TNC - Annual Report 2019 | FinancialReports.eu

Stock Code ： 2617

Taiwan Navigation Co., Ltd.

2019 Annual Report

P rinted on Ma y 13, 2020

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 S tock Exchan g e Market Observation Pos t System ： ht t p://mops.tws e .com.tw Compan y Website ：： http://www. t aiwanline.co m .tw

1. Contact information of the Spokesperson and Deputy Spokesperson ：

Spokesperson Deputy Spokesperson Name ： Chyou, Jong-Lin Name ： Wang, Hui-Ju Title ： President Title ： Vice President Tel ： (02)2394-1769#201 Tel ： (02) 2394-1769#208 E-mail ： [email protected] E-mail ： [email protected]

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

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 ： Huang, Hui-Min and Yeh, Shu-Cnuan 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
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	- 37 -
3.5 Replacement of CPA	- 38 -
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	- 40 -
3.7 Changes in Shareholding of Directors, Supervisors, Managers and
Major Shareholders	- 41 -
3.8 Relationship among the Top Ten Shareholders	- 42 -
3.9 Ownership of Shares in Affiliated Enterprises	- 42 -
3.10 Manager’s Training Records Information in 2019	- 43 -
3.11 Continuing Education and Training	- 47 -
3.12 Directors’ and Supervisors’ Training Records in 2019	- 48 -
IV. Capital Overview ............................................................................... - 50	-
4.1 Capital and Shares	- 50 -
4.2 Issuance of Corporate Bonds	- 54 --
4.3 Issuance of Preferred Stock	- 54 -
4.4 Issuance of Overseas Depositary Receipt	- 54 -
4.5 Issuance of Employee Stock Options	- 54 -
4.6 Issuance of New Restricted Employee Shares	- 54 -
4.7 Merger and Acquisitions or Stock Shares Transferred with New Stock
Shares Issued.	- 54 -
4.8 Financing Plans and Implementation	- 54 -
V. Operation Overview ............................................................................ - 55	-
5.1.The Business Contents	- 55 -
5.2 Market and Sales Overview	- 57 -

5.3 Human Resources in Last Two Years and Data as of End Data on
May 13, 2020 - 60 -
5.4 Information of Expenditure on Environmental Protection - 60 -
5.5 Labor Relations - 60 -
5.6 Significant Contracts - 62 -
VI. Financial Information ........................................................................ - 63 -
6.1 Condensed Balance Sheet, Statement of Comprehensive Income, and
Auditor’s Opinions Over the Last Five Years. - 63 -
6.2.Financial Analysis in the Past Five Years - 67 -
6.3 Audit Committee’s Review Report for the Year 2019 - 70 -
6.4 Financial Statements for the Years Ended December 31, 2019 and 2018
and Independent Auditors’ Report - 71 -
6.5 Consolidated Financial Statements for the Years Ended December 31,
2019 and 2018 and Independent Auditors’ Report - 142 -
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. - 204 -
VII. Review of Financial Conditions, Financial Performance, and Risk
Management ..................................................................................... - 204 -
7.1 Analysis of Consolidated Financial Status - 204 -
7.2 Analysis of Consolidated Financial Performance - 204 -
7.3 Analysis of Cash Flow - 205 -
7.4 Impacts on Financial Operations of Major Capital Expenditure Items
- 206 -
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. - 206 -
7.6 Risk Assessment - 206 -
VIII. Special Disclosure ........................................................................... - 209 -
8.1 Summary of Affiliated Companies - 209 -
8.2 The Most Recent Fiscal Year and Up to the Date of this Annual Report
Printed, Private Placement Securities - 212 -
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 - 212 -
8.4 Other Supplementary Information - 212 -
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 - 212 -

I. Letter to Shareholders

Looking back in 2019, the dry bulk freight market was the most volatile in five years. In early year, the exporting amount of iron ore in Brazil was abruptly reduced due to the collapse of tailings dam, causing the global shipping freight of dry bulk to nosedive. Fortunately, in the second half of the year the capacity of iron ore production slowly recovered, so too stabilized the freight market. Then, thanks to some shipments being shifted earlier ahead of the enforcement of IMO 2020 low Sulphur regulation as well as the arrangement for retrofitting Sox scrubber, the freight market arose to the highest in six year in the 3rd quarter and maintained a similar level in the 4th quarter..

Our major business comes from the operation of bulk carriers, whose revenue in 2019 was on a par with the previous year. However, due to the sale of three vessels in 2018, the total shipping capacity was substantially decreased, so the total revenue was reduced to NTD 3,113,990 thousand, which is NTD 253, 246 thousand less than the year before. Earnings per share of 2019 is NTD 1.44.

In order to keep our fleet competitively strong, we have continually carried out the replacement in recent years, removing two vessels in 2019 after three in 2018. As of end of 2019, there are seven new buildings on order, which would be delivered from 2021 onwards, and then it would raise the revenue and profit handsomely. In addition to bulk carriers, we still operate harbor tugs, container liner service of Taiwan Strait, and the management for CPC Taiwan’s tankers and harbor tugs, whose profit stays stable.

From January 2020 onwards, the novel coronavirus occurring in Wuhan has been rampaging around the world in a short period of time. The production and consumption of major countries were severely affected like dominion effect. The BDI index in February fell by 80% compared to the peak in September the year before. The stock markets around the world also tumbled. In April IMF pessimistically predicted that the world economic growth in 2020 would be down to minus 3%. With the capital outflowing in emerging markets, those countries’ fiscal investment would be affected shortly, further decreasing the demand on material commodities. Therefore, the shipping market this year is predicted to be more difficult compared to previous years.

However, in the long run, the global quantitative easing and the credit relaxation would help corporations raise capital for investment. Furthermore, in view both that the oil price stays low in decades and many countries expand their public investment, the global demand on material commodities would be very sharp after the coronavirus pandemic subsides. In addition, under the pessimistic surroundings, the newbuilding order has been further shrunk, helping contain the tonnage supply. Therefore, the outlook of the shipping market in the future should be optimistic.

All of our bulkers are on time charter, in long and short period, so the impact due to the pandemic is still under control. However, we would still act prudently, paying close attention to the market situation in order to swiftly make adjustment to reduce the impact. As regards other business, ship management is not affected by market, so except for maintaining it, it’s needed to look for new business; with respect to the cross strait container liner, to keep monitoring the tonnage balance and the trading pattern is also important about adjusting this business. As for the ferry “Tai Hwa”, the operation, though not profitable for a long time, is

mainly to meet government’s public policy to take care of the offshore islanders. It’s good news that the government now has a clear replacement policy and also set a timeline for that.

We hereby appreciate all shareholders’ long-term support and their trust on our operational team. Only under everyone’s support and supervision can we be able to maintain the profit last year. In the years to come with the volatile economy and shipping industry we must work harder, expanding our business spectrum and enhancing management efficiency in order to maximize profit in the benefit of all shareholders.

Sincerely,

Liu, Wen-Ching Chairman

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
3 -

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) 64,000 DWT Ultramax bulk carriers.
2019 � Placed order to build three(3) 84,000 DWT and two(2) 81,000 DWT Kamsarmax bulk carriers.
4 -

==> picture [407 x 727] intentionally omitted <==

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

Sea Affair Section II
Traffic Dept.
Business Section I
Advisory Section
Technical Dept.
Engineering Section
Supply Section
Marine Dept. SQA Section
Crew Section
Fixed Assets
Management Section
Financial Dept. Financing Section
Accounting Section
General Affair Section
Administrative
Personnel Section
Dept.Dept.
I.T.Section
Planning Office
Labor Security
Office
Operation Section
Kaohsiung
Branch Office
General Affair Section
Auditing Office
e
Audit Committe
Compensation Committee
President
Vice President
Shareholders Meeting
Boards of Directors / Chairman
TAIWAN NAVIGATION CO., LTD
3.1 Organization 3.1.1. Organizational Chart
----- End of picture text -----

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.

Executives and Directors Who are Spouses or within Two Degrees of Kinship	Relation	None	None	None	None	None	None	None	None	None	None	None	None	None	None	None
	Name	None		None		None		None		None		None		None	None	None
	Title	None		None		None		None		None		None		None	None	None
Other Position		Notes (1)		Notes (2)		Notes (3)		Notes (4)		-		Notes (5)		Notes (6)	-	Notes (7)
Experience�Education�		Master of The Hong Kong Polytechnic University Chairman, Taiwan Navigation Co., Ltd.		Bachelor of Dept. of Marine Engineering, National Taiwan Ocean University Senior VP of Technical Dept,Taiwan Navigation Co., Ltd.		Ph.D. of Dept. of Transporation and Logistics Management, National Chiao Tung University Director General, Taiwan Railways Administration, MOTC		Master of Tamkang University Chief Financial Officer and Senior Vice President, YangMing Marine Transport Corp.		Master of Business Administration, McMaster University VP of Shipping Division, Chinese Maritime Transport Ltd.		Bachelor of Dept. of Economics, Soochow	University Chairman, Global Growing International Co., Ltd.	Bachelor of Dept. of Accounting, Soochow University EMBA of National Taiwan University	Ph.D. of National Taiwan Ocean University Independent Director, Taiwan Navigation Co., Ltd.	Ph.D. of Dept. Business Administration, National Central University Professor of Dept. of Logistics and Shipping Management, Kainan University
Shareholding by Nominee Arrangement	�	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
	Shares	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Spouse & Minor Shareholding	�	0	0.14	0	0	0	0	0	0	0	0	0	0	0	0	0
	Shares	0	592,000	0	0	0	0	0	0	0	10,000	0	0	0	0	0
Current Shareholding	�	26.46	0	26.46	0	26.46	0	2.64	0	7.46	0	2.29	0	0	0	0
	Shares	110,436,379	0	110,436,379	1,000	110,436,379	0	11,019,000	0	31,125,000	0	9,536,000	0	0	0	0
Shareholding when Elected	�	26.46	0	26.46	0	26.46	0	2.42	0	7.46	0	2.01	0	0	0	0
	Shares	110,436,379	0	110,436,379	1,000	110,436,379	0	10,079,000	0	31,125,000	0	8,374,000	0	0	0	0
Date First Elected		Jun 26, 2006	Sep 19, 2016	Jun 26, 2006	May 1, 2020	Jun 26, 2006	Aug 10, 2018	Jun 18, 2012	May 5, 2020	Jun 19, 2009	Feb01, 2020	Jun 26, 2018	Jun 26, 2018	Jun 22, 2015	Jun 26, 2018	Jun 26, 2018
Term (Years)		3			3		3		3		3		3	3	3	3
Date Elected		Jun 26, 2018	Jun 26, 2018	Jun 26, 2018	May 1, 2020	Jun 26, 2018	Aug 10, 2018	Jun 26, 2018	May 5, 2020	Jun 26, 2018	Feb01, 2020		Jun 26, 2018	Jun 26, 2018	Jun 26, 2018	Jun 26, 2018
Gender		Male			Male		Male		Female		Male		Female	Male	Male	Male
Name		MOTC Representative: Liu, Wen-Ching			MOTC Representative: Chyou, Jong-Lin	MOTC Representative: Chang, Chen-Yuan		Yunn Wang Investment	Co. Ltd. Representative: Ho, Hsiu-Chi	CMT Representative: Tarng, Ban-Jen		Global Growing International Co., Ltd. Representative: Lin, Yu-Chin		Wang, Chin-San	Huang, Wong-Hsiu	Lu, Shih-Tong
Nationality/ Place of Incorporation		R.O.C.			R.O.C.	R.O.C.			R.O.C.	R.O.C.		R.O.C.		R.O.C.	R.O.C.	R.O.C.
Title		Chairman			Director	Director			Director	Director		Director		Independent Director	Independent Director	Independent Director

3.2.2 Major Shareholders of the Institutional Shareholders

Date: Apr 20, 2020

	Date: Apr 20, 2020
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)(39.56%)�AGCMT Group Ltd. (21.21%)�Peng, Yin-Gang (1.00%)�TransGlobe Life Insurance Inc. (0.77%)�The Capital Group (0.54%)�Citibank Managed Dimensional Emerging Markets Evaluation Fund Investment Account (0.48%)�Citi (Taiwan) Commercial Bank Trust DFA Investment Diversified Group (0.42%)�Chen, Sian-Ze (0.38%)�Citibank Taiwan in Custody for DFA Emerging Markets Small Cap Fund(0.31%)�Chen, Shih-Wei (0.30%)
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

3.2.3 Major Shareholders of the Company’s Major Institutional Shareholders	3.2.3 Major Shareholders of the Company’s Major Institutional Shareholders
Date: Apr 20, 2020
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.(2.49%)�Global Growing International Co., Ltd. (2.29%)�CTBC Bank Employee Stock Ownership Trust Account of Taiwan Navigation Co., Ltd. (1.50%)�Jack Xia Investment Co., Ltd.(1.49%)�Chen, Chang-Hong (0.68%)�Yi-Sheng Investment Co., Ltd. (0.65%)
Yang Ming Marine Transport Corp.	MOTC(20.13%)�National Development Fund, Executive Yuan(19.80%)�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%)
Associated International Inc. (Note)	AGCMT Group Ltd. (100%)
AGCMT Group Ltd. (Note)	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.

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)	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 Accountin g, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10	11	12
Liu,Wen-Ching	-	-	Yes	-	-	�	�	�	�	�	�	�	�	�	-	1
Chyou, Jong-Lin	-	Yes	Yes	-	-	�	�	�	�	�	�	�	�	�	-	-
Chang, Chen-Yuan	-	Yes	Yes	�	�	�	�	-	�	�	�	�	�	�	-	-
Ho,Hsiu-Chi	-	Yes	Yes	�	�	�	�	-	�	�	-	�	�	�	-	-
Tarng,Ban-Jen	-	-	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:

Not an employee of the company or any of its affiliates.
Not a director or supervisor of the company or any of its affiliates. Not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent.
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 of one percent or more of the total number of issued shares of the company or ranking in the top 10 in holdings.
Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of a managerial officer under subparagraph 1 or any of the persons in the preceding two subparagraphs.
Not a director, supervisor, or employee of a corporate shareholder that directly holds five percent or more of the total number of issued shares of the company, or that ranks among the top five in shareholdings, or that designates its representative to serve as a director or supervisor of the company under Article 27, paragraph 1 or 2 of the Company Act. Not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent.
If a majority of the company's director seats or voting shares and those of any other company are controlled by the same person: not a director, supervisor, or employee of that other company. Not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent.
If the chairperson, general manager, or person holding an equivalent position of the company and a person in any of those
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positions at another company or institution are the same person or are spouses: not a director (or governor), supervisor, or employee of that other company or institution. Not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent.

Not a director, supervisor, officer, or shareholder holding five percent or more of the shares, of a specified company or institution that has a financial or business relationship with the company. Not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent, if the specified company or institution holds 20 percent or more and no more than 50 percent of the total number of issued shares of the public company.
Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting or related services to the company or any affiliate of the company for which the provider in the past 2 years has received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided, this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Act or to the Business Mergers and Acquisitions Act or related laws or regulations.
Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
Not been a person of any conditions defined in Article 30 of the Company Law.
Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

3.2.4.1 Diversity Regarding Board Members

Title/Name	Items	Gender	Management	Leadership & decision- making	Industry Knowledge	Finance accounting
Chairman	Liu, Wen-Ching	Male	V	V	V
Director	Chyou, Jong-Lin	Male	V	V	V
Director	Chang, Chen-Yuan	Male	V	V	V
Director	Ho, Hsiu-Chi	Male	V	V	V	V
Director	Tarng, Ban-Jen	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 -

Managers who are Spouses or Within Two Degrees of Kinship	Relation	None	None	None	None	None	None	None	None	None	None	None
	Name	None	None	None	None	None	None	None	None	None	None	None
	Title	None	None	None	None	None	None	None	None	None	None	None
Other Position		Director of Tai Shing Maritime Co., S. A &. Shin Wang Maritime Inc.	Director of Tai Shing Maritime Co., S. A. & Shin Wang Maritime INC.& Yunn Wang Investment Co. Ltd. & Taiwan Foundation International Pte. Ltd.	Director of Tai Shing Maritime Co., S. A &. Shin Wang Maritime Inc.	None	Director of Shin Wang Maritime Inc.	Director of Tai Shing Maritime Co., S. A &. Shin Wang Maritime Inc.	Director of Shin Wang Maritime Inc. & Yunn Wang Investment Co. Ltd., and Deputy Managing Director of Taiwan Foundation International Pte. Ltd.	None	None	None	None
Experience�Education�		Bachelor of Dept. of Marine Engineering, National Taiwan Ocean University	MBA, University of Houston	Master of Dept. Business Administration, Soochow University	MBA, Tennessee State University	Bachelor of Dept. of Business Administration, Ming Chuan University	Bachelor of Dept. of Business Administration, National Chung Hsing University	Master of Dept. of Financial Management, Fu Jen Catholic University	Bachelor of Dept. of Transporation and Communication Management Science, National Cheng Kung University	Bachelor of Dept. of Shipping and Transporation Management, National Taiwan Ocean University	Master of Dept. of Shipping and Transporation Management, National Taiwan Ocean University	Master of Dept. of Shipping and Transporation Management, National Kaohsiung University of Science and Technology
Shareholding by Nominee Arrangement	%	0	0	0	0	0	0	0	0	0	0	0
	Shares	0	0	0	0	0	0	0	0	0	0	0
Spouse & Minor Shareholding	%	0	0	0	0	0.01	0	0	0	0	0	0
	Shares	0	0	0	0	45,000	0	0	0	0	0	0
Shareholding	%	0	0	0	0	0	0	0	0	0	0	0
	Shares	1,000	6,634	0	10,000	0	0	0	358	0	0	0
Date Effective		May 01, 2020	Apr 01, 2016	Apr 01, 2019	Jan 01, 2017	Aug 16, 2018	Aug 16, 2018	Jun 01, 2016	Apr 01, 2019	Apr 01, 2019	Jan 01, 2020	Aug 16, 2018
Gender		Male	Female	Male	Male	Male	Male	Male	Male	Male	Male	Male
Name		Chyou, Jong-Lin	Wang, Hui-Ju	Peng, Wen-Hsun	Wang, Che-Wen	Huang, Ruei-Kuang	Yu, Yuan-Wang	Chen, Chien-Chou	Lee, Chin-Te	Lin, Chi-Sheng	Lu, Chung-Hsing	Chang, Chin-Wei
Nationality		R.O.C.	R.O.C.	R.O.C.	R.O.C.	R.O.C.	R.O.C.	R.O.C.	R.O.C.	R.O.C.	R.O.C.	R.O.C.
Title		President	Executive Vice President	Executive Vice President	Auditor General of Auditing Office	Manager of Department	Manager of Department	General Manager of Financial Department	General Manager of Administrative Department	General Manager of Labor Security Office	Senior Vice President of Planning Office	General Manager of Kaohsiung Branch Office
						General Marine	General Traffic

11 -

Compensation Paid to Directors from an Invested Company Other than the Company’s Subsidiary	Compensation Paid to Directors from an Invested Company Other than the Company’s Subsidiary	Compensation Paid to Directors from an Invested Company Other than the Company’s Subsidiary	Compensation Paid to Directors from an Invested Company Other than the Company’s Subsidiary	None	None	None				None	None
Ratio of Total Compensation (A+B+C+D+E+F+G) to Net Income (%)		Companies in the consolidated financial statements		1.13						3.02
		e company	Th	1.13						2.11
Relevant Remuneration Received by Directors Who are Also Employees	Employee Compensation (G)	Companies in the consolidated financial statements	Cash/ Stock	-						-
		The company	Cash/ Stock	-						-
	Severance Pay (F)	Companies in the consolidated financial statements		-						126
		The company		-						126
	Salary, Bonuses, and Allowances (E)	Companies in the consolidated financial statements		-						5,323
		The company		-						3,051
Ratio of Total Remuneration	(A+B+C+D) to Net Income (%)	Companies in the consolidated financial statements		1.13						2.11
		The company		1.13						1.58
Remuneration	Allowances (D)	Companies in the consolidated financial statements		258						2,175
		The company		258						2,175
	Directors Compensation(C)	Companies in the consolidated financial statements		6,513						1,302
		The company		6,513						1,302
	Severance Pay (B)	Companies in the consolidated financial statements		-						769
		The company		-						536
	Base Compensation (A)	All companies in the consolidated financial statements		-						8,448
		The company		-						5,486
		Name		MOTC	CMT	Yunn Wang	Representative of MOTC: Liu, Wen-Ching	Representative of MOTC: Mei, Char-Lee	Representative of MOTC: Chang, Chen-Yuan	Representative of Yunn Wang: Lin, Wen-Bor	Representative of CMT: Wang, Tien-Wei	Representative of Global Growing.:Lin, Yu-Chin	Wang, Chin-San	Huang, Wong-Hsiu	Lu, Shih-Tong
		Title		Legal Director	Legal Director	Legal Director	Chairman	Director/President	Director	Director	Director	Director	Independent Director	Independent Director	Independent Director

								- 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

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� Chang,Chen-Yuan� Lin, Wen-Bor� Wang, Tien-Wei� Lin, Yu-Chin� Wang, Chin-San� Huang,Wong-Hsiu �Lu, Shih-Tong	CMT�Yunn Wang Investment Co. Ltd. �Mei, Char-Lee� Chang,Chen-Yuan �Lin, Wen-Bor� Wang, Tien-Wei� Lin, Yu-Chin� Wang, Chin-San� Huang,Wong-Hsiu �Lu, Shih-Tong	CMT�Yunn Wang Investment Co. Ltd. � Chang,Chen-Yuan �Lin, Wen-Bor� Wang, Tien-Wei� Lin, Yu-Chin� Wang, Chin-San� Huang,Wong-Hsiu �Lu, Shih-Tong	CMT�Yunn Wang Investment Co. Ltd. � Chang,Chen-Yuan �Lin, Wen-Bor� Wang, Tien-Wei� Lin, Yu-Chin� Wang, Chin-San� 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	12	12	12	12

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.

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3.2.6.2 Remuneration of the President and Vice Presidents

Date: Dec 31, 2019; 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	4,039	6,139	327	327	2,330	4,357	507	-	507	-	1.20	1.88	None
Executive Vice President	Wang, Hui-Ju
Executive Vice President	Peng, Wen-Hsun

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	Peng,Wen-Hsun	-
Over NT$2,000,000 ~ Under NT$5,000,000	Mei, Char-Lee�Wang, Hui-Ju	Wang, Hui-Ju�Peng, Wen-Hsun
Over NT$5,000,000 ~ Under NT$10,000,000	-	Mei, Char-Lee
Over NT$10,000,000	-	-
Total	3	3

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.

3.2.6.3 Bonus to Executive Officers

Date � Dec 31, 2019; Unit: NT$ thousands

	Title	Name	Stock Bonus	Cash Bonus	Total	Percentage in Net Income after tax(%)
Executive Officers	Executive Vice President	Wang, Hui-Ju	0	2,440	2,440	0.41
	Executive Vice President	Peng, Wen-Hsun
	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	Lin,Chi-Sheng
	General Manager of Planning Office	Lu, Chung-Hsing
	General Manager of Traffic Department	Yu, Yuan-Wang

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	General Manager of Financial Department	Chen, Chien-Chou
	General Manager of Administrative Department	Lee, Chin-Te
	General Manager of Kaohsiung Branch Office	Chang, Chin-Wei

3.2.6.4 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

1. Ratio of the total remuneration to net income

Title	2019 Ratio of total remuneration paid to directors, supervisors, president and vice presidents to net income	2018 Ratio of total remuneration paid to directors, supervisors, president and vice presidents to net income
Directors	4.14%	2.83%
Supervisors	-	0.17%
President & Executive Vice President	1.88%	1.08%

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. Operations of the 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 (�)	By Proxy	Attendance Rate (%) ��/��
Chairman	Representative of MOTC: Liu, Wen-Ching	6	-	100
Director	Representative of MOTC: Mei, Char-Lee	6	-	100
Director	Representative of MOTC: Chang, Chen-Yuan	4	2	66
Director	Representative of Yunn Wang Investment Co. Ltd.: Lin, Wen-Bor	6	-	100
Director	Representative of CMT: Wang, Tien-Wei	6	-	100
Director	Representative of Global Growing International Co., Ltd.: Lin, Yu-Chin	6	-	100
Independent director	Wang, Chin-San	5	1	83
Independent director	Huang, Wong-Hsiu	6	-	100
Independent director	Lu, Shih-Tong	4	2	66
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. TWSE/TPEx-listed companies are required to disclose the evaluation cycle and period, scope of evaluation, evaluation method, and evaluation items of the self (or peer) evaluations conducted by the Board of Directors, and to fill out “Implementation Status of Board Evaluations.” 4. Measures taken to strengthen the functionality of the board: The Board of Directors has established an Audit Committee and a Remuneration Committee to assist the board in carrying out its various duties.

B. Implementation Status of Board Evaluations

Evaluation cycle (Note 1)	Evaluation period (Note 2)	Scope of evaluation (Note 3)	Evaluation method (Note 4)	Evaluation items (Note 5)
Once a year	evaluation of Board performance between January 1, 2019 and December 31, 2019	the Board of Directors	internal self-evaluation by the Board of Directors	level of participation in company operations, the quality of Board decisions, Board composition and structure, appointment of directors and their continued development, and internal controls

16 -
Note 1: Refers to the cycle of Board evaluations, such as: Once a year.
Note 2: Refers to the period covered by the Board evaluation, such as: evaluation of Board performance between January 1, 2019 and December 31, 2019.
Note 3: The scope of performance evaluations includes the Board of Directors, individual directors, and functional committees.
Note 4: The evaluation method includes internal self-evaluation by the Board of Directors, self-assessment by directors, peer evaluation, and entrusting external professional institutions and experts or using other appropriate methods for performance evaluation.
Note 5: According to the scope of evaluation, evaluation items must at least include the following items:
(1) Board performance evaluation: At least includes level of participation in company operations, the quality of Board decisions, Board composition and structure, appointment of directors and their continued development, and internal controls.
(2) Individual director performance evaluation: At least includes grasp of company targets and missions, understanding of the director's role and responsibilities, level of participation in company operations, internal relationship management and communication, director's specialty and continued development, and internal controls.
(3) Functional committee performance evaluation: Participation in company operations, understanding of the responsibilities of functional committees, improvement of the decision-making quality of functional committees, composition of functional committees, and member selection and internal control.

The attendance status of independent directors in the 2019 Board meeting:

� Attendance in Person � � � By Proxy �� Absence

The attendance status of independent directors in the 2019 Board meeting: ��Attendance in Person��ByProxy��Absence	The attendance status of independent directors in the 2019 Board meeting: ��Attendance in Person��ByProxy��Absence	The attendance status of independent directors in the 2019 Board meeting: ��Attendance in Person��ByProxy��Absence	The attendance status of independent directors in the 2019 Board meeting: ��Attendance in Person��ByProxy��Absence	The attendance status of independent directors in the 2019 Board meeting: ��Attendance in Person��ByProxy��Absence	The attendance status of independent directors in the 2019 Board meeting: ��Attendance in Person��ByProxy��Absence	The attendance status of independent directors in the 2019 Board meeting: ��Attendance in Person��ByProxy��Absence
2019	First	Second	Third	Fourth	Fifth	Sixth
Wang,Chin-San	�	�	�	�	�	�
Huang,Wong-Hsiu	�	�	�	�	�	�
Lu,Shih-Tong	�	�	�	�	�	�

3.3.2 Audit Committee

A total of five(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 (%)��/��
Independent director	Wang, Chin-San	4	-	80
Independent director	Huang, Wong-Hsiu	5	-	100
Independent director	Lu, Shih-Tong	3	-	60
Other mentionable items: The company's Audit Committee is composed of 3 independent directors .The Audit Committee assists the Board in fulfilling its oversight of the quality and integrity of the accounting, auditing, reporting, and financial control practices of the Company. The Audit Committee held 5 meetings in 2019, and the matters considered mainly included : (1) Financial reports;Auditing and accounting policies and procedures. (2) Internal control systems and including related policies and procedures. (3) Material asset or derivatives transactions. (4) Material endorsements or guarantees. (5) Legal compliance. (6) Performance, independence, qualification of independent auditor. (7) IT security (8) Corporate risk management (9) Hiring or dismissal of an attesting CPA, or the compensation given thereto. � Review financial report Board of Directors has prepared the 2019 Business Report, Consolidated and Individual Financial Statements and Profit Distribution Proposal, the consolidated and individual financial statements have

17 -

been audited by Huang, Hui-Min and Yeh, Shu-Cnuan, both CPAs of Deloitte and Touche have issued	been audited by Huang, Hui-Min and Yeh, Shu-Cnuan, both CPAs of Deloitte and Touche have issued	been audited by Huang, Hui-Min and Yeh, Shu-Cnuan, both CPAs of Deloitte and Touche have issued
independent auditors’ reports. The 2019 Business Report, Consolidated and Individual Financial
Statements and Profit Distribution Proposal have been audited by the audit	Committee and nothing
unusual has been found. We hereby submit this report to the 2020 Shareholders’ Meeting of Taiwan
Navigation Co., Ltd.
� Evaluate the effectiveness of internal control system
The company's Audit Committee evaluate the effectiveness of the company’s internal control system
and including related policies and procedure, (control measures including:	Finance�Operation�Risk
management�Information security�Outsourcing�Compliance with relevant laws and
regulations…etc.), audit company’s internal auditor and certified public accountant, regular basis
report from company’s supervisors, risk management and compliance with relevant laws and
regulations. Considering the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) published in 2013- Internal Control- Integrated Framework, the Audit Committee believes
that the Company's risk management and internal control systems are effective, and the company has
adopted the necessary control mechanisms to monitor and correct violations.
� Appointed CPA
In order to ensure the independence of the accounting firm, the Audit Committee has formulated an
independence evaluation form with reference to Article 47 of the Accountant Law and No. 10 of the
The Norm of Professional Ethics for Certified Public Accountant. The fourth meeting of the first
audit committee on March 26, 2019 and the fifth meeting of the twenty-fifth board of directors on
March 26, 2019.Evaluate and resolve the independence of CPA Ms. Hui-Min Huang and CPA Mr.
Chih-Ming Shao of Deloitte & Touche for the year of 2019.
1. Annual Operation Situation:
(1) Matters referred to in Article 14-5 of the Securities and Exchange Act.
Date Contents	Resolution	Committee’s Opinion
1.The subsidiary purchases four bulk carriers.
2.TNC issues a performance guarantee letter for wholly
owned subsidiary about two of 80,000dwt newly-built
bulk carriers
3.Change of certified public accountant (CPA) for
4th Regular Meeting internal adjustments by the certifying accounting firm.
of the First Audit 4.Evaluation for The independence of accountant for the
Committee year of 2019.
Mar 26, 2019 5.The proposal of the company’s 2018 business report,
consolidated and stand-alone financial statements.
6.Amendment to the company’s "Operational Procedures
for Acquisition and Disposal of Assets."
7.The company’s 2018 statement of Internal Control
System.
5th Regular Meeting 1.2019 first quarter financial statements.
of the First Audit 2.The proposal for the distribution of 2018 profits.	Approved	None
Committee 3.Public bidding for the company's land in Kaohsiung
May 15, 2019
6th Regular Meeting 1.2019 second quarter financial statements.
of the First Audit 2.The proposal for replacement of older fleet.
Committee 3.The subsidiary applies for loans from banks, and the
Aug 6, 2019 company agrees to be a guarantor for it.
7th Regular Meeting 1.2019 third quarter financial statements.
of the First Audit 2.The proposal for replacement of older fleet.
Committee 3.The subsidiary purchases two bulk carriers.
Nov 5, 2019
8th Regular Meeting 1.Amendment to the company’s "Operational Procedures
of the First Audit for for Endorsements and Guarantees ."
Committee 2.Amendment to the company’s internal control system
Dec 17, 2019 and internal audit implementation rules.
3.The company’s 2020 Internal Audit Plan.

18 -

(2) Other matters which were not approved by the Audit Committee but were approved by two-thirds or	(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)2019 mainly communication is summarized as follows:
Date Communication with Chief Internal Auditor Communication with CPAs
4th Regular Meeting of the First Audit Committee 1.Review the Internal Audit Report. 2.Review and approve Self-assessment audit report of Internal Control System and 2018 2018 financial statements. and the key audit matters.
Mar 26, 2019 statement of Internal Control System.
5th Regular Meeting 1.2019 first quarter consolidated
of the First Audit Committee Review the Internal Audit Report. financial statements and the key audit matters.
May 15, 2019 2. IFRS16 Leases
6th Regular Meeting
of the First Audit Committee Review the Internal Audit Report.
Aug 6, 2019
1.2019 third quarter
7th Regular Meeting of the First Audit Committee Nov 5, 2019 Review the Internal Audit Report. consolidated financial statements and the key audit matters. 2.Report 2019 annual audit scope and schedule its
planning
8th Regular Meeting 1.Review the Internal Audit Report.
of the First Audit 2.Review and approve to amendments the
Committee company’s internal control system and internal
Dec 17, 2019 audit implementation rules.
3.Review and approve 2020 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.

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

Evaluation Item			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	�		TNC has established the “Best-Practice Principles for Corporate Governance” and disclosed on the official website. ( http://www.taiwanline.com.tw)	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
TWSE/TPEx Listed Companies”?
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?	�		In order to strengthen the corporate governance and enhance the structure and function of the board of directors, the Company has passed the amendment of "Corporate Governance Principles" during the 3rd session of 25th Board meeting held on 2018.08.13 clarifying the policy of Board Diversity Article 20, the composition of the board of directors shall be determined by taking diversity into consideration. It is advisable that directors concurrently serving as company officers not exceed one-third of the total number of the board members, and that an appropriate policy on diversity based on the company's business operations, operating dynamics, and development needs be formulated and include, without being limited to, the following two generalstandards:	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
(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 and report the performance evaluation results to the Board and us it as a reference for the compensation of the Board of Directors? (4) Does the company regularly evaluate the independence of CPAs?	� �	�	Basic requirements and values: Gender, age, nationality, and culture. Professional knowledge and skills: A professional background (e.g., law, accounting, industry, finance, marketing, technology), professional skills, and industry experience. Presently, the Company’s board of directors consists of nine members who possess managerial and/or professional experiences, two of whom are female (22%), three of whom are independent directors (33%). TNC has established the remuneration committee and set up the audit committee after the 2018 Shareholders' Meeting by regulations. The company has approved the Procedures for Performance Evaluation of the Board during the 18th session of 24th Board meeting held on 2017.12.22. The method of implementation through questionnaires was facilitated by the company’s Office of the Secretary to assess the performance of the board of directors at the end of the year. This company has processed the performance assessment of the board of directors for the year 2019 in Jan. 2020 and has submitted the assessment results during the 11th session of 25th Board meeting held on 2020.03.17. The assessment criterion achievement rates for the board of directors is 100%. 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 CPAdoesnothave a close	As summarized 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
			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.)
4. Does the company allocated suitable and sufficient corporate governance staff and appointed a manager responsible for corporate governance matters (including but not limited to providing information for directors and supervisors to perform their functions, assisting directors in complying with law and regulations, 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 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)?	� �		TNC has set up a Chinese/English 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 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 report its annual financial report within two months after the end of the fiscal year and announce the first, second, and third quarter financial reports and monthly operating updates before the prescribed deadlines?		�	TNC report and announce annual financial report within three months after the end of the fiscal year in accordance with the requirements of the Securities and Exchange Law. The quarterly financial report and the monthly operating are announced within the prescribed deadlines.	TNC report and announce in accordance with the deadlines of Securities and Exchange Act.
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.	�		1.The improved situation is described	None
			below:
			(1)TNC has accomplished English notice of meeting in the year of 2018 and uploaded to MOPS 30 days before the shareholders meeting date. (2)We have accomplished English material information on MOPS in 2018. (3)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. (4)All directors completed training in accordance with regulations. (5)Wehave disclosed the protection

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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
			measures for employees' working environment and personal safety in the company's annual report and website in 2018, to provide a safe and healthy working environment, education training for employees (6)TNC has set up a shareholder’s area and also added an appropriate person to handle information collection and disclosure. (7)The company has added an information security management structure of the corporate governance section on the company's website. 2.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 ensure the rights and interests of shareholders and strengthen the powers of the board of directors, TNC’s board of directors made a resolution to appoint General Manager of Financial Department, Chen, Chien-Chou, also serves as the corporate governance officer:

Corporate governance officer, a General Manager,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 security-related institution or a public company.
Corporate governance officer shall furnish information required for business execution by directors, assist directors with legal compliance, and handle matters relating to board meetings and shareholder’s meetings in accordance with law. ..etc.
General Manager of the financial department, Chen, Chien-Chou, is qualified for the above requirement by regulations.

Related implementation status in 2019:

Assist the directors in performing their duties, provide the required information, and arrange for directors to pursue further studies:
(1) Inform the members of the board of directors about the revision of the company's business field and the latest laws and regulations related to corporate governance.
(2) Provide company information required by the directors and communicate with directors smoothly.
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(3) Assist in arranging independent directors to meet with the company managers, internal auditors or visa accountant, communicate and understand Issues related to the company's financial business.
(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 18 times for 54 hours.
To assist procedures and resolutions of the board of directors and shareholders' meeting: (1) Report to the Board of Directors and the Audit Committee, the company's corporate governance operations, shareholders' meetings, and Boards of directors held in accordance with relevant laws and corporate governance code specifications.
(2) Assist and remind the directors that should follow the regulations when performing business.
(3) After the meeting of board of directors, to be responsible for the release of significant information on relevant resolutions, to ensure the legality and correctness of the content and to guarantee investor trading information equivalent.
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 matters need to be avoided, they will be reminded in advance and the minutes of the board meeting will be completed within 20 days after the meeting.
Handle the pre-registration of the date of the shareholders' meeting by the law, make the notice, the handbook, and the minute of the meeting within the statutory time limit.

3.3.4. 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.

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	Independence	Independence	Criteria (Note)	Criteria (Note)	Criteria (Note)	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	9	10
Independent director	Wang, Chin-San	Yes	Yes	Yes	�	�	�	�	�	�	�	�	�	�	0	Applied

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Independent director	Huang, Wong-Hsiu	Yes	Yes	Yes	�	�	�	�	�	�	�	�	�	�	0	Applied
Nature Person	Su, Yu-Ching	-	-	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.

Not an employee of the company or any of its affiliates.
Not a director or supervisor of the company or any of its affiliates. Not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent.
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 of one percent or more of the total number of issued shares of the company or ranking in the top 10 in holdings.
Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of a managerial officer under subparagraph 1 or any of the persons in the preceding two subparagraphs.
Not a director, supervisor, or employee of a corporate shareholder that directly holds five percent or more of the total number of issued shares of the company, or that ranks among the top five in shareholdings, or that designates its representative to serve as a director or supervisor of the company under Article 27, paragraph 1 or 2 of the Company Act. Not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent.
If a majority of the company's director seats or voting shares and those of any other company are controlled by the same person: not a director, supervisor, or employee of that other company. Not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent.
If the chairperson, general manager, or person holding an equivalent position of the company and a person in any of those positions at another company or institution are the same person or are spouses: not a director (or governor), supervisor, or employee of that other company or institution. Not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent.
Not a director, supervisor, officer, or shareholder holding five percent or more of the shares, of a specified company or institution that has a financial or business relationship with the company. Not apply to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent, if the specified company or institution holds 20 percent or more and no more than 50 percent of the total number of issued shares of the public company.
Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting or related services to the company or any affiliate of the company for which the provider in the past 2 years has received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided, this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Act or to the Business Mergers and Acquisitions Act or related laws or regulations.
Not been a person of any conditions defined in Article 30 of the Company Law.
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

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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.

Attendance of Members at Remuneration Committee Meetings
(1) A total of three members in the Remuneration Committee.
(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	3	-	100
Committee Member	Kuo, Ping-Hsiu	1	-	100	Resigned on Jun 29, 2019
Independent director	Huang, Wong-Hsiu	2	-	100	Joined on Jun 29, 2019
Committee Member	Su, Yu-Ching	3	-	100
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.

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

annual year.
Date	Contents	Resolution	Committee’s Opinion
3rd Regular Meeting of the 25th Remuneration Committee Mar 13, 2019	TNC's 2018 directors and managers are paid for the amount of NT$10,088,110.	Approved	None
4th Regular Meeting of the 25th Remuneration Committee Jul 24, 2019	Amend the regulations of Remuneration Committee.	Approved	None
5th Regular Meeting of the 25th Remuneration Committee Nov 27, 2019	The Company intends to resolve 2019 annual director's remuneration before tax benefit (not yet put out employees and directors remuneration) set aside one percent.	Approved	None

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3.3.5. Corporate Social Responsibility

3.3.5.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.Does the company follow principles of materiality in evaluation the risks of environmental, social, and corporate governance, and establish relevant policies or strategies? 2. 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? 3.Environment (1) 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?	� � �		The company will establish a social responsibility policy by the law in the future. The company will set up an enterprise for corporate social responsibility by the law. 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 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	As summarized As summarized None

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Evaluation Item			Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(2) Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment? (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?	� �		end of 2019 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. The company is committed to improving the efficiency of resource utilization, and establishing regulations of energy 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. 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	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
(4) Does the company collect information on greenhouse gass emissions, water consumption, and total weight of waste in the past two years, and formulate policies on energy conservation and carbon reduction, greenhouse gas reduction, warter usage reduction, or other waste management policies?	�		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 2019 compared to 2012 have reduced nearly 30%, and we’ll keep moving toward the goal of reducing carbon emissions in 2020. As aforesaid, it’s how we mitigate greenhouse gas emissions, save energy and reduce carbon production. The resource of using water for our fleet is taken from the sea. Sea water becomes fresh water for using via fresh water generator onboard. We also request our fleet to save water as much as possible to serve a purpose of environmental protection. Except that all the flammable wastes are disposed by incinerator which is in compliance with air pollution standard, we proactively reached out the Classification to implement, verify and establish Inventory of Hazardous Materials of European Union (IHM) in 2020 to meet the regulations ofdisposalandrecycling.	None
4. Social Responsibilities (1) Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights? (2)Does the company formulate and implement reasonable employee benefits (including compensation, vacation, and other benefits), and appropriately reflect operating performance or results in employee compensation? (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?	� � �		TNC’s management policy is formulated in accordance with relevant government labor laws and IMO regulations, and certified by ISM Code. Reasonable employee benefits measures have been formulated and implemented and the results of operations reflected in remuneration. 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	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
(4) Does the company provide its employees with career development and training sessions? (5) With respect to customer health and safety of products and services, customer privacy, marketing, and labeling, does the Company comply with relevant regulations and international standards, and formulate related consumer protection policies and appeal procedures? (6) Does the Company have a supplier management policy that requires suppliers to comply with and implement relevant regulations on issues such as environmental protection, occupational safety and health, or labor rights?	� � �		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 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’s fleets are operated and certified in accordance with relevant regulations and international standards. TNC upholds the principle of properfaith 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 specializedstaffto accept. 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 relationshipis quite stable. Whenpurchasing	None None None

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Evaluation Item			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 refer to internationally accepted reporting standards or guidelines for compiling reports on non-financial information, such as CSR reports? Did the previous release reports obtain a confirmation or assurance opinion from a third party verifier?		�	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. The company complies withCorporate Social Responsibilitybased on related regulations with governance, and set up http://www.taiwanline.com.tw/to website publicly.	The previous release reports of the company has not obtain a confirmation or assurance opinion from a third party verifier.
6. 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.
7. 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.”
3.3.6. Ethical Corporate Management
Evaluation Item	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 disclose its ethical corporate management policies and procedures in its official charter and material documents issued externally, as well as the commitment of the Board of Directors and management team to its implementation? (2) Has the Company established a mechanism to assess the risks of non-ethical conduct, regularly analyze and assess relatively high-risk non-ethical conduct and activities	� �		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 employeeloyalty which is abided by the	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
within its scope of business, and formulate policies to prevent unethical conduct, which at minimum covers measures to prevent the conduct mentioned in Article 7.2 of "the Ethical Corporate Management Best- Practice Principles for TWSE/ TPEx Listed Companies"? (3) Do the Company's measures to prevent high-risk unethical misconduct clearly specify operating procedures, conduct guidelines, disciplinary and appeal mechanisms for violations? Are they implemented and are regularly reviewed for amendment?	�		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 tofollow up.	None
2. Fulfill operations integrity policy (1) Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts? (2)Has the Company established a dedicated unit to promote ethical corporate management under the Board of Directors, and regularly (at least once a year) report to the Board of Directors on its ethical corporate management policy, measures to prevent unethical conduct, and monitor implementation? (3) Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it? (4) Has the Company established an effective accounting system and internal control system to facilitate ethical corporate management? Does its internal audit team provide risk assessment results and formulate audit plans related to unethical conduct, and audit compliance of nonethical conduct measures, or does the Company engage externalCPAs to	� � � �		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 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. To implement honest management and to avoid the occurrence of fraud, the internal auditors of the company formulate annual audit plan based on the result of the risk assessment results and subsequently reports unethical conduct in audit findings.	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
implement such audits? (5) Does the company regularly hold internal and external educational trainings on operational integrity?	�		By the provisions of the law, regular internal and external integrity education and training willbehandled.	None
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)Has the Company established standard operating procedures for handling whistleblowing claims and, after a complete investigation, follow-up measures and mechanisms related to maintaining confidentiality? (3) Does the company provide proper whistleblowerprotection?	� � �		The company has established an e-mail address ([email protected])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.

3.3.7. 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�

3.3.8. 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.

3.3.9. Internal Control Statement �

Please refer to pages 31 of the Chinese annual report for TNC’s 2019 Internal Control Statement.
34 -
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.

3.3.10. 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.

3.3.11. Important resolutions made by the Shareholders’ Meeting and Board of Directors by the end of 2018 and the printing date of the annual report.

Shareholders’ Meeting:
The resolutions approved by the entire attending shareholders at the regular shareholders’ meeting on June 25, 2019, and its implementation as follow:
(1) To recognize the 2018 business report and financial statements.
- Implementation: The company has been completed in accordance with the resolutions of the shareholders ' meeting.
(2) To recognize the proposal for distribution of 2018 profits. Implementation: The company has been completed in accordance with the resolutions of the shareholders ' meeting.
(3) To approve an amendment to the "Operational Procedures for Acquisition and Disposal of Assets."
- Implementation: The company has amended procedures and posted on the TNC’s website.
(4) To approve an amendment to the "Operational Procedures for Loaning of Company Funds."
- Implementation: The company has amended procedures and posted on the TNC’s website.

2. Board Meetings:

Date	Major resolutions
5th Board meeting of the 25th Board of Directors (Mar 26, 2019)	1. The subsidiary purchases four new bulk carriers. 2. TNC issues a performance guarantee letter for wholly owned subsidiary about two of 80,000dwt new bulk carriers. ��Change of certified public accountant (CPA) for internal adjustments by the certifying accounting firm. 4. Evaluation for The independence of accountant for the year of 2019. 5. The proposal of the company 2019 Annual Shareholders' Meeting. 6. The amount and method of payment of the company’s directors, supervisors, and employees’ remuneration. 7. The proposal of the company’s 2018 business report, consolidated and stand-alone financial statements. 8. The company applies for loans from banks. 9. The company’s 2018 statement of Internal Control System. 10.Amendment to the company’s "Operational Procedures for Acquisition and Disposal of Assets." 11.The company establishes a standard operational protocol for responding to requests from directors. Resolution: All Directors present at the meeting passed the motion unanimously.
6th Board meeting of the 25th Board of Directors (May 15, 2019)	1.2019 first quarter consolidated financial statements. 2. The proposal for the distribution of 2018 profits. 3. Public bidding for the company's land in Kaohsiung. 4.The company's 25th Remuneration Committee member changes.

Date

Major resolutions

5th Board meeting
of the 25th Board of
Directors
(Mar 26, 2019)

1. The subsidiary purchases four new bulk carriers.
2. TNC issues a performance guarantee letter for wholly owned
subsidiary about two of 80,000dwt new bulk carriers.
��Change of certified public accountant (CPA) for internal
adjustments by the certifying accounting firm.
4. Evaluation for The independence of accountant for the year of
2019.
5. The proposal of the company 2019 Annual Shareholders' Meeting.
6. The amount and method of payment of the company’s directors,
supervisors, and employees’ remuneration.
7. The proposal of the company’s 2018 business report, consolidated
and stand-alone financial statements.
8. The company applies for loans from banks.
9. The company’s 2018 statement of Internal Control System.
10.Amendment to the company’s "Operational Procedures for
Acquisition and Disposal of Assets."
11.The company establishes a standard operational protocol for
responding to requests from directors.
Resolution: All Directors present at the meeting passed the motion
unanimously.

6th Board meeting
of the 25th Board of
Directors
(May 15, 2019)

1.2019 first quarter consolidated financial statements.
2. The proposal for the distribution of 2018 profits.
3. Public bidding for the company's land in Kaohsiung.
4.The company's 25th Remuneration Committee member changes.

35 -

Date	Major resolutions
	Resolution: All Directors present at the meeting passed the motion unanimously.
7th Board meeting of the 25th Board of Directors (Aug 6, 2019)	1.2019 second quarter consolidated financial statements. 2. The proposal for replacement of older fleet. 3. Designated Auguest 28, 2019, as the ex-dividend record date. 4. The subsidiary applies for loans from banks, and the company agrees to be a guarantor for it. 5.Amendment to the company’s “Remuneration Committee Charter” Resolution: All Directors present at the meeting passed the motion unanimously.
8th Board meeting of the 25th Board of Directors (Sep 23, 2019) (interim)	1. The time charter party for three new bulk carriers of subsidiary. Resolution: All Directors present at the meeting passed the motion unanimously.
9th Board meeting of the 25th Board of Directors (Nov 5, 2019)	1.2019 third quarter consolidated financial statements. 2. The proposal for replacement of older fleet. 3. The subsidiary purchases two new bulk carriers. Resolution: All Directors present at the meeting passed the motion unanimously.
10th Board meeting of the 25th Board of Directors (Dec 17, 2019)	1. The company has completed an annual budget of 2019. 2. The proportion and distribution method of the Company's employees and directors’ remuneration of 2019. 3. Amendment to the company’s ”Operational Procedures for Endorsements and Guarantees”. 4. Review and approval of 2020 Internal Audit Plan. 5. Review and approval of amendments to the company’s internal control system and internal audit implementation rules. 6.Promotion of the company's managers. Resolution: All Directors present at the meeting passed the motion unanimously.
11th Board meeting of the 25th Board of Directors (Mar 17, 2020)	1. The company’s 2018 statement of Internal Control System. 2. Change of certified public accountant (CPA) for internal adjustments by the certifying accounting firm. 3. Evaluation for The independence of accountant for the year of 2019. 4. The amount and method of payment of the company’s directors, supervisors, and employees’ remuneration. 5. The proposal of the company’s 2019 business report, consolidated and stand-alone financial statements. 6. Public bidding for the company's land in Kaohsiung. 7. The proposal of the company 2020 Annual Shareholders' Meeting. 8. The company applies for overdrafts and guarantees with banks. Resolution: All Directors present at the meeting passed the motion unanimously.
12th Board meeting of the 25th Board of Directors (Apr 22, 2020)	1. Appointment of new President. 2. President’s remuneration Resolution: All Directors present at the meeting passed the motion unanimously.
13th Board meeting of the 25th Board of Directors (May 13, 2020)	1. The subsidiary purchases one new bulk carrier. 2. The proposal for the distribution of 2019 profits. 3. The company applies for loans from banks. 4. Supplement to the proposal of the company 2020 Annual Shareholders' Meeting. 5. Amendment to the company’s “Audit Committee Charter”. 6. Amendment to the company’s“Regulations Governing Procedure

36 -

Date	Major resolutions
	for Board of Directors Meetings” 7. Amendment to the company’s”Operational Procedures for Endorsements and Guarantees” 8. Amendment to the company’s” Operational Procedures for Loaning of Company Funds” 9. To release the prohibition on current juristic-person directors from participation in competition business. Resolution: All Directors present at the meeting passed the motion unanimously.

Date

Major resolutions

for Board of Directors Meetings”
7. Amendment to the company’s”Operational Procedures for
Endorsements and Guarantees”
8. Amendment to the company’s” Operational Procedures for Loaning
of Company Funds”
9. To release the prohibition on current juristic-person directors from
participation in competition business.
Resolution: All Directors present at the meeting passed the motion
unanimously.

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

3.3.13. List of resignations and dismissals of important persons in the company:

List of resignations and dismissals of important persons in the company

Date: May 13, 2020

Position	Name	Date of Appointment	Termination Date	Reason for Resignation or Dismissal
President	Mei, Char-Lee	.Iun.1.2013	May 1, 2020	Retirement

Note: The important persons to in the company refer to the chairman, general manager, accounting director, finance director, internal audit director and research and development director.

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

3.4 Audit Fee

3.4Audit Fee	3.4Audit Fee
Accounting Firm		Name of CPA			Period Covered by CPA’s Audit		Remarks
Deloitte & Touche		Huang, Hui-Min	Yeh, Shu-Cnuan.		Jan 2019-Dec 2019
					Unit: NT$ thousands
Fee Range		Fee Items	Audit Fee	Non-audit Fee		Total
1	Under NT$ 2,000,000			�(Note)
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 2019 non-audit public fee for the year was NT$400 thousand, and the contents were 100 thousand for the agreement, NT$130 thousand for the business tax, and NT$170 thousand for the transfer price.

37 -

Unit: NT$ thousands

Accounting Firm	Name of CPA	Audit Fee		Non-audit Fee	Non-audit Fee			Period Covered by CPA’s Audit
			System of Design	Company Registration	Human Resource	Others	Subtotal
Deloitte & Touche	Huang, Hui-Min	3,530				400	400	Jan 2019- Dec 2019
	Yeh, Shu-Cnuan							Jan 2019- Dec 2019

Notes:

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
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
The auditing fee has not decreased by more than 10% compared to the previous year: None

3.5 Replacement of CPA

1. Regarding the former CPA

2019 �

2019�
Replacement Date	February, 2019
Replacement reasons and explanations	The original CPA of the Company were Wong, Ya-Ling from Deloitte & Touche. Due to internal restructuring at Deloitte & Touche, the CPA of the Company was changed to Huang, Hui-Min, beginning February, 2019.
Describe whether the Company terminated or the CPA did not accept the appointment	Parties Status			CPA	The Company
	Termination of appointment			Not applicable	Not applicable
	No longer accepted (continued) appointment			Not applicable	Not applicable
Other issues (except for unqualified issues) in the audit reports within the last two years	Not applicable
Differences with the company	Yes	-	Accounting principles or practices
		-	Disclosure of Financial Statements
		-	Audit scope or steps
		-	Others
	None	�
	Remarks/specify details:
Other Revealed Matters	None

38 -

Replacement Date	December , 2019	December , 2019	December , 2019	December , 2019	December , 2019
Replacement reasons and explanations	The original CPA of the Company were Shao, Chih-Ming from Deloitte & Touche. Due to internal restructuring at Deloitte & Touche, the CPA of the Company was changed to Yeh, Shu-Cnuan, beginning December, 2019.
Describe whether the Company terminated or the CPA did not accept the appointment	Parties Status			CPA	The Company
	Termination of appointment			Not applicable	Not applicable
	No longer accepted (continued) appointment			Not applicable	Not applicable
Other issues (except for unqualified issues) in the audit reports within the last two years	Not applicable
Differences with the company	Yes	-	Accounting principles or practices
		-	Disclosure of Financial Statements
		-	Audit scope or steps
		-	Others
	None	�
	Remarks/specify details:
Other Revealed Matters	None

2018 � None.

Regarding the successor CPA

2019�
Name of accounting firm	Deloitte & Touche
Name of CPA	Huang, Hui-Min
Date of appointment	February, 2019
Consultation results and opinions on accounting treatments or principles with respect to specified transactions and the company's financial reports that the CPA might issue prior to the engagement.	Not applicable
Succeeding CPA’s written opinion of disagreement toward the former CPA	None

39 -

Name of accounting firm	Deloitte & Touche
Name of CPA	Yeh, Shu-Cnuan
Date of appointment	December, 2019.
Consultation results and opinions on accounting treatments or principles with respect to specified transactions and the company's financial reports that the CPA might issue prior to the engagement.	Not applicable
Succeeding CPA’s written opinion of disagreement toward the former CPA	None

2018 � None.

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.

40 -

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

3.7.1 Changes in Shareholding

				Unit: Shares	Unit: Shares
Title	Name	2019		As of Apr. 20,2020
		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	YunnWangInvestmentCo. Ltd.	0	0	310,000	0
Director	GlobalGrowingInternationalCo.,Ltd.	0	0	0	0
Chairman	Liu, Wen-Ching	0	0	0	0
Director Resigned on May1,2020	Mei, Char-Lee	0	0	0	0
Director	Chang, Chen-Yuan	0	0	0	0
Director	Lin, Wen-Bor	0	0	0	0
Director Resigned on Feb 1,2020	Wang, Tien-Wei	0	0	N/A	N/A
Director Joined on Feb 1,2020	Tarng, James	0	0	0	0
Director	Lin,Yu-Chin	0	0	0	0
Independent director	Wang, Chin-San	0	0	0	0
Independent director	Huang, Wong-Hsiu	0	0	0	0
Independent director	Lu, Shih-Tong	0	0	0	0
ExecutiveVice President	Wang,Hui-Ju	0	0	0	0
ExecutiveVice President	Peng, Wen-Hsun	0	0	0	0
AuditorGeneral	Wang, Che-Wen	0	0	0	0
SeniorVice President	Chyou, Jong-Lin	0	0	0	0
SeniorVice President	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	N/A	N/A
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.

41 -

Date: Apr 20, 2020

3.8 Relationship among the Top Ten Shareholders

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
	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. Peng, Shih-Hsiao	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. Shih,Jia-Jhen	10,389,000	2.49	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	-	-
CTBC Bank Employee Stock Ownership Trust Account of Taiwan Navigation Co., Ltd.	6,256,167	1.50	0	0	0	0
Jack Xia Investment Co., Ltd. Cai, Shi-Yong	6,200,000	1.49	0	0	0	0	-	-
Chen, Chang-Hong	2,843,000	0.68	0	0	0	0	-	-
Yi-Sheng Investment Co., Ltd. Lan, Li-Hua	2,700,000	0.65	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, 2019; 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	%

42 -

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.

3.10 Manager’s Training Records Information in 2019

Title	Name	Date Elected	Date From/To	Date From/To	Sponsor Unit	Course	Time(hr.)
President	Mei, Char-Lee	Jun 01, 2013	Feb 12, 2019	Feb 12 2019	Taiwan Navigation Co.,Ltd.	Labor safety and health and Disaster prevention	2.0
			Aug 08, 2019	Aug 08, 2019	Taiwan Navigation Co., Ltd.	Oil refining and storage	3.0
			Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co., Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co.,Ltd.	Information Security Training	2.0
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co., Ltd.	Training on sexual harassment prevention and control	1.0
Executive Vice President	Wang, Hui-Ju	Apr 01, 2016	Feb 12, 2019	Feb 12 2019	Taiwan Navigation Co.,Ltd.	Labor safety and health and Disaster prevention	2.0
			Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co., Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co.,Ltd.	Information Security Training	2.0
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co.,Ltd.	Training on sexual harassment prevention and control	1.0
			Jan 16, 2019	Jan 16, 2019	Accounting research and development foundation	Tax Law and Professional Guidelines For The Prevention and Control of Money Laundering	1.0
			Jan 16, 2019	Jan 16, 2019	Accounting research and development foundation	The Content and Response of the Company Law Amendment	3.0
			May22, 2019	May22, 2019	Britannia	Britannia Superintendents Office Seminar	8.0
Executive Vice Presiden	Peng, Wen-Hsun	Apr 01, 2019	Feb 12, 2019	Feb 12 2019	Taiwan Navigation Co.,Ltd.	Labor safety and health and Disaster prevention	2.0
			Aug 08, 2019	Aug 08, 2019	Taiwan Navigation Co., Ltd.	Oil refining and storage	3.0

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Title	Name	Date Elected	Date From/To	Date From/To	Sponsor Unit	Course	Time(hr.)
			Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co., Ltd.	Integrity Management Training	2.0
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co., Ltd.	Training on sexual harassment prevention and control	1.0
			May16, 2019	May20, 2019	C.R.	Internal Auditor Training	24.0
Auditor General of Auditing Office	Wang, Che-Wen	Jan 01, 2017	Feb 12, 2019	Feb 12 2019	Taiwan Navigation Co.,Ltd.	Labor safety and health and Disaster prevention	2.0
			Aug 08, 2019	Aug 08, 2019	Taiwan Navigation Co., Ltd.	Oil refining and storage	3.0
			Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co.,Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co.,Ltd.	Information Security Training	2.0
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co., Ltd.	Training on sexual harassment prevention and control	1.0
			Aug 26, 2019	Aug 26, 2019	Accounting research and development foundation	How to do a good job of risk detection and crisis response	6.0
			Sep 16, 2019	Sep 16, 2019	Accounting research and development foundation	Audit and verification of corporate governance personnel	6.0
			Oct 25, 2019	Oct 25, 2019	Securities and Futures Development Foundation	Securities 108 Annual Prevention of Insider Trading Publicity Conference	3.0
Senior Vice President of Technical Department	Chyou, Jong-Lin	Apr 01, 2019	Feb 12, 2019	Feb 12 2019	Taiwan Navigation Co.,Ltd.	Labor safety and health and Disaster prevention	2.0
			Aug 08, 2019	Aug 08, 2019	Taiwan Navigation Co., Ltd.	Oil refining and storage	3.0
			Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co., Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co., Ltd.	Information Security Training	2.0

44 -

Title	Name	Date Elected	Date From/To	Date From/To	Sponsor Unit	Course	Time(hr.)
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co., Ltd.	Training on sexual harassment prevention and control	1.0
Senior Vice President of Planning Office	Lu, Chung-Hsing	Aug 16, 2018	Feb 12, 2019	Feb 12 2019	Taiwan Navigation Co., Ltd.	Labor safety and health and Disaster prevention	2.0
			Aug 08, 2019	Aug 08, 2019	Taiwan Navigation Co.,Ltd.	Oil refining and storage	3.0
			Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co., Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co., Ltd.	Information Security Training	2.0
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co., Ltd.	Training on sexual harassment prevention and control	1.0
			Apr 26, 2019	Apr 26, 2019	Securities and Futures Development Foundation	Securities 108 Annual Prevention of Insider Trading Publicity Conference	3.0
General Manager of Marine Department	Huang, Ruei-Kuang	Aug 16, 2018	Feb 12, 2019	Feb 12 2019	Taiwan Navigation Co.,Ltd.	Labor safety and health and Disaster prevention	2.0
			Aug 08, 2019	Aug 08, 2019	Taiwan Navigation Co., Ltd.	Oil refining and storage	3.0
			Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co.,Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co., Ltd.	Information Security Training	2.0
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co.,Ltd.	Training on sexual harassment prevention and control	1.0
General Manager of Traffic Department	Yu, Yuan-Wang	Aug 16, 2018	Feb 12, 2019	Feb 12 2019	Taiwan Navigation Co., Ltd.	Labor safety and health and Disaster prevention	2.0
			Aug 08, 2019	Aug 08, 2019	Taiwan Navigation Co.,Ltd.	Oil refining and storage	3.0
			Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co.,Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co.,Ltd.	Information Security Training	2.0

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Title	Name	Date Elected	Date From/To	Date From/To	Sponsor Unit	Course	Time(hr.)
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co., Ltd.	Training on sexual harassment prevention and control	1.0
			Nov 07, 2019	Nov 07, 2019	INCE GORDON DADDS	Seminar on Maritime Law and CharterContracts	4.0
			May16, 2019	May16, 2019	Charles Taylor	Seminar on Sea Loss Accidents and Common Sea Damage	8.0
General Manager of Financial Department	Chen, Chien-Chou	Jan 01, 2016	Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co.,Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co., Ltd.	Information Security Training	2.0
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co., Ltd.	Training on sexual harassment prevention and control	1.0
			Sep19, 2019	Sep19, 2019	Securities and Futures Development Foundation	Analysis of corporate financial information and the application of decision-making	3.0
			Sep24, 2019	Sep25, 2019	Securities and Futures Development Foundation	Executive Director of Corporate Governance Practice Workshop	12.0
			Oct 01, 2019	Oct 01, 2019	Securities and Futures Development Foundation	Talking about the legal risk and response of the director's supervision from the major corporate malpractice case	3.0
			Oct 28, 2019	Oct 29, 2019	Securities and Futures Development Foundation	Continuing education for the head of accounting	12.0
General Manager of Administrative Department	Lee, Chin-Te	Apr 01, 2019	Feb 12, 2019	Feb 12 2019	Taiwan Navigation Co., Ltd.	Labor safety and health and Disaster prevention	2.0
			Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co.,Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co.,Ltd.	Information Security Training	2.0
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co., Ltd.	Training on sexual harassment prevention and control	1.0
General Manager of Labor Security Office	Lin, Chi-Sheng	Apr 01, 2019	Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co.,Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co.,Ltd.	Information Security Training	2.0

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Title	Name	Date Elected	Date From/To	Date From/To	Sponsor Unit	Course	Time(hr.)
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co.,Ltd.	Training on sexual harassment prevention and control	1.0
			Apr 30, 2019	Apr 30, 2019	China Labor Safety and Health Management Association	Safety and health education training in charge of occupational safety and health operations of species A	6.0
General Manager of Kaohsiung Branch Office	Chang, Chin-Wei	Aug 16, 2018	Aug 08, 2019	Aug 08, 2019	Taiwan Navigation Co.,Ltd.	Oil refining and storage	2.0
			Nov 06, 2019	Nov 06, 2019	Taiwan Navigation Co., Ltd.	Integrity Management Training	2.0
			Nov 15, 2019	Nov 15, 2019	Taiwan Navigation Co.,Ltd.	Information Security Training	2.0
			Dec 04, 2019	Dec 04, 2019	Taiwan Navigation Co., Ltd.	Training on sexual harassment prevention and control	1.0

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 2019 years of education and training are as follow:

Course	Time (hr.)	Total number of person-times	Total Fee(NTD)
Presentation of life planning and work skills	272	164	58,357
Integrity management related courses	130	65
Labor safety and health and environmental protection concept	78	39
Training of new recruit	44	4
external professional training(Include Preventing Insider Trading )	223	35
Directors and Independent Directors Refresher Course(Include Preventing Insider Trading )	54	9

In the year of 2019, we organized internal and external education training (including courses on Compliance with business regulations with integrity , Prevent insider trading, Oil refining and storage, Safety and health management and Disaster prevention training, Training for new personnel, External training, etc.).

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3.12 Directors’ and Supervisors’ Training Records in 2019

Title	Name	Training period	Training period	Sponsor Unit	Course	Time (hr.)	Whether or not it corresponds to law(Remarks)
Representative of MOTC:	Liu, Wen-Ching	Jun 21 , 2019	Jun 21 , 2019	Taiwan Corporate Governance Association	Talk about the operation of the board of directors from the company's own management	3	Yes
		Jun 21 , 2019	Jun 21 , 2019	Taiwan Corporate Governance Association	The Impact of the Sino-US Trade War on Taiwan Business	3	Yes
Representative of MOTC:	Mei, Char-Lee	Apr 26, 2019	Apr 26, 2019	Securities and Futures Institute	Prevention of insider trading advocacy	3	Yes
		May 15, 2019	May 15, 2019	Taiwan Stock Exchange	ESG Investment Promotion Forum	3	Yes
Director	Chang, Chen-Yuan	Jul 24, 2019	Jul 24, 2019	Securities and Futures Institute	108 Year Listed Companies and Unlisted (Cabinet) Public Lyon Stakes Law Follows The Briefing	3	Yes
		Sep 24, 2019	Sep 24, 2019	Taiwan Corporate Governance Association	Board of Directors Should Understand Legal Matters: Beware of Misbreaching the Red Line of Joint Conduct	3	Yes
Director	Lin, Wen-Bor	Sep 11, 2019	Sep 11, 2019	Securities and Futures Institute	Directors and Supervisors (including Independents) and Corporate Governance ExecutiveS Practice Advanced Seminar - Corporate Strategyand Key	3	Yes
		Nov 06, 2019	Nov 06, 2019t	Taiwan Stock Exchange	Performance Indicators Effective lying director function advocacy	3	Yes
Director	Wang, Tien-Wei	May 15, 2019	May 15, 2019	Taiwan Stock Exchange	Climate-Related Financial Disclosure (TCFD) Promotion Forum	3	Yes
		Aug 07, 2019	Aug 07, 2019	Securities and Futures Institute	The law on the equity transaction of listed companies and unlisted (cabinet) public lying companies follows the briefing	3	Yes
Director	Lin, Yu-Chin	Aug 07, 2019	Aug 07, 2019	Securities and Futures Institute	The law on the equity transaction of listed companies and unlisted (cabinet) public lying companies follows the briefing	3	Yes
		Nov 21, 2019	Nov 21, 2019	Taiwan Stock Exchange	Performance Indicators Effective lying director function advocacy	3	Yes
Independent Director	Wang, Chin-San	Oct 04, 2019c	Oct 04, 2019c	Taiwan Corporation Governance Association	The Impact of Blockchain Technology and Application development on Enterprises	3	Yes
		Oct 04, 2019	Oct 04, 2019	Taiwan Corporation Governance Association	Corporate Governance and Director's Responsibility under the New Company Law	3	Yes

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Title	Name	Training period	Training period	Sponsor Unit	Course	Time (hr.)	Whether or not it corresponds to law(Remarks)
Independent Director	Huang, Wong-Hsiu	Jul 17, 2019	Jul 17, 2019	Securities and Futures Institute	The law on the equity transaction of listed companies and unlisted (cabinet) public lying companies follows the briefing	3	Yes
		Nov 24, 2019	Nov 24, 2019	Taiwan Corporation Governance Association	Board of Directors Should Understand Legal Matters: Beware of Misbreaching the Red Line of Joint Conduct	3	Yes
Independent Director	Lu, Shih-Tong	Jul 17, 2019	Jul 17, 2019	Securities and Futures Institute	The law on the equity transaction of listed companies and unlisted (cabinet) public lying companies follows the briefing	3	Yes
		Dec 10, 2019	Dec 10, 2019	Taiwan Academy of Banking and Finance	Corporate Governance Lecture Hall (No. 46): From the Latest Corporate Governance Blueprint to The Promotion of Director's Functions	3	Yes

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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 thanCash	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.

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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 20, 2020
Type of Shareholders Number	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	2	6	49	15,904	63	16,024
Shareholding (shares)	110,436,397	7,554,167	146,108,494	139,456,494	13,738,935	417,294,487
Holding Percentage	26.46%	1.81%	35.01%	33.42%	3.30%	100.00%

4.1.3 Distribution Profile of Share Ownership

4.1.3.1. Common Shares

4.1.3.1. Common Shares
		Date: Apr 20, 2020
Shareholder Ownership (Unit: Share)	Number of Shareholders	Ownership (Shares)	Ownership Percentage (%)
1~11,11,999	3,495	529,173	0.13
1,000~111,5,000	8,574	19,139,089	4.59
5,001~11,10,000	1,754	14,421,428	3.46
10,001~11,15,000	588	7,659,109	1.84
15,001~11,20,000	433	8,120,088	1.95
20,001~11,30,000	376	9,819,797	2.35
30,001~11,40,000	203	7,368,393	1.77
40,001~11,50,000	125	5,904,566	1.41
50,001~1,100,000	264	18,972,646	4.55
100,001~1,200,000	116	16,492,054	3.95
200,001~1,400,000	52	14,479,348	3.47
400,001~1,600,000	13	6,505,608	1.55
600,001~1,800,000	5	3,422,765	0.82
800,001~1,000,000	6	5,442,085	1.30
1,000,001 or over	20	279,018,338	66.86
Total	16,024	417,294,487	100.00

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 20, 2020 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.	10,389,000	2.49%
Global Growing International Co., Ltd.	9,536,000	2.29%
CTBC Bank Employee Stock Ownership Trust Account of Taiwan Navigation Co., Ltd.	6,256,167	1.50%
Jack Xia Investment Co., Ltd.	6,200,000	1.49%
Chen, Chang-Hong	2,843,000	0.68%
Yi-Sheng Investment Co., Ltd.	2,700,000	0.65%

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

Unit: NT$ � %

					Unit: NT$�%
Items	Year		2018	2019	Jan 01, 2020 ~ Mar 31, 2020
Market Price per Share	Highest Market Price		23.45	23.95	17.90
	Lowest Market Price		14.40	17.30	12.25
	Average Market Price		17.83	19.06	15.86
Net Worth per Share	Before Distribution		24.97	24.54	24.80
	After Distribution		23.67	23.74 Note(5)	-
Earnings perShare	Weighted Average Shares		417,294,487	417,294,487	417,294,487
	Earnings Per Share		2.29	1.44	0.39
Dividends per Share	Cash Dividends		1.30	0.80 Note(5)	-
	Stock Dividends	-	-	-	-
		-	-	-	-
	Accumulated Undistributed Dividends		-	-	-
Return on Investment	Price / Earnings Ratio		7.79	13.24	-
	Price / Dividend Ratio		13.72	23.83 Note(5)	-
	Cash Dividend Yield Rate		7.29%	4.20% 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 2019 profits, which proposed to be total cash dividend NT333,835,589 (NT 0.80Per 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 2019 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

2019

2019	2019
InNT$
Item	Amount
Unappropriatedretainedearningsofpreviousyear Add:2019netprofitaftertax Less:Remeasurementofdefinedbenefit Less:Investmentadjustedretainedearningsbyusing equitymethod Currentperiodnetprofitplusotherprofititems Undistributedearningsinthecurrentyear Less:10%legalreserve Less:Specialreserveinaccordancewiththelaws andregulations RetainedEarningsavailablefordistribution DistributionItem: CashdividendNT$0.80pershare UnappropriatedRetainedEarningsattheendof2019	3,609,818,919 601,095,541 (868,888) (648)
	600,226,005 (60,022,601) (236,506,844)
	3,913,515,479 (333,835,589)
	3,579,679,890

Note1: The earnings distribution was priority distributed the profit of 2019.
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 Chairman 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’ Compensation and Employees’ Profit Sharing Bonus

Employee’s bonus and remuneration of directors 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 at 1.5 % or less. Bonus for landside employees and remuneration for directors shall be reported in Shareholders’ Meeting. However, if the Corporation is still bearing previous loss, a sum shall be reserve to make up the loss before appropriating the bonus and remuneration at the percentages stated above.
The basis for estimating the Employee’s bonus, remuneration of directors 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
53 -

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.

It is proposed to appropriate cash bonus of NT$7,815,260 to employees and cash remuneration of NT$7,815,260 to directors in 2019. 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.
(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.
(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.
(3) Imputed EPS after taking into consideration the remuneration to be allocated to employees and directors: NT$1.44.
Discrepancy between actual allocated amount and estimate bonus to employees and remuneration to directors 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

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V. Operation Overview

5.1.The Business Contents

5.1.1 Operation Scope

The major content of operations.
(1) The operation in respect of passenger and freight in coastal and international waters.
(2) The operation in respect of terminal warehouse domestically and overseas.
(3) The operation in respect of the subsidiary business of steamship and terminal warehouse Port agency.
(4) Operating shipping agency business.
(5) The operation in respect of sand mining at sea or river, navigation channel dredging, and tugboat service.
(6) The assignment to the construction company for residential & commercial buildings for sale and rental.
(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, 2019~Dec 31, 2019)

(1) Percentage of Total Revenue

centage of Total Revenue
Business Range	Percentage
Ocean route	83.00%
Ship management	7.13%
Tug service	4.13%
Coastal route	3.16%
Others	2.58%

(2) Percentage of Main operation areas

centage of Main operation areas
Shipping line	Percentage
Asia	70.34%
Europe	27.86%
Others	1.80%

3. Introduction of the operating business �

There were 34 vessels in TNC’s operation fleet in 2019, which can be characterized as follows based on its’ nature of business:

(1) Ocean-going shipping line

Bulk Carriers � 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 – 18 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–A 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
(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.1, NO.2, NO.3, NO.5, and NO.6, in total of five vessels, responsible for the towing operations of C.P.C. LNG vessels.
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Petroleum tanker: HONG YUN, SHENG YUN, TONG YUN, DER YUN, and HUA 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

As the largest raw material importer in the world, China’s economic trend affect the freight market in bulk shipping. The catastrophic tailings dam failure of Vale S.A., Brazilian iron ore producer, in late January 2019 made its export volume at a six-year low, resulting in iron ore prices reaching the highest level after 2014. The long-haul voyage of shipping iron ore from Brazil to China along with the reduced export amount reins in the tonnage demand apparently, leading the freight rate to nosedive in the first half of last year. Fortunately, the production recovered gradually later on, along with the import of coal growing over 7% in China and India , sustained the freight rate last year.

As regards world fleet tonnage supply, the deliveries of bulk carriers in 2019 were around 39 million in terms of deadweight, which went up 40% more than last year, at a historical high in past seven years. Because of depressing freight in the first half of the year, the demolition was only around 7 million DWT. Though the demolition increases 61% more than last year, it remains at a relatively low level when you look into the past ten years. The world fleet growth also stays at a low level, only increasing 4.0% compared to last year.

In terms of tonnage supply of bulk carriers, this year’s delivery volume is estimated to be a new high since 2014. The 210K dwt Newcastlemax has the highest dwt, followed by the 80K dwt Kamsarmax, and the third is the 60K dwt Ultramax. Thus, if the stimulation from the fiscal and monetary policy of countries worldwide are insufficient, the dry bulk freight market may be worse compared to the previous two years. The order of dry bulk newbuildings in 2019 is 17% lower than last year in terms of deadweight tons, the cause in part is from the 2030 and 2050 greenhouse gas reduction target set by the International Maritime Organization (IMO). This may lead some shipowners to remain in a wait-and-see attitude towards new ship specifications. Moreover, given that the volume of current orders which accounts for about 9.1% of the existing tonnage is still at a low level, it shall be conducive to the development of the bulk shipping industry in the long run.

Under the influence of Covid-19 pandemic outbreak, the capital outflowing in emerging markets, those countries’ fiscal investment would be affected shortly, further decreasing the demand on material commodities. Therefore, the shipping market this year is predicted to be more difficult compared to previous years. However, in the long run, the global quantitative easing and the credit relaxation would help corporations raise capital for investment. Furthermore, in view both that the oil price stays low in decades and many countries expand their public investment, the global demand on material commodities would be very sharp after the coronavirus pandemic subsides.

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.

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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.

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.

2. 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

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

(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.
(3) Harbor Tug �
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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 3.4% in 2020 and 2021, respectively, which indicate the economy pick up than 2019. However, due to the outbreak of Covid-19 pandemic occurring in Wuhan, many of the cities were in lockdown and the manufacturing activities were delayed which severely affected the consumption no matter for industrial use or consumer use. In March, the epidemic spread to all countries in the world, especially in Europe and the United States. IMF re-estimated a negative growth of 3% in 2020 in April.

United States and China reached a Phase One trade agreement in January, temporarily reining the two-year tariff war between U.S. and China (the US-China trade war). Although the agreement cannot completely end the future trade war between these two countries, it will at least ease the situation of deteriorating trade conflicts. Especially, the agreement stated that China will increase purchases of U.S. manufacturing, energy and agricultural goods and services by at least $200 billion over the next two years on the basis of 2017 and China agreed to buy US$ 40-50 billion in US agricultural products per year, which will be greatly helpful for the dry bulk market, if the new coronavirus outbreak is under control.

In terms of oil prices, the negotiation failed between Organization of Petroleum Exporting Countries (OPEC) and Russia on production cuts in early March of this year, and oil prices plummeted to a record low of 18 years and triggered financial market turmoil. Due to the sluggish oil demand caused by Covid-19 pandemic and the increase in the price war supply of oil-producing countries, it is estimated that this year the oil price will continue to be maintained at around US $ 35 per barrel. In our point of view, if oil prices continue to slump, it may prompt Charterers to request the vessel to sail with full speed, which directly speed up the digestion of cargo delivery, but reduce the demand for ships. As we more worry about is the freight demand that affected by the economic downturn may further lower freight rates.

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 long-term trade deficit between the United States and China and the European Union has not been effectively resolved, and the short-term

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trade agreement between China and the United States is uncertain.

(2) The spread of Covid-19 has led to economic downturns in various countries.
(3) Low oil prices may prompt Charterers to increase the speed of ships, accelerate the digestion of cargo delivery and reduce the demand for ships.
Countermeasure: We will take a close look at the global economy and dry bulk shipping market. 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. The operation strategy is based on the principal of making profit with prudential 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.

Major Suppliers in the Last Two Calendar Years

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

Major Clients of the Last Two Calendar Years:

Unit: NT$ thousands

					Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
	2018				2019
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	332,990	10	Government - relatedparties	A	353,278	11	Government - relatedparties
2	B	198,970	6	None	B	333,431	11	None
3	C	563,561	17	None	C	307,934	10	None
	Others	2,271,715	67		Others	2,119,347	68
	Net Sales	3,367,236	100		Net Sales	3,113,990	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

			Unit:	NT$ thousands
Year Item	2018		2019
	Quantity	Amount	Quantity	Amount
Ocean route	Note	2,869,499	Note	2,584,556
Ship management		203,315		222,136
Tug Service		127,504		128,705
Coastal route	42,570 tons 52,993 Persons	103,401	39,807 tons 53,243 Persons	98,417
Others		63,517		80,176
Total		$3,367,236		$3,113,990

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

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5.3 Human Resources in Last Two Years and Data as of End Data on May 13, 2020

	Year	2018	2019	Data as of end data on May13,2020
Number of Employees	Shore staff	74	74	74
	Marine staff	198	197	166
	Total	272	271	240
Average Age		48.5	48.5	48
AverageYears ofService		13.8	14.4	14.4
Education	Ph.D.	0%	0%	0%
	Masters	9%	9.5%	9.5%
	Bachelor’sDegree	54%	54.5%	55.5%
	Senior High School	25%	25%	24%
	Below Senior High School	12%	11%	11%

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.

Given that the IMO’s Ballast Water Management Convention taking effect in 2019, we have installed the Ballast Water Management System for two existing ships along with corresponding arrangement and been approved by Class Society to reach the balance between Marine ecology and environment. The costs of equipment and modification is approximately Three hundred thousand United States dollars.

During March to June of 2019, we ordered two Kamasarmax of eighty-one thousand dwt. vessels from Oshima shipyard and three eighty-three thousand dwt. vessels with Namura Shipbuilding in Japan. Besides, in order to energy saving, carbon and air pollution reduction, the Diesel engines of two vessels are adopted to International Air Pollution Convention in MARPOL NOx emission Tier � and the investment amount is one million United States dollars each vessel.

5.5 Labor Relations

5.5.1 Employee Benefit Program

TNC has a complete and generous welfare measures, the main projects are:

Insurance:
Employees of the Company are covered by labor insurance and group insurance in accordance with the law, and all employees and dependents are also required to participate in universal health Insurance. And travel safety insurance, employer liability insurance. And for directors, independent directors and managers to buy liability insurance.
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.
Bonus system �

TNC’s bonuses are paid annually according to the surplus status. Includes work bonus, performance bonus, employee bonus, three-day gift.

Subsidies for further education and domestic and foreign tourism. Employee shareholding trust subsidies.
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Rewards for excellent and senior employees �
The outstanding or senior employees will be rewarded and praised for their contribution.
Various of leisure facilities and activities �
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. Subsidize employees to travel at home and abroad. Year-end dinner party to draw the activities.
To establish child care services with kindergartens.
Contract with major hotel banks to provide employees shopping, loans, accommodation, catering and other preferential programs.
9.The Employee Benefits Committee �
The company has established The Employee Benefits Committee, The Employee Benefits Committee will set-aside and allocate employees' welfare funds by the law. and issue marriage, childbirth and birthday gifts, funeral benefits, and education grants for employees' children. Colleagues elect welfare committee members in an open manner, and to conduct various welfare activities.

5.5.2 Retirement Plan

Conditions for applying for retirement
Employees who have one of the following situations may retire from the public: Persons who have worked for more than fifteen years and have reached the age of 55. A person who has worked for more than twenty-five years.

A person who has been working for more than ten years or more is 60 years of age. An employee who has one of the following situations should retire: Persons over 65 years of age.

Loss of mind or physical disability as a worker.

Retirement to:

Old pension: retirement according to the labor benchmark law, work each full year to give two bases, more than fifteen years, each full year to give a base, up to a maximum of forty-five bases.

New pension: Those who retire under the Labour Pensions Ordinance and have worked for more than 15 years may receive a monthly pension and a pension for those who have not been there for 15 years.

The Labour Retirement Reserve Supervision Committee's allocation method: The number of old retirees is about 36 percent and is allocated at 2 percent of the total monthly salary of employees and paid by the Labour Retirement Reserve Spciboards upon retirement. The number of new retirees is about 64%, and the Labour Retirement Reserve Supervision Board allocates pensions to the Labour Insurance Bureau on the basis of the monthly salary of employees of 6-7%, and the employees request from the Labour Insurance Bureau upon retirement.
Implementation:

A total of 5 retired persons in 2019 years, the old system from the effective date of retirement within 30 days of payment, the new system of individuals to the Labour Insurance Bureau.

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,

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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	Training andre-trainingfor first aid personnel	Threehours a year
12	Fire preventionofbuilding and safetyinspectionofequipment	Once every two years

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, 2019	As of Dec 31, 2019
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

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 2020Q1(Note1)
		2015	2016	2017	2018	2019	2020Q1
Current assets		1,480,735	1,109,509	987,757	1,255,739	1,592,523	1,819,434
Investments accounted for using the equity method		88,966	81,267	102,431	115,001	109,431	88,091
Property, Plant and Equipment		8,306,707	10,276,809	12,519,739	11,863,484	10,753,184	10,528,632
Other assets		2,997,513	2,452,332	1,807,789	1,901,677	2,658,612	2,804,634
Total assets		12,873,921	13,919,917	15,417,716	15,135,901	15,113,750	15,240,791
Current liabilities	Before distribution	606,085	466,725	729,666	939,806	505,748	1,087,605
	After distribution	697,890	466,725	1,021,772	1,482,289	(Note2)	(Note2)
Non-current liabilities		2,215,760	3,739,754	5,131,063	3,776,103	4,366,773	3,803,260
Total liabilities	Before distribution	2,821,845	4,206,479	5,860,729	4,715,909	4,872,521	4,890,865
	After distribution	2,913,650	4,206,479	6,152,835	5,258,392	(Note2)	(Note2)
Equity attributable to shareholders of the parent		10,052,076	9,713,438	9,556,987	10,419,992	10,241,229	10,349,926
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	5,013,660	4,825,560	5,292,146	5,947,533	6,005,277	6,168,914
	After distribution	4,921,855	4,825,560	5,000,040	5,405,050	(Note2)	(Note2)
Other equity interest		531,089	380,551	(242,486)	(34,868)	(271,375)	(326,315)
Treasury stock		0	0	0	0	0	0
Non-controlling interest		0	0	0	0	0	0
Total equity	Before distribution	10,052,076	9,713,438	9,556,987	10,419,992	10,241,229	10,349,926
	Afterdistribution	9,960,271	9,713,438	9,264,881	9,877,509	(Note2)	(Note2)

Note1: The above financial information of 2015-2019 was audited by CPA, financial information of 2020Q1 was reviewed by CPA. Note2: The appropriation of earnings for 2019 will be discussed at the annual shareholders’ meeting.

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2. Consolidated Condensed Statement of Comprehensive Income – Based on IFRS

Unit: NT$ thousands; EPS: NT$

	Unit: NT$ thousands; EPS: NT$	Unit: NT$ thousands; EPS: NT$	Unit: NT$ thousands; EPS: NT$	Unit: NT$ thousands; EPS: NT$	Unit: NT$ thousands; EPS: NT$	Unit: NT$ thousands; EPS: NT$
Year Item	Financial information for the last five years and 2020Q1(Note)
	2015	2016	2017	2018	2019	2020Q1
Operating revenue	2,682,432	2,457,613	2,817,921	3,367,236	3,113,990	629,948
Gross profit	230,334	31,878	457,065	862,173	742,721	130,739
Income from operations	123,872	(62,662)	342,305	715,408	603,799	98,626
Non-operating income and expenses	11,539	(5,963)	144,766	273,227	162,097	81,901
Income before tax	135,411	(68,625)	487,071	988,635	765,896	180,527
Continuing Operations' Income	135,411	(68,625)	487,071	988,635	765,896	180,527
Loss from Discountinued Operations	0	0	0	0	0	0
Net income (loss)	93,911	(90,825)	466,471	957,635	601,096	163,637
Other comprehensive income(loss)	251,179	(156,008)	(622,922)	137,550	(237,376)	(54,940)
Total comprehensive income(loss)	345,090	(246,833)	(156,451)	1,095,185	363,720	108,697
Net income(loss) attributable to shareholders of the parent	93,911	(90,825)	466,471	957,635	601,096	163,637
Net income attributable to non-controlling interest	-	-	-	-	-	-
Comprehensive income(loss) attributable to Shareholders of the parent	345,090	(246,833)	(156,451)	1,095,185	363,720	108,697
Comprehensive income attributable to non-controlling interest	-	-	-	-	-	-
Earnings per share	0.22	(0.22)	1.12	2.29	1.44	0.39

Note: The above financial information of 2015-2019 was audited by CPA, financial information of 2020Q1 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

Parent Company Only Condensed Balance Sheet- Based on IFRS

1. Parent Company Only Condensed Balance Sheet- Based on IFRS	1. Parent Company Only Condensed Balance Sheet- Based on IFRS	1. Parent Company Only Condensed Balance Sheet- Based on IFRS	1. Parent Company Only Condensed Balance Sheet- Based on IFRS	1. Parent Company Only Condensed Balance Sheet- Based on IFRS	1. Parent Company Only Condensed Balance Sheet- 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)
		2015	2016	2017	2018	2019
Current assets		467,656	344,132	555,012	572,393	364,280
Investments accounted for using the equitymethod		8,245,353	7,932,708	7,680,039	8,871,325	9,008,154
Property, Plant and Equipment		779,122	741,574	722,198	684,613	671,086
Other assets		1,293,292	1,257,633	1,433,815	1,349,211	1,562,335
Total assets		10,785,423	10,276,047	10,391,064	11,477,542	11,605,855
Current liabilities	Before distribution	329,636	177,759	454,760	669,452	277,110
	After distribution	421,441	177,759	749,866	1,211,935	(Note2)
Non-current liabilities		403,711	384,850	379,317	388,098	1,087,516
Total liabilities	Before distribution	733,347	562,609	834,077	1,057,550	1,364,626
	After distribution	825,152	562,609	1,126,183	1,600,033	(Note2)
Equity attributable to shareholders of theparent		10,052,076	9,713,438	9,556,987	10,419,992	10,241,229
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	5,013,660	4,825,560	5,292,146	5,947,533	6,005,277
	After distribution	4,921,855	4,825,560	5,000,040	5,405,050	(Note2)
Other equity interest		531,089	380,551	(242,486)	(34,868)	(271,375)
Treasury stock		0	0	0	0	0
Non-controlling interest		0	0	0	0	0
Total equity	Before distribution	10,052,076	9,713,438	9,556,987	10,419,992	10,241,229
	After distribution	9,960,271	9,713,438	9,264,881	9,877,509	(Note2)

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

Note2: The appropriation of earnings for 2019 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) 2015 2016 2017 2018 2019 Operating revenue 1,583,542 1,393,348 1,240,099 1,276,210 1,148,090 Gross profit 209,400 208,865 214,112 170,744 225,072 Income from operations 106,879 117,066 103,318 29,188 91,582 Non-operating income and expenses 28,532 (185,691) 383,753 959,447 674,314 Income (loss) before tax 135,411 (68,625) 487,071 988,635 765,896 Net income (loss) 93,911 (90,825) 466,471 957,635 601,096 Other comprehensive income (loss) 251,179 (156,008) (622,922) 137,550 (237,376) Total comprehensive income (loss) 345,090 (246,833) (156,451) 1,095,185 363,720 Earnings per share 0.22 (0.22) 1.12 2.29 1.44
Year Item	Financial information for the last fiveyears(Note)
	2015	2016	2017	2018	2019
Operating revenue	1,583,542	1,393,348	1,240,099	1,276,210	1,148,090
Gross profit	209,400	208,865	214,112	170,744	225,072
Income from operations	106,879	117,066	103,318	29,188	91,582
Non-operating income and expenses	28,532	(185,691)	383,753	959,447	674,314
Income (loss) before tax	135,411	(68,625)	487,071	988,635	765,896
Net income (loss)	93,911	(90,825)	466,471	957,635	601,096
Other comprehensive income (loss)	251,179	(156,008)	(622,922)	137,550	(237,376)
Total comprehensive income (loss)	345,090	(246,833)	(156,451)	1,095,185	363,720
Earnings per share	0.22	(0.22)	1.12	2.29	1.44

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
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
2019	Deloitte & Touche	Huang, Hui-Min Yeh, Shu-Cnuan	Unqualified Opinion

2. Replacement of CPA in the past five years:

The original CPAs of the Company were Wong, Ya-Ling and Shao, Chih-Ming from Deloitte & Touche. Due to internal restructuring at Deloitte & Touche, the CPAs of the Company were changed to Huang, Hui-Min and Yeh, Shu-Cnuan.

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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 2020Q1	Financial Analysis in the Past Five Years and 2020Q1	Financial Analysis in the Past Five Years and 2020Q1	Financial Analysis in the Past Five Years and 2020Q1	Financial Analysis in the Past Five Years and 2020Q1	Financial Analysis in the Past Five Years and 2020Q1
			2015	2016	2017	2018	2019	2020Q1
Financial structure	Debt Ratio		21.92	30.22	38.01	31.16	32.24	32.09
	Ratio of long-term capital to property, plant and equipment		147.69	130.91	117.32	119.66	135.85	134.43
Solvency	Current ratio		244.31	237.72	135.37	133.62	314.88	167.29
	Quick ratio		224.51	211.23	118.11	121.13	297.15	158.07
	Interest earned ratio (times)		9.84	-0.96	8.32	9.63	9.21	11.61
Operating performance	Accounts receivable turnover (times)		15.83	15.27	20.80	28.11	26.64	22.60
	Average collection period		23.05	23.90	17.54	12.98	13.70	16.15
	Inventory turnover (times)		-	-	-	-	-	-
	Accounts payable turnover (times)		12.65	13.90	13.60	15.14	15.42	14.40
	Average days in sales		-	-	-	-	-	-
	Property, plant and equipment turnover (times)		0.33	0.26	0.25	0.28	0.28	0.24
	Total assets turnover (times)		0.21	0.18	0.19	0.22	0.21	0.17
Profitability	Return on total assets (%)		0.83	-0.46	3.56	6.87	4.47	4.67
	Return on stockholders' equity (%)		0.94	-0.92	4.84	9.59	5.82	6.36
	Income to paid-in capital	Income from operations	2.97	-1.50	8.20	17.14	14.47	9.45
		Income before tax	3.24	-1.64	11.67	23.69	18.35	17.30
	Profit ratio (%)		3.5	-3.70	16.55	28.44	19.30	25.98
	Earnings per share (NT$)		0.22	-0.22	1.12	2.29	1.44	0.39
Cash flow	Cash flow ratio (%)		128.37	122.24	158.95	159.84	275.7	65.24
	Cash flow adequacy ratio (%)		92.95	59.54	51.71	65.15	72.07	82.96
	Cash reinvestment ratio (%)		2.71	2.34	5.51	6.05	4.27	3.69
Leverage	Operating leverage		1.86	-0.51	3.21	2.07	2.19	2.53
	Financial leverage		1.14	0.64	1.24	1.19	1.18	1.21
Explanations for the variations over 20% of financial ratios in the last two years: 1. The decline of the current liabilities caused an increase of the current ratio, quick ratio and cash flow ratio. 2. The decline of the profit caused decline of ROA, ROE, income to paid-in capital ratio, profit ratio , and EPS. 3. The rise of the cash dividend caused decline of the cash reinvestment ratio.

The decline of the profit caused decline of ROA, ROE, income to paid-in capital ratio, profit ratio , and EPS.
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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
			2015	2016	2017	2018	2019
Financial structure	Debt Ratio		6.80	5.47	8.03	9.21	11.76
	Ratio of long-term capital to property, plant and equipment		1,342.00	1,361.74	1,375.84	1,578.72	1,688.12
Solvency	Current ratio		141.87	193.59	122.05	85.50	131.46
	Quick ratio		134.39	174.87	115.23	80.60	120.50
	Interest earned ratio		52.21	-78.06	314.43	322.72	189.51
Operating performance	Accounts receivable turnover (times)		9.44	9.49	10.72	11.95	10.91
	Average collection period		38.68	38.47	34.05	30.55	33.45
	Inventory turnover (times)		-	-	-	-
	Accounts payable turnover (times)		12.85	13.76	11.36	12.91	14.95
	Average days in sales		-	-	-	-
	Property, plant and equipment turnover(times)		1.99	1.83	1.69	1.81	1.69
	Total assets turnover (times)		0.15	0.13	0.12	0.12	0.10
Profitability	Return on total assets (%)		0.89	-0.86	4.53	8.78	5.24
	Return on stockholders' equity (%)		0.94	-0.92	4.84	9.59	5.82
	Income to paid-in capital	Income from operations	2.56	2.81	2.48	0.70	2.19
		Income before tax	3.24	-1.64	11.67	23.69	18.35
	Profit ratio (%)		5.93	-6.52	37.62	75.04	52.36
	Earnings per share (NT$)		0.22	-0.22	1.12	2.29	1.44
Cash flow	Cash flow ratio (%)		44.53	44.90	51.64	11.15	60.35
	Cash flow adequacy ratio (%)		52.42	32.83	71.52	59.37	56.34
	Cash reinvestment ratio (%)		-1.08	-0.11	2.13	-1.81	-3.00
Leverage	Operating leverage		1.96	1.78	1.36	2.46	1.51
	Financial leverage		1.03	1.01	1.02	1.12	1.05
Explanations for the variations over 20% of financial ratios in the last two years: 1. The rise of the long-term borrowing caused an increase of the debt ratio. 2. The decline of the current liabilities caused an increase of the cash flow ratio, current ratio, and quick ratio. 3. The decline of the net income caused decline of the interest earned ratio, ROA, ROE, income to paid-in capital ratio, profit ratio , and EPS. 4. The rise of the cash dividend caused decline of the cash reinvestment ratio. 5. The rise of the operating income caused decline of the operating leverage, and an increase of the income to paid-in capital ratio.

The decline of the net income caused decline of the interest earned ratio, ROA, ROE, income to paid-in capital ratio, profit ratio , and EPS.
The rise of the operating income caused decline of the operating leverage, and an increase of the income to paid-in capital ratio.
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Equations as follows:

Financial structure
(1) Ratio of liabilities to assets = Total liabilities / Total assets
(2) Ratio of long-term capital to property, plant, and equipment = (Total equity + non-current liabilities) /Net property, plant and equipment
Solvency
(1) Current ratio = Current assets / Current liabilities
(2) Quick ratio = (Current assets – Inventory – Prepaid expenses) / Current liabilities
(3) Times interest earned = Net income before tax and interest expense / Interest expense of the year
Operating ability
(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)
(2) Days sales in accounts receivable = 365 / Account receivable turnover
(3) Inventory turnover = Cost of goods sold / Average inventory amount
(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)
(5) Average days in sales = 365 / Inventory turnover
(6) Property, plant and equipment turnover = Net sales / Average net property, plant, and equipment
(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)
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 2019

The 2019 audit committee’s audit report.

Boar d of Directors has p r epared th e 2019 Business Report, Conso l idated an d Individu a l Financial S tatements and Profi t Distributi o n Propos a l, the con s olidated and individ u al financi a l statement s have bee n audited b y Huang, H ui � Min an d Yeh, Shu � C nuan, both CPAs of D eloitte an d Touche have issued independe n t auditors’ reports. The 2019 B u siness Re p ort, Cons o lidated an d Individual Financial S tatements and Profit Distribution Proposal have bee n audited b y the audit Committe e and nothing unusu a l has bee n found. P u rsuant to t he releva n t require m ents of th e Securities Exchange Act and the Compa n y Act. We hereby s ubmit thi s report t o the 202 0 Sharehold e rs’ Meeting of Taiwa n Navigatio n Co., Ltd.

T a iwan Navigation C o ., Ltd. C hairman o f Audit C o mmitte e

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Taiwan Navigation Co., Ltd.

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

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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, 2019 and 2018, 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, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2019. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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The key audit matters identified in the financial statements of the Corporation for the year ended December 31, 2019 are stated as follows:

The Recognition of Gain of Equity Method Investee’s Disposal of Bulk Carriers

The Corporation’s subsidiary Tai Shing, primarily engages in bulk carriers transportation service. Tai Shing disposed some of its aging bulk carriers in 2019 in order to replace them with new bulk carriers and the Corporation recognized a gain on disposal under investments accounted for using the equity method. Given that the transaction is material to the financial statements, a gain on disposal of the asset of $182,587 thousand was material to the subsidiary Tai Shing’s financial statements. We considered occurrence and accuracy of gain on disposal of bulk carriers recognized under investments accounted for using the equity method a key audit matter.

Our main audit procedures performed was as follows:

We understood management’s relevant evaluation processes of disposal of the bulk carriers and verified the implementation of related controls, through appropriate approvals.
We reviewed the transaction contract and the record of remittances and verified the accuracy of the counterparty and the amount received.
We reviewed the bulk carriers’ protocol of delivery and acceptance and verified the accuracy of the timing of recognition of gain on disposal of bulk carriers.
We reperformed the calculation of gain on disposal of bulk carriers and verified the accuracy of amount 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.

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Auditors’ Responsibilities for the Audit of the Financial Statements

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

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

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Corporation to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient 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.

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2019 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Hui-Min Huang and Shu-Cnuan Yeh.

Deloitte & Touche Taipei, Taiwan Republic of China March 18, 2020

Notice to Readers

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

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

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independent auditors’ report and financial statements shall prevail.

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TAIWAN NAVIGATION CO., LTD.

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

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss (Notes 4, 7 and 23) Financial assets at fair value through other comprehensive income (Notes 4, 8 and 23) Accounts receivable, net (Notes 4, 9 and 17) Trade receivables from related parties (Notes 4, 9, 17, 23 and 25) Prepayments (Note 23) Other financial assets (Notes 4 and 10) Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through other comprehensive income (Notes 4, 8 and 23) Investments accounted for using the equity method (Notes 4 and 11) Property, plant and equipment (Notes 4, 12 and 24) Investment properties (Notes 4, 13 and 20) Other non-current assets (Notes 4, 18 and 24) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 14 and 20) Notes and accounts payable Trade payables to related parties (Note 23) Other payables Current tax liabilities (Notes 4 and 18) Advance receipts (Note 20) Other current liabilities (Note 4) Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 14 and 20) Deferred tax liabilities (Notes 4 and 18) Net defined benefit liabilities (Notes 4 and 15) Other non-current liabilities (Note 20) Total non-current liabilities Total liabilities EQUITY (Note 16) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity TOTAL		2019		2018
		Amount % $ 126,966 1 - - 95,244 1 27,226 - 59,434 1 30,361 - 21,520 - 3,529 - 364,280 3 321,789 3 9,008,154 78 671,086 6 1,229,337 10 11,209 - 11,241,575 97 $ 11,605,855 100 $ - - 37,197 1 13,504 - 85,685 1 95,921 1 14,196 - 30,607 - 277,110 3 520,000 4 363,604 3 67,550 1 136,362 1 1,087,516 9 1,364,626 12 4,172,945 36 334,382 3 1,760,362 15 34,868 1 4,210,047 36 6,005,277 52 (271,375) (3) 10,241,229 88 $ 11,605,855 100		Amount % $ 119,820 1 76,777 1 116,247 1 23,056 - 93,577 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 35,527 - 37,253 1 100,203 1 4,011 - 6,013 - 21,268 - 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 $ 11,477,542 100

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, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 4, 13, 17, 23 and 25) OPERATING COSTS (Notes 12, 13, 15 and 23) GROSS PROFIT OPERATING EXPENSES (Notes 12 and 15) PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Share of profit of subsidiaries and associates accounted for using the equity method (Notes 4 and 11) Interest income (Note 4) Dividend income (Notes 4 and 8) Other income (Note 23) Gain on disposal of property, plant and equipment Interest expense Other expenses (Note 23) Net gain on foreign currency exchange (Note 27) Net 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 18) 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 15) Unrealized loss on investments in equity instruments designated as at fair value through other comprehensive income		2019 Amount % $ 1,148,090 100 923,018 80 225,072 20 133,490 12 91,582 8 633,197 55 3,655 - 6,885 1 41,670 4 350 - (4,063) - (3,232) - 1,047 - (5,195) (1) 674,314 59 765,896 67 164,800 14 601,096 53 (869) - (6,397) (1)		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) (Continued)

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TAIWAN NAVIGATION CO., LTD.

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

Share of other comprehensive income (loss) of associates accounted for using the equity method (Note 11) Items that may be reclassified subsequently to profit or loss: Share of other comprehensive income (loss) of subsidiaries and associates accounted for using the equity method (Note 11) Other comprehensive income (loss) for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR EARNINGS PER SHARE (Note 19) Basic Diluted		2019 Amount % $ (6,268) - (13,534) (1) (223,842) (20) (237,376) (21) $ 363,720 32 $ 1.44 $ 1.44		2018
				Amount % $ 12,034 1 (120,077) (9) 257,627 20 137,550 11 $ 1,095,185 86 $ 2.29 $ 2.29



		$		$

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

(Concluded)

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							Total Equity	$ 9,556,987	59,926	9,616,913		-	-	(292,106)	957,635		137,550		1,095,185	10,419,992		-	(542,483)	-	601,096		(237,376)		363,720	$ 10,241,229
Other Equity	Exchange Unrealized Loss	Differences on on Financial	Translating the Assets at Fair Unrealized	Financial Value Through Gain (Loss) on	Statements of Other Available-for-	Foreign Comprehensive sale Financial	Operations Income Assets	$ (131,037) $ - $ (111,449)	- (51,523) 111,449	(131,037) (51,523) -		- - -	- - -	- - -	- - -		257,627 (109,935) -		257,627 (109,935) -	126,590 (161,458) -		- - -	- - -	- - -	- - -		(223,842) (12,665) -		(223,842) (12,665) -	$ (97,252) $ (174,123) $ -
						Unappropriated	Earnings	$ 3,674,194	-	3,674,194		(46,647)	(242,486)	(292,106)	957,635		(10,142)		947,493	4,040,448		(95,763)	(542,483)	207,618	601,096		(869)		600,227	$ 4,210,047
					Retained Earnings		Special Reserve	$ -	-	-		-	242,486	-	-		-		-	242,486		-	-	(207,618)	-		-		-	$ 34,868
							Legal Reserve	$ 1,617,952	-	1,617,952		46,647	-	-	-		-		-	1,664,599		95,763	-	-	-		-		-	$ 1,760,362
					Ordinary Shares	Shares	(In Thousands) Amount Capital Surplus	BALANCE AT JANUARY 1, 2018 417,294 $ 4,172,945 $ 334,382	Effect of retrospective application - - -	BALANCE AT JANUARY 1, 2018 AS ADJUSTED 417,294 4,172,945 334,382	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 417,294 4,172,945 334,382	Appropriation of 2018 earnings	Legal reserve - - -	Cash dividends - - -	Reversal of special reserve - - -	Net profit for the year ended December 31, 2019 - - -	Other comprehensive loss for the year ended	December 31, 2019, net of income tax - - -	Total comprehensive income (loss) for the year ended	December 31, 2019 - - -	BALANCE AT DECEMBER 31, 2019 417,294 $ 4,172,945 $ 334,382

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TAIWAN NAVIGATION CO., LTD.

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

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation and amortization expenses Net loss 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 Gain on disposal of property, plant and equipment Unrealized loss on foreign currency exchange, net Changes in operating assets and liabilities 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 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 financial asset at fair value through other comprehensive income Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of investment properties Decrease in other financial assets Decrease (increase) in other non-current assets Interest received Dividends received Net cash generated from investing activities	2019 $ 765,896 46,591 5,195 4,063 (3,655) (6,885) (633,197) (350) 358 - (4,308) 33,800 2,445 950 2,426 1,765 (23,721) (14,720) (3,637) 9,339 (2,132) 180,223 (12,979) 167,244 - (28,100) 350 (3,953) 81,395 (1,298) 9,945 273,143 331,482	2018 $ 988,635 42,482 15,038 3,073 (3,332) (6,885) (924,752) - 196 32,019 (1,628) (24,936) (1,795) (746) (6,112) 2,535 (28,738) 26,468 (3,077) 80 (16,465) 92,060 (17,387) 74,673 (45,750) (3,020) - - 64,727 4,431 9,071 10,012 39,471 (Continued)

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TAIWAN NAVIGATION CO., LTD.

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

CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in short-term borrowings Proceeds from in long-term borrowings Repayments of long-term borrowings Decrease in other non-current liabilities Cash dividends paid Interest paid Net cash used in financing activities 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	2019 $ (165,177) 575,000 (355,000) (59) (542,483) (3,861) (491,580) 7,146 119,820 $ 126,966	2018 $ 222,177 - - (432) (292,106) (3,076) (73,437) 40,707 79,113 $ 119,820

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, 2019 AND 2018 (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 17, 2020.

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

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

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

IFRS 16 “Leases”

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

Definition of a lease

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

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The Corporation as lessee

The Corporation recognizes right-of-use assets and lease liabilities for all leases on the balance sheets except for those whose payments under low-value asset and short-term leases are recognized as expenses on a straight-line basis. On the statements of comprehensive income, the Corporation presents the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the statements of cash flows, cash payments for the principal portion of lease liabilities and cash payments for the interest portion are classified within financing activities. Prior to the application of IFRS 16, payments under operating lease contracts were recognized as expenses on a straight-line basis. Cash flows for operating leases were classified within operating activities on the statements of cash flows. Leased assets and finance lease payables were recognized on the balance sheets for contracts classified as finance leases.

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

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

The Corporation also applies the following practical expedients:

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

The 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. The difference between the application of IFRS 16 and operating lease commitments disclosed under IAS 17 on December 31, 2018 is explained as follows:

The future minimum lease payments of non-cancellable operating lease commitments on December 31, 2018 Less: Recognition exemption for short-term leases Undiscounted amounts on January 1, 2019	$ 43,260 (43,260) $ -

Undiscounted amounts on January 1, 2019

The Corporation as lessor

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

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

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

Note 1: The Corporation shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.
Note 2: The Corporation shall apply these amendments retrospectively for annual reporting periods beginning on or after January 1, 2020.
Note 3: The Corporation shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

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

c. The IFRSs issued by IASB but not yet endorsed and issued into effect by the FSC

New IFRSs Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	Effective Date Announced by IASB (Note)
	To be determined by IASB January 1, 2021 January 1, 2022

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

As of the date the financial statements were authorized for issue, the Corporation is continuously assessing the possible impact that the application of above 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”).

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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.

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 parent company only financial statements to be the same with 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 parent company only financial statements.

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

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within 12 months after the reporting period; and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

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

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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 financial statements, the functional currencies of 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 recognized in other comprehensive income 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 accounted for as 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 loss, if any.

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

The Corporation assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the investee’s financial statements as a whole. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Corporation recognizes 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 parent company only financial statements. Profits and losses resulting from upstream transactions and transactions between subsidiaries are recognized only in the parent company only financial statements only to the extent of interests in the subsidiaries that are not related to the Corporation.

f. Investments 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 loss, if any. 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.

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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.

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 initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment loss.

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

Freehold land is not depreciated.

The 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.

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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 an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Corporation estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

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 on 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 the Corporation becomes a party to the contractual provisions of the instruments.

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

1) Financial assets

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

a) Measurement categories

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

i. Financial assets at FVTPL

Financial assets 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, and any dividends, interest earned and remeasurement gains or losses on such financial assets are recognized in profit or loss. Fair value is determined in the manner described in Note 22.

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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, trade receivables 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.

A financial asset is credit impaired when one or more of the following events have occurred:

i) Significant financial difficulty of the issuer or the borrower;
ii) Breach of contract, such as a default;
iii) It is becoming probable that the borrower will enter bankruptcy or undergo a financial reorganization.

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.

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

b) Impairment of financial assets

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

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.

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

For internal credit risk management purposes, the Corporation determines that the information that internal or external information show that the debtor is unlikely to pay its creditors indicates that a financial asset is in default.

The impairment loss of all financial assets is recognized in profit or loss by a reduction in their carrying amount through a loss allowance account.

c) Derecognition of financial assets

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

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 difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, 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) Equity instruments

Equity instruments issued by the Corporation are classified as equity in accordance with the substance of the contractual arrangements and the definitions of an equity instrument.

Equity instruments issued by the Corporation are recognized at the proceeds received, net of direct issue costs.

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3) 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

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

As the Corporation provides services for freight transport, ship chartering and ship management, 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 freight transport services is recognized with reference to the stage of completion of the services provided and the revenue from ship chartering and ship management services are recognized with reference to the number of days incurred.

l. Leasing

2019

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

For a contract that contains a lease component and non-lease components, the Corporation allocates the consideration in the contract to each component on the basis of the relative stand-alone price and accounts for each component separately. However, for the lease of transportation equipment in which the Corporation is a lessee and transportation service is provided by a lessor, the Corporation elects to account for the lease and non-lease components as a single lease component.

1) The Corporation as lessor

All leases are classified as operating leases.

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

When a lease includes both land and building elements, the Corporation assesses the classification of each element separately as a finance or an operating lease based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the lessee.

2) The Corporation as lessee

The Corporation applies a recognition exemption where lease payments are recognized as costs and expenses on a straight-line basis over the lease terms for short-term leases and low-value asset leases.

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2018

All leases are classified as operating leases.

The Corporation as lessor, rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

The Corporation as lessee, operating lease payments are recognized as costs and 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.

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 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 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

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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.

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.

After the evaluation of management, the Corporation has no critical accounting judgements and key sources of estimation uncertainty.

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
		2019 $ 258 30,772 95,936 $ 126,966	2018 $ 262 21,270 98,288 $ 119,820

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The market rate intervals of cash in banks and cash equivalents at the end of the year are as follows:

Bank balance and cash equivalents	December 31
	2019 2018 0.01%-2.20% 0.01%-3.30%

As of December 31, 2019 and 2018, the bank balances (including time deposits with original maturities of more than 3 months and pledged deposits) related to bank, government-related parties, are as follows:

First Commercial Bank Bank of Taiwan Other		December 31	December 31
		2019 $ 63,561 65,249 450 $ 129,260	2018 $ 42,461 39,769 6,696 $ 88,926

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Derivative financial assets Mandatory convertible bonds		December	31
		2019 $ -	2018 $ 76,777

The Corporation’s investments in mandatory convertible bonds mentioned above matured in June 2019 and were converted in private placement listed shares of Yang Ming Marine Transport Corporation in accordance with the terms of conversion, refer to Note 23.

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Current Domestic investments Listed shares Yang Ming Marine Transport Corporation		December 31	December 31
		2019 $ 95,244	2018 $ 116,247 (Continued)

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Non-current Domestic investments Private placement listed shares Yang Ming Marine Transport Corporation Unlisted shares Chunghwa Investment Co., Ltd. Foreign investments Unlisted shares Taiwan Foundation International Pte. Ltd.		December 31	December 31
		2019 $ 185,559 90,651 276,210 45,579 $ 321,789	2018 $ 145,794 49,943 195,737 45,864 $ 241,601 (Concluded)

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.

Dividends of $6,885 thousand were both recognized as of December 31, 2019 and 2018. Both were related to investments in equity instruments at FVTOCI held as of December 31, 2019 and 2018.

9. ACCOUNTS RECEIVABLE, NET (INCLUDING RELATED PARTIES)

At amortized cost Gross carrying amount Less: Allowance for impairment loss Trade receivables from related parties		December	31
		2019 $ 29,826 2,600 $ 27,226 $ 59,434	2018 $ 25,656 2,600 $ 23,056 $ 93,577

The Corporation measures loss allowance of trade receivables (including related parties) at an amount equal to lifetime ECLs. The expected credit losses on accounts receivables are estimated by reference to past default experience of the 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 based on past due status is not further distinguished according to the Corporation’s different customer base.

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

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The aging of receivables (including related parties) is as follows:

Up to 60 days 61-90 days More than 90 days Gross carrying amount Loss allowance (lifetime ECLs) Amortized cost		December 31	December 31
		2019 $ 88,635 288 337 89,260 (2,600) $ 86,660	2018 $ 93,732 596 24,905 119,233 (2,600) $ 116,633

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

As of December 31, 2019 and 2018, the amounts of the loss allowance of accounts receivable were both $2,600 thousand.

10. OTHER FINANCIAL ASSETS

Time deposits with original maturities of more than 3 months Others		December 31	December 31
		2019 $ - 21,520 $ 21,520	2018 $ 81,395 23,946 $ 105,341

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

	December 31
2019	2018
-	2.56%-3.15%

11. 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
		2019 $ 8,507,779 390,944 $ 8,898,723	2018 $ 8,651,166 105,158 $ 8,756,324

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

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b. Investments in associates

Associates that are not individually material Yunn Wang Investment Co., Ltd.		December 31	December 31
		2019 $ 109,431	2018 $ 115,001

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

Refer to Table 4 “Information on Investees” 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 the Corporation’s investments in subsidiaries and associates were calculated based on the financial statements which have been audited.

Aggregate information of associates

The Corporation’s share of: Net profit for the year Other comprehensive income (loss) Total comprehensive income for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 6,952 (6,268) $ 684	2018 $ 3,663 12,034 $ 15,697

12. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2019 Additions Disposals Balance at December 31, 2019 Accumulated depreciation Balance at January 1, 2019 Disposals Depreciation expenses Balance at December 31, 2019 Carrying amounts at December 31, 2019 Cost Balance at January 1, 2018 Additions Disposals Balance at December 31, 2018	Land $ 191,103 - - $ 191,103 $ 191,103 $ 191,103 - - $ 191,103	Buildings Transportation Equipment $ 82,555 $ 1,553,872 6,668 19,659 - (18,894) $ 89,223 $ 1,554,637 $ 36,350 $ 1,107,481 - (18,894 ) 1,585 39,598 $ 37,935 $ 1,128,185 $ 51,288 $ 426,452 $ 82,555 $ 1,553,378 - 1,982 - (1,488) $ 82,555 $ 1,553,872	Other Equipment Total $ 3,737 $ 1,831,267 1,773 28,100 (1,085) (19,979) $ 4,425 $ 1,839,388 $ 2,823 $ 1,146,654 (1,085 ) (19,979 ) 444 41,627 $ 2,182 $ 1,168,302 $ 2,243 $ 671,086 $ 2,699 $ 1,829,735 1,038 3,020 - (1,488) $ 3,737 $ 1,831,267 (Continued)

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Accumulated depreciation Balance at January 1, 2018 Disposals Depreciation expenses Balance at December 31, 2018 Carrying amounts at December 31, 2018	Land $ 191,103	Buildings Transportation Equipment $ 34,638 $ 1,070,318 - (1,488 ) 1,712 38,651 $ 36,350 $ 1,107,481 $ 46,205 $ 446,391	Other Equipment Total $ 2,581 $ 1,107,537 - (1,488 ) 242 40,605 $ 2,823 $ 1,146,654 $ 914 $ 684,613 (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	25 years
Drydock	2 years
Vehicles and motorcycles	3-8 years
Other equipment	3-10 years

The property, plant and equipment are used by the Corporation.

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

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

Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 43,581 2,544 $ 46,125	2018 $ 40,028 1,929 $ 41,957

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
		2019 $ 466	2018 $ 525

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13. INVESTMENT PROPERTIES

Cost Balance at January 1, 2019 Additions Balance at December 31, 2019 Accumulated depreciation Balance at January 1, 2019 Depreciation expenses Balance at December 31, 2019 Carrying amounts at December 31, 2019 Cost Balance at January 1, 2018 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 $ 1,055,678 1,650 $ 1,057,328 $ 1,057,328 $ 1,055,678 - $ 1,055,678 $ 1,055,678	Buildings $ 120,895 134,815 $ 255,710 $ 79,203 4,498 $ 83,701 $ 172,009 $ 121,072 (177) $ 120,895 $ 78,028 (177) 1,352 $ 79,203 $ 41,692	Total $ 1,176,573 136,465 $ 1,313,038 $ 79,203 4,498 $ 83,701 $ 1,229,337 $ 1,176,750 (177) $ 1,176,573 $ 78,028 (177) 1,352 $ 79,203 $ 1,097,370

The acquisition of investment properties which included non-cash transactions (Refer to Note 20) is as follows:

	For the Year	For the Year
		Ended
	December 31,
		2019
Increase in investment properties	$	136,465
Increase in prepaid rents (included in advance receipts and other non-current liabilities)		(132,512)
	$	3,953

The investment properties were leased out for 1 to 20 years. The lease contracts contain market review clauses in the event that the lessees exercise their options to extend. The lessees do not have bargain purchase options to acquire the investment properties at the expiry of the lease periods.

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The maturity analysis of lease payments receivable under operating leases of investment properties as of December 31, 2019 is as follows:

			December 31,	December 31,
				2019
Year	1		$	45,297
Year	2			30,451
Year	3			16,123
Year	4			12,485
Year	5			12,693
Year	6	onwards		162,085
			$	279,134

The maturity analysis of lease payments receivable under operating leases of investment properties as of December 31, 2018 is as follows:

	December 31,	December 31,
		2018
Not later than 1 year	$	47,559
Later than 1 year and not later than 5 years		81,490
Later than 5 years		174,778
	$	303,827

Investment properties are depreciated using the straight-line method over their estimated useful lives of 25-60 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
		2019 $ 3,658,333	2018 $ 3,555,321

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
		2019 $ 56,076 $ 19,576 398 $ 19,974	2018 $ 52,658 $ 15,904 398 $ 16,302

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14. BORROWINGS

a. Short-term borrowings

Unsecured borrowings Line of credit borrowings		December 31	December 31
		2019 $ -	2018 $ 465,177

The interest rate on line of credit borrowings was 0.95% per annum at December 31, 2018.

b. Long-term borrowings

Line of credit borrowings		December 31	December 31
		2019 $ 520,000	2018 $ -

The range of interest rates on line of credit borrowings was 0.97%-1.01% per annum at December 31, 2019. The interest is paid on a monthly basis. The principals will be fully paid by February 2021 and 2022, respectively.

As of December 31, 2018, the bank borrowings related to bank, which is a government-related party, were as follows:

First Commercial Bank		December 31	December 31
		2019 $ -	2018 $ 165,177

The interest expense related to bank, which is a government-related party, were $707 thousand and $583 thousand for the years ended December 31, 2019 and 2018, respectively.

15. 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, the Corporation 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 contributes 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

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pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Corporation has no right to influence the investment policy and strategy.

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

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities		December 31	December 31
		2019 $ 108,365 (40,815) $ 67,550	2018 $ 106,805 (37,992) $ 68,813

Movements in net defined benefit liabilities are as follows:

	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of		Benefit
	Obligation	the Plan Assets	Liabilities
Balance at January 1, 2018	$ 101,626	$ (26,490)	$	75,136
Service cost
Current service cost	1,783	-		1,783
Net 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 (gain) loss
Changes in demographic assumptions	3,431	-		3,431
Changes in financial assumptions	1,256	-		1,256
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
Service cost
Current service cost	1,944			1,944
Net interest expense (income)	1,068	(385)		683
Recognized in profit or loss	3,012	(385)		2,627
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	(1,274)		(1,274)
Actuarial (gain) loss
Changes in demographic assumptions	731	-		731
Changes in financial assumptions	2,542	-		2,542
Experience adjustments	(1,130)	-		(1,130)
Recognized in other comprehensive income	2,143	(1,274)		869
Contributions from the employer	-	(1,164)		(1,164)
Benefits paid	(3,595)	-		(3,595)
Balance at December 31, 2019	$ 108,365	$ (40,815)	$	67,550

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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 plans’ debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated using the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

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

Discount rate Expected rate of salary increase	December 31
	2019 2018 0.75% 1% 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 will increase (decrease) as follows:

Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase 0.25% increase 0.25% decrease		December	31
		2019 $ (2,549) $ 2,658 $ 2,558 $ (2,468)	2018 $ (2,600) $ 2,713 $ 2,619 $ (2,524)

The sensitivity analysis previously presented 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
		2019 $ 426 10.1 years	2018 $ 948 10.5 years

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The details of employee benefits expense are 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
		2019 $ 11,234 2,627 13,861 330,649 $ 344,510 $ 246,068 98,442 $ 344,510	2018 $ 10,182 2,561 12,743 325,422 $ 338,165 $ 229,298 108,867 $ 338,165

Employee’s compensation and remuneration of directors and supervisors

According to the Corporation’s Articles, 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 employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2019 and 2018, which were approved by the Corporation’s board of directors on March 2019 and 2018, respectively, are as follows:

Accrual rate

Employees’ compensation Remuneration of directors and supervisors Amount	For the Year Ended December 31
	2019 2018 1% 1% 1% 1%

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31	For the Year Ended December 31
	2019 Cash $ 7,816 7,815	2018
		Cash $ 10,088 10,088

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

There is no difference between the actual amounts of employees’ compensation and remuneration of directors and supervisors paid and the amounts recognized in the financial statements for the year ended December 31, 2018.

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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 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 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

16. EQUITY

a. Ordinary shares

Shares authorized (in thousands) Capital authorized Shares issued and fully paid (in thousands) Capital issued		December 31	December 31
		2019 480,000 $ 4,800,000 417,294 $ 4,172,945	2018 480,000 $ 4,800,000 417,294 $ 4,172,945

b. Capital surplus

Treasury share transactions Donations		December 31	December 31
		2019 $ 334,352 30 $ 334,382	2018 $ 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 forth in the Corporation’s Articles, 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

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directors and supervisors, refer to Note 15.

The Corporation’s Articles also stipulate a dividends policy whereby the issuance 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.

Items referred to under Rule No. 1010012865 issued by the FSC and in the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Corporation.

The appropriations of earnings for 2018 and 2017 were approved in the shareholders’ meetings in June 2019 and 2018, respectively, are as follows:

Legal reserve Appropriation (reversal) of special reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2018 2017 $ 95,763 $ 46,647 (207,618) 242,486 542,483 292,106	Dividends Per Share (NT$)
		For the Year Ended December 31
		2018 2017 $1.3 $0.7

The appropriation of earnings for 2019 is subject to the proposition in the board of directors and the resolution in the shareholders’ meeting to be held in May and June 2020, respectively.

17. REVENUE

Revenue from transportation Rental income from investment properties (Notes 13 and 20) Other revenue Contract information December 31, 2019 Account receivables (Note 9) $ 27,226 Trade receivables from related parties (Notes 23 and 25) $ 59,434	For the Year Ended December 31	For the Year Ended December 31
	2019 $ 1,067,914 56,076 24,100 $ 1,148,090 December 31, 2018 $ 23,056 $ 93,577	2018 $ 1,212,693 52,658 10,859 $ 1,276,210 January 1, 2018 $ 21,427 $ 68,286

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18. INCOME TAXES

a. Income tax recognized in profit or loss

Major components of income tax expense are as follows:

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior year 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	For the Year Ended	December 31
		2019 $ 78,851 25,843 195 104,889 59,911 - 59,911 $ 164,800	2018 $ 15,499 - 122 15,621 14,479 900 15,379 $ 31,000

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 Income tax appropriated earnings 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
		2019 $ 765,896 $ 153,179 (1,217) 25,843 (13,200) - 195 $ 164,800	2018 $ 988,635 $ 197,727 1,952 - (169,701) 900 122 $ 31,000

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%.

In July 2019, the President of the ROC announced the amendments to the Statute for Industrial Innovation, which stipulate that the amounts of unappropriated earnings in 2018 and thereafter that are reinvested in the construction or purchase of certain assets or technologies are allowed as deduction when computing the income tax on unappropriated earnings.

b. Current tax liabilities

Current tax liabilities Income tax payable		December	31
		2019 $ 95,921	2018 $ 4,011

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Current income tax payable is the net amount of December 31, 2019 and 2018, deducted by $8,773 thousand and $11,488 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 are as follows:

For the year ended December 31, 2019

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

For the year ended December 31, 2018
Opening
Balance
Deferred tax assets
Temporary differences
Unrealized exchange gains
and losses
$ 185
Others

491
$ 676
Deferred tax liabilities
Temporary differences
Reserve for land value
increment tax
$ 282,241
Share of profit of subsidiaries
and associates accounted
for using the equity
method

5,779

Opening
Balance
Recognized in
Profit or Loss Closing Balance
$ 315
$ 76
$ 391

518

61

579
$ 833
$ 137
$ 970
$ 282,241
$ -
$ 282,241

21,315

60,048

81,363
$ 303,556
$ 60,048
$ 363,604
Effect of Tax
Rate Changes
Recognized in
Profit or Loss
Closing
Balance
$ 32
$ 98
$ 315

87

(60)

518
$ 119
$ 38
$ 833
$ -
$ -
$ 282,241

1,019

14,517

21,315

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$ 288,020 $ 1,019 $ 14,517 $ 303,556

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

As of December 31, 2019 and 2018, the taxable temporary differences associated with investment in subsidiaries for which no deferred tax liabilities have been recognized were $5,214,720 thousand and $5,148,718 thousand, respectively.

e. Income tax assessments

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

19. EARNINGS PER SHARE

Unit: NT$ Per Share For the Year Ended December 31 2019 2018 Basic earnings per share $ 1.44 $ 2.29 Diluted earnings per share $ 1.44 $ 2.29 Net Profit for the Year For the Year Ended December 31 2019 2018 Earnings used in the computation of basic earnings per share $ 601,096 $ 957,635 Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares)	Unit: NT$ Per Share For the Year Ended December 31	Unit: NT$ Per Share For the Year Ended December 31
	2019 $ 1.44 $ 1.44 For the Year Ended	2018 $ 2.29 $ 2.29 December 31
		2018 $ 957,635

Weighted average number of ordinary shares used in computation of basic earnings per share Effect of potentially dilutive ordinary shares Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 417,294 573 417,867	2018 417,294 604 417,898

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

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20. CASH FLOW INFORMATION

a. Non-cash transactions

In 2017, the Corporation entered into a land lease agreement with the lessee with a lease term of 20 years and agreed that the lessee construct a building in the name of the Corporation, which is both an applicant of construction and proprietor of the building, on the land. In addition, the lessee afforded the cost of building to exchange the right to use building during the lease period. In 2019, the construction of building was completed and delivered to the Corporation. The cost of the construction was $132,512 thousand, which was classified as prepaid rent. The Corporation recognized the rental income in installments during the lease period. The rental income was $4,355 thousand for the year ended December 31, 2019. As of December 31, 2019, the balance of unamortized prepaid rent was $128,157 thousand ($7,465 thousand and $120,692 thousand were included in advance receipts and other non-current liabilities, respectively).

b. Changes in liabilities arising from financing activities

Short-term borrowings Long-term borrowings	Opening Balance Cash Flows Other (Note) $ 465,177 $ (165,177) $ (300,000) - 220,000 300,000 $ 465,177 $ 54,823 $ -	Closing Balance $ - 520,000 $ 520,000

Note: The Corporation’s short-term borrowing of $300,000 thousand matured in March 2019. However, the Corporation re-entered into a long-term borrowing contract with the bank to pay the short-term borrowing in advance in February 2019.

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.

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b. Fair value of financial instruments measured at fair value on a recurring basis
1) Fair value hierarchy

December 31, 2019 Financial assets at FVTOCI Investments in equity instruments Listed shares - ROC Unlisted shares - ROC Unlisted shares - foreign 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	Level 1 $ 95,244 - - $ 95,244 Level 1 $ - $ 116,247 - - $ 116,247	Level 2 $ 185,559 - - $ 185,559 Level 2 $ 76,777 $ 145,794 - - $ 145,794	Level 3 $ - 90,651 45,579 $ 136,230 Level 3 $ - $ - 49,943 45,864 $ 95,807	Total $ 280,803 90,651 45,579
				$ 417,033
				Total $ 76,777
				$ 262,041 49,943 45,864
				$ 357,848

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

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 and ordinary shares converted from mandatory convertible bonds 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.

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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 assets of unlisted shares - foreign held by the Corporation were mainly bank deposits and new investment properties as of December 31, 2019 and 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, 2019 and 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 $8,848 thousand and $4,875 thousand, respectively.

c. Categories of financial instruments

Financial assets FVTPL Mandatorily classified as at FVTPL Financial assets at amortized cost (Note 1) Financial assets at FVTOCI Equity instruments Financial liabilities Amortized cost (Note 2)	December 31
	2019 2018 $ - $ 76,777 235,146 341,794 417,033 357,848 656,386 638,160

Note 1: 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 2: 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 payable, 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.

1) Market risk

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

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a) Foreign currency risk

The carrying amounts of the Corporation’s foreign currency denominated monetary assets and monetary liabilities at the end of the year are set out in Note 27.

Sensitivity analysis

The Corporation was mainly exposed to the U.S. 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 included only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the year 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	USD Impact	USD Impact
	For the Year Ended December 31
		2019 $ (2,509)	2018 $ (4,282)

b) Interest rate risk

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

Fair value interest rate risk Financial assets Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2019 2018 $ 95,936 $ 256,460 7,574 10,277 520,000 465,177

Sensitivity analysis

The sensitivity analysis below was determined based on the Corporation’s exposure to interest rates for non-derivative instruments at the end of the year. For variable interest rate liabilities, the analysis was prepared assuming the amount of each liability outstanding at the end of the year 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.

For the financial assets held by the Corporation with variable interest rates on December 31, 2019 and 2018, if the market interest rates had been 1% higher, the cash inflow from variable rate financial assets would have been $76 thousand and $103 thousand, respectively. If the market interest rates had been 1% lower, there would be an equal and opposite impact on

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variable interest rate financial assets, and the amount would be negative.

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For the financial liabilities held by the Corporation with variable interest rates on December 31, 2019 and 2018, if the market interest rates had been 1% higher, the cash outflow from variable rate financial liabilities would have been $5,200 thousand and $4,652 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 domestic and foreign listed (unlisted) shares and corporate bonds.

Sensitivity analysis

The equity price risk for the flexible-priced financial assets held by the Corporation was assessed using sensitivity analysis.

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 years ended December 31, 2019 and 2018 would have increased/decreased by $20,852 thousand and $17,892 thousand, respectively, as a result of the changes in fair value of financial assets at FVTOCI.

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, financial institutions and companies 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.

The Corporation relies on bank borrowings as a significant source of liquidity. As of December 31, 2019 and 2018, the Corporation had available unutilized short-term bank loan facilities (including overdraft and guarantee) of $165,400 thousand and $130,400 thousand, respectively.

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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 has been 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, 2019 Non-interest bearing Variable interest rate liabilities December 31, 2018 Non-interest bearing Variable interest rate liabilities	Less than 1 Year $ 136,386 - $ 136,386 Less than 1 Year $ 172,983 469,596 $ 642,579	1-3 Years $ - 528,957 $ 528,957 1-3 Years $ - - $ -	3-5 Years $ - - $ - 3-5 Years $ - - $ -	5+ Years $ - - $ - 5+ Years $ - - $ -

23. 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. The Ministry of Transportation and Communications has significant influence over the Corporation. Besides, the nature and amounts of transactions, individually and collectively insignificant, with the government - related party have not been disclosed, and information disclosed, elsewhere in the other notes and details of transactions between the Corporation and other related parties are disclosed below.

a. Names and categories of the related parties

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

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b. Operating transactions

Operating revenue Government - related party 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
		2019 $ 184,786 23 $ 184,809 $ 170,711 1,137 151,316 $ 323,164	2018 $ 319,015 84 $ 319,099 $ 297,151 1,906 156,810 $ 455,867

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

At the end of the year, trade receivables from related parties are as follows:

Government - related party Yang Ming Subsidiary Others		December 31	December 31
		2019 $ 26,670 2,045 $ 28,715	2018 $ 59,043 1,207 $ 60,250

At the end of the year, prepayments from related parties (included in prepayments) are as follows:

Government - related parties Others		December 31	December 31
		2019 $ 3,469	2018 $ 6,479

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At the end of the year, trade payables to related parties are as follows:

Government and its subsidiaries - related parties Yang Ming Others Subsidiary Tai Shing		December 31	December 31
		2019 $ 13,327 121 56 $ 13,504	2018 $ 26,092 338 10,823 $ 37,253

The Corporation did not recognize allowance for doubtful accounts and did not receive guarantees during the years ended December 31, 2019 and 2018. 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 financial assets at FVTPL - current) 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, matured in June 2019 and were converted into 9,597 thousands shares of private placement ordinary shares. The aforementioned private shares can be applied for registration of the retroactive handling of public issuance and listing shares with the FSC if Yang Ming complies with the regulations of the retroactive handling of public issuance. The Corporation held the aforementioned investments, which were classified as financial assets at FVTOCI – non-current, for strategic purposes.

In February 2017, the Corporation purchased 19,083 thousand shares of private placement ordinary shares issued by Yang Ming for $199,990 thousand (classified as financial assets at FVTOCI - non-current), and the rights and obligations of the private placement 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 the Corporation did not have any significant influence over Yang Ming.

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

Service revenues of endorsement and guarantees Subsidiary Tai Shing Management of service revenues Subsidiary Tai Shing Others Service fees of endorsement and guarantees Subsidiary Tai Shing	For the Year Ended	For the Year Ended	December 31
		2019 $ 30,082 $ 4,572 3,543 $ 8,115 $ 1,242	2018 $ 26,564 $ 4,572 2,400 $ 6,972 $ 1,206

e. Compensation of key management personnel

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

Short-term employee benefits Post-employment benefits	For the Year Ended	For the Year Ended	December 31
		2019 $ 22,611 863 $ 23,474	2018 $ 24,211 811 $ 25,022

24. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were pledged or mortgaged as collateral for bank borrowings and transactions:

Property, plant and equipment Pledged deposits (included in other non-current assets)		December	31
		2019 $ 8,197 5,465 $ 13,662	2018 $ 4,800 5,465 $ 10,265

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25. SIGNIFICANT UNRECOGNIZED COMMITMENTS AND CONTINGENCIES

a. Significant unrecognized commitments and contingencies of the Corporation as of December 31, 2019 are as follows:
1) The aggregate information of the Corporation entering into ship management agreements with CPC Corporation, Taiwan, which is a government-related party, 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 $352 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.

The Corporation’s operating revenue and costs to CPC Corporation, Taiwan, for the year ended December 31, 2019 were $353,278 thousand and $40,129 thousand, respectively. As of December 31, 2019, the balance of trade receivables from related parties was $30,719 thousand.

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, 2019, 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 which less than US$136,000 thousand. In March and April 2019, Tai Shing has entered into a contract with Namura Shipbuilding Co., Ltd. and Oshima Shipbuilding Co., Ltd.; each bulk carrier’s cost was US$33,980 thousand, US$33,980 thousand, US$32,320 thousand and US$33,900 thousand, respectively with a total amount of US$134,180 thousand. As of the date of the independent auditor’s report to the financial statements for the year ended December 31, 2019, the unpaid amount was US$113,966 thousand. The parent company is Tai Shing’s guarantor of Oshima Shipbuiding Co., Ltd.
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4) In October 2019, the board of directors of the subsidiary Tai Shing resolved to build 84,000-ton and 64,000-ton bulk carriers with Namura Shipbuilding Co., Ltd. and Oshima Shipbuilding Co., Ltd., respectively, with a total cost of less than US$64,100 thousand. In December 2019, Tai Shing has entered into a contract with Namura Shipbuilding Co., Ltd. to build one bulk carrier with an amount of US$34,900 thousand. In addition, in March 2020, the cost resulted from adjusting bulk carrier’s parts decreased to US$34,280 thousand. As of the date of the independent auditors’ report to the financial statements for the year ended December 31, 2019, the unpaid amount was US$30,852 thousand.
5) 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 and contingencies of the Corporation as of December 31, 2018 are as follows:
1) Aggregate information of the Corporation entering into ship management agreements with CPC Corporation, Taiwan, which is a government-related party 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.

The Corporation’s operating revenue and costs to CPC Corporation, Taiwan, for the year ended December 31, 2018 were $332,990 thousand and $37,465 thousand, respectively. As of December 31, 2018, the balance of trade receivables from related parties was $33,327 thousand.

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, 2018, the unpaid amount was US$41,996 thousand. The parent company is Tai Shing’s guarantor.
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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 2019, 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. As of the date of the independent auditors’ report to the financial statements for the year ended December 31, 2018, the unpaid amount was US$61,164 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.

26. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

In June 2019, the subsidiary, Tai Shing, entered into a bulk carrier sale contract with Ningbo Haizhou Shipping Limited., and the bulk carrier was delivered in January 2020.

27. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

December 31, 2019

		Foreign			Carrying
	Currencies				Amount
	(In	Thousands)	Exchange Rate	(In	Thousands)
Financial assets
Monetary items
USD	$	4,798	29.98 (USD:NTD)	$	143,844
Non-monetary items
Investments accounted for using the equity
method
USD	$	296,822	29.98 (USD:NTD)	$	8,898,723
Financial liabilities
Monetary items
USD	$	613	29.98 (USD:NTD)	$	18,383

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December 31, 2018

		Foreign			Carrying
	Currencies				Amount
	(In	Thousands)	Exchange Rate	(In	Thousands)
Financial assets
Monetary items
USD	$	8,413	30.715 (USD:NTD)	$	258,418
Non-monetary items
Investments accounted for using the equity
method
USD	$	285,083	30.715 (USD:NTD)	$	8,756,324
Financial liabilities
Monetary items
USD	$	1,444	30.715 (USD:NTD)	$	44,341

For the years ended December 31, 2019 and 2018, net foreign exchange gain were $1,047 thousand and $6,868 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)
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 (None)
9) Trading in derivative instruments (Note 7)
10) Information on investees (Table 4)
b. Information on investments in mainland China (None)
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Note	Note	-	-
Endorsement/ Guarantee Given on Behalf of Company in Mainland China		-	-
Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent		-	Yes
Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries		Yes	-
Aggregate Endorsement/ Guarantee Limit (Notes 1 and 2)		$ 8,345,890	7,038,468 (US$ 234,772)
Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)		62.0	2.9
Amount Endorsed/ Guaranteed by Collaterals (Note 2)		$ -	239,540 (US$ 7,990)
Actual Borrowing Amount (Note 2)		$ 6,247,322 (US$ 208,383)	239,540 (US$ 7,990)
Outstanding Endorsement/ Guarantee at the End of the Year (Note 2)		$ 6,337,262 (US$ 211,383)	242,688 (US$ 8,095)
Maximum Amount Endorsed/ Guaranteed During the Year (Note 2)		$ 6,700,680 (US$ 223,505)	242,688 (US$ 8,095)
Limit on Endorsement/ Guarantee Given on Behalf of Each Party (Notes 1 and 2)		$ 8,345,890	7,038,468 (US$ 234,772)
Endorsee/Guarantee	Relationship	Subsidiary	Parent
	Name	Tai Shing	Taiwan Navigation Co., Ltd.
	Endorser/Guarantor	Taiwan Navigation Co., Ltd.	Tai Shing
	No.	0	1

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	Note
December 31, 2019	Fair Value	$ 90,651 45,579 185,559 95,244
	Percentage of Ownership (%)	6.00 15.00 1.10 0.51
	Carrying Amount	$ 90,651 45,579 185,559 95,244
	Number of Shares (In Thousands)	4,590 1,500 28,680 13,210
	Financial Statement Account	Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - current
	Relationship with the Holding Company	- Corporate director Significantly influenced by the Ministry of Transportation and Communications Significantly influenced by the Ministry of Transportation and Communications
	Type and Name/Issuer of Marketable Securities	Shares Chunghwa Investment Co., Ltd. Taiwan Foundation International Pte. Ltd. Private placement listed shares Yang Ming Listed shares Yang Ming
	Holding Company Name	Taiwan Navigation Co., Ltd.

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	Note
Notes/Accounts Receivable (Payable)	% of Total (Note 2)	52 45 (99) - - 100 (90)
	Ending Balance	$ 30,719 26,670 (13,327) (56) 56 17,550 (17,550)
Abnormal Transaction	Payment Terms	- - - - - - -
	Unit Price	$ - - - - - - -
Transaction Details	Payment Terms	By negotiations By negotiations By negotiations By negotiations By negotiations By negotiations By negotiations
	% of Total	(31) (16) 18 16 (10) (34) 89
	Amount	$ (353,278) (184,786) 170,711 151,316 (151,316) (511,581) 511,581
	Purchase/Sale	Ship management service and port service revenue Freight transportation revenue Rental expense and stevedoring expense Rental expense Rental revenue Rental revenue Rental expense
	Relationship	(Note 1) (Note 1) Subsidiary Parent company The same parent company The same parent company
	Related Party	CPC Corporation, Taiwan Yang Ming Tai Shing Taiwan Navigation Co., Ltd. Shin Wang Tai Shing
	Seller/Buyer	Taiwan Navigation Co., Ltd. Tai Shing Shin Wang

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Note	Note
Share of Profit (Loss)		$ 66,002 560,243 6,952
Net Income (Loss) of the Investee		$ 66,002 560,243 13,973
As of December 31, 2019	Carrying Amount	$ 8,507,779 390,944 109,431
	%	100.00 100.00 49.75
	Number of Shares (In Thousands)	- - 5,211
Investment Amount	December 31, 2018	$ 3,921,447 32,500 41,861
	December 31, 2019	$ 3,921,447 32,500 41,861
	Main Business and Products	Rental and sale of ships Rental and sale of ships Investment
	Location	Panama City, Panama Monrovia City, Liberia Taipei
	Investee Company	Tai Shing Shin Wang Yunn Wang
	Investor Company	Taiwan Navigation Co., Ltd.

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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 property, plant and equipment
Statement of changes in accumulated depreciation of property, plant and
equipment
Statement of changes in investments properties
Statement of long-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
Note 12
Note 12
Note 13
3
4
5
6
7

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SCHEDULE 1

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

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 2019.11.22-2020.02.15 1.42%-2.20%	Amount $ 258 23,198 7,574 30,772 95,936 $ 126,966

Note: Including US$3,259 thousand, at exchange rates of US$1=$29.98.

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					Amount		$ 8,507,779	390,944	109,431	109,431	$9,008,154	$9,008,154
			Balance, December 31, 2019		%		100.00	100.00	49.75
Share of Profit of	Subsidiaries and	Associates	Balance, December 31, 2018 Accounted for	Shares Using the Equity Equity Adjustments Shares	Investees (In Thousands) Amount Cash Dividends Method (Note 1) (Note 2) (In Thousand)	Unlisted shares	Tai Shing - $ 8,651,166 $ - $ 66,002 $ (209,389) -	Shin Wang - 105,158 (260,004) 560,243 (14,453) -	Yun Wang 5,211 115,001 (6,254) 6,952 (6,268) 5,211		$ 8,871,325 $ (266,258) $ 633,197 $ (230,110)

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SCHEDULE 3

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF LONG-TERM BORROWINGS DECEMBER 31, 2019 (In Thousands of New Taiwan Dollars)

			Balance,
			December 31,	Loan
Financial Institutions	Period	Rate	2019	Commitments	Collateral
Line of credit borrowings
Bank SinoPac	2019.11.11-2022.02.28	1.01%	$ 300,000	$ 300,000	None
Far Eastern Bank	2019.09.11-2021.02.12	0.97%	220,000	300,000	None
			$ 520,000	$ 600,000

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SCHEDULE 4

TAIWAN NAVIGATION CO., LTD.

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

Item Ocean route revenue Ship management revenue Tug service revenue Coastal route revenue Others (Note)	Amount $ 618,656 222,136 128,705 98,417 80,176 $ 1,148,090

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

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SCHEDULE 5

TAIWAN NAVIGATION CO., LTD.

STATEMENT OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2019 (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 $ 344,762
	213,213
	36,129 36,792
	72,921
	132,400 3,127 3,929
	139,456
	43,581
	109,085
	$ 923,018

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

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SCHEDULE 6

TAIWAN NAVIGATION CO., LTD.

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

Items Salary and pension Labor and health insurance Depreciation Others (Note)	Amount $ 90,894 5,910 2,544 34,142
	$ 133,490

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

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SCHEDULE 7

TAIWAN NAVIGATION CO., LTD.

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

Employee benefits expense Salary Labor and health insurance Pension Board compensation Other employee benefits Depreciation Amortization	2019	Total $ 279,191 21,330 13,861 11,055 19,073 $ 344,510 $ 46,125 $ 466	2018
	Classified as Operating Costs Classified as Operating Expenses $ 203,149 $ 76,042 15,420 5,910 10,064 3,797 - 11,055 17,435 1,638 $ 246,068 $ 98,442 $ 43,581 $ 2,544 $ - $ 466		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	Total $ 277,155 19,118 12,743 11,107 18,042 $ 338,165 $ 41,957 $ 525

Note 1: For the years ended December 31, 2019 and 2018, the Corporation had an average 271 and 260 employees, respectively, which included 7 non-employee directors for the years then ended. The calculation basis was consistent with employee benefits expense.
Note 2: a. The average employee benefits expense for the year ended December 31, 2019 was $1,263 thousand. The average employee benefits expense for the year ended December 31, 2018 was $1,293 thousand.
b. The average employee salary for the year ended December 31, 2019 was $1,058 thousand. The average employee salary for the year ended December 31, 2018 was $1,095 thousand.
c. Changes in average employee salary was (3.4%).
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Taiwan Navigation Co., Ltd. and Subsidiaries

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

142 -

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, 2019 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 17, 2020

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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, 2019 and 2018, 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, 2019 and 2018, 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, 2019. 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.

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The key audit matters identified in the consolidated financial statements of the Group for the year ended December 31, 2019 are stated as follows:

The Recognition of Gain on Subsidiary’s Disposal of Bulk Carriers

The Group’s subsidiary Tai Shing, primarily engages in bulk carriers transportation service. Tai Shing disposed some of its aging bulk carriers in 2019 in order to replace them with new bulk carriers. Given that the transaction is material to the consolidated financial statements, a gain on disposal of the asset of $182,587 thousand (included in gain on disposal of property, plant and equipment) was material to the Group’s financial statements. We considered occurrence and accuracy of gain on disposal of bulk carriers a key audit matter.

Our main audit procedures performed were as follows:

We understood management’s relevant evaluation processes of disposal of the bulk carriers and verified the implementation of related controls, through appropriate approvals.
We reviewed the transaction contract and the record of remittances and verified the accuracy of the counterparty and the amount received.
We reviewed the bulk carriers’ protocol of delivery and acceptance and verified the accuracy of the timing of recognition of gain on disposal of bulk carriers.
We reperformed the calculation of gain on disposal of bulk carriers and verified the accuracy of amount 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, 2019 and 2018 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.

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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.

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

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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2019 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Hui-Min Huang and Shu-Cnuan Yeh.

Deloitte & Touche Taipei, Taiwan Republic of China March 18, 2020

Notice to Readers

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

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

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TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss (Notes 4, 7 and 23) Financial assets at fair value through other comprehensive income (Notes 4, 8 and 23) Accounts receivable, net (Notes 4, 9 and 17) Trade receivables from related parties (Notes 4, 9, 17, 23 and 25) Prepayments (Note 23) Other financial assets (Notes 4 and 10) Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through other comprehensive income (Notes 4,8 and 23) Investments accounted for using the equity method (Notes 4 and 11) Property, plant and equipment (Notes 4, 12 and 24) Investment properties (Notes 4, 13 and 20) Prepayments for equipment (Note 25) Other non-current assets (Notes 4, 18 and 24) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 14 and 20) Notes and accounts payable Trade payables to related parties (Note 23) Other payables Current tax liabilities (Notes 4 and 18) Advance receipts (Note 20) Current portion of long-term borrowings (Notes 14 and 20) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 14, 20 and 24) Deferred tax liabilities (Notes 4 and 18) Net defined benefit liabilities (Notes 4 and 15) Other non-current liabilities (Note 20) Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Note 16) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity attributable to owners of the Corporation Total equity TOTAL		2019		2018
		Amount % $ 408,216 3 - - 95,244 1 40,971 - 57,389 - 89,714 1 876,113 6 24,876 - 1,592,523 11 321,789 2 109,431 1 10,753,184 71 1,229,337 8 856,587 6 250,899 1 13,521,227 89 $ 15,113,750 100 $ - - 130,310 1 13,448 - 123,121 1 95,921 1 27,929 - 27,674 - 87,345 - 505,748 3 3,799,257 25 363,604 2 67,550 1 136,362 1 4,366,773 29 4,872,521 32 4,172,945 28 334,382 2 1,760,362 12 34,868 - 4,210,047 28 6,005,277 40 (271,375) (2) 10,241,229 68 10,241,229 68 $ 15,113,750 100		Amount % $ 478,550 3 76,777 - 116,247 1 35,922 - 92,370 1 117,382 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 4 137,399 1 26,430 - 144,933 1 4,011 - 29,274 - - - 40,437 - 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

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, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 4, 13, 17, 23 and 25) OPERATING COSTS (Notes 12, 13, 15 and 23) GROSS PROFIT OPERATING EXPENSES (Notes 12 and 15) PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Interest income (Note 4) Dividend income (Notes 4 and 8) Other income (Note 23) Gain on disposal of property, plant and equipment (Notes 4 and 12) Net gain on foreign currency exchange (Note 27) Share of profit of associates accounted for using the equity method (Notes 4 and 11) Interest expense (Notes 4 and 12) Other expenses Net 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 18) 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 15) Unrealized loss on investments in equity instruments designated as at fair value through other comprehensive income Share of other comprehensive income (loss) of associates accounted for using the equity method (Note 11)		2019 Amount % $ 3,113,990 100 2,371,269 76 742,721 24 138,922 5 603,799 19 28,691 1 6,885 - 38,667 1 182,937 6 267 - 6,952 - (93,248) (3) (3,859) - (5,195) - 162,097 5 765,896 24 164,800 5 601,096 19 (869) - (6,397) - (6,268) - (13,534) -		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) (Continued)

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TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations Other comprehensive income (loss) for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR NET PROFIT ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests EARNINGS PER SHARE (Note 19) Basic Diluted		2019 Amount % $ (223,842) (7) (237,376) (7) $ 363,720 12 $ 601,096 19 - - $ 601,096 19 $ 363,720 12 - - $ 363,720 12 $ 1.44 $ 1.44		2018
				Amount % $ 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

		$
		$
		$
		$
		$

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

(Concluded)

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								Total Equity	$ 9,556,987	59,926	9,616,913		-	-	(292,106)	957,635		137,550		1,095,185	10,419,992		-	(542,483)	-	601,096		(237,376)		363,720	$10,241,229
Other Equity	Unrealized Loss	on Investments	in Financial	Exchange Assets at Fair Unrealized	Differences on Value Through Gain (Loss) on	Translating Other Available-for-	Foreign Comprehensive sale Financial	Operations Income Assets	$ (131,037) $ - $ (111,449)	- (51,523) 111,449	(131,037) (51,523) -		- - -	- - -	- - -	- - -		257,627 (109,935) -		257,627 (109,935) -	126,590 (161,458) -		- - -	- - -	- - -	- - -		(223,842) (12,665) -		(223,842) (12,665) -	$ (97,252) $ (174,123) $ -
							Unappropriated	Earnings	$ 3,674,194	-	3,674,194		(46,647)	(242,486)	(292,106)	957,635		(10,142)		947,493	4,040,448		(95,763)	(542,483)	207,618	601,096		(869)		600,227	$ 4,210,047
						Retained Earnings		Special Reserve	$ -	-	-		-	242,486	-	-		-		-	242,486		-	-	(207,618)	-		-		-	$ 34,868
								Legal Reserve	$ 1,617,952	-	1,617,952		46,647	-	-	-		-		-	1,664,599		95,763	-	-	-		-		-	$ 1,760,362
						Ordinary Shares	Shares	(In Thousands) Amount Capital Surplus	BALANCE AT JANUARY 1, 2018 417,294 $ 4,172,945 $ 334,382	Effect of retrospective application - - -	BALANCE AT JANUARY 1, 2018 AS ADJUSTED 417,294 4,172,945 334,382	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 417,294 4,172,945 334,382	Appropriation of 2018 earnings	Legal reserve - - -	Cash dividends - - -	Reversal of special reserve - - -	Net profit for the year ended December 31, 2019 - - -	Other comprehensive loss for the year ended	December 31, 2019, net of income tax - - -	Total comprehensive income (loss) for the year ended	December 31, 2019 - - -	BALANCE AT DECEMBER 31, 2019 417,294 $ 4,172,945 $ 334,382

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TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation and amortization expenses Net loss on fair value change of financial assets at fair value through profit or loss Interest expense Interest income Dividend income Share of profit of associates accounted for using the equity method Gain on disposal of property, plant and equipment Unrealized loss on foreign currency exchange, net Changes in operating assets and liabilities 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 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 financial asset at fair value through other comprehensive income Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of investment properties Increase in other financial assets Increase in other non-current assets Increase in prepayments for equipment Interest received Dividends received Net cash generated from (used in) investing activities	2019 $ 765,896 716,062 5,195 93,248 (28,691) (6,885) (6,952) (182,937) 236 - (5,539) 34,661 26,508 (4) 697 (4,792) (12,855) (20,252) (12,942) 48,782 (2,132) 1,407,304 (12,979) 1,394,325 - (80,178) 428,241 (3,953) (586,084) (1,298) (580,326) 27,807 13,139 (782,652)	2018 $ 988,635 762,789 15,038 114,496 (15,450) (6,885) (3,663) (347,950) 44 32,019 1,620 (25,109) 11,389 (415) (12,399) 1,395 (8,274) 28,394 (5,693) 9,016 (19,386) 1,519,611 (17,387) 1,502,224 (45,750) (65,288) 671,749 - (127,450) (3,611) (155,875) 14,637 10,012 298,424 (Continued)

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TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in short-term borrowings Proceeds from in long-term borrowings Repayments of long-term borrowings Decrease in other non-current liabilities Cash dividends paid Interest paid Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2019 $ (258,465) 575,000 (355,000) (59) (542,483) (93,969) (674,976) (7,031) (70,334) 478,550 $ 408,216	2018 $ 181,050 181,441 (1,671,307) (432) (292,106) (114,317) (1,715,671) 10,762 95,739 382,811 $ 478,550

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, 2019 AND 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

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 17, 2020.

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

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

IFRS 16 “Leases”

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

Definition of a lease

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

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The Group as lessee

The Group recognizes right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value asset and short-term leases are recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group presents the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities and cash payments for the interest portion are classified within financing activities. Prior to the application of IFRS 16, payments under operating lease contracts were recognized as expenses on a straight-line basis. Cash flows for operating leases were classified within operating activities on the consolidated statements of cash flows. Leased assets and finance lease payables were recognized on the balance sheets for contracts classified as finance leases.

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

The Group also applies the following practical expedients:

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

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. The difference between the application of IRFS 16 and operating lease commitments disclosed under IAS 17 on December 31, 2018 is explained as follows:

The future minimum lease payments of non-cancellable operating lease commitments on December 31, 2018 Less: Recognition exemption for short-term leases Undiscounted amounts on January 1, 2019	$ 43,260 (43,260) $ -

Undiscounted amounts on January 1, 2019

The Group as lessor

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

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

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

Note 1: 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 2: The Group shall apply these amendments retrospectively for annual reporting periods beginning on or after January 1, 2020.
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 assesses that the application of above standards and interpretations have no material impact on the Group’s financial position and financial performance.

c. The IFRSs issued by IASB but not yet endorsed and issued into effect by the FSC

New IFRSs Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	Effective Date Announced by IASB (Note)
	To be determined by IASB January 1, 2021 January 1, 2022

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

As of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of above 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 (the “Regulations”) and IFRSs issued into effect by the FSC.

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b. Basis of preparation

The consolidated 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.

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.

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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.

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.

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 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 the 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 are 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.

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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 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 loss, if any. 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 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 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 initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment loss.

Freehold land is not depreciated.

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.

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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.

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 an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Group assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

j. Financial instruments

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

1) Financial assets

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

a) Measurement categories

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

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i. Financial assets at FVTPL

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.

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

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

A financial asset is credit impaired when one or more of the following events have occurred:

i) Significant financial difficulty of the issuer or the borrower;
ii) Breach of contract, such as a default;
iii) It is becoming probable that the borrower will enter bankruptcy or undergo a financial reorganization.

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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.

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.

b) Impairment of financial assets

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.

For internal credit risk management purposes, the Group determines that the information that internal or external information show that the debtor is unlikely to pay its creditors indicates that a financial asset is in default.

The impairment loss of all financial assets is recognized in profit or loss by a reduction in their carrying amount through a loss 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.

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2) Equity instruments

Equity instruments issued by the Group are classified as equity in accordance with the substance of the contractual arrangements and the definitions of an equity instrument.

Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

3) Financial liabilities

k. Revenue recognition

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

As the Group provides services for ship chartering, freight transport and ship management, 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 chartering and ship management 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.

l. Leasing

2019

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

For a contract that contains a lease component and non-lease components, the Group allocates the consideration in the contract to each component on the basis of the relative stand-alone price and accounts for each component separately. However, for the lease of transportation equipment in which the Group is a lessee and transportation service is provided by a lessor, the Group elects to account for the lease and non-lease components as a single lease component.

1) The Group as lessor

All leases are classified as operating leases.

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When a lease includes both land and building elements, the Group assesses the classification of each element separately as a finance or an operating lease based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the lessee.

2) The Group as lessee

The Group applies a recognition exemption where lease payments are recognized as costs and expenses on a straight-line basis over the lease terms for short-term leases and low-value asset leases.

2018

All leases are classified as operating leases.

The Group as lessor, rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

The Group as lessee, operating lease payments are recognized as costs and 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.

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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 in the year the shareholders approve to retain earnings.

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

2) Deferred tax

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

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

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, 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 profits 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

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.

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

After the evaluation of management, the Group has no critical accounting judgements and key sources of estimation uncertainty.

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
		2019 $ 258 47,299 360,659 $ 408,216	2018 $ 262 37,128 441,160 $ 478,550

The market rate intervals of cash in banks and cash equivalents at the end of the year are as follows:

Bank balance and cash equivalents	December 31
	2019 2018 0.01%-2.40% 0.01%-3.30%

First Commercial Bank Land Bank of Taiwan Bank of Taiwan Other		December 31	December 31
		2019 $ 372,210 251,812 66,919 1,087 $ 692,028	2018 $ 201,413 252,338 86,771 2,249 $ 542,771

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Derivative financial assets Mandatory convertible bonds		December	31
		2019 $ -	2018 $ 76,777

The Group’s investments in mandatory convertible bonds mentioned above matured in June 2019 and were converted in private placement listed shares of Yang Ming Marine Transport Corporation in accordance with the terms of conversion, refer to Note 23.

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8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Current Domestic investments Listed shares Yang Ming Marine Transport Corporation Non-current Domestic investments Private placement listed shares Yang Ming Marine Transport Corporation Unlisted shares Chunghwa Investment Co., Ltd. Foreign investments Unlisted shares Taiwan Foundation International Pte. Ltd.		December 31	December 31
		2019 $ 95,244 $ 185,559 90,651 276,210 $ 45,579 $ 321,789	2018 $ 116,247 $ 145,794 49,943 195,737 $ 45,864 $ 241,601

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.

Dividends of $6,885 thousand were both recognized as of December 31, 2019 and 2018. Both were related to investments in equity instruments at FVTOCI held as of December 31, 2019 and 2018.

9. ACCOUNTS RECEIVABLE, NET (INCLUDING RELATED PARTIES)

At amortized cost Gross carrying amount Less: Allowance for impairment loss Trade receivables from related parties		December	31
		2019 $ 43,571 2,600 $ 40,971 $ 57,389	2018 $ 38,522 2,600 $ 35,922 $ 92,370

The Group measures loss allowance of trade receivables (including related parties) at an amount equal to lifetime ECLs. The expected credit losses on accounts receivables are estimated by reference to past default experience of the 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 based on past due status is not further distinguished according to the Group’s different customer base.

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

The aging of receivables (including related parties) is as follows:

Up to 60 days 61-90 days More than 90 days Gross carrying amount Loss allowance (lifetime ECLs) Amortized cost		December 31	December 31
		2019 $ 95,508 343 5,109 100,960 (2,600) $ 98,360	2018 $ 98,911 4,015 27,966 130,892 (2,600) $ 128,292

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

As of December 31, 2019 and 2018, the amounts of the loss allowance of accounts receivable were both $2,600 thousand.

10. OTHER FINANCIAL ASSETS

Time deposits with original maturities of more than 3 months Others		December 31	December 31
		2019 $ 834,044 42,069 $ 876,113	2018 $ 276,589 43,291 $ 319,880

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

December 31	December 31
2019	2018
2.25%-2.45%	2.56%-3.15%

11. 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
		2019 $ 109,431	2018 $ 115,001

At the end of the year, the Group holds 49.75% interest in Yunn Wang Investment Co., Ltd. (Yunn Wang).

Refer to Table 5 “Information on Investees” for the nature of activities, principal place of business and country of incorporation of Yunn Wang.

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The share of profit or loss and other comprehensive income of the Group’s investments in Yunn Wang were calculated based on the financial statements which have been audited.

Aggregate information of associates:

The Group’s share of: Net profit for the year Other comprehensive income (loss) Total comprehensive income for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 6,952 (6,268) $ 684	2018 $ 3,663 12,034 $ 15,697

12. PROPERTY, PLANT AND EQUIPMENT

Assets used by the Group Assets leased under operating leases a. Assets used by the Group - 2019 Cost Balance at January 1, 2019 Additions Disposals Balance at December 31, 2019 Accumulated depreciation Balance at January 1, 2019 Disposals Depreciation expenses Balance at December 31, 2019 Carrying amounts at December 31, 2019	Land $ 191,103 - - $ 191,103 $ 191,103	Buildings Transportation Equipment $ 82,555 $ 1,553,872 6,668 19,659 - (18,894) $ 89,223 $ 1,554,637 $ 36,350 $ 1,107,481 - (18,894 ) 1,585 39,598 $ 37,935 $ 1,128,185 $ 51,288 $ 426,452	December 31, 2019 $ 671,086 10,082,098 $ 10,753,184 Other Equipment Total $ 3,737 $ 1,831,267 1,773 28,100 (1,085) (19,979) $ 4,425 $ 1,839,388 $ 2,823 $ 1,146,654 (1,085 ) (19,979 ) 444 41,627 $ 2,182 $ 1,168,302 $ 2,243 $ 671,086

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

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

b. Assets leased under operating leases - 2019

Transportation Equipment Cost Balance at January 1, 2019 $ 15,724,581 Additions 38,475 Disposals (1,189,947) Reclassified - Effects of foreign currency exchange differences (334,954) Balance at December 31, 2019 $ 14,238,155 Accumulated depreciation Balance at January 1, 2019 $ 4,565,273 Disposals (944,727) Depreciation expenses 665,085 Effects of foreign currency exchange differences (99,208) Balance at December 31, 2019 $ 4,186,423 Carrying amounts at December 31, 2019 $ 10,051,732	Other Equipment $ 22,859 13,603 (622) 2,556 (1,104) $ 37,292 $ 3,295 (538) 4,386 (217) $ 6,926 $ 30,366	Total $ 15,747,440 52,078 (1,190,569) 2,556 (336,058) $ 14,275,447 $ 4,568,568 (945,265) 669,471 (99,425) $ 4,193,349 $ 10,082,098

The Group entered into bulk carriers sale contracts in July and October 2019, respectively, and the bulk carriers were delivered in July and November 2019, respectively. The total amount of proceeds from disposal was $427,891 thousand and the recognized gain on disposal was $182,587 thousand.

The Group leases bulk carriers on fixed lease payments or index-based variable payments, and the lease includes the option to extend the lease period. A portion of the operating lease contract contains market review clauses in the event that lessees exercise their options to extend. The lessees do not have bargain purchase options to acquire the assets at the expiry of the lease period.

The maturity analysis of lease payments receivable under operating lease payments was as follows:

		December 31,	December 31,
			2019
Year	1	$	999,177
Year	2		101,962
		$	1,101,139

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

Transportation equipment Vessels 20-25 years Drydock 2.5 years Other equipment 5-8 years

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

c. 2018

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	Buildings Transportation Equipment $ 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 $ 12,381 17,188 (3,483 ) 510 $ 26,596 $ 5,738 (2,757 ) 3,036 102 $ 6,119 $ 20,477	Total $ 18,868,247 65,288 (1,873,186 ) 518,358 $ 17,578,707 $ 6,348,508 (1,549,387 ) 760,912 155,190 $ 5,715,223 $ 11,863,484

The Group leases bulk carriers under operating leases, and the lease terms includes the option to extend. A portion of the operating lease contract contains market review clauses in the event that lessees exercise their options to extend. The lessees do not have bargain purchase options to acquire the assets at the expiry of the lease periods.

The future minimum lease payments of non-cancelable operating leases are as follows:

	December 31,
	2019
Not later than 1 year	$ 1,227,345
Later than 1 year and not later than 5 years	185,348
	$ 1,412,693

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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 24.

Information about capitalized interest is as follows:

Capitalized interest Range of capitalization rate	For the Year Ended December 31
	2019 2018 $ 21,536 $ 5,675 2.58%-3.57% 2.10%-3.57%

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
		2019 $ 713,052 2,544 $ 715,596	2018 $ 760,335 1,929 $ 762,264

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
		2019 $ 466	2018 $ 525

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13. INVESTMENT PROPERTIES

Cost Balance at January 1, 2019 Additions Balance at December 31, 2019 Accumulated depreciation Balance at January 1, 2019 Depreciation expenses Balance at December 31, 2019 Carrying amounts at December 31, 2019 Cost Balance at January 1, 2018 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 $ 1,055,678 1,650 $ 1,057,328 $ 1,057,328 $ 1,055,678 - $ 1,055,678 $ 1,055,678	Buildings $ 120,895 134,815 $ 255,710 $ 79,203 4,498 $ 83,701 $ 172,009 $ 121,072 (177) $ 120,895 $ 78,028 (177) 1,352 $ 79,203 $ 41,692	Total $ 1,176,573 136,465 $ 1,313,038 $ 79,203 4,498 $ 83,701 $ 1,229,337 $ 1,176,750 (177) $ 1,176,573 $ 78,028 (177) 1,352 $ 79,203 $ 1,097,370

The acquisition of investment properties which included non-cash transactions (Refer to Note 20) is as follows:

	For the Year	For the Year
		Ended
	December 31,
		2019
Increase in investment properties	$	136,465
Increase in prepaid rents (included in advance receipts and other non-current liabilities)		(132,512)
	$	3,953

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The maturity analysis of lease payments receivable under operating leases of investment properties as of December 31, 2019 is as follows:

			December 31,	December 31,
				2019
Year	1		$	45,297
Year	2			30,451
Year	3			16,123
Year	4			12,485
Year	5			12,693
Year	6	onwards		162,085
			$	279,134

The maturity analysis of lease payments receivable under operating leases of investment properties as of December 31, 2018 is as follows:

	December 31,	December 31,
		2018
Not later than 1 year	$	47,559
Later than 1 year and not later than 5 years		81,490
Later than 5 years		174,778
	$	303,827

Investment properties are depreciated using the straight-line method over their estimated useful lives of 25-60 years.

The fair value of investment properties were not appraised by independent valuers. The management of the Group 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
		2019 $ 3,658,333	2018 $ 3,555,321

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
		2019 $ 56,076 $ 19,576 398 $ 19,974	2018 $ 52,658 $ 15,904 398 $ 16,302

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14. BORROWINGS

a. Short-term borrowings

Unsecured borrowings Line of credit borrowings		December 31	December 31
		2019 $ -	2018 $ 557,322

The interest rate on line of credit borrowings was 0.95%-3.25% per annum at December 31, 2018.

b. Long-term borrowings

Secured borrowings (1) Line of credit borrowings (2) Less: Current portions Long-term borrowings Interest rate range		December 31	December 31
		2019 $ 3,127,051 699,880 3,826,931 27,674 $ 3,799,257 0.97%-2.76%	2018 $ 3,203,715 184,290 3,388,005 - $ 3,388,005 3.16%-3.57%

1) Secured borrowings are project loans for the construction of ships of Tai Shing, whose freehold ships are provided as collateral (refer to Note 24), and the principal and interest are amortized on a monthly, quarterly and semi-annual basis. Tai Shing is expected to settle the payment in full by October 2027. As of December 31, 2019, Tai Shing paid in advance a portion of the principal which is due in July 2022.
2) The interest on credit borrowings is paid on a monthly basis. The principal will be either paid in full or paid on a quarterly basis from September 2020 and is expected to be fully paid by September 2023.

As of December 31, 2019 and 2018, the bank borrowings related to banks, which are government-related parties, were as follows:

Bank of Taiwan Land Bank of Taiwan Mega International Commercial Bank First Commercial Bank		December 31	December 31
		2019 $ 1,731,345 1,395,706 179,880 - $ 3,306,931	2018 $ 1,773,791 1,429,924 184,290 165,177 $ 3,553,182

The interest expense (including capitalized interest) related to banks, which are government-related parties, were $110,390 thousand and $115,215 thousand for the years ended December 31, 2019 and 2018, respectively.

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15. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Group adopted a pension plan under the Labor Pension Act (LPA), which is a state-managed defined contribution plan. Under the LPA, the Group 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 contributes 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 Group has no right to influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans are as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities		December 31	December 31
		2019 $ 108,365 (40,815) $ 67,550	2018 $ 106,805 (37,992) $ 68,813

Movements in net defined benefit liabilities are as follows:

	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of		Benefit
	Obligation	the Plan Assets	Liabilities
Balance at January 1, 2018	$ 104,501	$ (26,490)	$	78,011
Service cost
Current service cost	1,959	-		1,959
Net 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 (gain) loss
Changes in demographic assumptions	3,431	-		3,431
Changes in financial assumptions	1,256	-		1,256
Experience adjustments	6,306	-		6,306
Recognized in other comprehensive income	10,993	(851)		10,142
				(Continued)

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	Present Value	Present Value
	of the Defined			Net Defined
		Benefit	Fair Value of		Benefit
	Obligation		the Plan Assets	Liabilities
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
Service cost
Current service cost		1,944	-		1,944
Net interest expense (income)		1,068	(385)		683
Recognized in profit or loss		3,012	(385)		2,627
Remeasurement
Return on plan assets (excluding amounts
included in net interest)		-	(1,274)		(1,274)
Actuarial (gain) loss
Changes in demographic assumptions		731	-		731
Changes in financial assumptions		2,542	-		2,542
Experience adjustments		(1,130)	-		(1,130)
Recognized in other comprehensive income		2,143	(1,274)		869
Contributions from the employer		-	(1,164)		(1,164)
Benefits paid		(3,595)	-		(3,595)
Balance at December 31, 2019	$	108,365	$ (40,815)	$	67,550
					(Concluded)

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

1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plans’ debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated using 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.

Discount rate Expected rate of salary increase	December 31
	2019 2018 0.75% 1% 3% 3%

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Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase 0.25% increase 0.25% decrease		December	31
		2019 $ (2,549) $ 2,658 $ 2,558 $ (2,468)	2018 $ (2,600) $ 2,713 $ 2,619 $ (2,524)

Expected contributions to the plans for the next year Average duration of the defined benefit obligation		December	31
		2019 $ 426 10.1 years	2018 $ 948 10.5 years

The details of employee benefits expense are 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
		2019 $ 11,234 2,627 13,861 726,988 $ 740,849 $ 642,408 98,441 $ 740,849	2018 $ 10,182 2,737 12,919 750,709 $ 763,628 $ 654,761 108,867 $ 763,628

Employee’s compensation and remuneration of directors and supervisors

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Accrual rate

Employees’ compensation Remuneration of directors and supervisors Amount	For the Year Ended December 31
	2019 2018 1% 1% 1% 1%

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31	For the Year Ended December 31
	2019 Cash $ 7,816 7,815	2018
		Cash $ 10,088 10,088

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

There is no difference between the actual amounts of employees’ compensation and remuneration of directors and supervisors paid and the amounts recognized in the consolidated financial statements for the year ended December 31, 2018.

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 2020 and 2019 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

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16. EQUITY

a. Ordinary shares

Shares authorized (in thousands) Capital authorized Shares issued and fully paid (in thousands) Capital issued		December 31	December 31
		2019 480,000 $ 4,800,000 417,294 $ 4,172,945	2018 480,000 $ 4,800,000 417,294 $ 4,172,945

b. Capital surplus

Treasury share transactions Donations		December 31	December 31
		2019 $ 334,352 30 $ 334,382	2018 $ 334,352 30 $ 334,382

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

c. Retained earnings and dividends policy

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The appropriations of earnings for 2018 and 2017 were approved in the shareholders’ meetings in June 2019 and 2018, respectively, are as follows:

Legal reserve Appropriation (reversal) of special reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2018 2017 $ 95,763 $ 46,647 (207,618) 242,486 542,483 292,106	Dividends Per Share (NT$)
		For the Year Ended December 31
		2018 2017 $1.3 $0.7

The appropriation of earnings for 2019 is subject to the proposition in the board of directors and the resolution in the shareholders’ meeting to be held in May and June 2020, respectively.

17. REVENUE

Revenue from transportation Rental income from investment properties (Notes 13 and 20) Other revenue Contract information December 31, 2019 Account receivables (Note 9) $ 40,971 Trade receivables from related parties (Notes 23 and 25) $ 57,389	For the Year Ended December 31	For the Year Ended December 31
	2019 $ 3,033,814 56,076 24,100 $ 3,113,990 December 31, 2018 $ 35,922 $ 92,370	2018 $ 3,303,719 52,658 10,859 $ 3,367,236 January 1, 2018 $ 37,089 $ 66,905

18. INCOME TAXES

a. Income tax recognized in profit or loss

Major components of income tax expense are as follows:

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior year	For the Year Ended	For the Year Ended	December 31
		2019 $ 78,851 25,843 195 104,889	2018 $ 15,499 - 122 15,621 (Continued)

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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	For the Year Ended	December 31
		2019 $ 59,911 - 59,911 $ 164,800	2018 $ 14,479 900 15,379 $ 31,000 (Concluded)

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

Profit before tax Income tax expense calculated at the statutory rate (20%) Tax effect of adjusting items: Tax-exempt income Income tax appropriated earnings 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
		2019 $ 765,896 $ 153,179 (1,217) 25,843 (13,200) - 195 $ 164,800	2018 $ 988,635 $ 197,727 1,952 - (169,701) 900 122 $ 31,000

b. Current tax liabilities

Current tax liabilities Income tax payable		December	31
		2019 $ 95,921	2018 $ 4,011

Current income tax payable is the net amount of December 31, 2019 and 2018, deducted by $8,773 thousand and $11,488 thousand of prepaid income tax, respectively.

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c. Deferred tax assets and liabilities

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

For the year ended December 31, 2019

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 accounted
for using the equity method

For the year ended December 31, 2018
Opening
Balance
Deferred tax assets
Temporary differences
Unrealized exchange gains
and losses
$ 185
Others

491
$ 676
Deferred tax liabilities
Temporary differences
Reserve for land value
increment tax
$ 282,241
Share of profit of subsidiaries
accounted for using the
equity method

5,779
$ 288,020

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

e. Income tax assessments

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

19. 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
		2019 $ 1.44 $ 1.44	2018 $ 2.29 $ 2.29

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

Net Profit for the Year

For the Year Ended 2019 Earnings used in the computation of basic earnings per share $ 601,096 Weighted Average Number of Ordinary Shares Outstanding (In Thousand Shares)	For the Year Ended	December 31
		2018 $ 957,635

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
		2019 417,294 573 417,867	2018 417,294 604 417,898

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20. CASH FLOW INFORMATION

a. Non-cash transactions

In 2017, the Group entered into a land lease agreement with the lessee with a lease term of 20 years and agreed that the lessee construct a building in the name of the Corporation, which is both an applicant of construction and proprietor of the building, on the land. In addition, the lessee afforded the cost of building to exchange the right to use building during the lease period. In 2019, the construction of building was completed and delivered to the Group. The cost of the construction was $132,512 thousand, which was classified as prepaid rent. The Group recognized the rental income in installments during the lease period. The rental income was $4,355 thousand for the year ended December 31, 2019. As of December 31, 2019, the balance of unamortized prepaid rent was $128,157 thousand ($7,465 thousand and $120,692 thousand were included in advance receipts and other non-current liabilities, respectively).

b. Changes in liabilities arising from financing activities

For the year ended December 31, 2019

Short-term borrowings Long-term borrowings (including current portions)	Opening Balance $ 557,322 3,388,005 $ 3,945,327	Cash Flows $ (258,465) 220,000 $ (38,465)		Non-cash Changes Foreign Exchange Movement $ 1,143 (81,074) $ (79,931)	Other (Note) $ (300,000) 300,000 $ -	Closing Balance $ - 3,826,931

						$ 3,826,931

Note: The Group’s short-term borrowing of $300,000 thousand matured in March 2019. However, the Group re-entered into a long-term borrowing contract with the bank to pay the short-term borrowing in advance in February 2019.

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

21. CAPITAL MANAGEMENT

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

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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.

22. 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, 2019

Financial assets at FVTOCI Investments in equity instruments Listed shares - ROC Unlisted shares - ROC Unlisted shares - foreign 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	Level 1 $ 95,244 - - $ 95,244 Level 1 $ - $ 116,247 - - $ 116,247	Level 2 $ 185,559 - - $ 185,559 Level 2 $ 76,777 $ 145,794 - - $ 145,794	Level 3 $ - 90,651 45,579 $ 136,230 Level 3 $ - $ - 49,943 45,864 $ 95,807	Total $ 280,803 90,651 45,579 $ 417,033 Total $ 76,777 $ 262,041 49,943 45,864 $ 357,848

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

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.
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b) Domestic listed private shares and ordinary shares converted from mandatory convertible bonds 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 Group are mainly investment in domestic listed shares. Besides, the assets of unlisted shares - foreign held by the Group were mainly bank deposits and new investment properties as of December 31, 2019 and 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 Group were an 89.75% discount rate for lack of marketability as of December 31, 2019 and 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 $8,848 thousand and $4,875 thousand, respectively.

c. Categories of financial instruments

Financial assets FVTPL Mandatorily classified as at FVTPL Financial assets at amortized cost (Note 1) Financial assets at FVTOCI Equity instruments Financial liabilities Amortized cost (Note 2)	December 31
	2019 2018 $ - $ 76,777 1,382,689 926,722 417,033 357,848 4,093,810 4,254,089

Note 1: 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 2: 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 (including current portions).
d. Financial risk management objectives and policies

The Group’s major financial instruments include equity and debt investments, accounts receivable, accounts payable, 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.

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1) Market risk

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

a) Foreign currency risk

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the year 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 included only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the year 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	USD Impact	USD Impact
	For the Year Ended December 31
		2019 $ (2,509)	2018 $ (4,282)

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 year are as follows:

Fair value interest rate risk Financial assets Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis	December 31
	2019 2018 $ 1,194,703 $ 794,526 24,101 26,135 3,826,931 3,945,327

The sensitivity analysis below was determined based on the Group’s exposure to interest rates for non-derivative instruments at the end of the year. For variable interest rate liabilities, the analysis was prepared assuming the amount of each liability outstanding at the end of the year 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.

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For the financial assets held by the Group with variable interest rates on December 31, 2019 and 2018, if the market interest rates had been 1% higher, the cash inflow from variable rate financial assets would have been $241 thousand and $261 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, 2019 and 2018, if the market interest rates had been 1% higher, the cash outflow from variable rate financial liabilities would have been $38,269 thousand and $39,453 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 domestic and foreign listed (unlisted) shares and corporate bonds.

Sensitivity analysis

The equity price risk for the flexible-priced financial assets held by the Group was assessed using sensitivity analysis.

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.

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, 2019 and 2018, the Group had available unutilized short-term bank loan facilities (including overdraft and guarantee) of $255,340 thousand and $222,545 thousand, respectively.

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The following table details the Group’s remaining contractual maturity of its non-derivative financial liabilities with variable interest rates and agreed repayment periods. The table has been 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, 2019

Non-interest bearing Variable interest rate liabilities December 31, 2018 Non-interest bearing Variable interest rate liabilities	Less than 1 Year $ 266,879 28,276 $ 295,155 Less than 1 Year $ 308,762 564,653 $ 873,415	1-3 Years $ - 1,472,894 $ 1,472,894 1-3 Years $ - 317,810 $ 317,810	3-5 Years $ - 1,320,995 $ 1,320,995 3-5 Years $ - 1,475,211 $ 1,475,211	5+ Years $ - 1,394,408
				$ 1,394,408
				5+ Years $ - 2,171,977
				$ 2,171,977

23. 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. The Ministry of Transportation and Communications has significant influence over the Group. Besides, the nature and amounts of transactions, individually and collectively insignificant, with the government - related party have not been disclosed, and information disclosed, elsewhere in the other notes and details of transactions between the Group and other related parties are disclosed below.

a. Names and categories of the related parties

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

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b. Operating transactions

Operating revenue Government - related party 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
		2019 $ 184,786 23 $ 184,809 $ 170,711 1,137 $ 171,848	2018 $ 319,015 84 $ 319,099 $ 297,151 1,906 $ 299,057

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

At the end of the year, trade receivables from related parties are as follows:

Government - related party Yang Ming		December 31	December 31
		2019 $ 26,670	2018 $ 59,043

At the end of the year, prepayments from related parties (included in prepayments) are as follows:

Government - related parties Others		December 31	December 31
		2019 $ 3,469	2018 $ 6,479

At the end of the year, trade payables to related parties are as follows:

Government and its subsidiaries - related parties Yang Ming Others		December 31	December 31
		2019 $ 13,327 121 $ 13,448	2018 $ 26,092 338 $ 26,430

The Group did not recognize allowance for doubtful accounts and did not receive guarantees during the years ended December 31, 2019 and 2018. In addition, the outstanding payables to related parties had no guarantees.

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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 financial assets at FVTPL - current) 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, matured in June 2019 and were converted into 9,597 thousands shares of private placement ordinary shares. The aforementioned private shares can be applied for registration of the retroactive handling of public issuance and listing shares with the FSC if Yang Ming complies with the regulations of the retroactive handling of public issuance. The Group held the aforementioned investments, which were classified as financial assets at FVTOCI - non-current, for strategic purposes.

In November 2017, the Group 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, as the Group did not have any significant influence over Yang Ming.

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

Associates (management of service revenues)	For the Year Ended	For the Year Ended	December 31
		2019 $ 114	2018 $ 114

e. Compensation of key management personnel

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

Short-term employee benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 29,699 1,097 $ 30,796	2018 $ 31,652 1,055 $ 32,707

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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	December 31
		2019 $ 7,633,029 245,005 $ 7,878,034	2018 $ 8,138,906 250,878 $ 8,389,784

25. SIGNIFICANT UNRECOGNIZED COMMITMENTS AND CONTINGENCIES

a. Significant unrecognized commitments and contingencies of the Group as of December 31, 2019 are as follows:
1) The aggregate information of the Group entering into ship management agreements with CPC Corporation, Taiwan, which is a government-related party, 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 $352 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.

The Group’s operating revenue and costs to CPC Corporation, Taiwan, for the year ended December 31, 2019 were $353,278 thousand and $40,129 thousand, respectively. As of December 31, 2019, the balance of trade receivables from related parties was $30,719 thousand.

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, 2019, the unpaid amount was US$41,996 thousand (the paid amount was included in prepayments for equipment). The parent company is Tai Shing’s guarantor.
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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 which less than US$136,000 thousand. In March and April 2019, Tai Shing has entered into a contract with Namura Shipbuilding Co., Ltd. and Oshima Shipbuilding Co., Ltd.; each bulk carrier’s cost was US$33,980 thousand, US$33,980 thousand, US$32,320 thousand and US$33,900 thousand, respectively with a total amount of US$134,180 thousand. As of the date of the independent auditor’s report to the consolidated financial statements for the year ended December 31, 2019, the unpaid amount was US$113,966 thousand (the paid amount was included in prepayments for equipment). The parent company is Tai Shing’s guarantor of Oshima Shipbuiding Co., Ltd.
4) In October 2019, the board of directors of the subsidiary Tai Shing resolved to build 84,000-ton and 64,000-ton bulk carriers with Namura Shipbuilding Co., Ltd. and Oshima Shipbuilding Co., Ltd., respectively, with a total cost of less than US$64,100 thousand. In December 2019, Tai Shing has entered into a contract with Namura Shipbuilding Co., Ltd. to build one bulk carrier with an amount of US$34,900 thousand. In addition, in March 2020, the cost resulted from adjusting bulk carrier’s parts decreased to US$34,280 thousand. As of the date of the independent auditors’ report to the consolidated financial statements for the year ended December 31, 2019, the unpaid amount was US$30,852 thousand (the paid amount was included in prepayments for equipment).
b. Significant unrecognized commitments and contingencies of the Group as of December 31, 2018 are as follows:
1) Aggregate information of the Group entering into ship management agreements with CPC Corporation, Taiwan, which is a government-related party 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.

The Group’s operating revenue and costs to CPC Corporation, Taiwan, for the year ended December 31, 2018 were $332,990 thousand and $37,465 thousand, respectively. As of December 31, 2018, the balance of trade receivables from related parties was $33,327 thousand.

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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, 2018, the unpaid amount was US$41,996 thousand (the paid amount was included in prepayments for equipment). 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 2019, 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. As of the date of the independent auditors’ report to the consolidated financial statements for the year ended December 31, 2018, the unpaid amount was US$61,164 thousand (the paid amount was included in prepayments for equipment).

26. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

In June 2019, the Group entered into a bulk carrier sale contract with Ningbo Haizhou Shipping Limited., and the bulk carrier was delivered in January 2020.

27. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

December 31, 2019
		Foreign		Carrying
	Currencies			Amount
	(In Thousands)		Exchange Rate	(In Thousands)
Financial assets
Monetary items
USD	$	4,798	29.98 (USD:NTD)	$	143,844
Financial liabilities
Monetary items
USD	$	613	29.98 (USD:NTD)	$	18,383

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December 31, 2018

		Foreign		Carrying	Carrying
	Currencies			Amount
	(In Thousands)		Exchange Rate	(In Thousands)
Financial assets
Monetary items
USD	$	8,413	30.715 (USD:NTD)	$	258,418
Financial liabilities
Monetary items
USD	$	1,444	30.715 (USD:NTD)	$	44,341

For the years ended December 31, 2019 and 2018, net foreign exchange gain were $267 thousand and $6,685 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)
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 (None)
9) Trading in derivative instruments (Note 7)
10) Intercompany relationships and significant intercompany transactions (Table 4)
11) Information on investees (Table 5)
b. Information on investments in mainland China (None)
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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:

Item Ocean route revenue Ship management revenue Tug service revenue Coastal route revenue Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 2,584,556 222,136 128,705 98,417 80,176 $ 3,113,990	2018 $ 2,869,499 203,315 127,504 103,401 63,517 $ 3,367,236

c. Geographical information

The Group’s revenue from external customers by location of operations are detailed below.

Item Service routes Asia Europe Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2019 $ 2,190,265 867,649 3,057,914 56,076 $ 3,113,990	2018 $ 2,050,767 1,263,812 3,314,579 52,657 $ 3,367,236

The Group’s non-current assets by location of operations are detailed below:

Taiwan Panama		December 31	December 31
		2019 $ 1,910,662 11,178,375 $ 13,089,037	2018 $ 1,791,390 11,731,337 $ 13,522,727

Non-current assets exclude financial instruments, investments accounted for using the equity method and deferred tax assets.

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d. Information about major customers

A B C	For the Year Ended December 31	For the Year Ended December 31
	2019 Amount % $ 353,278 11 333,431 11 307,934 10	2018
		Amount % $ 332,990 10 198,970 6 563,561 17

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Note	Note	-	-
Endorsement/ Guarantee Given on Behalf of Company in Mainland China		-	-
Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent		-	Yes
Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries		Yes	-
Aggregate Endorsement/ Guarantee Limit (Notes 1 and 2)		$ 8,345,890	7,038,468 (US$ 234,772)
Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)		62.0	2.9
Amount Endorsed/ Guaranteed by Collaterals (Note 2)		$ -	239,540 (US$ 7,990)
Actual Borrowing Amount (Note 2)		$ 6,247,322 (US$ 208,383)	239,540 (US$ 7,990)
Outstanding Endorsement/ Guarantee at the End of the Year (Note 2)		$ 6,337,262 (US$ 211,383)	242,688 (US$ 8,095)
Maximum Amount Endorsed/ Guaranteed During the Year (Note 2)		$ 6,700,680 (US$ 223,505)	242,688 (US$ 8,095)
Limit on Endorsement/ Guarantee Given on Behalf of Each Party (Notes 1 and 2)		$ 8,345,890	7,038,468 (US$ 234,772)
Endorsee/Guarantee	Relationship	Subsidiary	Parent
	Name	Tai Shing	Taiwan Navigation Co., Ltd.
	Endorser/Guarantor	Taiwan Navigation Co., Ltd.	Tai Shing
	No.	0	1

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	Note
December 31, 2019	Fair Value	$ 90,651 45,579 185,559 95,244
	Percentage of Ownership (%)	6.00 15.00 1.10 0.51
	Carrying Amount	$ 90,651 45,579 185,559 95,244
	Number of Shares (In Thousands)	4,590 1,500 28,680 13,210
	Financial Statement Account	Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - current
	Relationship with the Holding Company	- Corporate director Significantly influenced by the Ministry of Transportation and Communications Significantly influenced by the Ministry of Transportation and Communications
	Type and Name/Issuer of Marketable Securities	Shares Chunghwa Investment Co., Ltd. Taiwan Foundation International Pte. Ltd. Private placement listed shares Yang Ming Listed shares Yang Ming
	Holding Company Name	Taiwan Navigation Co., Ltd.

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	Note	Note 3 Note 3 Note 3 Note 3
Notes/Accounts Receivable (Payable)	% of Total (Note 2)	52 45 (99) - - 100 (90)
	Ending Balance	$ 30,719 26,670 (13,327) (56) 56 17,550 (17,550)
Abnormal Transaction	Payment Terms	- - - - - - -
	Unit Price	$ - - - - - - -
Transaction Details	Payment Terms	By negotiations By negotiations By negotiations By negotiations By negotiations By negotiations By negotiations
	% of Total	(31) (16) 18 16 (10) (34) 89
	Amount	$ (353,278) (184,786) 170,711 151,316 (151,316) (511,581) 511,581
	Purchase/Sale	Ship management service and port service revenue Freight transportation revenue Rental expense and stevedoring expense Rental expense Rental revenue Rental revenue Rental expense
	Relationship	(Note 1) (Note 1) Subsidiary Parent company The same parent company The same parent company
	Related Party	CPC Corporation, Taiwan Yang Ming Tai Shing Taiwan Navigation Co., Ltd. Shin Wang Tai Shing
	Seller/Buyer	Taiwan Navigation Co., Ltd. Tai Shing Shin Wang

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Transaction Details	% of Total Sales or Assets	5 16 -	Note: Eliminated upon consolidation.
	Payment Terms	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. The rental of 9 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
	Amount	$ 151,316 511,581 17,550
	Financial Statement Account	Operating revenue - rental Operating revenue - rental Trade receivables from related parties
	Relationship	Parent The same parent company
	Related Party	Taiwan Navigation Co., Ltd. Shin Wang
	Company Name	Tai Shing
	No.	1

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Note	Note	Note Note
Share of Profit (Loss)		$ 66,002 560,243 6,952
Net Income (Loss) of the Investee		$ 66,002 560,243 13,973
As of December 31, 2019	Carrying Amount	$ 8,507,779 390,944 109,431
	%	100.00 100.00 49.75
	Number of Shares (In Thousands)	- - 5,211
Investment Amount	December 31, 2018	$ 3,921,447 32,500 41,861
	December 31, 2019	$ 3,921,447 32,500 41,861
	Main Business and Products	Rental and sale of ships Rental and sale of ships Investment
	Location	Panama City, Panama Monrovia City, Liberia Taipei
	Investee Company	Tai Shing Shin Wang Yunn Wang
	Investor Company	Taiwan Navigation Co., Ltd.

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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	2019	2018	Difference Amount	Variance(%)
Current assets	$1,592,523	$1,255,739	$336,784	27
Non-current assets	13,521,227	13,880,162	(358,935)	(3)
Total assets	15,113,750	15,135,901	(22,151)	(0)
Current liabilities	505,748	939,806	(434,058)	(46)
Non-current liabilities	4,366,773	3,776,103	590,670	16
Total liabilities	4,872,521	4,715,909	156,612	3
Capital stock	4,172,945	4,172,945	0	0
Capital surplus	334,382	334,382	0	0
Retained earnings	6,005,277	5,947,533	57,744	1
Other equity	(271,375)	(34,868)	(236,507)	678
Total stockholders'equity	10,241,229	10,419,992	(178,763)	(2)
Total liabilities and stockholders'equity	15,113,750	15,135,901	(22,151)	(0)
Analysis of variance: 1. The rise of the other financial assets caused an increase in the current assets. 2. The decline of the short-term borrowings caused decline of the current liabilities. 3. The rise of the long-term borrowings caused an increase of the non-current liabilities. 4. The changes of the exchange differences on translating foreign operations caused decline of the other equity.

7.2 Analysis of Consolidated Financial Performance

Unit: NT$ thousands

			Unit:	NT$ thousands
Year Item	2019	2018	Difference Amount	Variance(%)
Operating revenue	$3,113,990	$3,367,236	(253,246)	(8)
Operating costs	2,371,269	2,505,063	(133,794)	(5)
Gross profit	742,721	862,173	(119,452)	(14)
Operating expenses	138,922	146,765	(7,843)	(5)
Profit from operations	603,799	715,408	(111,609)	(16)
Non-operating income and expenses	162,097	273,227	(111,130)	(41)
Income before income tax	765,896	988,635	(222,739)	(23)
Income tax expense	(164,800)	(31,000)	(133,800)	432
Net income	601,096	957,635	(356,539)	(37)
Analysis of variance: 1. The disposal of five bulk carriers since 2018 and decline of BDI caused decline of operating revenue, gross profit, profit from operations, and income before income tax. 2. The decline of the non-operating income and expenses was mainly due to the decline of gain on disposal of property, plant, and equipment. 3. The rise of the income tax expense was mainly due to the surtax on undistributed earnings of 2018 and income tax of subsidiary’s distributed earnings.

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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 decrease in Cash and Cash Equivalents	Cash surplus (Deficit)	Remedies of Cash Deficit
				Investment Plans	Financing Plans
478,550	1,394,325	(70,334)	408,216	-	-
1. Analysis of 2019 cash flows: Net decrease in cash and cash equivalents was mainly due to increase on other financial assets, prepayments for equipment, and appropriation of cash dividends. 2. Remedies of cash deficit: Not applicable.

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	2019	2018	Variance (%)
Cash Flow Ratio (%)	275.70	159.84	72%
Cash Flow Adequacy Ratio (%)	72.07	65.15	11%
Cash Reinvestment Ratio (%)	4.27	6.05	(29%)
Analysis of variance: 1. The decline of current liabilities caused an increase in the cash flow ratio. 2. The increase of cash dividends caused decline 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)	Remedies of Cash Deficit
				Investment Plans	Financing Plans
408,216	1,153,634	(3,762)	404,454	-	-
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.

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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% from bank borrowings	2022Q2-Q3	66,220	-	-	6,622	6,622	6,622	46,354
Build one 80,000-ton bulk carrier(Note2)	30%cash flow generated from operation and 70% from bank borrowings	2022Q1	34,280	-	-	3,428	3,428	3,428	23,996

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	357,308	96,285	74,343
2022	744,391	196,382	150,669

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.

Investment policy for recent year: The TNC’s investment policy is oriented on the core business of related diversification activities.
Gain from investments � Share of profit of associates accounted for using the equity method of 2019 was 6,952 $NT thousands.

7.6 Risk Assessment

7.6.1 Risk Factor:

Impact of interest rate, exchange rate, and inflation on the company’s earnings, and responsive measures:
(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 and time deposits with maturities of more than three months to ensure the
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principal and liquidity.

(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 2019 totaled NT$267 thousand, accounting for 0.01% of the operating revenue, accounting for only 0.03% 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.
(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.

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:
(1) The company has not engaged in high-risk, highly leveraged investments, and all investments project have been carefully evaluated and implemented.
(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.
(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.
Future Research & Development Projects and Corresponding Budget:
The company is a ship transportation industry and does not have a specific research and development projects.
Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales:
(1) Finance:
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.
(2) Sales:
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.
Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales: None.
The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures: The company has always adhered to the goal of safety, treat the customers as supremacy, providing quality shipping services, fulfilling corporate social responsibility, and
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demonstrate good corporate image.

Expected Benefits, Risks, and Responses of Merger and Acquisition Plans:None.
Expected Benefits, Risks, and Responses of Factory Expansion Plans
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.
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.
Effects of, Risks Relating to and Responses to the Changes in Management Rights: None.
The goals and methods of adopting Hedge Accounting
(1) The company does not engage in activities related to hedging accounting.
(2) The types, goals, methods, effects, and accounting treatment of hedge trading: Not applicable.
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

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.
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.
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.
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.
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VIII. Special Disclosure

8.1 Summary of Affiliated Companies

8.1.1 TNC’s Affiliated Companies Information

TNC’s Affiliated Companies

==> picture [422 x 170] intentionally omitted <==

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

TAIWAN NAVIGATION CO., LTD
100% 100%
TAI SHING MARITIME CO. S.A. SHIN WANG MARITIME INC.
----- End of picture text -----

Basic Information on the TNC’s Affiliated Companies

			Unit: US$ thousands	Unit: US$ thousands
Company Name	Establishment Date	Address	Dec 31, 2019 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

For companies presumed to have a relationship of control and subordination where the shareholders in common: None.
The connections exist among the industries covered by the business operated by the affiliates overall.

Date: Dec 31, 2019

		Date: Dec 31, 2019
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.

209 -

5. Information of Chairman and Directors of the TNC’s Affiliates Company.

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, 2019 Unit; US$ thousands Operating Revenue Operating (loss)Profits Income (After Tax) EPS in US$ (After Tax) 47,912 (1,605) 2,123 21.23 36,622 17,802 18,016 18,016	Date: Dec 31, 2019 Unit; US$ thousands Operating Revenue Operating (loss)Profits Income (After Tax) EPS in US$ (After Tax) 47,912 (1,605) 2,123 21.23 36,622 17,802 18,016 18,016	Date: Dec 31, 2019 Unit; US$ thousands Operating Revenue Operating (loss)Profits Income (After Tax) EPS in US$ (After Tax) 47,912 (1,605) 2,123 21.23 36,622 17,802 18,016 18,016	Date: Dec 31, 2019 Unit; US$ thousands Operating Revenue Operating (loss)Profits Income (After Tax) EPS in US$ (After Tax) 47,912 (1,605) 2,123 21.23 36,622 17,802 18,016 18,016
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	400,055	116,273	283,782	47,912	(1,605)	2,123	21.23
SHIN WANG MARITIME INC.	1,000	14,430	1,390	13,040	36,622	17,802	18,016	18,016

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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, 2019 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,

Taiwan Navigation Co., Ltd.

Liu, Wen-Ching Chairman

March 17, 2020

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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:

Mr. Mei, Char-Lee retired on May 1,2020. On April 22,2020, the company's board of directors elected the President as Mr. Chyou,Jong-Lin. The change of president did not cause any significant impact on shareholders' equity or securities prices.

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Taiwan Navigation Co., Ltd.

Liu, Wen-Ching Chairman

AI assistant

TNC — Annual Report 2019

52171_rns_2020-07-28_09245330-64c5-4bac-b2a2-727b03f77dd0.pdf

Taiwan Navigation Co., Ltd.

2019 Annual Report

P rinted on Ma y 13, 2020

Notice to readers

1. Contact information of the Spokesperson and Deputy Spokesperson ：

2. Contact Information of the Head Office and Branch Office

3. Share Transfer Agency ：

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

5. Overseas Trade Places for Listed Negotiable Securities ： None.

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

Table of Contents

I. Letter to Shareholders

II. Company Profile

2.1 Date of Founding

2.2 Head Office and Branch Office

2.3 Major Events

3.1.2. Major Department Functions

Traffic Department

Technical Department

Marine Department

Financial Department

Administrative Department

Auditing Office

Labor Security Office

Planning Office

Kaohsiung Branch Office

3.2.2 Major Shareholders of the Institutional Shareholders

3.2.3 Major Shareholders of the Company’s Major Institutional Shareholders

3.2.4 Professional Qualifications and Independence Analysis of Directors

3.2.4.1 Diversity Regarding Board Members

Level of Remuneration

3.2.6.2 Remuneration of the President and Vice Presidents

Level of Remuneration

3.2.6.3 Bonus to Executive Officers

1. Ratio of the total remuneration to net income

3.3 Implementation of Corporate Governance

3.3.1 Board of Directors

A. Operations of the Board of Directors

B. Implementation Status of Board Evaluations

3.3.2 Audit Committee

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

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

3.3.5. Corporate Social Responsibility

3.3.7. Other Company-established corporate governance rules and regulations:

3.3.8. Other important information to improve the understanding of corporate governance:

3.3.9. Internal Control Statement �

3.3.11. Important resolutions made by the Shareholders’ Meeting and Board of Directors by the end of 2018 and the printing date of the annual report.

2. Board Meetings:

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

3.3.13. List of resignations and dismissals of important persons in the company:

List of resignations and dismissals of important persons in the company

3.4 Audit Fee

3.5 Replacement of CPA

1. Regarding the former CPA

2019 �

2018 � None.

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.

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

3.7.1 Changes in Shareholding

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

3.8 Relationship among the Top Ten Shareholders

3.9 Ownership of Shares in Affiliated Enterprises

3.10 Manager’s Training Records Information in 2019

3.11 Continuing Education and Training

3.12 Directors’ and Supervisors’ Training Records in 2019

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

4.1.2 Status of Shareholders

4.1.3 Distribution Profile of Share Ownership

4.1.3.1. Common Shares

4.1.4 List of Major Shareholders

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

4.1.6 Dividend Policy and Implementation Status

4.1.6.1 Dividend Policy (Articles of Incorporation 26)

4.1.6.2 Proposed Distribution of Dividend

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

TNC Annual Report 2019