TNC — Annual Report 2018

Jul 8, 2019

Stock Code 2617

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Taiwan Navigation Co., Ltd

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2018 Annual Report

Printed on May 21, 2019

Notice to readers

This English-version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English and Chinese versions, the Chinese version shall prevail.

Taiwan Stock Exchange Market Observation Post System http://mops.twse.com.tw Company Website http://www.taiwanline.com.tw

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1. Contact information of the Spokesperson and Deputy Spokesperson

Spokesperson Deputy Spokesperson Name Mei, Char-Lee Name Wang, Hui-Ju Title President Title Vice President Tel (02)2394-1769#201 Tel (02) 2394-1769#208 E-mail meicharlie@taiwanline.com.tw E-mail stella@taiwanline.com.tw

2. Contact Information of the Head Office and Branch Office

Head office Add No.29, sec 2, Chi Nan Rd., Taipei City, (100) Taiwan (R.O.C.) Tel 886-2-2394-1769 (Rep.) Kaohsiung Branch Add No.5, Jiexing 1st St., Kaohsiung City, (804) Taiwan (R.O.C.) Tel 886-7-561-9700

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3. Share Transfer Agency

Name Taishin International Bank Stock-Affairs Agency Dept. Add B1 No.96. Jianguo N. Rd. Sec. 1, Taipei City,(104) Taiwan (R.O.C.) Website www.taishinbank.com.tw Tel 886-2-2504-8125

4. Contact information of the Certified Public Accountants for the Lastest Financial Report

Auditors Wong, Ya-Ling and Shao, Chih-Ming Accounting Firm Deloitte Touche Tohmatsu Limited (Taipei, Taiwan) Add 20F, No. 100, Songren Rd., Taipei City,(110) Taiwan (R.O.C.) Website www.deloitte.com.tw Tel (02)2545-9988

5. Overseas Trade Places for Listed Negotiable Securities None.

6. Company Webside http://www.taiwanline.com.tw

Table of Contents

Table of Contents
I. Letter to Shareholders .......................................................................... - 1 -
II. Company Profile .................................................................................. - 3 -
2.1 Date of Founding		- 3 -
2.2 Head Office and Branch Office		- 3 -
2.3 Major Events		- 3 -
III. Corporate Governance Report ......................................................... - 5 -
3.1 Organization		- 5 -
3.2 Board Members and Management Team		- 7 -
3.3 Implementation of Corporate Governance	-	16 -
3.4 Audit Fee	-	35 -
3.5 Replacement of CPA	-	36 -
3.6 The Company’s Chairman, Chief Executive Officer, Chief Financial
Officer, and Managers in Charge of its Finance and Accounting
Operations Has in the Most Recent Year Held any Positions at TNC’s
Independent Auditing Firm or its Affiliates Enterprise	-	36 -
3.7 Changes in Shareholding of Directors, Supervisors, Managers and
Major Shareholders	-	37 -
3.8 Relationship among the Top Ten Shareholders	-	38 -
3.9 Ownership of Shares in Affiliated Enterprises	-	38 -
3.10 Manager’s Training Records Information in 2018	-	39 -
3.11 Continuing Education and Training	-	42 -
3.12 Directors’ and Supervisors’ Training Records in 2018	-	43 -
IV. Capital Overview ............................................................................... - 45	-
4.1 Capital and Shares	-	45 -
4.2 Issuance of Corporate Bonds	-	49 -
4.3 Issuance of Preferred Stock	-	49 -
4.4 Issuance of Overseas Depositary Receipt	-	49 -
4.5 Issuance of Employee Stock Options	-	49 -
4.6 Issuance of New Restricted Employee Shares	-	49 -
4.7 Merger and Acquisitions or Stock Shares Transferred with New Stock
Shares Issued.	-	49 -
4.8 Financing Plans and Implementation	-	49 -
V. Operation Overview ............................................................................ - 50	-
5.1.The Business Contents	-	50 -
5.2 Market and Sales Overview	-	52 -

5.3 Human Resources in Last Two Years and Data as of End Data on Apr
30, 2018 - 55 -
5.4 Information of Expenditure on Environmental Protection - 55 -
5.5 Labor Relations - 55 -
5.6 Significant Contracts - 57 -
VI. Financial Information ........................................................................ - 58 -
6.1 Condensed Balance Sheet, Statement of Comprehensive Income, and
Auditor’s Opinions Over the Last Five Years. - 58 -
6.2.Financial Analysis in the Past Five Years - 62 -
6.3 Audit Committee’s Review Report for the Year 2018 - 65 -
6.4 Financial Statements for the Years Ended December 31, 2018 and 2017
and Independent Auditors’ Report - 66 -
6.5 Consolidated Financial Statements for the Years Ended December 31,
2018 and 2017 and Independent Auditors’ Report - 135 -
6.6 Financial Difficulties Faced by the Company and the Related Party in
the Most Recent Years and Up to the Date of the Annual Report
Printed: None. - 198 -
VII. Review of Financial Conditions, Financial Performance, and Risk
Management ..................................................................................... - 198 -
7.1 Analysis of Consolidated Financial Status - 198 -
7.2 Analysis of Consolidated Financial Performance - 198 -
7.3 Analysis of Cash Flow - 199 -
7.4 Impacts on Financial Operations of Major Capital Expenditure Items
- 200 -
7.5 Investment Policy for the Recent Year, Main Reasons for the Profits/
Losses Generated Thereby, the Plan for Improving Investment
Profitability, and Investment Plans for the Coming Year. - 200 -
7.6 Risk Assessment - 200 -
VIII. Special Disclosure ........................................................................... - 203 -
8.1 Summary of Affiliated Companies - 203 -
8.2 The Most Recent Fiscal Year and Up to the Date of this Annual Report
Printed, Private Placement Securities - 206 -
8.3 The Most Recent Fiscal Year and Up to the Date of this Annual Report
Printed, Subsidiary Companies Holding or Disposal of the Company’s
Stock List - 206 -
8.4 Other Supplementary Information - 206 -
8.5 Matters according to the Article 36.3.2 of the Securities and Exchange
Act of Taiwan in the Most Recent Year and Up to the Date of Printing
of this Annual Report which have Significant Impact to Shareholders’
Equity or Stock Price - 206 -

I. Letter to Shareholders

The world economy in 2018 was a year of fluctuating. The trading conflict between the U.S. and China, the biggest two economies, was just relentless in escalation. To shipping industry, the profit gained was higher than last year, though the sea, seemed calm on the surface, looked likely set to encounter a storm on the horizon. Overall, the world economy was still in expansion last year, but in the second half, with China and U.S. tariff war as well as the recession in Europe zone, the shipping industry had gradually being affected and slowed down. Fortunately, China's import on iron ore, accounting for about 20 % of global dry bulk cargo, dropped only 1% last year, while China's import on coal increased by 4%. Combined with the strong demand for raw material from other new emerging countries, the average of Baltic Freight Index still rose by 17% in 2018 compared to 2017.

Last year, considering the deficiency of the ship's performance, three of our old vessels were sold. In early 2019 we purchased four Kamsarmax of eighty-thousand deadweight, two from Oshima shipyard and the others from Namura Shipbuilding in Japan, in order to maintain our fleet competitiveness. As for the cross-strait container liner service, due to the changes of the trading pattern as well as the tonnage's oversupply, we maintain only one route to reflect the reduced demand.

In 2018, Our consolidated operating revenue totaled NT$3,367,236 thousand, an increase of 19 percent over NT$2,817,921 thousand in 2017. Consolidated income before income tax totaled NT$988,635 thousand, an increase of 103 percent over NT$487,071 thousand in 2017. Earnings per share were NT$2.29.

In retrospect on the change of dry bulker in 2018, the deliveries 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 vessels. Overall, the dry bulk fleet expanded by 2.9% last year and the expansion still stood at a low level. In the global economy, according to IMF’s world economic outlook, it predicted the economic growth rate would be 3.3% 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 of U.S. In the Eurozone, it is expected to be continuously depressed in the next two years given that Germany’s export is affected by the world’s depressed economy as well as the uncertainty of Brexit is still dragging on.

China, owing to the sluggish real estate and the downward export as a result of the trading conflict with America, has seen its domestic consumption obviously reduced. Though People's Bank of China had cut the reserve requirement ration by 1 % and commenced launching many infrastructure projects, it’s forecasted that the growth rate next two years would still decline to 6.3% and 6.1%. In India, the current Modi government is actively promoting economic construction, Indian manufacturing and foreign investment, so the economic development in the next two years is still quite promising. It is estimated that it will reach 7.3% and 7.5% in 2019 and 2020. For the ASEAN, the economy maintained stable growth of 5.1% and 5.2%.

For the future prospect in business, in addition to continually operating 18 owned dry bulkers in

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long/short term time charter, we will also maintain the existing container liner service between Taiwan and China as well s other port services and management business. As for "Tai Hwa", a ferry purely under the government’s policy to enhance the offshore island transportation, though all employees have endeavored to reduce the losses recently, the total passengers obviously dropped to a new low last year due to her overage along with the competition from Budai port in tourism peak of summertime. The aforesaid indeed posts a potential risk to our operation. Therefore, we hope the governments, Central and Penghu, could conclude the project of "New Tai Hwa“, including the construction and her subsequent operation, as early as possible so that our financial burden and operation risk could be lessened.

We hereby appreciate all shareholders’ long term support and their trust in our operational team. Only under everyone’s support and supervision can we be able to further increase the profit last year. In the years to come, we must work harder, expand our business spectrum, and enhance management efficiency in order to maximize profit in the benefit of all shareholders.

Sincerely,

Liu, Wen-Ching Chairman

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II. Company Profile

2.1 Date of Founding

Founding date: July 01, 1946

2.2 Head Office and Branch Office

Head office

Add：No.29, sec 2, Chi Nan Rd., Taipei City,(100) Taiwan (R.O.C.)

Tel：886-2-2394-1769(Rep.)

Kaohsiung Branch

Add：No.5, Jiexing 1st St., Kaohsiung City,(804) Taiwan (R.O.C.)

Tel：886-7-561-9700

2.3 Major Events

• 1946 ● Taiwan Navigation Company founded on July 1[st] .

• 1949 ● Reorganized the company into Taiwan Navigation Co., Ltd. with a capital of NT$30 million.

• 1979 ● M/V YE LAN and M/V TAO YUAN, two(2) 29,000 DWT multi-purpose container ships were delivered and deployed to service.

• 1980 ● Increased the capital to NT$1,428.226 million.

• 1982 ● M/V TAI CHUNG, a 37,000 DWT bulk carrier was delivered and deployed to service.

• 1985 ● M/V KEELUNG, a 37,000 DWT bulk carrier was delivered and deployed to service.

• 1989 ● M/V TAI HWA, an 8,000 GRT passenger car/cargo RORO ferry was delivered and deployed to service between Kaohsiung and Penghu.

• 1990 ● Increased the capital to NT$1,865.826 million.

• 1992 ● Increased the capital to NT$2,465.826 million.

• 1996 ● TAI CHIN 101 and TAI CHIN 102, two(2) 3,400 PS tugs; TAI CHIN 103, a 2,400 PS tug, all were delivered and deployed to the tug services in TAI CHUNG port

• JIUN KANG No.1 and JIUN KANG No.2, two(2) suction hopper dredgers, were purchased and deployed to harbor service.

• 1997 ● Reduced the capital to NT$2,286.469 million.

• 1998 ● Taiwan Navigation Co., Ltd. was privatized and went public in June.

• 1999 ● Placed order to build three(3) 51,000 DWT Handymax bulk carriers and three(3) 73,000 DWT Panamax bulk carriers

• 2000 ● M/V TAI PLENTY, a 73,000 DWT Panamax bulk carrier was delivered and deployed to global service.

• 2001 ● M/V TAI PROFIT and M/V TAI PRIZE, two(2) 73,000 DWT Panamax bulk carriers, and M/V TAI HARMONY and M/V TAI HEALTH, two(2) 51,000 DWT Handymax bulk carriers, were delivered and deployed to global service.

• 2002 ● M/V TAI HARVEST, a 51,000 DWT Handymax bulk carrier was delivered and

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deployed to global service.

• Placed order to build two(2) 52,000 DWT Handymax bulk carriers and two(2) 77,000 DWT Panamax bulk carriers

• 2003 ● Placed order to build one(1) 77,000 DWT Panamax bulk carrier and two(2) 55,000 DWT Handymax bulk carriers.

• 2004 ● M/V TAI PROGRESS and M/V PROMOTION, two(2) 77,000 DWT Panamax bulk carriers; M/V TAI HAPPINESS and M/V TAI HAWK, two(2) 52,000 DWT Handymax bulk carriers, all were delivered and deployed to global service.

• 2005 ● M/V TAI PROSPERITY, a 77,000 DWT Panamax bulk carrier was delivered and deployed to global service.

• 2007 ● M/V TAI HONESTY and M/V TAI HUNTER, two(2) 55,000 DWT Handymax bulk carriers was delivered and deployed to global service.

• TAI CHIN 201 and TAI CHIN 202, two(2) 5,400 PS tugs; TAI CHIN 203 and TAI CHIN 205, two(2) 4,600 PS tugs, all were delivered and deployed to the tug services for LNG carriers in TAI CHUNG port.

• Placed order to build two(2) 61,000 DWT Ultramax bulk carriers.

• 2012 ● M/V TAI SHINE, a 61,000 DWT Ultramax bulk carrier was delivered and deployed to global service.

• 2013 ● M/V TAI SUCCESS, a 61,000 DWT Ultramax bulk carrier was delivered and deployed to global service.

• Placed order to build two(2) 60,000 DWT and two(2) 62,000 DWT Ultramax bulk carriers.

• 2014 ● Placed order to build two(2) 82,000 DWT and two(2) 84,000 DWT Kamsarmax bulk carriers.

• 2015 ● M/V TAI SPLENDOR, a 60,000 DWT Ultramax bulk carrier was delivered and deployed to global service.

• 2016 ● M/V TAI SUMMIT, a 60,000 DWT Ultramax bulk carrier; M/V TAI SPRING and M/V TAI STAR, two(2) 52,000 DWT Ultramax bulk carriers, all were delivered and deployed to global service.

• 2017 ● M/V TAI KUDOS and M/V TAI KNOWLEDGE, two(2) 82,000 DWT Kamsarmax bulk carriers; M/V TAI KEYSTONE and M/V TAI KINGDOM, two(2) 84,000 DWT Kamsarmax bulk carriers, all were delivered and deployed to global service.

• Placed order to build two(2) 62,000 DWT Ultramax bulk carriers.

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III. Corporate Governance Report

3.1 Organization

3.1.1. Organizational Chart

								TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD	TAIWAN NAVIGATION CO., LTD
								Shareholders Meeting Boards of Directors / Chairman
											Boards of Directors / Chairman
													President
													Vice President
Auditing Office		Kaohsiung Branch Office		Labor Security Office		Planning Office			Administrative Dept.Dept.					Financial Dept.				Marine Dept.		Technical Dept.		Traffic Dept.

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3.1.2. Major Department Functions

Traffic Department

Coastal shipping business, insurance claim, and resale ship trading.

Technical Department

New shipbuilding business and evaluate resale ship condition. Drawing approval and supervision of new-building ships; Management of repairs and surveys of ships; Review & approval of parts requisition; Assessment of ship’s status; Planning of modification of ships; Establishment of planned maintenance system (PMS) for ship’s hull and machinery, and monitoring of the performance of PMS, and ISM.

Marine Department

ISM、ISO、ISPS、MLC、SOPEP. Safety Quality Assurance Section: In charge of Plan, Check, Act of ISM and ISPS system of ships; To assist Technical Dept. for accident/emergency cases of ships; Joint Investigation of casualties of ships; To continuously follow up international and national regulations and provide suggestion of the corresponding solution; To issue and/or forward the relevant technical circulars, including those from the Administration. In charge of Recruitment, employment, rotation, and promotion of seafarers; Management of training, assessment, rewards, and licenses of seafarers; Collaboration with maritime school and training center; Collecting of relevant requirements/information of seafarers market; Planning of payroll system of seafarers. Supply Section: In charge of the purchase and delivery of nautical charts, publications, spare parts, lubricants, and ship’s stores.

Financial Department

Fund scheduling and management, processing of stocks, issuance of company stocks and bonds, cash, cashier and custody, real estate development management, budgeting, the final accounting and accounting treatment, collection, and analysis of cost information and related financial and accounting matters.

Administrative Department

Seal, paperwork, file management, and general affairs. Company organization, division responsibilities, staff rules, and regulations. Recruitment, employment, rotation, and promotion. Management of training, assessment, and rewards of employees. Construction and maintenance of computer software and hardware and information networks.

Auditing Office

Internal management system, auditing process of each department, and supervision of purchase or sell the property.

Labor Security Office

Security inspections of ship and crew, planning and management of health examination, training of labor security.

Planning Office

Planning of mid to long-term business operations, fleet replacement plan, the performance of business tracking and assessment, research, and construction of business strategies.

Kaohsiung Branch Office

Adhere to the instructions of the head office, TNC handles the business of the company's Kaohsiung Port Area by the law. In charge of ships enter or leave the port, loading, and unloading, passenger ticketing, and agent shipping business. Ship emergency repaired, the crew changes, ship certificate inspection, and renewal. The management of the real estate in the Kaohsiung area.

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3.2 Board Members and Management Team

3.2.1. Information Regarding Board Members

																Date:Apr 27,2019	Date:Apr 27,2019	Date:Apr 27,2019	Date:Apr 27,2019
Title	Nationality/ Place of Incorporation	Name	Gender	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected		Current Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience Education	Other Position	Executives and Directors Who are Spouses or within Two Degrees of Kinship
							Shares		Shares		Shares		Shares				Title	Name	Relation
Chairman	R.O.C.	MOTC Representative: Liu, Wen-Ching	Male	Jun 26,2018	3	Jun 26,2006	110,436,379	26.46	110,436,379	26.46	0	0	0	0	Master of The Hong Kong Polytechnic University Chairman,Taiwan Navigation Co.,Ltd.	Notes (1)	None	None	None
				Jun 26, 2018		Sep 19, 2016	0	0	0	0	120,000	0.03	0	0
Director	R.O.C.	MOTC Representative: Mei, Char-Lee	Male	Jun 26,2018	3	Jun 26,2006	110,436,379	26.46	110,436,379	26.46	0	0	0	0	Master of Dept. of Shipping and Transporation Management, National Taiwan Ocean University President,Taiwan Navigation Co., Ltd.	Notes (2)	None	None	None
				Jun 26, 2018		Jun 01, 2013	0	0	0	0	0	0	0	0
Director	R.O.C.	MOTC Representative: Chang, Chen-Yuan	Male	Aug 10, 2018	3	Jun 26, 2006	110,436,379	26.46	110,436,379	26.46	0	0	0	0	Doctor of Dept. of Transporation and Logistics Management, National Chiao Tung University Political Vice Minister, Ministry of Transportation and Communication R.O.C.	Notes (3)	None	None	None
						Aug 10, 2018	0	0	0	0	0	0	0	0
Director	R.O.C.	Yunn Wang Investment Co. Ltd. Representative: Lin, Wen-Bor	Male	Jun 26,2018	3	Jun 18,2012	10,079,000	2.42	10,079,000	2.42	0	0	0	0	Master of National Chiao Tung University President and COO of YangMing Marine Transport Corp.	Notes (4)	None	None	None
				Jun 26, 2018		Jun 18, 2012	0	0	0	0	0	0	0	0
Director	R.O.C.	CMT Representative: Wang, Tien-Wei	Male	Jun 26, 2018	3	Jun 19, 2009	31,125,000	7.46	31,125,000	7.46	0	0	0	0	Bachelor of Dept. Marine Engineering, National Taiwan Ocean University President of Marine Department, Chinese Maritime Transport Ltd.	-	None	None	None
				Jun 26, 2018		Jul 01, 2016	0	0	0	0	10,000	0	0	0
Director	R.O.C.	Global Growing International Co., Ltd. Representative: Lin, Yu-Chin	Female	Jun 26, 2018	3	Jun 26, 2018	8,374,000	2.01	9,536,000	2.29	0	0	0	0	Bachelor of Dept. of Economics, Soochow University Chairman, Global Growing International Co., Ltd.	Notes (5)	None	None	None
						Jun 26, 2018	0	0	0	0	0	0	0	0
Independent Director	R.O.C.	Wang, Chin-San	Male	Jun 26, 2018	3	Jun 22, 2015	0	0	0	0	0	0	0	0	Dept. of Accounting, Soochow University EMBA of National Taiwan University	Notes (6)	None	None	None
Independent Director	R.O.C.	Huang, Wong-Hsiu	Male	Jun 26, 2018	3	Jun 26, 2018	0	0	0	0	0	0	0	0	Doctor of National Taiwan Ocean University Consultant, Industrial Development and Investment Promotion Committee of TaichungCiry	-	None	None	None
Independent Director	R.O.C.	Lu, Shih-Tong	Male	Jun 26, 2018	3	Jun 26, 2018	0	0	0	0	0	0	0	0	Doctor of Dept. Business Administration, National Central University Professor of Dept. of Logistics and Shipping Management,Kainan University	Notes (7)	None	None	None

Notes:

(1) Director of Tai-Shing Maritime Co., S.A. and Shin-Wang Maritme Inc., Independent Director of Transart Graphics Co., Ltd.

(2) Director of Tai-Shing Maritime Co., S.A. and Shin-Wang Maritme Inc.

(3) Director of Taipei Rapid Transit Corp.

(4) Director of Yang Ming Line Holding Co., Yang Ming Line(B.V.I.) Holding Co., Ltd. Yang Ming Line(Singapore) Pte. Ltd. Yang Ming (America) Corp. Young-Carrier Company Ltd. and Kao Ming ContainerTerminal Corp.

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(5) Chairman of the Beacon Worldwide (BV) Ltd.

(6) Independent Director of Taiwan Cement Corp., DACIN Construction Co., Ltd. and Fulin Plastic Industry (Cayman) Holding Co., Ltd. Supervisor of DIVA Laboratories. Ltd. Director of Chilisin Electronics Corp. and Yageo Corp.

(7) Director of Tuo Jia Investment Consultant Co., Ltd and Rui Xiang Health Industry Management Consultant Co., Ltd. Supervisor of Foodjoy Co., Ltd.

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3.2.2 Major Shareholders of the Institutional Shareholders

Date: Apr 27, 2019

	Date: Apr 27, 2019
Name of Institutional Shareholders	Major Shareholders
Ministry of Transportation and Communications R.O.C(MOTC)	The government of the Republic of China (100%)
Chinese Maritime Transport Ltd.(CMT)	Associated International Inc.(AII)(34.1%) AGCMT Group Ltd. (19%) Fubon Financial Co., Ltd. (4.22%) Fu, Di-Chen (1.73%) Peng, Yin-Gang (1.00%) Liu, Jun-Jie (0.72%) The Capital Group (0.69%) Fu, Di-Yun (0.52%) Citibank Managed Dimensional Emerging Markets Evaluation Fund Investment Account (0.49%) Citi (Taiwan) Commercial Bank Trust DFA Investment Diversified Group (0.49%)
Yunn Wang Investment Co., Ltd.	Yang Ming Marine Transport Corp. (49.75%) Taiwan Navigation Co., Ltd. (49.75%) Plenty Investment Co., Ltd.(0.5%)
Global Growing International Co., Ltd.	Lin, Yu-Chin (100%)

3.2.3 Major Shareholders of the Company’s Major Institutional Shareholders

Date: Apr 27, 2019

	Date: Apr 27, 2019
Name of Institutional Shareholders	Major Shareholders
Taiwan Navigation Co., Ltd.	MOTC (26.46%) Yang Ming Marine Transport Corp. (16.96%) CMT (7.46%) Plenty Investment Co., Ltd.(2.95%) Yunn Wang Investment Co., Ltd.(2.42%) Global Growing International Co., Ltd. (2.29%) Jack Xia Investment Co., Ltd.(1.36%) CTBC Bank Employee Stock Ownership Trust Account of Taiwan Navigation Co., Ltd. (1.35%) Chen, Chang-Hong (0.65%) SU, Xing-Qian (0.61%)
Yang Ming Marine Transport Corp.	MOTC(20.13%) National Development Fund, Executive Yuan(19.8%) Taiwan International Ports Corporation, Ltd.(5.14%) Mercuries Life Insurance Co., Ltd.(3.49%) Taiwan Navigation Co., Ltd. (1.39%) Chinachem Group (1.28%) Hong, Chao-Shun (1.17%) United Logistics International Co.,(1.08%) Mega International Commercial Bank. Co., Ltd. Employee Stock Ownership Trust Account of Yang Ming Marine Transport (0.88%) T3EX Global Holdings Corp. (0.74%)
Fubon Financial Co., Ltd.	Fubon Financial Holding Co. (100%)
Associated International Inc.(AII)	AGCMT Group Ltd. (100%)
AGCMT Group Ltd.	Giant International Holdings Pte. Ltd.(100%)
Plenty Investment Co., Ltd. (Note)	Lee, Chin-Te (11.11%) Lin, Chi-Sheng (11.11%) Chyou, Jong-Lin(11.11%)..etc.

Note Only provide the parts of the company’s shareholder Because of non-publish company.

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3.2.4 Professional Qualifications and Independence Analysis of Directors

Date: Apr 27, 2019

Criteria Name	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director
	An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Commerce, Law, Finance, or Accounting , or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10
Liu, Wen-Ching	-	-	Yes	-	-								-	1
Mei, Char-Lee	-	Yes	Yes	-	-								-	-
Chang, Chen-Yuan	-	Yes	Yes					-					-	-
Lin,Wen-Bor	-	Yes	Yes					-	-				-	-
Wang,Tien-Wei	-	Yes	Yes					-					-	-
Lin,Yu-Chin	-	-	Yes										-	-
Wang,Chin-San	Yes	Yes	Yes											3
Huang, Wong-Hsiu	Yes	Yes	Yes											-
Lu,Shih-Tong	Yes	Yes	Yes											-

• Notes: Please tick the corresponding boxes that apply to the directors during the two years prior to being elected or during the term of office:

• (1) Not an employee of this Company or its affiliates.

• (2) Not a Director or Supervisor of the Company or its affiliates. (However, this does not apply, in cases where the person is an Independent Director of the company, its parent company, or any subsidiary in which the company directly or indirectly holds more than 50% of the voting shares.)

• (3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number of outstanding shares of the Company or ranking in the top ten in holdings.

• (4) Not a spouse, second-degree relative or third-degree relative of those listed in the above three items.

• (5) Not a director, supervisor, or employee of a corporate shareholder that directly holds five percent or more of the total number of outstanding shares of the Company or that holds shares ranking in the top five in holdings.

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

• (7) Not a professional individual who provides services or consultation in business, legal, finance, or accounting to the Company or its any related companies, nor an owner, partner, director, supervisor, officer or spouse of a sole proprietorship, partnership, company, or institution. However, this does not apply to the members of the Compensation Committee who perform their duties based on article 7 of the "Regulations Governing the Appointment and Exercise of Powers by the Compensation Committee of a Company Whose Stock is Listed on the TWSE or Traded on the TPEx".

• (8) Not a spouse or a second-degree relative of any other Director of the Company.

• (9) No violations of Article 30 of the Company Law.

• (10) Not a governmental, judicial person or it’s representative as defined by Article 27 of the Company Law.

• 9 -

3.2.4.1 Diversity Regarding Board Members

Title/Name	Items	Gender	Management	Leadership & decision- making	Industry Knowledge	Finance accounting	Law	Environmental protection
Chairman	Liu, Wen-Ching	Male	V	V	V
Director	Mei, Char-Lee	Male	V	V	V
Director	Chang, Chen-Yuan	Male	V	V	V
Director	Lin, Wen-Bor	Male	V	V	V	V
Director	Wang, Tien-Wei	Male	V	V	V
Director	Lin, Yu-Chin	Female	V	V	V	V
Independent Director	Wang, Chin-San	Male	V	V		V
Independent Director	Huang, Wong-Hsiu	Male	V	V	V	V
Independent Director	Lu, Shih-Tong	Male	V	V	V	V

• 10 -

3.2.5 Information Regarding Management Team

												Date: Apr 27, 2019	Date: Apr 27, 2019	Date: Apr 27, 2019	Date: Apr 27, 2019
Title	Nationality	Name	Gender	Date Effective	Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience（Education）	Other Position	Managers who are Spouses or Within Two Degrees of Kinship
					Shares	%	Shares	%	Shares	%			Title	Name	Relation
President	R.O.C.	Mei, Char-Lee	Male	Jun 01, 2013	0	0	0	0	0	0	Master of Dept. of Shipping and Transporation Management, National TaiwanOceanUniversity	Director of Tai Shing Maritime Co., S. A &. Shin Wang Maritime Inc.	None	None	None
Executive Vice President	R.O.C.	Wang, Hui-Ju	Female	Apr 01, 2016	6,634	0	0	0	0	0	MBA, University of Houston	Director of Tai Shing Maritime Co., S. A. & Shin Wang Maritime INC.& Yunn Wang Investment Co. Ltd. & Taiwan Foundation International Pte. Ltd.	None	None	None
Executive Vice President	R.O.C.	Peng, Wen-Hsun	Male	Apr 01, 2019	0	0	0	0	0	0	Master of Dept. Business Administration, Soochow University	Director of Shin Wang Maritime Inc.	None	None	None
Auditor General of Auditing Office	R.O.C.	Wang, Che-Wen	Male	Jan 01, 2017	10,000	0	0	0	0	0	MBA, Tennessee State University	None	None	None	None
Senior Vice President of Technical Department	R.O.C.	Chyou, Jong-Lin	Male	Apr 01, 2019	1,000	0	0	0	0	0	Bachelor of Dept. Marine Engineering, National Taiwan Ocean University	Director of Tai Shing Maritime Co., S. A &. Shin Wang Maritime Inc.	None	None	None
General Manager of Marine Department	R.O.C.	Huang, Ruei-Kuang	Male	Aug 16, 2018	0	0	41,000	0	0	0	Bachelor of Dept. of Business Administration, Ming Chuan University	None	None	None	None
General Manager of Traffic Department	R.O.C.	Yu, Yuan-Wang	Male	Aug 16, 2018	0	0	0	0	0	0	Bachelor of Dept. of Business Administration, National Chung Hsing University	None	None	None	None
General Manager of Financial Department	R.O.C.	Chen, Chien-Chou	Male	Jun 01, 2016	0	0	0	0	0	0	Master of Dept. of Financial Management, Fu Jen Catholic University	Director of Shin Wang Maritime Inc. & Yunn Wang Investment Co. Ltd., and Deputy Managing Director of Taiwan Foundation International Pte. Ltd.	None	None	None
General Manager of Administrative Department	R.O.C.	Lee, Chin-Te	Male	Apr 01, 2019	358	0	0	0	0	0	Bachelor of Dept. of Transporation and Communication Management Science, NationalChengKung University	None	None	None	None
General Manager of Labor Security Office	R.O.C.	Lin, Chi-Sheng	Male	Apr 01, 2019	0	0	0	0	0	0	Bachelor of Dept. of Shipping and Transporation Management, National TaiwanOceanUniversity	None	None	None	None
General Manager of Planning Office	R.O.C.	Lu, Chung-Hsing	Male	Aug 16, 2018	0	0	0	0	0	0	Master of Dept. of Shipping and Transporation Management, National Taiwan Ocean University	Director of Tai Shing Maritime Co., S. A &. Shin Wang Maritime Inc.	None	None	None
General Manager of Kaohsiung Branch Office	R.O.C.	Chang, Chin-Wei	Male	Aug 16, 2018	0	0	0	0	0	0	Master of Dept. of Shipping and Transporation Management, National Kaohsiung University of Science andTechnology	None	None	None	None

• 11 -

3.2.6 Remuneration of Directors, Supervisors, President, and Vice Presidents 3.2.6.1 Remuneration of Directors

																	Date: Dec 31, 2018; Unit: NT$ thousands	Date: Dec 31, 2018; Unit: NT$ thousands	Date: Dec 31, 2018; Unit: NT$ thousands	Date: Dec 31, 2018; Unit: NT$ thousands	Date: Dec 31, 2018; Unit: NT$ thousands
	Title	Name			Rem		uneration				Ratio of Total Remuneration (A+B+C+D) to Net Income(%)		Relevant Remuner		ation Received by D Employees		irectors Who are Also		Ratio of Total Compensation (A+B+C+D+E+F+G) to Net Income(%)		Compensation Paid toDirectors from an Invested Company Other than the Company’s Subsidiary
			Base Compensation (A)		Severance Pay (B)		Directors Compensation(C)		Allowa	nces (D)			Salary, Bonuses, and Allowances(E)		Severance Pay (F)		Employee Compensation(G)
			The company	All companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements
																	Cash/ Stock	Cash/ Stock
	Legal Director	MOTC	-	-	-	-	7,828	7,828	202	202	0.84	0.84	-	-	-	-	-	-	0.84	0.84	None
	Legal Director	CMT
	Legal Director	YunnWang
	Chairman	Representative of MOTC: Liu, Wen-Ching	5,787	9,342	559	803	870	870	1,681	1,681	0.93	1.32	3,487	6,216	126	126	-	-	1.30	1.99	None
	Director/President	Representative of MOTC: Mei, Char-Lee
	Director (Resigned on Aug 10, 2018)	Representative of MOTC: Chi, Wen-Jong
	Director (Joined on Aug 10, 2018)	Representative of MOTC: Chang, Chen-Yuan
	Director	Representative of Yunn Wang: Lin, Wen-Bor
	Director	Representative of CMT: Wang, Tien-Wei
	Director ( Joined on Jun 26, 2018)	Representative of Global Growing.:Lin, Yu-Chin
	Independent Director	Wang, Chin-San
	Independent Director ( Resigned on Jun 26, 2018)	Bau, Jia-Yuan
	Independent Director ( Joined onJun 2,2018)	Huang, Wong-Hsiu
	Independent Director ( Joined onJun 26,2018)	Lu, Shih-Tong

• 12 -

In addition to the above remuneration, Is there any director received remuneration from companies included in the consolidated financial statements in the most recent year for their services, such as being consultant: None.

According to the Articles of Incorporation 27, the Corporation may resolve remuneration for directors at 1.5 % or less of annual profits in a year. Also, reasonable remuneration will base on the operating results of the company and the director’s contribution.

Remuneration evaluation based on the Board performance appraisal method, consider not only whole company’s operation efficiencies, industry’s future operation risk, and trends but also evaluate reasonable remuneration on personal achievement and contribution, all relate evaluation will process by Remuneration Committee and Board of Direct. To pursuit the TNC’s sustainable management and risk control, the remuneration policy will adjust depending on actual operating conditions and related laws.

Level of Remuneration

==> picture [39 x 72] intentionally omitted <==

Level of Remuneration
Range of Remuneration	Name of Directors
	Total of (A+B+C+D)		Total of (A+B+C+D+E+F+G)
	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements
Under NT$ 2,000,000	CMT Yunn Wang Investment Co. Ltd. Mei, Char-Lee Chi, Wen-Jong Chang,Chen-Yuan Lin, Wen-Bor Wang, Tien-Wei Lin, Yu-Chin Wang, Chin-San Bau, Jia-Yuan Huang,Wong-Hsiu Lu, Shih-Tong	CMT Yunn Wang Investment Co. Ltd. Mei, Char-Lee Chi, Wen-Jong Chang,Chen-Yuan Lin, Wen-Bor Wang, Tien-Wei Lin, Yu-Chin Wang, Chin-San Bau, Jia-Yuan、 Huang,Wong-Hsiu Lu, Shih-Tong	CMT Yunn Wang Investment Co. Ltd. Chi, Wen-Jong Chang,Chen-Yuan Lin, Wen-Bor Wang, Tien-Wei Lin, Yu-Chin Wang, Chin-San Bau, Jia-Yuan、 Huang,Wong-Hsiu Lu, Shih-Tong	CMT Yunn Wang Investment Co. Ltd. Chi, Wen-Jong Chang,Chen-Yuan Lin, Wen-Bor Wang, Tien-Wei Lin, Yu-Chin Wang, Chin-San Bau, Jia-Yuan、 Huang,Wong-Hsiu Lu, Shih-Tong
Over NT$2,000,000 ~ Under NT$5,000,000	MOTC	MOTC	MOTC Mei, Char-Lee	MOTC
Over NT$5,000,000 ~ Under NT$10,000,000	Liu, Wen-Ching	Liu, Wen-Ching	Liu, Wen-Ching	Liu, Wen-Ching Mei, Char-Lee
Over NT$10,000,000 ~ Under NT$15,000,000	-	-	-	-
Over NT$15,000,000 ~ Under NT$30,000,000	-	-	-	-
Over NT$30,000,000 ~ Under NT$50,000,000	-	-	-	-
Over NT$50,000,000 ~ Under NT$1000,000,000	-	-	-	-
Over NT$100,000,000	-	-	-	-
Total	14	14	14	14

Note: The Remuneration of Directors and Level of Remuneration charts contained herein are for informational purposes only and in no way shall be used to tax purposes of any kind.

• 13 -

3.2.6.2 Remuneration of Supervisors

Date: Dec 31, 2018; Unit: NT$ thousands

Title	Name			Remuneration	Remuneration			Ratio of Total Remuneration (A+B+C) to Net Income(%)	Ratio of Total Remuneration (A+B+C) to Net Income(%)	Compensation Paid to Supervisors from an Invested Company Other than the Company’s Subsidiary
		Base Compensation (A)		Bonus to Supervisors (B)		Allowances (C)
		The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements
Legal person Supervisor	Ching Mao Management Consulting Co., Ltd	-	-	695	695	-	-	0.07	0.07	None
Supervisor	Representative of Ching Mao Management Consulting Co., Ltd: Yu,He-Bei	-	-	-	-	117	117	0.01	0.01	None
Supervisor	Ou, Chin-Shih	-	-	695	695	117	117	0.09	0.09	None

Note: From the date of Jun 26, 2018, Supervisors have replaced by the Audit Committee. The Remuneration of Supervisors chart contained herein is for informational purposes only and in no way shall be used to tax purposes of any kind.

3.2.6.3 Remuneration of the President and Vice Presidents

Date: Dec 31, 2018; Unit: NT$ thousands

Title	Name	Salary (A)	Salary (A)	Severance Pay (B)	Severance Pay (B)	Bonuses and Allowances (C)	Bonuses and Allowances (C)	Employee Compensation (D)	Employee Compensation (D)	Employee Compensation (D)	Employee Compensation (D)	Ratio of total compensation (A+B+C+D) to net income (%)	Ratio of total compensation (A+B+C+D) to net income (%)	Compensation Paid to the President and Vice Presidents from an Invested Company Other than the Company’s Subsidiary
		The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company		Companies in the consolidated financial statements		The company	Companies in the consolidated financial statements
								Cash	Stock	Cash	Stock
President	Mei, Char-Lee	3,149	4,825	252	252	2,681	4,891	389	-	389	-	0.68	1.08	None
Executive Vice President	Wang, Hui-Ju

Level of Remuneration

Level of Remuneration
Range of Remuneration	Name of President and Vice Presidents
	The company	Companies in the consolidated financial statements
Under NT$ 2,000,000	-	-
Over NT$2,000,000 ~ Under NT$5,000,000	Mei, Char-Lee Wang, Hui-Ju	Wang, Hui-Ju
Over NT$5,000,000 ~ Under NT$10,000,000	-	Mei, Char-Lee
Over NT$10,000,000	-	-
Total	2	2

Note: The Remuneration of the President and Vice Presidents and Level of Remuneration charts contained herein are for informational purposes only and in no way shall be used to tax purposes of any kind.

• 14 -

3.2.6.4 Bonus to Executive Officers

			Date Dec 31, 2018;Unit: NT$ thousands Stock Bonus Cash Bonus Total Percentage in Net Income after tax(%) 0 2,824 2,824 0.29	Date Dec 31, 2018;Unit: NT$ thousands Stock Bonus Cash Bonus Total Percentage in Net Income after tax(%) 0 2,824 2,824 0.29	Date Dec 31, 2018;Unit: NT$ thousands Stock Bonus Cash Bonus Total Percentage in Net Income after tax(%) 0 2,824 2,824 0.29	Date Dec 31, 2018;Unit: NT$ thousands Stock Bonus Cash Bonus Total Percentage in Net Income after tax(%) 0 2,824 2,824 0.29
	Title	Name	Stock Bonus	Cash Bonus	Total	Percentage in Net Income after tax(%)
Executive Officers	Executive Vice President	Wang, Hui-Ju	0	2,824	2,824	0.29
	Auditor General of Auditing Office	Wang, Che-Wen
	Senior Vice President of Technical Department	Chyou, Jong-Lin
	General Manager of Marine Department	Huang, Ruei-Kuang
	General Manager of Labor Security Office	Lee, Chin-Te
	General Manager of Planning Office	Lu, Chung-Hsing
	General Manager of Traffic Department	Yu, Yuan-Wang
	General Manager of Financial Department	Chen, Chien-Chou
	General Manager of Administrative Department	Peng, Wen-Hsun
	General Manager of Kaohsiung Branch Office	Chang, Chin-Wei

• 3.2.6.5 Comparison of Remuneration for Directors, Supervisors, President and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, President and Vice Presidents

• Ratio of the total remuneration to net income

Title	2018 Ratio of total remuneration paid to directors, supervisors, president and vice presidents to net income	2017 Ratio of total remuneration paid to directors, supervisors, president and vice presidents to net income
Directors	2.83%	3.93%
Supervisors	0.17%	0.4%
President & Vice President	1.08%	1.75%

==> picture [25 x 13] intentionally omitted <==

Notes

• (1) From the date of Jun 26, 2018, Supervisors have replaced by the Audit Committee.

• (2) According to the Company’s policy for compensation, appropriated compensation shall be paid based on salaries, staff compensation, bonuses, and job evaluation of the personnel in the Company.

• The board members remuneration policies are based on the Articles of Incorporation and had the resolution from shareholder’s meeting, the remuneration of president and vice president is according to the company’s benefits policies, plan, and programs. The compensation is measured based on personal achievements and positive correlation with the performance of the Company’s business.

• 15 -

3.3 Implementation of Corporate Governance

3.3.1 Board of Directors

A total of six (A) meetings of the Board of Directors were held in the previous period. The attendance of director and supervisor were as follows:

Title	Name	Attendance in Person (Ｂ)	By Proxy	Attendance Rate (%) 【Ｂ/Ａ】	Remarks
Chairman	Representative of MOTC: Liu, Wen-Ching	6	-	100	Re-election
Director	Representative of MOTC: Mei, Char-Lee	6	-	100	Re-election
Director	Representative of MOTC: Chi, Wen-Jong	3	-	100	Resigned on Aug 10, 2018
Director	Representative of MOTC: Chang, Chen-Yuan	2	1	66	Joined on Aug 10, 2018
Director	Representative of Yunn Wang Investment Co. Ltd.,: Lin, Wen-Bor	6	-	100	Re-election
Director	Representative of CMT: Wang, Tien-Wei	6	-	100	Re-election
Director	Representative of Global Growing International Co., Ltd.: Lin, Yu-Chin	4	-	100	Joined on Jun 26, 2018
Independent director	Wang, Chin-San	6	-	100	Re-election
Independent director	Bau, Jia-Yuan	1	1	50	Resigned on Jun 26, 2018
Independent director	Huang, Wong-Hsiu	4	-	100	Joined on Jun 26, 2018
Independent director	Lu, Shih-Tong	4	-	100	Joined on Jun 26, 2018
Supervisor	Representative of Ching Mao Management ConsultingCO. Ltd: Yu, He-Bei	2	-	100	Resigned on Jun 26, 2018
Supervisor	Ou, Chin-Shih	2	-	100	Resigned on Jun 26, 2018
Other mentionable items: 1. If any of the following circumstances occur,, the dates of the meetings, sessions, contents of motion, all independent directors’ opinions and the company’s response should be specified: (1) Matters referred to in Article 14-3 of the Securities and Exchange Act. (2) Other matters involving objections or expressed reservations by independent directors that were recorded or stated in writing that require a resolution by the board of directors. 2. If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: None 3. Measures taken to strengthen the functionalityof the board: None.

The attendance status of independent directors in the ◎ Attendance in Person ☆ ByProxy				2018 Board meeting: Absence
2018	First	Second	Third	Fourth	Fifth	Sixth
Wang,Chin-San	◎	◎	◎	◎	◎	◎
Bau,Jia-Yuan	◎	☆	-	-	-	-
Huang,Wong-Hsiu	-	-	◎	◎	◎	◎
Lu,Shih-Tong	-	-	◎	◎	◎	◎

• 16 -

3.3.2 Audit Committee

A total of three (A) Audit Committee meetings were held in the previous period. The attendance of the independent directors was as follows:

Title	Name	Attendance in Person (B)	By Proxy	Attendance Rate (%)【Ｂ/Ａ】	Remarks
Independent director	Wang, Chin-San	3	-	100	Established on Jun 26,2018
Independent director	Huang, Wong-Hsiu	3	-	100	Established on Jun 26,2018
Independent director	Lu, Shih-Tong	3	-	100	Established on Jun 26,2018
Other mentionable items: 1. Annual Operation Situation: (1) Matters referred to in Article 14-5 of the Securities and Exchange Act. Date Contents Resolution Committee’s Opinion 1st Regular Meeting of the First Audit Committee Aug 13, 2018 1. 2018, second quarter financial statements. 2. Audit service fee and accountants to be performed by Deloitte & Touche. 3. The amendments to TNC’s ”Procedures for Lending Funds to Other Parties”. 4. Sale two Subsidiary’s bulk carriers. 5. To be a joint guarantor for Subsidiary’s short or medium terms loan. Approved None 3rd Regular Meeting of the First Audit Committee Dec 19, 2018 1. Purchase bulk carrier. 2. Upgrade subsidiary’s new build bulk carrier. 3. 2019 Internal Audit Plan. (2) Other matters which were not approved by the Audit Committee but were approved by two-thirds or more of all directors.: None. 2. If there are independent directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance, and voting should be specified: None. 3. Communications between the independent directors, the Company's chief internal auditor and CPAs (e.g., the material items, methods, and results of audits of corporate finance or operations, etc.) (1) The internal auditors have communicated the result of the audit reports to the members of the Audit Committee every end of the next month, and have presented the findings of all audit reports in the meetings of the Audit Committee and Board of Directors. (2) The members of the Audit Committee shall communicate to the CPAs if necessary. (3)2018 mainly communication is summarized as follows: Date Communication with Chief Internal Auditor Communication with CPAs 1st Regular Meeting of the Frist Audit Committee Aug 13, 2018 Reviewing the Internal Audit Report. 2nd Regular Meeting of the First Audit Committee Nov 09, 2018 Reviewing the Internal Audit Report. 1. 2018 of the key audit matters. 2. Latest Amended of Company Act information. 3rd Regular Meeting of the First Audit Committee Dec 19, 2018 Reviewing the Internal Audit Report. Reviewing and approving 2019 Internal Audit Plan. Note: Detail Information president on the company’s website: http://www.taiwanline.com.tw (4)If any of the independent directors’ opinions circumstances occur, the dates of the meetings, sessions, contents of motion, resolution of Board of directors and the company’s response should be specified: None.

• 17 -

3.3.3 Attendance of Supervisors at Board Meetings

A total of six (A) meetings of the Board of Directors were held in the previous period. The attendance of supervisors was as follows:

Title	Name	Attendance in Person (B)	Attendance Rate (%) 【Ｂ/Ａ】	Remarks
Supervisor	Representative of Ching Mao Management Consulting CO. Ltd: Yu, He-Bei	2	100	Resigned on Jun 26, 2018, and replaced by the Audit Committee
Supervisor	Ou, Chin-Shih	2	100	Resigned on Jun 26, 2018, and replaced by the Audit Committee
Other mentionable items: 1. Composition and responsibilities of supervisors: (1) Communications between supervisors and the Company's employees and shareholders (e.g., communication channels and methods, etc.): Supervisor has the right to survey the company’s financial and operation business in any time, and management team shall pervade the report if necessary. (2) Communications between supervisors and the Company's chief internal auditor and CPA (e.g. items, methods and results of the audits of corporate finance or operations, etc.): The internal auditors have communicated the result of the audit reports to the supervisors every end of the next month, and have presented the findings of all audit reports in the meetings of the Board of Directors. The supervisors shall communicate to the CPAs if necessary. 2018 mainly communication is summarized as follows: Date Matters Communicated Resolution and Opinion Mar 23, 2018 Review of the Company’s Internal Audit Report. Review of the Company’s 2017 Statement on Internal Control. None May 11, 2018 Review of the Company’s Internal Audit Report. Note: Detail Information president on the following website: http://www.taiwanline.com.tw. 2. If a supervisor expresses an opinion during a meeting of the Board of Directors, the dates of the meetings, sessions, contents of motion, resolutions of the directors’ meetings and the company’s response to the supervisor’s opinion should be specified: None.

• 18 -

3.3.4 . Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
1. Does the company establish and disclose the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?			TNC has established the “Best-Practice Principles for Corporate Governance” and disclosed on the official website. ( http://www.taiwanline.com.tw)	None
2. Shareholding structure & shareholders’ rights (1) Does the company establish an internal operating procedure to deal with shareholders’ suggestions, doubts, disputes and litigations, and implement based on the procedure? (2) Does the company possess the list of its major shareholders as well as the ultimate owners of those shares? (3) Does the company establish and execute the risk management and firewall system within its conglomerate structure? (4) Does the company establish internal rules against insiders trading with undisclosedinformation?	  		TNC has designated a spokesperson or an agency spokesperson to handle shareholders’ suggestions, doubts, disputes, and litigation instead. Moreover, TNC will establish an internal operating procedure as need. TNC discloses shareholders’ status information under the law on time, and also keeps good relationships with each other. TNC has established appropriate internal Rules to strictly regulate the activities of operation, trading, and financial transactions between the company and its affiliates. TNC has established “Procedure for Handling Material Inside Information” to push relevant personnelto observe.	As summarized None None None
3. Composition and Responsibilities of the Board of Directors (1) Does the Board develop and implement a diversified policy for the composition of its members? (2) Does the company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee? (3) Does the company establish a standard to measure the performance of the Board, and implement it annually?	 		TNC has established diversifications by the law. TNC has established the remuneration committee and set up the audit committee after the 2018 Shareholders' Meeting by regulations. TNC has formulated rules and procedures for evaluating the Board’s performance and conducts it annually.	None As summarized None.

• 19 -

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(4) Does the company regularly evaluate the independence of CPAs?			The CPA Provide” Statement of Independence” annually, which were proposed by the Corporation’s board of director. TNC evaluates the independence of CPAs of the following items annually: 1. The CPA does not have a direct or indirect financial interest relationship with the Company. 2. The CPA does not have a close business relationship or potential employment relationship with the Company. 3. The CPA does not serve as the advocate of the company. 4. The CPA does not become familiar with the personnel of the company. 5. The CPA does not coerce by the company. 6. Assessment of the designated period. (The CPA has complied with the requirements of independence.)	None.
4. Does the company set up a corporate governance unit or appoint personnel responsible for corporate governance matters (including but not limited to providing information for directors and supervisors to perform their functions, handling work related to meetings of the board of directors and the shareholders' meetings, filing company registration and changes to company registration, and producing minutes of board meetings and shareholders’ meetings)?			In order to protect shareholders' rights and strengthen the functions of the board’s directors, the company has designated the manager, financial department, with more than three years of management experience in finance, accounting and stock affairs as corporate governance personnel who responsible for information provided, business performance, assistance for directors and supervisors in complying with the laws and regulations. Handle matters relating to the board meetings and the shareholders' meeting by thelaw.	None
5. Does the company establish a communication channel and build a designated section on its website for stakeholders (including but not limited to shareholders, employees, customers, and suppliers), as well as handle all the issues they care for in terms of corporate social responsibilities?			TNC has provided a communication channel on website for shareholders and internal crew, as well as constructed a shareholder’s area for updating information.	None
6. Does the company appoint a professional shareholder service agency to deal with shareholder affairs?			TNC designates Stock agent of Taishin International Bank to deal with shareholder affairs	None
7. Information Disclosure (1) Does the company have a corporate			TNC has set up a Chinese/English	None
	- 20 -

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
website to disclose both financial standings and the status of corporate governance? (2) Does the company have other information disclosure channels (e.g., building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)?			website (http://www.taiwanline.com.tw). To disclose information regarding the Company’s financials, business, and corporate governance status for investors’ reference. The Company has assigned an appropriate person to handle information collectionand disclosure.	None
8. Is there any other important information to facilitate a better understanding of the company’s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors and supervisors)?			1. Employee benefits and employee care: labor insurance, including family dependents (health insurance), group insurance, and retirement system. 2. Investor relations: the finance and business-related information will be disclosed regularly or irregularly to MOPS and website. 3. The relationship between suppliers and company: the company has made a long-term cooperation contract with suppliers based on mutual trust and benefit. 4. Directors’ and supervisors’ training records: the company will inform directors of training information irregularly, and disclosed the training status on MOPS. 5. The implementation of customer relations policies, and purchasing insurance for directors and supervisors: the company purchase insurance annually of directors, supervisors, andmanagers.	None
9. Please explain the improvements which have been made in accordance with the results of the Corporate Governance Evaluation System released by the Corporate Governance Center, Taiwan Stock Exchange, and provide the priority enhancement measures.			TNC has accomplished English notice of meeting in the year of 2018 and uploaded to MOPS 30 days before the shareholders meeting date. We have accomplished English material information on MOPS in 2018. TNC established the board performance evaluation and approved by the board of directors in 2018. The evaluation results were disclosed on the Company's website. We have disclosed the protection measures for employees' working environment and personalsafetyinthe	None

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
			company's annual report and website in 106 years, to provide a safe and healthy working environment, education training for employees TNC has set up a shareholder’s area and also added an appropriate person to handle information collection and disclosure. In response to corporate governance evaluation, we give priority to strengthening the following matters TNC will continue to improve the part that has not scored in 2017. In 2018, we will focus on enhancing the implementation of CSR, and on strengthening BOD’s operation and functions. Furthermore, we’ll conduct corporate governance evaluation, and build the image of corporate governance culture.

To respect the rights and interests of stakeholders and strengthen the powers of the board of directors, TNC’s board of directors made a resolution of the appointed General Manager of Financial Department Chen, Chien-Chou, also serves as a corporate governance officer:

1. Corporate governance officer, said a General Manager and can also serve as another department, shall be a qualified, practice-eligible lawyer or accountant or have been in a managerial position for at least three years in a security, financial, or futures-related institution or a public company.

2. Corporate governance officer shall furnish information required for business execution by directors, assisting directors with legal compliance, and handling matters relating to board meetings and shareholder’s meetings according to law. ..etc.

3. General Manager of the financial department, Chen, Chien-Chou, has qualified on the above requirement by regulations.

Related implementation status in 2018:

1. Assist the directors in performing their duties, provide the required information, and arrange for directors to pursue further studies:

2. (1) Inform the members of the board of directors about the revision of the company's business areas and the latest laws and regulations related to corporate governance.

3. (2) Providing company information required by the directors to maintain smooth communication and communication between directors and unit supervisors.

4. (3) Assist in arranging independent directors to meet with the company management, internal audit supervisor or visa accountant, communicate and understand Issues related to the company's financial business.

5. (4) According to the company's industrial characteristics and the latest economic development, arrange for directors to participate in the annual refresher program and curriculum, total seventeen times for 51 hours.

6. 22 -

7. To assist the board of directors and shareholders' meeting procedures and resolutions: (1) Report to the Board of Directors and the Audit Committee, the company's corporate governance operations, shareholders' meetings, and directors held relevant laws and corporate governance code specifications.

8. (2) Assist and remind the directors of the regulations that should be followed when performing business.

9. (3) After the board of directors, responsible for the release of significant information on relevant resolutions, to ensure the legality and correctness of the content of the re-examination, guarantee investor trading information equivalence.

10. The agenda of the board of directors shall be notified to the directors seven days before the meeting, and the meeting shall be convened to provide the meeting materials. If the issues need to be avoided, the matters will be reminded beforehand and the minutes of the board meeting will be completed within 20 days after the meeting.

11. Handle the pre-registration of the date of the shareholders' meeting by the law, make a notice of the meeting within the statutory time limit, discuss the proceedings, and record the proceedings and change the registration in the revised charter or directors.

12. 23 -

3.3.5. Composition, Responsibilities, and Operations of the Remuneration Committee

The Remuneration Committee assists the Board in discharging its responsibilities relating to the Company’s compensation and benefits policies, plans and programs, and the evaluation of the directors’ and executives’ compensation.

The Chairman of the Remuneration Committee convened four regular meetings in 2016. The Remuneration Committee Charter is available on the Company’s corporate website.

1. Professional Qualifications and Independence Analysis of Remuneration Committee Members

Title	Criteria Name	Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years’Work Experience	Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years’Work Experience	Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years’Work Experience	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Independence Criteria (Note)	Number of Other Public Companies in Which the Individual is Concurrently Serving as a Remuneration Committee Member	Remarks
		An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university	A judge, public prosecutor, attorney, Certified Public Accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the business of the Company	Has work experience in the areas of commerce, law, finance, or accounting, or otherwise necessary for the business of the Company	1	2	3	4	5	6	7	8
Independent director	Wang, Chin-San	Yes	Yes	Yes									0	Applied
Nature Person	Kuo, Ping-Hsiu	Yes	-	Yes									0	-
Nature Person	Su, Yu-Ching	-	-	Yes									0	-
Independent director	Bau, Jia-Yuan	Yes	-	Yes									0	Applied
Nature Person	Syu, Shu-Ming	-	-	Yes									0	-

Note: Please tick the corresponding boxes that apply to a member during the two years prior to being elected or during the term(s) of office.

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

(2) Not a director or supervisor of affiliated companies. Not applicable in cases where the person is an independent director of the parent company or any subsidiary as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.

(3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company, or ranking in the top 10 in holdings.

(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three sub-paragraphs.

(5) Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company, or who holds shares ranking in the top five holdings.

(6) Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution which has a financial or business relationship with the Company.

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

(8) Not a person of any conditions defined in Article 30 of the Company Law.

Remarks: If the members are directors, please indicate whether they meet the requirements of Article 6(5) of the “Stock Listing or the Settlement and Exercise of Duties of the Payroll Committee of the Trading Companies.”

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• Compensation and remuneration committee authority:

• The committee shall faithfully perform the following functions and powers with the attention of the excellent manager and submit the recommendations to the board of directors for discussion: (1) Review this procedure regularly and propose amendments.

• (2) Establish and regularly review the policies, systems, standards, and structures of the performance evaluation and salary remuneration of directors and managers of the Company.

• (3) Regularly assess and determine the salary remuneration of the directors and managers of the company.

• (4) Matters relating to salary remunerations handed down by other board of directors.

When the committee performs its previous functions and powers, it shall be based on the following principles:

• (1) Ensure that the company's salary compensation arrangements are in compliance with relevant laws and regulations and are sufficient to attract talents.

• (2) The performance appraisal and salary remuneration of directors and managers should refer to the normal level of the peers, and consider the time and the responsibilities of the individuals, and assess the relevance of the individual's performance to the company's operating performance and future risks.

• (3) Directors and managers should not be led to engage in behaviors that exceed the company's risk appetite in pursuit of salary compensation.

• (4) Members of the Committee shall not participate in the discussion and voting of their personal salary remuneration decisions.

The salary remuneration referred to in the preceding two items includes cash remuneration, stock options, dividend share, retirement benefits or resignation benefits, various allowances and other measures with substantial rewards; the scope shall be in accordance with the guidelines for the record of the annual report of the public company. The remuneration of the directors and managers is the same.

1. Attendance of Members at Remuneration Committee Meetings

2. (1) A total of three members in the Remuneration Committee.

3. (2) Current term: From July 01, 2018 to Jun 25, 2021. From the previous term to the current term, a total of four (A) Remuneration Committee meetings were held in the previous period. The attendance record of the Remuneration Committee members was as follows:

Title	Name	Attendance in Person( )	By Proxy	Attendance Rate in Person(%)( / )	Remarks
Convener	Wang, Chin-San	4	-	100	Re-Joined on July 01, 2018
Committee Member	Kuo, Ping-Hsiu	3	-	100	Joined on July 01, 2018
Committee Member	Su, Yu-Ching	3	-	100	Joined on July 01, 2018
Independent director	Bau, Jia-Yuan	1	-	100	Resigned on Jun 26, 2018
Committee Member	Syu, Shu-Ming	1	-	100	Resigned on Jun 26, 2018
Other mentionable items: 1. If the board of directors declines to adopt or modifies a recommendation of the remuneration committee, it should specify the date of the meeting, session, content of the motion, resolution by the board of directors, and the Company’s response to the remuneration committee’s opinion (eg., the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified): None. 2. Resolutions of the remuneration committee objected to by members or expressed reservations and recorded or declared in writing, the date of the meeting, session, the content of the motion, all members’ opinions and the response to members’ opinion should be specified: None.

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• (3) Annual Operation Situation: A total of three Remuneration Committee meetings were held in the annual year.

Date	Contents	Resolution	Committee’s Opinion
24th Remuneration Committee 7th Regular Meeting Mar 09, 2018	TNC's 2017 directors and managers are paid for the amount of NT$4,970,198.	Approved	None
25th Remuneration Committee 1st Regular Meeting Jul 19, 2018	The monthly salary remuneration case of the independent directors and general directors of the twenty-fifth session of the Board of Directors (excluding the chairman and general manager).	Approved	None
25th Remuneration Committee 2nd Regular Meeting Dec 04, 2018	The Company intends to press 2018 annual director's remuneration before tax benefit (not yet put out employees and directors remuneration) set aside one percent.	Approved	None

3.3.6 Corporate Social Responsibility

3.3.6 Corporate Social Responsibility
Evaluation Item	Implementation Status			Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
1. Corporate Governance Implementation (1) Does the company declare its corporate social responsibility policy and examine the results of the implementation? (2) Does the company provide educational training on corporate social responsibility on a regular basis? (3) Does the company establish exclusively (or concurrently) dedicated first-line managers authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board? (4) Does the company declare a reasonable salary remuneration policy, and integrate the employee performance appraisal system with its corporate social responsibility policy, as well as establish an effective reward and disciplinary system?	 	 	The company will establish a social responsibility policy by the law in the future. Regularly hold social responsibility education and training such as environmental protection, energy conservation, and carbon reduction. The company will set up an enterprise for corporate social responsibility by the law. The company has established a reasonable salary remuneration policy concerning industry standards.	As summarized None As summarized None
2. Sustainable Environment Development (1) Does the company endeavor to utilize all resourcesmore efficiently and userenewable			The company is committed to improving the efficiency of resource utilization, and establishingregulations ofenergy	None

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
materials which have low impact on the environment? (2) Does the company establish proper environmental management systems based on the characteristics of their industries?			conservation, carbon reduction management, and taking the following measures: 1. Promote paperless, transmit data via email, make announcements, and use the projector to play conference materials. 2. Encourage double-sided printing of paper and reuse of blank pages on the reverse side. 3. Set up a paper recycling bin to recycle paper that cannot be reused. 4. According to the outdoor temperature, the temperature of the air conditioner is controlled by the building to achieve energy saving and carbon reduction. 5. Turn off the primary light source during noon breaks and off hours. 6. It is expected that the office will be fully equipped with energy-saving LED lights in 2018. 7. Adjust the water output of the faucet to save water, and promote the colleagues to conserve water and control the amount of water. 8. Implement waste sorting and resource recycling and implement environmental protection policies. The Company’s policy is “Teamwork, Challenge, Innovation, and Service.” We always keep the principal of safety first and customers first, pursue improvement on ship’s safe operation, ensure the safety of life at sea, and avoid marine pollution. Our fleets follow International Safety Management Code (ISM Code) and the International Maritime Organization (IMO) MARPOL regulations to carry out various measures to prevent environmental pollution. The structure and machine of our vessels in operation are well designed. The sewage treatment and oily water separator in all of our fleets have complied with the rule of MARPOL 73/78. To avoid pollution and damage happening in the marine environment and to reduce energy consumption, our new build 60,000 /80,000 -ton Bulk Carriers constructed at Oshima Shipyard are equipped with Ballast Water Treatment System approved by the International Maritime Organization(IMO) to	None

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(3) Does the company monitor the impact of climate change on its operations and conduct greenhouse gas inspections, as well as establish company strategies for energy conservation and carbon reduction?			comply with the strict international regulations. All the fleets under management had been certified by the certificate of “International Oil Pollution Prevention MARPOL.” We, the company had been completed the installation of BWTS (Ballast Water Treatment System) for three existing vessels before the end of 2018 and also replace other three old vessels which have higher fuel oil consumption with new energy-saving vessels that we just ordered to reduce emissions of environmentally harmful gases such as CO2, NOx, etc. In order to achieve energy saving, carbon reduction, and environment protection, our M.V Tai Hwa applied shore power facilities to reduce the fuel oil consumption when vessel at berth since August of 2015 and it’s estimated that around 1,000 metric tons of carbon emissions will be reduced. We’ll continue to implement this project so that the emission of methane (CH4) and nitrous oxide (N2O) can be reduced well too. All equipment such as Main Engine, Generators, Incinerators, etc., of our vessels built since 2000 have complied with the nitrogen oxide Safety Emission Standards which indicated in the International Maritime Organization (IMO) 1997 protocol. We also do the maintenance regularly and replace the spare parts to preserve their function. Our vessel’s emission of carbon dioxide in 2018 compared to 2012 have reduced nearly 30%, and we’ll keep moving toward the goal of reducing carbon emissions in 2019.	None
3. Preserving Public Welfare (1) Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights? (2) Has the company set up an employee hotline or grievance mechanism to handle complaints with appropriate solutions?	 		TNC’s management policy is formulated in accordance with relevant government labor laws and IMO regulations, and certified by ISM Code. TNC upholds the principle of proper faith management and establishes an independent reporting mailbox at accusation @taiwanline.com.tw for the internal and external personnel of the company to use and assign specialized staff to accept.	None None

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(3) Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis? (4) Does the company setup a communication channel with employees on a regular basis, as well as reasonably inform employees of any significant changes in operations that may have an impact on them? (5) Does the company provide its employees with career development and training sessions? (6) Does the company establish any consumer protection mechanisms and appealing procedures regarding research development, purchasing, producing, operating, and service? (7)Does the company advertise andlabel its	    		TNC is committed to the maintenance of the working environment and staff safety and protection, with labor safety and health management room and occupational safety and health committee. According to law, Regular monitoring of carbon dioxide and fire control, regular maintenance of elevators, fire fighting facilities, and enforcement of access control, as well as measures to beautify the environment to maintain safety and comfort in the working environment. In addition, employees have regular health checks and health prevention workshops to maintain the safety of personnel. In order to create a harmonious relationship and prevent sexual harassment, and provide a smooth and safe working environment, the company has sexual harassment prevention key points and sexual harassment prevention training to protect employees. In addition, in order to maintain the environmental safety and physical and mental health of our maritime colleagues, and to promote the international maritime labor convention(MLC) ship certification, our bulk fleet has passed the certification and obtained the certificate. The company has established communication channels such as interviews in regular performance appraisal and usually communicates up and down without hindrance, and employees are aware of operational changes. The Company arranges internal and external training for the employees, and also provides practical opportunities to students of maritime colleges, in order to cultivate maritime talents. In recent years, the Company was awarded by the Ministry of Transportation and Communications in the Nautical Festival. A consumer complaint channel is established for the operated vessel, M/V TAI HUA, to protect consumer rights. The Company’sfleets are operated and	None None None None None

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
goods and services according to relevant regulations and international standards? (8) Does the company evaluate the records of suppliers’ impact on the environment and society before taking on business partnerships? (9) Do the contracts between the company and its major suppliers include termination clauses which come into force once the suppliers breach the corporate social responsibility policy and cause appreciable impact on the environment and society?	 		certified in accordance with relevant regulations and international standards. Suppliers the Company adapted are with functional social assessment and without impact on the environment and society. TNC and the suppliers have long-term cooperation based on mutual trust and mutual benefit. When signing the contract, additional terms to regulate manufacturers are added according to the actual demands, and the relationship is quite stable. When purchasing ship’s stores, suppliers are strictly requested to provide the declaration of non-asbestos component issued by original manufacturers or suppliers at the time of delivery.	None None
4. Enhancing Information Disclosure: Does the company disclose relevant and reliable information regarding its corporate social responsibility on its website and the Market Observation Post System(MOPS)?			Information disclosure has been strengthened.	None
5. If the company has established the corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies,” please describe any discrepancy between the Principles and their implementation None.
6. Other important information to facilitate better understanding of the company’s corporate social responsibility practices For moreinformation, please seeTNC’s website“Rules ofthe company saving energies and greenpolicy.”
7. A clear statement shall be made below if the corporate social responsibility reports were verified by external certification, institutions All management bulkcarriershas approved by thelegal institutions and been issued theMARPOLcertificate.

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3.3.7.Ethical Corporate Management

Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
1. Establishment of ethical corporate management policies and programs (1) Does the company declare its ethical corporate management policies and procedures in its guidelines and external documents, as well as the commitment from its board to implement the policies? (2) Does the company establish policies to prevent unethical conduct with clear statements regarding relevant procedures, guidelines of conduct, punishment for violation, rules of appeal, and the commitment to implement the policies? (3) Does the company establish appropriate precautions against high-potential unethical conducts or listed activities stated in Article 2, Paragraph 7 of the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies?	  		The company complies with the Securities Exchange Act, The Company Act, and other relevant law. The related information has been established in the Ethical Corporate Management Principle, the Ethical Code of conduct, Working Regulations, and the Board of Directors. The principles and related regulations were announced and disseminated to employees to enhance integrity and self-discipline, and also invited colleagues to sign a statement of employee loyalty which is abided by the principle and obligation of loyal and honest management. 1. TNC requests directors and managers to take the lead in setting an example to follow the principle which is abided by business ethics and professional ethics. 2. TNC has established the Company’s external and internal process that provided employees to follow up.	None None None
2. Fulfill operations integrity policy (1) Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts? (2) Does the company establish an exclusively (or concurrently) dedicated unit supervised by the Board to be in charge of corporate integrity? (3) Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it? (4) Has the company established effective systems for both accounting and internal control to facilitate ethical corporate management, and are they audited by either internal auditors or CPAs on a regular basis?	   		TNC sets out ‘Procedures for Handling Material Inside Information.’ to oversee the relevant personnel to comply with, and maintain the correct use of information. TNC conducts its business fairly and transparently and considers cautiously before selecting suppliers. The administration department of the company is in charge of promoting the principle and submitting quarterly reports to the Board of Directors. In the rules of procedure of the board of directors of the company, the directors of the board of directors shall be interested in the matters of the meeting and the legal person of their own or their representatives. They shall explain the critical content of their interests in the board of directors,such as the interests of	None None None None

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Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(5) Does the company regularly hold internal and external educational trainings on operational integrity?			the company, and may not join Discussion and voting shall be evaded in discussion and voting, and no other directors may exercise their voting rights. TNC has established an accounting system and internal control system. The internal auditors of the company regularly check the audit plan according to the audit plan and have implemented honest management to avoid the occurrence of fraud. By the provisions of the law, regular internal and external integrity education and training willbehandled.	As summarized
3. Operation of the integrity channel (1) Does the company establish both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up? (2) Does the company establish standard operating procedures for confidential reporting on investigating accusation cases? (3) Does the company provide proper whistleblowerprotection?	  		The company has established an e-mail address (accusation@taiwanline.com.tw)and appointed person (Auditing Office) to accept reports and related complaints. The company has established standard operating procedures for confidential reporting on investigating accusation cases. The company has proper measures to protect the whistleblower.	None None None
4. Strengthening information disclosure: Does the company disclose its ethical corporate management policies and the results of its implementation on the company’s website and MOPS?			The Company’s Ethical Corporate Management Best-Practice Principles and the results of our implementation have been posted on the Company’s website and MOPS.	None
5. If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation Therehave been no differences.
6. Other important information to facilitate a better understanding of the company’s ethical corporate management policies (e.g., review and amend its policies). TNC continues to promote integrity-based policies based on a clean, transparent, and responsible business philosophy and develops relevant measures.

3.3.8 Other Company-established corporate governance rules and regulations:

In order to implement corporate governance, the Company has formulated the Code of Practice on Corporate Governance, the Code of Conduct for Good Faith, the Code of Ethical Conduct and the Rules of Procedure for Board Meetings, for more information please refer to the Company’s website for the company’s Governance Principles：http://www.taiwanline.com.tw。

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3.3.9 Other important information to improve the understanding of corporate governance:

The company established “Procedures for Handling Material Inside Information” as the basis for the company's significant information processing and disclosure mechanism, and will un-regularly review to meet current legal and substantive management needs. The Measures are also announced in the internal management system for managers and employees to check at any time. Meanwhile, the internal information of the insiders of the company will un-regularly notify.

3.3.10 Internal Control Statement ：

1. Please refer to pages 31 of the Chinese annual report for TNC’s 2018 Internal Control Statement.

2. The Company is required by the Security and Futures Bureau to hire an accountant to audit the Company’s internal control system and disclose the audit report made by accountants: None.

3.3.11 Lawful punishment inflicted on the Company, and/ or disciplinary action taken by the Company against its employees for violating internal regulations in the latest year and up to the printing date of this Annual Report); important errors committed; and correction and improvement procedures: None.

3.3.12 Important resolutions made by the Shareholders’ Meeting and Board of Directors by the end of 2017 and the printing date of the annual report.

1. Shareholders’ Meeting:

The resolutions approved by the entire attending shareholders at the regular shareholders’ meeting on June 26, 2018, and its implementation as follow:

• (1) To approve an amendment to the "Articles of Incorporation."

• Implementation: The amendment procedures have approved by the Ministry of

  • Economic Affairs and completed the registration of changes on August 22, 2018, which announced on TNC’s website.

• (2) To approve an amendment to the "Operational Procedures for Acquisition and Disposal of Assets."

• Implementation: TNC has been processed with the amendment procedures and announced on the company’s website.

• (3) To approve an amendment to the "Operational Procedures for Endorsements and Guarantees."

• Implementation: The company has been processed with the amendment procedures and announced on the TNC’s website.

• (4) To approve an amendment to the "Operational Procedures for Loaning of Company Funds."

• Implementation: The company has been processed with the amendment procedures and announced on the TNC’s website.

• (5) To approved election of directors(including independent directors). Implementation: The company has been completed in accordance with the resolutions of the shareholders ' meeting.

• (6) To release prohibition on directors (including independent directors) from participation in the competition business. Implementation: The company has been completed in accordance with the resolutions of the shareholders ' meeting.

• (7) To recognize the 2017 business report and financial statements. Implementation: The company has been completed in accordance with the resolutions of the shareholders ' meeting.

• (8) To recognize the proposal for distribution of 2017 profits. Implementation: The company has been completed in accordance with the resolutions of the shareholders ' meeting.

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2. Board Meetings:

Date	Major resolutions
The 24th Board of Directors of the 20th Board meeting (May 11, 2018)	1. The proposal for the distribution of 2017 profits. 2. Examine the qualifications of candidates for directors (including independent directors). 3. To release prohibition on directors (including independent directors) from participation in the competitive business. Resolution: All Directors present at the meeting passed the motion unanimously.
The 25th Board of Directors of the 1st Board meeting (Jun 26, 2018)	1. The election of the 25th Chairman. 2. Appointed the 25th Remuneration Committee members. Resolution: All Directors present at the meeting passed the motion unanimously.
The 25th Board of Directors of the 2nd Board meeting (Aug 13, 2018)	1. The proposal for replacement of older fleet. 2. Designated September 3, 2018, as the ex-dividend record date. 3. The company and wholly owned subsidiary apply for co-loan or another credit amount from current financial institutions, and the company agrees to be a guarantor for its subsidiary. 4. The selection of the accounting and accounting firms of the Company in the years of 2018 and 2019, the appointment of accountants and service public funds. 5. In order to support the government's new southbound policy, the company establishes an overseas joint venture holding company in Singapore with Taiwan International Ports Corporation, Ltd., and the maximum amount of investment is US$6 million. 6. Amendment to the "Operational Procedures for Loaning of Company Funds." Resolution: All Directors present at the meeting passed the motion unanimously.
The 25th Board of Directors of the 3td Board meeting (Nov 9, 2018)	1. In order to protect the shareholders' rights and strengthen the functions of the board of directors, the company designates the company's corporate governance personnel. 2. To release managers from non-competition restrictions Resolution: All Directors present at the meeting passed the motion unanimously.
The 25th Board of Directors of the 4th Board meeting (Dec 9, 2018)	1. Wholly owned subsidiary -Tai Shing Maritime Co., S.A has ordered no more than four 80,000dwt bulk carriers to Namura Shipbuilding Co., Ltd and Oshima Shipbuilding Co., Ltd, and the total amount does not exceed US$136 million. 2. Wholly owned subsidiary -Tai Shing Maritime Co., S.A. has upgraded two of Oshima's new bulk carriers from 62K-Type to 64K-type and added a Sox Scrubber to each bulk. 3. The company has completed an annual budget of 2019. 4. The proportion and distribution method of the Company's employees, directors, and supervisors for the year 2018 remuneration. 5. Formulate the company's internal audit plan for the year of 2019. Resolution: All Directors present at the meeting passed the motion unanimously.
The 25th Board of Directors of the 4th Board meeting (Mar 26, 2019)	1. The Company's internal control for the year 2018 has completed self-assessment according to relevant regulations, and issued a statement of internal control that is effective and implementation and declares it to MOPS. 2. According to the contracts, TNC issues a performance guarantee for wholly owned subsidiary Tai Shing Maritime Co., S.A. about two of 80,000dwt newly-built bulk carriers for SUMITOMO Cop., and the total guaranteed amount is USD62.22 million.

• 34 -

Date

Major resolutions

3. The company evaluates for The independence of accountant for the year of 2019. 4. The proposal of the company 2019 Annual Shareholders' Meeting. 5. The amount and method of payment of the company’s directors, supervisors, and employees’ compensation. 6. The proposal of the company’s 2018 business report, consolidated and stand-alone financial statements. 7. Amendment to the company’s "Operational Procedures for Acquisition and Disposal of Assets." 8. Amendment to the company’s "Operational Procedures for Loaning of Company Funds." Resolution: All Directors present at the meeting passed the motion unanimously.

3.3.13 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors: None.

3.3.14 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit, and R&D: None.

3.3.15 Certification of Employees Whose Jobs are	Related to the Company’s Finance:
Name of Certificate	Number of Employees
Certified Public Accountants (CPA)	2
Certified Internal Auditor(CIA)	1

3.4 Audit Fee

3.4 Audit Fee
Accounting Firm	Name of CPA		Period Covered by CPA’s Audit	Remarks
Deloitte & Touche	Wong, Ya-Ling	Shao, Chih-Ming	Jan 2018~Dec, 2018

			Unit: NT$ thousands	Unit: NT$ thousands
Fee Items Fee Range		Audit Fee	Non-audit Fee	Total
1	Under NT$ 2,000,000		√
2	Over NT$2,000,000 ~ Under NT$4,000,000	√
3	Over NT$4,000,000 ~ Under NT$6,000,000			√
4	Over NT$6,000,000 ~ Under NT$8,000,000
5	Over NT$8,000,000 ~ Under NT$10,000,000
6	Over NT$10,000,000

Note: The 2018 non-audit public fee for the year was NT$410 thousand, and the contents were 100 thousand for the agreement, NT$140 thousand for the business tax, and NT$170 thousand for the transfer price.

• 35 -

Unit: NT$ thousands

Accounting Firm	Name of CPA	Audit Fee		Non-audit Fee	Non-audit Fee			Period Covered by CPA’s Audit	Remarks
			System of Design	Company Registration	Human Resource	Others	Subtotal
Deloitte & Touche	Wong, Ya-Ling	3,880				410	410	Jan 2018- Dec 2018
	Shao, Chih-Ming							Jan 2018- Dec 2018

Notes:

1. The non-audit fee paid to a certified CPA, certified Office of CPA and affiliated companies account for over 1/4 to audit fee: Not applicable

2. During the past year, the CPA has changed, and there is a decrease in the amount or percentage of the auditing fee compared to the previous year: None

3. The auditing fee has not decreased by more than 15% compared to the previous year: None

3.5 Replacement of CPA

1. Regarding the former CPA

2. 2018 None. 2017 None.

3. Regarding the successor CPA 2018 None. 2017 None.

4. The former CPA's written response to the matters referred to in Article 10.5(1) and Article10.5(2)(iii): Not applicable

3.6 The Company’s Chairman, Chief Executive Officer, Chief Financial Officer, and Managers in Charge of its Finance and Accounting Operations Has in the Most Recent Year Held any Positions at TNC’s Independent Auditing Firm or its Affiliates Enterprise: None.

• 36 -

3.7 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders 3.7.1 Changes in Shareholding

Unit: Shares

				Unit: Shares	Unit: Shares
Title	Name	2017		As of Apr. 28,2018
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Director	Ministry of Transportation and Communications	0	0	0	0
Director	Chinese Maritime Transport Ltd.	0	0	0	0
Director	Global Growing International Co., Ltd. representative:	0	0	0	0
Director	Yunn WangInvestment Co. Ltd.	0	0	0	0
Chairman	Liu,Wen-Ching	0	0	0	0
Director	Mei,Char-Lee	0	0	0	0
Director Resigned on Aug10,2018	Chi, Wen-Jong	0	0	N/A	N/A
Director Joined on Aug10,2018	Chang, Chen-Yuan	0	0	0	0
Director	Lin,Wen-Bor	0	0	0	0
Director	Wang,Tien-Wei	0	0	0	0
Director Joined on Jun 26,2018	Lin, Yu-Chin	0	0	0	0
Independent director	Wang,Chin-San	0	0	0	0
independent director Resigned on Jun 26,2018	Bao, Jya-Yuan	0	0	N/A	N/A
independent director Joined on Jun 26,2018	Huang, Wong-Hsiu	0	0	0	0
Independent director Joined on Jun 26,2018	Lu, Shih-Tong	0	0	0	0
Supervisors Resigned on Jun 26,2018	Jengmao Financial Consultant Ltd.	0	0	N/A	N/A
Supervisors Resigned on Jun 26,2018	Ou, Chin-Shyh	0	0	N/A	N/A
Supervisors Resigned on Jun 26,2018	Yu, Ho-Pei	0	0	N/A	N/A
President	Mei,Char-Lee	0	0	0	0
Executive Vice President	Wang,Hui-Ju	0	0	0	0
Executive Vice President	Peng,Wen-Hsun	0	0	0	0
Auditor General	Wang,Che-Wen	0	0	0	0
Senior Vice President	Chyou,Jong-Lin	0	0	0	0
General Manager	Lu,Chung-Hsing	0	0	0	0
General Manager	Chen,Chien-Chou	0	0	0	0
General Manager	Yu,Yuan-Wang	0	0	0	0
General Manager	Huang,Ruei-Kuang	0	0	0	0
General Manager	Lee,Chin-Te	0	0	0	0
General Manager	Chang,Chin-Wei	0	0	0	0
General Manager	Lin,Chi-Sheng	0	0	0	0
Special Assistant to President	Chang, Hao-Yuan	0	0	0	0
Major shareholder (over 10%)	Yang Ming Marine Transport Corp.	0	0	0	0

3.7.2 Information on equity transfer or equity pledge: Not applicable.

• 37 -

3.8 Relationship among the Top Ten Shareholders

Date: Apr 27, 2019

Name	Current Shareholding	Current Shareholding	Spouse’s/ minor’s Shareholding	Spouse’s/ minor’s Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees	Remarks
	Shares	%	Shares	%	Shares	%	Name	Relationship
MOTC: Lin,Chia-Lung	110,436,379	26.46	0	0	0	0	Yang Ming Marine	Director
Yang Ming Marine Transport Corp. Hsieh, Bronson	70,758,243	16.96	0	0	0	0	Yunn Wang Investment	Director
Chinese Maritime Transport Ltd. Zhou, Mu-Hao	31,125,000	7.46	0	0	0	0	Plenty Investment Co., Ltd.	Parent-Subsidiary Enterprise
Plenty Investment Co., Ltd. Zhou, Mu-Hao	12,297,052	2.95	0	0	0	0	Chinese Maritime	Parent-Subsidiary Enterprise
Yunn Wang Investment Co. Ltd.: Wang, Walter H.T.	10,079,000	2.42	0	0	0	0	Yang Ming Marine	Affiliated Enterprise
Global Growing International Co., Ltd.: Lin, Yu-Chin	9,536,000	2.29	0	0	0	0	-	-
Jack Xia Investment Co., Ltd. Cai, Shi-Yong	5,690,000	1.36	0	0	0	0	-	-
CTBC Bank Employee Stock Ownership Trust Account of Taiwan Navigation Co., Ltd.	5,639,921	1.35	0	0	0	0
Chen, Chang-Hong	2,700,000	0.65	0	0	0	0	-	-
Su, Xing-Qian	2,530,000	0.61	0	0	0	0

3.9 Ownership of Shares in Affiliated Enterprises

The number of shares held by the company, the company's directors, supervisors, managers and the company directly or indirectly controlled by the company in the same investment business, and the combined proportion of shares is calculated.

Date: Dec 31, 2018; Unit: shares/ %

Affiliated Enterprise	Ownership by the Company	Ownership by the Company	Direct or Indirect Ownership by Directors/Supervisors /Managers	Direct or Indirect Ownership by Directors/Supervisors /Managers	Total Ownership	Total Ownership
	Shares	%	Shares	%	Shares	%
Tai Shing Maritime Co., S.A.	100	100	-	-	100	100
Shin Wang Maritime Inc.	1	100	-	-	1	100
Yunn Wang Investment Co. Ltd.	5,211,474	49.75	-	-	5,211,474	49.75

Note The company uses long-term equity investments in the equity method.

• 38 -

3.10 Manager’s Training Records Information in 2018

Title	Name	Date Elected	Date From/To	Date From/To	Sponsor Unit	Course	Time(hr.)	Remarks
President	Mei, Char-Lee	Jun 01, 2013	Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co.,Ltd.	Western Bulk training of Singapore	1.0
			Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Explanation of inert gases of oil tanker and prevention of marine pollution	1.0
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Advocacy of Money Laundering Prevention	3.0
Executive Vice President	Wang, Hui-Ju	Apr 01, 2016	Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co.,Ltd.	Western Bulk training of Singapore	1.0
			Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Explanation of inert gases of oil tanker and prevention of marine pollution	1.0
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co.,Ltd.	Safety and health of Labor	1.0
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co.,Ltd.	Team training of Self-defense firefighting	1.0
			Oct 02, 2018	Oct 02, 2018	Britannia	Britannia Superintendents Office Seminar	8.0
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Advocacy of Money Laundering Prevention	3.0
Auditor General of Auditing Office	Wang, Che-Wen	Jan 01, 2017	Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co.,Ltd.	Western Bulk training of Singapore	1.0
			Jan 08,2018	Jan 08,2018	Taiwan Navigation Co., Ltd.	Explanation of inert gases of oil tanker and prevention of marine pollution	1.0
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co.,Ltd.	Safety and health of Labor	1.0
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co.,Ltd.	Team training of Self-defense firefighting	1.0
			Jan 28, 2018	Jan 29, 2018	Accounting research and development foundation	Continuing training for internal auditor of public audit company	12.0

• 39 -

Title	Name	Date Elected	Date From/To	Date From/To	Sponsor Unit	Course	Time(hr.)	Remarks
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Advocacy of Money Laundering Prevention	3.0
Senior Vice President of Technical Department	Chyou, Jong-Lin	Aug 11, 2016	Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co.,Ltd.	Western Bulk training of Singapore	1.0
			Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Explanation of inert gases of oil tanker and prevention of marine pollution	1.0
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Advocacy of Money Laundering Prevention	3.0
General Manager of Marine Department	Huang, Ruei-Kuang	Aug 16, 2018	Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co.,Ltd.	Western Bulk training of Singapore	1.0
			Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Explanation of inert gases of oil tanker and prevention of marine pollution	1.0
			Nov 14, 2018	Nov 14, 2018	Taiwan Navigation Co.,Ltd.	Safety and health of Labor	1.0
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Team training of Self-defense firefighting	1.0
General Manager of Traffic Department	Yu, Yuan-Wang	Aug 16, 2018	Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Western Bulk training of Singapore	1.0
			Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Explanation of inert gases of oil tanker and prevention of marine pollution	1.0
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co.,Ltd.	Safety and health of Labor	1.0
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co., Ltd.	Team training of Self-defense firefighting	1.0
			Nov 14, 2018	Nov 14, 2018	Taiwan Navigation Co., Ltd.	Sharing of 2018 IMT TTX PROGRM	2.0
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Advocacy of Money Laundering Prevention	3.0

• 40 -

Title	Name	Date Elected	Date From/To	Date From/To	Sponsor Unit	Course	Time(hr.)	Remarks
General Manager of Financial Department	Chen, Chien-Chou	Jan 01, 2016	Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co.,Ltd.	Western Bulk training of Singapore	1.0
			Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Explanation of inert gases of oil tanker and prevention of marine pollution	1.0
			Sep 27, 2018	Sep 28, 2018	Accounting research and development foundation	Continuing training for accounting manager	12.0
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Advocacy of Money Laundering Prevention	3.0
General Manager of Administrative Department	Peng, Wen-Hsun	Jul 01, 2016	Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Western Bulk training of Singapore	1.0
			Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co.,Ltd.	Explanation of inert gases of oil tanker and prevention of marine pollution	1.0
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co.,Ltd.	Safety and health of Labor	1.0
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co., Ltd.	Team training of Self-defense firefighting	1.0
			May 25, 2018	May 25, 2018	The institute of internal auditors	Analysis of improving governance energy	6.0
			Jan 11, 2018	Jan 11, 2018	The institute of internal auditors	Prevention of financial fraud and skill of financial forensics	6.0
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Advocacy of Money Laundering Prevention	3.0
General Manager of Labor Security Office	Lee, Chin-Te	Sep 01, 2018	Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Western Bulk training of Singapore	1.0
			Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Explanation of inert gases of oil tanker and prevention of marine pollution	1.0
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co.,Ltd.	Safety and health of Labor	1.0

• 41 -

Title	Name	Date Elected	Date From/To	Date From/To	Sponsor Unit	Course	Time(hr.)	Remarks
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co., Ltd.	Team training of Self-defense firefighting	1.0
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Advocacy of Money Laundering Prevention	3.0
General Manager of Planning Department	Lu, Chung-Hsing	Aug 16, 2018	Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Western Bulk training of Singapore	1.0
			Jan 08, 2018	Jan 08, 2018	Taiwan Navigation Co., Ltd.	Explanation of inert gases of oil tanker and prevention of marine pollution	1.0
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Advocacy of Money Laundering Prevention	3.0
General Manager of Kaohsiung Branch Office	Chang, Chin-Wei	Aug 16, 2018	Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co., Ltd.	Safety and health of Labor	1.0
			Jan 25, 2018	Jan 25, 2018	Taiwan Navigation Co., Ltd.	Team training of Self-defense firefighting	1.0
			Dec 10, 2018	Dec 10, 2018	Taiwan Navigation Co., Ltd.	Protection of personal data	3.0
			Dec 28, 2018	Dec 28, 2018	Taiwan Navigation Co., Ltd.	Advocacy of Money Laundering Prevention	3.0

3.11 Continuing Education and Training

To fill the need for affairs, and enhance the quality of human, service and the working safety to reach the goal of the organization, the company designs employee learning and development as a key project for human resources management. Promote various training activities, and talent training programs by the company's operating strategy expanded and professional function training, which is based on core functions. Also, the company provides a variety of training methods and opportunities to subsidize employees' on-the-job training and training resources. The results of the company's 2018 years of education and training are as follow:

• 42 -

Course	Time (hr.)	Total number of person-times	Total Fee(NTD)
Presentation of life planning and work skills	361	163	174,172
Integrity management related courses	192	64
Labor safety and health and environmental protection concept	188	82
Training of new recruit	45	4

In the year of 2018, we organized internal and external education and training (including courses on compliance with integrity, safety and health management, self-defense firefighting training, prevention of marine pollution, and training for new personnel).

3.12 Directors’ and Supervisors’ Training Records in 2018

Title	Name	Date Elected	Training period	Training period	Sponsor Unit	Course	Time(hr.)	Whether or not it corresponds to law(Remarks)
Representative of MOTC:	Liu, Wen-Ching	Sep 19, 2018	May 08, 2018	May 08, 2018	Taiwan Stock Exchange	Forum of new corporate governance for public company	3	Yes
			Nov 07, 2018	Nov 07, 2018	Taiwan Corporation Governance Association	Improve corporate maturity and move towards Industry 4.0	3	Yes
			Nov 07, 2018	Nov 07, 2018	Taiwan Corporation Governance Association	Improve the value of enterprise by digital transformation	3	Yes
Representative of MOTC:	Mei, Char-Lee	Jan 01, 2013	May 08, 2018	May 08, 2018	Taiwan Stock Exchange	Forum of new corporate governance for public company	3	Yes
			Nov 30, 2018	Nov 30, 2018	Taiwan Corporation Governance Association	Responsibility and risk management of director by the new corporate governance	3	Yes
Director	Wang, Tien-Wei	Jul 01, 2016	Oct 26, 2018	Oct 26, 2018	Taiwan Corporation Governance Association	Operation and responsibility of board	3	Yes
			Nov 23, 2018	Nov 23, 2018	Taiwan Corporation Governance Association	Practice of company secretary operation by corporate governance	3	Yes
Director	Lin, Wen-Bor	Jan 18, 2012	Sep 06, 2018	Sep 06, 2018	Securities & Futures Institute	Securities fraud to exchange stock for banknote- issue of illegality between stock and bond issuance	3	Yes
			Oct 17, 2018	Oct 17, 2018	Securities & Futures Institute	Responsibility review -Information disclosure	3	Yes
Director	Lin, Yu-Chin	Jun 26, 2018	Aug 10, 2018	Aug 10, 2018	Taiwan Corporation Governance Association	The secret and non-competition of corporation	3	Yes

• 43 -

Title	Name	Date Elected	Training period	Training period	Sponsor Unit	Course	Time(hr.)	Whether or not it corresponds to law(Remarks)
			Aug 17, 2018	Aug 17, 2018	Taiwan Corporation Governance Association	Last line of defense of corporate governance- - liability insurance of supervisor	3	Yes
			Aug 31, 2018	Aug 31, 2018	Taiwan Corporation Governance Association	Legal liability of insider trading and case study	3	Yes
			Sep 14, 2018	Sep 14, 2018	Taiwan Corporation Governance Association	Corporate governance-operation practice of secretary	3	Yes
Independent Director	Wang, Chin-San	Jun 22, 2015	Oct 29, 2018	Oct 29, 2018	Taiwan Corporation Governance Association	To face the new law, the way of enterprise response	3	Yes
			Oct 29, 2018	Oct 29, 2018	Taiwan Corporation Governance Association	Practice analysis of anti-tax avoidance	3	Yes
Independent Director	Huang, Wong-Hsiu	Jun 26, 2018	Aug 08, 2018	Aug 08, 2018	Taiwan Academy of Banking and Finance	Management and Treatment strategy of news crisis	3	Yes
			Aug 21, 2018	Aug 21, 2018	Securities & Futures Institute	Operation practice of independent director and functional committee	3	Yes
Independent Director	Lu, Shih-Tong	Jun 26, 2018	Aug 02, 2018	Aug 02, 2018	Securities & Futures Institute	Human resources in the M&A process and discussion on the integration of mergers and acquisitions	3	Yes
			Aug 08, 2018	Aug 08, 2018	Taiwan Academy of Banking and Finance	Management and Treatment strategy of news crisis	3	Yes
			Sep 28, 2018	Sep 28, 2018	Taiwan Corporation Governance Association	How to review the financial report with non-financial background	3	Yes
			Nov 07, 2018	Nov 07, 2018	Taiwan Academy of Banking and Finance	Director's loyalty and case analysis	3	Yes

• 44 -

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

Unit: shares /NT$

Month/ Year	Issue Price (Par Share (NT$)	Authorized Share Capital	Authorized Share Capital	Paid-in Capital Stock	Paid-in Capital Stock	Remark	Remark
		Shares	Amount (NT$)	Shares	Amount (NT$)	Sources of Capital	Capital Increased by Assets Other than Cash	Other
1980	10	142,822,600	1,428,226,000	142,822,600	1,428,226,000	Capital increased bycash	N/A	Note (1)
1982	10	162,582,600	1,625,826,000	162,582,600	1,625,826,000	Capital increased bycash	N/A	Note (2)
1990	10	186,528,600	1,865,826,000	186,528,600	1,865,826,000	Capital increased bycash	N/A	Note (3)
1992	10	246,582,600	2,465,826,000	246,582,600	2,465,826,000	Capital increased bycash	N/A	Note (4)
Mar,1997	10	228,646,900	2,286,469,000	228,646,900	2,286,469,000	Capital reduction	N/A	Note(6)
Aug, 2000	10	480,000,000	4,800,000,000	269,803,242	2,698,033,420	N/A	Stock dividend from capital reserves	Note (7)
Sep, 2001	10	480,000,000	4,800,000,000	279,246,459	2,792,464,590	N/A	Stock dividend from capital reserves	Note (8)
Oct, 2002	10	480,000,000	4,800,000,000	294,605,014	2,946,050,140	N/A	Stock dividend from Retained Earnings	Note (9)
Aug, 2003	10	480,000,000	4,800,000,000	318,173,415	3,181,734,150	N/A	Stock dividend from Retained Earnings	Note (10)
Aug, 2004	10	480,000,000	4,800,000,000	353,172,490	3,531,724,900	N/A	Stock dividend from Retained Earnings	Note (11)
Aug, 2005	10	480,000,000	4,800,000,000	384,958,014	3,849,580,140	N/A	Stock dividend from Retained Earnings	Note (12)
Sep, 2006	10	480,000,000	4,800,000,000	417,294,487	4,172,944,870	N/A	Stock dividend from Retained Earnings	Note (13)

Notes:

(1) In 1980: Preferred Stock: NT$1,398,226,000 and Common Stock: NT$30,000,000.

(2) In 1982: Preferred Stock: NT$1,595,826,000 and Common Stock: NT$30,000,000.

(3 )In 1990: Preferred Stock: NT$1,595,826,000 and Common Stock: NT$270,000,000.

(4) In 1992: Preferred Stock: NT$1,595,826,000 and Common Stock: NT$870,000,000.

(5) On Jul 01, 1996: All of the Preferred Stock NT$1,595,826,000 transfer to the Common Stock with 1:1 rate.

(6) SEC Jan 10, 1997(86) No.75438 Approved Capital reduction NT$179,357,000.

(7) SEC Jul 10, 2000(89) No.59207 Approved Stock dividend from capital reserves NT$411,564,420.

(8) SEC Aug 2, 2001(90) No.149677 Approved Stock dividend from capital reserves NT$94,431,170.

(9) SEC Jul 29, 2002(91) No.0910142097 Approved Stock dividend from Retained Earnings NT$153,585,550.

(10) SEC Jul 10, 2003(92) No.0920129197 Approved Stock dividend from Retained Earnings NT$235,684,010.

(11) SEC Jul 08, 2004(92) No. 0930130369 Approved Stock dividend from Retained Earnings NT$349,990,750.

(12) SEC Jun 15, 2005 No.0940124028 Approved Stock Dividend from Retained Earnings NT$317,855,240.

(13) SEC Jul 24, 2006 No.0950132256 Approved Stock Dividend from Retained Earnings NT$323,364,730.

		Date:	Date:	Apr 27, 2019
Type of Stock		Authorized Share Capital		Remarks
	Issued Shares	Un-issued Shares	Total Shares
Common Stock	417,294,487	182,705,513	600,000,000(Note)	-

Note According to the 2007 annual shareholder meeting resolution of the article of incorporation, the authorized capital of the company total shares NT$600,000,000.

• 45 -

4.1.2 Status of Shareholders

4.1.2 Status of Shareholders	4.1.2 Status of Shareholders	4.1.2 Status of Shareholders	4.1.2 Status of Shareholders	4.1.2 Status of Shareholders	4.1.2 Status of Shareholders	4.1.2 Status of Shareholders
Date: Apr 27, 2019
Type of Shareholders Number	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	2	7	46	16,385	75	16,515
Shareholding (shares)	110,436,379	6,055,921	142,528,494	138,784,905	19,488,770	417,294,487
Holding Percentage	26.46%	1.45%	34.16%	33.26%	4.67%	100.00%

4.1.3 Distribution Profile of Share Ownership

4.1.3.1. Common Shares

4.1.3.1. Common Shares
		Date: Apr 27, 2019
Shareholder Ownership (Unit: Share)	Number of Shareholders	Ownership (Shares)	Ownership Percentage (%)
1~999	3,555	544,103	0.13
1,000~5,000	8,961	20,070,463	4.81
5,001~10,000	1,752	14,466,053	3.47
10,001~15,000	580	7,595,757	1.82
15,001~20,000	472	8,911,208	2.14
20,001~30,000	380	9,954,136	2.39
30,001~40,000	198	7,146,811	1.71
40,001~50,000	148	6,961,103	1.67
50,001~100,000	258	18,775,661	4.50
100,001~200,000	106	14,922,597	3.58
200,001~400,000	56	15,727,849	3.77
400,001~600,000	17	8,094,024	1.94
600,001~800,000	10	7,172,630	1.72
800,001~1,000,000	3	2,750,000	0.66
1,000,001 or over	19	274,202,092	65.71
Total	16,515	417,294,487	100

4.1.3.2. Preferred Shares: None.

4.1.4 List of Major Shareholders

4.1.4 List of Major Shareholders	4.1.4 List of Major Shareholders	4.1.4 List of Major Shareholders
Date: Apr 27, 2019 Unit: shares
Shares Shareholders	Total Shares Owned	Ownership Percentage (%)
Ministry of Transportation and Communications(MOTC)	110,436,379	26.46
Yang Ming Marine Transport Corp.	70,758,243	16.96
Chinese Maritime Transport Ltd.	31,125,000	7.46
Plenty Investment Co., Ltd.	12,297,052	2.95%
Yunn Wang Investment Co. Ltd.	10,079,000	2.42
Global Growing International Co., Ltd.	9,536,000	2.29
Jack Xia Investment Co., Ltd.	5,690,000	1.36
CTBC Bank Employee Stock Ownership Trust Account of Taiwan Navigation Co., Ltd.	5,639,921	1.35
Chen, Chang-Hong	2,700,000	0.65
Su, Xing-Qian	2,530,000	0.61

• 46 -

4.1.5 Market Price, Net Worth, Earnings, and Dividends Per Common Share

Unit: NT$ %

					Unit: NT$ %
Items	Year		2017	2018	Jan 01, 2019 ~ Mar 31, 2019
Market Price per Share	Highest Market Price		18.45	23.45	19.15
	Lowest Market Price		12.30	14.40	17.30
	Average Market Price		14.26	17.83	17.92
Net Worth per Share	Before Distribution		22.90	24.97	25.42
	After Distribution		22.20	23.67 Note(5)	-
Earnings perShare	Weighted Average Shares		417,294,487	417,294,487	417,294,487
	Earnings Per Share		1.12	2.29	0.40
Dividends per Share	Cash Dividends		0.70	1.30 Note(5)	-
	Stock Dividends	-	-	-	-
		-	-	-	-
	Accumulated Undistributed Dividends		-	-	-
Return on Investment	Price / Earnings Ratio		12.73	7.79	-
	Price / Dividend Ratio		20.37	13.72 Note(5)	-
	Cash Dividend Yield Rate		4.91%	7.29% Note(5)	-

Notes:

(1) Referred to TWSE website.

(2) Price/ Earnings Ratio = Average Market Price/ Earnings Per Share

(3) Price/ Divided Ratio = Average Market Price/ Cash Dividends Per Share

(4) Cash Dividend Yield Rate=Cash Dividends Per Share/Average Market Price

(5) Pending for shareholders’ approval.

4.1.6 Dividend Policy and Implementation Status

4.1.6.1 Dividend Policy (Articles of Incorporation 26)

The dividend policy was based on considering capital expenditure budget, and financing plans of the future and demand of operations retains part of retained earnings available for distribution. The payment of cash dividends takes precedence over the issuance of share dividends; cash dividends shall not be less than 50% of the total dividends distributed.

4.1.6.2 Proposed Distribution of Dividend

The Corporation made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve of 10% of the remaining profit or until the legal reserve equals the Corporation’s paid-in capital, and setting aside or reversing a special reserve in accordance with the laws and regulations. Then, any remaining profit together with any undistributed retained earnings shall be used by the Corporation’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders.

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

The proposal for the distribution of 2018 profits, which proposed to be total cash dividend NT542,482,833 (NT 1.30Per Share) was passed at the meeting of the Board of Directors.

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• 4.1.6.3 The proposal for the distribution of 2018 profits, which were adopted at the meeting of the Board of Directors and will be discussed at the annual shareholders’ meeting, was as follows:

Taiwan Navigation Co., Ltd. Profit Distribution Table

2018

Item Unappropriated retained earnings of previous year Less: Remeasurement of defined benefit Adjusted unappropriated retained earnings Plus: 2018 net profit after tax Plus: 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

Unit: NT$ Amount 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

Note1: The earnings distribution was priority distributed the profit of 2018. Note2: The cash dividends are pro rata and rounded down to the nearest whole dollar with any amount less than NT$1 being forfeited. Less than a dollar fractional totals are adjusted in order from large to small decimal points and shareholders numbers are ordered from first to last to meet the distribution of the cash dividend total. Once resolved at annual shareholders’ meeting, the board of directors is authorized to set the ex-dividend date and to handle the dividend distribution matters accordingly.

4.1.7 Impacts of proposed stock dividends on the Company’s business performance and earnings per share: None.

4.1.8 Directors’ and Supervisors’ Compensation and Employees’ Profit Sharing Bonus

1. Employee’s bonus and remuneration of directors and supervisors set forth in the Articles of Incorporation (Articles of Incorporation 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 and supervisors at 1.5 % or less. Bonus for landside employees and remuneration for directors and supervisors 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.

2. The basis for estimating the Employee’s bonus, remuneration of directors and supervisors and calculating the number of shares distributed, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period: The basis for remuneration estimation shall be based on a certain rate of profitability of the current year. In the case of the accounting treatment of the discrepancy between the actual distributed amount and the estimated figure, it shall be identified as accounting changes and stated as the income of the year of allocation.

3. It is proposed to appropriate cash bonus of NT$10,088,100 to employees and cash remuneration of NT$10,088,100 to directors and supervisors in 2018. In the case of the accounting treatment of the discrepancy between the actual distributed amount and the estimated figure, it shall be identified as accounting changes and stated as the income of the year of allocation.

4. 48 -

5. (1) The amount of shares bonus to employees distributed in stocks, and the size of that amount as a percentage of the sum of the capital increase by retained earnings and total shares bonus to employees: None.

6. (2) The amount of compensation to employees distributed in stocks, and the size of that amount as a percentage of the sum of the after-tax net income for the current period and total compensation to employees: None.

7. (3) Imputed EPS after taking into consideration the remuneration to be allocated to employees and directors: NT$2.29.

8. Discrepancy between actual allocated amount and estimate bonus to employees, remuneration to directors and supervisors last year: None

4.1.9 Buyback of Treasury Stock: None.

4.2 Issuance of Corporate Bonds

4.2.1 Corporate Bonds: None

4.2.2 Corporate Bonds due within one year: None

4.2.3 Convertible Bonds: None

4.2.4 Exchangeable Bonds: None

4.2.5 Shelf Registration for Issuing Bonds: None

4.2.6 Corporate Bonds with Warrants: None

4.2.7 Issuance of Private Placement Bond over the past three years: None

• 4.2.8 The stock of parent company hold or disposal by the subsidiary in recent years and up to the date of the annual report printed: None.

4.3 Issuance of Preferred Stock: None

4.4 Issuance of Overseas Depositary Receipt: None

4.5 Issuance of Employee Stock Options: None

4.6 Issuance of New Restricted Employee Shares: None

4.7 Merger and Acquisitions or Stock Shares Transferred with New Stock Shares Issued.

4.8 Financing Plans and Implementation: None

• 49 -

V. Operation Overview

5.1.The Business Contents

5.1.1 Operation Scope

1. The major content of operations.

2. (1) The operation in respect of passenger and freight in coastal and international waters.

3. (2) The operation in respect of terminal warehouse domestically and overseas.

4. (3) The operation in respect of the subsidiary business of steamship and terminal warehouse Port agency.

5. (4) Operating shipping agency business.

6. (5) The operation in respect of sand mining at sea or river, navigation channel dredging, and tugboat service.

7. (6) The assignment to the construction company for residential & commercial buildings for sale and rental.

8. (7) In addition to the licensing business which presents above, business that can operate, including non-prohibits or non-restricts business by law.

2. Revenue distribution(Jan 01, 2018~Dec 31, 2018)

(1) Percentage of Total Revenue

centage of Total Revenue
Business Range	Percentage
Ocean route	85.22%
Coastal route	3.07%
Tug service	3.79%
Ship management	6.04%
Others	1.88%

(2) Percentage of Main operation areas

centage of Main operation areas
Coastal Route	Percentage
Asia	60.90%
Europe	37.53%
Others	1.57%

==> picture [25 x 13] intentionally omitted <==

3. Introduction of the operating business

There were 36 vessels in TNC’s operation fleet in 2018, which can be characterized as follows based on its’ nature of business:

(1) Ocean-going shipping line

• Bulk Carriers Tai Plenty, Tai Profit, Tai Prize, Tai Progress, Tai Promotion, Tai Prosperity, Tai Health, Tai Happiness, Tai Hawk, Tai Honesty, Tai Hunter, Tai Shine, Tai Success, Tai Splendor, Tai Summit, Tai Spring, Tai Star, Tai Kingdom, Tai Kudos, Tai Keystone, Tai Knowledge – 21 owned vessels are on Time Charter or Voyage Charter considering the current shipping market as well as the profit margin of the operation.

• Containers YM Ideals & YM Immense–2 time-charted-in vessels provided on container liner service trading between Taiwan and China with the route as follow: KHH─TCH─KEE─SHA─DLC─XGG─TAO─LYG─KHH&KHH─TCH─KEE─NBO─S HA─XGG─TAO─SHA─KHH.

• (2) Costal route shipping line

• Ro-Ro Ferry Tai Hwa–owned ferry, trading routinely between Kaohsiung and Makung (Penghu island) and also provides service for cargos and cars.

• (3) Tug service

Tai Chin 201, 202, 203, 205 – 4 owned tugboats are provided on assisting inward and outward port service for CPC Taiwan’s LNG in Taichung port.

• (4) Operation for C.P.C.

• Towing service for LNG: YUN AN NO.2, NO.5, NO.6, NO.8, and NO.9, in total of five

• 50 -

vessels, responsible for the towing operations of C.P.C. LNG vessels.

• Petroleum tanker: HONG YUN, SHENG YUN, TONG YUN, HUA YUN, and DER YUN, in total of 5 vessels, responsible for the petroleum transportation of C.P.C.

• New business that our company is planning to build up:

• (1) We continue to develop the business of bulk shipping. We are planning to replace our old fleet with new ones and to order newbuildings of other bulker sectors in order to expand our owned fleet to reach economies of scale.

• (2) As to our container liner service, we endeavor to broaden new client base and extend operation scope with other shipping companies.

• (3) We depend on our professional and ample experience to extend the business of tug service and vessel operating so that we are able to achieve diversification and risk spreading.

5.1.2 The Current Condition and Development of the Shipping Industry

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.

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 dwt since the bulling market obviously hindered Owner’s willingness to scrap vessels. Overall, the dry bulk fleet expanded by 2.9% last year and the expansion still stood at a low level.

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 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 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.

5.1.3 The relationship of upstream, midstream and downstream in shipping

The upstream of bulk shipping is supposed to be the big mining companies and grain trading houses, such as the biggest miner in Australia, BHP Billiton, Vale in Brazil and Cargill for grain trader. For example, the market is oligopoly for the top three iron ore miners. They determine the price of the iron ore. Their production also has a great effect on the freight rate of global bulk shipping.

The midstream should be global steel refiners and coal-fired power plants in every country. Their general demand for transportation also has an effect on the freight rate.

The downstream includes car manufacturers, construction industry, and manufacturing. The demand and planning in downstream industries usually drives the supply of raw materials in the midstream and upstream. Therefore, the freight rate in bulk shipping usually becomes a leading indicator of global economic. However, the oversupply in ship tonnage in recent years makes it difficult in precisely making a reflection on the freight rate even though the cargo demand is increasing.

• 51 -

5.1.4 Various Development Trends and competitive situation of products

Bulk carrier, like container, is currently facing the trend of large, light-weight and ECO-Type model, using same hall size and carry more cargos. In addition, because of various environmental regulations such as ballast water management systems, electronic chart and ECA low sulfur emission regulations, the cost of ship-owner operations has increased. In recent years, ECO-Type started to operate, which cause operational challenges for Non-ECO-Type vessels.

5.1.5 Research and Development

Currently, TNC has no planning in any research plan.

5.1.6 Long-term and Short-term business development

1. Short-term business development:

In addition to fulfilling the contract of ship management, our business mainly focuses on dry-bulk cargoes which are on time charter and arranges accordingly with long-term and short-term charter periods. In the meantime, we keep the route of container ship between Taiwan and China, and will timely adjust the ship tonnage involved.

1. Long-term business development:

In terms of long period, we are still seeking an opportunity to enlarge our bulk carrier fleet so as to reach scale economy and conduct the vessel renewal to keep our fleet competitive and meet the latest international environmental regulations.

Container ship’s route will be adjusted accordingly base on the economic development between Taiwan and China.

The Business of Tai Hwa ferry, which conducts a round trip between Kaohsiung and Magong, under our actively expend of shipping business between Taiwan and Penghu, there is a significant growth, but consider the ferry is old and the limited potential market, once the policy allowed, we will get rid of it. However, to maintain company’s income, we continuously seeking the competitive opportunity of ship management business.

5.2 Market and Sales Overview

5.2.1 Market analysis

1. Main service offer area and the percentage of market share:

2. (1) Ocean Going Route:

   • Bulk Carrier:

Our bulk carriers are on time charter or voyage charter, and mainly load and discharge at China, Australia, South and North America, and Europe, etc.

• Containership- Operation Route:

Kaohsiung-Taichung-Shanghai-Dalian-Tianjin-Qingdao-Lianyungang-Kaohsiung, and Kaohsiung-Taichung-Keelung-Ningbo-Shanghai-Tianjin-Qingdao-Shanghai-Kaohsiung, direct full container route between China and Taiwan.

• Tanker:

Trade to those ports assigned by China Petroleum Cooperation to load and discharge petrol.

==> picture [25 x 13] intentionally omitted <==

• (2) Coastal Route

• Tai Hwa liner service between Kaohsiung and Magong, to carry passengers, packages, and cars for maintaining the transportation between Kaohsiung and Magong.

==> picture [25 x 13] intentionally omitted <==

• (3) Harbor Tug

  • Under a long time charter with CPC Taiwan, Tai Chin 201, 202, 203 and 205 assist LNG carrier at Taichung Port. To manage CPC Taiwan’s Yun An II, V, VI, VIII, IX at Yun An Port to assist the LNG carriers.

• The market future of supply and demand as well as its development According to IMF’s world economic outlook, published in late January, it predicted the economic growth rate would be 3.3% and 3.6% in 2019 and 2020, respectively, which indicated the boom

• 52 -

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 economic 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 the previous year. The forecast for its growth would drop from 2.9% in 2018 to 2.3% in 2019 and 1.9% in 2020. China is so far the largest trading country in the world, owing to the economic 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 than in 2018. However, it’s forecasted that the growth rate both in 2019 and 2020 would still decline to 6.3% and 6.1%.

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.

3. Competitive Niche

• (1) Most of our bulk fleet are built by Japan shipyard, both quality and operation reliability are trusted by the industry.

• (2) Take advantage of the timing of low market to build ships; therefore, the average cost of construction and operation are low.

• Advantages and disadvantages of development vision and countermeasures.

• (1) Favorable factors:

  • Having the experience and technology of ship management, it is an advantage to undertake the ship management business at each port.

  • Given that domestic port service gradually goes privatized, and we have professional management and operation skill, it’s an advantage to undertake the ship management business at each port.

• (2) Our financial condition is stable and sound, also has good credit with the financial institute, which is of advantage to raise funds for the purchase and construction of ships to expand the scale of ship operation.

• (3) we have run the business of bulk carrier, container ship, tanker, ship management, and ferry for a long time, so those professional experiences are of advantage toward the developing of shipping business in the future.

• (4) Our ship management service for the state-owned enterprises is only to provide labor service; there is no need to cover the shipbuilding and operating cost. It not only benefits the control of human resource and decreases the risk of operation but increases the turnover.

Disadvantage factors and the countermeasure

• Disadvantage factor: (1) The U.S. trade deficit with China and EU has been escalating, especially after Trump administration levied punished tariff on China, which has caused a huge impact on China’s domestic consumption and export, and reduced the demand of commodities as well as dry bulk shipping.

• (2) The IMO low Sulphur regulation will take effect in 2020, which may make old vessel less competitive.

• Countermeasure: We will take a close look at the trade negotiation between the U.S. and other countries and the movement of each country’s trading policy. Moreover, we will choose Charterers carefully in order to avoid the default of the contract when the shipping industry is depressed by the global economy in the future. The operation strategy is based on the principal of making profit with prudential

• 53 -

approaches and will continue to carry out the replacement of our fleet to maintain competitive power. Besides, we will actively seek high rating Charterers’ cooperation so as to make a long-term contract and stabilize our revenue.

5.2.2 The important function of the main product and the production flow

TNC mainly offers vessel for sea transportation and offers manning service. The following is the brief procedure of dry bulk cargo carriage.

Cargo owner or the shipper-forwarders- Ship carrier (Shipowner)-Loading port agent-Loading-Transportation (by sea)-Discharging port agent-Discharging-Inland transportConsignee (Cargo owner)

5.2.3 Supply of major raw materials: Not applicable

5.2.4 Major suppliers and clients commanding 10%-plus share of annual order volume.

1. Major Suppliers in the Last Two Calendar Years

Major suppliers commanding 10%-plus share of annual order volume: None.

1. Major Clients of the Last Two Calendar Years:

Unit: NT$ thousands

					Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
	2017				2018
Item	Company Name	Amount	Percentage of net annual sales(%)	Relation with Issuer	Company Name	Amount	Percentage of net annual sales(%)	Relation with Issuer
1	A	495,314	18	None	A	563,561	17	None
2	B	285,468	10	Government - related parties	B	332,990	10	Government - related parties
	Others	2,037,139	72		Others	2,470,685	73
	Net Sales	2,817,921	100		Net Sales	3,367,236	100

5.2.5. Production of the Last Two Years: Not applicable

5.2.6. Shipment quantities and Sales of the Last Two Years

Unit: NT$ thousands

Year Item	2017		2018
	Quantity	Amount	Quantity	Amount
Ocean route	Note	2,265,531	Note	2,869,499
Coastal route	37,236 tons 70,399 Persons	112,015	42,570 tons 52,993 Persons	103,401
Tug Service		127,793		127,504
Ship management		259,647		203,315
Others		52,935		63,517
Total		2,817,921		$3,367,236

Note: In the ocean route, bulk carriers are charting to the other companies, and their Quantity is not applicable.

• 54 -

5.3 Human Resources in Last Two Years and Data as of End Data on Apr 30, 2018

	Year	2017	2018	Data as of end data on Apr30,2018
Number of Employees	Shore staff	68	74	74
	Marine staff	192	198	202
	Total	260	272	276
Average Age		50	48.5	48.5
Average Years ofService		16	13.8	13.8
Education	Ph.D.	0%	0%	0%
	Masters	9%	9%	9%
	Bachelor’sDegree	54%	56%	56%
	Senior HighSchool	25%	25%	25%
	Below Senior HighSchool	12%	10%	10%

5.4 Information of Expenditure on Environmental Protection

Because of the new regulation of the US Environmental Protection Agency (EPA), TNC's ocean-going vessel has changed the L.O used in Stern Tube Seal to environmental oil and also the material of Stern Tube Seal to be modified to compatible with that oil while vessels entered dry-docking survey since 2014. For new build vessels, we went further to apply Air Seal to reduce the risk of leaking the stern tube oil. To follow the ECO trend, TNC Orders two new build 64,000 tons bulk carriers, with Sox Scrubber, each vessel 2 million US dollars and say total investment up to 4 million US dollars, on Sep 2017. The new bulk carriers will deliver one by one on Apr 2021 and Jul 2021.

5.5 Labor Relations

5.5.1 Employee Benefit Program

TNC has complete and generous welfare measures:

1. Insurance The company provides labor and health insurance, including family dependents (health insurance), and group insurance with relevant laws and regulations.

2. Continuing education and training for employees For TNC’s strategy and workforce training needs, the company provides personal training, professional technical training, management Training, self-inspired training, quality management training, safety, and health training courses, etc. various of training for recruit and employees to enrich professional knowledge and developing personal potential as need.

3. Bonus system Bonus granted will depend on annual surplus.

4. Training and travel expense reimbursement for employees.

5. Rewards for excellent and senior employees The outstanding or senior employees will be rewarded and praised for their contribution.

6. Various of leisure facilities and activities To enhance abilities and boost the morale of employees, TNC provides libraries, reading area, and karaoke for entertainments. Furthermore, the company also holds regular activities such as hiking and softball, to maintain good relationships with each other.

7. 55 -

8. The Employee Benefits Committee The company has established The Employee Benefits Committee, and all of the employees elected the members. The Employee Benefits Committee will set-aside and allocate employees' welfare funds by the law.

5.5.2 Retirement Plan

Under the Labor Standards Act and the Labor Pension Act, the company has established the “Retirement Plan” to take care of employees’ life after retirement.

5.5.3 Labor Disputes Situation in recent years till the deadline of the annual report printed

There are many channels for communicating smoothly, such as suggestion email, and The Employee Benefits Committee Convocation Rules of the Labor-Management Conference so that there are no damages caused by labor disputes in recent years.

5.5.4 Measures for ensuring the safety of the working environment and employees

TNC is committed to the maintenance of the working environment and staff safety protection. Labour Safety and Health Management Office, and Occupational Safety and Health Committee regular implementation of carbon dioxide detection and fire control inspection, maintenance of elevators, fire fighting facilities, cleaning of cooling water towers. Also, the inspection of water quality, replacement of the filter core of hot drinking machines between tea and water, detection of carbon dioxide concentration, Vector Control and Environmental Hygiene Disinfection and Enhancement of access Control Security personnel are stationed 24 hours a day to ensure the safety of employees and company property, and take measures to beautify the environment. To maintain a safe and comfortable working environment. Besides, staff are subject to regular health checks and health prevention workshops to safeguard the safety of personnel In accordance with the provisions of the Labour Safety, and Health Law, a code of work safety and hygiene should be drawn up to ensure a safe working environment for employees to comply with and implementation situation is as follows:

Term	Content	Performance
1	Vector Control and Environmental sanitation	Twice ayear
2	Deratization	Once a month
3	Detection of fire equipment and measures	Once ayear
4	Detection of elevator	Once aquarter
5	Air conditioningelectrical maintenance	Once a month
6	Ice water host cleaningand maintenance	Once ayear
7	Reservoir cleaningand waterqualitytesting	Twice ayear
8	Renew the filter of drinkingfountain	Once half ayear
9	Detection concentration of carbon dioxide	Once half ayear
10	Clearance of septic tank	Once ayear
11	Trainingand re-trainingfor first aidpersonnel	Three hours ayear
12	Fire prevention of building and safety inspection of equipment	Once every two years

To create a harmonious relationship between the two sexes and prevent harassment by prevention staff, and to provide a friendly and safe working environment, the company has the main points of prevention and treatment of sexual harassment. Also, to protect the employees of the company, to maintain the environmental safety and physical and mental health of colleagues at sea, to promote the international maritime labor convention (MLC) ship certification, the company's bulk fleet has passed the certification and obtained a certificate.

• 56 -

5.5.5 Energy Conservation and Carbon Reduction

TNC has set up the Energy Conservation and Carbon Reduction Policy.

5.6 Significant Contracts

			As of Dec 31, 2018	As of Dec 31, 2018
Contract	Counterparty	Start/Expiration date of Contract	Major Contents	Restrictions
Operation for C.P.C-Towing service Contract	CPC Corporation, Taiwan	YUN AN NO.1, NO.2, NO.3, NO.5 and NO.6 May 16, 2015~May 15, 2020	Responsible for the towing operations of C.P.C. LNG vessels.	None
Long term Tug service Contract	CPC Corporation, Taiwan	TAI CHIN 201, 202, 203, 205 Feb 10, 2007~Dec 31,2032	Assisting inward and outward port service for CPC LNG vessels.
Operation for C.P.C-Petroleum tanker	CPC Corporation, Taiwan	HONG YUN and SHENG YUN Jan 5, 2017~Jan 24,2023	Responsible for the petroleum transportation of C.P.C.
Operation for C.P.C-Petroleum tanker	CPC Corporation, Taiwan	HUA YUN, TONG YUN, and DER YUN Apr 7, 2017~Oct 29, 2022	Responsible for the petroleum transportation of C.P.C.

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VI. Financial Information

6.1 Condensed Balance Sheet, Statement of Comprehensive Income, and Auditor’s Opinions Over the Last Five Years.

6.1.1 Consolidated Condensed Balance Sheet and Consolidated Condensed Statement of Comprehensive Income – Based on IFRS

1. Consolidated Condensed Balance Sheet–Based on IFRS

Unit: NT$ thousands

		Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Year Item		Financial information for the last five years and 2019Q1(Note1)
		2014	2015	2016	2017	2018	2019Q1
Current assets		2,065,122	1,480,735	1,109,509	987,757	1,255,739	1,259,984
Investments accounted for usingthe equitymethod		127,809	88,966	81,267	102,431	115,001	110,998
Property, Plant and Equipment		7,708,444	8,306,707	10,276,809	12,519,739	11,863,484	11,721,781
Other assets		2,816,211	2,997,513	2,452,332	1,807,789	1,901,677	2,147,099
Total assets		12,717,586	12,873,921	13,919,917	15,417,716	15,135,901	15,239,862
Current liabilities	Before distribution	727,450	606,085	466,725	729,666	939,806	862,746
	After distribution	998,691	697,890	466,725	1,021,772	(Note2)	(Note2)
Non-current liabilities		2,011,909	2,215,760	3,739,754	5,131,063	3,776,103	3,771,449
Total liabilities	Before distribution	2,739,359	2,821,845	4,206,479	5,860,729	4,715,909	4,634,195
	After distribution	3,010,600	2,913,650	4,206,479	6,152,835	(Note2)	(Note2)
Equity attributable to shareholders ofthe parent		9,978,227	10,052,076	9,713,438	9,556,987	10,419,992	10,605,667
Capital stock		4,172,945	4,172,945	4,172,945	4,172,945	4,172,945	4,172,945
Capital surplus		334,382	334,382	334,382	334,382	334,382	334,382
Retained earnings	Before distribution	5,190,723	5,013,660	4,825,560	5,292,146	5,947,533	6,114,623
	After distribution	4,919,482	4,921,855	4,825,560	5,000,040	(Note2)	(Note2)
Other equity interest		280,177	531,089	380,551	(242,486)	(34,868)	(16,283)
Treasury stock		0	0	0	0	0	0
Non-controlling interest		0	0	0	0	0	0
Total equity	Before distribution	9,978,227	10,052,076	9,713,438	9,556,987	10,419,992	10,605,667
	After distribution	9,706,986	9,960,271	9,713,438	9,264,881	(Note2)	(Note2)

Note1: The above financial information of 2014-2018 was audited by CPA, financial information of 2019Q1 was reviewed by CPA. Note2: The appropriation of earnings for 2018 will be discussed at the annual shareholders’ meeting.

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• Consolidated Condensed Statement of Comprehensive Income – Based on IFRS

2. Consolidated Condensed Statement of Comprehensive Income – Based on IFRS	2. Consolidated Condensed Statement of Comprehensive Income – Based on IFRS	2. Consolidated Condensed Statement of Comprehensive Income – Based on IFRS	2. Consolidated Condensed Statement of Comprehensive Income – Based on IFRS	2. Consolidated Condensed Statement of Comprehensive Income – Based on IFRS	2. Consolidated Condensed Statement of Comprehensive Income – Based on IFRS	2. Consolidated Condensed Statement of Comprehensive Income – Based on IFRS
Unit: NT$ thousands; EPS: NT$
Year Item	Financial information for the last five years and 2019Q1(Note)
	2014	2015	2016	2017	2018	2019Q1
Operating revenue	2,897,517	2,682,432	2,457,613	2,817,921	3,367,236	748,799
Gross profit	365,720	230,334	31,878	457,065	862,173	201,199
Income from operations	234,421	123,872	(62,662)	342,305	715,408	168,110
Non-operating income and expenses	188,083	11,539	(5,963)	144,766	273,227	3,980
Income before tax	422,504	135,411	(68,625)	487,071	988,635	172,090
Continuing Operations' Income	422,504	135,411	(68,625)	487,071	988,635	172,090
Loss from Discountinued Operations	0	0	0	0	0	0
Net income (Loss)	305,504	93,911	(90,825)	466,471	957,635	167,090
Other comprehensive income	432,421	251,179	(156,008)	(622,922)	137,550	18,585
Total comprehensive income	737,925	345,090	(246,833)	(156,451)	1,095,185	185,675
Net income attributable to shareholders of the parent	305,504	93,911	(90,825)	466,471	957,635	167,090
Net income attributable to non-controlling interest	-	-	-	-	-	-
Comprehensive income attributable to Shareholders of the parent	737,925	345,090	(246,833)	(156,451)	1,095,185	185,675
Comprehensive income attributable to non-controlling interest	-	-	-	-	-	-
Earnings per share	0.73	0.22	(0.22)	1.12	2.29	0.40

Note: The above financial information of 2014-2018 was audited by CPA, financial information of 2019Q1 was reviewed by CPA.

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6.1.2 Parent Company Only Condensed Balance Sheet and Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS

1. Parent Company Only Condensed Balance Sheet- Based on IFRS

6.1.2 Parent Company Only Condensed Balance Sheet and Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS 1. Parent Company Only Condensed Balance Sheet- Based on IFRS	6.1.2 Parent Company Only Condensed Balance Sheet and Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS 1. Parent Company Only Condensed Balance Sheet- Based on IFRS	6.1.2 Parent Company Only Condensed Balance Sheet and Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS 1. Parent Company Only Condensed Balance Sheet- Based on IFRS	6.1.2 Parent Company Only Condensed Balance Sheet and Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS 1. Parent Company Only Condensed Balance Sheet- Based on IFRS	6.1.2 Parent Company Only Condensed Balance Sheet and Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS 1. Parent Company Only Condensed Balance Sheet- Based on IFRS	6.1.2 Parent Company Only Condensed Balance Sheet and Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS 1. Parent Company Only Condensed Balance Sheet- Based on IFRS	6.1.2 Parent Company Only Condensed Balance Sheet and Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS 1. Parent Company Only Condensed Balance Sheet- Based on IFRS
Unit: NT$ thousands
Year Item		Financial information for the last fiveyears(Note1)
		2014	2015	2016	2017	2018
Current assets		518,409	467,656	344,132	555,012	572,393
Investments accounted for using the equitymethod		8,058,982	8,245,353	7,932,708	7,680,039	8,871,325
Property, Plant and Equipment		813,632	779,122	741,574	722,198	684,613
Other assets		1,500,451	1,293,292	1,257,633	1,433,815	1,349,211
Total assets		10,891,474	10,785,423	10,276,047	10,391,064	11,477,542
Current liabilities	Before distribution	351,757	329,636	177,759	454,760	669,452
	After distribution	622,998	421,441	177,759	749,866	(Note2)
Non-current liabilities		561,490	403,711	384,850	379,317	388,098
Total liabilities	Before distribution	913,247	733,347	562,609	834,077	1,057,550
	After distribution	1,184,488	825,152	562,609	1,126,183	(Note2)
Equity attributable to shareholders of theparent		9,978,227	10,052,076	9,713,438	9,556,987	10,419,992
Capital stock		4,172,945	4,172,945	4,172,945	4,172,945	4,172,945
Capital surplus		334,382	334,382	334,382	334,382	334,382
Retained earnings	Before distribution	5,190,723	5,013,660	4,825,560	5,292,146	5,947,533
	After distribution	4,919,482	4,921,855	4,825,560	5,000,040	(Note2)
Other equity interest		280,177	531,089	380,551	(242,486)	(34,868)
Treasury stock		0	0	0	0	0
Non-controlling interest		0	0	0	0	0
Total equity	Before distribution	9,978,227	10,052,076	9,713,438	9,556,987	10,419,992
	After distribution	9,706,986	9,960,271	9,713,438	9,264,881	(Note2)

Note1: The above financial information for each year was audited by CPA.

Note2: The appropriation of earnings for 2018 will be discussed at the annual shareholders’ meeting.

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2. Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS

2. Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS	2. Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS	2. Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS	2. Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS	2. Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS	2. Parent Company Only Condensed Statement of Comprehensive Income – Based on IFRS
Unit: NT$ thousands; EPS: NT$
Year Item	Financial information for the last fiveyears(Note)
	2014	2015	2016	2017	2018
Operating revenue	1,995,607	1,583,542	1,393,348	1,240,099	1,276,210
Gross profit	305,634	209,400	208,865	214,112	170,744
Income from operations	178,144	106,879	117,066	103,318	29,188
Non-operating income and expenses	244,360	28,532	(185,691)	383,753	959,447
Income before tax	422,504	135,411	(68,625)	487,071	988,635
Net income (Loss)	305,504	93,911	(90,825)	466,471	957,635
Other comprehensive income	432,421	251,179	(156,008)	(622,922)	137,550
Total comprehensive income	737,925	345,090	(246,833)	(156,451)	1,095,185
Earnings per share	0.73	0.22	(0.22)	1.12	2.29

Note: The above financial information for each year was audited by CPA.

6.1.3 CPAs and Their Auditing Opinions in the Past Five Years

1. CPAs and their auditing opinions in the past five years

Year	Accounting Firm	CPAs	Opinion
2014	Deloitte & Touche	Wong, Ya-Ling Shao, Chih-Ming	Unqualified Opinion
2015	Deloitte & Touche	Wong, Ya-Ling Shao, Chih-Ming	Unqualified Opinion
2016	Deloitte & Touche	Wong, Ya-Ling Shao, Chih-Ming	Unqualified Opinion
2017	Deloitte & Touche	Wong, Ya-Ling Shao, Chih-Ming	Unqualified Opinion
2018	Deloitte & Touche	Wong, Ya-Ling Shao, Chih-Ming	Unqualified Opinion

1. Replacement of CPA in the past five years: None.

2. 61 -

6.2.Financial Analysis in the Past Five Years

6.2.1 Financial Analysis for Consolidated Report – Based on IFRS

Item	Year	Year	Financial Analysis in the Past Five Years and 2019Q1	Financial Analysis in the Past Five Years and 2019Q1	Financial Analysis in the Past Five Years and 2019Q1	Financial Analysis in the Past Five Years and 2019Q1	Financial Analysis in the Past Five Years and 2019Q1	Financial Analysis in the Past Five Years and 2019Q1
			2014	2015	2016	2017	2018	2019Q1
Financial structure	Debt Ratio		21.54	21.92	30.22	38.01	31.16	30.41
	Ratio of long-term capital to property, plant and equipment		155.55	147.69	130.91	117.32	119.66	122.65
Solvency	Current ratio		283.89	244.31	237.72	135.37	133.62	146.04
	Quick ratio		264.28	224.51	211.23	118.11	121.13	132.67
	Interest earned ratio (times)		19.19	9.84	-0.96	8.32	9.63	7.19
Operating performance	Accounts receivable turnover (times)		14.71	15.83	15.27	20.80	28.11	22.80
	Average collection period		24.81	23.05	23.90	17.54	12.98	16.01
	Inventory turnover (times)		-	-	-	-	-	-
	Accounts payable turnover (times)		10.97	12.65	13.90	13.60	15.14	14.70
	Average days in sales		-	-	-	-	-	-
	Property, plant and equipment turnover (times)		0.37	0.33	0.26	0.25	0.28	0.25
	Total assets turnover (times)		0.23	0.21	0.18	0.19	0.22	0.20
Profitability	Return on total assets (%)		2.56	0.83	-0.46	3.56	6.87	4.99
	Return on stockholders' equity (%)		3.12	0.94	-0.92	4.84	9.59	6.36
	Income to paid-in capital	Income from operations	5.62	2.97	-1.50	8.20	17.14	16.11
		Income before tax	10.12	3.24	-1.64	11.67	23.69	16.50
	Profit ratio (%)		10.54	3.5	-3.70	16.55	28.44	22.31
	Earnings per share (NT$)		0.73	0.22	-0.22	1.12	2.29	0.40
Cash flow	Cash flow ratio (%)		100.37	128.37	122.24	158.95	159.84	130.20
	Cash flow adequacy ratio (%)		108.22	92.95	59.54	51.71	65.15	74.65
	Cash reinvestment ratio (%)		2.24	2.71	2.34	5.51	6.05	5.52
Leverage	Operating leverage		1.56	1.86	-0.51	3.21	2.07	2.08
	Financial leverage		1.11	1.14	0.64	1.24	1.19	1.20
Explanations for the variations over 20% of financial ratios in the last two years: 1. The rise of the net sales caused an increase in the accounts receivable turnover and decline of the average collection period. 2. The rise of the profit caused an increase of ROA, ROE, income to paid-in capital ratio, profit ratio , and EPS. 3. The rise of the net cash flow from operating activity caused an increase in the cash flow adequacy ratio. 4. The rise of the operating income caused the decline of the operating leverage.

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6.2.2 Financial Analysis for Parent Company Only–Based on IFRS

Item	Year	Year	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years	Financial Analysis in the Past Five Years
			2014	2015	2016	2017	2018
Financial structure	Debt Ratio		8.38	6.80	5.47	8.03	9.21
	Ratio of long-term capital to property,plant and equipment		1,295.39	1,342.00	1,361.74	1,375.84	1,578.72
Solvency	Current ratio		147.38	141.87	193.59	122.05	85.50
	Quick ratio		133.79	134.39	174.87	115.23	80.60
	Interest earned ratio		106.02	52.21	-78.06	314.43	322.72
Operating performance	Accounts receivable turnover (times)		10.14	9.44	9.49	10.72	11.95
	Average collection period		35.98	38.68	38.47	34.05	30.55
	Inventory turnover (times)		-	-	-	-	-
	Accounts payable turnover (times)		12.61	12.85	13.76	11.36	12.91
	Average days in sales		-	-	-	-	-
	Property, plant and equipment turnover (times)		2.40	1.99	1.83	1.69	1.81
	Total assets turnover (times)		0.19	0.15	0.13	0.12	0.12
Profitability	Return on total assets (%)		2.88	0.89	-0.86	4.53	8.78
	Return on stockholders' equity (%)		3.12	0.94	-0.92	4.84	9.59
	Income to paid-in capital	Income from operations	4.27	2.56	2.81	2.48	0.70
		Income before tax	10.12	3.24	-1.64	11.67	23.69
	Profit ratio (%)		15.31	5.93	-6.52	37.62	75.04
	Earnings per share (NT$)		0.73	0.22	-0.22	1.12	2.29
Cash flow	Cash flow ratio (%)		18.39	44.53	44.90	51.64	11.15
	Cash flow adequacy ratio (%)		36.96	52.42	32.83	71.52	59.37
	Cash reinvestment ratio (%)		-2.33	-1.08	-0.11	2.13	-1.81
Leverage	Operating leverage		1.72	1.96	1.78	1.36	2.46
	Financial leverage		1.02	1.03	1.01	1.02	1.12
Explanations for the variations over 20% of financial ratios in the last two years: 1. The rise of the current liabilities caused the decline of the current ratio and quick ratio. 2. The rise of the net income caused an increase of ROA, ROE, income before tax to paid-in capital ratio, profit ratio, and EPS. 3. The decline of the income from operations caused the decline of the income from operations to paid-in capital ratio. 4. The decline of the net cash flow from operating activity caused the decline of the cash flow ratio. 5. The decline of the cash reinvestment ratio was mainly due to the distribution of cash dividend. 6. The decline of the operating income caused an increase in the operating leverage.

1. The rise of the net income caused an increase of ROA, ROE, income before tax to paid-in capital ratio, profit ratio, and EPS.

2. The decline of the income from operations caused the decline of the income from operations to paid-in capital ratio.

3. 63 -

Equations as follows:

1. Financial structure

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

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

4. Solvency

5. (1) Current ratio = Current assets / Current liabilities

6. (2) Quick ratio = (Current assets – Inventory – Prepaid expenses) / Current liabilities

7. (3) Times interest earned = Net income before tax and interest expense / Interest expense of the year

8. Operating ability

9. (1) Account receivable turnover (including accounts receivable and notes receivable derived from business operation) = Net sales / Average accounts receivable (including accounts receivable and notes receivable derived from business operation)

10. (2) Days sales in accounts receivable = 365 / Account receivable turnover

11. (3) Inventory turnover = Cost of goods sold / Average inventory amount

12. (4) Account payable turnover (including accounts payable and notes payable derived from business operation) = Cost of goods sold/ Average accounts payable (including accounts payable and notes payable derived from business operation)

13. (5) Average days in sales = 365 / Inventory turnover

14. (6) Property, plant and equipment turnover = Net sales / Average net property, plant, and equipment

15. (7) Total assets turnover = Net sales / Average total assets

4. Profitability

• (1) Ratio of return on total assets = [Net income (loss) + interest expense x (1-tax rate)] / Average total assets

• (2) Ratio of return on equity = Net income (loss) / Net average total equity

• (3) Profit ratio = Net income (loss) / Net sales

• (4) Earnings per share = (Profit attributable to shareholders of the parent – preferred stock dividend) / Weighted average stock shares issued

• Cash flow

• (1) Cash flow ratio = Net cash flow from operating activity / Current liabilities

• (2) Cash flow adequacy ratio = Net cash flow from operating activity in the past five years / (Capital expenditure + Inventory increase + Cash dividend) in the past five years

• (3) Cash reinvestment ratio = (Net cash flow from operating activity – Cash dividend) / (Gross property, plant and equipment + Gross Investment property + Long-term investment + Other non-current assets + Working capital)

6. Leverage:

• (1) Degree of operating leverage = (Net operating revenue – Variable operating cost and expense) / Operating income

• (2) Degree of financial leverage = Operating income / (Operating income – interest expense)

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6.3 Audit Committee’s Review Report for the Year 2018

Audit Committee’s Review Report

The Board of Directors has prepared the Taiwan Navigation Co., Ltd (“the Company”) 2018 Business Report, Consolidated Financial Statements, Parent Company Only Financial Statements, and proposal for allocation of earnings. The CPA of Deloitte & Touche Ya-Ling Wong and Chih-Ming Shao were retained to audit the Company’s financial statements and has issued an audit report relating to the financial statements. The Business Report, Consolidated Financial Statements, Parent Company Only Financial Statements, and proposal for allocation of earnings have been reviewed and determined to be correct and accurate by the Audit Committee members of Taiwan Navigation Co., Ltd. According to relevant requirements of the Securities and Exchange Act and the Company Law, we hereby submit this report.

To

Taiwan Navigation Co., Ltd’s 2019 General Shareholders’ Meeting

Chairman of the Audit Committee: Wang, Chin-San

May 15, 2019

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Taiwan Navigation Co., Ltd.

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

• 66 -

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 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.

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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:

1. We understood management’s evaluation processes of disposal of the bulk carriers and verified the implementation of related controls, through appropriate approvals.

2. We tested the transaction contract and the record of remittances to verify the accuracy of the amount received.

3. 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 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.

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

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

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

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

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the 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.

5. 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.

6. 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.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 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.

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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.

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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.

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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) 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 (120,077) (9)		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 - - - - - 115 - (Continued)

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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 % $ - - 257,627 20 257,627 20 137,550 11 $ 1,095,185 86 $ 2.29 $ 2.29		2017
				Amount % $ (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)

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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.

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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)

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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)

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

TAIWAN NAVIGATION CO., LTD.

1. GENERAL INFORMATION

Taiwan Navigation Co., Ltd. (the “Corporation”), whose shares are listed on the Taiwan Stock Exchange, was originally majority-owned by the Taiwan Provincial Government but was privatized on June 20, 1998. The Corporation mainly engages in passenger and freight transport via water, port warehousing, aquatic sand mining, and navigation channel dredging and also acts as a shipping agency, provides tugboats, and acts as a land owner in agreements with construction companies for the use of its land for the construction of residential and commercial buildings for sale and rental.

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

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Corporation’s board of directors on March 26, 2019.

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

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

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

1) IFRS 9 “Financial Instruments” and related amendments

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

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

Classification, measurement, and impairment of financial assets

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

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

Measure Financial Asset IAS 39 Cash and cash equivalents Loans and receivables Derivatives At fair value through profit or loss (FVTPL) Equity securities Available‑for‑sale Mutual funds Held‑for‑trading Time deposits with original maturities of more than 3 months Loans and receivables Accounts receivable (including related parties) Loans and receivables Others financial assets Loans and receivables Financial Asset IAS 39 Carrying Amount as of January 1, 2018 FVTOCI Equity instruments Add: Reclassification from available-for-sale (IAS 39) $ - Amortized cost - Add: Reclassification from loans and receivables (IAS 39) - $ -	Measure	ment Category	Carrying IAS 39 $ 79,113 97,827 374,141 32,007 146,122 89,713 17,834 IFRS 9 Carrying Amount as of January 1, 2018 $ 434,067 332,782 $ 766,849	**Carrying **	Amount IFRS 9 Remark $ 79,113 a) 97,827 d) 434,067 b) 32,007 c) 146,122 a) 89,713 a) 17,834 a) Other Equity Effect on January 1, 2018 Remark $ 59,926 b) - a) $ 59,926
		IFRS 9 At amortized cost Mandatorily at FVTPL At fair value through other comprehensive income (FVTOCI) - equity instruments Mandatorily at FVTPL At amortized cost At amortized cost At amortized cost Reclassifi- cation Remea- surement $ 374,141 $ 59,926 332,782 - $ 706,923 $ 59,926
		$	$

• a) Cash and cash equivalents, accounts receivable (including related parties), time deposits with original maturities of more than 3 months and other financial assets that were previously classified as loans and receivables under IAS 39 are classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.

• b) The Corporation elected to designate all its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not held for trading. As a result, the related other equity - unrealized loss on available-for-sale financial assets of $(111,449) thousand was reclassified to other equity - unrealized loss on financial assets at FVTOCI.

Investments in unlisted shares previously measured at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase of $59,926 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized gain on financial assets at FVTOCI on January 1, 2018.

• c) Mutual funds previously classified as held for trading under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments.

• d) Mandatory convertible bond investments were designated as at FVTPL under IAS 39 because they were hybrid instruments. They have been classified as mandatorily measured at FVTPL in their entirety under IFRS 9 since they contain host contracts that are assets within the scope of IFRS 9.

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

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

The Corporation evaluated the retrospective application of IFRS 15 on assets, liabilities, and equity as of January 1, 2018 and the comprehensive income and cash flows for the year ended December 31, 2018. The application of IFRS 15 has no material impact on the Corporation. The following table shows the impact on the classification of assets and liabilities.

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

As Originally Stated Adjustments Arising from Initial Application Current liabilities Contract liabilities $ - $ 25,721 Advance receipts 25,721 (25,721) Total effect on liabilities $ 25,721 $ - Impact on assets, liabilities and equity for current year	Restated $ 25,721 - $ 25,721

	December 31,	December 31,
		2018
Increase in contract liabilities - current	$	22,644
Decrease in advance receipts		(22,644)
Total effect on liabilities	$	-

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

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

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

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• Note 2: The FSC permits the election for early adoption of the amendments starting from January 1, 2018.

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

IFRS 16 “Leases”

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

Definition of a lease

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

The Corporation as lessee

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

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

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

The Corporation expects to apply the following practical expedients:

• a) The Corporation will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.

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

• c) The Corporation will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.

• d) The Corporation will use hindsight, such as in determining lease terms, to measure lease liabilities.

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The Corporation as lessor

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

The initial application of IFRS 16 is not expected to have a material impact on the Corporation’s assets, liabilities and equity as of January 1, 2019.

Except for the above impact, as of the date the financial statements were authorized for issue, the Corporation assesses that the application of other standards and interpretations will have no material impact on the Corporation’s financial position and financial performance.

• c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

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

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

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

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

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

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

• b. Basis of preparation

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

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

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

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

• 3) Level 3 inputs are unobservable inputs on an asset or liability.

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

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

Current assets include:

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

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

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

Current liabilities include:

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

• 2) Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and

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

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

• d. Foreign currencies

In preparing the Corporation’s financial statements, transactions in currencies other than the Corporation’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions.

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

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

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

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

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

In relation to a partial disposal of a subsidiary that does not result in the Corporation losing control over the subsidiary, the proportionate share of accumulated exchange differences is included in the calculation of equity transactions but is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

• e. Investments in subsidiaries

The Corporation uses the equity method to account for its investments in subsidiaries.

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

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

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

When the Corporation’s share of losses of a subsidiary exceeds its interest in that subsidiary (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Corporation’s net investment in the subsidiary), the Corporation continues recognizing its share of further losses.

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

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

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

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

f. Investment in associates

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

The Corporation uses the equity method to account for its investments in associates. Under the equity method, investments in an associate are initially recognized at cost and adjusted thereafter to recognize the Corporation’s share of the profit or loss and other comprehensive income of the associate. The Corporation also recognizes the changes in the Corporation’s share of the equity of associates attributable to the Corporation.

When the Corporation subscribes for additional new shares of an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Corporation’s proportionate interest in the associate. The Corporation records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates accounted for using the equity method. If the Corporation’s ownership interest is reduced due to its additional subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required had the investee directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

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

The entire carrying amount of the investment is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

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The Corporation discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Corporation accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required had that associate directly disposed of the related assets or liabilities.

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

g. Property, plant and equipment

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

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

Freehold land is not depreciated.

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

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

• h. Investment properties

Investment properties are properties held to earn rentals or for capital appreciation. Investment properties also included land held for a currently undetermined future use.

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

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

• i. Impairment of tangible assets

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

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

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

• j. Financial instruments

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

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

• 1) Financial assets

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

• a) Measurement categories

2018

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

• i. Financial assets at FVTPL

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

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 22.

• ii. Financial assets at amortized cost

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

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

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

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, accounts receivable at amortized cost and other financial assets, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

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

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

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

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• iii. Investments in equity instruments at FVTOCI

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

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

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

2017

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

• i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such financial assets are either held for trading or designated as at FVTPL.

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Financial assets at FVTPL are stated at fair value, with any gains or losses arising on their remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial assets. Fair value is determined in the manner described in Note 22.

ii. Available-for-sale financial assets

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

Available-for-sale financial assets are measured at fair value. Changes in the carrying amounts of available-for-sale monetary financial assets (relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments) are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when such investments are disposed of or are determined to be impaired.

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

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

iii. Loans and receivables

Loans and receivables are measured at amortized cost using the effective interest method less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• b) Impairment of financial assets

2018

The Corporation recognizes a loss allowance for expected credit losses on financial assets at amortized cost.

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

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

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

2017

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

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

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

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

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

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

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

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

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

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

• c) Derecognition of financial assets

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

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

2) Financial liabilities

Financial liabilities are measured at amortized cost using the effective interest method. The difference between the carrying amount of a financial liability derecognized and the consideration paid is recognized in profit or loss.

k. Revenue recognition

2018

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

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

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Services for ship management, ship chartering and freight transport

As the Corporation provides services for ship management, ship chartering and freight transport, customers simultaneously obtain and consume the benefit provided by the Corporation’s performance, and the relevant revenue is recognized when the services are provided. The revenue from ship management and ship chattering services are recognized with reference to the number of days incurred, and the revenue from freight transport services is recognized with reference to the stage of completion of the services provided.

2017

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

1) Service income

Service income is recognized when services are provided.

The revenue from ship management and ship chattering services is recognized with reference to the stage of completion of the relevant contract.

• 2) Dividend and interest income

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

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

l. Leasing

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

• 1) The Corporation as lessor

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

• 2) The Corporation as lessee

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

• m. Employee benefits

• 1) Short-term employee benefits

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

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2) Retirement benefits

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

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and past service cost, as well as gains and losses on settlements) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur or when the plan amendment or curtailment occurs/or when the settlement occurs. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

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

• n. Taxation

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

1) Current tax

According to the Income Tax Law, an additional tax of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

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

• 2) Deferred tax

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

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

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries except where the Corporation is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

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

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

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• 3) Current and deferred taxes for the year

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalents Time deposits with original maturities of less than 3 months		December 31	December 31
		2018 $ 262 21,270 98,288 $ 119,820	2017 $ 262 14,867 63,984 $ 79,113

The market rate intervals of cash in banks and cash equivalents at the end of the reporting period were as follows:

Bank balance and cash equivalents	December 31
	2018 2017 0.01%-3.30% 0.01%-1.66%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Derivative financial assets Mandatory convertible bonds Mutual funds		December	31
		2018 $ 76,777 - $ 76,777	2017 $ - 32,007 $ 32,007 (Continued)

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8.	December 31 2018 2017 Financial assets at FVTPL-non-current Derivative financial assets Mandatory convertible bonds $ - $ 97,827 (Concluded) FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018 December 31, 2018 Current Domestic investments Listed shares Yang Ming Marine Transport Corporation $ 116,247 Non-current Domestic investments Private placement listed shares Yang Ming Marine Transport Corporation $ 145,794 Unlisted shares Chunghwa Investment Co., Ltd. 49,943 195,737 Foreign investments Unlisted shares Taiwan Foundation International Pte. Ltd. 45,864 $ 241,601		**December **	**31 **

The Corporation’s investments in the ordinary shares mentioned above are expected to earn profit through dividend income. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Corporation’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale under IAS 39. Refer to Notes 3 and 9 for information relating to their reclassification and comparative information for 2017.

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

Current Domestic investments Listed shares

December 31, 2017 $ 151,914 (Continued)

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	December 31,
	2017
Non-current
Domestic investments
Private placement listed shares	$ 176,327
	(Concluded)

The Corporation invested in restricted private shares of domestic listed companies. Because the impact of share restrictions is reliably measured and the results are comparable to those of the average market participant, the aforementioned equity investments were classified as available-for-sale financial assets - non-current.

10. ACCOUNTS RECEIVABLE, NET

At amortized cost Gross carrying amount Less: Allowance for impairment loss		**December **	**31 **
		2018 $ 58,983 2,600 $ 56,383	2017 $ 54,467 2,600 $ 51,867

In 2018

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

The Corporation writes off an account receivable when there is information indicating that the debtor is experiencing severe financial difficulty and there is no realistic prospect of recovery of the receivable. For accounts receivables that have been written off, the Corporation continues to engage in enforcement activity to attempt to recover the receivables which are due. Where recoveries are made, these are recognized in profit or loss.

The aging of receivables is as follows:

	December 31,
	2018
Up to 60 days	$ 58,160
61-90 days	596
More than 90 days	227
Gross carrying amount	58,983
Loss allowance (lifetime ECLs)	(2,600)
Amortized cost	$ 56,383

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

Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 and December 31, 2018 per IFRS 9	2018 $ 2,600 -
	$ 2,600

In 2017

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

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

The aging of receivables was as follows:

	December 31,
	2017
Up to 60 days	$ 40,414
61-90 days	13,161
More than 90 days	892
	$ 54,467

The above aging schedule was based on the number of days past due days from the invoice date.

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

	December 31,
	2017
Up to 30 days	$ 13,161
31-60 days	883
More than 60 days	9
	$ 14,053

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

As of December 31, 2017, the amounts of the allowances for impairment loss individually and collectively assessed for were $2,600 thousand.

The Corporation did not hold any collateral over these balances.

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11. OTHER FINANCIAL ASSETS

Time deposits with original maturities of more than 3 months Others		December 31	December 31
		2018 $ 81,395 23,946 $ 105,341	2017 $ 146,122 17,834 $ 163,956

The market rate intervals of time deposits with original maturities of more than 3 months at the end of the reporting period were as follows:

**December 31 **	**December 31 **
2018	2017
2.56%-3.15%	1.55%-2.02%

12. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

a. Investments in subsidiary Tai Shing Maritime Co., S.A. (Tai Shing) ShinWang Maritime Inc. (Shin Wang)		December 31	December 31
		2018 $ 8,651,166 105,158 $ 8,756,324	2017 $ 7,547,150 30,458 $ 7,577,608

At the end of the reporting period, the Corporation holds 100% interest in the subsidiaries.

b. Investments in associates Associates that are not individually material Yunn Wang Investment Co., Ltd.		December 31	December 31
		2018 $ 115,001	2017 $ 102,431

At the end of the reporting period, the Corporation holds 49.75% interest in Yunn Wang Investment Co., Ltd. (Yunn Wang).

Refer to Table 4 “Information on Investees” (following these Notes to Financial Statements) for the nature of activities, principal place of business and country of incorporation of Yunn Wang.

The share of profit or loss and other comprehensive income of Yunn Wang were calculated based on the financial statements that have been audited.

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The aggregate information of associates is as follows:

The Corporation’s share of: Net profit (loss) for the year Other comprehensive income Total comprehensive income for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 3,663 12,034 $ 15,697	2017 $ (137) 21,562 $ 21,425

13. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Balance at December 31, 2017 Accumulated depreciation Balance at January 1, 2017 Disposals Depreciation expenses Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Balance at December 31, 2018 Accumulated depreciation Balance at January 1, 2018 Disposals Depreciation expenses Balance at December 31, 2018 Carrying amounts at December 31, 2018	Land $ 191,103 - - $ 191,103 $ 191,103 $ 191,103 - - $ 191,103 $ 191,103	Buildings Transportation Equipment $ 82,555 $ 1,551,086 - 15,296 - (13,004) $ 82,555 $ 1,553,378 $ 32,926 $ 1,050,365 - (13,004 ) 1,712 32,957 $ 34,638 $ 1,070,318 $ 47,917 $ 483,060 $ 82,555 $ 1,553,378 - 1,982 - (1,488) $ 82,555 $ 1,553,872 $ 34,638 $ 1,070,318 - (1,488 ) 1,712 38,651 $ 36,350 $ 1,107,481 $ 46,205 $ 446,391	Other Equipment $ 2,614 85 - $ 2,699 $ 2,493 - 88 $ 2,581 $ 118 $ 2,699 1,038 - $ 3,737 $ 2,581 - 242 $ 2,823 $ 914	Total $ 1,827,358 15,381 (13,004) $ 1,829,735 $ 1,085,784 (13,004 ) 34,757 $ 1,107,537 $ 722,198 $ 1,829,735 3,020 (1,488) $ 1,831,267 $ 1,107,537 (1,488 ) 40,605 $ 1,146,654 $ 684,613

The above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings Main buildings 48-60 years Renovation work 8 years Transportation equipment Vessels 25 years Drydock 2 years Vehicles and motorcycles 3-8 years Other equipment 3-10 years

Property, plant and equipment pledged as collateral for bank borrowings are set out in Note 24.

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Depreciation expenses related to property, plant and equipment and investment properties are as follows:

For the Year Ended December 31 2018 2017 Operating costs $ 40,028 $ 34,133 Operating expenses 1,929 1,976 $ 41,957 $ 36,109 Amortization expenses related to other non-current assets are as follows: For the Year Ended December 31 2018 2017 Operating expenses $ 525 $ 695	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 525	2017 $ 695

14. INVESTMENT PROPERTIES

Cost Land Buildings Less: Accumulated depreciation - buildings		December 31	December 31
		2018 $ 1,055,678 120,895 1,176,573 79,203 $ 1,097,370	2017 $ 1,055,678 121,072 1,176,750 78,028 $ 1,098,722

Investment properties are depreciated using the straight-line method over their estimated useful lives of 60 years.

The fair value of investment properties were not appraised by independent valuers. The management of the Corporation used the valuation model that market participants use in determining the fair value. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

Fair value		**December 31 **	**December 31 **
		2018 $ 3,555,321	2017 $ 3,505,306

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Rental income and operating expenses directly related to investment properties are as follows:

Rental income related to investment properties Operating expenses directly related to investment properties Direct operating expenses from investment properties generating rental income Direct operating expenses from investment properties not generating rental income	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 52,658 $ 15,904 398 $ 16,302	2017 $ 48,360 $ 16,821 438 $ 17,259

15. BORROWINGS

Short-term Borrowings

Unsecured borrowings Line of credit borrowings		**December 31 **	**December 31 **
		2018 $ 465,177	2017 $ 243,000

As of December 31, 2018 and 2017, the rates of line of credit borrowings were 0.95%.

16. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Corporation adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 7% of monthly salaries and wages.

b. Defined benefit plans

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

• 100 -

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

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities		December 31	December 31
		2018 $ 106,805 (37,992) $ 68,813	2017 $ 101,626 (26,490) $ 75,136

Movements in net defined benefit liabilities were as follows:

	Present Value
	of the Defined			Net Defined
	Benefit	Fair Value of			Benefit
	Obligation	the Plan Assets		Liabilities
Balance at January 1, 2017	$ 111,714	$ (29,241)		$	82,473
Service cost
Current service cost	1,939		-		1,939
Interest expense (income)	1,257		(332)		925
Recognized in profit or loss	3,196		(332)		2,864
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-		40		40
Actuarial loss - changes in demographic
assumptions	4,411		-		4,411
Actuarial loss - experience adjustments	(4,566)		-		(4,566)
Recognized in other comprehensive income	(155)		40		(115)
Contributions from the employer	-		(6,121)		(6,121)
Benefits paid	(13,129)		9,164		(3,965)
Balance at December 31, 2017	101,626		(26,490)		75,136
Service cost
Current service cost	1,783		-		1,783
Interest expense (income)	1,143		(365)		778
Recognized in profit or loss	2,926		(365)		2,561
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-		(851)		(851)
Actuarial loss - changes in demographic
assumptions	3,431		-		3,431
Actuarial loss - changes in financial
assumptions	1,256		-		1,256
Actuarial loss - experience adjustments	6,306		-		(6,306)
Recognized in other comprehensive income	10,993		(851)		10,142
Contributions from the employer	-		(12,059)		(12,059)
Benefits paid	(8,740)		1,773		(6,967)
Balance at December 31, 2018	$ 106,805	$ (37,992)		$	68,813

• 101 -

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

• 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

• 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.

• 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

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

Discount rate Expected rate of salary increase	December 31
	2018 2017 1% 1.125% 3% 3%

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

Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase 0.25% increase 0.25% decrease		**December **	**31 **
		2018 $ (2,600) $ 2,713 $ 2,619 $ (2,524)	2017 $ (2,364) $ 2,464 $ 2,381 $ (2,297)

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

Expected contributions to the plans for the next year Average duration of the defined benefit obligation		**December **	**31 **
		2018 $ 948 10.5 years	2017 $ 12,041 10.2 years

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The details of employee benefits expense were as follow:

Post-employment benefits Defined contribution plans Defined benefit plans Other employee benefits An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended	For the Year Ended	December 31
		2018 $ 10,182 2,561 12,743 325,422 $ 338,165 $ 229,298 108,867 $ 338,165	2017 $ 9,430 2,864 12,294 287,044 $ 299,338 $ 219,048 80,290 $ 299,338

Employee’s compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of the Corporation, the Corporation accrued employees’ compensation at the rates of no less than 0.5% and remuneration of directors and supervisors at rates of no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors and supervisors.

The employee’s compensation accrued at the rate of 1% were $10,088 thousand and $4,975 thousand for the years ended December 31, 2018 and 2017, respectively; and the remuneration of directors and supervisors accrued at the rate of 1% were $10,088 thousand and $4,974 thousand, respectively.

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

The employees’ compensation and remuneration of directors and supervisors for the year ended December 31, 2017, which were approved by the Corporation’s board of directors in March 2018, was as follows:

Amount

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31, 2017
	Cash $ 4,970 4,970

The employees’ compensation and the remuneration of directors and supervisors were not estimated for 2016 because of the Corporation’s loss for the year ended December 31, 2016.

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The actual amounts of the employees’ compensation and remuneration of directors and supervisors paid for 2017 differed from the amounts recognized in the financial statements for the year ended December 31, 2017. The differences were adjusted to profit and loss for the year ended December 31, 2018.

Amounts approved in the board of directors’ meeting Amounts recognized in the annual consolidated financial statements	For the Year Ended December 31, 2017
	Employees’ Compensation Remuneration of Directors and Supervisors $ 4,970 $ 4,970 $ 4,975 $ 4,974

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the Corporation’s board of directors in 2018 and 2017 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

17. EQUITY

a. Ordinary shares

Numbers of shares authorized (in thousands) Value of shares authorized Number of shares issued and fully paid (in thousands) Value of shares issued		**December 31 **	**December 31 **
		2018 480,000 $ 4,800,000 417,294 $ 4,172,945	2017 480,000 $ 4,800,000 417,294 $ 4,172,945

b. Capital surplus

Treasury share transactions Donations		December 31	December 31
		2018 $ 334,352 30 $ 334,382	2017 $ 334,352 30 $ 334,382

Such capital surplus may be used to offset a deficit; in addition, when the Corporation has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Corporation’s capital surplus and to once a year).

• c. Retained earnings and dividends policy

Under the dividends policy as set out in the Corporation’s Articles of Incorporation, where the Corporation made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve of 10% of the remaining profit or until the legal reserve equals the Corporation’s paid-in capital, and setting aside or reversing a special reserve in accordance with the laws and regulations. Then, any remaining profit together with any undistributed retained earnings shall be used by the Corporation’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on the distribution of employees’ compensation and remuneration of directors and supervisors, refer to Note 16.

• 104 -

The Articles of Incorporation also stipulate a dividends policy whereby the payment of cash dividends takes precedence over the issuance of share dividends. In principle, cash dividends shall not be less than 50% of the total dividends distributed.

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

Items referred to under Rule No. 1010012865 issued by the FSC should be appropriated to a special reserve by the Corporation.

The appropriations of earnings for 2017 which were approved in shareholders’ meetings in June 2018 were as follows:

Legal reserve Special reserve Cash dividends	For the Year Ended December 31, 2017
	Appropriation of Earnings Dividends Per Share (NT$) $ 46,647 242,486 292,106 $0.7

Information on deficit compensation for 2016 approved in the shareholders’ meetings is available on the Market Observation Post System website of the Taiwan Stock Exchange.

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

18. REVENUE

Revenue from contracts with customers Revenue from transportation Rental income Rental income from investment properties (Note 14) Other operating revenue Other revenue Contract liabilities Contract liabilities	For the Year Ended December 31	For the Year Ended December 31
	2018 $ 1,212,693 52,658 10,859 $ 1,276,210 December 31, 2018 $ 22,644	2017 $ 1,187,164 48,360 4,575 $ 1,240,099 January 1, 2018 $ 25,721

The changes in the balance of contract liabilities primarily result from the timing difference between the Corporation’s performance and the respective customer’s payment

• 105 -

For the year ended December 31, 2018, the Corporation recognized $5,637 thousand as revenue from the beginning balance of contract liability.

19. INCOME TAXES

• a. Income tax recognized in profit or loss

Major components of tax expense were as follows:

Current tax In respect of the current year Adjustments for prior years Deferred tax In respect of the current year Effect of tax rate changes Income tax expense recognized in profit or loss	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ 15,499 122 15,621 14,479 900 15,379 $ 31,000	2017 $ 21,086 39 21,125 (525) - (525) $ 20,600

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

Profit before tax Income tax expense calculated at the statutory rate Tax effect of adjusting items: Tax-exempt income Unrecognized deductible temporary differences Effect of tax rate changes Adjustments for prior years’ tax Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2018 $ 988,635 $ 197,727 1,952 (169,701) 900 122 $ 31,000	2017 $ 487,071 $ 82,802 (4,357) (57,884) - 39 $ 20,600

In 2017, the applicable corporate income tax rate used by the Corporation in the ROC is 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5%.

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

• 106 -

b. Current tax assets and liabilities

Current tax assets Tax refund receivable (included in other current assets) Current tax liabilities Income tax payable (included in other current liabilities)		December	31
		2018 $ - $ 4,011	2017 $ 3,536 $ 9,313

Current income tax payable is the net amount of December 31, 2018 and 2017, deducted by $11,488 thousand and $11,773 thousand of prepaid income tax, respectively.

c. Deferred tax assets and liabilities

The movements of deferred tax assets (included in other non-current assets) and deferred tax liabilities were as follows:

For the year ended December 31, 2018

Deferred tax assets Temporary differences Unrealized exchange gains and losses Others Deferred tax liabilities Temporary differences Reserve for land value increment tax Share of profit of subsidiaries and associates accounted for using the equity method	Opening Balance Effect of Tax Rate Changes Recognized in Profit or Loss $ 185 $ 32 $ 98 491 87 (60) $ 676 $ 119 $ 38 $ 282,241 $ - $ - 5,779 1,019 14,517 $ 288,020 $ 1,019 $ 14,517	Closing Balance $ 315 518 $ 833 $ 282,241 21,315 $ 303,556

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For the year ended December 31, 2017

Deferred tax assets Temporary differences Unrealized exchange gains and losses Others Deferred tax liabilities Temporary differences Reserve for land value increment tax Share of profit of subsidiaries and associates accounted for using the equity method Unrealized exchange gains and losses	Opening Balance Recognized in Profit or Loss Closing Balance $ - $ 185 $ 185 414 77 491 $ 414 $ 262 $ 676 $ 282,241 $ - $ 282,241 5,777 2 5,779 265 (265) - $ 288,283 $ (263) $ 288,020

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

As of December 31, 2018 and 2017, the taxable temporary differences associated with investment in subsidiaries for which no deferred tax liabilities have been recognized were $5,148,718 thousand and $4,300,213 thousand, respectively.

• e. Income tax assessments

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

20. EARNINGS PER SHARE

Basic earnings per share Diluted earnings per share Net Profit for the Period Earnings used in the computation of basic earnings per share	Unit: NT$ Per Share **For the Year Ended December 31 **	Unit: NT$ Per Share **For the Year Ended December 31 **	Unit: NT$ Per Share **For the Year Ended December 31 **
	2018 $ 2.29 $ 2.29 For the Year Ended		2017 $ 1.12 $ 1.12 December 31
		2018 $ 957,635	2017 $ 466,471

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

Weighted average number of ordinary shares in computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 417,294 604 417,898	2017 417,294 300 417,594

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

21. CAPITAL MANAGEMENT

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

Key management personnel of the Corporation review the capital structure on an annual basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Corporation may adjust the amount of dividends paid to shareholders, the number of new shares issued, or the existing debt redeemed.

22. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments not measured at fair value

The Corporation’s management believes that the carrying amount of financial assets and liabilities recognized in the financial statements approximate their fair values or their fair values cannot be reliably measured.

• 109 -

• b. Fair value of financial instruments measured at fair value on a recurring basis

• 1) Fair value hierarchy

December 31, 2018 Financial assets at FVTPL Derivative financial assets Financial assets at FVTOCI Investments in equity instruments Listed shares - ROC Unlisted shares - ROC Unlisted shares - foreign December 31, 2017 Financial assets at FVTPL Derivative financial assets Non-derivative financial assets held for trading Available-for-sale financial assets Investments in equity instruments Listed shares - ROC	Level 1 $ - $ 116,247 - - $ 116,247 Level 1 $ - 32,007 $ 32,007 $ 151,914	Level 2 $ 76,777 $ 145,794 - - $ 145,794 Level 2 $ 97,827 - $ 97,827 $ 176,327	Level 3 $ - $ - 49,943 45,864 $ 95,807 Level 3 $ - - $ - $ -	Total $ 76,777 $ 262,041 49,943 45,864 $ 357,848 Total $ 97,827 32,007 $ 129,834 $ 328,241

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

• 2) Valuation techniques and inputs applied for Level 2 fair value measurement

• a) Derivative financial assets with no market price available for reference of their fair values have their fair values estimated using the respective mandatory convertible bonds’ evaluation model. The estimations and assumptions used by the Corporation for the evaluation method are consistent with those used by market participants in the pricing of financial instruments.

• b) Domestic listed private shares with no market price available for reference of their fair values have their fair values estimated using the evaluation method. The estimations and assumptions used by the Corporation for the evaluation method are consistent with those used by market participants in the pricing of financial instruments. The relevant information used in the evaluation was obtainable by the Corporation.

The evaluation method used by the Corporation for estimating fair value is the Black-Scholes model.

• 110 -

• 3) Valuation techniques and inputs applied for Level 3 fair value measurement

Unlisted equity securities - ROC held by the Corporation are mainly investment in domestic listed shares. Besides, the asset of unlisted shares - foreign held by the Corporation were mainly bank deposits as of December 31, 2018. Thus, the aforementioned unlisted equity securities were evaluated using the asset-based approach. Separate assets and liabilities of the underlying investments were respectively regarded as individual evaluation targets and were evaluated according to their nature to reflect their overall fair value. Unobservable inputs used by the Corporation were an 89.75% discount rate for lack of marketability as of December 31, 2018. If the discount rate for lack of marketability were to increase/decrease by 1% and all other variables were held constant, the fair value would decrease/increase by $4,875 thousand.

• c. Categories of financial instruments

Financial assets Financial assets at FVTPL Held for trading Designated as at FVTPL Mandatorily at FVTPL Available-for-sale financial assets (Note 1) Loans and receivables (Note 2) Financial assets at amortized cost (Note 3) Financial assets at FVTOCI Equity instruments Financial liabilities Financial liabilities at amortized cost (Note 4)	December 31
	2018 2017 $ - $ 32,007 - 97,827 76,777 - - 374,141 - 332,782 341,794 - 357,848 - 638,160 415,169

• Note 1: The balances include the carrying amount of available-for-sale financial assets measured at cost.

• Note 2: The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, accounts receivable, trade receivables from related parties, and other financial assets.

• Note 3: The balances include financial assets measured at amortized cost, which comprise cash and cash equivalents, accounts receivable, trade receivables from related parties, and other financial assets.

• Note 4: The balances include financial liabilities measured at amortized cost, which comprise short-term borrowings, notes and accounts payable, trade payables to related parties, other payables, and long-term borrowings.

• d. Financial risk management objectives and policies

The Corporation’s major financial instruments include equity and debt investments, accounts receivable, accounts payables, and borrowings. The Corporation’s corporate treasury function is responsible for monitoring and managing the financial risks related to the operations of the Corporation. These risks include market risk, credit risk, and liquidity risk.

• 111 -

1) Market risk

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

a) Foreign currency risk

The carrying amounts of the Corporation’s foreign currency denominated monetary assets and monetary liabilities are set out in Note 26.

Sensitivity analysis

The Corporation was mainly exposed to the US dollar (USD).

The following table details the Corporation’s sensitivity to a 2% increase and decrease in New Taiwan dollars against the relevant foreign currencies. The sensitivity rate used when reporting foreign currency risk internally to key management personnel and representing management’s assessment of the reasonably possible change in foreign exchange rates is 2%. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 2% change in foreign currency rates. The table below indicates an increase (a decrease) in pre-tax profit associated with the New Taiwan dollar strengthening 2% against the US dollar.

Loss b) Interest rate risk		USD Impact on NTD	USD Impact on NTD
		For the Year Ended **December 31 **
		2018 $ (4,282)	2017 $ (3,969)

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

Fair value interest rate risk Financial assets Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis	**December 31 **
	2018 2017 $ 256,460 $ 307,933 10,277 4,196 465,177 243,000

The sensitivity analysis below was determined based on the Corporation’s exposure to interest rates for non-derivative instruments at the end of the reporting period. For variable interest rate liabilities, the analysis was prepared assuming the amount of each liability outstanding at the end of the reporting period was outstanding for the whole year. The sensitivity rate of 1% is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

The financial assets and liabilities held by the Corporation with variable interest rates will change according to the effective interest rates, which vary with market interest rates, and will result in fluctuations of the future cash flows.

• 112 -

For the financial assets held by the Corporation with variable interest rates on December 31, 2018 and 2017, if the market interest rates had been 1% higher, the cash inflow from variable interest rate financial assets would have been $103 thousand and $42 thousand, respectively. If the market interest rates had been 1% lower, there would be an equal and opposite impact on variable interest rate financial assets, and the amount would be negative.

For the financial liabilities held by the Corporation with variable interest rates on December 31, 2018 and 2017, if the market interest rates had been 1% higher, the cash outflow from variable interest rate financial liabilities would have been $4,652 thousand and $2,430 thousand, respectively. If the market interest rates had been 1% lower, there would be an equal and opposite impact on variable interest rate financial liabilities, and the amount would be negative.

c) Other price risk

The Corporation was exposed to equity price risk through its investments in mutual funds and marketable securities.

Sensitivity analysis

The Corporation assessed the risk of the financial assets with variances in equity prices. Sensitivity analyses were used for evaluating the exposure to equity price risks.

If equity prices had been 5% higher/lower, the pre-tax profit for the year ended December 31, 2018 would have increased/decreased by $3,839 thousand, as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the year ended December 31, 2018 would have increased/decreased by $17,892 thousand, as a result of the changes in fair value of financial assets at FVTOCI.

If equity prices had been 5% higher/lower, pre-tax profit for the year ended December 31, 2017 would have increased/decreased by $6,492 thousand, as a result of the changes in fair value of held-for-trading investments, and the pre-tax other comprehensive income for the year ended December 31, 2017 would have increased/decreased by $16,412 thousand, as a result of the changes in fair value of available-for-sale shares.

2) Credit risk

There is no significant concentration of credit risk for the Corporation. Credit risk is from cash and cash equivalent deposits in banks and accounts receivable from customers.

The Corporation adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient letters of bank guarantees and security deposits, where appropriate, as a means of mitigating the risk of financial loss from defaults. To reduce credit risk, the Corporation has established internal monitoring procedures to monitor credit risk exposure and the credit condition of counterparties.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks and financial institutions with high credit-ratings assigned by international credit-rating agencies.

3) Liquidity risk

The Corporation manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Corporation’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

• 113 -

The Corporation relies on bank borrowings as a significant source of liquidity. As of December 31, 2018 and 2017, the Corporation had available unutilized short-term bank loan facilities of $130,400 thousand and $460,205 thousand, respectively.

The following table details the Corporation’s remaining contractual maturity of its non-derivative financial liabilities with variable interest rates and agreed repayment periods. The table was drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Corporation can be required to pay. The table includes both interest and principal cash flows.

December 31, 2018

On Demand or Less than 1 Year Non-derivative financial liabilities Variable interest rate liabilities $ 469,596 December 31, 2017 On Demand or Less than 1 Year Non-derivative financial liabilities Variable interest rate liabilities $ 245,309	1-3 Years $ - 1-3 Years $ -	3-5 Years $ - 3-5 Years $ -	5+ Years $ -
			5+ Years $ -

23. TRANSACTIONS WITH RELATED PARTIES

Besides information disclosed elsewhere in the other notes, details of transactions between the Corporation and other related parties are disclosed below.

• a. Names and categories of the related parties

Related Party Name Related Party Category Yang Ming Marine Transport Corporation (Yang Ming) Government - related parties Hong Ming Terminal & Stevedoring Corp. Subsidiary of government - related parties Tai Shing Marine Transport Corporation (Tai Shing) Subsidiary Shin Wang Marine Transport Corporation Subsidiary Yunn Wang Investment Co., Ltd. Associates

• 114 -

b. Operating transactions

Operating revenue Government - related parties Yang Ming Associates Others Operating costs Government and its subsidiaries - related parties Yang Ming Others Subsidiary Tai Shing	For the Year Ended	For the Year Ended	December 31
		2018 $ 319,015 84 $ 319,099 $ 297,151 1,906 156,810 $ 455,867	2017 $ 189,930 114 $ 190,044 $ 196,604 1,707 237,153 $ 435,464

Transactions with related parties were based on agreements. Lease contracts with associates were based on market conditions.

At the end of reporting period, trade receivables from related parties were as follows:

Government - related parties Yang Ming Subsidiary Others		December 31	December 31
		2018 $ 59,043 1,207 $ 60,250	2017 $ 36,465 1,381 $ 37,846

At the end of reporting period, prepayments from related parties (included in prepayments) were as follows:

Government - related parties Others		**December 31 **	**December 31 **
		2018 $ 6,479	2017 $ 666

• 115 -

At the end of reporting period, trade payables to related parties were as follows:

Government - related parties Yang Ming Others Subsidiary Tai Shing		December 31	December 31
		2018 $ 26,092 338 10,823 $ 37,253	2017 $ 34,123 203 31,136 $ 65,462

The Corporation did not recognize allowance for doubtful accounts and did not receive guarantees during the years ended December 31, 2018 and 2017. In addition, the outstanding payables to related parties had no guarantees.

c. Other transactions with government - related parties

The Ministry of Transportation and Communication of the Executive Yuan of the ROC holds a 26.46% interest in the Corporation. In June 2012, the Corporation purchased seven-year, privately placed, secured mandatory convertible bonds (classified as at FVTPL) issued by Yang Ming (of which the Ministry of Transportation and Communication of the Executive Yuan of the ROC holds a 35.51% interest) for $200,000 thousand. The bonds, with a coupon rate of 3% per annum, are due in June 2019 and were transferrable starting from three months after issuance. The bonds shall only be converted into Yang Ming’s ordinary shares at the prevailing conversion price on the last day of the seven-year maturity.

In February 2017, the Corporation purchased 19,083 thousand shares of privately placed ordinary shares issued by Yang Ming for $199,990 thousand (classified as at FVTOCI - non-current and as available-for-sale financial assets - non-current as of December 31, 2018 and 2017, respectively), and the rights and obligations of the privately placed ordinary shares are the same as those of the ordinary shares issued by Yang Ming. However, the private shares are subject to the restrictions on transfer by the Securities Exchange Act., which say that private shares may not be transferred within 3 years of the delivery date. After 3 full years have elapsed since the delivery date of the privately placed ordinary shares, Yang Ming may apply for registration of the retroactive handling of public issuance and listing with the FSC, if Yang Ming complies with the relevant laws and regulations.

In November 2017, the Corporation paid $158,519 thousand in cash to acquire an additional 13,210 thousand shares issued by Yang Ming. However, the Corporation’s investment in Yang Ming was still classified as at FVTOCI - current as of December 31, 2018 and as available-for-sale financial assets - current as of December 31, 2017, as the Corporation did not have any significant influence over Yang Ming.

d. Other transactions with related parties (included in non-operating income - other income)

The Corporation performed management services and endorsement services to its subsidiaries and associates. The management services revenue and endorsement services revenue were $33,536 thousand and $27,217 thousand for the years ended December 31, 2018 and 2017, respectively.

In addition, the subsidiary provides escrows services to the Corporation, and the escrows service fees were $1,206 thousand and $1,158 thousand for the years ended December 31, 2018 and 2017, respectively.

• 116 -

• e. Compensation of key management personnel

The compensation of directors, supervisors and other key management personnel were as follows:

Short-term employee benefits Post-employment benefits	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2018 $ 24,211 811 $ 25,022	2017 $ 16,694 1,015 $ 17,709

24. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were pledged or mortgaged as collateral for long-term borrowings and transactions:

Property, plant and equipment Pledged deposits (included in other non-current assets)		December	31
		2018 $ 4,800 5,465 $ 10,265	2017 $ 9,600 10,415 $ 20,015

25. SIGNIFICANT UNRECOGNIZED COMMITMENTS AND CONTINGENCIES

• a. Significant unrecognized commitments and contingencies of the Corporation as of December 31, 2018 were as follows:

• 1) Aggregate information of the Corporation entering into ship management agreements with other entities is stated below:

Ship CPC Corporation, Taiwan YUN AN I. II. III. V. VI TAI CHIN 201, 202, 203 and 205 HONG YUN and SHENH YUN HUA YUN, TONG YUN and DER YUN	Date of Agreement 2015.05.16-2020.05.15 2007.02.10-2032.12.31 2017.01.05-2023.01.24 2017.04.07-2022.10.29	Calculation and Fee Collection Method
		Basic fees of ship management were $1,400 thousand per month with additional bonuses and with collection on a monthly basis. The fee was $350 thousand per day calculated by day, with collection on a monthly basis. Basic fees of ship management were $112 thousand for each ship per day, calculated by day, with collection on a monthly basis. Basic fees of ship management were $96-$104 thousand for each ship per day, calculated by day, with collection on a monthly basis.

• 117 -

• 2) In May 2017, the board of directors of the subsidiary Tai Shing resolved to build two 62,000-ton bulk carriers with Oshima Shipbuilding Co., Ltd.; each bulk carrier’s cost was US$25,500 thousand. In addition, in December 2018, the board of directors resolved to upgrade two 62,000-ton bulk carriers to two 64,000-ton bulk carriers with the installation of SOx scrubber. As a result, each bulk carrier’s cost was US$26,390 thousand and the total cost of the upgrade was US$890 thousand. As of the date of the independent auditors’ report to the financial statements for the year ended December 31, 2017, the unpaid amount was US$41,996 thousand. The parent company is Tai Shing’s guarantor.

• 3) In December 2018, the board of directors of the subsidiary Tai Shing resolved to build 80,000-ton bulk carriers with Namura Shipbuilding Co., Ltd. and Oshima Shipbuilding Co., Ltd., and the total number of bulk carriers shall be not more than four bulk carriers with a total cost of less than US$136,000 thousand. In March 2018, Tai Shing has entered into a contract with Namura Shipbuilding Co., Ltd. to build two bulk carriers; each bulk carrier’s cost was US$33,980 thousand, with a total amount of US$67,960 thousand.

• 4) The Corporation entered into an operating lease contract with Tai Shing for 2 bulks carriers. The rent of each bulk carrier is $2-14 thousand dollars payable on a monthly basis.

• b. Significant unrecognized commitments of the Corporation as of December 31, 2017 were as follows:

• 1) Aggregate information of the Corporation entering into ship management agreements with other entities is stated below:

Ship CPC Corporation, Taiwan YUN AN I. II. III. V. VI. TAI CHIN 201, 202, 203 and 205 HONG YUN and SHENH YUN HUA YUN, TONG YUN and DER YUN	Date of Agreement 2015.05.16-2020.05.15 2007.02.10-2032.12.31 2017.01.05-2023.01.24 2017.04.07-2022.10.29	Calculation and Fee Collection Method
		Basic fees of ship management were $1,400 thousand per month with additional bonuses and with collection on a monthly basis. The fee was $349 thousand per day, calculated by day, with collection on a monthly basis. Basic fees of ship management were $112 thousand for each ship per day, calculated by day, with collection on a monthly basis. Basic fees of ship management were $96-104 thousand for each ship per day, calculated by day, with collection on a monthly basis.

• 2) In May 2017, the board of directors of the subsidiary Tai Shing resolved to build two 62,000-ton bulk carriers with Oshima Shipbuilding Co., Ltd., each bulk carrier’s cost was US$25,500 thousand. As of the date of the independent auditors’ report to the financial statements for the year ended December 31, 2017, the unpaid amount was US$43,290 thousand. The Corporation is Tai Shing’s guarantor.

• 3) The Corporation entered into an operating lease contract with Tai Shing for leasing 2 bulks carriers. The rent of each bulk carrier is $2-14 thousand dollars payable on a monthly basis.

• 118 -

26. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by foreign currencies other than functional currencies of the Corporation, and the exchange rates between foreign currencies and the respective functional currencies are disclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

December 31, 2018

Foreign Currencies (In Thousands) Exchange Rate Financial assets Monetary items USD $ 8,413 30.715 (USD:NTD) Non-monetary items Investments accounted for using the equity method USD $ 285,083 30.715 (USD:NTD) Financial liabilities Monetary items USD $ 1,444 30.715 (USD:NTD) December 31, 2017 Foreign Currencies (In Thousands) Exchange Rate Financial assets Monetary items USD $ 9,002 29.76 (USD:NTD) Non-monetary items Investments accounted for using the equity method USD $ 254,624 29.76 (USD:NTD) Financial liabilities Monetary items USD $ 2,334 29.76 (USD:NTD)	Carrying Amount $ 258,418
	$ 8,756,324
	$ 44,341
	Carrying Amount $ 267,889
	$ 7,577,608
	$ 69,456

For the years ended December 31, 2018 and 2017, net foreign exchange gain (losses) were $6,868 thousand and $(14,124) thousand, respectively, resulting from the fluctuation of the USD.

• 119 -

27. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees:

• 1) Financing provided to others (None)

• 2) Endorsements/guarantees provided (Table 1)

• 3) Marketable securities held (Table 2)

• 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital (None)

• 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital (None)

• 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital (None)

• 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital (Table 3)

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital (Table 4)

• 9) Trading in derivative instruments (Note 7)

• 10) Information on investees (Table 5)

• b. Information on investments in mainland China (None)

• 120 -

TABLE 1

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (New Taiwan Dollars/US Dollars in Thousands)

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limit on Endorsement/ Guarantee Given on Behalf of Each Party (Notes 1 and 2)	Maximum Amount Endorsed/ Guaranteed During the Year (Note 2)	Outstanding Endorsement/ Guarantee at the End of the Year (Note 2)	Actual Borrowing Amount (Note 2)	Amount Endorsed/ Guaranteed by Collaterals (Note 2)	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit (Notes 1 and 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiary	Endorsement/ Guarantee Given by Subsidiary on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Company in Mainland China	Note
		Name	Relationship
0	Taiwan Navigation Co., Ltd.	Tai Shing	Subsidiary	$ 8,345,890	$ 6,744,470 (US$ 219,582)	$ 4,830,995 (US$ 157,285)	$ 4,662,063 (US$ 151,785)	$ -	46.0	$ 8,345,890	Yes	-	-	-
1	Tai Shing	Taiwan Navigation Co., Ltd.	Parent	7,211,022 (US$ 234,772)	337,159 (US$ 10,977)	248,638 (US$ 8,095)	245,413 (US$ 7,990)	245,413 (US$ 7,990)	2.9	7,211,022 (US$ 234,772)	-	Yes	-	-

Note 1: Not more than twice the endorser’s/guarantor’s paid-in capital.

Note 2: Translated at the exchange rate on December 31, 2018, US$1=NT$30.715.

• 121 -

TABLE 2

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Holding Company Name	Type and Name/Issuer of Marketable Security	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Number of Shares (In Thousands)	Carrying Amount	Percentage of Ownership (%)	Fair Value
Taiwan Navigation Co., Ltd.	Mandatorily convertible bonds Yang Ming Shares Chunghwa Investment Co., Ltd. Taiwan Foundation International Pte. Ltd. Private placement listed shares Yang Ming Listed shares Yang Ming	More than half of directors assigned by the Ministry of Transportation and Communications - Corporate director More than half of directors assigned by the Ministry of Transportation and Communications More than half of directors assigned by the Ministry of Transportation and Communications	Financial assets at FVTPL - current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - current	- 4,590 1,500 19,083 13,210	$ 76,777 49,943 45,864 145,794 116,247	- 6.00 15.00 0.82 0.57	$ 76,777 49,943 45,864 145,794 116,247

Note: See Table 4 for the information on investments in subsidiaries and associates.

• 122 -

TABLE 3

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

(In Thousands of New Taiwan Dollars)

Seller/Buyer	Related Party	Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total (Note 2)
Taiwan Navigation Co., Ltd. Tai Shing Shin Wang	Yang Ming Tai Shing Taiwan Navigation Co., Ltd. Shin Wang Tai Shing	(Note 1) Subsidiary Parent company The same parent company The same parent company	Freight transportation revenue Rental expense and stevedoring expense Rental expense Rental revenue Rental revenue Rental expense	$ (319,015) 297,151 156,810 (156,810) (689,426) 689,426	(25) 27 14 (7) (32) 95	By negotiations By negotiations By negotiations By negotiations By negotiations By negotiations	$ - - - - - -	- - - - - -	$ 59,043 (26,092) (10,823) 10,823 103,267 (103,267)	98 (70) (29) 9 91 (99)

Note 1: More than half of directors assigned by the Ministry of Transportation and Communications.

Note 2: The proportion of total receivables (payables).

• 123 -

TABLE 4

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amount Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Tai Shing	Shin Wang	The same parent company	$ 103,267	9.7	$ -	-	$ 103,267	$ -

• 124 -

TABLE 5

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

Investor Company	Investee Company	Location	Main Business and Products	Investment Amount	Investment Amount	As of December 31, 2018	As of December 31, 2018	As of December 31, 2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares (In Thousands)	%	Carrying Amount
Taiwan Navigation Co., Ltd.	Tai Shing Shin Wang Yunn Wang	Panama City, Panama Monrovia City, Liberia Taipei	Rental and sale of ships Rental and sale of ships Investment	$ 3,921,447 32,500 41,861	$ 3,921,447 32,500 41,861	- - 5,211	100.00 100.00 49.75	$ 8,651,166 105,158 115,001	$ 848,505 72,584 7,364	$ 848,505 72,584 3,663

• 125 -

TAIWAN NAVIGATION CO., LTD.

SCHEDULE OF THE STATEMENTS OF IMPORTANT ACCOUNTING ITEMS

Statement Statement of Assets, Liabilities and Equities Statement of cash and cash equivalents Statement of changes in investments accounted for using the equity method Statement of changes in investments properties Statement of short-term borrowings Statement of Profit and Loss Statement of operating revenue Statement of operating costs Statement of operating expenses Statement of analysis of employee benefits expense, depreciation and amortization by function

**Schedule Number **

1 2 3 4 5 6 7 8

• 126 -

SCHEDULE 1

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Except Amounts Shown in the Notes)

Item Period Rate Cash on hand Bank balance (Note) Checking accounts Demand deposits Cash equivalents (Note) Time deposits with original maturities of less than 3 months 2018.11.26-2019.02.15 1.62%-3.30%	Amount $ 262 10,993 10,277 21,270 98,288 $ 119,820

Note: Including US$3,225 thousand and HK$1,000 thousand, at exchange rates of US$1=$30.715 and HK$1=$3.921, respectively.

• 127 -

SCHEDULE 2

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Investees Unlisted shares Tai Shing Shin Wang Yun Wang	Balance, December 31, 2017 Share of Profit of Subsidiaries and Associates Accounted for Shares (In Thousands) Amount Cash Dividends Using the Equity Method (Note 1) Equity Adjustments (Note 2) - $ 7,547,150 $ - $ 848,505 $ 255,511 - 30,458 - 72,584 2,116 5,211 102,431 (3,127) 3,663 12,034 $ 7,680,039 $ (3,127) $ 924,752 $ 269,661	Balance, December 31, 2018
	Shares (In Thousands) - - 5,211	Shares (In Thousand) % - 100.00 - 100.00 5,211 49.75	Amount $ 8,651,166 105,158 115,001 $ 8,871,325

Note 1: Investment accounted for using the equity method and related share of profit was calculated based on the financial statement that have been audited.

Note 2: Including exchange differences on translating foreign operations and unrealized gain (loss) on investments in financial assets at fair value other comprehensive income.

• 128 -

SCHEDULE 3

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF CHANGES IN INVESTMENTS PROPERTIES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Balance, December 31, 2017 Cost Land $ 1,055,678 Buildings 121,072 1,176,750 Accumulated depreciation Buildings 78,028 $ 1,098,722	Increase in 2018 $ - - $ - $ 1,352	Decrease in 2018 Balance, December 31, 2018 $ - $ 1,055,678 177 120,895 $ 177 1,176,573 $ 177 79,203 $ 1,097,370

• 129 -

SCHEDULE 4

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF SHORT-TERM BORROWINGS DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

			Balance,
			December 31,	Loan
Financial Institutions	Period	Rate	2018	Commitments	Collateral
Line of credit borrowings
Bank SinoPac	2018.03.01-2019.03.31	0.95%	$ 300,000	$ 300,000	None
First Bank	2018.09.19-2019.09.19	0.95%	165,177	230,177	None
			$ 465,177	$ 530,177

• 130 -

SCHEDULE 5

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF OPERATING REVENUE FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Ocean going shipping line revenue Ship management service revenue Port service revenue Coastal shipping line revenue Others (Note)	Amount $ 778,473 203,315 127,504 103,401 63,517 $ 1,276,210

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

• 131 -

SCHEDULE 6

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item Rent Salary and pension Freight Port fee Cargo charges Usage material fee Fuel Material Grease Depreciation Others (Note)	Amount $ 462,154 198,869 56,128 55,294 111,422 174,661 4,527 3,230 182,418 40,028 110,575 $ 1,105,466

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

• 132 -

SCHEDULE 7

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Items Salary and pension Insurance Depreciation Others (Note)	Amount $ 102,136 5,572 1,929 31,919 $ 141,556

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

• 133 -

SCHEDULE 8

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF ANALYSIS OF EMPLOYEE BENEFITS EXPENSE, DEPRECIATION AND AMORTIZATION BY FUNCTION FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

Employee benefits expense Salary Labor and health insurance Pension Board compensation Other employee benefits Depreciation Amortization	2018	Total $ 277,155 19,118 12,743 11,107 18,042 $ 338,165 $ 41,957 $ 525	2017
	Classified as Operating Costs Classified as Operating Expenses $ 189,694 $ 87,461 13,969 5,149 9,175 3,568 - 11,107 16,460 1,582 $ 229,298 $ 108,867 $ 40,028 $ 1,929 $ - $ 525		Classified as Operating Costs Classified as Operating Expenses $ 181,547 $ 65,521 12,815 4,550 8,761 3,533 - 5,473 15,925 1,213 $ 219,048 $ 80,290 $ 34,133 $ 1,976 $ - $ 695	Total $ 247,068 17,365 12,294 5,473 17,138 $ 299,338 $ 36,109 $ 695

Note: As of December 31, 2018 and 2017, the Corporation had 270 and 260 employees, respectively. There were 7 and 5 non-employee directors for 2018 and 2017, respectively.

• 134 -

Taiwan Navigation Co., Ltd. and Subsidiaries

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

• 135 -

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

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

Very truly yours, TAIWAN NAVIGATION CO., LTD.

By:

LIU, WEN-QING Chairman

March 26, 2019

• 136 -

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 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.

• 137 -

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 some of its aging bulk carriers in 2018 in order to replace them with new bulk carriers. 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.

Our main audit procedures performed in respect of the gain on disposal of bulk carriers were as follows:

1. We understood management’s evaluation processes of disposal of the bulk carriers and verified the implementation of related controls through appropriate approvals.

2. We tested the transaction contract and the record of remittances to verify the accuracy of the amount received.

3. 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.

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.

• 138 -

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:

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

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

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

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

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

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

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

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

• 139 -

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.

• 140 -

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 Share of other comprehensive income of associates accounted for using the equity method (Note 12)		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) 12,034 - (120,077) (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 - - - - - 115 - (Continued)

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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)

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 % $ 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 % $ (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)

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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.

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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	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)	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) (Continued)

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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)

Interest received Dividends received 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 $ 14,637 10,012 298,424 181,050 181,441 (1,671,307) (432) (292,106) (114,317) (1,715,671) 10,762 95,739 382,811 $ 478,550	2017 $ 14,360 6,228 (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)

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

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

Taiwan Navigation Co., Ltd. (the “Corporation”), whose shares are listed on the Taiwan Stock Exchange, was originally majority-owned by the Taiwan Provincial Government but was privatized on June 20, 1998. The Corporation mainly engages in passenger and freight transport via water, port warehousing, aquatic sand mining, and navigation channel dredging and also acts as a shipping agency, provides tugboats, and acts as a land owner in agreements with construction companies for the use of its land for the construction of residential and commercial buildings for sale and rental.

Tai Shing Maritime Co., S.A. (Tai Shing) was established in the Republic of Panama, and Shin Wang Maritime Inc. (Shin Wang) was established in Liberia. The Corporation holds a respective 100% interest in Tai Shing and Shin Wang. Tai Shing and Shin Wang mainly engage in the general management, purchasing, sale, charter, and operation of sea navigation routes and in other maritime operations of ships.

The consolidated financial statements of the Corporation and its subsidiaries, collectively referred to as the “Group”, are presented in New Taiwan dollars, the functional currency of the Corporation.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Corporation’s board of directors on March 26, 2019.

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

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

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

1) IFRS 9 “Financial Instruments” and related amendments

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

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

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Classification, measurement, and impairment of financial assets

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

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

Financial Asset Cash and cash equivalents Derivatives Equity securities Mutual funds Time deposits with original maturities of more than 3 months Accounts receivable (including related parties) Others financial assets Financial Asset FVTOCI Equity instruments Add: Reclassification from av (IAS 39) Amortized cost Add: Reclassification from loan receivables (IAS 39)	Measureme	nt Category	Carrying Amount IAS 39 IFRS 9 Remark $ 382,811 $ 382,811 a) 97,827 97,827 d) 374,141 434,067 b) 32,007 32,007 c) 146,122 146,122 a) 103,994 103,994 a) 30,390 30,390 a) IFRS 9 Carrying Amount as of January 1, 2018 Other Equity Effect on January 1, 2018 Remark $ 434,067 $ 59,926 b) 663,317 - a) $ 1,097,384 $ 59,926
	IAS 39 Loans and receivables At fair value through profit or loss (FVTPL) Available‑for‑sale Held‑for‑trading Loans and receivables Loans and receivables Loans and receivables IAS 39 Carrying Amount as of January 1, 2018 ailable-for-sale $ - - s and - $ -	IFRS 9 At amortized cost Mandatorily at FVTPL At fair value through other comprehensive income (FVTOCI) - equity instruments Mandatorily at FVTPL At amortized cost At amortized cost At amortized cost Reclassifi- cation Remea- surement $ 374,141 $ 59,926 663,317 - $ 1,037,458 $ 59,926

• a) Cash and cash equivalents, accounts receivable (including related parties), time deposits with original maturities of more than 3 months and other financial assets that were previously classified as loans and receivables under IAS 39 are classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.

• b) The Group elected to designate all its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not held for trading. As a result, the related other equity - unrealized loss on available-for-sale financial assets of $(111,449) thousand was reclassified to other equity - unrealized loss on financial assets at FVTOCI.

Investments in unlisted shares previously measured at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, an increase of $59,926 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018.

• c) Mutual funds previously classified as held for trading under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments.

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• d) Mandatory convertible bond investments were designated as at FVTPL under IAS 39 because they were hybrid instruments. They have been classified as mandatorily measured at FVTPL in their entirety under IFRS 9 since they contain host contracts that are assets within the scope of IFRS 9.

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

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

The Group evaluated the retrospective application of IFRS 15 on assets, liabilities, and equity as of January 1, 2018 and the comprehensive income and cash flows for the year ended December 31, 2018. The application of IFRS 15 has no material impact on the Group. The following table shows the impact on the classification of assets and liabilities.

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

As Originally Stated Adjustments Arising from Initial Application Current liabilities Contract liabilities $ - $ 50,833 Advance receipts 50,833 (50,833) Total effect on liabilities $ 50,833 $ -	Restated $ 50,833 - $ 50,833

Impact on assets, liabilities and equity for current year

	December 31,	December 31,
		2018
Increase in contract liabilities - current	$	45,905
Decrease in advance receipts		(45,905)
Total effect on liabilities	$	-

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

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

• 149 -

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

• Note 2: The FSC permits the election for early adoption of the amendments starting from January 1, 2018.

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

IFRS 16 “Leases”

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

Definition of a lease

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

The Group as lessee

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

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

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

The Group expects to apply the following practical expedients:

• 1) The Group will apply a single discount rate to a portfolio of leases with reasonably similar characteristics to measure lease liabilities.

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

• 3) The Group will exclude initial direct costs from the measurement of right-of-use assets on January 1, 2019.

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• 4) The Group will use hindsight, such as in determining lease terms, to measure lease liabilities.

The Group as lessor

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

The initial application of IFRS 16 is not expected to have a material impact on the Group’s assets, liabilities and equity as of January 1, 2019.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group assesses that the application of other standards and interpretations will have no material impact on the Group’s financial position and financial performance.

• c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Effective Date New IFRSs Announced by IASB (Note 1)

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

January 1, 2020 (Note 2) To be determined by IASB

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

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

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

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

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

• b. Basis of preparation

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

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

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

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

• 3) Level 3 inputs are unobservable inputs on an asset or liability.

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

Current assets include:

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

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

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

Current liabilities include:

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

• 2) Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and

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

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

• d. Basis of consolidation

• 1) Principles for preparing consolidated financial statements

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

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

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

• 2) Subsidiaries included in the consolidated financial statements

The Group holds 100% of the interest of the subsidiaries which are included in the consolidated financial statements. The subsidiaries are Tai Shing and Shin Wang, which are mainly engaged in marine freight transportation services.

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e. Foreign currencies

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

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

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

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

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

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

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

• f. Investments in associates

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

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

When the Group subscribes for additional new shares of an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus - changes in capital surplus from investments in associates accounted for using the equity method. If the Group’s ownership interest is reduced due to its additional subscription of the new shares of the associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be

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required had the investee directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

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

The entire carrying amount of the investment is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date, and the fair value is regarded as the investment’s fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required had that associate directly disposed of the related assets or liabilities.

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

• g. Property, plant and equipment

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

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

Freehold land is not depreciated.

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

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

• h. Investment properties

Investment properties are properties held to earn rentals or for capital appreciation. Investment properties also included land held for a currently undetermined future use.

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

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

• i. Impairment of tangible assets

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

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

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

• j. Financial instruments

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

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

1) Financial assets

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

a) Measurement categories

2018

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

• i. Financial assets at FVTPL

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

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Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 23.

• ii. Financial assets at amortized cost

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

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

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

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, accounts receivable at amortized cost and other financial assets, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

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

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

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

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• iii. Investments in equity instruments at FVTOCI

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

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

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

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2017

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

• i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such financial assets are either held for trading or designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on their remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial assets. Fair value is determined in the manner described in Note 23.

ii. Available-for-sale financial assets

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

Available-for-sale financial assets are measured at fair value. Changes in the carrying amounts of available-for-sale monetary financial assets (relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments) are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when such investments are disposed of or are determined to be impaired.

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

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

iii. Loans and receivables

Loans and receivables are measured at amortized cost using the effective interest method less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

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b) Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost.

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

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

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

2017

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

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

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

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

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

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

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

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

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

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

c) Derecognition of financial assets

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

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

2) Financial liabilities

Financial liabilities are measured at amortized cost using the effective interest method. The difference between the carrying amount of a financial liability derecognized and the consideration paid is recognized in profit or loss.

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• k. Revenue recognition

2018

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

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

Services for ship management, ship chartering and freight transport

As the Group provides services for ship management, ship chartering and freight transport, customers simultaneously obtain and consume the benefit provided by the Group’s performance, and the relevant revenue is recognized when the services are provided. The revenue from ship management and ship chattering services are recognized with reference to the number of days incurred, and the revenue from freight transport services is recognized with reference to the stage of completion of the services provided.

2017

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

• 1) Service income

Service income is recognized when services are provided.

The revenue from ship management and ship chattering services is recognized with reference to the stage of completion of the relevant contract.

• 2) Dividend and interest income

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

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

l. Leasing

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

• 1) The Group as lessor

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

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2) The Group as lessee

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

m. Borrowing costs

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

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than that which is stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

• n. Employee benefits

1) Short-term employee benefits

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

2) Retirement benefits

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

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost and past service cost, as well as gains and losses on settlements) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur or when the plan amendment or curtailment occurs/or when the settlement occurs. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

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

• o. Taxation

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

1) Current tax

According to the Income Tax Law, an additional tax of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain earnings.

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

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• 2) Deferred tax

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

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

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

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

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

• 3) Current and deferred taxes for the year

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

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6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalents Time deposits with original maturities of less than 3 months		December 31	December 31
		2018 $ 262 37,128 441,160 $ 478,550	2017 $ 262 32,631 349,918 $ 382,811

The market rate intervals of cash in banks and cash equivalents at the end of the reporting period were as follows:

7. 8.	December 31 2018 2017 Bank balance and cash equivalents 0.01%-3.30% 0.01%-2.50% FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS December 31 2018 2017 Financial assets at FVTPL-current Derivative financial assets Mandatory convertible bonds $ 76,777 $ - Mutual funds - 32,007 $ 76,777 $ 32,007 Financial assets at FVTPL-non-current Derivative financial assets Mandatory convertible bonds $ - $ 97,827 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018 December 31, 2018 Current Domestic investments Listed shares Yang Ming Marine Transport Corporation $ 116,247 (Continued)	**December 31 **

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	December 31,
	2018
Non-current
Domestic investments
Private placement listed shares
Yang Ming Marine Transport Corporation	$ 145,794
Unlisted shares
Chunghwa Investment Co., Ltd.	49,943
	195,737
Foreign investments
Unlisted shares
Taiwan Foundation International Pte. Ltd.	45,864
	$ 241,601
	(Concluded)

The Group’s investments in the ordinary shares mentioned above are expected to earn profit through dividend income. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale under IAS 39. Refer to Notes 3 and 9 for information relating to their reclassification and comparative information for 2017.

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

	December 31,
	2017
Current
Domestic investments
Listed shares	$ 151,914
Non-current
Domestic investments
Private placement listed shares	$ 176,327

The Group invested in restricted private shares of domestic listed companies. Because the impact of share restrictions is reliably measured and the results are comparable to those of the average market participant, the aforementioned equity investments were classified as available-for-sale financial assets - non-current.

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10. ACCOUNTS RECEIVABLE, NET

At amortized cost Gross carrying amount Less: Allowance for impairment loss		December	31
		2018 $ 71,849 2,600 $ 69,249	2017 $ 70,129 2,600 $ 67,529

In 2018

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

The Group writes off an account receivable when there is information indicating that the debtor is experiencing severe financial difficulty and there is no realistic prospect of recovery of the receivable. For accounts receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables which are due. Where recoveries are made, these are recognized in profit or loss.

The aging of receivables is as follows:

	December 31,	December 31,
		2018
Up to 60 days	$	64,546
61-90 days		4,015
More than 90 days		3,288
Gross carrying amount		71,849
Loss allowance (lifetime ECLs)		(2,600)
Amortized cost	$	69,249
The movements of the loss allowance for accounts receivable were as follows:
		2018
Balance at January 1, 2018 per IAS 39	$	2,600
Adjustment on initial application of IFRS 9		-
Balance at January 1, 2018 and December 31, 2018 per IFRS 9	$	2,600

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In 2017

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

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

The aging of receivables was as follows:

	December 31,
	2017
Up to 60 days	$ 54,078
61-90 days	13,161
More than 90 days	2,890
	$ 70,129

The above aging schedule was based on the number of days past due days from the invoice date.

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

	December 31,
	2017
Up to 30 days	$ 13,161
31-60 days	883
More than 60 days	2,007
	$ 16,051

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

As of December 31, 2017, the amounts of the allowances for impairment loss individually and collectively assessed for were $2,600 thousand.

The Group did not hold any collateral over these balances.

11. OTHER FINANCIAL ASSETS

Time deposits with original maturities of more than 3 months Others		December 31	December 31
		2018 $ 276,589 43,291 $ 319,880	2017 $ 146,122 30,390 $ 176,512

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The market rate intervals of time deposits with original maturities of more than 3 months at the end of the reporting period were as follows:

December 31	December 31
2018	2017
2.56%-3.15%	1.55%-2.02%

12. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates Associates that are not individually material Yunn Wang Investment Co., Ltd.		**December 31 **	**December 31 **
		2018 $ 115,001	2017 $ 102,431

At the end of the reporting period, the Group holds 49.75% interest in Yunn Wang Investment Co., Ltd. (Yunn Wang).

Refer to Table 5 “Information on Investees” (following these Notes to Consolidated Financial Statements) for the nature of activities, principal place of business and country of incorporation of Yunn Wang.

The share of profit or loss and other comprehensive income of Yunn Wang were calculated based on the financial statements that have been audited.

The aggregate information of associates is as follows:

The Group’s share of: Net profit (loss) for the year Other comprehensive income Total comprehensive income for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 3,663 12,034 $ 15,697	2017 $ (137) 21,562 $ 21,425

13. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Reclassification Effects of foreign currency exchange differences Balance at December 31, 2017	Land $ 191,103 - - - - $ 191,103	Buildings Transportation Equipment $ 82,555 $ 16,983,179 - 3,178,982 - (1,225,235 ) - 957,274 - (1,311,992) $ 82,555 $ 18,582,208	Other Equipment $ 7,617 5,884 (610 ) - (510) $ 12,381	Total $ 17,264,454 3,184,866 (1,225,845 ) 957,274 (1,312,502) $ 18,868,247 (Continued)

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Accumulated depreciation Balance at January 1, 2017 Disposals Depreciation expenses Effects of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Effects of foreign currency exchange differences Balance at December 31, 2018 Accumulated depreciation Balance at January 1, 2018 Disposals Depreciation expenses Effects of foreign currency exchange differences Balance at December 31, 2018 Carrying amounts at December 31, 2018	Land $ 191,103 $ 191,103 - - - $ 191,103 $ 191,103	Buildings Transportation Equipment $ 32,927 $ 6,948,614 - (941,909 ) 1,711 751,813 - (450,386) $ 34,638 $ 6,308,132 $ 47,917 $ 12,274,076 $ 82,555 $ 18,582,208 - 48,100 - (1,869,703 ) - 517,848 $ 82,555 $ 17,278,453 $ 34,638 $ 6,308,132 - (1,546,630 ) 1,712 756,164 - 155,088 $ 36,350 $ 5,672,754 $ 46,205 $ 11,605,699	Other Equipment Total $ 6,104 $ 6,987,645 (460 ) (942,369 ) 368 753,892 (274) (450,660) $ 5,738 $ 6,348,508 $ 6,643 $ 12,519,739 $ 12,381 $ 18,868,247 17,188 65,288 (3,483 ) (1,873,186 ) 510 518,358 $ 26,596 $ 17,578,707 $ 5,738 $ 6,348,508 (2,757 ) (1,549,387 ) 3,036 760,912 102 155,190 $ 6,119 $ 5,715,223 $ 20,477 $ 11,863,484 (Concluded)

The above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Buildings Main buildings 48-60 years Renovation work 8 years Transportation equipment Vessels 20-25 years Drydock 2-2.5 years Vehicles and motorcycles 3-8 years Other equipment 3-20 years

Property, plant and equipment pledged as collateral for bank borrowings are set out in Note 25.

Information about capitalized interest is as follows:

Capitalized interest Range of capitalization rate	**For the Year Ended December 31 **
	2018 2017 $ 5,675 $ 13,957 2.10%-3.57% 1.62%-2.46%

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Depreciation expenses related to property, plant and equipment and investment properties are as follows:

Operating costs Operating expenses	For the Year Ended	For the Year Ended	December 31
		2018 $ 760,335 1,929 $ 762,264	2017 $ 753,268 1,976 $ 755,244

Amortization expenses related to other non-current assets are as follows:

Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 525	2017 $ 695

14. INVESTMENT PROPERTIES

Cost Land Buildings Less: Accumulated depreciation - buildings		December 31	December 31
		2018 $ 1,055,678 120,895 1,176,573 79,203 $ 1,097,370	2017 $ 1,055,678 121,072 1,176,750 78,028 $ 1,098,722

Investment properties are depreciated using the straight-line method over their estimated useful lives of 60 years.

The fair value of investment properties were not appraised by independent valuers. The management of the Corporation used the valuation model that market participants use in determining the fair value. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

December 31 2018 2017 Fair value $ 3,555,321 $ 3,505,306 Rental income and operating expenses directly related to investment properties are as follows:		December 31

Rental income related to investment properties Operating expenses directly related to investment properties Direct operating expenses from investment properties generating rental income Direct operating expenses from investment properties not generating rental income	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ 52,658 $ 15,904 398 $ 16,302	2017 $ 48,360 $ 16,821 438 $ 17,259

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15. BORROWINGS

• a. Short-term borrowings

b.	Unsecured borrowings Line of credit borrowings Interest rate range Long-term borrowings Secured borrowings (1) Line of credit borrowings (2) Interest rate range			**December 31 **	**December 31 **
			2018 2017 $ 557,322 $ 372,754 0.95%-3.25% 0.95%-2.17% **December 31 **
			2018 $ 3,203,715 184,290 $ 3,388,005 3.16%-3.57%		2017 $ 4,748,871 - $ 4,748,871 2.10%-2.46%

• 1) Secured borrowings include bank loans of the Corporation and project loans for the construction of ships of Tai Shing, whose freehold ships are provided as collateral (refer to Note 25), which have principal and interest amortized on a monthly, quarterly and semi-annual basis and which are expected to be paid off in October 2027. Tai Shing paid off a portion of the principal due in July 2022 as of December 31, 2018.

• 2) Interest on line of credit borrowings is paid on a monthly basis. The principal will be repaid on a quarterly basis from September 2020 and expected to be paid off in September 2023.

16. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Corporation adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 7% of monthly salaries and wages.

b. Defined benefit plans

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

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

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities Movements in net defined benefit liabilities were as follows:		**December 31 **	**December 31 **
		2018 $ 106,805 (37,992) $ 68,813	2017 $ 104,501 (26,490) $ 78,011

	Present Value
	of the Defined			Net Defined
	Benefit	Fair Value of			Benefit
	Obligation	the Plan Assets		Liabilities
Balance at January 1, 2017	$ 113,173	$ (29,241)		$	83,932
Service cost
Current service cost	3,355		-		3,355
Interest expense (income)	1,257		(332)		925
Recognized in profit or loss	4,612		(332)		4,280
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-		40		40
Actuarial loss - changes in demographic
assumptions	4,411		-		4,411
Actuarial loss - experience adjustments	(4,566)		-		(4,566)
Recognized in other comprehensive income	(155)		40		(115)
Contributions from the employer	-		(6,121)		(6,121)
Benefits paid	(13,129)		9,164		(3,965)
Balance at December 31, 2017	104,501		(26,490)		78,011
Service cost
Current service cost	1,959		-		1,959
Interest expense (income)	1,143		(365)		778
Recognized in profit or loss	3,102		(365)		2,737
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-		(851)		(851)
Actuarial loss - changes in demographic
assumptions	3,431		-		3,431
Actuarial loss - changes in financial
assumptions	1,256		-		1,256
Actuarial loss - experience adjustments	6,306		-		6,306
Recognized in other comprehensive income	10,993		(851)		10,142
Contributions from the employer	-		(12,059)		(12,059)
Benefits paid	(11,836)		1,773		(10,063)
Exchange differences on foreign plans	45		-		45
Balance at December 31, 2018	$ 106,805	$ (37,992)		$	68,813

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

• 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

• 2) Interest risk: A decrease in the corporate bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.

• 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

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

Discount rate Expected rate of salary increase	December 31
	2018 2017 1% 1.125% 3% 3%

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

Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase 0.25% increase 0.25% decrease		**December **	**31 **
		2018 $ (2,600) $ 2,713 $ 2,619 $ (2,524)	2017 $ (2,364) $ 2,464 $ 2,381 $ (2,297)

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

Expected contributions to the plans for the next year Average duration of the defined benefit obligation		**December **	**31 **
		2018 $ 948 10.5 years	2017 $ 12,041 10.2 years

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The details of employee benefits expense were as follow:

Post-employment benefits Defined contribution plans Defined benefit plans Other employee benefits An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended	For the Year Ended	December 31
		2018 $ 10,182 2,737 12,919 750,709 $ 763,628 $ 654,761 108,867 $ 763,628	2017 $ 9,430 4,280 13,710 721,865 $ 735,575 $ 655,285 80,290 $ 735,575

Employee’s compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of the Corporation, the Corporation accrued employees’ compensation at the rates of no less than 0.5% and remuneration of directors and supervisors at rates of no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors and supervisors.

The employee’s compensation accrued at the rate of 1% were $10,088 thousand and $4,975 thousand for the years ended December 31, 2018 and 2017, respectively; and the remuneration of directors and supervisors accrued at the rate of 1% were $10,088 thousand and $4,974 thousand, respectively.

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

The employees’ compensation and remuneration of directors and supervisors for the year ended December 31, 2017, which were approved by the Corporation’s board of directors in March 2018, was as follows:

Amount

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31, 2017
	Cash $ 4,970 4,970

The employees’ compensation and the remuneration of directors and supervisors were not estimated for 2016 because of the Corporation’s loss for the year ended December 31, 2016.

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The actual amounts of the employees’ compensation and remuneration of directors and supervisors paid for 2017 differed from the amounts recognized in the consolidated financial statements for the year ended December 31, 2017. The differences were adjusted to profit and loss for the year ended December 31, 2018.

Amounts approved in the board of directors’ meeting Amounts recognized in the annual consolidated financial statements	For the Year Ended December 31, 2017
	Employees’ Compensation Remuneration of Directors and Supervisors $ 4,970 $ 4,970 $ 4,975 $ 4,974

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the Corporation’s board of directors in 2018 and 2017 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

17. EQUITY

a. Ordinary shares

Numbers of shares authorized (in thousands) Value of shares authorized Number of shares issued and fully paid (in thousands) Value of shares issued		December 31	December 31
		2018 480,000 $ 4,800,000 417,294 $ 4,172,945	2017 480,000 $ 4,800,000 417,294 $ 4,172,945

• b. Capital surplus

Treasury share transactions Donations		December 31	December 31
		2018 $ 334,352 30 $ 334,382	2017 $ 334,352 30 $ 334,382

Such capital surplus may be used to offset a deficit; in addition, when the Corporation has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Corporation’s capital surplus and to once a year).

c. Retained earnings and dividends policy

Under the dividends policy as set out in the Corporation’s Articles of Incorporation, where the Corporation made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve of 10% of the remaining profit or until the legal reserve equals the Corporation’s paid-in capital, and setting aside or reversing a special reserve in accordance with the laws and regulations. Then, any remaining profit together with any undistributed retained earnings shall be used by the Corporation’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on the distribution of employees’ compensation

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and remuneration of directors and supervisors after the amendment, refer to Note 16. The Articles of Incorporation also stipulate a dividends policy whereby the payment of cash dividends takes precedence over the issuance of share dividends. In principle, cash dividends shall not be less than 50% of the total dividends distributed.

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

Items referred to under Rule No. 1010012865 issued by the FSC should be appropriated to a special reserve by the Corporation.

The appropriation of earnings for 2017, which was approved in shareholders’ meetings in June 2018, was as follows:

Legal reserve Special reserve Cash dividends	For the Year Ended December 31, 2017
	Appropriation of Earnings Dividends Per Share (NT$) $ 46,647 242,486 292,106 $0.7

Information on deficit compensation for 2016 approved in the shareholders’ meetings is available on the Market Observation Post System website of the Taiwan Stock Exchange.

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

18. REVENUE

Revenue from contracts with customers Revenue from transportation Rental income Rental income from investment properties (Note 14) Other operating revenue Other revenue Contract balances Contract liabilities	For the Year Ended December 31	For the Year Ended December 31
	2018 $ 3,303,719 52,658 10,859 $ 3,367,236 December 31, 2018 $ 45,905	2017 $ 2,764,986 48,360 4,575 $ 2,817,921 January 1, 2018 $ 50,833

The change in the balance of contract liabilities primarily result from the timing difference between the Group’s performance and the respective customer’s payment.

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For the year ended December 31, 2018, the Group recognized $30,750 thousand as revenue from the beginning balance of contract liability.

19. INCOME TAXES

• a. Income tax recognized in profit or loss

Major components of tax expense were as follows:

Current tax In respect of the current year Adjustments for prior years Deferred tax In respect of the current year Effect of tax rate changes Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 15,499 122 15,621 14,479 900 15,379 $ 31,000	2017 $ 21,086 39 21,125 (525) - (525) $ 20,600

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

Profit before tax Income tax expense calculated at the statutory rate Tax effect of adjusting items: Tax-exempt income Unrecognized deductible temporary differences Effect of tax rate changes Adjustments for prior years’ tax Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2018 $ 988,635 $ 197,727 1,952 (169,701) 900 122 $ 31,000	2017 $ 487,071 $ 82,802 (4,357) (57,884) - 39 $ 20,600

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

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

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b. Current tax assets and liabilities

Current tax assets Tax refund receivable (included in other current assets) Current tax liabilities Income tax payable		December	31
		2018 $ - $ 4,011	2017 $ 3,536 $ 9,313

Current income tax payable is the net amount of December 31, 2018 and 2017, deducted by $11,488 thousand and $11,773 thousand of prepaid income tax, respectively.

c. Deferred tax assets and liabilities

The movements of deferred tax assets (included in other current assets) and deferred tax liabilities were as follows:

For the year ended December 31, 2018

Deferred tax assets Temporary differences Unrealized exchange gains and losses Others Deferred tax liabilities Temporary differences Reserve for land value increment tax Share of profit of subsidiaries and associates accounted for using the equity method	Opening Balance Effect of Tax Rate Changes Recognized in Profit or Loss $ 185 $ 32 $ 98 491 87 (60) $ 676 $ 119 $ 38 $ 282,241 $ - $ - 5,779 1,019 14,517 $ 288,020 $ 1,019 $ 14,517	Closing Balance $ 315 518 $ 833 $ 282,241 21,315 $ 303,556

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For the year ended December 31, 2017

Deferred tax assets Temporary differences Unrealized exchange gains and losses Others Deferred tax liabilities Temporary differences Reserve for land value increment tax Share of profit of subsidiaries and associates accounted for using the equity method Unrealized exchange gains and losses	Opening Balance Recognized in Profit or Loss $ - $ 185 414 77 $ 414 $ 262 $ 282,241 $ - 5,777 2 265 (265) $ 288,283 $ (263)	Closing Balance $ 185 491 $ 676 $ 282,241 5,779 - $ 288,020

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

As of December 31, 2018 and 2017, the taxable temporary differences associated with investment in subsidiaries for which no deferred tax liabilities have been recognized were $5,148,718 thousand and $4,300,213 thousand, respectively.

e. Income tax return assessments

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

20. EARNINGS PER SHARE

Basic earnings per share Diluted earnings per share	Unit: NT$ Per Share **For the Year Ended December 31 **	Unit: NT$ Per Share **For the Year Ended December 31 **	Unit: NT$ Per Share **For the Year Ended December 31 **
		2018 $ 2.29 $ 2.29	2017 $ 1.12 $ 1.12

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

Net Profit for the Period

Earnings used in the computation of basic earnings per share	For the Year Ended	For the Year Ended	December 31
		2018 $ 957,635	2017 $ 466,471

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

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 417,294 604 417,898	2017 417,294 300 417,594

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

21. CASH FLOWS INFORMATION FROM FINANCING ACTIVITIES

For the year ended December 31, 2018

Short-term borrowings Long-term borrowings	Opening Balance $ 372,754 4,748,871 $ 5,121,625	Cash Flows $ 181,050 (1,489,866) $ (1,308,816)		Non-cash Changes Foreign Exchange Movement $ 3,518 129,000 $ 132,518	Closing Balance $ 557,322 3,388,005 $ 3,945,327

For the year ended December 31, 2017

Short-term borrowings Current portion of long-term borrowings Long-term borrowings Other non-current liabilities	Opening Balance $ 35,000 117,219 3,352,881 14,658 $ 3,519,758	Cash Flows $ 340,927 (110,814) 1,695,330 1,534 $ 1,926,977		Non-cash Changes Foreign Exchange Movement $ (3,173) (6,405) (299,340) (31) $ (308,949)	Closing Balance $ 372,754 - 4,748,871 16,161 $ 5,137,786

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22. CAPITAL MANAGEMENT

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

Key management personnel of the Group review the capital structure on an annual basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the amount of dividends paid to shareholders, the number of new shares issued, or the existing debt redeemed.

23. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments not measured at fair value

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

• b. Fair value of financial instruments measured at fair value on a recurring basis

• 1) Fair value hierarchy

December 31, 2018 Financial assets at FVTPL Derivative financial assets Financial assets at FVTOCI Investments in equity instruments Listed shares - ROC Unlisted shares - ROC Unlisted shares - foreign December 31, 2017 Financial assets at FVTPL Derivative financial assets Non-derivative financial assets held for trading Available-for-sale financial assets Investments in equity instruments Listed shares - ROC	Level 1 $ - $ 116,247 - - $ 116,247 Level 1 $ - 32,007 $ 32,007 $ 151,914	Level 2 $ 76,777 $ 145,794 - - $ 145,794 Level 2 $ 97,827 - $ 97,827 $ 176,327	Level 3 $ - $ - 49,943 45,864 $ 95,807 Level 3 $ - - $ - $ -	Total $ 76,777
				$ 262,041 49,943 45,864
				$ 357,848
				Total $ 97,827 32,007
				$ 129,834
				$ 328,241

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

• 2) Valuation techniques and inputs applied for Level 2 fair value measurement

• a) Derivative financial assets with no market price available for reference of their fair values have their fair values estimated using the respective mandatory convertible bonds’ evaluation model. The estimations and assumptions used by the Group for the evaluation method are consistent with those used by market participants in the pricing of financial instruments.

• b) Domestic listed private shares with no market price available for reference of their fair values have their fair values estimated using the evaluation method. The estimations and assumptions used by the Group for the evaluation method are consistent with those used by market participants in the pricing of financial instruments. The relevant information used in the evaluation was obtainable by the Corporation.

The evaluation method used by the Group for estimating fair value is the Black-Scholes model.

• 3) Valuation techniques and inputs applied for Level 3 fair value measurement

Unlisted equity securities - ROC held by the Corporation are mainly investment in domestic listed shares. Besides, the asset of unlisted shares - foreign held by the Corporation were mainly bank deposits as of December 31, 2018. Thus, the aforementioned unlisted equity securities were evaluated using the asset-based approach. Separate assets and liabilities of the underlying investments were respectively regarded as individual evaluation targets and were evaluated according to their nature to reflect their overall fair value. Unobservable inputs used by the Corporation were an 89.75% discount rate for lack of marketability as of December 31, 2018. If the discount rate for lack of marketability were to increase/decrease by 1% and all other variables were held constant, the fair value would decrease/increase by $4,875 thousand.

• c. Categories of financial instruments

Financial assets Financial assets at FVTPL Held for trading Designated as at FVTPL Mandatorily at FVTPL Available-for-sale financial assets (Note 1) Loans and receivables (Note 2) Financial assets at amortized cost (Note 3) Financial assets at FVTOCI Equity instruments Financial liabilities Financial liabilities at amortized cost (Note 4)	**December 31 **
	2018 2017 $ - $ 32,007 - 97,827 76,777 - - 374,141 - 663,317 926,722 - 357,848 - 4,254,089 5,403,747

• Note 1: The balances include the carrying amount of available-for-sale financial assets measured at cost.

• Note 2: The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, accounts receivable, trade receivables from related parties, and other financial assets.

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• Note 3: The balances include financial assets measured at amortized cost, which comprise cash and cash equivalents, accounts receivable, trade receivables from related parties, and other financial assets.

• Note 4: The balances include financial liabilities measured at amortized cost, which comprise short-term borrowings, notes and accounts payable, trade payables to related parties, other payables, and long-term borrowings.

• d. Financial risk management objectives and policies

The Group’s major financial instruments include equity and debt investments, accounts receivable, accounts payables, and borrowings. The Group’s corporate treasury function is responsible for monitoring and managing the financial risks related to the operations of the Group. These risks include market risk, credit risk, and liquidity risk.

1) Market risk

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

• a) Foreign currency risk

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) are set out in Note 27.

Sensitivity analysis

The Group was mainly exposed to the U.S. dollar (USD).

The following table details the Group’s sensitivity to a 2% increase and decrease in New Taiwan dollars against the relevant foreign currencies. The sensitivity rate used when reporting foreign currency risk internally to key management personnel and representing management’s assessment of the reasonably possible change in foreign exchange rates is 2%. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 2% change in foreign currency rates. The table below indicates an increase (a decrease) in pre-tax profit associated with the New Taiwan dollar strengthening 2% against the U.S. dollar.

Loss	USD Impact on NTD	USD Impact on NTD	USD Impact on NTD
	**For the Year Ended December 31 **
		2018 $ (4,282)	2017 $ (3,969)

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b) Interest rate risk

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

Fair value interest rate risk Financial assets Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2018 2017 $ 794,526 $ 593,867 26,135 21,960 3,945,327 5,121,625

Sensitivity analysis

The sensitivity analysis below was determined based on the Group’s exposure to interest rates for non-derivative instruments at the end of the reporting period. For variable interest rate liabilities, the analysis was prepared assuming the amount of each liability outstanding at the end of the reporting period was outstanding for the whole year. The sensitivity rate of 1% is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

The financial assets and liabilities held by the Group with variable interest rates will change according to the effective interest rates, which vary with market interest rates, and will result in fluctuations of the future cash flows.

For the financial assets held by the Group with variable interest rates on December 31, 2018 and 2017, if the market interest rates had been 1% higher, the cash inflow from variable interest rate financial assets would have been $261 thousand and $220 thousand, respectively. If the market interest rates had been 1% lower, there would be an equal and opposite impact on variable interest rate financial assets, and the amount would be negative.

For the financial liabilities held by the Group with variable interest rates on December 31, 2018 and 2017, if the market interest rates had been 1% higher, the cash outflow from variable interest rate financial liabilities would have been $39,453 thousand and $51,216 thousand, respectively. If the market interest rates had been 1% lower, there would be an equal and opposite impact on variable interest rate financial liabilities, and the amount would be negative.

c) Other price risk

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

Sensitivity analysis

The Group assessed the risk of the financial assets with variances in equity prices. Sensitivity analyses were used for evaluating the exposure to equity price risks.

If equity prices had been 5% higher/lower, the pre-tax profit for the year ended December 31, 2018 would have increased/decreased by $3,839 thousand, as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the year ended December 31, 2018 would have increased/decreased by $17,892 thousand, as a result of the changes in fair value of financial assets at FVTOCI.

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If equity prices had been 5% higher/lower, pre-tax profit for the year ended December 31, 2017 would have increased/decreased by $6,492 thousand, as a result of the changes in fair value of held-for-trading investments, and the pre-tax other comprehensive income for the year ended December 31, 2017 would have increased/decreased by $16,412 thousand, as a result of the changes in fair value of available-for-sale shares.

2) Credit risk

There is no significant concentration of credit risk for the Group. Credit risk is from cash and cash equivalent deposits in banks and accounts receivable from customers.

The Group adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient letters of bank guarantees and security deposits, where appropriate, as a means of mitigating the risk of financial loss from defaults. To reduce credit risk, the Group has established internal monitoring procedures to monitor credit risk exposure and the credit condition of counterparties.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks and financial institutions with high credit-ratings assigned by international credit-rating agencies.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liquidity. As of December 31, 2018 and 2017, the Group had available unutilized short-term bank loan facilities of $222,545 thousand and $549,485 thousand, respectively.

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with variable interest rates and agreed repayment periods. The table was drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

December 31, 2018

On Demand or Less than 1 Year Non-derivative financial liabilities Variable interest rate liabilities $ 564,653	1-3 Years $ 302,747	3-5 Years $ 1,348,301	5+ Years $ 1,847,284

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December 31, 2017

On Demand or Less than 1 Year Non-derivative financial liabilities Variable interest rate liabilities $ 377,862	1-3 Years $ 962,313	3-5 Years $ 1,509,766	5+ Years $ 2,380,795

24. TRANSACTIONS WITH RELATED PARTIES

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

• a. Names and categories of the related parties

Related Party Name Related Party Category Yang Ming Marine Transport Corporation (Yang Ming) Government - related parties Hong Ming Terminal & Stevedoring Corp. Subsidiary of government - related parties Yunn Wang Investment Co., Ltd. Associates

• b. Operating transactions

Operating revenue Government - related parties Yang Ming Associates Others Operating costs Government and its subsidiaries - related parties Yang Ming Others	**For the Year Ended **	**For the Year Ended **	**December 31 **
		2018 $ 319,015 84 $ 319,099 $ 297,151 1,906 $ 299,057	2017 $ 189,930 114 $ 190,044 $ 196,604 1,707 $ 198,311

Transactions with related parties were based on agreements. Lease contracts with associates were based on market conditions.

• 185 -

At the end of reporting period, trade receivables from related parties were as follows:

Government - related parties Yang Ming		December 31	December 31
		2018 $ 59,043	2017 $ 36,465

At the end of reporting period, prepayments from related parties (included in prepayments) were as follows:

Government - related parties Others		**December 31 **	**December 31 **
		2018 $ 6,479	2017 $ 666

At the end of reporting period, trade payables to related parties were as follows:

Government - related parties Yang Ming Others		December 31	December 31
		2018 $ 26,092 338 $ 26,430	2017 $ 34,123 203 $ 34,326

The Group did not recognize allowance for doubtful accounts and did not receive guarantees during the years ended December 31, 2018 and 2017. In addition, the outstanding payables to related parties had no guarantees.

c. Other transactions with government - related parties

The Ministry of Transportation and Communication of the Executive Yuan of the ROC holds a 26.46% interest in the Corporation. In June 2012, the Corporation purchased seven-year, privately placed, secured mandatory convertible bonds (classified as at FVTPL) issued by Yang Ming (of which the Ministry of Transportation and Communication of the Executive Yuan of the ROC holds a 35.51% interest) for $200,000 thousand. The bonds, with a coupon rate of 3% per annum, are due in June 2019 and were transferrable starting from three months after issuance. The bonds shall only be converted into Yang Ming’s ordinary shares at the prevailing conversion price on the last day of the seven-year maturity.

In February 2017, the Corporation purchased 19,083 thousand shares of privately placed ordinary shares issued by Yang Ming for $199,990 thousand (classified as at FVTOCI - non-current and as available-for-sale financial assets - non-current as of December 31, 2018 and 2017, respectively), and the rights and obligations of the privately placed ordinary shares are the same as those of the ordinary shares issued by Yang Ming. However, the private shares are subject to the restrictions on transfer by the Securities Exchange Act., which say that private shares may not be transferred within 3 years of the delivery date. After 3 full years have elapsed since the delivery date of the privately placed ordinary shares, Yang Ming may apply for registration of the retroactive handling of public issuance and listing with the FSC, if Yang Ming complies with the relevant laws and regulations.

• 186 -

In November 2017, the Corporation paid $158,519 thousand in cash to acquire an additional 13,210 thousand shares issued by Yang Ming. However, the Group’s investment in Yang Ming was still classified as at FVTOCI - current and as available-for-sale financial assets - current as of December 31, 2018 and 2017, respectively, as the Group did not have any significant influence over Yang Ming.

• d. Other transactions with related parties (included in non-operating income - other income)

Associates (management service revenue)	For the Year Ended	For the Year Ended	December 31
		2018 $ 114	2017 $ 114

• e. Compensation of key management personnel

The compensation of directors, supervisors and other key management personnel were as follows:

Short-term employee benefits Post-employment benefits	For the Year Ended	For the Year Ended	December 31
		2018 $ 31,652 1,055 $ 32,707	2017 $ 22,045 1,355 $ 23,400

25. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were pledged or mortgaged as collateral for long-term borrowings and transactions:

Property, plant and equipment Pledged deposits (included in other non-current assets)		December 31	December 31
		2018 $ 8,138,906 250,878 $ 8,389,784	2017 $ 9,543,458 240,281 $ 9,783,739

26. SIGNIFICANT UNRECOGNIZED COMMITMENTS AND CONTINGENCIES

• a. Significant unrecognized commitments and contingencies of the Group as of December 31, 2018 were as follows:

• 1) Aggregate information of the Group entering into ship management agreements with other entities is stated below:

Ship Date of Agreement Calculation and Fee Collection Method CPC Corporation, Taiwan YUN AN I. II. III. V. 2015.05.16-2020.05.15 Basic fees of ship management were $1,400 VI. thousand per month with additional bonuses and with collection on a monthly basis.

(Continued)

• 187 -

Ship Date of Agreement Calculation and Fee Collection Method TAI CHIN 201, 202, 2007.02.10-2032.12.31 The fee was $350 thousand per day 203 and 205 calculated by day, with collection on a monthly basis. HONG YUN and 2017.01.05-2023.01.24 Basic fees of ship management were $112 SHENH YUN thousand for each ship per day, calculated by day, with collection on a monthly basis. HUA YUN, TONG 2017.04.07-2022.10.29 Basic fees of ship management were YUN and DER YUN $96-$104 thousand for each ship per day, calculated by day, with collection on a monthly basis. (Concluded)

• 2) In May 2017, the board of directors of the subsidiary Tai Shing resolved to build two 62,000-ton bulk carriers with Oshima Shipbuilding Co., Ltd.; each bulk carrier’s cost was US$25,500 thousand. In addition, in December 2018, the board of directors resolved to upgrade two 62,000-ton bulk carriers to two 64,000-ton bulk carriers with the installation of SOx scrubber. As a result, each bulk carrier’s cost was US$26,390 thousand and the total cost of the upgrade was US$890 thousand. As of the date of the independent auditors’ report to the consolidated financial statements for the year ended December 31, 2017, the unpaid amount was US$41,996 thousand. The parent company is Tai Shing’s guarantor.

• 3) In December 2018, the board of directors of the subsidiary Tai Shing resolved to build 80,000-ton bulk carriers with Namura Shipbuilding Co., Ltd. and Oshima Shipbuilding Co., Ltd., and the total number of bulk carriers shall be not more than four bulk carriers with a total cost of less than US$136,000 thousand. In March 2018, Tai Shing has entered into a contract with Namura Shipbuilding Co., Ltd. to build two bulk carriers; each bulk carrier’s cost was US$33,980 thousand, with a total amount of US$67,960 thousand.

• b. Significant unrecognized commitments of the Group as of December 31, 2017 were as follows:

• 1) Aggregate information of the Group entering into ship management agreements with other entities is stated below:

Ship CPC Corporation, Taiwan YUN AN I. II. III. V. VI. TAI CHIN 201, 202, 203 and 205 HONG YUN and SHENH YUN HUA YUN, TONG YUN and DER YUN	Date of Agreement 2015.05.16-2020.05.15 2007.02.10-2032.12.31 2017.01.05-2023.01.24 2017.04.07-2022.10.29	Calculation and Fee Collection Method
		Basic fees of ship management were $1,400 thousand per month with additional bonuses and with collection on a monthly basis. The fee was $349 thousand per day, calculated by day, with collection on a monthly basis. Basic fees of ship management were $112 thousand for each ship per day, calculated by day, with collection on a monthly basis. Basic fees of ship management were $96-104 thousand for each ship per day, calculated by day, with collection on a monthly basis.

• 188 -

• 2) In May 2017, the board of directors of the subsidiary Tai Shing resolved to build two 62,000-ton bulk carriers with Oshima Shipbuilding Co., Ltd., each bulk carrier’s cost was US$25,500 thousand. As of the date of the independent auditors’ report to the consolidated financial statements for the year ended December 31, 2017, the unpaid amount was US$43,290 thousand. The parent company is Tai Shing’s guarantor.

27. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by foreign currencies other than functional currencies of the group entities, and the exchange rates between foreign currencies and the respective functional currencies are disclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

December 31, 2018

Foreign Currencies (In Thousands) Exchange Rate Financial assets Monetary items USD $ 8,413 30.715 (USD:NTD) Financial liabilities Monetary items USD $ 1,444 30.715 (USD:NTD) December 31, 2017 Foreign Currencies (In Thousands) Exchange Rate Financial assets Monetary items USD $ 9,002 29.76 (USD:NTD) Financial liabilities Monetary items USD $ 2,334 29.76 (USD:NTD)	Carrying Amount $ 258,418 $ 44,341 Carrying Amount $ 267,889 $ 69,456

For the years ended December 31, 2018 and 2017, net foreign exchange gain (losses) were $6,685 thousand and $(14,263) thousand, respectively, resulting from the fluctuation of the USD.

28. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees:

• 1) Financing provided to others (None)

• 2) Endorsements/guarantees provided (Table 1)

• 189 -

• 3) Marketable securities held (Table 2)

• 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital (None)

• 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital (None)

• 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital (None)

• 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital (Table 3)

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital (Table 4)

• 9) Trading in derivative instruments (Note 7)

• 10) Intercompany relationships and significant intercompany transactions (Table 5)

• 11) Information on investees (Table 6)

• b. Information on investments in mainland China (None)

29. SEGMENT INFORMATION

• a. Operating segments information

The Group managed its organization and allocated resources by reference to a single operating segment, and its operating activities are related to the business of passenger and freight transportation and acting as a shipping agency.

• b. Details of major operating revenue are as follows:

Ocean-going shipping line revenue Ship management service revenue Port service revenue Coastal shipping line revenue Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 2,869,499 203,315 127,504 103,401 63,517 $ 3,367,236	2017 $ 2,265,531 259,647 127,793 112,015 52,935 $ 2,817,921

• 190 -

c. Geographical information

The Group’s revenue from external customers by location of operations are detailed below.

Asia Europe Others	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ 2,050,767 1,263,812 3,314,579 52,657 $ 3,367,236	2017 $ 1,583,704 1,185,857 2,769,561 48,360 $ 2,817,921

The Group’s non-current assets by location of operations are detailed below:

Taiwan Panama		December 31	December 31
		2018 $ 1,792,223 11,731,337 $ 13,523,560	2017 $ 1,835,960 12,171,514 $ 14,007,474

Non-current assets exclude financial instruments.

• d. Information about major customers

A B

For the Year Ended December 31	For the Year Ended December 31
2018 Amount % $ 563,561 17 332,990 10	2017
	Amount % $ 495,314 18 285,468 10

• 191 -

TABLE 1

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (New Taiwan Dollars/US Dollars in Thousands)

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limit on Endorsement/ Guarantee Given on Behalf of Each Party (Notes 1 and 2)	Maximum Amount Endorsed/ Guaranteed During the Year (Note 2)	Outstanding Endorsement/ Guarantee at the End of the Year (Note 2)	Actual Borrowing Amount (Note 2)	Amount Endorsed/ Guaranteed by Collaterals (Note 2)	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit (Notes 1 and 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiary	Endorsement/ Guarantee Given by Subsidiary on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Company in Mainland China	Note
		Name	Relationship
0	Taiwan Navigation Co., Ltd.	Tai Shing	Subsidiary	$ 8,345,890	$ 6,744,470 (US$ 219,582)	$ 4,830,995 (US$ 157,285)	$ 4,662,063 (US$ 151,785)	$ -	46.0	$ 8,345,890	Yes	-	-	-
1	Tai Shing	Taiwan Navigation Co., Ltd.	Parent	7,211,022 (US$ 234,772)	337,159 (US$ 10,977)	248,638 (US$ 8,095)	245,413 (US$ 7,990)	245,413 (US$ 7,990)	2.9	7,211,022 (US$ 234,772)	-	Yes	-	-

Note 1: Not more than twice the endorser’s/guarantor’s paid-in capital.

Note 2: Translated at the exchange rate on December 31, 2018, US$1=NT$30.715.

• 192 -

TABLE 2

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Holding Company Name	Type and Name/Issuer of Marketable Security	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Number of Shares (In Thousands)	Carrying Amount	Percentage of Ownership (%)	Fair Value
Taiwan Navigation Co., Ltd.	Mandatorily convertible bonds Yang Ming Shares Chunghwa Investment Co., Ltd. Taiwan Foundation International Pte. Ltd. Private placement listed shares Yang Ming Listed shares Yang Ming	More than half of directors assigned by the Ministry of Transportation and Communications - Corporate director More than half of directors assigned by the Ministry of Transportation and Communications More than half of directors assigned by the Ministry of Transportation and Communications	Financial assets at FVTPL - current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - current	- 4,590 1,500 19,083 13,210	$ 76,777 49,943 45,864 145,794 116,247	- 6.00 15.00 0.82 0.57	$ 76,777 49,943 45,864 145,794 116,247

Note: See Table 5 for the information on investments in subsidiaries and associates.

• 193 -

TABLE 3

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

(In Thousands of New Taiwan Dollars)

Seller/Buyer	Related Party	Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total (Note 2)
Taiwan Navigation Co., Ltd. Tai Shing Shin Wang	Yang Ming Tai Shing Taiwan Navigation Co., Ltd. Shin Wang Tai Shing	(Note 1) Subsidiary Parent company The same parent company The same parent company	Freight transportation revenue Rental expense and stevedoring expense Rental expense Rental revenue Rental revenue Rental expense	$ (319,015) 297,151 156,810 (156,810) (689,426) 689,426	(25) 27 14 (7) (32) 95	By negotiations By negotiations By negotiations By negotiations By negotiations By negotiations	$ - - - - - -	- - - - - -	$ 59,043 (26,092) (10,823) 10,823 103,267 (103,267)	98 (70) (29) 9 91 (99)	(Note 3) (Note 3) (Note 3) (Note 3)

Note 1: More than half of directors assigned by the Ministry of Transportation and Communications.

Note 2: The proportion of total receivables (payables).

Note 3: Eliminated upon consolidation.

• 194 -

TABLE 4

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate		Overdue	Amount Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Tai Shing	Shin Wang	The same parent company	$ 103,267	9.7	$ -	-	$ 103,267	$ -

Note: Eliminated upon consolidation.

• 195 -

TABLE 5

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

(In Thousands of New Taiwan Dollars)

No.	Company Name	Related Party	Relationship			Transaction Details
				Financial Statement Account	Amount	Payment Terms	% of Total Sales or Assets
1	Tai Shing	Taiwan Navigation Co., Ltd. Shin Wang	Parent The same parent company	Operating revenue - rental Trade receivables from related parties Operating revenue - rental Trade receivables from related parties	$ 156,810 10,823 689,426 103,267	The rental of 2 ships in total was calculated for each ship at $2-14 thousand per day and was collected on a monthly basis. Collected based on agreements The rental of 10 ships in total was calculated for each ship at $2-15 thousand per day and was collected on a monthly basis. Collected based on agreements	5 - 20 1

Note: Eliminated upon consolidation.

• 196 -

TABLE 6

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

Investor Company	Investee Company	Location	Main Business and Products	Investment Amount	Investment Amount	As of December 31, 2018	As of December 31, 2018	As of December 31, 2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	December 31, 2017	Number of Shares (In Thousands)	%	Carrying Amount
Taiwan Navigation Co., Ltd.	Tai Shing Shin Wang Yunn Wang	Panama City, Panama Monrovia City, Liberia Taipei	Rental and sale of ships Rental and sale of ships Investment	$ 3,921,447 32,500 41,861	$ 3,921,447 32,500 41,861	- - 5,211	100.00 100.00 49.75	$ 8,651,166 105,158 115,001	$ 848,505 72,584 7,364	$ 848,505 72,584 3,663	Note Note

Note: Eliminated upon consolidation.

• 197 -

6.6 Financial Difficulties Faced by the Company and the Related Party in the Most Recent Years and Up to the Date of the Annual Report Printed: None.

VII. Review of Financial Conditions, Financial Performance, and Risk Management

7.1 Analysis of Consolidated Financial Status

Unit: NT$ thousands

Year Item	2018	2017	Difference Amount	Variance(%)
Current assets	$1,255,739	$987,757	267,982	27
Non-current assets	13,880,162	14,429,959	(549,797)	(4)
Total assets	15,135,901	15,417,716	(281,815)	(2)
Current liabilities	939,806	729,666	210,140	29
Non-current liabilities	3,776,103	5,131,063	(1,354,960)	(26)
Total liabilities	4,715,909	5,860,729	(1,144,820)	(20)
Capital stock	4,172,945	4,172,945	0	0
Capital surplus	334,382	334,382	0	0
Retained earnings	5,947,533	5,292,146	655,387	12
Other equity	(34,868)	(242,486)	207,618	86
Total stockholders'equity	10,419,992	9,556,987	863,005	9
Total liabilities and stockholders'equity	15,135,901	15,417,716	(281,815)	(2)
Analysis of variance: 1. The rise of the other financial assets caused an increase in the current assets. 2. The rise of the short-term borrowings caused an increase of the current liabilities. 3. The decline of the long-term borrowings caused the decline of the non-current liabilities. 4. The changes of the exchange differences on translating foreign operations caused an increase of the other equity.

7.2 Analysis of Consolidated Financial Performance

7.2 Analysis of Consolidated Financial Performance	7.2 Analysis of Consolidated Financial Performance	7.2 Analysis of Consolidated Financial Performance	7.2 Analysis of Consolidated Financial Performance	7.2 Analysis of Consolidated Financial Performance
Unit: NT$ thousands
Year Item	2018	2017	Difference Amount	Variance(%)
Operating revenue	$3,367,236	$2,817,921	549,315	19
Operating costs	2,505,063	2,360,856	144,207	6
Gross profit	862,173	457,065	405,108	89
Operating expenses	146,765	114,760	32,005	28
Profit from operations	715,408	342,305	373,103	109
Non-operating income and expenses	273,227	144,766	128,461	89
Income before income tax	988,635	487,071	501,564	103
Income tax expense	(31,000)	(20,600)	10,400	50
Net income	957,635	466,471	491,164	105
Analysis of variance: 1. The rise of the revenue of bulk carriers caused an increase in operating revenue, gross profit, profit from operations, and income before income tax. 2. The rise of the operating expenses was mainly due to the increase in the performance bonus. 3. The increase of the non-operating income and expenses was mainly due to the gain on disposal of property, plant, and equipment. 4. The rise of the income tax expense was mainly due to the increase in income before income tax.

• 198 -

7.3 Analysis of Cash Flow

7.3.1 Cash Flow Analysis for the Current Year

7.3.1 Cash Flow Analysis for the Current Year	7.3.1 Cash Flow Analysis for the Current Year	7.3.1 Cash Flow Analysis for the Current Year	7.3.1 Cash Flow Analysis for the Current Year
				Unit: NT$ thousands
Cash and Cash Equivalents, Beginning of Year	Net Cash Flow from Operating Activities	Net increase in Cash and Cash Equivalents	Cash surplus (Deficit)	Remedies of Cash Deficit
				Investment Plans	Financing Plans
382,811	1,502,224	95,739	478,550	-	-
1. Analysis of 2018 cash flows: Net increase in cash and cash equivalents was mainly due to cash inflow from operating activities and repayments of borrowings. 2. Remedies of cash deficit: Not applicable.

Net increase in cash and cash equivalents was mainly due to cash inflow from operating activities and repayments of borrowings.

7.3.2 Improvement Plan for Liquidity Problem of the Recent Year: Not applicable.

7.3.3 Liquidity Analysis for the Last Two Years:

Year Item	2018	2017	Variance (%)
Cash Flow Ratio (%)	159.84	158.95	1
Cash Flow Adequacy Ratio (%)	65.15	51.71	26
Cash Reinvestment Ratio (%)	6.05	5.51	10
Analysis of variance: 1. The increase in the net cash flow from operating activities caused an increase in the cash flow adequacy ratio. 2. The decline of the gross property, plant, and equipment caused an increase in the cash reinvestment ratio.

7.3.4 Cash Liquidity Analysis for the Next Year:

.3.4 Cash Liquidity Analysis for the Next Year:	.3.4 Cash Liquidity Analysis for the Next Year:	.3.4 Cash Liquidity Analysis for the Next Year:	.3.4 Cash Liquidity Analysis for the Next Year:
				Unit: NT$ thousands
Estimated Cash and Cash Equivalents, Beginning of Year	Estimated Net Cash Flow from Operating Activities	Estimated Cash Outflow	Cash surplus (Deficit)	Leverage of Cash Deficit
				Investment Plans	Financing Plans
478,550	1,523,842	(87,149)	391,401	-	-
1. Cash flow analysis for the next year The decrease in cash and cash equivalents of the year was mainly due to the net cash used in investing activities. 2. Remedies of expected cash deficit: Not applicable.

1. Cash flow analysis for the next year The decrease in cash and cash equivalents of the year was mainly due to the net cash used in investing activities.

2. 199 -

7.4 Impacts on Financial Operations of Major Capital Expenditure Items

7.4.1 Major capital expenditure items and source of capital

				Unit: USD$ thousands	Unit: USD$ thousands	Unit: USD$ thousands	Unit: USD$ thousands	Unit: USD$ thousands	Unit: USD$ thousands
Project	Actual or Planned Source of Capital	Actual or Planned Date of Completion	Total Capital	Actual or Expected Capital Expenditure
				2017	2018	2019	2020	2021	2022
Build two 64,000-ton bulk carriers(Note1)	40%cash flow generated from operation and 60% from bank borrowings	2021Q2-Q3	52,780	4,810	4,810	1,164	4,810	37,186	-
Build two 80,000-ton bulk carriers(Note2)	30%cash flow generated from operation and 70% from bank borrowings	2021Q1-Q2	67,960	-	-	6,796	13,592	47,572	-
Build two 80,000-ton bulk carriers(Note2)	30%cash flow generated from operation and 70% frombankborrowings	2022Q2-Q3	66,220	-	-	6,622	6,622	6,622	46,354

Note1: The project was invested by TNC’s wholly owned subsidiary Tai Shing Maritime Co., S.A in 2017. Note2: The project was invested by TNC’s wholly owned subsidiary Tai Shing Maritime Co., S.A in 2019.

7.4.2 Expected Benefits

7.4.2 Expected Benefits
	Unit: NT$ thousands
Year	Operating Revenue	Gross Profit	Profit from Operations
2021	312,015	198,830	147,872
2022	573,705	365,634	272,428

Note: Estimate by the recent freight rate, and may be affected by the fluctuation of the BDI index and the time of contract.

7.5 Investment Policy for the Recent Year, Main Reasons for the Profits/ Losses Generated Thereby, the Plan for Improving Investment Profitability, and Investment Plans for the Coming Year.

1. Investment policy for recent year: The TNC’s investment policy is oriented on the core business of related diversification activities.

2. Gain from investments Share of profit of associates accounted for using the equity method of 2018 was 3,663 $NT thousands.

7.6 Risk Assessment

7.6.1 Risk Factor:

1. Impact of interest rate, exchange rate, and inflation on the company’s earnings, and responsive measures:

2. (1) Interest rate: The interest rate of bank borrowings of the company and it’s subsidiaries are floating. Central banks around the world are still adopting low interest rate policies. The Company's interest rate risk is primarily to pay back the liabilities generated from operating and investment activities. The company satisfied the need of funds through the cash generated from operating activities and long-term ship mortgage borrowings to reduce the risk of the interest rate. The Company allocate the cash in short-term time deposits, time deposits with maturities of more than three months, and short-term fixed-income bonds with high liquidity to ensure the principal and liquidity.

3. 200 -

4. (2) Foreign exchange rate:

The company adopts the natural hedging, which reduces the risk of exchange rate changes by offsetting foreign currency income and expenditure. Gain on foreign currency exchange of 2018 totaled NT$6,685 thousand, accounting for 0.20% of the operating revenue, accounting for only 0.68% of the income before income tax.

• (3) Inflation:

Apart from the market demand and supply of the marine fuel oil, which may affect the operating cost of the company’s Ro-Ro Ferry and container ships, the impact of price fluctuations on the Company is relatively small.

==> picture [25 x 13] intentionally omitted <==

• (4) Responsive measures

• Management of interest rate: The company will consistently implement effective fund management and maintain a low debt ratio to reduce the impact of interest rate changes. Management of foreign exchange rate: The company will maintain a stable and effective natural hedging to balance the structure of foreign currency income and expenditure, foreign currency assets, and liabilities.

Management of fuel oil price: The company will save fuel consumption through ship management, and reduce the profit impact of oil price fluctuations.

1. High-risk and highly leveraged investments, loans to third parties, endorsements/guarantees, and derivatives trading. The main causes of any profits or losses incurred and future responsive measures:

2. (1) The company has not engaged in high-risk, highly leveraged investments, and all investments project have been carefully evaluated and implemented.

3. (2) The company only provides endorsements and guarantees to wholly owned subsidiary Tai Shing Maritime Co., S.A within the limit. And the Tai Shing Maritime Co., S.A issues certificates of deposit as performance guarantee for the company’s business purpose. All operations are comply with the Operational Procedures for Endorsements and Guarantee and relevant regulations.

4. (3) The operation of derivative was mainly engaged in investment. All operations have been carefully implemented in consideration of the risk and comply with the Operational Procedures for Acquisition and Disposal of Assets.

5. Future Research & Development Projects and Corresponding Budget:

6. The company is a ship transportation industry and does not have a specific research and development projects.

7. Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales:

8. (1) Finance:

9. The financial department actively participated in relevant training courses, and kept abreast of changes in the Securities and Exchange Act and the Company Law, and planned the response measures, so there is no significant impact on the company's finances.

10. (2) Sales:

11. All of the company's vessels are comply with the certificate and equipment installation regulations at home and abroad, make sure operation properly, so there is no significant impact on the sales of the Company.

12. Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales: None.

13. The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures:

14. The company has always adhered to the goal of safety, treat the customers as supremacy, providing quality shipping services, fulfilling corporate social responsibility, and demonstrate good corporate image.

15. 201 -

16. Expected Benefits, Risks, and Responses of Merger and Acquisition Plans:None.

17. Expected Benefits, Risks, and Responses of Factory Expansion Plans

18. Risks Relating to Excessive Concentration of Purchases and Sales: The company doesn't have the problem of excessive concentration of purchases and sales; all of the company we cooperate in long term have well credit.

19. Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10%: None.

20. Effects of, Risks Relating to and Responses to the Changes in Management Rights: None.

21. The goals and methods of adopting Hedge Accounting

22. (1) The company does not engage in activities related to hedging accounting.

23. (2) The types, goals, methods, effects, and accounting treatment of hedge trading: Not applicable.

24. Other material risks and responses: No Information Security Risk issue and there is no impact on the company.

7.6.2 Litigation or Non-litigation Matters

1. Major ongoing lawsuits, non-lawsuits or administrative lawsuit during the last two years and up to the date of publication of the annual report. : None.

2. Major ongoing lawsuits, non-lawsuits or administrative lawsuits caused by directors, supervisors or shareholders with over 10% shareholdings during the last two years and up to the date of publication of the annual report: None.

3. Matters according to the Article 157 of the Securities and Exchange Act caused by directors, supervisors or shareholders with over 10% shareholdings during the last two years and up to the date of publication of the annual report: None.

4. 7.6.3 There are Financial problems or loss credits from directors, supervisors or shareholders with over 10% shareholdings during the last two years and up to the date of publication of the annual report: None.

5. 202 -

VIII. Special Disclosure

8.1 Summary of Affiliated Companies

8.1.1 TNC’s Affiliated Companies Information

1. TNC’s Affiliated Companies

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TAIWAN NAVIGATION CO., LTD
100% 100%
TAI SHING MARITIME CO. S.A. SHIN WANG MARITIME INC.
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2. Basic Information on the TNC’s Affiliated Companies

Unit: US$ thousands

				Unit: US$ thousands
Company Name	Establishment Date	Address	Dec 31, 2018 Paid-up Capital	Major Operations
TAI SHING MARITIME CO.S.A	Sep 29, 1998	Republic of Panama	US$117,386	Marine operations and shipping agency
SHIN WANG MARITIME INC.	Jan 02, 2007	Republic of Liberia	US$1,000	Marine operations and shipping agency

1. For companies presumed to have a relationship of control and subordination where the shareholders in common: None.

2. The connections exist among the industries covered by the business operated by the affiliates overall.

Date: Dec 31, 2018

		Date: Dec 31, 2018
Industry	Affiliates Company Name	The connections among the industries between the affiliates
Shipping Industry	TAI SHING MARITIME CO. S.A	Part of bulkers time charter to Taiwan Navigation Co., Ltd., and Shin Wang Maritime Inc.
Shipping Industry	SHIN WANG MARITIME INC.	Operation bulkers, which are time charter from Tai Shing Maritime Co., S.A.

• 203 -

5. Information of Chairman and Directors of the TNC’s Affiliates Company.

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Date: Dec 31, 2018 Unit; share

Company Name	Title	Name or Representative	Shareholding	Shareholding
			Shares	%
TAI SHING MARITIME CO.S.A	Chairman	TNC, Representative: Liu, Wen-Ching	100	100
	Director	TNC, Representative: Mei, Char-Lee	100	100
	Director	TNC, Representative: Wang, Hui-Ju	100	100
	Director	TNC, Representative: Chyou, Jong-Lin	100	100
	Director	TNC, Representative: Lu, Chung-Hsing	100	100
SHIN WANG MARITIME INC.	Chairman	TNC, Representative: Liu, Wen-Ching	1	100
	Director	TNC, Representative: Mei, Char-Lee	1	100
	Director	TNC, Representative: Wang, Hui-Ju	1	100
	Director	TNC, Representative: Chyou, Jong-Lin	1	100
	Director	TNC, Representative: Chen, Chien-Chou	1	100
	Director	TNC, Representative: Peng, Wen-Hsun	1	100
	Director	TNC, Representative: Lu, Chung-Hsing	1	100

6. Operation Overview of the TNC’s Affiliates Company.

					Date: Dec 31, 2018 Unit; US$ thousands	Date: Dec 31, 2018 Unit; US$ thousands	Date: Dec 31, 2018 Unit; US$ thousands	Date: Dec 31, 2018 Unit; US$ thousands
Company Name	Capital	Total Assets	Total Liabilities	Equity	Operating Revenue	Operating (loss)Profits	Income (After Tax)	EPS in US$ (After Tax)
TAI SHING MARITIME CO., S.A.	117,386	400,463	118,803	281,660	70,677	20,167	28,059	280.59
SHIN WANG MARITIME INC.	1,000	7,481	4,057	3,424	26,451	2,291	2,400	2,400

• 204 -

8.1.2 Affiliates Consolidated Financial Statement Announcements

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The entities that are required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2018 are all the same as those included in the consolidated financial statements of Taiwan Navigation Co., Ltd. and its subsidiaries prepared in conformity with the International Financial Reporting Standard 10 “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates is included in the consolidated financial statements of Taiwan Navigation Co., Ltd. and its subsidiaries. Hence, we do not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours,

By

Taiwan Navigation Co., Ltd.

Liu, Wen-Ching Chairman

March 26, 2019

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8.2 The Most Recent Fiscal Year and Up to the Date of this Annual Report Printed, Private Placement Securities None.

8.3 The Most Recent Fiscal Year and Up to the Date of this Annual Report Printed, Subsidiary Companies Holding or Disposal of the Company’s Stock List: None.

8.4 Other Supplementary Information: None.

• 8.5 Matters according to the Article 36.3.2 of the Securities and Exchange Act of Taiwan in the Most Recent Year and Up to the Date of Printing of this Annual Report which have Significant Impact to Shareholders’ Equity or Stock Price: None.

• 206 -

Taiwan Navigation Co., Ltd.

Liu, Wen-Ching Chairman