TNC - Interim / Quarterly Report 2019

Taiwan Navigation Co., Ltd. and Subsidiaries

Consolidated Financial Statements for the Three Months Ended March 31, 2019 and 2018 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, 2019 and 2018, 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 11 to the consolidated financial statements, as of March 31, 2019 and 2018, investments accounted for using the equity method were NT$110,998 thousand and NT$97,900 thousand, respectively, and for the three months ended March 31, 2019 and 2018, net comprehensive loss recognized from these equity-method investments was NT$4,003 thousand and NT$4,531 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, 2019 and 2018 and its consolidated financial performance and its consolidated cash flows for the three months then ended March 31, 2019 and 2018 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 Hui-Min Huang and Chih-Ming Shao.

Deloitte & Touche Taipei, Taiwan Republic of China

May 15, 2019

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance, and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures, and practices to 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 6) Financial assets at fair value through profit or loss (Notes 7 and 23) Financial assets at fair value through other comprehensive income (Notes 8 and 23) Accounts receivable, net (Notes 9) Trade receivables from related parties (Notes 23) Prepayments (Note 23) Other financial assets (Notes 10) Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss (Notes 7 and 23) Financial assets at fair value through other comprehensive income (Notes 8 and 23) Investments accounted for using the equity method (Notes 11) Property, plant and equipment (Notes 12 and 24) Investment properties (Notes 13) Prepayments for equipment (Note 25) Other non-current assets (Note 24) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 14) Contract liabilities (Note 17) Notes and accounts payable Trade payables to related parties (Note 23) Other payables Current tax liabilities (Notes 4 ) Other current liabilities Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 14 and 24) 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 16) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity attributable to owners of the Corporation Total equity TOTAL		March 31, 2019 (Reviewed) Amount % $ 590,644 4 75,609 - 114,265 1 91,771 1 33,130 - 115,421 1 217,652 1 21,492 - 1,259,984 8 - - 236,683 1 110,998 1 11,721,781 77 1,097,032 7 556,823 4 256,561 2 13,979,878 92 $ 15,239,862 100 $ 520,709 3 41,390 - 121,737 1 12,403 - 118,185 1 23,753 - 24,569 - 862,746 5 3,399,587 22 288,679 2 67,354 1 15,829 - 3,771,449 25 4,634,195 30 4,172,945 28 334,382 2 1,664,599 11 242,486 1 4,207,538 28 6,114,623 40 (16,283) - 10,605,667 70 10,605,667 70 $ 15,239,862 100		December 31, 2018 (Audited) Amount % $ 478,550 3 76,777 1 116,247 1 69,249 - 59,043 - 117,382 1 319,880 2 18,611 - 1,255,739 8 - - 241,601 2 115,001 1 11,863,484 78 1,097,370 7 306,899 2 255,807 2 13,880,162 92 $ 15,135,901 100 $ 557,322 4 45,905 - 137,399 1 26,430 - 144,933 1 4,011 - 23,806 - 939,806 6 3,388,005 22 303,556 2 68,813 1 15,729 - 3,776,103 25 4,715,909 31 4,172,945 28 334,382 2 1,664,599 11 242,486 1 4,040,448 27 5,947,533 39 (34,868) - 10,419,992 69 10,419,992 69 $ 15,135,901 100		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 9,313 - 11,485 - 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

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

(With Deloitte & Touche auditors’ review report dated May 15, 2019)

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, 13,17 and 23) OPERATING COSTS (Notes 4,12,13,15 and 23) GROSS PROFIT OPERATING EXPENSES (Notes 12 and 15) PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Interest income Other income (Note 23) Net gain (loss) on foreign currency exchange Interest expense (Notes 12 ) Other expenses Net loss on financial assets at fair value through profit or loss Total non-operating income and expenses INCOME BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 18) NET INCOME FOR THE PERIOD OTHER COMPREHENSIVE INCOME (LOSS) 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 11)		For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31	For the Three Months Ended March 31
		2019	% 100 73 27 5 22 1 4 - (4) - - 1 23 1 22 (1) - (1)		2018
		Amount $ 748,799 547,600 201,199 33,089 168,110 7,227 27,039 54 (27,797) (1,375) (1,168) 3,980 172,090 5,000 167,090 ($ 6,900) ( 4,011) ( 10,911)			Amount $ 797,254 604,864 192,390 28,751 163,639 2,484 14,643 (4,622) (27,252) (1,391) (2,078) (18,216) 145,423 932 144,491 ($ 56,351) ( 4,513) ( 60,864)	% 100 76 24 4 20 - 2 (1) (3) - - (2) 18 - 18 (7) (1) (8)

(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)

For the Three Months Ended March 31	For the Three Months Ended March 31
2019 Amount % 29,496 4 18,585 3 $ 185,675 25 $ 167,090 22 - - $ 167,090 22 $ 185,675 25 - - $ 185,675 25 $ 0.40 $ 0.40	2018
	Amount ( 168,880) ( 229,744) ($ 85,253) $ 144,491 - $ 144,491 ($ 85,253) - ($ 85,253) $ 0.35 $ 0.35	% (21) (29) (11) 18 - 18 (11) - (11)
	(
$	($
$	$
$	$
$	($
$	($

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

(With Deloitte & Touche auditors’ review report dated May 15, 2019)

(Concluded)

(Reviewed, Not Audited)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars)

Ordinary Shares Shares (In Thousands) Amount 417,294 $ 4,172,945 - - 417,294 4,172,945 - - - - - - 417,294 $ 4,172,945 417,294 $ 4,172,945 - - - - - - 417,294 $ 4,172,945		Retained Earnings
			(
Shares (In Thousands) 417,294 - 417,294 - - - 417,294 417,294 - - - 417,294	Legal Reserve $ 1,617,952 - 1,617,952 - - - $ 1,617,952 $ 1,664,599 - - - $ 1,664,599	Special Reserve $ - - - - - - - $ 242,486 - - - $ 242,486
			( ( ( (

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

(With Deloitte & Touche auditors’ review report dated May 15, 2019)

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 Net loss on fair value change of financial instruments at fair value through profit or loss Interest expense Interest income Share of loss (profit) of associates accounted for using the equity method Unrealized loss on foreign currency exchange Changes in operating assets and liabilities Financial assets mandatorily classified as at fair value through profit or loss Accounts receivable Trade receivables from related parties Prepayments Other current assets Other financial assets Contract liabilities Notes and accounts payable Trade payables to related parties Other payables 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 Acquisition of property, plant and equipment Decrease in other financial assets 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
	( ( ( ( ( ( ( ( ( ( ( ( (	2019 $ 172,090 181,351 1,168 27,797 7,227 ) 8 ) 99 - 22,570 ) 25,863 2,232 2,097 ) 34,991 ) 4,622 ) 16,116 ) 14,060 ) 27,222 ) 747 1,459) 280,975 152) 280,823 - 138,681 - 250,327 ) 6,485 105,161)	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 (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 (decrease)in short-term borrowings Repayments of long-term borrowings Increase in other non-current liabilities Interest paid Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE 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
	( ( (	2019 $ 37,144 ) - 100 27,485) 64,529) 961 112,094 478,550 $ 590,644	2018 $ 529 (436,231) 894 (26,817) (461,625) (5,105) (114,994) 382,811 $ 267,817

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

(With Deloitte & Touche auditors’ review report dated May 15, 2019)

(Concluded)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018 (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 15, 2019.

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

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of 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:

IFRS 16 “Leases”

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

Definition of a lease

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

The Group as lessee

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

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

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

The Group also applies the following practical expedients:

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

The initial application of IFRS 16 has no material impact on the Group’s assets, liabilities and equity as of January 1, 2019. The difference of the operating lease commitments disclosed under IAS 17 on December 31, 2018 is explained as follows:

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

The Group as lessor

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

10 -
b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

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

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.
Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

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

.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

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.
11 -
c. 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.

d. Other significant accounting policies

Except for the policies related to leases and the policies explained as follows, please refer to the summary of significant accounting policies of 2018 Consolidated Financial Statements.

1) Leases

2019

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

(1)The Group as lessor

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.

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

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

(2)The Group as lessee

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

2018

All the leases are classified as operating leases.

(1)The Group as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. (2)The Group as lessee

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

12 -

2) Retirement benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate 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.

3) 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 expected total annual earnings. The effect of a change in tax rate resulting from a change in 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.

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.

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, 2019 December 31, 2018 $ 262 $ 262 32,108 37,128 558,274 441,160 $ 590,644 $ 478,550	March 31, 2018 $ 262 37,218 230,337 $ 267,817

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

	March 31,	December 31,	March 31,
	2019	2018	2018
Bank balance	0.01%-2.82%	0.01%-3.30%	0.01%-2.22%

13 -

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets mandatorily classified as at FVTPL- current Mandatory convertible bonds Financial assets mandatorily classified as at FVTPL- non-current Mandatory convertible bonds	March 31, 2019 December 31, 2018 $ 75,609 $ 76,777 $ - $ -	March 31, 2018 $ -
		$ 95,742

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Current Domestic investments Listed shares Yang Ming Marine Transport Corporation Non-current Domestic investments Private placement listed shares Yang Ming Marine Transport Corporation Unlisted shares Chunghwa Investment Co., Ltd. Foreign investments Unlisted shares Taiwan Foundation International Pte. Ltd.	March 31, 2019 December 31, 2018 $ 114,265 $ 116,247 $ 148,084 $ 145,794 42,307 49,943 190,391 195,737 46,292 45,864 $ 236,683 $ 241,601	March 31, 2018 $ 139,365
		$ 162,778 75,573
		238,351
		-
		$ 238,351

The Group’s investments in the ordinary shares mentioned above are expected to earn profit through dividend income. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes.

9. ACCOUNTS RECEIVABLE, NET

Accounts receivable At amortized cost Gross carrying amount Less: Allowance for impairment loss	March 31, 2019 December 31, 2018 $ 94,371 $ 71,849 2,600 2,600 $ 91,771 $ 69,249	March 31, 2018 $ 85,135 2,600 $ 82,535

14 -

The Group applies the approach, 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:

Up to 60 days 61-90 days More than 90 days Gross carrying amount Loss allowance (lifetime ECLs) Amortized cost	March 31, 2019 December 31, 2018 $ 79,007 $ 64,546 8,738 4,015 6,626 3,288 94,371 71,849 (2,600) (2,600) $ 91,771 $ 69,249	March 31, 2018 $ 76,712 8,408 15 85,135 (2,600) $ 82,535

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

As of March 31, 2019,December 31, 2018 and March 31, 2018, the amounts of the allowances for impairment loss assessed for were $2,600 thousand.

10. OTHER FINANCIAL ASSETS

Time deposits with original maturities of more than 3 months Others	March 31, 2019 December 31, 2018 $ 139,337 $ 276,589 78,315 43,291 $ 217,652 $ 319,880	March 31, 2018 $ 104,778 56,991 $ 161,769

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,
2019	2018	2018
2.75%-3.10%	2.56%-3.15%	1.90%-2.30%

15 -

11. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates Associates that are not individually material Yunn Wang Investment Co., Ltd.	March 31, 2019 December 31, 2018 $ 110,998 $ 115,001	March 31, 2018 $ 97,900

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

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

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

The aggregate information of associates is as follows:

The Group’s share of: Net profit (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
		2019 $ 8 (4,011) $ (4,003)	2018 $ (18) (4,513) $ (4,531)

16 -

12. PROPERTY, PLANT AND EQUIPMENT

Assets used by the Group Assets leased under operating leases		March 31, 2019
		$ 674,555 11,047,226 $ 11,721,781

a. Assets used by the Group - 2019

Freehold Land Cost Balance at January 1, 2019 $ 191,103 Disposals - Balance at March 31, 2019 $ 191,103 Accumulated depreciation Balance at January 1, 2019 Disposals Depreciation expenses Balance at March 31, 2019 Carrying amounts at December 31, 2018 and January 1, 2019 $ 191,103 Carrying amounts at March 31, 2019 $ 191,103	Buildings Transportation Equipment $ 82,555 $ 1,553,872 - - $ 82,555 $ 1,553,872 $ 36,350 $ 1,107,481 - - 428 9,544 $ 36,778 $ 1,117,025 $ 46,205 $ 446,391 $ 45,777 $ 436,847	Other Equipment $ 3,737 (181) $ 3,556 $ 2,824 (181) 85 $ 2,728 $ 913 $ 828	Total $ 1,831,267 (181) $ 1,831,086
			$ 1,146,655 (181) 10,057 $ 1,156,531
			$ 684,612
			$ 674,555

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

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

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

b. Assets leased under operating leases - 2019

Cost Balance at January 1, 2019 Effects of foreign currency exchange differences Balance at March 31, 2019 Accumulated depreciation Balance at January 1, 2019 Depreciation expenses Effects of foreign currency exchange differences Balance at March 31, 2019 Carrying amounts at December 31, 2018 and January 1, 2019 Carrying amounts at March 31, 2019	Transportation Equipment $ 15,724,581 53,754 $ 15,778,335 $ 4,565,273 169,917 14,620 $ 4,749,810 $ 11,159,308 $ 11,028,525	Other Equipment $ 22,859 79 $ 22,938 $ 3,295 936 6 $ 4,237 $ 19,564 $ 18,701		Total $ 15,747,440 53,833
				$ 15,801,273
				$ 4,568,568 170,853 14,626
				$ 4,754,047
				$ 11,178,872
				$ 11,047,226

17 -

The group of operating leases relate to leases of bulk vessel base on the change of index or the fixed payment , and there is an option to extend for another years during lease period. Parts of operating lease contracts contain market review clauses in the event that the lessees exercise their options to extend. The lessees do not have bargain purchase options to acquire the assets at the expiry of the lease periods.

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

Year 1 Year 2	March 31, 2019 $ 1,270,015 309,440 $ 1,579,455

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

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

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

c. 2018 Freehold Land Cost Balance at January 1, 2018 $ 191,103 Disposals - 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 March 31, 2018 $ 191,103	Buildings Transportation Equipment $ 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 $ 47,489 $ 11,822,657	Other Equipment $ 12,381 257 (213) $ 12,425 $ 5,738 262 (73) $ 5,927 $ 6,498	Total $ 18,868,247 257 (375,008)
			$ 18,493,496 $ 6,348,508 195,071 (117,830)
			$ 6,425,749 $ 12,067,747

The group leases bulk vessel as operating leases, and there is an option to extend for another years during lease period. Parts of operating lease contracts contain market review clauses in the event that the lessees exercise their options to extend. The lessees do not have bargain purchase options to acquire the assets at the expiry of the lease periods.

The future minimum lease payments of non-cancellable operating leases were as follows:

December 31, 2018 Not later than 1 year $ 1,227,345 Later than 1 year and not later than 5 years 185,348 $ 1,412,693	March 31, 2018 $ 1,372,555 331,371 $ 1,703,926

18 -

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 24.

Information about capitalized interest is as follows:

Capitalized interest Range of capitalization rate		For the Three Months Ended March 31
	2019 2018 $ 3,557 $ 898 3.03%-3.57% 2.10%-3.02%

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
		2019 $ 180,741 507 $ 181,248	2018 $ 194,970 439 $ 195,409

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

Operating expenses 13. INVESTMENT PROPERTIES Cost Land Buildings Less: Accumulated depreciation - buildings	March 31, 2019 $ 1,055,678 120,895 1,176,573 79,541 $ 1,097,032		For the Three Months Ended March 31	For the Three Months Ended March 31
			2019 $ 103 December 31, 2018 $ 1,055,678 120,895 1,176,573 79,203 $ 1,097,370	2018 $ 162 March 31, 2018 $ 1,055,678 121,072 1,176,750 78,366 $ 1,098,384

The abovementioned investment properties were leased out for 1 to 18 years. The lease contracts contain market review clauses in the event that the lessees exercise their options to extend. The lessees do not have bargain purchase

19 -

options to acquire the investment properties at the expiry of the lease periods.

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

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 onwards	March 31, 2019 $ 51,033 40,419 23,650 12,485 12,505 170,183 $ 310,275

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

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years	December 31, 2018 $ 47,355 79,833 173,325 $ 300,513	March 31, 2018 $ 51,491 98,833 181,627 $ 331,951

Except for depreciation, the Group did not recognize material additions, disposals, or impairment loss of investment properties during the three months ended March 31, 2019 and 2018.

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 $3,555,321 thousand and $3,505,306 thousand as of December 31, 2018 and 2017, 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.

20 -

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

Rental income related to investment properties Operating expenses directly related to investment properties Direct operating expenses from investment properties generating rental income Direct operating expenses from investment properties not generating rental income		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 12,990 $ 4,097 99 $ 4,196	2018 $ 12,569 $ 4,003 109 $ 4,112

14. BORROWINGS

a. Short-term borrowings

b.	Unsecured borrowings Line of credit borrowings Interest rate range Long-term borrowings Secured borrowings(1) credit borrowings(2) Interest rate range	March 31, 2019 D $ 520,709 0.95%-3.04% March 31, 2019 D $ 3,214,667 $ 184,920 $ 3,399,587 $ 3.26%-3.55%	ecember 31, 2018 $ 557,322 0.95%-3.25% ecember 31, 2018 3,203,715 $ 184,290 3,388,005 $ 3.16%-3.57%	March 31, 2018 $ 370,688 0.95%-2.48% March 31, 2018 4,213,961 - 4,213,961 2.44%-3.02%

(1) Secured borrowings include bank loans of the Corporation and project loans for the construction of ships of Tai Shing, whose freehold ships are provided as collateral (refer to Note 24), which have principal and interest amortized on a monthly, quarterly and semi-annual basis and which are expected to be paid off in October 2027. Tai Shing paid off a portion of the principal due in July 2022 as of March 31, 2019.
(2) Interest on line of credit borrowings is paid on a monthly basis. The principal will be repaid on a quarterly basis from September 2020 and expected to be paid off in September 2023.

15. RETIREMENT BENEFIT PLANS

For the three months ended March 31, 2018 and 2017, the employee benefits expense in respect of the Group’s defined retirement benefit plans were calculated using the respective actuarially determined annual pension cost discount rate as of December 31, 2018 and 2017.

21 -

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
		2019 $ 2,830 657 3,487 179,476 $ 182,963 $ 158,726 24,237 $ 182,963	2018 $ 2,458 811 3,269 178,785 $ 182,054 $ 162,203 19,851 $ 182,054

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, 2019 and 2018, the employees’ compensation and the remuneration of directors and supervisors are as follows:

Accrual rate

Employees’ compensation Remuneration of directors and supervisors Amount Employees’ compensation Remuneration of directors and supervisors		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 2018 1% 1% 1% 1% For the Three Months Ended March 31
		2019 $ 1,480 $ 1,480	2018 $ 976 $ 976

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 2018 and 2017, which were resolved by the board of directors in March 2019 and 2018, was as follows:

Amount

Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31	For the Year Ended December 31
	2018 Cash $10,088 10,088	2017
		Cash $ 4,970 4,970

22 -

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

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

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

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the Corporation’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

16. 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, 2019 480,000 $ 4,800,000 417,294 $ 4,172,945	December 31, 2018 480,000 $ 4,800,000 417,294 $ 4,172,945	March 31, 2018 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, 2019 December 31, 2018 $ 334,352 $ 334,352 30 30 $ 334,382 $ 334,382	March 31, 2018 $ 334,352 30 $ 334,382

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

23 -
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 15.

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

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

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

The appropriations of earnings for 2018 and 2017 that were proposed by the board of directors in May 2019 and approved in the shareholders’ meetings in June 2018 , respectively, were as follows:

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

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

17. REVENUE

Revenue from contracts with customers Revenue from transportation Rental income Rental income from investment properties (Note 13) Other operating revenue Other revenue		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 727,144 12,990 8,665 $ 748,799	2018 $ 782,642 12,569 2,043 $ 797,254

24 -

Contract balances

	March	31, 2019	December 31, 2018	March 31, 2018	January 1, 2018
Contract liabilities	$	41,390	$ 45,905	$ 60,967	$ 50,833

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

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
		2019 $ 19,895 ( 14,895) - $ 5,000	2018 $ - 32 900 $ 932

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 assessments

The income tax returns of the Corporation through 2017 have been assessed by the tax authorities. The income tax returns of Tai Shing through 2016 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
		2019 $ 0.40 $ 0.40	2018 $ 0.35 $ 0.35

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
		2019 $ 167,090	2018 $ 144,491

25 -

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
		2019 417,294 619 417,913	2018 417,294 355 417,649

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.

20. CASH FLOWS INFORMATION FROM FINANCING ACTIVITIES

For the Three Months Ended March 31, 2019

Opening Balance Short-term borrowings $ 557,322 Long-term borrowings 3,388,005 $ 3,945,327 For the Three Months Ended March 31, 2018 Opening Balance Short-term borrowings $ 372,754 Long-term borrowings 4,748,871 $ 5,121,625	Cash Flows ($ 37,144) - ($ 37,144) Cash Flows $ 529 ( 436,231) ($ 435,702)		Non-cash Changes Foreign Exchange Movement $ 531 11,582 $ 12,113 Non-cash Changes Foreign Exchange Movement ($ 2,595) ( 98,679) ($ 101,274)	Closing Balance $ 520,709 3,399,587 $ 3,920,296 Closing Balance $ 370,688 4,213,961 $ 4,584,649

Short-term borrowings Long-term borrowings

21. CAPITAL MANAGEMENT

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

26 -

22. FINANCIAL INSTRUMENTS

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

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

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

March 31, 2019

Financial assets at FVTPL Derivative financial assets Financial assets at FVTOCI Investments in equity instruments Listed shares - ROC Unlisted shares - ROC Unlisted shares - foreign December 31, 2018 Financial assets at FVTPL Derivative financial assets Financial assets at FVTOCI Investments in equity instruments Listed shares - ROC Unlisted shares - ROC Unlisted shares - foreign March 31, 2018 Financial assets at FVTPL Derivative financial assets Financial assets at FVTOCI Investments in equity instruments Listed shares - ROC Unlisted shares - ROC	Level 1 $ - $ 114,265 - - $ 114,265 Level 1 $ - $ 116,247 - - $ 116,247 Level 1 $ - $ 139,365 - $ 139,365	Level 2 $ 75,609 $ 148,084 - - $ 148,084 Level 2 $ 76,777 $ 145,794 - - $ 145,794 Level 2 $ 95,742 $ 162,778 - $ 162,778	Level 3 $ - $ - 42,307 46,292 $ 88,599 Level 3 $ - $ - 49,943 45,864 $ 95,807 Level 3 $ - $ - 75,573 $ 75,573	Total $ 75,609 $ 262,349 42,307 46,292 $ 350,948 Total $ 76,777 $ 262,041 49,943 45,864 $ 357,848 Total $ 95,742 $ 302,143 75,573 $ 377,716

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

27 -
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. Besides, the asset of unlisted shares - foreign held by the Corporation were mainly bank deposits as of March 31, 2019, December 31, 2018, and March 31, 2018. Thus, the aforementioned unlisted equity securities were evaluated using the asset-based approach. Separate assets and liabilities of the underlying investments were respectively regarded as individual evaluation targets and were evaluated according to their nature to reflect their overall fair value. Unobservable inputs used by the Group were an 89.75% discount rate for lack of marketability as of March 31, 2019, December 31, 2018, and 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 $4,129, $4,875 and $7,376 thousand.

c. Categories of financial instruments

		March 31,	December 31,	December 31,	March 31,	March 31,
		2019		2018		2018
Financial assets
Financial assets at FVTPL
Mandatorily at FVTPL	$	75,609	$	76,777	$	95,742
Financial assets at amortized cost (Note 1)		933,197		926,722		574,931
Financial assets at FVTOCI
Equity instruments		350,948		357,848		377,716
Financial liabilities
Financial liabilities at amortized cost (Note 2)		4,172,621		4,254,089		4,864,151

Note 1: 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 2: The balances include financial liabilities measured at amortized cost, which comprise short-term borrowings, accounts payable, trade payables to related parties, dividends payable, other payables, and long-term borrowings.
d. Financial risk management objectives and policies

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

1) Market risk

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

a) Foreign currency risk
28 -

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period are set out in Note 26.

Sensitivity analysis

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

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

Loss		USD Impact on NTD	USD Impact on NTD
		For the Three Months Ended March 31
		2019 $ (5,502)	2018 $ (3,624)

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:

		March 31,	December 31,	December 31,		March 31,
		2019		2018		2018
Fair value interest rate risk
Financial assets	$	773,220	$	794,526	$	430,857
Cash flow interest rate risk
Financial assets		18,202		26,135		23,132
Financial liabilities		3,920,296		3,945,327		4,584,649

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.

For the financial assets held by the Group with variable interest rates on March 31, 2019 and 2018, if the market interest rates had been 1% higher, the cash inflow from variable interest rate financial assets would have been $46 thousand and $58 thousand, respectively. If the market interest rates had been 1% lower, there would be an equal and opposite impact on variable interest rate financial assets, and the amount would be negative.

For the financial liabilities held by the Group with variable interest rates on March 31, 2019 and 2018, if the market interest rates had been 1% higher, the cash outflow from variable interest rate financial liabilities would have been $9,801 thousand and $11,462 thousand, respectively. If the market interest rates had been 1% lower, there would be an equal and opposite impact on variable interest rate financial

29 -

liabilities, and the amount would be negative.

c) Other price risk

The Group was exposed to equity price risk on its investments in common stocks and corporate bonds.

Sensitivity analysis

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

If investments prices had been 5% higher/lower, the pre-tax profit for the three months ended March 31, 2019 and 2018 would have increased/decreased by $3,780 and $4,787 thousand, as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the three months ended March 31, 2019 and 2018 would have increased/decreased by $17,548 and $18,886 thousand, as a result of the changes in fair value of financial assets at FVTOCI.

2) Credit risk

There is no significant concentration of credit risk for the 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, financial institutions and incorporations 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, 2019, December 31, 2018, and March 31, 2018, the Group had available unutilized short-term bank loan facilities of $212,860 thousand, $222,545 thousand, and $399,200 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, 2019

On Demand or Less than 1 Year Variable interest rate liabilities $ 526,815	1-3 Years $ 488,959	3-5 Years $ 1,472,937	5+ Years $ 2,030,174

30 -

December 31, 2018

On Demand or Less than 1 Year Variable interest rate liabilities $ 564,653 March 31, 2018 On Demand or Less than 1 Year Variable interest rate liabilities $ 375,827	1-3 Years $ 317,810 1-3 Years $ 714,093	3-5 Years $ 1,475,211 3-5 Years $ 1,567,070	5+ Years $ 2,171,977 5+ Years $ 2,492,478

23. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Corporation and its subsidiaries, which are related parties of the Corporation, have been eliminated on consolidation and are not disclosed in this note. 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
		2019 $ 47,317 6 $ 47,323 $ 46,349 358 $ 46,707	2018 $ 63,664 29 $ 63,693 $ 65,642 270 $ 65,912

31 -

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

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

Government - related parties Yang Ming	March 31, 2019 December 31, 2018 $ 33,130 $ 59,043	March 31, 2018 $ 62,810

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

March 31, 2019 December 31, 2018 Government - related parties Others $ 4,774 $ 6,479 At the end of reporting period, trade payables to related parties were as follows: March 31, 2019 December 31, 2018 Government - related parties Yang Ming $ 12,310 $ 26,092 Others 93 338 $ 12,403 $ 26,430	March 31, 2018 $ 1,407
	March 31, 2018 $ 37,898 -
	$ 37,898

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

c. Other transactions with government - related parties

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

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

32 -

In November 2017, the Company paid $158,519 thousand in cash to acquire an additional 13,210 thousand shares issued by Yang Ming. However, the Group’s investment in Yang Ming was still classified as at FVTOCI - current, as the Group did not have any significant influence over Yang Ming.

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

Associates (management service revenue) Others		For the Three Months Ended March 31	For the Three Months Ended March 31
		2019 $ 29	2018 $ 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
		2019 $ 6,308 255 $ 6,563	2018 $ 5,099 250 $ 5,349

24. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

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

Property, plant and equipment Pledged deposits (included in other non-current assets)	March 31, 2019 December 31, 2018 $ 8,080,993 $ 8,138,906 251,717 250,878 $ 8,332,710 $ 8,389,784	March 31, 2018 $ 9,234,574 242,964
		$ 9,477,538

33 -

25. SIGNIFICANT UNRECOGNIZED COMMITMENTS

a. Significant unrecognized commitments of the Group as of March 31, 2019 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 $350 thousand per day, calculated by day, with collection on a monthly basis.. Basic fees of ship management were $112 thousand for each ship per day, calculated by day, with collection on a monthly basis. Basic fees of ship management were $96-$104 thousand for each ship per day, calculated by day, with collection on a monthly basis.

2) In May 2017, the board of directors of the subsidiary Tai Shing resolved to build two 62,000-ton bulk carriers with Oshima Shipbuilding Co., Ltd.; each bulk carrier’s cost was US$25,500 thousand. In addition, in December 2018, the board of directors resolved to upgrade two 62,000-ton bulk carriers to two 64,000-ton bulk carriers with the installation of SOx scrubber. As a result, each bulk carrier’s cost was US$26,390 thousand and the total cost of the upgrade was US$890 thousand. As of the date on which these consolidated financial statements were reviewed, the unpaid amount was US$41,996 thousand. The parent company is Tai Shing’s guarantor.
3) In December 2018, the board of directors of the subsidiary Tai Shing resolved to build 80,000-ton bulk carriers with Namura Shipbuilding Co., Ltd. and Oshima Shipbuilding Co., Ltd., and the total number of bulk carriers shall be not more than four bulk carriers with a total cost of less than US$136,000 thousand. In March and April 2019, Tai Shing has entered into contracts with Namura Shipbuilding Co., Ltd. and Oshima Shipbuilding Co., Ltd.; each bulk carrier’s cost was US$33,980 thousand, US$33,980 thousand, US$32,320 thousand, and US$33,900 thousand, respectively with a total amount of US$134,180 thousand. As of the date on which these consolidated financial statements were reviewed, the unpaid amount was US$120,762 thousand. The parent company is Tai Shing’s guarantor.
b. Significant unrecognized commitments and contingencies of the Group as of December 31, 2018 were as follows:
1) Aggregate information of the Group entering into ship management agreements with other entities is stated below:

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

34 -
2) In May 2017, the board of directors of the subsidiary Tai Shing resolved to build two 62,000-ton bulk carriers with Oshima Shipbuilding Co., Ltd.; each bulk carrier’s cost was US$25,500 thousand. In addition, in December 2018, the board of directors resolved to upgrade two 62,000-ton bulk carriers to two 64,000-ton bulk carriers with the installation of SOx scrubber. As a result, each bulk carrier’s cost was US$26,390 thousand and the total cost of the upgrade was US$890 thousand. As of the date of the independent auditors’ report to the consolidated financial statements for the year ended December 31, 2018, the unpaid amount was US$41,996 thousand. The parent company is Tai Shing’s guarantor.
3) In December 2018, the board of directors of the subsidiary Tai Shing resolved to build 80,000-ton bulk carriers with Namura Shipbuilding Co., Ltd. and Oshima Shipbuilding Co., Ltd., and the total number of bulk carriers shall be not more than four bulk carriers with a total cost of less than US$136,000 thousand. In March 2018, Tai Shing has entered into a contract with Namura Shipbuilding Co., Ltd. to build two bulk carriers; each bulk carrier’s cost was US$33,980 thousand, with a total amount of US$67,960 thousand. As of the date of the independent auditors’ report to the consolidated financial statements for the year ended December 31, 2018, the unpaid amount was US$61,164 thousand.
c. 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 , calculated by day, with collection on a monthly basis.. Basic fees of ship management were $112 thousand for each ship per day, calculated by day, with collection on a monthly basis. Basic fees of ship management were $96-104 thousand for each ship per day, calculated by day, with collection on a monthly basis.

2) In May 2017, the board of directors of the subsidiary Tai Shing resolved to build two 62,000-ton bulk carriers with Oshima Shipbuilding Co., Ltd., each of which cost US$25,500 thousand. As of the date on which the consolidated financial statements for the three months ended March 31, 2018 were reviewed, the unpaid amount was US$43,290 thousand. The parent company is Tai Shing’s guarantor.
35 -

26. 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, 2019

Foreign
Currencies
(In Thousands)
Exchange Rate
Financial assets
Monetary items
USD

$ 10,119
30.82 (USD:NTD)

Financial liabilities

Monetary items

USD
$ 1,194
30.82 (USD:NTD)

December 31, 2018
Foreign
Currencies
(In Thousands)
Exchange Rate
Financial assets
Monetary items
USD
$ 8,413
30.715 (USD:NTD)

Financial liabilities

Monetary items

USD
$ 1,444
30.715 (USD:NTD)

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)

Carrying
Amount
$ 311,864
$ 36,787
Carrying
Amount
$ 258,418
$ 44,341
Carrying
Amount
$ 240,612
$ 59,387

For the three months ended March 31, 2019 and 2018, net foreign exchange profits(losses) were $54 thousand and $(4,622) thousand, respectively, resulting from the fluctuation of the USD.

36 -

27. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees:
1) Financing provided to others (None)
2) Endorsements/guarantees provided (Table 1)
3) Marketable securities held (Table 2)
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital (None)
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital (None)
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital (None)
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital (Table 3)
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital (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)

28. 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.

37 -

TABLE 1

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE THREE MONTHS ENDED MARCH 31, 2019 (In Thousands of New Taiwan Dollars/U.S. Dollars)

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	$ 6,888,411 (US$ 223,505)	$ 6,888,411 (US$ 223,505)	$ 4,641,016 (US$ 150,585)	-	65.0	$ 8,345,890	Yes	-	-	-
1	Tai Shing	Taiwan Navigation	Parent	7,235,677 (US$ 234,772)	249,488 (US$ 8,095)	249,488 (US$ 8,095)	246,252 (US$ 7,990)	246,252 (US$ 7,990)	2.8	7,235,677 (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, 2019, US$1=NT$30.82.

38 -

TABLE 2

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD MARCH 31, 2019 (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, 2019	March 31, 2019		Note
				Number of Shares (In Thousands)	Carrying Amount	Percentage of Ownership (%)	Fair Value
Taiwan Navigation Co., Ltd.	Mandatorily convertible bonds Yang Ming Shares Chunghwa Investment Co., Ltd. Taiwan Foundation International Pte. Ltd. Private placement listed shares Yang Ming Listed shares Yang Ming	More than half of directors assigned by the Ministry of Transportation and Communications - Corporate director More than half of directors assigned by the Ministry of Transportation and Communications More than half of directors assigned by the Ministry of Transportation and Communications	Financial assets at FVTPL - current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTOCI - non-current Financial assets at FVTPL - current	- 4,590 1,500 19,083 13,210	$ 75,609 42,307 46,292 148,084 114,265	- 6.00 15.00 0.82 0.57	$ 75,609 42,307 46,292 148,084 114,265

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

39 -

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, 2019

(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	$ (253,012) 253,012	(50) 97	By negotiations By negotiations	$ - -	- -	$ 93,490 (93,490)	86 (100)	(Note 2) (Note 2)

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

Note 2: Eliminated upon consolidation.

40 -

TABLE 4

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE THREE MONTHS ENDED MARCH 31, 2019 (In Thousands of New Taiwan Dollars)

No.	Company Name	Related Party	Relationship			Transaction Details
				Financial Statement Accounts	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	$ 39,618 15,299 253,012 93,490	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 10 ships in total was calculated for each ship at $2-15 thousand per day and was collected on a monthly basis. The payment terms were based on agreements	5 - 34 1

Note: Eliminated upon consolidation.

41 -

TABLE 5

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE THREE MONTHS ENDED MARCH 31, 2019 (In Thousands of New Taiwan Dollars)

Investor Company	Investee Company	Location	Main Business and Products	Investment Amount	Investment Amount	As of March 31, 2019	As of March 31, 2019	As of March 31, 2019	Net Income (Loss) of the Investee	Share of Profit (Loss)	Note
				December 31, 2018	March 31, 2019	Number of Shares (In Thousands)	%	Carrying Amount
Taiwan Navigation Co., Ltd.	Tai Shing Shin Wang Yunn Wang	Panama City, Panama Monrovia City, Liberia Taipei	Rental and sale of ships Rental and sale of ships Investment	$ 3,921,447 32,500 41,861	$ 3,921,447 32,500 41,861	- - 5,211	100.00 100.00 49.75	$ 8,829,547 31,562 110,998	$ 149,676 13 17	$ 149,676 13 8	Note Note

Note: Eliminated upon consolidation.

42 -

AI assistant

TNC — Interim / Quarterly Report 2019

52171_rns_2019-11-08_e7be0491-d093-4aa2-8180-1674559382b4.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

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)

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

IFRS 16 “Leases”

Definition of a lease

The Group as lessee

~~.~~

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2) Subsidiaries included in the consolidated financial statements

2019

(1)The Group as lessor

2018

(1)The Group as lessor

2) Retirement benefits

3) Taxation

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

6. CASH AND CASH EQUIVALENTS

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

9. ACCOUNTS RECEIVABLE, NET

10. OTHER FINANCIAL ASSETS

11. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

12. PROPERTY, PLANT AND EQUIPMENT

14. BORROWINGS

15. RETIREMENT BENEFIT PLANS

Employee’s compensation and remuneration of directors and supervisors

Accrual rate

Amount

16. EQUITY

17. REVENUE

18. INCOME TAX

19. EARNINGS PER SHARE

Net Profit for the Period

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

20. CASH FLOWS INFORMATION FROM FINANCING ACTIVITIES

21. CAPITAL MANAGEMENT

22. FINANCIAL INSTRUMENTS

March 31, 2019

1) Market risk

Sensitivity analysis

Sensitivity analysis

Sensitivity analysis

2) Credit risk

3) Liquidity risk

December 31, 2018

23. TRANSACTIONS WITH RELATED PARTIES

24. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

25. SIGNIFICANT UNRECOGNIZED COMMITMENTS

26. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

March 31, 2019

27. SEPARATELY DISCLOSED ITEMS

28. SEGMENT INFORMATION

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE THREE MONTHS ENDED MARCH 31, 2019 (In Thousands of New Taiwan Dollars/U.S. Dollars)

TAIWAN NAVIGATION CO., LTD. AND SUBSIDIARIES

TNC Interim / Quarterly Report 2019

.