S t o c k C o d e ２６１７

TAIWAN NAVIGATION CO., LTD.

Handbook for the 2019 Annual Shareholders’ Meeting

Time: June 25, 2019 Place:No.1F,No.43,Sec.1,ZhongxiaoW.Rd.,Taipei.Taiwan (Cosmos Hotel Taipei)

Meeting Procedure ............................................................................................................... 1 Meeting Agenda ................................................................................................................... 3 Reports .................................................................................................................................. 5 Recognitions ........................................................................................................................ 7 Discussions ............................................................................................................................ 9 Questions and Motions ...................................................................................................... 11 Attachments ........................................................................................................................ 12 (1) 2018 Business Report ............................................................................................... 13 (2) The 2018 audit committee’s audit report ............................................................... 19 (3) Independent Auditors’ Report and 2018 Consolidated Financial Statements ...... 20 Independent Auditors’ Report and 2018 Individual Entity Financial Statements 31 (4) Comparison Table for the Operational Procedures for Acquisition and Disposal of Assets Before and After Amendment .................................................................... 42 (5) Comparison Table for the Operational Procedures for Loaning of Company Funds Before and After Amendment ................................................................................ 49 Appendices .......................................................................................................................... 50 (1) Rules of Procedure for Shareholders’ Meeting ....................................................... 51 (2) Articles of Incorporation .......................................................................................... 54 (3)Operational Procedures for Acquisition and Disposal of Assets .............................. 60 (4) Operational Procedures for Loaning of Company Funds ....................................... 75 (5) Shareholdings of All Directors ................................................................................ 84

Meeting Procedure

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Taiwan Navigation Company Limited Meeting Procedure of the 2019 Annual Shareholders’ Meeting

1. Call the meeting to order

2. Chairman remarks

3. Reports

4. Recognitions

5. Discussions

6. Questions and Motions

7. Adjourn

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Meeting Agenda

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Taiwan Navigation Co., Ltd. Meeting Agenda of the 2019 Annual Shareholders’ Meeting

Time: 9:00 am, June 25 (Tues.) 2019

Place: 1F, No.43, Sec. 1, Zhongxiao W.Rd.,Taipei,Taiwan

(COSMOS Hotel TAIPEI)

1. Call the meeting to order

2. Chairman remarks

3. Reports

(1) To report the 2018 business.
(2) The 2018 audit committee’s audit report.
(3) The 2018 directors,supervisors and employees' remuneration.

4. Recognitions

(1) The 2018 business report and financial statements.

(2) The proposal for distribution of 2018 profits .

5. Discussions

(1) Amendment to the "Operational Procedures for Acquisition

and Disposal of Assets"

(2) Amendment to the "Operational Procedures for Loaning of Company Funds" .

6. Questions and Motions

7. Adjournment

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Reports

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Rreports

1. To report the 2018 business

The 2018 Business Report is attached as Attachment 1(P13-18).

2. The 2018 audit committee’s audit report

The 2018 Audit Committee review Report is attached as Attachment 2(P19).

3. The 2018 directors,supervisors and employees' remuneration

Board proposed to allocate 1% of the profit befor income tax,which is NT$10,088,110 , as

the remuneration of directors and supervisiors.

The allocation of the remuneration of employee is the same as direetors and supervisors.

The aforesaid items will be paid in cash.

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Recognitions

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Recognitions

Case 1 Proposed by the Board

Subject: The 2018 business report and financial statements .

Explanation: The 2018 consolidated and individual financial statements have been duly audited

by CPA Ms. Ya-Ling Wong and CPA Mr. Chih-Ming Shao of Deloitte & Touche and an unmodified opinion was issued. The 2018 business Report, Financial Statements (consolidated and individual) Independent Auditors’ report are attached as Attachment 1 (P13-18) and Attachment 3 (P20-41).

Resolution:

Case 2 Proposed by the Board Subject: The proposal for distribution of 2018 profits .

Explanation: 2018 net profit after tax is NTD957,634,850,please refer to the 2018 Profit Distribution Table as follows:

Taiwan Navigation Co., Ltd. Profit Distribution Table 2018

In NT$

	In NT$
Item
Unappropriated retained earnings of previous year Less: Remeasurement of defined benefit Adjusted unappropriated retained earnings Add:2018 net profit after tax Add: Reverse of special reserve in accordance with the laws and regulations Less: 10% legal reserve Retained Earnings available for distribution Distribution Item: Cash dividend NT$1.30 per share Unappropriated Retained Earnings at the end of 2018	3,092,953,408 10,141,392
	3,082,812,016 957,634,850 207,618,371 95,763,485
	4,152,301,752 542,482,833
	3,609,818,919

Chairman Manager Accounting Executive Liu,Wen-Ching Mei,Char-Lee Chen,Chien-Chou

Resolution:

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Discussions

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Discussions

Case 1 Proposed by the Board

Subject: Amendment to the "Operational Procedures for Acquisition and Disposal of Assets" Explanation:

In order to comply with the implement of IFRS 16 Lease,TNC will amend parts of the provisions of Operational Procedures for Acquisition and Disposal of Assets.
The comparision table for the Operational Procedures for Acquisition and Disposal of Assets before and after amendment and all the provisions before the amendment are attached as Attachment 4 (P42-48) and Appendix 3 (P60-74).

Resolution:

Case 2 Proposed by the Board

Subject: Amendment to the "Operational Procedures for Loaning of Company Funds" Explanation:

1.Taiwan Stock Exchange Corporation asked TNC to amend parts of the Operational Procedures for Loaning of Company Funds at May 3, 2018.
2.The comparision table for the Operational Procedures for Loaning of Company Funds before and after amendment and all the provisions before the amendment are attached as Attachment 5 (P49) and Appendix 4 (P75–83).

Resolution:

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Questions and Motions

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Attachments

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Attachment 1

2018 Business Report

1.The Operation Policy

The policy of our Company’s operation is to make profit for shareholders by maintaining a high quality of fleet based on both the shipping expertise/experience and the strengthened ship management. In business spectrum, there are eighteen owned bulk carriers, incl. supramax and panamax type, trading around the world for carrying solid bulk cargo, one roro ferry sailing between Kaohsiung and Makung, and four tugboats assisting vessels in Taichung harbor. In addition, a container ship is chartered in to provide liner service between Taiwan Strait, and CPC Taiwan’s tankers and tugboats are under our management.

2. The overview of operation

In 2018 we operated 38 ships, of which 26 were owned, 10 were under our management, and 2 were chartered in. Meanwhile, in order to rejuvenate our fleet and make it more competitive, we sold three 17-year-old vessels. For the business of the owned bulkers, we mainly focus on period time charter at current stage.

The world bulk carrier fleet was increased by 2.9%, which is the third year below 3% in a row. Due the average 17% increase of the Baltic index in 2018 after a strongly rebound in 2017, the owners’ willingness on demolition was further dropping. The demolition volume was down to a new level you’ve never seen in 10 years with total volume just less than 5 million in terms of deadweight.

Since China still represents 45% of the global tonne-mile in dry bulk demand, its economic trend deeply influences the dry bulk freight. Though 6.6 % GDP growth in 2018 is still within the expectation, China did not boost the dry bulk market due to its increased consumption on the iron ore inventory as well as being restricted to the government-set quota for coal import, and a substantial drop of soya bean import as a result of the trade tensions with U.S.

As regards the cross-strait container liner service, due to the over-supplied tonnage and the change of trading pattern resulting from the trade tensions between U.S. and China, one route was suspended in order to reflect the reduced demand. In ship management, we now manage five tankers as well as five tugboats (Yun An port) for CPC Taiwan.

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In terms of deadweight the world contracting volume increased by 32% compared to last year, among which ultramax type took the largest with Kamsarmax in the second place. Though the contracting activity was increasing continually in two years, the order book only accounts for 10.5% of the current world fleet.

3.Performance of Operation Plan

In 2018, the net combined operation revenue is NT$3,367,236,000 and grew NT$2,817,921,000 or 19% from that of 2017. The combined pretax net profit is NT$988,635,000 and is NT$487,071,000, an increase of 103%.

4. Execution of Operating Revenue and Expenditure Budgets

(1) Operating Revenue

The net combined revenue of 2018 is NT$3,367,236,000, an increase from NT$2,817,921,000 of 2017 of NT$549,315,000. The causes are rising bulk freight and increase in number of vessels operated.

(2) Operating Costs and Expenses

The total combined operating costs and expenses in 2018 is NT$2,651,828,000, increased from NT$2,475,616,000 with NT$176,212,000, and the main cause is resumption of TC2 Container services (suspended on Oct. 3.)

5.Analysis of Profitability

2018 Combined financial ratios of the Company are:

Return on Asset: 6.87%

Return on Equity: 9.59% Net profit rate: 28.44%

Earnings per share (after tax): 2.29

6.Situation of Research and Development

Energy conservation, reduction of CO2 emission and reduction of pollution of air and sea water are the philosophy and target in environment protection of the Company and for that purpose, the Company completed installation of ballast water processing system to 2 existing vessels for reducing the pollution of sea water. Also, in Sept. 2017, the Company placed orders with Oshima Shippingbuilding KK of Japan for 2 brand new energy conservation bulkers and they will be installed with exhause desulfur devices, which can reduce the sulfur content of no higher than 0.1% m/m emission standard. It is better than the requirements of no higher than 0.5% m/m of most waters in the world. The Company

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had devoted to the reduction of sulfur content in the air of the planet. The two energy conservation vessels will be available in the service in April and July of 2021.

7. The analysis of industry

The industry side: Given that the iron ore import of China accounts for about 20 % of global dry bulk cargo, its import plays a major role in tonnage demand. While Chinese steel production was up 11%, it iron ore import edged down by 1%. The reasons behind that were due to a shift to the increase of the scrap-based production and the consumption of the stock imported earlier.

In addition, Chinese coal imports, the second largest, were dropping significantly in the 4th quarter of 2017 due to the restriction quota set by government, a rising domestic production, and an increasing hydropower, but it still edged up by 4% for the year as a whole. As to the grain imports, China represents 18% of global seaborne demand of its kind, of which soybean was about 88 million tons equivalent to 80% of total grain imports. Therefore, as China and U.S. are stuck in trade tensions and the tariffs tit for tat, the soybean becomes China’s bargain chip. According to the statistics, China almost halved its imports of soybeans from the U.S. in 2018 but increased soybeans from Brazil by 30% compared to 2017. Though part of soybeans was imported in transit via the third countries, such as Argentina, Mexico, and Vietnam, the total volume was still dropping. Coal imports, the second largest in dry bulk seaborne demand, were edging up 3.3% compared to last year. The demand from Europe was decreasing, while Japan and S. Korean remained the same with India and other emerging countries keeping growth. Therefore, the global seaborne imports of coal were up 3.3, the most important factor supporting the freight market in 2018.

In fleet growth, the deliveries in 2018 were 28 million in terms of deadweight, down 26.3% compared to last year. Ship scrapping was largely reduced by 72.4% to merely below 5 million deadweight since the bulling market obviously hindered Owner’s willingness to scrap vessel. Overall, the dry bulk fleet expanded by 2.9% last year and the expansion still stood at low level.

In the aspect of the macro economy: In 2018, world economy grew by 3.7%, which compares to 3.8% in 2017 slightly drop 0.1%. For the performance of those major advanced economies, the United State economy grew by 2.9%, Eurozone was 1.8%, Japan was 0.9%

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and China was 6.6%, to which in comparison of the rate in 2017 separately are 2.2%, 2.4%, 1.9% and 6.9%. Obviously, except for the United State, under tax cuts and the expanded fiscal policy, their economy had a dramatic growth, other countries were slowing down. Emerging countries generally are worse than the previous year, save for India, due to the rise and appreciation of the dollar and its return to the United States. As for China, because of their reining in shadow banking activity, tightening financial regulatory to curb the off-budget local government investment, and the widening trade dispute with the United State, the forth-quarter’s growth decreased to 6.4% and its purchasing manager’s index dropped back to 49.4%, this was the very first time since June 2017 to plunge to below 50%, the threshold.

The international oil price is highly correlated to the global economy, especially a critical factor to the emerging economies. In the beginning of 2016, the oil price was hovering at 30 dollars per barrel, but as the global economy grew, oil price rose to 80 dollars in the third-quarter. However, with the limitation to the economic growth in China and India, the increase of US shale oil and OPEC production, the United State’ exemption to eight countries for Iranian oil after November, and the expected slowdown in the world economy, the oil price has been rapidly tumbling 30% to 50-60 dollars.

The Forecast of 2019: according to IMF’s world economic outlook, published in late January, it predicted the economic growth rate would be 3.5% and 3.6% in 2019 and 2020, respectively, which indicated the boom was slower than the last two years. Considering the shrinking effect of the US tax cuts and the impact of its trade conflict with China on export, it would, to some extent, put a brake on the economy growth. However, given its steady labor market and the wage growth, the aforesaid would still bring expansion to the United State economy, just not as strong as previous year. The forecast of its growth would drop from 2.9% in 2018 to 2.5% in 2019 and 1.8% in 2020.

In 2018 China continued its supply-side reform and strengthened the risk prevention on the local government’ debt as well as to thwart the pollution. All aforesaid indirectly led to a decline in its infrastructure growth. China is so far the largest trading country in the world, owing to the economy slowdown, and the trading conflict with America, it has influenced the export. To mitigate the impact of the decline in exports on economic growth, the bank had cut the reserve requirement ration by 1 %, a considerable 218 billion-dollar circulating capital was released to stimulate the economy, and the expansion of railway construction was announced in the same month, an estimated $125 billion of investment with 6% more

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than in 2018. However, it’s forecasted that the growth rate both in 2019 and 2020 would still decline to 6.2%.

In the Eurozone, Germany is expected to be continuously depressed in the next two years due to the world depressed economy and its revised auto emission standards as well as the uncertainty of Brexit. Japan will raise the consumption tax rate to 10% from October this year. Although the government will carry out other fiscal policies to mitigate the impact, it is estimated that the growth rate will be 1.1% and will fall to 0.5% next year which is also affected by the world’s depression. In India, the current Modi government is actively promoting economic construction, Indian manufacturing and foreign investment which makes the economic development in the next two years is still quite promising. It is estimated that it will reach 7.5% and 7.7% in 2019 and 2020. For the ASEAN, economy maintained stable growth of 5.1% and 5.2%.

In terms of the price of oil, the International Energy Agency (IEA) pointed out that the global economy is slowing down in 2019, and the output of US crude oil continues to increase (currently surpassing Russia and Saudi Arabia to become the world's largest crude oil producer), which will put downward pressure on oil prices. As far as our company is concerned, if the oil price remains low, it will be helpful for the container routes. However, for the bulk carriers, due to the low oil price, ships’ Charterers may tend to instruct ships to sail at full speed in order to speed up the cargo transportation and then increase the supply of tonnage. It might lead to the result that the freight will be further impacted due to the declining demand of cargo. For that part, it is a matter to be worried about.

In 2018 the order of dry bulk carrier in terms of deadweight increased by 32% compared to last year, in which Ultramax bulk carriers in sixty-thousand dwt took the first place followed by Kamasarmax of eighty-thousand dwt. Despite of the continual growth in the past two years, the current order book in terms of deadweight only accounts for about 10.5 % of the existing fleet. That is still considered to be at a low level.

For 2019, in view of the accidental collapse of the Vale’s tailings dam in Brazil this January, it is very likely that the consequent closure of other tailings dams will cause 1.5% decrease in global iron ore shipments within a short period of time, causing a downward pressure on the freight rate of Panamax bulk carriers or size larger. In the long-run, given that the IMO’s Ballast Water Management Convention will take effect in September 2019 along with the 2020 Low Sulphur Fuel Regulation coming into force next year, it is conceivable that

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some shipowners would be impelled to scrap old ships earlier. If the tonnage supply can be reduced by the disciplined newbuilding order, the freight rate would go up as a result.

8. The Future development

In the short term, our company is continually making effort in vessels’ maintenance and personnel training in order to reach the zero-accident goal, and to increase the fleet utilization by adopting a well-planed fleet arrangement. In the long term, we will enhance cooperation and keep good relationship with leading Charterers both domestically and abroad, and also seek long-term contract with them in order to reduce the operation risk. We will keep an eye on the shipbuilding trend, expanding the high-performance vessels by replacing the old to maintain competitive the overall fleet when the newbuilding market is relatively low. In the container market, we will also study the pattern of cargo logistics between Taiwan and China, and have strategic cooperation with domestic and foreign ocean carriers and expanse the port services.

Chairman Manager Accounting Executive

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Liu,Wen-Ching Mei,Char-Lee Chen,Chien-Chou

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Attachment 2

The 2018 audit committee’s audit report.

Board of Directors has prepared the 2018 Business Report, Consolidated and Individual Financial Statements and Profit Distribution Proposal,the consolidated and individual financial statements have been audited by Ya-Ling Wong and Chih-Ming Shao, both CPAs of Deloitte and Touche have issued independent auditors’ reports. The 2018 Business Report, Consolidated and Individual Financial Statements and Profit Distribution Proposal have been audited by the audit Committee and nothing unusual has been found. Pursuant to the relevant requirements of the Securities Exchange Act and the Company Act. We hereby submit this report to the 2019 Shareholders’ Meeting of Taiwan Navigation Co., Ltd.

Taiwan Navigation Co., Ltd. Chairman of Audit Committee

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Wang, Chin-San

May 15, 2019

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Attachment 3

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Taiwan Navigation Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Taiwan Navigation Co., Ltd. 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

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the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

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

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

Recognition of subsidiary’s gain on disposal of bulk carriers

The Group’s subsidiary Tai Shing, which primarily engages in bulk carriers transportation service, has disposed parts of its bulk carriers in 2018 in order to replace the current bulk carriers with the new bulk carriers. Given that the transaction mentioned above is material to the financial statement. Gain on disposal of bulk carriers included in investments accounted for using the equity method is considered a key audit matter.

Our main audit procedures performed in respect of the above mentioned were as follows:

We understood management’s evaluation processes of disposal of the bulk carriers and verified the implementation of related controls through appropriate approvals.
We tested the transaction contract and the record of remittances to verify the accuracy of the amount received.
We reperformed the calculation of gain on disposal of bulk carriers and verified the accuracy of timing of recognition.

Other Matter

We have also audited the parent company only financial statements of Taiwan Navigation Co., Ltd. as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified opinion.

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

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

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

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for

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our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

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

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

Deloitte & Touche Taipei, Taiwan Republic of China

March 26, 2019

Notice to Readers

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

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

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TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss (Notes 4, 7 and 24) Financial assets at fair value through other comprehensive income (Notes 4, 8 and 24) Available-for-sale financial assets (Notes 4, 9 and 24) Accounts receivable, net (Notes 4 and 10) Trade receivables from related parties (Notes 4 and 24) Prepayments (Note 24) Other financial assets (Notes 4 and 11) Other current assets (Notes 4 and 19) Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss (Notes 4, 7 and 24) Financial assets at fair value through other comprehensive income (Notes 4, 8 and 24) Available-for-sale financial assets (Notes 4, 9 and 24) Financial assets measured at cost (Note 4) Investments accounted for using the equity method (Notes 4 and 12) Property, plant and equipment (Notes 4, 13 and 25) Investment properties (Notes 4 and 14) Prepayments for equipment (Note 26) Other non-current assets (Notes 4, 19 and 25) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 15) Contract liabilities (Note 18) Notes and accounts payable Trade payables to related parties (Note 24) Other payables Current tax liabilities (Notes 4 and 19) Advance receipts (Note 18) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 15 and 25) Deferred tax liabilities (Notes 4 and 19) Net defined benefit liabilities (Notes 4 and 16) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Note 17) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity attributable to owners of the Corporation Total equity TOTAL		2018 Amount % $ 478,550 3 76,777 1 116,247 1 - - 69,249 - 59,043 - 117,382 1 319,880 2 18,611 - 1,255,739 8 - - 241,601 2 - - - - 115,001 1 11,863,484 78 1,097,370 7 306,899 2 255,807 2 13,880,162 92 $ 15,135,901 100 $ 557,322 4 45,905 - 137,399 1 26,430 - 144,933 1 4,011 - - - 23,806 - 939,806 6 3,388,005 22 303,556 2 68,813 1 15,729 - 3,776,103 25 4,715,909 31 4,172,945 28 334,382 2 1,664,599 11 242,486 1 4,040,448 27 5,947,533 39 (34,868) - 10,419,992 69 10,419,992 69 $ 15,135,901 100		2017
				Amount % $ 382,811 3 32,007 - - - 151,914 1 67,529 - 36,465 - 125,932 1 176,512 1 14,587 - 987,757 6 97,827 1 - - 176,327 1 45,900 - 102,431 1 12,519,739 81 1,098,722 7 143,957 1 245,056 2 14,429,959 94 $ 15,417,716 100 $ 372,754 3 - - 132,795 1 34,326 - 115,001 1 9,313 - 50,833 - 14,644 - 729,666 5 4,748,871 31 288,020 2 78,011 - 16,161 - 5,131,063 33 5,860,729 38 4,172,945 27 334,382 2 1,617,952 10 - - 3,674,194 24 5,292,146 34 (242,486) (1) 9,556,987 62 9,556,987 62 $ 15,417,716 100

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

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TAIWAN NAVIGATION 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, 14, 18 and 24) OPERATING COSTS (Notes 13, 14, 16 and 24) GROSS PROFIT OPERATING EXPENSES (Notes 13 and 16) PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Interest income (Note 4) Dividend income (Note 4) Other income (Note 24) Gain on disposal of property, plant and equipment Net gain (loss) on foreign currency exchange (Note 27) Share of profit (loss) of associates accounted for using the equity method (Notes 4 and 12) Interest expense (Notes 4 and 13) Other expenses Net gain (loss) on financial assets at fair value through profit or loss (Note 4) Total non-operating income and expenses INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 19) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) (Note 4) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans (Note 16) Unrealized loss on investments in equity instruments designated as at fair value through other comprehensive income		2018 Amount % $ 3,367,236 100 2,505,063 74 862,173 26 146,765 4 715,408 22 15,450 - 6,885 - 26,450 1 347,950 10 6,685 - 3,663 - (114,496) (3) (4,322) - (15,038) - 273,227 8 988,635 30 31,000 1 957,635 29 (10,142) - (121,969) (4)		2017
				Amount % $ 2,817,921 100 2,360,856 84 457,065 16 114,760 4 342,305 12 11,083 - 5,967 - 12,412 - 174,895 6 (14,263) - (137) - (66,534) (2) (3,741) - 25,084 1 144,766 5 487,071 17 20,600 1 466,471 16 115 - - -

(Continued)

－－ 26

TAIWAN NAVIGATION 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)

Share of other comprehensive income of associates accounted for using the equity method (Note 12) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Unrealized loss on available-for-sale financial assets Share of other comprehensive income of associates accounted for using the equity method (Note 12) Other comprehensive income (loss) for the year, net of income tax TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR NET PROFIT ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests EARNINGS PER SHARE (Note 20) Basic Diluted		2018 Amount % 12,034 - (120,077) (4) 257,627 8 - - - - 257,627 8 137,550 4 $ 1,095,185 33 $ 957,635 28 - - $ 957,635 28 $ 1,095,185 33 - - $ 1,095,185 33 $ 2.29 $ 2.29		2017
				Amount % - - 115 - (614,331) (22) (30,268) (1) 21,562 1 (623,037) (22) (622,922) (22) $ (156,451) (6) $ 466,471 17 - - $ 466,471 17 $ (156,451) (6) - - $ (156,451) (6) $ 1.12 $ 1.12




				$
				$
				$
				$
				$

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

(Concluded)

－－ 27

TAIWAN NAVIGATION 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)

BALANCE AT JANUARY 1, 2017 Net profit for the year ended December 31, 2017 Other comprehensive income (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 Effect of retrospective application BALANCE AT JANUARY 1, 2018 AS ADJUSTED Appropriation of 2017 earnings Legal reserve Special reserve Cash dividends Net profit for the year ended December 31, 2018 Other comprehensive income (loss) for the year ended December 31, 2018, net of income tax Total comprehensive income (loss) for the year ended December 31, 2018 BALANCE AT DECEMBER 31, 2018	Ordinary Shares Shares (In Thousands) Amount Capital Surplus 417,294 $ 4,172,945 $ 334,382 - - - - - - - - - 417,294 4,172,945 334,382 - - - 417,294 4,172,945 334,382 - - - - - - - - - - - - - - - - - - 417,294 $ 4,172,945 $ 334,382		Retained Earnings Unappropriated Legal Reserve Special Reserve Earnings $ 1,617,952 $ - $ 3,207,608 - - 466,471 - - 115 - - 466,586 1,617,952 - 3,674,194 - - - 1,617,952 - 3,674,194 46,647 - (46,647) - 242,486 (242,486) - - (292,106) - - 957,635 - - (10,142) - - 947,493 $ 1,664,599 $ 242,486 $ 4,040,448	Other Equity Exchange Differences on Unrealized Loss on Investments in Financial Assets at Fair Value Through Unrealized Gain (Loss) on Translating Other Available-for- Foreign Comprehensive sale Financial Operations Income Assets $ 483,294 $ - $ (102,743) - - - (614,331) - (8,706) (614,331) - (8,706) (131,037) - (111,449) - (51,523) 111,449 (131,037) (51,523) - - - - - - - - - - - - - 257,627 (109,935) - 257,627 (109,935) - $ 126,590 $ (161,458) $ -	Total Equity $ 9,713,438 466,471 (622,922) (156,451) 9,556,987 59,926 9,616,913 - - (292,106) 957,635 137,550 1,095,185 $ 10,419,992
	Shares (In Thousands) 417,294 - - - 417,294 - 417,294 - - - - - - 417,294

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

－－ 28

TAIWAN NAVIGATION 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 and amortization expenses Net loss (gain) on fair value change of financial assets at fair value through profit or loss Interest expense Interest income Dividend income Share of (profit) loss of associates accounted for using the equity method Gain on disposal of property, plant and equipment Unrealized loss on foreign currency exchange Changes in operating assets and liabilities Financial assets held for trading Financial assets mandatorily classified as at fair value through profit or loss Accounts receivable Trade receivables from related parties Prepayments Other current assets Other financial assets Contract liabilities Notes and accounts payable Trade payables to related parties Other payables Advance receipts Other current liabilities Net defined benefit liabilities Cash generated from operations Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of available-for-sale financial assets Purchase of financial assets at fair value through other comprehensive income Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Decrease (increase) in other financial assets Decrease (increase) in other non-current assets Increase in prepayments of equipment Interest received Dividends received (Continued)	2018 $ 988,635 762,789 15,038 114,496 (15,450) (6,885) (3,663) (347,950) 44 - 32,019 (1,267) (22,222) 11,389 (415) (12,399) (5,693) 1,395 (8,274) 28,394 - 9,016 (19,386) 1,519,611 (17,387) 1,502,224 - (45,750) (65,288) 671,749 (127,450) (3,611) (155,875) 14,637 10,012	2017 $ 487,071 755,939 (25,084) 66,534 (11,083) (5,967) 137 (174,895) 508 10,129 - 29,233 23,980 (9,541) 20 (15,959) - (15,146) 12,192 30,172 14,511 4,498 (5,656) 1,171,593 (11,773) 1,159,820 (358,509) - (3,184,866) 458,371 349,237 6,143 (147,478) 14,360 6,228

－－ 29

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

Net cash generated from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Proceeds from long-term borrowings Repayments of long-term borrowings Increase (decrease) in other non-current liabilities Cash dividends paid Interest paid Net cash generated from (used in) financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2018 $ 298,424 181,050 181,441 (1,671,307) (432) (292,106) (114,317) (1,715,671) 10,762 95,739 382,811 $ 478,550	2017 $ (2,856,514) 340,927 2,707,310 (1,122,794) 1,534 - (64,022) 1,862,955 (16,919) 149,342 233,469 $ 382,811

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

－－ 30

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders

Taiwan Navigation Co., Ltd.

Opinion

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

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2018. These matters

－－ 31

were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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

Recognition of Gain on disposal of bulk carriers recognized under investments accounted for using the equity method

The Corporation’s subsidiary Tai Shing, primarily engages in bulk carriers transportation service. Tai Shing disposed some of its aging bulk carriers in 2018 in order to replace them with new bulk carriers and the Corporation recognized the gain on disposal under investments accounted for using the equity method.. Given that the transaction is material to the financial statements. We considered gain on disposal of bulk carriers recognized in investments accounted for using the equity method a key audit matter.

For the related accounting policy and disclosures, please refer to Notes 4 and 12 to the financial statements.

Our main audit procedures performed in respect of the gain on disposal of bulk carriers under investments accounted for using the equity method was as follows:

We understood management’s evaluation processes of disposal of the bulk carriers and verified the implementation of related controls, through appropriate approvals.
We tested the transaction contract and the record of remittances to verify the accuracy of the amount received.
We reperformed the calculation of gain on disposal of bulk carriers and verified the accuracy of timing of recognition.

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

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

－－ 32

or error.

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

Those charged with governance including the audit committee, are responsible for overseeing the Corporation’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

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

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

－－ 33

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Corporation to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Corporation to express an opinion on the financial statements. We are responsible for the direction, supervision, and performance of the audit. We remain solely responsible for our audit opinion.

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

－－ 34

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

Deloitte & Touche Taipei, Taiwan Republic of China March 26, 2019

Notice to Readers

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

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

－－ 35

TAIWAN NAVIGATION CO., LTD.

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

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss (Notes 4, 7 and 23) Financial assets at fair value through other comprehensive income (Notes 4, 8 and 23) Available-for-sale financial assets (Notes 4, 9 and 23) Accounts receivable, net (Notes 4 and 10) Trade receivables from related parties (Notes 4 and 23) Prepayments (Note 23) Other financial assets (Notes 4 and 11) Other current assets (Notes 4 and 19) Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss (Notes 4, 7 and 23) Financial assets at fair value through other comprehensive income (Notes 4, 8 and 23) Available-for-sale financial assets (Notes 4, 9 and 23) Financial assets measured at cost (Note 4) Investments accounted for using the equity method (Notes 4 and 12) Property, plant and equipment (Notes 4, 13 and 24) Investment properties (Notes 4 and 14) Other non-current assets (Notes 4, 19 and 24) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 15) Contract liabilities (Note 18) Notes and accounts payable Trade payables to related parties (Note 23) Other payables Advance receipts (Note 18) Other current liabilities (Notes 4 and 19) Total current liabilities NON-CURRENT LIABILITIES Deferred tax liabilities (Notes 4 and 19) Net defined benefit liabilities (Notes 4 and 16) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY (Note 17) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity attributable to owners of the Corporation Total equity TOTAL		2018 Amount % $ 119,820 1 76,777 1 116,247 1 - - 56,383 - 60,250 1 32,806 - 105,341 1 4,769 - 572,393 5 - - 241,601 2 - - - - 8,871,325 77 684,613 6 1,097,370 10 10,240 - 10,905,149 95 $ 11,477,542 100 $ 465,177 4 22,644 - 35,527 - 37,253 1 100,203 1 - - 8,648 - 669,452 6 303,556 3 68,813 - 15,729 - 388,098 3 1,057,550 9 4,172,945 36 334,382 3 1,664,599 15 242,486 2 4,040,448 35 5,947,533 52 (34,868) - 10,419,992 91 10,419,992 91 $ 11,477,542 100		2017
				Amount % $ 79,113 1 32,007 - - - 151,914 1 51,867 1 37,846 - 31,011 - 163,956 2 7,298 - 555,012 5 97,827 1 - - 176,327 2 45,900 - 7,680,039 74 722,198 7 1,098,722 11 15,039 - 9,836,052 95 $ 10,391,064 100 $ 243,000 2 - - 32,969 - 65,462 1 73,738 1 25,721 - 13,870 - 454,760 4 288,020 3 75,136 1 16,161 - 379,317 4 834,077 8 4,172,945 40 334,382 3 1,617,952 16 - - 3,674,194 35 5,292,146 51 (242,486) (2) 9,556,987 92 9,556,987 92 $ 10,391,064 100

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

－－ 36

TAIWAN NAVIGATION CO., LTD.

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, 14, 18 and 23) OPERATING COSTS (Notes 13, 14, 16 and 23) GROSS PROFIT OPERATING EXPENSES (Notes 13 and 16) PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Share of profit of subsidiaries and associates accounted for using the equity method (Notes 4 and 12) Interest income (Note 4) Dividend income (Note 4) Other income (Note 23) Interest expense Other expenses (Note 23) Net gain (loss) on foreign currency exchange (Note 26) Net gain (loss) on financial assets at fair value through profit or loss Total non-operating income and expenses INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 19) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS)(Note4) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans (Note 16) Unrealized loss on investments in equity instruments designated as at fair value through other comprehensive income Share of other comprehensive income of associates accounted for using the equity method (Note 12)		2018 Amount % $ 1,276,210 100 1,105,466 87 170,744 13 141,556 11 29,188 2 924,752 72 3,332 - 6,885 1 38,876 3 (3,073) - (3,155) - 6,868 - (15,038) (1) 959,447 75 988,635 77 31,000 2 957,635 75 (10,142) (1) (121,969) (9) 12,034 1		2017
				Amount % $ 1,240,099 100 1,025,987 83 214,112 17 110,794 9 103,318 8 340,361 27 2,058 - 5,967 1 28,812 2 (1,554) - (2,851) - (14,124) (1) 25,084 2 383,753 31 487,071 39 20,600 2 466,471 37 115 - - - - -

(Continued)

－－ 37

TAIWAN NAVIGATION CO., LTD.

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

Items that may be reclassified subsequently to profit or loss: Unrealized loss on available-for-sale financial assets Share of other comprehensive income (loss) of subsidiaries and associates accounted for using the equity method (Note 12) Other comprehensive income (loss) for the year, net of income tax TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR EARNINGS PER SHARE (Note 20) Basic Diluted		2018 Amount % $ (120,077) (9) - - 257,627 20 257,627 20 137,550 11 $ 1,095,185 86 $ 2.29 $ 2.29		2017
				Amount % $ 115 - (30,268) (2) (592,769) (48) (623,037) (50) (622,922) (50) $ (156,451) (13) $ 1.12 $ 1.12



		$		$

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

(Concluded)

－－ 38

TAIWAN NAVIGATION CO., LTD.

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

BALANCE AT JANUARY 1, 2017 Net profit for the year ended December 31, 2017 Other comprehensive income (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 Effect of retrospective application BALANCE AT JANUARY 1, 2018 AS ADJUSTED Appropriation of 2017 earnings Legal reserve Special reserve Cash dividends Net profit for the year ended December 31, 2018 Other comprehensive income (loss) for the year ended December 31, 2018, net of income tax Total comprehensive income (loss) for the year ended December 31, 2018 BALANCE AT DECEMBER 31, 2018	Ordinary Shares Shares (In Thousands) Amount Capital Surplus 417,294 $ 4,172,945 $ 334,382 - - - - - - - - - 417,294 4,172,945 334,382 - - - 417,294 4,172,945 334,382 - - - - - - - - - - - - - - - - - - 417,294 $ 4,172,945 $ 334,382		Retained Earnings Unappropriated Legal Reserve Special Reserve Earnings $ 1,617,952 $ - $ 3,207,608 - - 466,471 - - 115 - - 466,586 1,617,952 - 3,674,194 - - - 1,617,952 - 3,674,194 46,647 - (46,647) - 242,486 (242,486) - - (292,106) - - 957,635 - - (10,142) - - 947,493 $ 1,664,599 $ 242,486 $ 4,040,448	Other Equity Exchange Differences on Unrealized Loss on Financial Assets at Fair Value Through Unrealized Gain (Loss) on Translating Other Available-for- Foreign Comprehensive sale Financial Operations Income Assets $ 483,294 $ - $ (102,743) - - - (614,331) - (8,706) (614,331) - (8,706) (131,037) - (111,449) - (51,523) 111,449 (131,037) (51,523) - - - - - - - - - - - - - 257,627 (109,935) - 257,627 (109,935) - $ 126,590 $ (161,458) $ -	Total Equity $ 9,713,438 466,471 (622,922) (156,451) 9,556,987 59,926 9,616,913 - - (292,106) 957,635 137,550 1,095,185 $ 10,419,992
	Shares (In Thousands) 417,294 - - - 417,294 - 417,294 - - - - - - 417,294

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

－－ 39

TAIWAN NAVIGATION CO., LTD.

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 and amortization expenses Net loss (gain) on fair value change of financial assets at fair value through profit or loss Interest expense Interest income Dividend income Share of profit of subsidiaries and associates accounted for using the equity method Unrealized loss (gain) on foreign currency exchange, net Changes in operating assets and liabilities Financial assets held for trading Financial assets mandatorily classified as at fair value through profit or loss Accounts receivable Trade receivables from related parties Prepayments Other current assets Other financial assets Contract liabilities Notes and accounts payable Trade payables to related parties Other payables Advance receipts Other current liabilities Net defined benefit liabilities Cash generated from operations Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of available-for-sale financial assets Purchase of financial asset at fair value through other comprehensive income Acquisition of property, plant and equipment Decrease (increase) in other financial assets Decrease in other non-current assets Interest received Dividends received Net cash generated from (used in) investing activities	2018 $ 988,635 42,482 15,038 3,073 (3,332) (6,885) (924,752) 196 - 32,019 (4,515) (22,049) (1,795) (746) (6,112) (3,077) 2,535 (28,738) 26,468 - 80 (16,465) 92,060 (17,387) 74,673 - (45,750) (3,020) 64,727 4,431 9,071 10,012 39,471	2017 $ 487,071 36,804 (25,084) 1,554 (2,058) (5,967) (340,361) (281) 10,129 - 21,891 23,540 2,280 19 (15,516) - (4,887) 21,285 25,333 17,375 713 (7,222) 246,618 (11,773) 234,845 (358,509) - (15,381) (113,872) 17,342 7,779 6,228 (456,413)

(Continued)

－－ 40

TAIWAN NAVIGATION CO., LTD.

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

CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Increase (decrease) in other non-current liabilities Cash dividends paid Interest paid Net cash (used in) generated from financing activities NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2018 $ 222,177 (432) (292,106) (3,076) (73,437) 40,707 79,113 $ 119,820	2017 $ 208,000 2,067 - (1,471) 208,596 (12,972) 92,085 $ 79,113

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

－－ 41

Attachment 4

Comparison Table for the Operational Procedures for Acquisition and Disposal of Assets Before and After Amendment

	After Amendment	Before Amendment
	Article 3: Scope of Asset … 2.Real property (including land, houses and buildings, investment property) and equipment … 5.Right-of-use assets 6. Claims of financial institutions (including receivables, bills purchased and discounted, loans, and overdue receivables) 7. Derivatives 8. Assets acquired or disposed of in connection with mergers, demergers, acquisitions, or transfer of shares in accordance with law. 9.Other major assets	Article 3: Scope of Asset … 2.Real property (including land, houses and buildings, investment property, and rights to use land) and equipment … 5. Claims of financial institutions (including receivables, bills purchased and discounted, loans, and overdue receivables) 6. Derivatives 7. Assets acquired or disposed of in connection with mergers, demergers, acquisitions, or transfer of shares in accordance with law. 8. Other important assets
	Article 4 – Definitions of Terms 1.Derivatives: The derivatives referred herein means forward contract, options contract, futures contract, leverage deposit contract, swap contract, anycombination of the above contract, or embossed derivatives compound contract of structured note,whose value demonstrated byspecific interest rate,price of financial instrument, merchandise price, exchange rate,price of fee rate index, credit rating or credit index or othervariables.The so-called forward contract does not include insurance contract, performance contract, after sale contract, long term lease contract and long term purchasing / selling contract. 2.Assets acquired or disposed through mergers, demergers, acquisitions, or transfer of shares in accordance with law: Refers to assets acquired or disposed through mergers, demergers, or acquisitions conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institution Merger Act and other acts, or to transfer of shares from another company through issuance of new shares of its own as	Article 4 – Definitions of Terms 1.Derivatives: The derivatives referred herein means the forward contract, options contract, futures contract, leverage deposit contract, swap contract and any combination of the above contract, or embossed derivatives compound contract of structured note, whose value demonstrated by asset, interest rate, exchange rate, index, or other profits. The so-called forward contract does not include insurance contract, performance contract, after sale contract, long term lease contract and long term purchasing / selling contract 2.Assets acquired or disposed through mergers, demergers, acquisitions, or transfer of shares in accordance with law: Refers to assets acquired or disposed through mergers, demergers, or acquisitions conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institution Merger Act and other acts, or to transfer of shares from another company through issuance of new shares of its own as

－－ 42

After Amendment

the consideration therefor (hereinafter "transfer of shares") under Article 156-3 of the Company Act.

Before Amendment the consideration therefor (hereinafter "transfer of shares") under Article 156-8 of the Company Act.

… 8. Specialized in Investment: refers to financial control company, bank, insurance company, bill financing company, trust securities dealers or underwriters, futures dealers, securities investment trust, securities investment consulting and fund management company established under law and submit to the administration of local financial competent agency.
1. When acquiring Appraisal report or opinion of CPA, Lawyer and / or securities underwriter, the Appraiser, AOA, Lawyer or securities underwriter shall meet the following requirements: (1) May not have previously received a final and unappealable sentence to imprisonment for 1 year or longer for a violation of the Act, the Company Act, the Banking Act of The Republic of China, the Insurance Act, the Financial Holding Company Act, or the Business Entity Accounting Act, or for fraud, breach of trust, embezzlement, forgery of documents, or occupational crime. However, this provision does not apply if 3 years have already passed since completion of service of the sentence, since expiration of the period of a suspended sentence, or since a pardon was received.
(2) May not be a related party or de facto related party of any party to the transaction.
(3) If the company is required to obtain appraisal reports from two or more professional appraisers, the different professional appraisers or appraisal officers may not be related parties or de facto related parties of each other.
When issuing an appraisal report or opinion, the personnel referred to in the preceding paragraph shall comply with the following: (1)Prior to accepting a case, they shall prudently assess their own professional

－－ 43


		After Amendment	Before Amendment
	capabilities, practical experience, and independence. (2)When examining a case, they shall appropriately plan and execute adequate working procedures, in order to produce a conclusion and use the conclusion as the basis for issuing the report or opinion. The related working procedures, data collected, and conclusion shall be fully and accurately specified in the case working papers. (3)They shall undertake an item-by-item evaluation of the comprehensiveness, accuracy, and reasonableness of the sources of data used, the parameters, and the information, as the basis for issuance of the appraisal report or the opinion. (4)They shall issue a statement attesting to the professional competence and independence of the personnel who prepared the report or opinion, and that they have evaluated and found that the information used is reasonable and accurate, and that they have complied with applicable laws and regulations.

Article 5`：` … 2. Real estate and equipment for business operation use: For amount less than NTD20 shall be approved by General Manager, between 20 and 50 million shall be approved by Chairman and shall be submit to Board of Directors for reference. 3. Right-of-use assets of real estate or equipment: Amount per lot less than NTD100 million shall be approved by General Manager and between 100 and 200 million shall be approved by Chairman and submitted to Board of Directors for reference. Any case in excess of the above level or selling or purchasing real estate,equipment or right-of-use assets,shall have secured consent of more than 1/2 of members of Audit Committee, and shall be submitted for the reference of Board of Directors. The provisions under Para. 2 and 3 of Clause 17 shall be applied.			Article 5`：` … 2. Real estate and equipment for business operation use: For amount less than NTD20 shall be approved by General Manager, between 20 and 50 million shall be approved by Chairman and shall be submit to Board of Directors for reference Any case in excess of the above level or selling or purchasing real estate, equipment or right-of-use assets, shall have secured consent of more than 1/2 of members of Audit Committee, and shall be submitted for the reference of Board of Directors. The provisions under Para. 2 and 3 of Clause 17 shall be applied.

－－ 44

After Amendment Before Amendment

Article 7:：
Handling procedure for acquiring or disposing
real estate,equipment or its right-of-use
assets:
1.Evaluation and Operation Procedure
All acquisition or disposition of real estate,
equipment or its right-of-use assetsshall be
Complying with the Fixed Asset Cycling
Procedure of Internal Control System of the
Company.
2.Determination Procedure for transaction
conditions and authorization level.
(1) The acquisition or disposition of real estate
or its right-of-use assetsshall take
reference of announced present value,
evaluated value and actual real estate
transaction price of neighboring area to
determine the term and price, and shall
come up with analysis report and Article 5
shall be complied.
(2) Acquisition and disposition of real estate,
equipment or its right-of-use assetsshall
be conducted in one of price inquiry, price
comparison or price negation or open bid.
3. Execution Unit
Acquisition and disposition of real estate,
equipment or its right-of-use assetsof the
Company shall be executed by using
department and finance department.
4. Evaluation Report of Real Estate,equipment
or its right-of-use assets:
In acquiring or disposing real estate,
equipment or its right-of-use assets,except
transaction withlocal government body,
building on own land, commissioned building
on lease land or acquiring or disposing
equipment orits right-of-use assets, when
the transaction amount exceeds 20% of the
paid up capital of the Company or NTD300
million, expert’s appraisal report shall be
obtained before he occurrence date and shall
also meet the following:
(1)Where due to special circumstances it is
necessary to give a limited price,
specified price, or special price as a
reference basis for the transaction price,
the transaction shall be submitted for Article 7:：
Handling procedure for acquiring or disposing
real estate, equipment:
1.Evaluation and Operation Procedure
All acquisition or disposition of real estate,
equipment shall be Complying with the Fixed
Asset Cycling Procedure of Internal Control
System of the Company.
2.Determination
Procedure
for
transaction
conditions and authorization level.
(1) The acquisition or disposition of real
estate
shall
take
reference
of
announced present value, evaluated
value and actual real estate transaction
price of neighboring area to determine
the term and price, and shall come up
with analysis report and Article 5 shall
be complied.。
(2) Acquisition and disposition of real estate,
equipment shall be conducted in one of
price inquiry, price comparison or price
negation or open bid.
3. Execution Unit
Acquisition and disposition of real estate or
equipment of the Company shall be executed
by
using
department
and
finance
department.
4.Evaluation Report of Real Estate or Equipment:
In acquiring or disposing of real property or
equipment where the transaction amount
reaches 20 percent of the company's paid-in
capital or NT$300 million or more, the
company,
unless
transacting
with
a
government agency, engaging others to build
on its own land, engaging others to build on
rented land, or acquiring or disposing of
equipment for business use, shall obtain an
appraisal report prior to the date of
occurrence of the event from a professional
appraiser and shall further comply with the
following provisions:
(1)Where due to special circumstances it is
necessary to give a limited price, specified
price, or special price as a reference basis
for the transaction price, the transaction
shall be submitted for approval in


After Amendment	Before Amendment
Article 7:`：` Handling procedure for acquiring or disposing real estate,equipment or its right-of-use assets: 1.Evaluation and Operation Procedure All acquisition or disposition of real estate, equipment or its right-of-use assetsshall be Complying with the Fixed Asset Cycling Procedure of Internal Control System of the Company. 2.Determination Procedure for transaction conditions and authorization level. (1) The acquisition or disposition of real estate or its right-of-use assetsshall take reference of announced present value, evaluated value and actual real estate transaction price of neighboring area to determine the term and price, and shall come up with analysis report and Article 5 shall be complied. (2) Acquisition and disposition of real estate, equipment or its right-of-use assetsshall be conducted in one of price inquiry, price comparison or price negation or open bid. 3. Execution Unit Acquisition and disposition of real estate, equipment or its right-of-use assetsof the Company shall be executed by using department and finance department. 4. Evaluation Report of Real Estate,equipment or its right-of-use assets: In acquiring or disposing real estate, equipment or its right-of-use assets,except transaction withlocal government body, building on own land, commissioned building on lease land or acquiring or disposing equipment orits right-of-use assets, when the transaction amount exceeds 20% of the paid up capital of the Company or NTD300 million, expert’s appraisal report shall be obtained before he occurrence date and shall also meet the following: (1)Where due to special circumstances it is necessary to give a limited price, specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for	Article 7:`：` Handling procedure for acquiring or disposing real estate, equipment: 1.Evaluation and Operation Procedure All acquisition or disposition of real estate, equipment shall be Complying with the Fixed Asset Cycling Procedure of Internal Control System of the Company. 2.Determination Procedure for transaction conditions and authorization level. (1) The acquisition or disposition of real estate shall take reference of announced present value, evaluated value and actual real estate transaction price of neighboring area to determine the term and price, and shall come up with analysis report and Article 5 shall be complied.`。` (2) Acquisition and disposition of real estate, equipment shall be conducted in one of price inquiry, price comparison or price negation or open bid. 3. Execution Unit Acquisition and disposition of real estate or equipment of the Company shall be executed by using department and finance department. 4.Evaluation Report of Real Estate or Equipment: In acquiring or disposing of real property or equipment where the transaction amount reaches 20 percent of the company's paid-in capital or NT$300 million or more, the company, unless transacting with a government agency, engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposing of equipment for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions: (1)Where due to special circumstances it is necessary to give a limited price, specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for approval in

－－ 45

After Amendment Before Amendment
approval in advance by the board of advance by the board of directors, and directors; the same procedure shall also the same procedure shall be followed for be followed whenever there is any any future changes to the terms and subsequent change to the terms and conditions of the transaction. conditions of the transaction. …. …
Article 10: Handling procedure for acquiring or Article 10: Handling procedure for acquiring or disposing intangible asset or its right-of-use disposing membership or intangible asset assets or membership 1. Evaluation and operation procedure 1.Evaluation and operation procedure Acquiring or disposing intangible asset or its Acquiring or disposing membership or right-of-use assets or membership of the intangible asset of the Company shall follow Company shall follow the Fixed Asset Cycle the Fixed Asset Cycle Procedure of internal Procedure of internal control system of the control system of the Company: Company.
1. Decision procedure for the transaction 2. Decision procedure for the transaction conditions and levels authorized: conditions and levels authorized: (1)Acquiring or disposing membership shall (1)Acquiring or disposing membership shall take reference of fair market price and take reference of fair market price and determine transaction condition and determine transaction condition and price and make it into analysis report price and make it into analysis report and and submit for approval of Board of submit for approval of Board of Directors. Directors.
(2)In acquiring or disposing intangible asset (2)In acquiring or disposing intangible asset, or its right-of-use assets, evaluation evaluation report of expert or market report of expert or market fair price shall fair price shall be taking into be take into consideration for consideration for determining determining transaction condition and transaction condition and the price, the price, which shall be making into which shall be making into evaluation evaluation report and proceed after report and proceed after approval of approval of board of directors. board of directors.
1. Execution unit 3. Execution unit The transaction of acquiring or disposing The transaction of acquiring or disposing intangible asset or its right-of-use assets or membership or intangible asset shall follow membership shall follow the above level to the above level to submit for approval and submit for approval and after securing after securing approval, the using unit and approval, the using unit and finance finance department shall be responsible for department shall be responsible for execution. execution.
1. Intangible asset or its right-of-use assets or 4. Membership or intangible asset expert membership expert evaluation report. evaluation report. (1)In the transaction of acquiring or (1) In the transaction of acquiring or disposing membership in amount more disposing membership in amount more than 1% of the paid-up capital of the than 1% of the paid-up capital of the Company or NTD3 million shall have Company or NTD3 million shall have expert’s appraisal report. expert’s appraisal report.
(2)When the amount of acquiring or (2) When the amount of acquiring or disposing intangible assets or it disposing intangible assets or amounted to

－－ 46

After Amendment

right-of-use assets amounted to 10% of paid up capital of the Company or more than NTD20 million shall have appraisal report.
(3)In acquiring or disposing intangible asset or its right-of-use assets or membership, when the transaction amount is in excess of 20% of paid up capital of the Company or NT$300 million, other than transaction with government body, shall first retain CPA to express opinion on the reasonability of transaction price before date of occurrence, and CPA shall handle it in accordance with Standard of Audit #20 Accounting Research & Development Foundation

Article 12: Handling procedure for acquiring or disposing derivatives:

1. Trading principles and strategies

(1) Types of transaction:

The derivatives referred herein means forward contract, options contract, futures contract, leverage deposit contract, swap contract, any combination of the above contract, or embossed derivatives compound contract of structured note, whose value demonstrated by specific interest rate, price of financial instrument, exchange rate, price of fee rate index, credit rating or credit index or other variables. The so-called forward contract does not include insurance contract, performance contract, after sale contract, long term lease contract and long term purchasing / selling contract.

…

2. Risk management measures

(5) Operation risk management

…
D.Derivatives trading positions held shall be evaluated at least once per week; however, positions for hedge trades required by business shall be evaluated at least twice per month. Evaluation reports shall be submitted to senior management personnel

Before Amendment

10% of paid up capital of the Company or more than NTD20 million shall have appraisal report.
(3)In acquiring or disposing membership or intangible asset, when the transaction amount is in excess of 20% of paid up capital of the Company or NT$300 million, other than transaction with government body, shall first retain CPA to express opinion on the reasonability of transaction price before date of occurrence, and CPA shall handle it in accordance with Standard of Audit #20 Accounting Research & Development Foundation

Article 12: Handling procedure for acquiring or disposing derivatives:

Trading principles and strategies
(1) Types of transaction:

The derivatives referred herein means the contracts such as forward contract, swap contract, options contract, futures contract, any combination of the above contract, or embossed derivatives compound contract of structured note, whose value demonstrated by asset, interest rate, exchange rate, index, or other profits. The so-called forward contract does not include insurance contract, performance contract, after sale contract, long term lease contract and long term purchasing / selling contract.

…

2. Risk management measures

…

(5) Operation risk management

… D.Derivatives trading positions held shall be evaluated at least once per week; however, positions for hedge trades required by business shall be evaluated at least twice per month. Evaluation reports shall be submitted to senior management personnel

－－ 47

	After Amendment	Before Amendment
	authorized by the board of directors. … 4. Regular evaluation methods (1) Board of Director shall appoint ranked executive to regularly supervise and evaluate whether the derivatives transaction engaged is complying with the transaction procedure established by the Company and the risk borne is within the allowed scope; when the market price evaluation identified abnormality (such as position held if exceeding ceiling of loss) Board of Directors shall be reported immediately and responsive measure shall be taken. … 5. The principle of supervision and management of Board of Director over derivatives transaction engaged … (3)When engaging in derivatives transaction, the persons related shall be authorized under the Derivatives Transaction Handling Procedure; afterward, he latest board meeting shall be reported. …	authorized by the board of directors. … 4. Regular evaluation methods (1) Board of Director shall appoint ranked executive to regularly supervise and evaluate whether the derivatives transaction engaged is complying with the transaction procedure established by the Company and the risk borne is within the allowed scope; when the market price evaluation identified abnormality (such as position held if exceeding ceiling of loss) Board of Directors shall be reported immediately and responsive measure shall be taken. .… 5. The principle of supervision and management of Board of Director over derivatives transaction engaged … (3) When engaging in derivatives transaction, the persons related shall be authorized under the Derivatives Transaction Handling Procedure; afterward, he latest board meeting shall be reported. …
	Article 18`：` The Operation Procedure was established on May 30, 1997. The 1stamendment on Nov. 19, 1999, 2ndamendment on Jan. 2002, 3rd amendment on May 30, 2003, 4thamendment on June 17, 2010, 5thamendment onJune 17, 2013, 6thamendment on June 22, 2015, 7th amendment on June 26, 2018 andthe 8th amendment on June 25, 2019.	Article 18`：` The Operation Procedure was established on May 30, 1997. The 1stamendment on Nov. 19, 1999, 2ndamendment on Jan. 2002, 3rd amendment on May 30, 2003, 4thamendment on June 17, 2010, 5thamendment onJune 17, 2013, 6thamendment on June 22, 2015 and 7th amendment on June 26, 2018`。`

－－ 48

Attachment 5

Comparison Table for the Operational Procedures for Loaning of Company Funds

Before and After Amendment

After Amendment Before Amendment
Article 2 Total amount of funds loaned and Article 2 Total amount of funds loaned and ceilings for individual borrower ceilings for individual borrower … … 3. Ceiling for individual borrower: 3. Ceiling for individual borrower: … …
(2) Loan to party with the needs of short term (2)Loan to party with the needs of short term financing ： financing ：
A.… A.… B. Subsidiary of the Company with whom B. Subsidiary of the Company with whom the Company is holding voting right less the Company is holding voting right less than 100% but more than 50%, directly than 100% but more than 50%, directly or indirectly, applied for financing due or indirectly, applied for financing due to needs of short-term finance. The to needs of short-term finance. The total amount loaned shall not be more total amount loaned shall not be more than 30% of paid up capital of the than 30% of paid up capital of the subsidiary, and individual subsidiary subsidiary, and every subsidiary loaned loaned amount shall not exceed paid up amount shall not exceed paid up capital capital of the Company of the Company

Article 13 ：

The Operation Procedure was established on May 30, 1997.The 1[st] amendment on Nov. 19, 1999, 2[nd] amendment in Jan. 2002, 3[rd] amendment on May 30, 2003, 4[th] amendment on June 17, 2010, 5[th] amendment onJune 17, 2013, 6[th] amendment on June 22, 2015, 7[th] amendment on June 26, 2018 and 8th amendment on June 25, 2019.

Article 13 ：

The Operation Procedure was established on May 30, 1997. The 1[st] amendment on Nov. 19, 1999, 2[nd] amendment in Jan. 2002, 3[rd] amendment on May 30, 2003, 4[th] amendment on June 17, 2010, 5[th] amendment onJune 17, 2013, 6[th] amendment on June 22, 2015 and 7[th] amendment on June 26, 2018

－－ 49

Appendices

－－ 50

Appendices 1

TAIWAN NAVIGATION CO., LTD

Rules of Procedure for Shareholders Meetings

Created on May 15, 1998 First amendment was made on June 21, 2002 Second amendment was made on June 22, 2016

Article 1 The shareholders’ Meeting of the Corporation (the “meeting”)shall be conducted in accordance with the Rules.
Article 2 Shareholders as stated in the Rules shall be the shareholder himself/herself or the proxy who is delegated by the shareholder to attend the meeting.
Article 3 The attending shareholders shall hand in a sign-in card in lieu of signing in. The number of shares in attendance shall be calculated according to the shares indicated by the sign-in cards handed in plus the number of shares whose voting rights are exercised by electronically.
Article 4 Attendance and voting rights at the meeting shall be calculated based on numbers of shares.
Article 5 The venue for the meeting shall be in headquarters, or in a suitable place . The meeting time may begin no earlier than 9 a.m. and no later than 3 p.m.
Article 6 If the meeting is convened by the board of directors, the chair of the meeting shall be the chairman of the board. When the chairman on leave or for any reason unable to exercise the powers of the chairman, the chairman shall appoint one of the directors to act as the chair. Where the chairman does not appoint the delegate , the directors shall mutually select from among themselves.
If a shareholder meeting is convened by a party with power to convene but other than the board of directors, the convening party shall chair the meeting.
Article 7 This Corporation may appoint its attorneys, certified public accountants, or related persons retained by it to attend the meeting. The personnel handling the shareholders' meeting shall wear a identification card.
Article 8 Corporation shall make an audio recording of the proceedings of the shareholders meeting, and the recorded materials shall be retained for at least 1 year.
Article 9 The chair shall call the meeting to order at the appointed meeting time. However, when the attending shareholders do not represent a majority of the total number of issued shares, the chair may announce a postponement, provided that no more than two such postponements, for a combined total of no more than 1 hour, may be made. If the quorum is not met after two postponements and the attending shareholders still represent less than one third of the total number of issued shares, a tentative resolution may be adopted pursuant to Article 175 of the Company Act.
When, prior to conclusion of the meeting, the attending shareholders represent a majority of the total number of issued shares, the chair may resubmit the tentative resolution for a vote by the shareholders meeting pursuant to Article 174 of the Company Act.
Article 10 If the meeting is convened by the board of directors, the meeting agenda shall be set by the board of directors. The meeting shall proceed in the order set by the agenda, which may not be changed without a resolution of the meeting.
The provisions of the preceding paragraph apply mutatis mutandis to the meeting convened by a party with the power to convene that is not the board of directors. The chair may not declare the meeting adjourned prior to completion of deliberation on the meeting agenda of the preceding two paragraphs (including extraordinary motions), except by a resolution of the shareholders meeting. If the chair declares the

－－ 51

meeting adjourned in violation of the rules of procedure, an agreement of a majority of the votes represented by the attending shareholders, and then continue the meeting. After the meeting is over, the shareholders may not elect the chair to continue the meeting in the same place or in another place.

Article 11 Before speaking, an attending shareholder must specify on a speaker's slip the subject of the speech, his/her shareholder account number (or attendance card number), and account name. The order in which shareholders speak will be set by the chair.
A shareholder in attendance who has submitted a speaker's slip but does not actually speak shall be deemed to have not spoken. When the content of the speech does not correspond to the subject given on the speaker's slip, the spoken content shall prevail.
When an attending shareholder is speaking, other shareholders may not speak or interrupt unless they have sought and obtained the consent of the chair and the shareholder that has the floor; the chair shall stop any violation.
Article 12 Except with the consent of the chair, a shareholder may not speak more than twice on the same proposal, and a single speech may not exceed 5 minutes.
If the shareholder's speech violates the rules or exceeds the scope of the agenda item, the chair may terminate the speech.
Article 13 When a juristic person is appointed to attend as proxy, it may designate only one person to represent it in the meeting.
When a juristic person shareholder appoints two or more representatives to attend the meeting, only one of them may speak on the same proposal.
Article 14 After an attending shareholder has spoken, the chair may respond in person or direct relevant personnel to respond.
Article 15 The discussion of the motion may be terminated at an appropriate time by the chair. If necessary, the chair may announce the discussion closed and call for a vote.
Article 16 Vote monitoring and counting personnel for the voting on a proposal shall be appointed by the chair, provided that all monitoring personnel shall be shareholders of the Corporation.
Article 17 Except as otherwise provided in the Company Act and in the Corporation's articles of incorporation, the passage of a proposal shall require an affirmative vote of a majority of the voting rights represented by the attending shareholders.
Article 18 When there is an amendment or an alternative to a proposal, the chair shall present the amended or alternative proposal together with the original proposal and decide the order in which they will be put to a vote. When any one among them is passed, the other proposals will then be deemed rejected, and no further voting shall be required.
Article 19 When a meeting is in progress, the chair may announce a break based on time considerations.
Article 20 When a meeting is in progress,if a force majeure event occurs, the chair may rule the meeting temporarily suspended and announce a time when, in view of the circumstances, the meeting will be resumed.
Article 21 The chair may direct the proctors or security personnel to help maintain order at the meeting place. When proctors or security personnel help maintain order at the meeting place, they shall wear an identification card or armband bearing the word "Proctor."
When a shareholder violates the rules of procedure and defies the chair's correction, obstructing the proceedings and refusing to heed calls to stop, the chair may direct the proctors or security personnel to escort the shareholder from the meeting.
Article 22 If the rules are not covered above, should be handled in accordance with the

－－ 52

provisions of the Company Act, Securities and Exchange Act and other relevant laws or or the Articles of Incorporation.

Article 23 These Rules, and any amendments hereto, shall be implemented after adoption by shareholders meetings.

－－ 53

Appendices 2

Taiwan Navigation Co., Ltd. Articles of Incorporation

Chapter 1 – General

Article 1 The Corporation shall be incorporated as a company limited by shares under the Company Act and its name should be Taiwan Navigation Co., Ltd.

Article 2 The scope of business of the Corporation shall be as follows:

Operation of domestic and overseas passengers and shipment services ;
Operation of domestic and overseas docks and Warehouses:
Businesses accessorial to steamers, docks and warehouses:
Operation of shipping agency business:
Operations of sand pumping, channel dredging and tugboats;
Commissioned building, leasing and selling of residential buildings and commercial buildings.

And the Corporation may engage in any business that is not prohibited or restricted by law, except the business requiring permission.

Article 3 The investment of the Corporation in other entity is not restricted by the limitation on total amount of its reinvestment under the Company Act; however, the amount of each investment shall be subject to the authorization of Board of Directors.
Article 4 For the needs in business operations, the Corporation may provide guarantee and /or providing endorsement pursuant to the Operational Procedures for Endorsements/Guarantees of the Corporation.
Article 5 The headquarter of the Corporation located in Taipei City. If necessary ,it may set up or dismiss domestic and overseas branch.
Article 6 The announcement of the Company shall be posted in prevailing daily newspapers, in the significant part, where the Headquarter located. However, this shall not apply if Securities Exchange agency has different requirement.

Chapter 2 – Shares

Article 7 Total capitalization of the Corporation is NTD6 billion,devided into 600 million common shares,with part value of NTD10 per share. The Board of Directors is authorized to issue those un-issued shares in installments.
Article 8 Shares issued by the Corporation may be exempted from printing physical share certificates but shares should be registered with Central Securities Depositiory Institution.

Article 9 (Deleted)

Article 10 Unless otherwise provided for in law or securities rules and / or regulations, the share

－－ 54

affairs and related matters shall be complying with the Regulations Governing the Administration of Shareholder Services of Public Companies as promulgated by the competent authority.

Chapter 3 – Shareholders’ Meeting

Article 11 Shareholders’ Meetings of the Corporation consist of Regular and Special Shareholders’ Meeting and shall be called by Board of Directors, unless otherwise provided under the Company Act.

General Shareholders’ Meeting shall be convened at least once a year and shall be convened within 6 months after the close of last fiscal year. However, this shall not be applicable under special situation with justifiable cause and approved by competent authority.

The Notice to convence a Regular and Special Shareholders’ Meetings shall be given to each shareholder no later than 30 days and 15 days in advance respectively and such notice shall state the date and place as well as cause of the meeting.

Article 12 A shareholder unable to attend shareholders’ meeting may present a proxy printed by the Corporation stated scope of authorization and delegate an agent to attend.

Except otherwise established by the Corporation, a shareholder attending shareholders’ meeting under proxy shall be complying with the stipulations under Regulations Governing the Use of Proxies for Attendance at Shareholder Meetings of Public Companies.

Article 13 A shareholder of the Corporation has one voting right in respect of each share held; however, this shall not apply to shareholders without voting right or with restrict voting right under law or articles of incorporation.
When electing directors in shareholders’ meeting, each share has number of voting rights equal to the number of directors to be elected, and the voting rights may be consolidated for any one of them or split for several director candidates, and the candidate won the higher number of voting right shall be the director elected.
Article 14 Unless otherwise provided for in the Company Act, resolution of shareholders’ meeting shall be made in a shareholders’ meeting attended with shareholders representing more than one-half of the issued shares and with more than half of voting rights of the attending shareholders.
When number of share attended is less than both the above rated number, but attended with shareholders representing more than 1/3 of issued shares, a pseudo resolution may be made with consent of shareholders representing more than half of the voting right, and the pseudo resolution shall be notified among all shareholders and call the shareholders meeting again within one month.

－－ 55

Article 15 At time of shareholders’ meeting, the Chairman of Board shall be the chairman; in case the Chairman is prevented from attending, one of the other directors shall be appointed to act as chairman and in the absence of such appointment, rest of directors shall elect among them, one director to act as chairman.

In case of shareholders’ meeting calling by person other than member of directors meeting, chairman of such shareholders’ meeting shall be the one with right to call such shareholders’ meeting. If there are more than one person with the right to call such meeting, one of them shall be elected by them to act as chairman.

Chapter 4 – Directors, Audit Committee and Duties

Article 16 The Company shall install 7 to 9 directors each of them shall have tenure of 3 years and may be elected. Generation of candidates shall be by nomination and shareholders shall elect from list of candidates. The shareholdings of the entire pack of directors shall be complying with the requirements under Regulation Governing the Shareholdings of Directors and Supervisors as well as the Audit.

Among the above shareholders, independent directors shall be no less than 3 and shall not be less than 1/5 of total number of directors.

The Company organized Audit Committee, formed with all independent directors and is responsible for performing duties of supervisors provided under Company Act, Securities Exchange Act and other related legislations.

Member of Audit Committee, exercising of rights and duties and all other matters to be complied shall follow related legislations and requirements. The charter of the organization shall be established by Board of Directors separately.

Article 17 Directors shall form Board of Directors and in a Board Meeting attended by more than 2/3 of all the directors shall elect one of the Directors as the Chairman of the Board to represent the Company. The remuneration for the Chairman and other directors shall be determined by Board of Directors under authorization, basis the extend involvement and contribution in the company affairs of each directors as well as the level of the trade.

At the severance or retiring of Chairman of the Board, the land side employee retirement system shall be applied for providing the severance pay or pension.

Article 17-1 In order to spread the legal liability and risk of directors and to promote the ability of company governance, the Company may subscribe liability insurance for all the directors, supervisors and managers for all the directors and the directors, and directors, supervisors and managers dispatched to the invested company of the Company.

Article 18 Board Meeting shall be called every two months. A notice for meeting shall be given to each and every directors 7 days in advance, with the cause of meeting stated; however,

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with emergency, it may be called anytime. In Directors Meeting, directors shall attend in person, but if any of the director is prevented from attending in person, another may be delegate to attend, but one director may be representing only one directors in Directors meeting.

If a directors Meeting is held in form of video conference, director attended in video 。 conference shall be deemed as attended in person.

Article 19 Directors Meeting shall be called by Chairman of the Board. At absence of Chairman and is unable to perform duty, one of the directors shall be appointed to be the deputy, but if without such appointment, one of the directors shall be elected from them to be the deputy.

Article 20 Except otherwise provided under Company Act, the resolution of Board Meeting shall have consent of more than half of the attending directors and when the number of yay and nay are the same, the Chairman shall determine it.

Article 21 Duties of Board of Directors are:

Review and determine business plan;
Review and determine guides for application of funds;
Review and determine budget and final accounting of the Company; ；
Proposing earnings distribution;
Approving setting up and dismissing of branch offices;
Review and approving material rules and regulations;
Approving the appointment and dismissal of important jobs;
Review and determine important contract with other entity;
Review matters submit for approval by the General Manager.
Other duties vested under related legislation and by Shareholders’ Meeting.

Article 22 (Deleted)

Article 23 When the number of directors relieved from office for more than 1/3 or the all the independent director are relieved from office, the Board of Director shall call special shareholders’ meeting to re-elect and the new director’s tenure shall be the tenure left 。
by the relieved directors.
Article 24 The Company is installed with one General Manager and shall be nominated by Chairman of the Board and shall be appointed and /or dismissed with consent of more than half of Directors. In addition, the Company is also installed with one or more Vice General Manager, Assistant General Manager, Manager, General Auditor and Chief. Each of them shall be nominated by the General Manager; however, appointment and dismissal of heads of finance, accounting and internal audit shall have the consent of Audit Committee, and all other important appointment and dismissal may also

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proposed for resolution of Board Meeting directly. All appointments and dismissals of other post of the Corporation shall be at disposal of the General Manager.

Chapter 5 – Accounting

Article 25 Fiscal year of the Company commences from January 1 of a year and ends on December 31 of the same year. At end of each fiscal year, Board of Director shall compile the following books and statement and submit for recognition of Shareholders’ Meeting as required under law.

Operation Report
Financial Statements
Proposal of Profits Distribution or Loss Replenishment.
Article 26 The industry the Corporation is involved is of ever-changing nature and the life cycle of the business is presently at stage of steady growth. With the consideration of needs of operation of the Corporation and maximizing the interests of shareholders, the dividend policy of the Company will be retaining part of earnings from the distributable earnings of the year, subject to capital outlay budget in the future and the needs of funds. Shareholder’s dividends will be distributed in cash preferably, but it may be partly in stock dividend, however, the cash dividend shall not be less than 50% of total dividend of the current year.
Article 27 When the Corporation stands with earnings in a year, no less than 0.5% of the earnings shall be appropriated as bonus for employees. Board of Directors shall decide whether distributed in cash or in stock. The employees eligible for the bonus shall be landside employees of the Corporation and employees of subsidiary meeting certain conditions. From the above earnings, the Corporation may resolve in Board Meeting a remuneration for directors at 1.5 % or less. Bonus for landside employees and remuneration for directors shall be reported in Shareholders’ Meeting. However, if the Corporation is still bearing previous loss, a sum shall be reserve to make up the loss before appropriating the bonus and remuneration at the percentages stated above. $. Before installing Audit Committee, the remuneration for Supervisors shall be distributed 。
in the same percentage as that for directors.
Article 27-1 When the annual accounting of the Corporation is existed with earnings, tax and loss making up shall be appropriated firstly. Thereafter, 10% of it shall be appropriated as legal earning surplus. However, if the accumulated earning surplus reached the amount of total paid capital, the appropriation of legal earnings surplus is not required. The balance of shall be appropriated or reverted to be special earnings surplus. If there are still residual earnings, it shall be joined with the accumulated undistributed earnings as distributable earnings for Board of Directors to propose Earning Distribution Proposal

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and submit for resolution of Shareholders Meeting to be shareholders dividend.

Chapter 6 -- Addendum

Article 28 Organization Cjharter of the Company shall be established by Board of Dirctors.

Article 29 Anything not specifically stated in this Articles of Incorporation shallbe handled pursuant to Company Act and other relate legislations.

Article 30 The Article of Incorporation was established in April, 1954.The 1[st] amendment made on June 27, 1958, 2[nd] amendment made on July 7, 1958, 3[rd] amendment made on Feb. 29, 1960, 4[th] amendment made on Aug. 11, 1961, 5[th] amendment made on July 18, 1967, 6[th] amendment made on Apr. 25, 1969, 7[th] amendment made on Oct. 17, 1969, 8[th] amendment made on Apr. 9, 1971, 9[th] amendment made on July 28, 1972, 10[th] amendment made on Feb. 15, 1974, 11[th] amendment made on Mar. 21, 1975, 12[th] amendment made on Apr. 31, 1976, 13[th] amendment made on July 22, 1977, 14[th] amendment made on Dec. 1, 1978, 15[th] amendment made on Nov. 23, 1979, 16[th] amendment made on Dec. 19, 1980, 17[th] amendment made on Dec. 24, 1982, 18[th] amendment made on July 29, 1983, 19[th] amendment made on Aug. 25, 1989, 20[th] amendment made on June 19, 1992, 21[st] amendment made on May 27, 1994, 22[nd] amendment made on Sept. 26, 1995, 23[rd] amendment made on Apr. 27, 1996, 24[th] amendment made on Oct. 29, 1996, 25[th] amendment made on June 24, 1997, 26[th] amendment made on May 15, 1998, 27[th] amendment made on Aug. 12, 1998, 28[th] amendment made on June 22, 2000, 29[th] amendment made on June 22, 2001, 30[th] amendment made on June 21, 2002, 31[st] amendment made on June 24, 2004, 32[nd] amendment made on May 18, 2005, 33[rd] amendment made on June 23, 2006, 34[th] amendment made on Nov. 15, 2007, 35[th] amendment made on June 19, 2009, 36[th] amendment made on June 22, 2011, 37[th] amendment made on June 18, 2012, 38[th] amendment made on June 22, 2016, 39[th] amendment made on June 20, 2017, 40[th] amendment made on June 26, 2018.

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Appendices 3

Taiwan Navigation Co., Ltd.

Operational Procedures for Acquisition and Disposal of Assets

Article 1 Purpose

This Handling Procedure is established for protecting assets of the Company and ensure 。 the information of the Company is open and transparent.

Article 2 Statutory Basis

This Handling Procedure is adopted in accordance with the provisions of Article 36-1 of the Securities and Exchange Act ("the Act"); provided, where another law or regulation provides otherwise, such provisions shall govern.

Article 3 Scope of Assets

1.Investment in Marketable securities: Investments in stocks, government bonds, corporate bonds, financial bonds, securities representing interest in a fund, depositary receipts, call (put) warrants, beneficial interest securities, aasset-backed securities, and Commercial promissory note.
2.Real property (including land, houses and buildings, investment property, rights to use land, and) and equipment.
3.Memberships
4.Intangible assets: including Patents, copyrights, trademarks, franchise rights, and other intangible assets.
5.Claims of financial institutions (including receivables, bills purchased and discounted, loans, and overdue receivables)
6.Derivatives
7.Assets acquired or disposed of in connection with mergers, demergers, acquisitions, or transfer of shares in accordance with law.
Other major assets.

Article 4 Definition of Terms

1.Derivatives: Forward contracts, options contracts, futures contracts, leverage contracts, and swap contracts, and compound contracts combining the above products, whose value is derived from assets, interest rates, foreign exchange rates, indexes or other interests. The term "forward contracts" does not include insurance contracts, performance contracts, after-sales service contracts, long-term leasing contracts, or long-term purchase (sales) agreements.
Assets acquired or disposed through legally merging, dividing, acquisition or share assigning: refers to the asset acquired or disposed through legally merge, division or acquisition pursuant to Business Merge & Acquisition Act, Financial Holding Act, or other legislation, or assigned of shares of other company through issuance of new shares pursuant to the provision under Paragraph 8 of Article 156 (hereafter referred to as Assign)
Related party or subsidiary: As defined in the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
Professional appraiser: Refers to a real property appraiser or other person duly authorized by law to engage in the value appraisal of real property or equipment.
Date of occurrence: Refers to the date of contract signing, date of payment, date of consignment trade, date of transfer, dates of boards of directors resolutions, or other date that can confirm the counterpart and monetary amount of the transaction, whichever date is earlier; provided, for investment for which approval of the competent authority is required, the earlier of the above date or the date of receipt

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of approval by the competent authority shall apply.

Mainland China area investment: Refers to investments in the mainland China area approved by the Ministry of Economic Affairs Investment Commission or conducted in accordance with the provisions of the Regulations Governing Permission for Investment or Technical Cooperation in the Mainland Area.
For the calculation of 10 percent of total assets under these Regulations, the total assets stated in the most recent parent company only financial report or individual financial report prepared under the Regulations Governing the Preparation of Financial Reports by Securities Issuers shall be used.
Article 5 When acquiring or disposing assets as described above shall be handled per the following authorized credit lines, where duty unit provides investment analysis plan and funds needs and sources analysis, and evaluate according to established procedure carefully, and execute after being approved.
Investment in marketable securities (excluding government bond, bond and commercial promissory note and monetary market funds issued by domestic securities investment trust with repo or reverse repo condition): accumulated holding less than NTD100 million shall be approved by the General Manager, between NTD100 and 300 (inclusive) million shall be approved by Chairman of the Board and shall be submitted for reference of Board of Directors.
Real estate and equipment for business operation: transaction amount per lot in NT$20 million or less shall be approved by the General Manager and above NTD20 million up to NTD 50 million shall be approved by Chairman of the Board and shall be submitted to Board of Directors for reference.
Investment exceeding the above authorized credit line or purchase or sell of real estate not for business operation shall have been agreed by more than 1/2 of members of Audit Committee and shall be submitted for resolution in Board Meeting and the provisions under Paragraph. 2 and Paragraph. 3 of Article 17 shall apply.
Article 6 Other than acquiring asset for business operation and investment in subsidiary for needs in business which acquires more than 90% equity, the Company and its subsidiary ma purchase real estate and marketable securities not for business operation and the restrictions in credit lines are listed below:
Purchase of real estate not for business operation shall not exceed 30% of paid up capital of the Company and subsidiary shall not exceed 15% of its paid-up capital.
Total amount of investment in marketable securities shall not exceed 30% of paid up capital of the Company; investment in marketable securities of subsidiary of the Company shall not exceed 15% of its paid-up capital, except it is specialized in investment.
Investment in individual marketable securities shall not exceed 10% of paid up capital of the Company and the investment of subsidiary in individual marketable securities shall not exceed 5% of its paid-up capital.
Total investment in marketable securities of subsidiary specialized in investment shall not exceed 150% of its paid-up capital and investment in individual marketable securities shall not exceed 120% of its paid-up capital.

Article 7 Handling Procedure for Acquiring or Disposing Real Estate or Equipment

Evaluation and Operation Procedure

The acquisition or disposal of real estate and equipment shall be arranged and handled according to internal control system fixed asset cycling procedure.

Determining procedure of conditions of transaction and authorized level
(1) When acquiring or disposing real estate, the declared present value, appraised

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value and the actual transaction price of neighboring real estate shall be taken into consideration in determining transaction terms and conditions as well as price and making into analysis report and handled in accordance with provisions under Article 5.

(2) Acquisition or disposing of real estate shall be handled in one of price inquiry, price comparison, price negotiation and bidding.
Executing Unit

Acquisition and disposing real estate or equipment shall be executed by Using Department and Finance Department.

4.Appraisal Report of Real Estate or Equipment

In acquiring or disposing of real property or equipment where the transaction amount reaches 20 percent of the company's paid-in capital or NT$300 million or more, the company, unless transacting with a government agency, engaging others to build on its own land, engaging others to build on rented land, or acquiring or disposing of equipment for business use, shall obtain an appraisal report prior to the date of occurrence of the event from a professional appraiser and shall further comply with the following provisions:

(1)Where due to special circumstances it is necessary to give a limited price, specified price, or special price as a reference basis for the transaction price, the transaction shall be submitted for approval in advance by the board of directors, and the same procedure shall be followed for any future changes to the terms and conditions of the transaction.
(2) Where the transaction amount is NT$1 billion or more, appraisals from two or more professional appraisers shall be obtained.
(3) Where any one of the following circumstances applies with respect to the professional appraiser's appraisal results, unless all the appraisal results for the assets to be acquired are higher than the transaction amount, or all the appraisal results for the assets to be disposed of are lower than the transaction amount, a certified public accountant shall be engaged to perform the appraisal in accordance with the provisions of Statement of Auditing Standards No. 20 published by the ROC Accounting Research and Development Foundation (ARDF) and render a specific opinion regarding the reason for the discrepancy and the appropriateness of the transaction price:
A.The discrepancy between the appraisal result and the transaction amount is 20 percent or more of the transaction amount.
B.The discrepancy between the appraisal results of two or more professional appraisers is 10 percent or more of the transaction amount.
(4) No more than 3 months may elapse between the date of the appraisal report issued by a professional appraiser and the contract execution date; provided, where the publicly announced current value for the same period is used and not more than 6 months have elapsed, an opinion may still be issued by the original professional appraiser.
(5) When the asset acquired through Court Auction, the evidencing document may be taken in lieu of Appraisal report or CPA’s Opinion.

Article 8 Handling Procedure for Acquiring or Disposing Marketable Securities

Evaluation and Operation Procedures

The purchasing and selling of marketable securities of the Company are all handled in accordance with the Investment Cycling Operation of Internal Control System.

Determining Procedure of Transaction Conditions and Authorized Levels

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(1) The marketable securities transaction worked in collective transaction market or in business hall of securities traders shall have prices and conditions determined by responsible unit and judgment per market level and shall be handled in accordance with the provisions under Article 5.
(2) Transaction of marketable securities not conducted in collective market or business hall of traders shall obtain the CPA audited and attested financial statements for reference in evaluating transaction prices, the per share net worth, profitability and future development potential, etc., and shall following the provisions under Article in handling. However, this may not apply if such marketable securities has public offering in open market or regulation has been established by competent agency of securities exchange.
Executing Unit
Investment in marketable securities shall be handled by Finance Department.
Obtaining Opinions from Experts
(1) In acquiring or disposing marketable securities with the transaction amount reached 20% of the paid-up capital of the Company, or NTD300 million, CPA shall be retained to express opinion on the reasonability of the transaction price. In the event CPA needs to adopt report of expert, It shall be handled in accordance with Standard on Audit #20 as issued by Accounting Research & Development Foundation. However, this may not apply if such marketable securities have public offering in open market or regulation has been established by competent agency of securities exchange.
(2) If asset is acquired or disposed through Court Auction Procedure, the evidencing certificate of the Court may be used in lieu of Appraisal Report or CPA Opinions. 。

Article 9 Related Party Transactions

In addition to follow the handling procedure for acquiring real property under Article 7, when the acquisition or disposal of real property involves the Company and interested party shall also follow the requirements below in going through resolution procedure and evaluation of the reasonability of transaction terms. When the amount of transaction accounts for more than 10% of total asset of the Company, the provisions under Article 7 shall be followed to obtain professional appraiser ‘s report or Opinion of CPA. Also, in judging whether the counterpart of transaction is an interest party, other than the legal form, the real relationship shall be considered.
Evaluation and Operation Procedures
- When the company intends to acquire or dispose of real property from or to a related party, or when it intends to acquire or dispose of assets other than real property from or to a related party and the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the company's total assets, or NT$300 million or more, except in trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises, shall submit the following data and information for review of Audit Committee to obtain consent of 1/2 or more members of the Committee, then it shall be submitted for resolution in Board Meeting before entering into contract and paying consideration, and provisions underparagraph 2 and paragraph 3 of 17 Article may be applied.
- (1) The purpose, necessity and anticipated benefit of the acquisition or disposal of assets.

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(2) The reason for choosing the related party as a trading counterparty.
(3) Related data and information for evaluating the reasonability of the conditions of transaction intended pursuant to Sub items 1 & 4 of subparagraph 3, paragraph1 of this Article for acquiring or disposing real property from or to interested party.
(4) The date and price at which the related party originally acquired the real property, the original trading counterparty, and that trading counterparty's relationship to the company and the related party.
(5) Monthly cash flow forecasts for the year commencing from the anticipated month of signing of the contract, and evaluation of the necessity of the transaction, and reasonableness of the funds utilization.
(6) An appraisal report from a professional appraiser or a CPA's opinion obtained in compliance with the preceding article.
(7) Restrictive covenants and other important stipulations associated with the transaction.

For the acquiring or disposing equipment for business operation between the Company and subsidiary, Board of Directors may authorize executive to determine in advance within certain amount under subparagraph 2, paragraph 2, article 5, which shall be reported to the next Board Meeting for recognition.

Evaluate the reasonableness of the transaction costs
(1) In acquiring real property from interested party, the Company shall assess the reasonability of transaction cost with the following methods:
- A. Based upon the related party's transaction price plus necessary interest on funding and the costs to be duly borne by the buyer. "Necessary interest on funding" is imputed as the weighted average interest rate on borrowing in the year the company purchases the property; provided, it may not be higher than the maximum non-financial industry lending rate announced by the Ministry of Finance.
- B. Total loan value appraisal from a financial institution where the related party has previously created a mortgage on the property as security for a loan; provided, the actual cumulative amount loaned by the financial institution shall have been 70 percent or more of the financial institution's appraised loan value of the property and the period of the loan shall have been 1 year or more. However, this shall not apply where the financial institution is a related party of one of the trading counterparties.
(2) Where land and structures thereupon are combined as a single property purchased in one transaction, the transaction costs for the land and the structures may be separately appraised in accordance with either of the means listed in the preceding subparagraph.
(3) When the Company acquire real property from interested party shall evaluate the real property cost according to the above paragraph 1, subparagraph 3 item A and item B and shall also engage a CPA to check the appraisal and render a specific opinion.
(4) When the Company acquiring real property from interested party and evaluate in accordance with the above paragraph 1, subparagraph 3 item A and item B and the results are all lover than the transaction price, then the above paragraph 1, subparagraph 3 item E shall be applied. However, this shall not apply if under the following conditions and objective evidence and supported by practical and reasonable opinion of real property professional appraiser and CPA:

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A. Where the related party acquired undeveloped land or leased land for development, it may submit proof of compliance with one of the following conditions:
- (a) Where undeveloped land is appraised in accordance with the means in the preceding Article, and structures according to the related party's construction cost plus reasonable construction profit are valued in excess of the actual transaction price. The "Reasonable construction profit" shall be deemed the average gross operating profit margin of the related party's construction division over the most recent 3 years or the gross profit margin for the construction industry for the most recent period as announced by the Ministry of Finance, whichever is lower.
- (b) Completed transactions by unrelated parties within the preceding year involving other floors of the same property or neighboring or closely valued parcels of land, where the land area and transaction terms are similar after calculation of reasonable price discrepancies in floor or area land prices in accordance with standard property market practices.
- (c) Completed leasing transactions by unrelated parties for other floors of the same property from within the preceding year, where the transaction terms are similar after calculation of reasonable price discrepancies among floors in accordance with standard property leasing market practices.
B.Where the Company acquiring acquiring real property from a related party provides evidence that the terms of the transaction are similar to the terms of transactions completed for the acquisition of neighboring or closely valued parcels of land of a similar size by unrelated parties within the preceding year. Completed transactions for neighboring or closely valued parcels of land in the preceding paragraph in principle refers to parcels on the same or an adjacent block and within a distance of no more than 500 meters or parcels close in publicly announced current value; transaction for similarly sized parcels in principle refers to transactions completed by unrelated parties for parcels with a land area of no less than 50 percent of the property in the planned transaction; within the preceding year refers to the year preceding the date of occurrence of the acquisition of the real property.
(5) If the Company acquiring real property from interested party, when evaluating per paragraph. 1, subparagraph3, item A and item B are both lower than the transaction price, the following shall be processed. When the Company and the company with shares issued publicly and invested in the Company evaluated in equity method, appropriated special earning surplus in compliance with the above requirements, may have the special earnings surplus may be applied only if the real property purchased in high price has been recognized of the price drop loss, or has been disposed, or has provided with proper compensation or has been restored, or has other evidence supporting free of un-reasonability and agreed by competent agency for securities exchange.
A. A special reserve shall be set aside in accordance with Article 41, paragraph 1 of the Act against the difference between the real property transaction price and the appraised cost, and may not be distributed or used for capital increase or issuance of bonus shares. Where a public company uses

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the equity method to account for its investment in another company, then the special reserve called for under Article 41, paragraph of the Act shall be set aside pro rata in a proportion consistent with the share of public company's equity stake in the other company.

     - B. Audit Committee shall comply with Article 218 of the Company Act.

     - C. The handling outcome in accordance of paragraph1, subparagraph3 item E (a) and (b) shall be submitted to Shareholders’ Meeting and the details of transaction disclosed in the annual operation report and prospect.

  - (6)If the Company acquiring real property from interested party is found with one of the following situations, shall be handled in accordance with paragraph 1, subparagraph 1 and subparagraph 2 in respect of evaluation and operation procedure; provisions under paragraph 1 subparagraph 3 Item A, B and C in respect of reasonability of transaction cost are not applicable. `：`

     - A. The related party acquired the real property through inheritance or as a gift.

     - B. More than 5 years will have elapsed from the time the related party signed the contract to obtain the real property to the signing date for the current transaction.

     - C. The real property is acquired through signing of a joint development contract with the related party, or through engaging a related party to build real property, either on the company's own land or on rented land.

  - (7)In acquiring real property by the Company from interested party, if evidence shown the transaction is in the situation deviated from normal business course, `。`

  - shall also handle in accordance with paragraph 1, subparagraph 3 ,item E.

Article 10 Handling Procedure for acquiring or disposing membership or intangible asset
Evaluation and Operation Procedure

The acquiring and disposing of membership or other intangible assets of the Company shall be following Fixed Asset Cycling Procedure of the Internal Control System of the Company.

Deciding procedure of Transaction Condition and Authorization Level
(1) Acquiring or disposing of membership shall take reference of fair market price, resolve conditions of the transaction and price and making into analysis report, and submit board meeting for resolution before proceeding.
(2) Acquiring and disposing intangible asset shall take reference of experts’ evaluation report or fair market price, resolve the conditions of transaction and the price and proceed after resolved in board meeting.
Executing Unit

In acquiring or disposing membership or intangible asset, the Company shall submit for approval according to the authorization levels, then execute buy the using unit or Administration.

Expert Evaluation / Opinion Report on membership or intangible asset
(1) When the transaction amount in acquiring or disposing membership is higher than 1/100 of paid up capital of the Company or NTD3 million, experts shall be retained to evaluate and coming up with Appraisal Report.
(2) When the transaction amount in acquiring or disposing intangible asset is higher than 1/10 of paid up capital of the Company or NTD20 million, experts shall be retained to evaluate and coming up with Appraisal Report.

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(3) When the transaction amount in acquiring or disposing membership or intangible asset is higher than 2/10 of paid up capital of the Company or NTD300 million, except transaction with government body, shall retain CPA to express opinion on the reasonability of transaction price, before the date of occurrence and CPA shall be required to work in accordance with Standards on Auditing #20 as issued by Accounting Research & Development Foundation.

Article 11 Handling procedure for acquiring or disposing claims against financial institution

Basically, the Company does not engaged in transaction of acquiring or disposing claim against financial institution; nevertheless, should the Company intends to engage in transaction of acquiring or disposing claim against financial institution, Board of Director will be requested for approval and operation procedure and evaluation will be established after the approval of Board of Directors.

Article 12 Handling Procedure for acquiring or disposing derivatives

Trading principles and strategies:
(1) Types of transaction ：

The derivatives as referred here in this Handling Procedure means transaction contract derived from commodity such as asset, interest rate, exchange rate, indices or other interest, which includes forward contract, Swap contract, Option, Futures and compound contract combined of the above; however, the above forward contract does not include insurance contract, performance contract, after sale service contract, long term lease contract and long term purchasing (sale) contract.

(2) Purpose of transaction:

The type of derivatives transaction engaged by the Company, in purposes, there are Investment and hedging. The former means the purpose of holding or issuing derivatives is to gain price difference in transaction and also bearing risk. The latter is through transaction of derivatives to reduce existing asset, liability or unretractable commitment, predicting risk of transaction. The two are applying risk position limitation, mandatory stop- loss and accounting processing principle.

(3) Segregation of duties

When derivatives transaction is to be engaged, consent shall be obtained first from 1/2 of members of Audit Committee and proceed only after passed in the board meeting and provisions under paragraph 2 and paragraph 3 of Article 17 may be applied.

A. When the Company is engaged in transaction of derivatives, the duties of Finance Department are:
(a) Control of credit line set by board of directors
(b) Watching the risks in derivatives transaction from time to time, and when there is situation abnormal, report shall be made to Board of Directors immediately and take all necessary responding measures.
(c) Approval of installation and removal of transaction personal
B. In the transaction of derivatives engaged by the Company, the duties of the traders are:
(a) Watch market information from time to time and analyze the changes of all kinds of derivatives from the fundamental and technical aspects as well as reporting latest news / information to executives of Finance Department.

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(b) Undertake transaction within authorized scope of Board of Directors
(c) Check in detail the currency, amount, and date of settlement of each transaction.
。
(d) Producing transaction report and income / loss calculation regularly.
C. In the transaction of derivatives engaged by the Company, the duties of the settling persons are:
(a) Handling and recheck of contract signing and account opening operation of the counter party of transaction
(b) Check in detail the currency, amount, and settlement date of each transaction.
(c) Settlement and closing operation of transaction.
D. In engaging derivatives transaction or offsetting transaction undertaken of the Company shall be handled in the authorization of different levels:

Level Amount per lot Acc. Amount of transaction Chairman US$10 Mil. US$30 Mil.

G. Manager US$10 Mil. US$30 Mil. Asst. G. Mgr US$5 Mil. US$20 Mil. Mgt. Fin. Dept US$2 Mil. US$10 Mil.

(4) Credit line of transaction and ceiling of loss

The total amount of derivatives engaged by the Company is set at 30% of total asset of the Company and the ceiling of gross contract loss is US$5 million and ceiling of loss of individual contract is US$1 million.

(5) Essentials of performance evaluation

Content of performance appraisal shall include:

  - A. Correctness of trend judgment

  - B. Appropriateness in position control

  - C. Fair market value and income / loss changes

Risk management measures
(1) Credit risk management:

Since market is affected by many factors and is likely to result in operational risk of derivative financial commodity, so the market risk management shall be performed in the following principle:

Object of transaction: shall be mainly with renowned domestic financial institution

Commodity of transaction: the derivatives provided by renowned domestic financial institution only

Amount of transaction: For same transaction object, the un-offset amount shall be not more than 10% of authorized amount, except exceptionally approved by the General Manager.

(2) Market Risk Management:

Presently the open exchange transaction market only, no futures is to be considered for the time being.

(3) Liquidity Risk Management:

In order to ensure market liquidity, selection of financial commodity shall be inclined more on high liquidity ones (can be settled in the market at any time) and the financial institution commissioned to handle the transaction must have sufficient information and the ability for transact in any market.

(4) Cash flow risk management

In order to ensure the stability of turnover, funding of derivatives transaction

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shall be mainly by the Company and the operation amount shall take cash flow of the Company in next 3 months to forecast funding needs.

(5) Operation Risk Management
A. The authorized credit line authorized by the Company shall be followed strictly, also the operation flow and shall be included into internal audit to avoid operation risk.
B. Personnel engaged in derivatives trading may not serve concurrently in other operations such as confirmation and settlement.
C. Risk measurement, monitoring, and control personnel shall be assigned to a different department that the itemB and shall report to the board of directors or senior management personnel with no responsibility for trading or position decision-making.
D. Derivatives trading positions held shall be evaluated at least once per week; however, positions for hedge trades required by business shall be evaluated at least twice per month. Evaluation reports shall be submitted to senior management personnel authorized by the board of directors.
(6) Commodity risk management

Internal transaction personnel shall be equipped with complete and correct professional knowledge and the banks shall be required to fully disclose risk involved to avoid misuse of derivative risks.

(7) Legal risk management:

The documents entered with financial institution shall be reviewed by Exchange, Legal consultant before formally signed to avoid legal risk.

Internal audit system
(1) Audit personnel shall periodically make a determination of the suitability of internal controls on derivatives and conduct a monthly audit of how faithfully derivatives trading by the trading department adheres to the procedures for engaging in derivatives trading, and prepare an audit report. If any material violation is discovered, all Audit Committee shall be notified in writing.
(2) Internal auditor shall report to the competent agency of securities exchange the audit report together with the annual audit of internal audit operation before end of February of next year and abnormality improvement situation shall be reported to competent agency of securities exchange latest end of May the next year.
Regular evaluation methods
(1) Board of Directors shall authorize ranked executives to supervise and valuate if the derivatives transactions engaged are conforming with the transaction procedure established by the Company, and the risk borne are within tolerable range on regular basis, any when market price evaluation found abnormality (position held is exceeding ceiling of loss, etc), board of Directors shall be reported immediately and take necessary measures.
(2) Derivatives trading positions held shall be evaluated at least once per week; however, positions for hedge trades required by business shall be evaluated at least twice per month. Evaluation reports shall be submitted to senior management personnel authorized by the board of directors
When engaging in derivatives transaction, the supervising principle of directors is: 則
(1) Senior management personnel authorized by the board of directors shall manage derivatives trading in accordance with the following principles.
- A. Periodically evaluate the risk management measures currently employed

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are appropriate and are faithfully conducted in accordance with these Regulations and the procedures for engaging in derivatives trading formulated by the company.

     - B. When irregular circumstances are found in the course of supervising trading and profit-loss circumstances, appropriate measures shall be adopted and a report immediately made to the board of directors; where a company has independent directors, an independent director shall be present at the meeting and express an opinion.

  - (2) Periodically evaluate whether derivatives trading performance is consistent with established operational strategy and whether the risk undertaken is within the company's permitted scope of tolerance.

  - (3) When the Company engaged in derivative transaction, when it is operated by authorized person according to established derivative transaction handling procedure, after completing the transaction, it shall be reported to the latest board meeting.

(4) The derivative transaction of the Company shall have established Reference Book recording the types of derivatives, amount, and date passed in board meeting and the items to be review under this Article paragraph1,subparagraph4, item B;subparagraph5, item Aand item B
Article 13 Handling Procedure for participating in Merge, Division, Acquisition or Share Assigning
In participating in merge, division, acquisition or shares assigning, the Company shall retain lawyer, CPA and securities underwriter to jointly organize legal procedure and estimate schedule, and a project team shall be formed to execute per procedure required under law. And before calling board meeting to resolve, retained CAP, lawyer or securities underwriter to express opinion over shares swap ratio, acquisition price or reasonability of distributing cash or other property and present to board meeting for discussion and resolution. However, In case of the Company merge subsidiary with 100% holding of the issued shares, or capital sum, directly or indirectly, or subsidiaries of the Company with their shareholdings held by the Company directly or indirectly, may not require obtaining the above opinion of experts of reasonability.
The Company shall produce document containing agreement content and related matters of merge, division or acquisition together with the above opinion of experts and Notice of Shareholder’s Meeting send to all shareholders to be the reference for shareholders in deciding whether agreeing the merge, division or acquisition or not. But this shall not apply where no shareholders’ meeting for resolving merge, division or acquisition under other legislation. Also, when any party to the merge, division or acquisition, failed in calling shareholders’ meeting, come to resolution or the proposal is denied in shareholders’ meeting , the company participating in the merge, division or acquisition shall hold presentation to explain the cause, subsequent handling operation and date expected to call for shareholders’ meeting.
A company participating in a merger, demerger, or acquisition shall convene a board of directors meeting and shareholders meeting on the day of the transaction to resolve matters relevant to the merger, demerger, or acquisition, unless another act provides otherwise or the FSC is notified in advance of extraordinary circumstances and grants consent.
A company participating in a transfer of shares shall call a board of directors meeting on the day of the transaction, unless another act provides otherwise or the FSC is notified in advance of extraordinary circumstances and grants consent.
When participating in a merger, demerger, acquisition, or transfer of another

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company's shares, a company that is listed on an exchange or has its shares traded on an OTC market shall prepare a full written record of the following information and retain it for 5 years for reference:

(1) Basic identification data for personnel: Including the occupational titles, names, and national ID numbers (or passport numbers in the case of foreign nationals) of all persons involved in the planning or implementation of any merger, demerger, acquisition, or transfer of another company's shares prior to disclosure of the information.
(2) Dates of material events: Including the signing of any letter of intent or memorandum of understanding, the hiring of a financial or legal advisor, the execution of a contract, and the convening of a board of directors meeting.
(3) Important documents and minutes: Including merger, demerger, acquisition, and share transfer plans, any letter of intent or memorandum of understanding, material contracts, and minutes of board of directors meetings.
When participating in a merger, demerger, acquisition, or transfer of another company's shares, a company that is listed on an exchange or has its shares traded on an OTC market shall, within 2 days counting inclusively from the date of passage of a resolution by the board of directors, report (in the prescribed format and via the Internet-based information system) the information set out in item A and item B of the preceding subparagraph to the FSC for recordation.
Where any of the companies participating in a merger, demerger, acquisition, or transfer of another company's shares is neither listed on an exchange nor has its shares traded on an OTC market, the company(s) so listed or traded shall sign an agreement with such company whereby the latter is required to abide by subparagraph(5) and subparagraph(6).
Where any of the companies participating in a merger, demerger, acquisition, or transfer of shares is not a public company, the public company(s) shall sign an agreement with the non-public company whereby the latter is required to abide by the provisions of Article 13.
Every person participating in or privy to the plan for merger, demerger, acquisition, or transfer of shares shall issue a written undertaking of confidentiality and may not disclose the content of the plan prior to public disclosure of the information and may not trade, in their own name or under the name of another person, in any stock or other equity security of any company related to the plan for merger, demerger, acquisition, or transfer of shares.
After public disclosure of the information, if any company participating in the merger, demerger, acquisition, or share transfer intends further to carry out a merger, demerger, acquisition, or share transfer with another company, all of the participating companies shall carry out anew the procedures or legal actions that had originally been completed toward the merger, demerger, acquisition, or share transfer; except that where the number of participating companies is decreased and a participating company's shareholders meeting has adopted a resolution authorizing the board of directors to alter the limits of authority, such participating company may be exempted from calling another shareholders meeting to resolve on the matter anew.
Public companies participating in a merger, demerger, acquisition, or transfer of shares may not arbitrarily alter the share exchange ratio or acquisition price unless under the below-listed circumstances, and shall stipulate the circumstances permitting alteration in the contract for the merger, demerger, acquisition, or transfer of shares:

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  - (1) Cash capital increase, issuance of convertible corporate bonds, or the issuance of bonus shares, issuance of corporate bonds with warrants, preferred shares with warrants, stock warrants, or other equity based securities.

  - (2) An action, such as a disposal of major assets, that affects the company's financial operations.

  - (3) An event, such as a major disaster or major change in technology, that affects shareholder equity or share price.

  - (4) An adjustment where any of the companies participating in the merger, demerger, acquisition, or transfer of shares from another company, buys back treasury stock.

  - (5) An increase or decrease in the number of entities or companies participating in the merger, demerger, acquisition, or transfer of shares.

  - (6) Other terms/conditions that the contract stipulates may be altered and that have been publicly disclosed.

12 The contract for participation by the company in a merger, demerger, acquisition, or of shares shall record the rights and obligations of the companies participating in the merger, demerger, acquisition, or transfer of shares, and shall also record the following:
- (1) Handling of breach of contract.
- (2) Principles for the handling of equity-type securities previously issued or treasury stock previously bought back by any company that is extinguished in a merger or that is demerged.
- (3) The amount of treasury stock participating companies are permitted under law to buy back after the record date of calculation of the share exchange ratio, and the principles for handling thereof.
- (4) The manner of handling changes in the number of participating entities or companies.
- (5) Preliminary progress schedule for plan execution, and anticipated completion date.
(6) Scheduled date for convening the legally mandated shareholders meeting if the plan exceeds the deadline without completion, and relevant procedures.
Article 14 Procedure for Disclosure of Information
Items to be announced and reported and Standards for announcing and reporting:
- (1) Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the company's total assets, or NT$300 million or more; provided, this shall not apply to trading of government bonds or bonds under repurchase and resale agreements, or subscription or redemptionof money market funds issued by domestic securities investment trust enterprises.
- (2) Merger, demerger, acquisition, or transfer of shares.
- (3) Losses from derivatives trading reaching the limits on aggregate losses or losses on individual contracts set out in the procedures adopted by the company.
- (4) Where the type of asset acquired or disposed is equipment for business use, the trading counterparty is not a related party, the transaction amount reaches NT$500 million or more.
- (5) Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint

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construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the company expects to invest in the transaction reaches NT$500 million.

(6)Where an asset transaction other than any of those referred to in the preceding five subparagraphs, an investment in the mainland China area reaches 20 percent or more of paid-in capital or NT$300 million; provided, this shall not apply to the following circumstances:
- A. Trading of government bonds.
- B. Securities trading by investment professionals on foreign or domestic securities exchanges or over-the-counter markets, or subscription by investment professionals of ordinary corporate bonds or of general bank debentures without equity characteristics that are offered and issued in the domestic primary market.
- C.Trading of bonds under repurchase/resale agreements, or subscription or redemption of money market funds issued by domestic securities investment trust enterprises.
(7) The calculation manners of the transaction amounts of the above 6 sub-items are:
- A. The amount of any individual transaction.
- B. The cumulative transaction amount of acquisitions and disposals of the same type of underlying asset with the same trading counterparty within the preceding year.
- C. The cumulative transaction amount of real property acquisitions and disposals (cumulative acquisitions and disposals, respectively) within the same development project within the preceding year.
- D.The cumulative transaction amount of acquisitions and disposals (cumulative acquisitions and disposals, respectively) of the same security within the preceding year.
- E. So called one year is based on the occurrence date of the specific transaction and retro back one year; those have been announced is not required to include and those have been obtained with professional appraiser’s appraising report or with CPA’s opinion as required shall not be included.
Timing for arranging announcement and reporting
The asset acquired or disposed by the Company is within the items required to announce under Item 1, Para. 1 of this Article and the transaction amount reached the standard for announcing and reporting under this Article, shall have announced and reported within 2 days from the date of occurrence.
Announcing and Reporting Procedures
(1)The Company shall announce on and reported to website designated of competent agency for securities exchange with related information
(2) The Company shall compile monthly reports on the status of derivatives trading engaged in up to the end of the preceding month by itself and any subsidiaries that are not domestic public companies and enter the information in the prescribed format into the information reporting website designated by the FSC by the 10th day of each month.
(3) When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is

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required to correct it, all the items shall be again publicly announced and reported in their entirety within two days counting inclusively from the date of knowing of such error or omission.

(4) The Company acquiring or disposing of assets shall keep all relevant contracts, meeting minutes, log books, appraisal reports and CPA, attorney, and securities underwriter opinions at the company headquarters, where they shall be retained for 5 years except where another act provides otherwise.
(5) Where any of the following circumstances occurs with respect to a transaction that a public company has already publicly announced and reported in accordance with the preceding article, a public report of relevant information shall be made on the information reporting website designated by the FSC within 2 days counting inclusively from the date of occurrence of the event:
A. Change, termination, or rescission of a contract signed in regard to the original transaction.
B. The merger, demerger, acquisition, or transfer of shares is not completed by the scheduled date set forth in the contract.
C. Change to the originally publicly announced and reported information.

Article 15 Subsidiaries of the Company shall

1.Establish and execute Handling Procedure for Acquiring or Disposing Assets pursuant to related provisions under Public Issued Company Acquiring or Disposing Assets Handling Procedure.
When a subsidiary is not a public issue company acquiring or disposing asset to a reporting level as established under Public Issued Company Acquiring or Disposing Assets Handling Procedure, the parent company shall arrange the declaration and reporting on behalf of such subsidiary.
In the Declaration and Reporting Standard of subsidiary, the :Reached 20% of the Paid Up Capital or 10% of total asset refer to the paid up capital and total asset of the Company.

Article 16 Penalty

When an employee of the Company breaches the provision under the Handling Procedure in handling acquisition or disposal of asset shall be subject to the appraisal per Personnel Management Measure of the Company per the level of the breach.
Article 17 Enforcement and Amendment
The establishment of this Handling Procedure shall have consent of more than 1/2 of members of Audit Committee and after passed resolution in Board Meeting, it shall be submitted for consent in Shareholder’s Meeting. The same applies in amendment of the Procedure.

In case the consent of more than 1/2 of members of Audit Committee it can be substituted with consent of more than 2/3of all directors, but the resolution of Audit Committee shall be stated in the Minute of Directors Meeting.

The entire member of audit committee and all directors as referred here shall be the member or directors in office at that time. 。

Article 18 The Handling Procedure was established initially on May 30, 1997. The 1[st] amendment on Nov. 25, 1999; 2[nd] Amendment on Feb. 24, 2000; 3[rd] Amendment on May 30, 2003; 4[th] Amendment on May 18, 2005; 5[th] Amendment on Nov. 15, 2007; 6[th] Amendment on June 22, 201; 7[th] Amendment on June 18, 2012; 8[th] Amendment on June 19, 2014; 9[th] Amendment on June 20, 2017 and the 10[th] Amendment on June 26, 2018.

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Appendices 4

Taiwan Navigation Co., Ltd.

Operational Procedures for Loaning of Company Funds

Article 1 If for business operation the Company needs to extend loan to other person (hereinafter referred to as borrower), the Company shall comply with these Operation Procedures; provided that where another act or regulation provides otherwise, the provisions of such act shall prevail.

The subsidiary as referred under this Operation Procedure shall be as determined under the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

The term "announce and report" as used in these Procedures means the process of entering data to the information reporting website designated by the Financial Supervisory Commission.

The net worth as referred in this Operation Procedure means the balance sheet equity attributable to the owners of the company under the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Article 2 Restriction of amount of loans and Individual subject to the loans 1. Subjects qualified for the loan:

(1) Company or firm having business transactions with the Company.
(2) Company or firm having necessity of short term funds transactions.
。
1. Loan extended shall not exceed 40% of net worth of the Company
Restriction on the individual loan subject:
(1) Loan extended to person having business transaction:
- A Individual company or firm having business transaction with the Company and applied for loan shall have a ceiling of loan amount of 20% of total transaction amount with the Company in the recent year.
- B.The total amount of loan of this part shall not exceed 10%of net worth of the Company.

(2) Extending to person having the need of short-term loan:

 - A Subsidiary of the Company with whom the Company has

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direct or indirect holding of 100% voting right shares applying for loan, the ceiling of loan shall not exceed 20% of the net worth of the Company.

B Subsidiary of the Company with whom the company holds more than 50% of voting right shares but less than 100%, applies for short term loan, the ceiling of loan shall not exceed 30% of paid up capital of such individual subsidiary and for each individual subsidiary shall not exceed 10% of net worth of the Company.
C The loaning of funds between overseas subsidiaries to whom the Company holds 100% voting right shares is not subject to the 40% net worth restriction but still subject to the Item 2, Para. 1, Article 2 and Article 3 requirements in establishing the ceiling of loan and time limit.
The Short Term referred above means one year, however, if the business cycle of the Company is longer than one year, the business cycle shall govern.
The Total Amount of Loan as referred under Item 2 means the accumulated balance of loan between the Company and the overseas subsidiary of the Company to whom the Company is holding directly or indirectly 100% of the voting right shares.

Article 3

Period of Loan and Manner of Interest Accruing

Period of each load shall basically not longer than one year counted from the date of extending the loan; if such loan still needed after maturing of the period, application shall be made again and shall be resolved in Board Meeting.
Interest of loan shall be calculated per day by multiplying total sum of balance of loan (total accumulated amount) by the annual interest rate, then divided by 365 to reach at the amount of interest. The interest of loan shall be negotiated and agreed by parties involved but shall not be lower than average interest rate of short loan of finical institution.
Payment of interest, except otherwise provided, shall be once a month and the borrower shall be notified to pay within one week after agreed interest paying date.

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Article 4

Review Procedure

1. Application: `：`

(1) Borrower shall provide its basic information and financial information, together with an application describing the purpose for the loan, loan period and amount, and submit to Finance Department of the Company.
(2) If loan is extended for business transaction, the handling person of Finance Department of the Company shall evaluate if the amount of loan and the business transaction amount are in appropriate ratio; if it is necessary for short term financing, the reason for qualifying for the loan and situation, which shall have credit survey conducted; the related data and the loan conditions proposed shall be submitted to the executive of Finance Department and the General Manager.

2. Credit Survey:

(1) First time borrower: Borrower shall provide basic information and financial information for arranging credit survey.
(2) If it’s for subsequent borrower, the credit survey shall be conducted when further borrowing is applied; if for material or emergency matter, the survey shall be conducted any time as the situation dictated.
(3) If the borrower is in good financial stand and the annual financial statements had been commissioned CPA for financing attestation, the survey report younger than one year may be employed to be reference for the loan.
(4) When the Company is conducting credit survey on the borrower, the operation risk, effects on financial situation and shareholders’ equity of the Company in extending the loan shall be evaluated together.
Loan Approval:
(1) When a loan application is to be denied after credit survey and evaluation, the handling person shall prepare the cause for turning down for approval of superior and then inform the borrower soonest possible.
(2) When a loan application is inclined to grant after credit

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survey and evaluation, the handling person shall complete opinion of the review, establishing terms and conditions of the loan for review board and when there is more than 50% of the board members agreed on it, the proposal shall then submitted for the resolution of the Board Meeting. When resolved, the provision under Para. 2 and Para. 3 of Article 12 may be applied.

Notifying borrower:
When a loan application is approved, the handling person shall notify borrower in writing, describing in detail the conditions of the loan, including credit line, term, interest rate, collateral and guarantor and ask the borrower to complete necessary formality soonest possible.
Contract signing and Identity Verification:
(1) Loan case shall have the terms and conditions of the loan drafted by the handling person and submitting for supervisor for approval and arranging contract signing with the borrower.
(2) Content of contract shall be meeting the terms and conditions of loan approved, and after affixing signatures of borrowers and guarantors on the contract, the handling per son shall conduct identity verification.
Setting of Right on Collateral:

If a loan case requires collateral, borrower shall provide and shall complete pledge or mortgage setting to secure the creditor’s right of the Company.

Insurance:
(1) Except land and marketable securities, all collaterals shall have insurance coverage subscribed, which shall include fire insurance and other related insurance. The insured amount shall be no less than pledged or mortgaged value of collateral basically and the beneficiary on the insurance policy shall be the Company. The title, quantity, place of deposit, insurance conditions and policy endorsement shall be conforming to those conditions for approval of loan.
(2) Handling person shall be watching the expiration of insurance and notify the borrower renew the insurance.

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Appropriation:

When terms and conditions for the loan are approved and the loan contract is executed by the borrower, setting registration of collaterals are completed and are found in good order, the Finance Department shall apply for appropriation.

Article 5 Reimbursement

After appropriation of a loan, the financial, business and credit conditions of the borrower and the guarantors shall be watched carefully and if collateral is provided, check for any impairment of the collateral, and one month before expiration of the loan, the borrower shall be remind to reimburse the balance of the loan.
When a borrower is reimbursing a loan at expiration, the interest payable shall be calculated and shall be paid together with reimbursement of principal of loan, before return and / or cancel the promissory note and/ or Loan Receipt.
When a borrower request to remove a mortgage, check if any loan balance remains outstanding before agreeing for removal of mortgage.

Article 6 (Deleted)

Article 7 Registration and Custody of Loan Case

The company shall prepare a memorandum book for its fund-loaning activities and truthfully record the following information: borrower, amount, date of approval by the board of directors, date of approval by the audit Committee, lending/borrowing date, and matters to be carefully evaluated under Operational Procedures.
Handling person of a loan case shall, after loan appropriation, place the loan contract/ receipt, promissory notes and other warrant of the creditor’s right, document of the collateral, insurance policy and related correspondence into a custody bag and mark particulars of documents placed inside the bag and name of borrower and submit for inspection of head of Finance Department . When it is found in order, the bag shall be sealed and affix signatures and seals of both the handling person and the head of Finance Department in Register of Matters under Custody.

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Article 8 Maters to be attended when loaning funds to other person:
Before loaning funds of the Company to other person, it shall be considered carefully if the requirement s under the Operation Procedure is compiled or not. The results of evaluation shall be submitted to Audit Committee for review. When it is agreed by more than1/2 of members of the Committee, it shall then be submitted for resolution of Board of Directors and paragraph 2 and paragraph 3 of Article 12 may be applied and shall not authorize any other to make the decision. The funds loaning transaction between the Company and subsidiary or between subsidiaries shall comply with the above requirements. Chairman of the Board may be authorized to provide the same borrower to appropriate in series or appropriate in revolving within certain credit line as resolved in Board Meeting with loan period no longer than one year. The "certain monetary limit" mentioned in the preceding paragraph shall not exceed 10% of the net worth on the most current financial statements of the lending company.
The company's internal auditors shall audit the Operational Procedures for Loaning Funds to Others and the implementation thereof no less frequently than quarterly and prepare written records accordingly. They shall promptly notify the audit Committee in writing of any material violation found.
If, as a result of a change in circumstances, an entity for which an endorsement/guarantee is made does not meet the requirements of these Regulations or the loan balance exceeds the limit, the company shall adopt rectification plans and submit the rectification plans to the audit Committee, and shall complete the rectification according to the timeframe set out in the plan.
Handling person shall compile detail list of Loaning Funds to Other Person of last month before 10[th] of the month and submit for reference of superiors.
After extending a loan, the provisions in the loan contract shall be followed in collecting interest and principal; should the original borrower need funding further, application shall be made as per 。

the Operation Procedure.

After extending a loan, should a debtor failed in reimbursing principal or paying interest, in addition for calling for reimbursement, shall take any and all necessary securing action, 。

dispose collateral or institute suit according to applicable law.

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Article 9 Control Procedure for Subsidiary Extending Loan to Another Person
Where a subsidiary of the company intends to make loans to others, the public company shall instruct it to formulate its own Operational Procedures for Loaning Funds to Others in compliance with these Regulations, and it shall comply with the Procedures when loaning funds.
Such subsidiary shall compile detail list of loaning funds to other person of last month before 10[th] of the month and submit for review of the Company.
The subsidiary of the company's internal auditors shall audit the Operational Procedures for Loaning Funds to Others and the implementation thereof no less frequently than quarterly and prepare written records accordingly. They shall promptly notify the audit Committee in writing of any material violation found
The subsidiary of the company's internal auditors shall audit the Operational Procedures for Loaning Funds to Others and the implementation and prepare written records accordingly. They shall promptly notify the Chairman in writing of any material violation found.

Article 10 Information Disclosure

1.The company shall announce and report the previous month's loan balances of its head office and subsidiaries by the 10th day of each month.
2.The company whose loans of funds reach one of the following levels shall announce and report such event within two days commencing immediately from the date of occurrence:
(1)The aggregate balance of loans to others by the company and its subsidiaries reaches 20 percent or more of the company's net worth as stated in its latest financial statement.
(2)The balance of loans by the company and its subsidiaries to a single enterprise reaches 10 percent or more of the company's net worth as stated in its latest financial statement.
(3)The amount of new loans of funds by the company or its subsidiaries reaches NT$10 million or more, and reaches 2 percent or more of the company's net worth as stated in its latest financial statement.

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3.The company shall announce and report on behalf of any subsidiary thereof that is not a public company of the Republic of China any matters that such subsidiary is required to announce and report pursuant to subparagraph 3 of the preceding paragraph.
4.The company shall evaluate the status of its loans of funds and reserve sufficient allowance for bad debts, and shall adequately disclose relevant information in its financial reports and provide certified public accountants with relevant information for implementation of necessary auditing procedures.“Date of occurrence” in these Regulations means the date of contract signing, date of payment, dates of boards of directors resolutions, or other date that can confirm the counterparty and monetary amount of the transaction, whichever date is earlier.

Article 11 Penalty

In the event the manager or handling person breach the Operation Procedure shall be put up for appraisal in accordance with the Personnel Management Measures and punished per the situation.

Article 12 Enforcement and Amendment

The adopts or amends of operational procedures shall require the approval of one-half or more of all audit committee members, and furthermore shall be submitted for a resolution by the board of directors and submitted them for approval by the shareholders' meeting.
If the approval of one-half or more of all audit committee members as required in the preceding paragraph is not obtained, the Operational Procedures may be implemented if approved by two-thirds or more of all directors, and the resolution of the audit committee shall be recorded in the minutes of the board of directors meeting.

The terms "all audit committee members" and "all directors" in the preceding paragraph shall be counted as the actual number of persons currently holding those positions.

Article 13 The Operation Procedure was established initially on May 30, 1997. The 1[st] amendment on Nov. 19, 1999, 2[nd] Amendment on January 2002, 3[rd] Amendment on May 31, 2003, 4[th] Amendment on June 17,

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2010, 5[th] Amendment on June 17, 2013,6[th] Amendment on June 22, 2015, 7[th] Amendment on June 26, 2018.

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Appendices 5

Taiwan Navigation Co., Ltd. Shareholdings of All Directors

The paid up capital of the Company is NT$4,172,944,870 and total issued shares of the Company is 417,294,487 shares.
According to Article 26 of the Securities and Exchange Act and Rules and Review Procedures for Director and Supervisor Share Ownership Ratios at Public Companies, the total shareholdings of all the Directors shall not be less than 16,000,000 shares .
According to the roster of shareholders on the book closure data of 2019 Shareholders’ Meeting(April 27)are detailed in the following table..

Title	Name	Date elected	Tenure	Shareholding while elected	Shareholding on the book closure data	Institution represented
Chairman	Liu, Wen-Ching	107.06.26	3 Years	110,436,379	110,436,379	Ministry of Transportation and Communications R.O.C
Director	Mei, Char-Lee
Director	Chang, Chen-Yuan
Director	Lin, Wen-Bor	107.06.26	3 Years	10,079,000	10,079,000	Yunn Wang Investment Co., Ltd.
Director	Wang, Tien-Wei	107.06.26	3 Years	31,125,000	31,125,000	Chinese Maritime Transport Ltd.
Director	Lin, Yu-Chin	107.06.26	3 Years	8,374,000	9,536,000	Global Growing International Co.,Ltd.
Independent Director	Wang, Chin-San	107.06.26	3 Years	-	-	-
Independent Director	Huang, Wong-Hsiu	107.06.26	3 Years	-	-	-
Independent Director	Lu, Shih-Tong	107.06.26	3 Years	-	-
Total				160,014,379	161,176,379

Note: according to Para. 2, Clause 2 of Public Issue Company Shareholding Ratio Requirements and Checking Standard, when number of elected independent director is 2 or more, required ratio of all directors and supervisors, other than independent director, may be reduced to 80%. As the company has established the audit committee, the minimum shareholding requirements for supervisors do not apply.

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AI assistant

TNC — AGM Information 2019

52171_rns_2019-07-08_fddb0ea9-35ca-454a-9ee4-cb1afbf98cd7.pdf

TAIWAN NAVIGATION CO., LTD.

Table of Contents

Meeting Procedure

Taiwan Navigation Company Limited Meeting Procedure of the 2019 Annual Shareholders’ Meeting

1. Call the meeting to order

2. Chairman remarks

3. Reports

4. Recognitions

5. Discussions

6. Questions and Motions

7. Adjourn

Meeting Agenda

Taiwan Navigation Co., Ltd. Meeting Agenda of the 2019 Annual Shareholders’ Meeting

1. Call the meeting to order

2. Chairman remarks

3. Reports

4. Recognitions

5. Discussions

6. Questions and Motions

7. Adjournment

Reports

Rreports

1. To report the 2018 business

2. The 2018 audit committee’s audit report

3. The 2018 directors,supervisors and employees' remuneration

Recognitions

Recognitions

Taiwan Navigation Co., Ltd. Profit Distribution Table 2018

Discussions

Discussions

Questions and Motions

Attachments

Attachment 1

2018 Business Report

1.The Operation Policy

2. The overview of operation

3.Performance of Operation Plan

4. Execution of Operating Revenue and Expenditure Budgets

(1) Operating Revenue

5.Analysis of Profitability

6.Situation of Research and Development

7. The analysis of industry

8. The Future development

Attachment 2

The 2018 audit committee’s audit report.

Attachment 3

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Other Matter

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Notice to Readers

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

TAIWAN NAVIGATION 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)

TAIWAN NAVIGATION 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)

TAIWAN NAVIGATION 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)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

INDEPENDENT AUDITORS’ REPORT

Opinion

Basis for Opinion

Key Audit Matters

Recognition of Gain on disposal of bulk carriers recognized under investments accounted for using the equity method

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

or error.

Auditors’ Responsibilities for the Audit of the Financial Statements

Notice to Readers

TAIWAN NAVIGATION CO., LTD.

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

TAIWAN NAVIGATION CO., LTD.

TNC AGM Information 2019

1. Application: `：`