 1,010,568 $ 2,551,176 108,373 (27,307) $ 2,632,182 $ 1,540,608 151,702 26,943 $ 1,665,367 $ 966,815

a. Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings
Main buildings	40 - 60 years
Factory and other buildings	5 - 40 years
Machinery equipment	3 - 12 years
Molding equipment	2 - 3 years
Transportation equipment	5 - 12 years
Other equipment	3 - 8 years

• b. Refer to Note 23 for the carrying amount of property, plant and equipment pledged as collateral for bank borrowings by the Company.

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11. OTHER ASSETS

Current Input tax Tax refund receivable Payment on behalf of others Non-current Refundable deposits Prepayment for properties, plant, and equipment		December 31	December 31
		2018 $ 30,481 8,813 1,322 $ 40,616 $ 16,879 22,326 $ 39,205	2017 $ 30,586 - 507 $ 31,093 $ 14,573 7,865 $ 22,438

12. NOTES PAYABLE AND ACCOUNTS PAYABLE (INCLUDING RELATED PARTIES)

Notes payable and accounts payable were both resulted from operating activities. The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

13. OTHER LIABILITIES

Current Other payables Payables for salaries or bonuses Payables for molding equipment Payables for annual leave Payables for employee’s compensation Payables for utilities expense Others Other payables to related parties Payables for royalty Payables for inspection expense Others		December 31	December 31
		2018 $ 158,847 18,558 17,831 9,665 4,489 14,174 $ 223,564 $ 64,427 4,036 274 $ 68,737	2017 $ 193,002 25,264 17,390 11,743 4,756 21,663 $ 273,818 $ 71,248 3,097 2,564 $ 76,909

(Continued)

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Other current liabilities Receipts under custody Non-current Other non-current liabilities Provision for employee benefits Guarantee deposits received		December 31 2018 2017 $ 236 $ 1,015 $ 2,407 $ 2,197 190 240 $ 2,597 $ 2,437 (Concluded)
		2018 $ 236 $ 2,407 190 $ 2,597

Provision for employee benefits is the estimate of long-term bonus for senior employees.

14. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

b. Defined benefit plans

The defined benefit plans adopted by the Company in accordance with the Labor Standards Law is operated by the government of the Republic of China (“ROC”). Pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. The Company contribute amounts equal to 5% and 8% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee and a manager pension fund administered by the manager pension fund managing committee. Pension contributions are deposited respectively in the Bank of Taiwan and Taiwan Business Bank in the committee’s name. Before the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Company has no right to influence the investment policy and strategy.

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

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities	December 31
	2018 2017 $ 371,377 $ 372,343 (236,357) (212,971) $ 135,020 $ 159,372

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Movements in net defined benefit liabilities were as follows:

Present Value of the Defined Benefit Obligation Fair Value of the Plan Assets Balance at January 1, 2017 $ 367,984 $ (193,910) Service cost Current service cost 5,504 - Net interest expense (income) 4,600 (2,465) Recognized in profit or loss 10,104 (2,465) Remeasurement Return on plan assets (excluding amounts included in net interest) - 637 Actuarial loss - changes in demographic assumptions 8,611 - Actuarial loss - experience adjustments 7,834 - Recognized in other comprehensive income 16,445 637 Contributions from the employer - (39,423) Benefits paid (22,190) 22,190 Balance at December 31, 2017 372,343 (212,971) Service cost Current service cost 4,913 - Net interest expense (income) 4,654 (2,736) Recognized in profit or loss 9,567 (2,736) Remeasurement Return on plan assets (excluding amounts included in net interest) - (5,104) Actuarial loss - changes in demographic assumptions 6,897 - Actuarial loss - changes in financial assumptions 4,890 - Actuarial loss - experience adjustments 1,350 - Recognized in other comprehensive income 13,137 (5,104) Contributions from the employer - (39,216) Benefits paid (23,670) 23,670 Balance at December 31, 2018 $ 371,377 $ (236,357)

Net Defined Benefit Liabilities (Assets) $ 174,074 5,504 2,135 7,639 637 8,611 7,834 17,082 (39,423) - 159,372 4,913 1,918 6,831 (5,104) 6,897 4,890 1,350 8,033 (39,216) - $ 135,020

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

Operating costs Selling and marketing expenses General and administrative expenses Research and development expenses		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 4,561 116 1,561 593 $ 6,831	2017 $ 5,071 141 1,724 703 $ 7,639

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

• 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

• 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plans’ debt investments.

• 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

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

Discount rate Expected rate of salary increase	December 31
	2018 2017 1.125% 1.250% 2.000% 2.000%

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

Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase 0.25% increase 0.25% decrease		December 31	December 31
		2018 $ (9,875) $ 10,264 $ 9,990 $ (9,661)	2017 $ (10,272) $ 10,686 $ 10,412 $ (10,061)

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

Expected contributions to the plans for the next year Average duration of the defined benefit obligation		December 31	December 31
		2018 $ 6,610 10.9 years	2017 $ 11,873 11.3 years

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15. EQUITY

a. Shares capital

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Ordinary shares Shares issued Ordinary shares	76,230
	$ 762,300
	76,230
	$ 762,300

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

b. Capital surplus

Issuance of ordinary shares Capital surplus from gain on disposal of assets Donations (dividends expired)		December 31	December 31
		2018 $ 56,330 4,142 133 $ 60,605	2017 $ 56,330 4,142 - $ 60,472

Such capital surplus from issuance of ordinary shares and donations may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and once a year). Capital surplus from gain on disposal of assets may only be used to offset a deficit.

• c. Retained earnings and dividends policy

Under the dividends policy as set forth in the amended Articles, where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on the distribution of employees’ compensation and remuneration of directors and supervisors before and after amendment, refer to Note 17(e) “Employees’ compensation and remuneration of director and supervisors for 2018 and 2017”.

In order to take the future needs of funding and long-term financial plan into consideration, when the board of directors drafts the surplus distribution, more than 50% of accumulated unappropriated earnings will be allocated as shareholders’ dividends, and the cash dividends shall not be lower than the 50% of the shareholders’ dividends. The said proportion of allocation of dividends and cash dividends shall be resolved by the resolution of the shareholders in their meeting.

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

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

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Company.

The appropriations of earnings for 2017 and 2016 were approved in the shareholders’ meetings on June 11, 2018 and June 14, 2017, respectively, as follows:

Legal reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2017 2016 $ 49,937 $ 49,384 396,396 396,396	Dividends Per Share (NT$)
		For the Year Ended December 31
		2017 2016 $ 5.2 $ 5.2

The appropriation of earnings for 2018 were proposed by the Company’s board of directors on March 15, 2019. The appropriations were as follows:

	Appropriation of	Appropriation of	Dividends Per	Dividends Per
		Earnings		Share (NT$)
Legal reserve	$	31,921
Cash dividends		289,674	$	3.8

The appropriations of earnings for 2018 are subject to the resolution of the shareholders in their meeting to be held on June 18, 2019.

16. REVENUE

Revenue from contracts with customers Revenue from sale of goods		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 5,703,811	2017 $ 6,197,390

• a. Contract information

Revenue from sale of goods

The Company’s primary products are car lamps and molds. Car lamps and molds are sold at their respective fixed amounts as agreed in the contracts. Revenue from sale of goods is recognized when the Company has transferred to the buyer the significant risks and rewards of ownership of the goods.

• b. Contract balances

Accounts receivable (including related parties) (Note 7) Contract liabilities - current Deferred revenue	December 31, 2018 $ 780,046
	$ 323,019

The changes in the balance of contract assets and contract liabilities primarily result from the timing differences between the Company’s performance and the respective customer’s payment.

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Revenue of the reporting period recognized from the beginning contract liabilities and from the performance obligations which were satisfied in the previous period is as follows:

	For the Year
	Ended December
	31, 2017
From the beginning contract liabilities
Sale of goods	$ 199,085

• c. Disaggregation of revenue

Type of goods Car lamps Molds Others		December 31	December 31
		2018 $ 4,488,820 603,582 611,409 $ 5,703,811	2017 $ 4,995,637 575,618 626,135 $ 6,197,390

17. PROFIT BEFORE INCOME TAX

• a. Other income

Bank deposit interest income Royalty revenue Others Other gains and losses Loss on disposal of financial assets Available-for-sale financial assets Fair value changes of financial assets and financial liabilities Financial assets classified as at FVTPL Interest on bank loans Net foreign exchange gains (losses) Royalty expense Loss on disposal of property, plant and equipment Others		For the Year Ended December 31	For the Year Ended December 31
		2018 2017 $ 358 $ 493 86,639 102,985 10,039 9,168 $ 97,036 $ 112,646 For the Year Ended December 31
		2018 $ - 10 (838) 30,097 (27,955) (424) (6,516) $ (5,626)	2017 $ (326) - (1,014) (12,952) (29,389) (329) (7,414) (51,424)

b. Other gains and losses

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Information about capitalized interest was as follows:

Capitalized interest Capitalization rate Depreciation Property, plant, and equipment An analysis of depreciation by function Operating costs Operating expenses		For the Year Ended December 31	For the Year Ended December 31
		2018 2017 $ - $ 195 - 0.79%～1.20% For the Year Ended December 31
		2018 $ 151,702 $ 137,498 14,204 $ 151,702	2017 $ 172,095 $ 155,301 16,794 $ 172,095

• c. Depreciation

• d. Employee benefits expense

Short-term benefits Salaries Directors’ remuneration Labor and health insurance Others Post-employment benefits Defined contribution plans Defined benefit plans (Note 14) Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 567,805 690 54,072 25,871 648,438 22,289 6,831 29,120 $ 677,558 $ 446,339 231,219 $ 677,558	2017 $ 601,413 611 53,768 25,475 681,267 21,780 7,639 29,419 $ 710,686 $ 471,313 239,373 $ 710,686

e. Employees’ compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of the Company, the Company accrued employees’ compensation at the rates of no less than 1% of net profit after offsetting previous fiscal deficits, and before income tax, and employees’ compensation. The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2018 and 2017, which were approved by the Company’s board of directors on March 15, 2019 and March 22, 2018, respectively, were as follows:

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Accrual rate

Employees’ compensation Amount Employees’ compensation - cash	For the Year Ended December 31
	2018 2017 1% 1% For the Year Ended December 31
	2018 2017 $ 3,746 $ 5,919

Remuneration of directors and supervisors was not issued over the years.

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

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

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

• f. Gains or losses on foreign currency exchange

Foreign exchange gains Foreign exchange losses		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 59,217 (29,120) $ 30,097	2017 $ 37,082 (50,034) $ (12,952)

18. INCOME TAX

• a. Major components of tax expense recognized in profit or loss

Current tax In respect of the current period Income tax on unappropriated earnings Adjustment for prior periods Deferred tax In respect of the current period Adjustments to deferred tax attributable to changes in tax rates and laws Income tax expense recognized in profit or loss		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 50,352 3,885 (14,089) 40,148 7,540 3,907 $ 51,595	2017 $ 84,919 2,934 (13,958) 73,895 12,712 - $ 86,607

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

Profit before tax Income tax expense calculated at the statutory rate Unrecognized deductible temporary differences Income tax on unappropriated earnings Adjustments for prior years’ tax Income tax expense recognized in profit or loss		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 370,802 $ 74,160 (12,361) 3,885 (14,089) $ 51,595	2017 $ 585,971 $ 99,615 (1,984) 2,934 (13,958) $ 86,607

In 2017, the applicable corporate income tax rate used by the Company in the ROC was 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings has been reduced from 10% to 5%.

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

• b. Income tax recognized in other comprehensive income

Deferred tax Effect of change in tax rate Remeasurement of defined benefit plans Exchange differences on translating foreign operations In respect of the current year Remeasurement of defined benefit plans Exchange differences on translating foreign operations Current tax assets and liabilities Current tax assets (classified under other current assets) Tax refund receivable Current tax liabilities Income tax payable		For the Year Ended December 31	For the Year Ended December 31
		2018 2017 $ 3,348 $ - 106 - 1,607 2,904 1,606 1,428 $ 6,667 $ 4,332 December 31
		2018 $ 8,813 $ 10,575	2017 $ - $ 55,118

c. Current tax assets and liabilities

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d. Deferred tax assets and liabilities

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

For the year ended December 31, 2018

Deferred Tax Assets Temporary differences Allowance for reduction of inventory to market Unrealized gain or loss with associates Long-term employee benefit liability Defined benefit plans Payables for annual leave Unrealized exchange losses Exchange differences on translating the financial statements of foreign operations Deferred Tax Liabilities Temporary differences Unappropriated earnings of associates Unrealized exchange gains Land value tax	Opening Balance Tax Rate Change (Recognized in Profit or Loss) Tax Rate Change (Recognized in Other Comprehen- sive Income) Recognized in Profit or Loss Recognized in Other Comprehen- sive Income $ 1,285 $ 227 $ - $ (563) $ - 1,223 216 - 70 - 374 66 - 41 - 27,093 1,433 3,348 (6,477) 1,607 2,956 522 - 88 - 512 90 - (602) - 599 - 106 - 1,606 $ 34,042 $ 2,554 $ 3,454 $ (7,443) $ 3,213 $ 36,615 $ 6,461 $ - $ (869) $ - - - - 966 - 76,736 - - - - $ 113,351 $ 6,461 $ - $ 97 $ -	Closing Balance $ 949 1,509 481 27,004 3,566 - 2,311
		$ 35,820
		$ 42,207 966 76,736
		$ 119,909

For the year ended December 31, 2017

Deferred Tax Assets Temporary differences Allowance for reduction of inventory to market Unrealized gain or loss with associates Declared export gross profit Long-term employee benefit liability Defined benefit plans Payables for annual leave Unrealized exchange losses Exchange differences on translating the financial statements of foreign operations	Opening Balance $ 1,164 2,927 7,812 334 29,593 2,785 - - $ 44,615	Recognized in Profit or Loss Recognized in Other Comprehensive Income $ 121 $ - (1,704 ) - (7,812 ) - 40 - (5,404 ) 2,904 171 - 512 - - 599 $ (14,076) $ 3,503	Closing Balance $ 1,285 1,223 - 374 27,093 2,956 512 599 $ 34,042 (Continued)

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• 182 -

Deferred Tax Liabilities Temporary differences Unappropriated earnings of associates Unrealized exchange gains Exchange differences on translating the financial statements of foreign operations Land value tax	Opening Balance $ 37,664 315 829 76,736 $ 115,544	Recognized in Profit or Loss Recognized in Other Comprehensive Income $ (1,049 ) $ - (315 ) - - (829 ) - - $ (1,364) $ (829)	Closing Balance $ 36,615 - - 76,736 $ 113,351 (Concluded)

• e. Income tax assessments

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

19. EARNINGS PER SHARE

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

Net Profit for the Year

Net profit for the year Shares Weighted average number of ordinary shares used in computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share		For the Year Ended December 31	For the Year Ended December 31
		2018 2017 $ 319,207 $ 499,364 Unit: In Thousands of Shares For the Year Ended December 31
		2018 76,230 87 76,317	2017 76,230 105 76,335

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

20. CAPITAL MANAGEMENT

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The Company manages its capital to ensure that entities in the Company will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Company consists of net debt (cash) and equity of the Company. The Company is not subject to any externally imposed capital requirements.

21. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments not measured at fair value

The carrying amounts of the Company’s financial instruments that are not measured at fair value, such as cash, accounts receivable (including related parties), refundable deposits (classified under other non-current assets), accounts payable (including related parties), and guarantee deposit received (classified under other non-current liabilities) approximate their fair values.

• b. Categories of financial instruments

Financial assets Loans and receivables (1) Financial assets at amortized cost (2) Financial liabilities Financial liabilities at amortized cost (3)	December 31
	2018 2017 $ - $ 1,304,023 969,566 - 1,012,270 1,322,520

• 1) The balances include loans and receivables measured at amortized cost, which comprise cash, notes and accounts receivable (including related parties), other receivables (including related parties), and refundable deposits (classified under other non-current assets).

• 2) The balances include financial assets at amortized cost, which comprise cash, notes and accounts receivable (including related parties), other receivables (including related parties), and refundable deposits (classified under other non-current assets).

• 3) The balances include financial liabilities at amortized cost, which comprise notes and accounts payable (including related parties), other payables (including related parties), and guarantee deposit received (classified under non-current liabilities).

• c. Financial risk management objectives and policies

The company’s major financial instruments include equity and debt investments, accounts receivable, and accounts payable.

The Company’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks are market risk (including currency risk and interest rate risk), credit risk and liquidity risk.

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1) Market risk

The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

• a) Foreign currency risk

The Company had foreign currency sales and purchases, which exposed the Company to foreign currency risk.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 24.

Sensitivity analysis

The Company was mainly exposed to the USD, CNY and JPY.

The following table details the Company’s sensitivity to an increase and decrease of 1% in the functional currency against the relevant foreign currencies. The sensitivity analysis included only outstanding foreign currency denominated monetary items. A positive number below indicates an increase in pre-tax profit. For a 1% weakening of the functional currency against the relevant foreign currency, there would be an equal and opposite impact on pre-tax profit, and the balances below would be negative.

Profit or loss Profit or loss Profit or loss	USD Impact
	For the Year Ended December 31
	2018 2017 $ 2,759 $ 2,787 CNY Impact
	For the Year Ended December 31
	2018 2017 $ 1,043 $ 595 JPY Impact
	For the Year Ended December 31
	2018 2017 $ 657 $ 1,143

Exchange rate fluctuations are mainly attributable to the exposure on outstanding cash, accounts receivable, other receivables and accounts payable in foreign currency which were not hedged at the end of the reporting period.

In management’s opinion, sensitivity analysis was unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period did not reflect the exposure during the period. Sales quoted in the USD, CNY, and JPY change with the fluctuation of client’s order.

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b) Interest rate risk

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

Cash flow interest rate risk Financial assets	December 31
	2018 2017 $ 111,324 $ 175,474

As of December 31, 2018 and 2017, there were no floating interest rate liabilities in the standalone financial statements. Hence, no significant interest rate risk was identified.

• 2) Credit risk

Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk, which would cause a financial loss to the Company due to the failure of the counterparty to discharge its obligation and due to the financial guarantees provided by the Company, could be equal to the total of the carrying amount of the respective recognized financial assets as stated in the balance sheets.

The company’s credit risk primarily arose from sales of the top 3 clients, which contributed more than 10% of the operating revenue in the statements of comprehensive income. The total percentages of accounts receivable (include related parties) from the above clients for the years ended December 31, 2018 and 2017 were 59% and 53%, respectively.

3) Liquidity risk

The Company manages liquidity risk by monitoring and maintaining a level of cash deemed adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

All of the financial liabilities of the Company had original maturities of less than three months. Because equity was greater than liabilities in the Company’s capital structure, and the unused bank quotas and working capital were abundant, there was no material liquidity risk.

22. TRANSACTIONS WITH RELATED PARTIES

Details of transactions between the Company and other related parties are disclosed below.

• a. Related party name and category

Related Party Name	Related Party Category
Koito Manufacturing Co., Ltd.	Investors with significant influence over the
	Company
Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd	Associates
Guangzhou Koito Automotive Lamp Co., Ltd.	Subsidiary of Koito Manufacturing Co.,
	Ltd.
India Japan Lighting Private Limited	Subsidiary of Koito Manufacturing Co.,
	Ltd.
	(Continued)

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Related Party Name

Related party category

PT. Indonesia Koito Subsidiary of Koito Manufacturing Co., Ltd. Thai Koito Company Limited Subsidiary of Koito Manufacturing Co., Ltd. Hubei Koito Automotive Lamp Co., Ltd. Subsidiary of Koito Manufacturing Co., Ltd. TYC Brother Industrial Co., Ltd. Substantive related party DBM Reflex of Taiwan Co., Limited Substantive related party Mai Huang Enterprise Co., Ltd. Substantive related party Juoku Technology Co., Ltd. Substantive related party Ta Yih Investment Co., Ltd. Substantive related party Ta Yih International Hotel Co., Ltd. Substantive related party Nai Yi Entertainment Company Ltd. Substantive related party Kenmos Auto Parts (USA) LLC Substantive related party Wu Jinmao Culture and Education Foundation Substantive related party

(Concluded)

b. Sales of goods

Related Party Category/Name Investors with significant influence over the Company Koito Manufacturing Co., Ltd. Associates Subsidiary of Koito Manufacturing Co., Ltd. Substantive related party		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 1,250,831 235,265 25,646 2,557 $ 1,514,299	2017 $ 1,559,161 127,706 138,854 8,659 $ 1,834,380

The prices of sales of goods with related parties did not have substantive difference compared to non-related parties, except the prices of sales of goods with associates were added based on the costs. The collection term of domestic sales with related parties is 90 days, the collection term of export sales with related parties apart from associates, according to the term of individual transaction, is 120 to 180 days, and the collection term does not have substantive difference compared to non-related parties.

The unrealized gains of sales with associates for the years ended December 31, 2018 and 2017 were $7,545 thousand and $7,193 thousand, respectively, and had been recognized as a reduction of investments accounted for using the equity method.

c. Purchases of goods

Related Party Category/Name Investors with significant influence over the Company Associates Subsidiary of Koito Manufacturing Co., Ltd. Substantive related party		For the Year Ended December 31	For the Year Ended December 31
		2018 $ 278,565 2,870 602 33,044 $ 315,081	2017 $ 275,263 3,476 331 67,323 $ 346,393

The payment term and price of goods purchased do not have substantive difference between related and

• 187 -

non-related parties. The payment term for related parties depends on individual transaction, which is normally 90 days, and does not have substantive difference from non-related parties.

• d. Receivables from related parties (excluding loans to related parties)

Line Item Related Party Category/Name Accounts receivable Investors with significant influence over the Company Koito Manufacturing Co., Ltd. Associates Subsidiary of Koito Manufacturing Co., Ltd. Substantive related party Less: Allowance for impairment loss Other receivables Associates Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd		December 31	December 31
		2018 $ 147,783 57,875 - 2,150 207,808 217 $ 207,591 $ 48,599	2017 $ 171,406 66,367 36,340 6,040 280,153 1,681 $ 278,472 $ 47,236

The outstanding trade receivables from related parties are unsecured.

• e. Payables to related parties (excluding loans from related parties)

Line Item Related Party Category/Name Notes payable Substantive related party Accounts payable Investors with significant influence over the Company Koito Manufacturing Co., Ltd. Associates Substantive related party Other payable Investors with significant influence over the Company Koito Manufacturing Co., Ltd. Associates Substantive related party		December 31	December 31
		2018 $ 6,437 $ 41,820 636 633 $ 43,089 $ 68,463 109 165 $ 68,737	2017 $ 15,038 $ 55,002 353 4,554 $ 59,909 $ 74,345 2,564 - $ 76,909

The outstanding payables from related parties are unsecured.

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f. Prepayments

Line Item Related Party Category/Name Prepayments in advance Subsidiary of Koito Manufacturing Co., Ltd. Substantive related party Prepaid expenses Investors with significant influence over the Company		December 31	December 31
		2018 $ - - 2,444 $ 2,444	2017 $ 89 4,293 - $ 4,382

• g. Acquisitions of property, plant and equipment

Related Party Category/Name Investors with significant influence over the Company Koito Manufacturing Co., Ltd.		Purchase Price	Purchase Price
		For the Year Ended December 31
		2018 $ 6,584	2017 $ -

h. Other transactions with related parties

1) Rental expenses

The Company entered into a contract with substantive related party to rent land, factory and a plant from March 1, 2014 to December 31, 2020. The total rental expenses were $ 5,887 thousand and $6,636 thousand for the years ended December 31, 2018 and 2017, respectively.

2) Royalty expenses

The Company entered into a royalty expense contract with its investor with significant influence - Koito Manufacturing Co., Ltd. from April 23, 2016 to April 22, 2019. The royalty expenses were $ 103,562 thousand and $112,494 thousand for the years ended December 31, 2018 and 2017, respectively, and had been recognized as operating costs and general and administrative expenses.

3) Examination expenses

The company entrusted its investor with significant influence - Koito Manufacturing Co., Ltd. for assistance on the examination of the headlight products. The examination expenses were $22,429 thousand and $21,313 thousand the years ended December 31, 2018 and 2017, respectively, and had been recognized as selling and marketing expenses.

4) Royalty revenue

The Company entered into a royalty revenue contract with its associate - Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd. from January 1, 2014 to December 31, 2019. The royalty revenues were $77,763 thousand and $91,726 thousand for the years ended December 31, 2018 and 2017, and had been recognized as other income of non-operating income and expenses. According to the contract, 50% of the royalty revenue should be paid to its investor with significant influence - Koito Manufacturing Co., Ltd. which amounted to $27,955 thousand and $29,389 thousand for the years ended December 31, 2018 and 2017, respectively, and had been recognized as other gains and losses, net of non-operating income and expenses.

• 189 -

The Company entered into a contract with subsidiary of Koito Manufacturing Co., Ltd - Hubei Koito Automotive Lamp Co., Ltd. from December 25, 2015 to December 24, 2020. The royalty revenues were $8,876 thousand and $11,259 thousand for the years ended December 31, 2018 and 2017, respectively, and had been recognized as other income of non-operating income and expenses.

i. Donations

Related Party Category/Name Substantive related party Compensation of key management personnel Short-term employee benefits Post-employment benefits		Purchase Price	Purchase Price
		For the Year Ended December 31
		2018 2017 $ 800 $ - For the Year Ended December 31
		2018 $ 21,566 128 $ 21,694	2017 $ 25,297 207 $ 25,504

• j. Compensation of key management personnel

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

23. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings:

Property, plant and equipment, net Land Buildings Machinery equipment	December 31, 2017 $ 596,826 21,846 1,226
	$ 619,898

• 190 -

24. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

December 31, 2018

		Foreign			Carrying
	Currencies		Exchange Rate		Amount
Financial assets
Monetary items
USD	$	9,460	30.71	$	290,509
CNY		29,305	4.473		131,082
JPY		548,611	0.2780		152,514
Non-monetary items
Investments accounted for using the equity
method
CNY		92,460	4.475		413,786
USD		33	30.72		1,020
Financial liabilities
Monetary items
USD		475	30.71		14,597
CNY		5,987	4.473		26,780
JPY		204,352	0.2780		56,810
December 31, 2017
		Foreign			Carrying
	Currencies		Exchange Rate		Amount
Financial assets
Monetary items
USD	$	10,065	29.670	$	298,882
CNY		18,814	4.549		85,583
JPY		887,611	0.2633		233,708
Non-monetary items
Investments accounted for using the equity
method
CNY		92,095	4.555		419,446
USD		34	29.76		1,026
Financial liabilities
Monetary items
USD		678	29.670		20,145
CNY		5,727	4.549		26,053
JPY		453,621	0.2633		119,438

• 191 -

The carrying amount of investments accounted for using the equity method does not contain the reduction of unrealized gains.

The significant realized and unrealized foreign exchange gains (losses) were as follows:

Foreign Currencies USD CNY JPY	For the Year Ended December 31	For the Year Ended December 31
	2018 Exchange Rate Net Foreign Exchange Gains (Losses) 30.14 (USD:NTD) $ 13,289 4.551 (CNY:NTD) (4,516) 0.2730 (JPY:NTD) 21,324 $ 30,097	2017
		Exchange Rate Net Foreign Exchange Gains (Losses) 29.72 (USD:NTD) $ (14,693) 4.551 (CNY:NTD) (2,163) 0.2633 (JPY:NTD) 3,904 $ (12,952)

25. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees:

• 1) Financing provided to others (None)

• 2) Endorsements/guarantees provided (None)

• 3) Marketable securities held (excluding investments in subsidiaries, associates and joint ventures) (None)

• 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital (None)

• 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital (None)

• 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital (None)

• 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital (Table 1)

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital (Table 2)

• 9) Trading in derivative instruments (None)

• 10) Information on investees (Table 3)

• b. Information on investments in mainland China

• 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area (Table 4)

• 192 -

• 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses (Table 5):

• a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period

• b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period

• c) The amount of property transactions and the amount of the resultant gains or losses

• d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes

• e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds

• f) Other transactions that have a material effect on the profit or loss for the year or on the financial position, such as the rendering or receipt of services

• 193 -

TABLE 1

Ta Yih Industrial Co., Ltd.

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

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

Buyer	Related Party	Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
The Company	Koito Manufacturing Co., Ltd. Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd	Investors with significant influence over the Company Associates accounted for using the equity method	Sales Purchases Sales	$(1,250,831) 278,565 (235,265)	(22) 7 (4)	90 days 90 days 120 to 160 days	No significant differences No significant differences Cost plus pricing	No significant differences No significant differences 120 to 160 days. Generally 90 days.	Accounts receivable $ 147,783 Accounts payable (41,820) Accounts receivable 57,875	19 (8) 7

• 194 -

TABLE 2

Ta Yih Industrial Co., Ltd.

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

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

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
The Company	Koito Manufacturing Co., Ltd.	Investors with significant influence over the Company	$ 147,783	7.8	$ -	－	$ 147,783	$ 144

• 195 -

TABLE 3

Ta Yih Industrial Co., Ltd.

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

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As of	December 31, 2018	December 31, 2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares	%	Carrying Amount
The Company	Ta Yih International Investment Co., Ltd.	Omar Hodge Building, Wickhams Cay I P.O. Box 362, Road Town, Tortola, British Virgin Islands	Investment	$ 1,367	$ 1,367	50,000	100	$ 1,020	$ (37)	$ (37)

Note: Information on investments in mainland China, refer to Table 4.

• 196 -

TABLE 4

Ta Yih Industrial Co., Ltd.

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

Investee Company	Main Businesses and Products	Paid-in Capital	Method of Investment	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2017 (Note 5)	Remittance of Funds	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2018	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss) (Note 1)	Carrying Amount as of December 31, 2018 (Note 1)	Accumulated Repatriation of Investment Income as of December 31, 2018 (Note 4)
						Outward		Inward
Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd	Importing, exporting and sale of automobile lamps in mainland China	USD $ 9 million (Note 2) (NTD $276,390 thousand) (Note 3)	Entrusting Ta Yih International Investment Co., Ltd. which was established in third region to invest in mainland China. Items referred to Rule No. 84022220 issued by the Investment Commission,MOEA.		$ 42,470	$	-	$ -	$ 42,470	$ 4,835	49	$ 2,369	$ 406,241	$ 238,605
Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2018				Investment Amount Authorized by The Investment Commission, MOEA			Upper Limit on the Amount of Investment Stipulated by The Investment Commission, MOEA (Note 6)
$ 42,470				USD$4.41 million (Note 2) (TWD$135,431 thousands) (Note 3)			$1,848,605×60%＝$1,109,163

Note 1 ： Amount was recognized based on the audited financial statements.

Note 2 ： On January 18, 1996, the Investment Commission, MOEA approved the investment of US$2.5 million (including cash investment of US$1.76 million and machinery investment of US$740,000) through the approval of the Rule No. 84022220. On February 20, 2001, according to the Rule No. 90003791, approved by the Investment Commission, MOEA, the Company entrusted Ta Yih Investment Co., Ltd. which was established in the third region to invest US$500,000 on machinery equipment. However, there was still US$150,000 left unpaid. Therefore, the amount of capital owned by Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd was only US$2.85 million. However, at the end of November 2005, the Company transferred 51% of the investment to Koito Manufacturing Co., Ltd. In December 2007, Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd resolved to issue share dividends from capital surplus of US$2.45 million , of which the investment amount belonged to the Company was US$2.45 million × 49% = US$1.205 million, and had been approved by the Investment Commission, MOEA on March 24, 2008. In August 2008, the Company applied for issuing share dividends from capital surplus of US$1.5 million, of which the amount of investment belonged to the company was US$1.5 million × 49% = US$735,000, and had been approved by the Investment Commission, MOEA on August 6, 2008. In May 2010, the Company applied for issuing share dividends from capital surplus of US$2.2 million, of which the amount of investment belonged to the Company was US$2.2 million × 49% = US$1.078 million. As of December 31, 2018, the paid-in capital of Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd was US$9 million. The registration was completed in July 2010 and had been approved by the Investment Commission, MOEA on November 30, 2010.

Note 3 ： The amount in the table should be shown in NTD$ (exchange rate was 30.71 at reporting date).

Note 4 ： Inward cash dividends.

Note 5 ： The original amount of investment was 86,673 (in thousands of NTD$). 51% equity of Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd was sold for 44,203 (in thousands of NTD$).

Note 6 ： The upper limit according to “Principle of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission, MOEA on August 29, 2008.

• 197 -

TABLE 5

Ta Yih Industrial Co., Ltd.

SIGNIFICANT TRANSACTIONS WITH INVESTEE COMPANIES IN MAINLAND CHINA, EITHER DIRECTLY OR INDIRECTLY THROUGH A THIRD PARTY, AND THEIR PRICES, PAYMENT TERMS, AND UNREALIZED GAINS OR LOSSES

FOR THE YEAR ENDED DECEMBER 31, 2018

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

Investee Company	Transaction Type	Purchase/Sale	Price	Transaction Details	Transaction Details	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Unrealized Gain	Note
		Amount		Payment Terms	Comparison with Normal Transactions	Ending Balance	%
Fuzhou Koito Ta Yih Automotive Lamp Co., Ltd	Sales Royalty revenue	$ 235,265 77,763	Cost plus pricing According to the contract	120 to 160 days Every 160 days.	90 days N/A	Accounts receivable $ 57,875 Other receivables 48,599	7 92	$ 4,565

• 198 -

• 6-6.If the company or its affiliates have experienced financial difficulties in the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report： No financial difficulties have occurred.

• 7 ． Analysis of its financial position and financial performance, and risks ： 7-1.Review and analysis of financial status Unit：NT thousands；%

Year of occurrence Items	2018	2017	Differences	Differences
			Amount	%
Current assets	2,003,960	2,308,382	-304,422	-13
Investments accounted for using the equitymethod	406,241	412,253	-6,012	-1
Property, plants,and equipment	966,815	1,010,568	-43,753	-4
Intangible assets	－	－	－	－
Other non-current assets	75,025	56,480	18,545	33
Total net assets	3,452,041	3,787,683	-335,642	-9
Current liabilities	1,345,910	1,577,498	-231,588	-15
Non-current liabilities	257,526	275,160	-17,634	-6
Total liabilities	1,603,436	1,852,658	-249,222	-13
Capital stocks	762,300	762,300	0	－
Capital surplus	60,605	60,472	133	0
Retained Earnings	1,054,592	1,134,859	-80,267	-7
Other equity	-28,892	-22,606	-6,286	-28
Total equity	1,848,605	1,935,025	-86,420	-4
The annual report shall list the main reasons for any material change in the company's assets, liabilities, or shareholders’ equity during the past 2 fiscal years, and describe the effect thereof. 1.Main reasons for major changes：changes greater than 20%, and the amount of change was NT $ 10 million. Other non-current assets increment：Mainly for prepaid production facilities and test equipment. 2.Significant effect：None. 3. Measures for future response：Not applicable.

• Notes：If the change is less than 20% and the amount of change does not reach NT$10 million, it will not be explained.

199

7-2.Review and analysis of financial performance Unit：NT thousands

Year of occurrence Item	2018	2017	Amount increased(decr eased)	Change ratio (%)	Change Analysis
Operating revenue	5,703,811	6,197,390	-493,579	-8
Operating gross profit	830,987	1,081,191	-250,204	-23	1
Operating expenses	553,968	577,027	-23,059	-4
Net income	277,019	504,164	-227,145	-45	2
Non-operating income and expenses	93,783	81,807	11,976	15
Net profit before tax	370,802	585,971	-215,169	-37	3
Income tax expense	51,595	86,607	-35,012	-40	4
Net income for this reporting period	319,207	499,364	-180,157	-36	5
Other comprehensive income	-9,364	-21,245	11,881	56	6
Total comprehensive income	309,843	478,119	-168,276	-35	7
Net income attributable to: the owner of the company	319,207	499,364	-180,157	-36	8
Total comprehensive income (loss) attributable to: the owner of the company	309,843	478,119	-168,276	-35	9
The annual report shall list the main reasons for any material change (increase or decrease of the change rate of more than 20%) in operating revenues, operating income, or income before tax during the past 2 fiscal years, provide a sales volume forecast for the next year and the basis therefor, and describe the effect upon the company's financial operations as well as measures to be taken in response： 1.Main reasons for major changes： (1)The decrease in profits is mainly due to the decline of the domestic car market and the increase in imported cars, which affects operating income and profits. (2)The decrease in income tax expenses is mainly due to the decrease in net profit before tax. (3)Increase in other comprehensive income: Mainly due to the reduction in the number of welfare plans compared to previous period. 2.Expected sales volume in the next year and its basis： Base on the orders negotiated with the car manufacturers for the next year and the assessment of the future environment, the company expects the sales volume to grow in 2019 compared to 2018. 3.Possible impact on future financial business：No significant impact. 4.Measures for future response：Not applicable.

• 7-3.Analysis of cash flow

• 7-3-1.Analysis of changes in recent annual cash flow, improvement plan for insufficient liquidity：

liquidity：
Year of occurrence Item	2018	2017	Increase (Decrease) ratio
Cash flow ratio	33.67%	36.85%	-9%
Fund Flow AdequacyRatio	79.47%	77.83%	2.1%
Cash reinvestment ratio	1.51%	4.93%	-69%

200

• 1.Analysis of changes in recent annual cash flow：

• (1)Decrease in cash flow ratio：

Mainly due to increase in the current liabilities compared with the previous period.

• (2)Increase in fund flow adequacy ratio：

  • Mainly due to the increase in net cash flow from operating activities of five years compared to the same period.

• (3)Decrease in cash reinvestment ratio：

  • Mainly due to the decrease in the current net cash flow from operating activities compared with the previous period.

• 2.Corrective measures to be taken in response to illiquidity：Not applicable.

7-3-2.Analysis of cash flow for the coming year

Unit：NT thousands

				Unit：NT thousands	Unit：NT thousands
Initial stage Balance (1)	Throughout the year Operating activities Net cash flow (2)	Annual cash outflow (3)	Balance (insufficient) amount (1)+(2)-(3)	Cash deficiency remedy
				Investment plans	Financial plan
114,260	5,800,181	5,797,200	117,221	－	－

Analysis of cash flow for the coming year (2019)：

• (1)Operating activities：

The sales revenue for 2019 is estimated to be stable, so business activities can generate net cash inflows.

(2)Investment activities：mainly paying for the purchase of fixed assets.

  - (3)Financing activities：mainly estimated cash dividends of NT$ 289,674,000 .

• 7-4.The effect upon financial operations of any major capital expenditures during the most recent fiscal year.

• 7-4-1.Review and analysis of major capital expenditures and the funds sources： No significant capital expenditure in the recent years.

7-4-2.Expected income：Not applicable.

• 7-5.The company's reinvestment policy for the most recent fiscal year, the main reasons for the profits/losses generated thereby, the plan for improving re-investment profitability, investment plans for the coming year：

• 7-5-1.Reinvestment policy：

  • The current investment scope of the Company is mainly manufacturing of lamps for automobiles and motorcycle industry.

7-5-2.Main cause for gains or losses：

• The 2018 net profit from the affiliated enterprise by the equity method was approximately NT$ 2,332,000 , which was derived from the nets profits of FUZHOU KOITO TAYIH AUTOMOTIVE LAMP CO.,LTD. The main reason for the decline of the 2108 profit was due to the decline in capacity utilization.

• 7-5-3.Improvement plan for losses： Continuous implementation of various cut cost activities.

• 7-5-4.Investment plan for the coming year：None.

201

• 7-6.Risk analysis and evaluation

• 7-6-1.The effect upon the company's profits (losses) of interest and exchange rate fluctuations and changes in the inflation rate, and response measures to be taken in the future for the most recent fiscal year and as they stood on the date of publication of the annual report：

  • (1)The impact of changes in interest rates on the company's profit and loss and the

measures of future responses：

measures of future responses	：
Item	Financial report for 2018
Interest expense	NT$838,000
Net income ratio	0.01%
Net profit before tax ratio	0.23%

• ①Effect on profit and loss

The interest expenses in 2018 was NT$ 838,000, which accounts for 0.01% of the revenue, and it has no significant impact on the company. The market interest rate for the first quarter of this year was comparable to last year, and the change is small.

• ②Measures for future response

The interest rate has little effect on the company's profit and loss, but the company usually maintains a good relationship with the bank, keeps abreast of interest rate changes, and adjusts the bank loan amount according to the capital cost of each bank.

• (2)The effect upon the company's profits (losses) of exchange rate fluctuations and response measures to be taken in the future：

esponse measures to be taken in the future：
Item	Financial report for 2018
Netgain/loss on foreign currencyexchange	NT$30,097,000
Net income ratio	0.53%
Netprofit before tax ratio	8.12%

The exchange rate fluctuations of the New Taiwan Dollar against the US dollar, Renminbi and the Japanese Yen have little impact on the Company's profit and loss. The Company has always paid attention to the exchange rate fluctuations in the international market and has continued to implement the following response measures：

• ①The foreign currency received from sales of foreign products is used to pay up for the purchase of materials to generate foreign currency payables, using the nature of natural hedging to avoid most of the exchange risk Therefore, only financial instruments are needed to apply for the foreign currency net assets (liabilities) to avoid exchange rate fluctuation risks.

• ②Keeps a close contact with the foreign exchange departments of financial institutions, collect relevant information on exchange rate changes at any time, fully grasp the international exchange rate trends and changes in information, and actively respond to the negative impact of exchange rate fluctuations.

• ③In accordance with the Order of the Securities and Futures Commission, Ministry of Finance on December 10, 2002 (2002), the Banking Certificate (1), No. 0910000610 "Regulations governing the Acquisition or Disposal of Assets by Public Companies" standardizes the procedures for trading financial derivatives and strengthens the risk control management system.

• (3)The impact of changes in inflation on the company's profit and loss and the measures of future responses：

• ①Effect on profit and loss

Inflation has no impact on the company's profit and loss. It is the company's consistent policy to maintain close and good cooperation with suppliers. Even if there is any inflation, the company can still obtain the most affordable price and the most adequate supply of raw material.

• ②Future response measures

The inflation has not much impact on the finished products and raw materials of the company, but it will still pay close attention to the inflation situation, if necessary, appropriate action will be apply to the price of the finished products or pre-purchase raw materials, in order to reduce the impact of inflation on the company.

202

• 7-6-2.The most recent fiscal year and as they stood on the date of publication of the annual report of the company's policy regarding high-risk investments, highly leveraged investments, loans to other parties, endorsements, guarantees, and derivatives transactions; the main reasons for the profits/losses generated thereby; and response measures to be taken in the future：

measures to	be taken in the future：
Risk factor	Policy	Gains or losses Main cause	Future measures
High risk, high leverage investment	The company focuses on its own operations and does not engage in high-risk, highly leveraged investments.	The Company has not engaged in high-risk, high-leverage investment in the recent years, so it does not apply.	Not applicable
Loans to others	They are all handled in accordance with the “Measures for the Management of Funds and Others”, and the relevant information is announced in accordance with regulations.	There is no fund loans to others in 2018, so it is not applicable.	Not applicable
Endorsement/guarantee	They are handled in accordance with the Company's “Management of Endorsements and Guarantees” and the relevant information is announced in accordance with regulations.	There is no endorsement or guarantees made for the recent years, so it is not applicable..	Not applicable
Derivatives trading	The derivative trading executed by the Company in the most recent year are not for trading purposes, and only hedge foreign currency operations are taken to reduce exchange rate fluctuations.	There is no derivative trading in 2018, so it is not applicable.	Not applicable

7-6-3.Future Research &Development plans and estimated investment in Research &Development： Unit：NT$1,000	7-6-3.Future Research &Development plans and estimated investment in Research &Development： Unit：NT$1,000	7-6-3.Future Research &Development plans and estimated investment in Research &Development： Unit：NT$1,000	7-6-3.Future Research &Development plans and estimated investment in Research &Development： Unit：NT$1,000	7-6-3.Future Research &Development plans and estimated investment in Research &Development： Unit：NT$1,000
Item	Topic	Research and development	Expected to be completed	Future research and development is successful
1	SOCKET LED can be replaced by new light source, and the research on the mass production of locomotive high beam and low beam light and car indicator light.	2,000	2020	Function demand of the market trend
2	Study of mass production of tunnel-type mapping visual taillights	2,500	2020	Demand for changes in shapes of headlights
3	Development of module of advanced ADB headlight optical system	17,170	2021	Function demand of the market trend
4	Research on the mass production of linear fiber optic light guiding components	1,500	2020	Demand for changes in shapes of headlights

• 7-6-4.The impact of important changes in domestic and overseas policies and laws on the company's financial business and the corresponding measures： There is no significant change in the domestic and overseas policies and laws. Response measures：The Company will continue to pay attention to relevant policy and legal changes and response immediately to the impact of changes.

• 7-6-5.Effect on the company's financial operations of developments and measures to be taken in response in science and technology as well as industrial change： There is no obvious manufacturing or related technology change in the industry or market of the company, so there is no impact on the financial business. Response

203

measures：

The Company will monitor the technological and industrial changes in technology, and will respond appropriately if there is any impact.

• 7-6-6.Effect on the company's crisis management of changes in the company's corporate image, and measures to be taken in response： The company's corporate image is good, with good profit in the first quarter of 2018 and 2019 and there is no bad image of the corporation.

• Response measures：

The spokesperson of the company wholeheartedly welcomes calls from shareholders or the media.

• 7-6-7.Expected benefits and possible risks associated with any merger and acquisitions, and mitigation measures being or to be taken： There is no acquisition or merging in the Company.

• 7-6-8.Expected benefits and possible risks associated with any plant expansion and mitigation measures being or to be taken： The Company has no expansion of plant.

• 7-6-9.Risks associated with any consolidation of sales or purchasing operations, and mitigation measures being or to be taken：None.

• 7-6-10.Effect upon and risk to the company in the event a major quantity of shares belonging to a director, supervisor, or shareholder holding greater than a 10 percent stake in the company has been transferred or has otherwise changed hands, and mitigation measures being or to be taken：None.

• 7-6-11.Effect upon and risk to company associated with any change in governance personnel or top management, and mitigation measures being or to be taken： There is no change in the governance of the top management or personnel.

• 7-6-12.Litigious and non-litigious matters. List major litigious, non-litigious or administrative disputes that: (1) involve the company and/or any company director, any company supervisor, the general manager, any person with actual responsibility for the firm, any major shareholder holding a stake of greater than 10 percent, and/or any company or companies controlled by the company; and (2) have been concluded by means of a final and unappealable judgment, or are still under litigation. Where such a dispute could materially affect shareholders' equity or the prices of the company's securities, the annual report shall disclose the facts of the dispute, amount of money at stake in the dispute, the date of litigation commencement, the main parties to the dispute, and the status of the dispute as of the date of publication of the annual report：None.

• 7-6-13.Other important risk management measures：None.

• 7-7.Other important matters：None.

204

‧ 8 Special items

8-1.Information related to the company's affiliates

The consolidated business report of the Affiliated Enterprise

• 8-1-1.The organizational chart of the affiliated enterprise

TA YIH INDUSTRIAL CO., LTD. 100％ Investment ratio Shares holding Amount of investment US$ 50,000 British Virgin Islands Ta Yih International Investment Company

8-1-2.Basic information of each affiliates： Unit：$

Name of Enterprise	A.Date of Establishment	Address	Paid-in capital	Primary business items or Production Items
British Virgin Islands Ta Yih International Investment Company	1995.11.17	Omar Hodge Building, Wickhams Cay I.P.O. Box 362, Road Town, Tortola, Bristish Virgin Islands	USD 50,000 (1：30.71)	Production business investment

• 8-1-3.Information of shareholders of companies presumed to have a relationship of control and subordination：None.

• 8-1-4.The industries covered by the business operated by the affiliates overall： British Virgin Islands Ta Yih International Investment Company：Investment business.

8-1-5.The information of the directors, supervisors, and general manager of each affiliate：

Unit ： $ ； Shares ： %

			Unit：$；Shares：%	Unit：$；Shares：%
Name of Enterprise	Job title	Name or representative	Shares holding		Note
			Number of shares (contribution)	Shareholding ratio (Contribution ratio)
British Virgin Islands Ta Yih International Investment Company	Chairman	TA YIH INDUSTRIAL CO.,LTD Representative - Wu Chun I	USD 50,000	100%

8-1-6.The overview of the operations of the affiliates： Unit：NT$1,000

Name of Enterprise	Paid-in capital	Assets Total value	Total liabilities Total equity	Net value	Business revenue	Current other comprehensive income Amount after tax	Earnings per share ($) Amount after tax
British Virgin Islands Ta Yih International Investment Company	1,536	1,020	0	1,020	0	(37)	(0.75)

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• 8-1-7.The Consolidated Financial Statements of Affiliated Enterprises： Please refer to the preceding item 6 of the “ Financial Overview subparagraph 4 of (the certified consolidated financial statements of the 2018).

8-1-8.Affiliation Report：None.

• 8-2.Where the company has carried out a private placement of securities during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report：None.

• 8-3.The subsidiaries holding or disposal of the company’s shares in the company during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report：None.

• 8-4.Additional description of other matters：None.

‧ 9 If any of the situations listed in Article 36, paragraph 3, subparagraph 2 of the Securities and Exchange Act, which might materially affect shareholders' equity or the price of the company's securities, has occurred during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report ：

Board of Directors Meeting of March 15, 2019：

1. approving the dismissal of the General Manager LEE WANG KEN from April 1,2019.

2. approving the appointment of the Vice President FENG, SHIH-CHUNG as new President, effective April 1,2019.

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TA YIH INDUSTRIAL CO.,LTD

Chairman ：Wu Chun I