TNC - Interim / Quarterly Report 2018

Taiwan Navigation Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Three Months Ended March 31, 2018 and 2017 and Independent Auditors’ Review Report

INDEPENDENT AUDITORS’ REVIEW REPORT

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

Introduction

We have reviewed the accompanying consolidated balance sheets of Taiwan Navigation Co., Ltd. and its subsidiaries (collectively, the “Group”) as of March 31, 2018 and 2017, the consolidated statements of comprehensive income, changes in equity and cash flows for the three months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as 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 Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

Except as explained in the following paragraph, we conducted our reviews in accordance with Statement of Auditing Standard No. 65 “Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Basis for Qualified Conclusion

As disclosed in Note 12 to the consolidated financial statements, as of March 31, 2018 and 2017, investments accounted for using the equity method were NT$97,900 thousand and NT$87,242 thousand, respectively, and for the three months ended March 31, 2018 and 2017, net comprehensive income (loss) recognized from these equity-method investments was NT$(4,531) thousand and NT$5,975 thousand, respectively, which was calculated on the basis of financial statements that have not been reviewed.

Qualified Conclusion

Based on our reviews, except for the adjustments, if any, as might have been determined to be necessary had the financial statements of the aforementioned investees and the relevant information disclosed been reviewed, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Group as of March 31, 2018 and 2017 and its consolidated financial performance and its consolidated cash flows for the three months then ended March 31, 2018 and 2017 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. The engagement partners on the reviews resulting in this independent auditors’ review report are Ya-Ling Wong and Chih-Ming Shao.

Deloitte & Touche Taipei, Taiwan Republic of China

May 11, 2018

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 review such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ review 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’ review report and consolidated financial statements shall prevail.

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(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 and 7) Financial assets at fair value through other comprehensive income (Notes 4, 8 and 22) Available-for-sale financial assets (Notes 4, 9 and 22) Accounts receivable, net (Notes 4 and 10) Trade receivables from related parties (Notes 4 and 22) Prepayments (Note 22) Other financial assets (Notes 4 and 11) Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss (Notes 4, 7 and 22) Financial assets at fair value through other comprehensive income (Notes 4, 8 and 22) Available-for-sale financial assets (Notes 4, 9 and 22) Financial assets measured at cost (Note 4) Investments accounted for using the equity method (Notes 4 and 12) Property, plant and equipment (Notes 4, 13 and 23) Investment properties (Notes 4 and 14) Prepayments for equipment (Note 24) Other non-current assets (Note 23) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 15) Contract liabilities Notes and accounts payable Trade payables to related parties (Note 22) Other payables Advance receipts Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 15 and 23) Deferred tax liabilities (Note 4) Net defined benefit liabilities (Note 4) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Note 17) Ordinary shares Capital surplus Retained earnings Legal reserve Unappropriated earnings Total retained earnings Other equity Total equity attributable to owners of the Corporation Total equity TOTAL		March 31, 2018 (Reviewed) Amount % $ 267,817 2 - - 139,365 1 - - 82,535 1 62,810 - 122,176 1 161,769 1 13,983 - 850,455 6 95,742 1 238,351 1 - - - - 97,900 1 12,067,747 81 1,098,384 7 147,589 1 247,667 2 13,993,380 94 $ 14,843,835 100 $ 370,688 3 60,967 - 145,483 1 37,898 - 96,121 1 - - 20,798 - 731,955 5 4,213,961 28 289,046 2 60,158 1 17,055 - 4,580,220 31 5,312,175 36 4,172,945 28 334,382 2 1,617,952 11 3,818,685 26 5,436,637 37 (412,304) (3) 9,531,660 64 9,531,660 64 $ 14,843,835 100		December 31, 2017 (Audited) Amount % $ 382,811 3 32,007 - - - 151,914 1 67,529 - 36,465 - 125,932 1 176,512 1 14,587 - 987,757 6 97,827 1 - - 176,327 1 45,900 - 102,431 1 12,519,739 81 1,098,722 7 143,957 1 245,056 2 14,429,959 94 $ 15,417,716 100 $ 372,754 3 - - 132,795 1 34,326 - 115,001 1 50,833 - 23,957 - 729,666 5 4,748,871 31 288,020 2 78,011 - 16,161 - 5,131,063 33 5,860,729 38 4,172,945 27 334,382 2 1,617,952 10 3,674,194 24 5,292,146 34 (242,486) (1) 9,556,987 62 9,556,987 62 $ 15,417,716 100		March 31, 2017 (Reviewed)
						Amount % $ 224,344 2 10,006 - - - - - 80,931 1 72,162 - 133,071 1 395,428 3 22,673 - 938,615 7 107,208 1 - - 224,035 2 45,900 - 87,242 1 9,545,474 72 1,099,736 8 1,011,497 7 256,155 2 12,377,247 93 $ 13,315,862 100 $ 294,170 2 - - 147,902 1 18,139 - 64,658 1 40,643 - 18,076 - 583,588 4 3,056,266 23 288,034 2 76,382 1 17,608 - 3,438,290 26 4,021,878 30 4,172,945 31 334,382 3 1,617,952 12 3,224,792 24 4,842,744 36 (56,087) - 9,293,984 70 9,293,984 70 $ 13,315,862 100

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

(With Deloitte & Touche auditors’ review report dated May 11, 2018)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

OPERATING REVENUE (Notes 4, 14 and 22) OPERATING COSTS (Notes 13, 14, 16 and 22) GROSS PROFIT OPERATING EXPENSES (Notes 13 and 16) PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Interest income (Note 4) Other income (Note 22) Gain (loss) on financial assets at fair value through profit or loss Interest expense (Notes 4 and 13) Other expenses Loss on foreign currency exchange Total non-operating income and expenses INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 18) NET INCOME FOR THE PERIOD OTHER COMPREHENSIVE INCOME (LOSS) (Note 4) Items that will not be reclassified subsequently to profit or loss: Unrealized loss on investments in equity instruments designated as at fair value through other comprehensive income Share of other comprehensive loss of associates accounted for using the equity method (Note 12)		For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 Amount % $ 797,254 100 604,864 76 192,390 24 28,751 4 163,639 20 2,484 - 14,643 2 (2,078) - (27,252) (3) (1,391) - (4,622) (1) (18,216) (2) 145,423 18 932 - 144,491 18 (56,351) (7) (4,513) (1)		2017
				Amount % $ 647,445 100 621,759 96 25,686 4 22,768 4 2,918 - 2,841 1 7,839 1 28,382 4 (10,874) (2) (1,681) - (8,641) (1) 17,866 3 20,784 3 3,600 - 17,184 3 - - - - (Continued)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Unrealized gain on available-for-sale financial assets Share of other comprehensive income of associates accounted for using the equity method (Note 12) Other comprehensive loss for the period, net of income tax TOTAL COMPREHENSIVE LOSS FOR THE PERIOD NET INCOME ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO: Owners of the Corporation Non-controlling interests EARNINGS PER SHARE (Note 19) Basic Diluted		For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 Amount % $ (168,880) (21) - - - - (229,744) (29) $ (85,253) (11) $ 144,491 18 - - $ 144,491 18 $ (85,253) (11) - - $ (85,253) (11) $ 0.35 $ 0.35		2017
				Amount % $ (466,700) (72) 24,045 3 6,017 1 (436,638) (68) $ (419,454) (65) $ 17,184 3 - - $ 17,184 3 $ (419,454) (65) - - $ (419,454) (65) $ 0.04 $ 0.04
		$
		$
		$
		$
		$

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

(With Deloitte & Touche auditors’ review report dated May 11, 2018)

(Concluded)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

BALANCE AT JANUARY 1, 2017 Net income for the three months ended March 31, 2017 Other comprehensive income (loss) for the three months ended March 31, 2017, net of income tax Total comprehensive income (loss) for the three months ended March 31, 2017 BALANCE AT MARCH 31, 2017 BALANCE AT JANUARY 1, 2018 Effect of retrospective application and retrospective restatement BALANCE AT JANUARY 1, 2018 AS RESTATED Net income for the three months ended March 31, 2018 Other comprehensive loss for the three months ended March 31, 2018, net of income tax Total comprehensive income (loss) for the three months ended March 31, 2018 BALANCE AT MARCH 31, 2018	Ordinary Shares Shares (In Thousands) Amount Capital Surplus 417,294 $ 4,172,945 $ 334,382 - - - - - - - - - 417,294 $ 4,172,945 $ 334,382 417,294 $ 4,172,945 $ 334,382 - - - 417,294 4,172,945 334,382 - - - - - - - - - 417,294 $ 4,172,945 $ 334,382	Retained Earnings Unappropriated Legal Reserve Earnings $ 1,617,952 $ 3,207,608 - 17,184 - - - 17,184 $ 1,617,952 $ 3,224,792 $ 1,617,952 $ 3,674,194 - - 1,617,952 3,674,194 - 144,491 - - - 144,491 $ 1,617,952 $ 3,818,685	Other Equity Exchange Differences on Unrealized Loss on Investments in Financial Assets at Fair Value Unrealized Gain (Loss) on Translating Through Other Available-for- Foreign Comprehensive sale Financial Operations Income Assets $ 483,294 $ - $ (102,743) - - - (466,700) - 30,062 (466,700) - 30,062 $ 16,594 $ - $ (72,681) $ (131,037) $ - $ (111,449) - (51,523) 111,449 (131,037) (51,523) - - - - (168,880) (60,864) - (168,880) (60,864) - $ (299,917) $ (112,387) $ -	Total Equity $ 9,713,438 17,184 (436,638) (419,454) $ 9,293,984 $ 9,556,987 59,926 9,616,913 144,491 (229,744) (85,253) $ 9,531,660
	Shares (In Thousands) 417,294 - - - 417,294 417,294 - 417,294 - - - 417,294

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

(With Deloitte & Touche auditors’ review report dated May 11, 2018)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation and amortization expenses Net loss (gain) on fair value change of financial instruments at fair value through profit or loss Interest expense Interest income Dividend income Share of loss of associates accounted for using the equity method Loss on foreign currency exchange Changes in operating assets and liabilities Financial assets mandatorily classified as at fair value through profit or loss Financial assets held for trading Accounts receivable Trade receivables from related parties Prepayments Other current assets Other financial assets Contract liabilities Notes and accounts payable Trade payables to related parties Other payables Advance receipts Other current liabilities Net defined benefit liabilities Cash generated from operations Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of available-for-sale financial assets Acquisition of property, plant and equipment Decrease in other financial assets Decrease (increase) in other non-current assets Increase in prepayments of equipment Interest received Net cash generated from (used in) investing activities		For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ 145,423 195,571 2,078 27,252 (2,484) - 18 60 32,014 - (15,462) (26,698) 1,637 1,406 (26,842) 10,874 15,044 3,976 (18,406) - (3,041) (17,828) 324,592 - 324,592 - (257) 40,633 (7,846) (6,893) 1,507 27,144	2017 $ 20,784 182,532 (28,382) 10,874 (2,841) (5,967) 42 2,063 - 32,047 15,966 (12,945) (15,002) (3,073) (37,739) - (1,916) (4,097) (18,621) 3,941 3,734 (7,463) 133,937 (22) 133,915 (199,990) (14,892) 152,094 19 (110,277) 1,249 (171,797) (Continued)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Repayments of long-term borrowings Increase in other non-current liabilities Interest paid Net cash generated from (used in) financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET DECREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ 529 (436,231) 894 (26,817) (461,625) (5,105) (114,994) 382,811 $ 267,817	2017 $ 259,170 (211,870) 2,984 (10,831) 39,453 (10,696) (9,125) 233,469 $ 224,344

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

(With Deloitte & Touche auditors’ review report dated May 11, 2018)

(Concluded)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

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

Tai Shing Maritime Co., S.A. (Tai Shing) was established in the Republic of Panama, and Shin Wang Maritime Inc. (Shin Wang) was established in Liberia. The Corporation holds a respective 100% interest in Tai Shing and Shin Wang. Tai Shing and Shin Wang mainly engage in the general management, purchasing, sale, charter, and operation of sea navigation routes and in other maritime operations of ships.

The consolidated financial statements of the Corporation and its subsidiaries, collectively referred to as the “Group”, are presented in New Taiwan dollars, the functional currency of the Corporation.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Corporation’s board of directors on May 11, 2018.

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

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

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

1) IFRS 9 “Financial Instruments” and related amendments

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

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

Classification, measurement, and impairment of financial assets

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

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

Financial Asset Cash and cash equivalents Derivatives Equity securities Mutual funds Time deposits with original maturities of more than 3 months Accounts receivable (including related parties) Others financial assets Financial Asset FVTOCI Equity instruments Add: Reclassification from available-for-sale (IAS 39) Amortized cost Add: Reclassification from loa receivables (IAS 39)	Measur	ement Category Carrying Amount IFRS 9 IAS 39 IFRS 9 Remark At amortized cost $ 382,811 $ 382,811 a) s Mandatorily at fair value through profit or loss (i.e. FVTPL) 97,827 97,827 d) At fair value through other comprehensive income (i.e. FVTOCI) - equity instruments 374,141 434,067 b) Mandatorily at FVTPL 32,007 32,007 c) At amortized cost 146,122 146,122 a) At amortized cost 103,994 103,994 a) At amortized cost 30,390 30,390 a) Reclassifi- cation Remea- surement IFRS 9 Carrying Amount as of January 1, 2018 Other Equity Effect on January 1, 2018 Remark $ 374,141 $ 59,926 $ 434,067 $ 59,926 b) 663,317 - 663,317 - a) $ 1,037,458 $ 59,926 $ 1,097,384 $ 59,926
	IAS 39 Loans and receivables At fair value through profit or los Available‑for‑sale Held‑for‑trading Loans and receivables Loans and receivables Loans and receivables IAS 39 Carrying Amount as of January 1, 2018 $ - - ns and - $ -

a) Cash and cash equivalents, accounts receivable (including related parties), time deposits with original maturities of more than 3 months and other financial assets that were previously classified as loans and receivables under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.
b) The Group elected to designate all its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not held for trading. As a result, the related other equity - unrealized loss on available-for-sale financial assets of $(111,449) thousand was reclassified to other equity - unrealized loss on financial assets at FVTOCI.

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

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c) Mutual funds previously classified as held for trading under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments.
d) Mandatory convertible bond investments were designated as at FVTPL under IAS 39 because they were hybrid instruments. They have been classified as mandatorily measured at FVTPL in their entirety under IFRS 9 since they contain host contracts that are assets within the scope of IFRS 9.
2) IFRS 15 “Revenue from Contracts with Customers” and related amendments

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

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

Impact on assets, liabilities, and equity for current period

			Adjustments	Adjustments
			Arising from
	As Originally			Initial
		Stated	Application		Restated
Current liabilities
Contract liabilities	$	-	$	50,833	$	50,833
Advance receipts		50,833		(50,833)		-
Total effect on liabilities	$	50,833	$	-	$	50,833
					March 31,
						2018
Increase in contract liabilities - current					$	60,967
Decrease in advance receipts						(60,967)
Total effect on liabilities					$	-

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

New IFRSs Annual Improvements to IFRSs 2015-2017 Cycle Amendments to IFRS 9 “Prepayment Features with Negative Compensation” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture” IFRS 16 “Leases” IFRS 17 “Insurance Contracts”	Effective Date Announced by IASB (Note 1)
	January 1, 2019 January 1, 2019 (Note 2) To be determined by IASB January 1, 2019 (Note 3) January 1, 2021 (Continued)

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New IFRSs Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” IFRIC 23 “Uncertainty over Income Tax Treatments”	Effective Date Announced by IASB (Note 1)
	January 1, 2019 (Note 4) January 1, 2019 January 1, 2019 (Concluded)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The FSC permits the election for early adoption of the amendments starting from January 1, 2018.
Note 3: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting from January 1, 2019.
Note 4: The Group shall apply these amendments to plan amendments, curtailments, or settlements occurring on or after January 1, 2019.

IFRS 16 “Leases”

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

Under IFRS 16, if the Group is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value asset and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating leases under IAS 17 to low-value asset and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities are classified within financing activities; cash payments for the interest portion are classified within financing activities.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Group as lessor.

When IFRS 16 becomes effective, the Group may elect to apply this standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this standard recognized at the date of initial application.

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

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

These interim consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34 “Interim Financial Reporting” as endorsed and issued into effect by the FSC. Disclosure information included in these interim consolidated financial statements is less than the disclosed information required in a complete set of annual consolidated financial statements.

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.

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

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
3) Level 3 inputs are unobservable inputs on an asset or liability.
c. Classification of current and non-current assets and liabilities

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within 12 months after the reporting period; and
3) Cash and cash equivalents unless an 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.

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d. Basis of consolidation
1) Principles for preparing consolidated financial statements

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

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

All intra-group transactions, balances, income, and expenses are eliminated in full upon consolidation.

2) Subsidiaries included in the consolidated financial statements

The Group holds 100% of the interest of the subsidiaries which are included in the consolidated financial statements. The subsidiaries are Tai Shing and Shin Wang, which are mainly engaged in marine freight transportation services.

e. Foreign currencies

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

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

Non-monetary items 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; and in which case, 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 the transaction.

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

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 the loss of 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 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.

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f. Investments in associates

An associate is an entity over which the Group has significant influence and that 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 measured at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. The Group also recognizes the changes in the Group’s share of the equity of associates attributable to the Group.

When the 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 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 had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for using the equity method is insufficient, the shortage is debited to retained earnings.

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

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

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 its 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. If an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Group continues to apply the equity method and does not remeasure the retained interest.

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

g. Property, plant and equipment

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

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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 their intended use.

Freehold land is not depreciated.

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effect 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 include 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 item of 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

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

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

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

j. Financial instruments

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

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

1) Financial assets

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

a) Measurement categories

2018

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

i. Financial assets at FVTPL

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

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 21.

ii. Financial assets at amortized cost

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

i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, accounts receivable (including related parties) 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.

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

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iii. Investments in equity instruments at FVTOCI

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

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

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

2017

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

i. Financial assets at FVTPL

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

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on their remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial assets. Fair value is determined in the manner described in Note 21.

ii. Held-to-maturity investments

Corporate bonds, which have credit ratings above a specific credit rating and which the Group has a positive intent and ability to hold to maturity, are classified as held-to-maturity investments.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

iii. Available-for-sale financial assets

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

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

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

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

iv. Loans and receivables

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

b) Impairment of financial assets

2018

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

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

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

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

2017

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

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

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

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

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

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

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

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

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

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

c) Derecognition of financial assets

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

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

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

k. Revenue recognition

2018

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

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

Services for ship management, ship chartering and freight transport

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

2017

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

1) Service income

Service income is recognized when services are provided.

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

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2) Dividend and interest income

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

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

l. Leasing

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

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

When the Group acts as lessee, operating lease payments are recognized as expenses on a straight-line basis over the lease terms.

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 services.

2) Retirement benefits

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

Defined benefit costs (including service cost, net interest, and remeasurement) under defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost, past service cost, and gains and losses on settlements) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur, 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.

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

Pension costs for an interim period are calculated on a year-to-date basis using the respective actuarially determined annual pension cost discount rate which is determined at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant plan amendments, settlements, or other significant one-off events.

o. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. Interim period income taxes are assessed on an annual basis and calculated by applying to an interim period’s pre-tax income the tax rate that would be applicable to the expected total annual earnings. The effect of a change in tax rate resulting from a change in the tax law is recognized consistently with the accounting for the transaction itself which gives rise to the tax consequence, and this is recognized in profit or loss in full in the period in which the change in tax rate occurs.

1) Current tax

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

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

2) Deferred tax

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

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

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the 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 profit will be available to allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

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

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3) Current and deferred taxes for the reporting period

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

Assessment of Impairment of Assets

When assessing assets for impairment, the Group relies on subjective judgments, such as the usage of assets and the business environment, to determine expected cash flows, useful lives and future gains and losses generated from these assets. Significant impairment may result from economic changes or changes in the Group’s strategy.

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	March 31, 2018 December 31, 2017 $ 262 $ 262 37,218 32,631 230,337 349,918 $ 267,817 $ 382,811	March 31, 2017 $ 262 27,847 196,235 $ 224,344

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

	March 31,	December 31,	March 31,
	2018	2017	2017
Bank balance	0.01%-2.22%	0.01%-2.50%	0.01%-1.32%

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7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Mutual funds Financial assets at FVTPL-non-current Derivative financial assets Mandatory convertible bonds	March 31, 2018 December 31, 2017 $ - $ 32,007 $ 95,742 $ 97,827	March 31, 2017 $ 10,006 $ 107,208

8. FINANCIAL ASSES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

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.	March 31, 2018 $ 139,365 $ 162,778 75,573 $ 238,351

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

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

December 31, 2017 Current Domestic investments Listed shares $ 151,914 Non-current Domestic investments Private placement listed shares $ 176,327	March 31, 2017 $ - $ 224,035

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

10. ACCOUNTS RECEIVABLE, NET

	March 31,	December 31,	March 31,
	2018	2017	2017
Accounts receivable
At amortized cost
Gross carrying amount	$ 85,135	$ 70,129	$ 83,531
Less: Allowance for impairment loss	2,600	2,600	2,600
	$ 82,535	$ 67,529	$ 80,931

For the three months ended March 31, 2018

No interest was charged on accounts receivable. The Group adopted a policy of only dealing with entities that are rated the equivalent of investment grade or higher and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. Credit rating information is obtained from independent rating agencies where available, or if not available, the Group uses other publicly available financial information or its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored, and the aggregate value of concluded transactions is spread amongst approved counterparties.

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

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

The aging of receivables is as follows:

	March 31,
	2018
Up to 60 days	$ 76,712
61-90 days	8,408
More than 90 days	15
Gross carrying amount	85,135
Loss allowance (lifetime ECLs)	(2,600)
Amortized cost	$ 82,535

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

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

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

For the three months ended March 31, 2017

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

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

For the balances of some accounts receivable that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss because there was no significant change in credit quality and the amounts were still considered recoverable.

The aging of receivables was as follows:

	December 31,	March 31,
	2017	2017
Up to 60 days	$ 54,078	$ 34,332
61-90 days	13,161	43,583
More than 90 days	2,890	5,616
	$ 70,129	$ 83,531

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

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

	December 31,	March 31,
	2017	2017
Up to 30 days	$ 13,161	$ 43,583
31-60 days	883	95
More than 60 days	2,007	5,521
	$ 16,051	$ 49,199

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

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

The Group did not hold any collateral over these balances.

11. OTHER FINANCIAL ASSETS

Time deposits with original maturities of more than 3 months Others	March 31, 2018 December 31, 2017 $ 104,778 $ 146,122 56,991 30,390 $ 161,769 $ 176,512	March 31, 2017 $ 343,487 51,941 $ 395,428

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

	March 31,	December 31,	March 31,
	2018	2017	2017
Time deposits with original maturities of more
than 3 months	1.90%-2.30%	1.55%-2.02%	1%-1.91%

12. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates Associates that are not individually material Yunn Wang Investment Co., Ltd.	March 31, 2018 December 31, 2017 $ 97,900 $ 102,431	March 31, 2017 $ 87,242

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

Refer to Table 5 “Information on Investees” (following these Notes to Consolidated Financial Statements) for the nature of activities, principle place of business and country of incorporation of Yunn Wang.

The share of profit or loss and other comprehensive income of Yunn Wang were calculated based on the financial statements that have not been reviewed.

The aggregate information of associates is as follows:

The Group’s share of: Net loss for the period Other comprehensive income (loss) Total comprehensive income (loss) for the period	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ (18) (4,513) $ (4,531)	2017 $ (42) 6,017 $ 5,975

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13. PROPERTY, PLANT AND EQUIPMENT

Freehold Land Cost Balance at January 1, 2017 $ 191,103 Additions - Disposals - Effects of foreign currency exchange differences - Balance at March 31, 2017 $ 191,103 Accumulated depreciation Balance at January 1, 2017 Disposals Depreciation expenses Effects of foreign currency exchange differences Balance at March 31, 2017 Carrying amounts at March 31, 2017 $ 191,103 Cost Balance at January 1, 2018 $ 191,103 Additions - Effects of foreign currency exchange differences - Balance at March 31, 2018 $ 191,103 Accumulated depreciation Balance at January 1, 2018 Depreciation expenses Effects of foreign currency exchange differences Balance at March 31, 2018 Carrying amounts at January 1, 2018 and December 31, 2017 $ 191,103 Carrying amounts at March 31, 2018 $ 191,103	Buildings Transportation Equipment $ 82,555 $ 16,983,179 - 14,892 - (5,741) - (918,947) $ 82,555 $ 16,073,383 $ 32,927 $ 6,948,614 - (5,741) 428 181,505 - (354,813) $ 33,355 $ 6,769,565 $ 49,200 $ 9,303,818 $ 82,555 $ 18,582,208 - - - (374,795) $ 82,555 $ 18,207,413 $ 34,638 $ 6,308,132 428 194,381 - (117,757) $ 35,066 $ 6,384,756 $ 47,917 $ 12,274,076 $ 47,489 $ 11,822,657	Other Equipment $ 7,617 - - (298) $ 7,319 $ 6,104 - 78 (216) $ 5,966 $ 1,353 $ 12,381 257 (213) $ 12,425 $ 5,738 262 (73) $ 5,927 $ 6,643 $ 6,498	Total $ 17,264,454 14,892 (5,741) (919,245) $ 16,354,360 $ 6,987,645 (5,741) 182,011 (355,029) $ 6,808,886 $ 9,545,474 $ 18,868,247 257 (375,008) $ 18,493,496 $ 6,348,508 195,071 (117,830) $ 6,425,749 $ 12,519,739 $ 12,067,747

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 2-3 years Vehicles and motorcycles 3-8 years Other equipment 4-20 years

Property, plant and equipment pledged as collateral for bank borrowings are set out in Note 23.

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Information about capitalized interest is as follows:

Capitalized interest Range of capitalization rate	For the Three Months Ended March 31
	2018 2017 $ 898 $ 4,561 2.10%-3.02% 1.62%-2.1%

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

Operating costs Operating expenses	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ 194,970 439 $ 195,409	2017 $ 181,840 509 $ 182,349

Amortization expenses related to other non-current assets were as follows:

Operating expenses	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ 162	2017 $ 183

14. INVESTMENT PROPERTIES

Cost Land Buildings Less: Accumulated depreciation - buildings	March 31, 2018 December 31, 2017 $ 1,055,678 $ 1,055,678 121,072 121,072 1,176,750 1,176,750 78,366 78,028 $ 1,098,384 $ 1,098,722	March 31, 2017 $ 1,055,678 121,072
		1,176,750 77,014
		$ 1,099,736

Except for depreciation, the Group did not recognize material additions, disposals, or impairment loss of investment properties during the three months ended March 31, 2018 and 2017.

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

The fair values of the investment properties were $3,505,306 thousand and $3,530,770 thousand as of December 31, 2017 and 2016, respectively. Management of the Group had assessed and determined that there was no significant change in the fair value during the three months ended March 31, 2018 and 2017, respectively.

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

Rental income related to investment properties Operating expenses directly related to investment properties Direct operating expenses from investment properties generating rental income Direct operating expenses from investment properties not generating rental income 15. BORROWINGS a. Short-term borrowings March 31, 2018 Unsecured borrowings Line of credit borrowings $ 370,688 Interest rate range 0.95%-2.48% b. Long-term borrowings March 31, 2018 Secured borrowings Bank loans $ 4,213,961 Interest rate range 2.44%-3.02%	For the Three Months Ended March 31	For the Three Months Ended March 31
	2018 $ 12,569 $ 4,003 109 $ 4,112 December 31, 2017 $ 372,754 0.95%-2.17% December 31, 2017 $ 4,748,871 2.10%-2.46%	2017 $ 11,867 $ 4,833 115 $ 4,948 March 31, 2017 $ 294,170 0.95%-1.58% March 31, 2017 $ 3,056,266 1.77%-1.94%

Secured borrowings include bank loans of the Corporation and project loans for the construction of ships of Tai Shing, whose freehold ships are provided as collateral (refer to Note 23), which have principal and interest amortized on a monthly, quarterly and semi-annual basis and which are expected to be paid off in October 2027. Tai Shing paid off a portion of the principal due in October 2020 as of March 31, 2018.

16. RETIREMENT BENEFIT PLANS

Employee benefits expense in respect of the Group’s defined retirement benefit plans were $811 thousand and $719 thousand for the three months ended March 31, 2018 and 2017, respectively, and were calculated using the respective actuarially determined annual pension cost discount rate as of December 31, 2017 and 2016.

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The details of employee benefits expense were as follow:

Post-employment benefits Defined contribution plans Defined benefit plans Other employee benefits An analysis of employee benefits expense by function Operating costs Operating expenses	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ 2,458 811 3,269 178,785 $ 182,054 $ 162,203 19,851 $ 182,054	2017 $ 1,951 719 2,670 164,012 $ 166,682 $ 152,377 14,305 $ 166,682

Employee’s compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of the Corporation, the Corporation accrued employees’ compensation at the rates of no less than 0.5% and remuneration of directors and supervisors at rates of no higher than 1.5%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors and supervisors. For the three months ended March 31, 2018, the employees’ compensation and the remuneration of directors and supervisors was $976 thousand and accrued at a rate of 1%.

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

The appropriation of employees’ compensation and remuneration of directors and supervisors for 2017, which were resolved by the board of directors in March 2018, was as follows:

Amount

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

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

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

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

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the Corporation’s board of directors in 2017 and 2016 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

17. EQUITY

a. Ordinary shares

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

Fully paid ordinary shares, which have a par value of $10, carry one vote per share and carry a right to dividends.

b. Capital surplus

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

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

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c. Retained earnings and dividends policy

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

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

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

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

The appropriation of earnings for 2017, which were proposed by the Corporation’s board of directors in May 2018, was as follows:

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

The appropriation of earnings for 2017 is subject to resolution in shareholders’ general meeting to be held in June 2018.

18. INCOME TAX

a. Income tax recognized in profit or loss

Major components of income tax expense were as follows:

Current tax In respect of the current period Deferred tax In respect of the current period Adjustments to deferred tax attributable to changes in tax rates and laws Income tax expense recognized in profit or loss	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ - 32 900 $ 932	2017 $ 4,109 (509) - $ 3,600

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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. The effect of the change in tax rate on deferred tax expense to be recognized in profit or loss is recognized in full in the period in which the change in the tax rate occurs. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5%.

b. Income tax return assessments

The income tax returns of the Corporation through 2016 have been assessed by the tax authorities. The income tax returns of Tai Shing through 2015 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 Three Months Ended March 31	Unit: NT$ Per Share For the Three Months Ended March 31	Unit: NT$ Per Share For the Three Months Ended March 31
		2018 $ 0.35 $ 0.35	2017 $ 0.04 $ 0.04

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

Net Profit for the Period

Earnings used in the computation of basic earnings per share	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ 144,491	2017 $ 17,184

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

Weighted average number of ordinary shares in computation of basic earnings per share Effect of potentially dilutive ordinary shares: Bonuses issued to employees Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 417,294 355 417,649	2017 417,294 - 417,294

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

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20. CAPITAL MANAGEMENT

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

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

21. 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

March 31, 2018 Financial assets at FVTPL Derivative financial assets Financial assets at FVTOCI Investments in equity instruments Listed shares - ROC Unlisted shares - ROC December 31, 2017 Financial assets at FVTPL Derivative financial assets Non-derivative financial assets held for trading Available-for-sale financial assets Investments in equity instruments Listed shares - ROC	Level 1 $ - $ 139,365 - $ 139,365 Level 1 $ - 32,007 $ 32,007 $ 151,914	Level 2 $ 95,742 $ 162,778 - $ 162,778 Level 2 $ 97,827 - $ 97,827 $ 176,327	Level 3 $ - $ - 75,573 $ 75,573 Level 3 $ - - $ - $ -	Total $ 95,742 $ 302,143 75,573 $ 377,716 Total $ 97,827 32,007 $ 129,834 $ 328,241

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March 31, 2017

Financial assets at FVTPL Derivative financial assets Non-derivative financial assets held for trading Available-for-sale financial assets Investments in equity instruments Listed shares - ROC	Level 1 $ - 10,006 $ 10,006 $ -	Level 2 $ 107,208 - $ 107,208 $ 224,035	Level 3 $ - - $ - $ -	Total $ 107,208 10,006 $ 117,214 $ 224,035

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

2) Valuation techniques and inputs applied for Level 2 fair value measurement
a) Derivative financial assets with no market price available for reference of their fair values have their fair values estimated using the mandatory convertible bonds’ evaluation model. The estimations and assumptions used by the Group for the evaluation method are consistent with those used by market participants in the pricing of financial instruments.
b) Domestic listed private shares with no market price available for reference of their fair values have their fair values estimated using the evaluation method. The estimations and assumptions used by the Group for the evaluation method are consistent with those used by market participants in the pricing of financial instruments. The relevant information used in the evaluation was obtainable by the Corporation.

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

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

Unlisted equity securities - ROC held by the Corporation are mainly investment in domestic listed shares. 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 March 31, 2018. If the discount rate for lack of marketability were to increase/decrease by 1% and all other variables were held constant, the fair value would decrease/increase by $7,376 thousand.

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c. Categories of financial instruments

	March 31,	March 31,	December	December	31,
		2018		2017		March 31, 2017
Financial assets
Financial assets at FVTPL
Held for trading	$	-	$	32,007		$	10,006
Designated as at FVTPL		-		97,827			107,208
Mandatorily at FVTPL		95,742			-		-
Loans and receivables (Note 2)		-		663,317			772,865
Available-for-sale financial assets (Note 1)		-		374,141			269,935
Financial assets at amortized cost (Note 3)		574,931			-		-
Financial assets at FVTOCI
Equity instruments		377,716			-		-
Financial liabilities
Financial liabilities at amortized cost (Note 4)		4,864,151		5,403,747			3,581,135

Note 1: The balances include the carrying amount of available-for-sale financial assets measured at cost.
Note 2: The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, accounts receivable, trade receivables from related parties, and other financial assets.
Note 3: The balances include financial assets measured at amortized cost, which comprise cash and cash equivalents, accounts receivable, trade receivables from related parties, and other financial assets.
Note 4: The balances include financial liabilities measured at amortized cost, which comprise short-term borrowings, notes and accounts payable, trade payables to related parties, other payables, and long-term borrowings (current portion included).

d. Financial risk management objectives and policies

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

1) Market risk

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

a) Foreign currency risk

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) are set out in Note 25.

Sensitivity analysis

The Group was mainly exposed to the U.S. dollar (USD).

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

Loss	USD Impact on NTD	USD Impact on NTD	USD Impact on NTD
	For the Three Months Ended March 31
		2018 $ (3,624)	2017 $ (2,862)

b) Interest rate risk

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

			December 31,	December 31,
	March 31, 2018			2017	March 31, 2017
Fair value interest rate risk
Financial assets	$	95,742	$	97,827	$	107,208
Cash flow interest rate risk
Financial assets		23,132		21,960		20,128
Financial liabilities		4,584,649		5,121,625		3,350,436

Sensitivity analysis

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

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

If interest rates had been 1% increase and decrease and all other variables were held constant, the Group’s pre-tax profit for the three months ended March 31, 2018 and 2017 would have decreased/increased by $11,404 thousand and $8,326 thousand, respectively, which would be mainly attributable to the Group’s exposure to interest rates on its variable-rate bank borrowings.

c) Other price risk

The Group was exposed to equity price risk on its investments in mutual funds and listed shares.

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Sensitivity analysis

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

If equity prices had been 5% higher/lower, the pre-tax other comprehensive income for the three months ended March 31, 2018 would have increased/decreased by $18,886 thousand, as a result of the changes in fair value of financial assets at FVTOCI.

If equity prices had been 5% higher/lower, pre-tax profit for the three months ended March 31, 2017 would have increased/decreased by $500 thousand, as a result of the changes in fair value of held-for-trading investments, and the pre-tax other comprehensive income for the three months ended March 31, 2017 would have increased/decreased by $11,202 thousand, as a result of the changes in fair value of available-for-sale shares.

2) Credit risk

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

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

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

3) Liquidity risk

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

The Group relies on bank borrowings as a significant source of liquidity. As of March 31, 2018, December 31, 2017, and March 31, 2017, the Group had available unutilized short-term bank loan facilities of $399,200 thousand, $549,485 thousand, and $204,595 thousand, respectively.

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 was drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.

March 31, 2018

On Demand or Less than 1 Year Variable interest rate liabilities $ 375,827	1-3 Years $ 688,581	3-5 Years $ 1,458,581	5+ Years $ 2,174,778

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December 31, 2017

On Demand or Less than 1 Year Variable interest rate liabilities $ 377,862 March 31, 2017 On Demand or Less than 1 Year Variable interest rate liabilities $ 297,528	1-3 Years $ 962,313 1-3 Years $ 677,407	3-5 Years $ 1,509,766 3-5 Years $ 984,553	5+ Years $ 2,380,795 5+ Years $ 1,450,220

22. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Corporation and its subsidiaries, which are related parties of the Corporation, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below:

a. Names and categories of the related parties

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

b. Operating transactions

Operating revenue Government - related parties Yang Ming Associates Others Operating costs Government and its subsidiaries - related parties Yang Ming Others	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ 63,664 29 $ 63,693 $ 65,642 270 $ 65,912	2017 $ 73,891 29 $ 73,920 $ 64,350 334 $ 64,684

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

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

	March 31,	December 31,	March 31,
	2018	2017	2017
Government - related parties
Yang Ming	$ 62,810	$ 36,465	$ 72,162

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

	March 31,	March 31,	December 31,	December 31,	March 31,	March 31,
		2018		2017		2017
Government - related parties
Others	$	1,407	$	666	$	1,757
At the end of reporting period, trade payables to related parties were as follows:
	March 31,		December 31,		March 31,
		2018		2017		2017
Government - related parties
Yang Ming	$	37,898	$	34,123	$	18,139
Others		-		203		-
	$	37,898	$	34,326	$	18,139

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

c. Other transactions with government - related parties

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

In February 2017, the Corporation purchased 19,083 thousand shares of private ordinary shares issued by Yang Ming for $199,990 thousand (classified as at FVTOCI - non-current as of March 31, 2018 and as available-for-sale financial assets - non-current as of December 31, 2017 and March 31, 2017, respectively), and the rights and obligations of the private 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 private 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.

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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 of March 31, 2018 and as available-for-sale financial assets - current as of December 31, 2017 and March 31, 2017, respectively, as the Group did not have any significant influence over Yang Ming.

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

Associates (management service revenue) Others	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ 29	2017 $ 29

e. Compensation of key management personnel

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

Short-term employee benefits Post-employment benefits	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2018 $ 5,099 250 $ 5,349	2017 $ 3,212 53 $ 3,265

23. 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)	March 31, 2018 December 31, 2017 $ 9,234,574 $ 9,543,458 242,964 240,281 $ 9,477,538 $ 9,783,739	March 31, 2017 $ 5,959,506 250,620 $ 6,210,126

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24. SIGNIFICANT UNRECOGNIZED COMMITMENTS

a. Significant unrecognized commitments of the Group as of March 31, 2018 were as follows:
1) Aggregate information of the Group entering into ship management agreements with other entities is stated below:

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

2) In May 2017, the board of directors of the subsidiary Tai Shing resolved to build two 62,000-ton bulk carriers with Oshima Shipbuilding Co., Ltd., each of which cost US$25,500 thousand. As of the date on which these consolidated financial statements were reviewed, the unpaid amount was US$43,290 thousand. The parent company is Tai Shing’s guarantor.
b. Significant unrecognized commitments of the Group as of December 31, 2017 were as follows:
1) Aggregate information of the Group entering into ship management agreements with other entities is stated below:

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

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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 of which cost US$25,500 thousand. As of the date of the independent auditors’ report for the consolidated financial statements for the year ended December 31, 2017, the unpaid amount was US$43,290 thousand. The parent company is Tai Shing’s guarantor.
c. Significant unrecognized commitments of the Group as of March 31, 2017 were as follows:
1) Aggregate information of the Group entering into ship management agreements with other entities is stated below:

Calculation and Fee Collection Ship Date of Agreement Method CPC Corporation, Taiwan YUN AN I. II. III. V. VI 2015.05.16-2018.05.15 Basic fees of ship management were $1,400 thousand per month with additional bonuses and with collection on a monthly basis. TAI CHIN 201, 202, 2007.02.10-2032.12.31 The fee was $347 thousand per day with 203 and 205 collection on a monthly basis. HONG YUN and 2017.01.05-2023.01.24 Basic fees of ship management were $112 SHENH YUN thousand for each ship per day, calculated by day, with collection on a monthly basis. Taiwan Power Company TAIPOWER 2011.05.19-2017.10.16 Basic fees of ship management were $133 PROSPERITY VI and thousand for each ship per day, TAIPOWER calculated by day, with collection on a PROSPERITY VIII monthly basis.

2) In February 2014, the Corporation’s subsidiary, Tai Shing, entered into a construction contract with Oshima Shipbuilding Co., Ltd. to build two 82,000-ton bulk carriers and two 84,000-ton bulk carriers, with each 82,000-ton bulk carrier and each 84,000-ton bulk carrier costing US$31,650 thousand and US$33,450 thousand, respectively. As of the date on which the consolidated financial statements for the three months ended March 31, 2017 were reviewed, the unpaid amount was US$91,140 thousand. The parent company is Tai Shing’s guarantor.
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25. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

March 31, 2018

Foreign Currencies (In Thousands) Exchange Rate Financial assets Monetary items USD $ 8,267 29.105 (USD:NTD) Financial liabilities Monetary items USD $ 2,040 29.105 (USD:NTD) December 31, 2017 Foreign Currencies (In Thousands) Exchange Rate Financial assets Monetary items USD $ 9,002 29.76 (USD:NTD) Financial liabilities Monetary items USD $ 2,334 29.76 (USD:NTD) March 31, 2017 Foreign Currencies (In Thousands) Exchange Rate Financial assets Monetary items USD $ 6,444 30.33 (USD:NTD) Financial liabilities Monetary items USD $ 1,725 30.33 (USD:NTD)	Carrying Amount $ 240,612
	$ 59,387
	Carrying Amount $ 267,889
	$ 69,456
	Carrying Amount $ 195,433
	$ 52,324

For the three months ended March 31, 2018 and 2017, net foreign exchange losses were $4,622 thousand and $8,641 thousand, respectively, resulting from the fluctuation of the USD.

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26. 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)

27. SEGMENT 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.

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TABLE 1

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE THREE MONTHS ENDED MARCH 31, 2018 (New Taiwan Dollars/U.S. Dollars in Thousands)

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limit on Endorsement/ Guarantee Given on Behalf of Each Party (Notes 1 and 2)	Maximum Amount Endorsed/ Guaranteed During the Period (Note 2)	Outstanding Endorsement/ Guarantee at the End of the Period (Note 2)	Actual Borrowing Amount (Note 2)	Amount Endorsed/ Guaranteed by Collaterals (Note 2)	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit (Notes 1 and 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiary	Endorsement/ Guarantee Given by Subsidiary on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Company in Mainland China	Note
		Name	Relationship
0	Taiwan Navigation	Tai Shing	Subsidiary	$ 8,345,890	$ 6,390,942 (US$ 219,582)	$ 6,390,942 (US$ 219,582)	$ 5,581,605 (US$ 191,775)	$ 5,581,605 (US$ 191,775)	67.0	$ 8,345,890	Yes	-	-	-
1	Tai Shing	Taiwan Navigation	Parent	6,833,043 (US$ 234,772)	319,486 (US$ 10,977)	235,605 (US$ 8,095)	232,549 (US$ 7,990)	232,549 (US$ 7,990)	3.1	6,833,043 (US$ 234,772)	-	Yes	-	-

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

Note 2: Translated at the exchange rate on March 31, 2018, US$1=NT$29.105.

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TABLE 2

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

Holding Company Name	Type and Name/Issuer of Marketable Security	Relationship with the Holding Company	Financial Statement Account		March 31, 2018	March 31, 2018		Note
				Number of Shares (In Thousands)	Carrying Amount	Percentage of Ownership (%)	Fair Value
Taiwan Navigation Co., Ltd.	Mandatorily convertible bonds Yang Ming Shares Chunghwa Investment Co., Ltd. Private placement listed shares Yang Ming Listed shares Yang Ming	More than half of directors assigned by the Ministry of Transportation and Communications - More than half of directors assigned by the Ministry of Transportation and Communications More than half of directors assigned by the Ministry of Transportation and Communications	Financial assets at fair value through profit or loss - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current	- 4,590 19,083 13,210	$ 95,742 75,573 162,778 139,365	- 6.00 0.82 0.57	$ 95,742 75,573 162,778 139,365

Note: See Table 5 for the information on investments in subsidiaries and associates.

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TABLE 3

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

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

(In Thousands of New Taiwan Dollars)

Seller/Buyer	Related Party	Relationship		Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% of Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total (Note 1)
Tai Shing Shin Wang	Shin Wang Tai Shing	The same parent company The same parent company	Rental revenue Rental expense	$ (141,597) 141,597	(26) 96	By negotiations By negotiations	$ - -	- -	$ 49,067 (49,067)	83 (100)	(Note 2) (Note 2)

Note 1: The proportion of the individual related party’s total receivables (payables).

Note 2: Eliminated upon consolidation.

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TABLE 4

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE THREE MONTHS ENDED MARCH 31, 2018 (In Thousands of New Taiwan Dollars)

No.	Company Name	Related Party	Relationship			Transaction Details
				Financial Statement Account	Amount	Payment Terms	% of Total Sales or Assets
1	Tai Shing	Taiwan Navigation Co., Ltd. Shin Wang	Parent The same parent company	Operating revenue - rental Trade receivables from related parties Operating revenue - rental Trade receivables from related parties	$ 37,701 10,208 141,597 49,067	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 payment terms were based on agreements The rental of 6 ships in total was calculated for each ship at $2-14 thousand per day and was collected on a monthly basis. The payment terms were based on agreements	5 - 18 -

Note: Eliminated upon consolidation.

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TABLE 5

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE THREE MONTHS ENDED MARCH 31, 2018 (In Thousands of New Taiwan Dollars)

Investor Company	Investee Company	Location	Main Business and Products	Investment Amount	Investment Amount	As of March 31,	As of March 31,	2018	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2017	March 31, 2018	Number of Shares (In Thousands)	%	Carrying Amount
Taiwan Navigation Co., Ltd.	Tai Shing Shin Wang Yunn Wang	Panama City, Panama Monrovia City, Liberia Taipei	Rental and sale of ships Rental and sale of ships Investment	$ 3,921,447 32,500 41,861	$ 3,921,447 32,500 41,861	- - 5,211	100.00 100.00 49.75	$ 7,535,822 29,821 97,900	$ 156,881 34 (37)	$ 156,881 34 (18)	Note Note

Note: Eliminated upon consolidation.

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AI assistant

TNC — Interim / Quarterly Report 2018

52171_rns_2018-11-14_360d5082-57dd-4d33-9150-ba78d403f904.pdf

Taiwan Navigation Co., Ltd. and Subsidiaries

INDEPENDENT AUDITORS’ REVIEW REPORT

Introduction

Scope of Review

Basis for Qualified Conclusion

Qualified Conclusion

Notice to Readers

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

1. GENERAL INFORMATION

2. APPROVAL OF FINANCIAL STATEMENTS

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

1) IFRS 9 “Financial Instruments” and related amendments

Classification, measurement, and impairment of financial assets

Impact on assets, liabilities, and equity for current period

IFRS 16 “Leases”

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

f. Investments in associates

g. Property, plant and equipment

1) Financial assets

a) Measurement categories

2018

iii. Investments in equity instruments at FVTOCI

2017

iv. Loans and receivables

2018

2017

c) Derecognition of financial assets

k. Revenue recognition

2017

1) Service income

l. Leasing

m. Borrowing costs

o. Taxation

1) Current tax

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Assessment of Impairment of Assets

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

8. FINANCIAL ASSES AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

10. ACCOUNTS RECEIVABLE, NET

11. OTHER FINANCIAL ASSETS

12. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

13. PROPERTY, PLANT AND EQUIPMENT

14. INVESTMENT PROPERTIES

16. RETIREMENT BENEFIT PLANS

Amount

17. EQUITY

b. Capital surplus

c. Retained earnings and dividends policy

18. INCOME TAX

b. Income tax return assessments

19. EARNINGS PER SHARE

Net Profit for the Period

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

20. CAPITAL MANAGEMENT

21. FINANCIAL INSTRUMENTS

March 31, 2017

c. Categories of financial instruments

d. Financial risk management objectives and policies

1) Market risk

a) Foreign currency risk

Sensitivity analysis

b) Interest rate risk

TNC Interim / Quarterly Report 2018