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YNM Annual Report 2017

Jun 28, 2018

51984_rns_2018-06-28_a1047ea0-c86b-4c5d-860c-098751968147.pdf

Annual Report

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YULON NISSAN MOTOR CO., LTD ANNUAL REPORT 2017

==> picture [596 x 383] intentionally omitted <==

Printed on May 24, 2018 SEC:mops.twse.com.tw Official Website:www.nissan.com.tw

Contents

I. Name, title, and phone of the spokesperson:

Name: Joseph Hsiung

Title: Vice President

Tel. ： 886‐37‐875881 Ext. 1601

E‐mail ： yulon‐nissan.ir@yulon‐nissan.com.tw

Deputy Spokesperson ： Emma.Lin

Title ： Vice General Manager

Tel. ： 886‐37‐875881 Ext. 1130

E‐mail ： emma.lin@yulon‐nissan.com.tw

II. Headquarters and plant address:

Headquaters: No. 39‐2, Bogongkeng, Xihu Village, Sanyi Town, Miaoli County, Taiwan Tel. ： 886‐37‐ 875881

Official Website ： http://www.nissan.com.tw

Taipei Branch: 7F, No. 150, Sec. 2, Nanking E. Road, Taipei City (Hualian Building) Tel. ： 886‐2‐ 25156421

Official Website ： http://www.nissan.com.tw

III. Name, address, and phone of the stock transfer agency:

Name: Yulon Motor Co., Ltd. Stock Affairs Office

Address: 7F, No. 150, Sec. 2, Nanking E. Road, Taipei City (Hualian Building) Tel. ： 886‐2‐ 25156421

Official Website ： http://www.nissan.com.tw

IV. Name, Firm, address, and phone of the acting independent auditors:

2017 Independent Auditors: Wan‐Yi Liao and Robert Yu

CPA Firm: Deloitte & Touche

Address: 12F, No. 156, Sec. 3, Minsheng E. Road, Taipei City (Hongtai Century Building) Tel. ： 886‐2‐2545‐9988

Website ： http//www.deloitte.com.tw

V. Overseas securities exchange corporation listing: None

VI. Corporate Website ： http://www.nissan.com.tw

裕隆日產 YULON NISSAN

Contents

I. Letter to Shareholders.............................................................................................................................. 1
1. 2017 Operating Performance .................................................................................................................. 3
2. Highlights of Business Operation Plans for 2018 ................................................................................... 3
3. Future Development Strategy of The Company ..................................................................................... 4
4. Impact of External Environment (including competitors, regulations, macroeconomics and other
factors) .................................................................................................................................................... 4
II. Company Brief Introduction
1. Established Date ..................................................................................................................................... 5
2. Highlights of Development ..................................................................................................................... 5
3. 2017 Operation Results ........................................................................................................................... 6
4. Others ...................................................................................................................................................... 6
III. Company Management Report
1. Organizational System ............................................................................................................................ 7
(1) Organization Chart ............................................................................................................................ 7
(2) Organizational Functions .................................................................................................................. 8
2. Information of Directors, Supervisors, President, Senior Vice President, Vice President, General
Manager .................................................................................................................................................. 9
(1) Directors and Supervisors' Information ............................................................................................. 9
(2) Information of President, Senior Vice President, Vice President and General Manager................. 19
(3) Payment of Remuneration to Directors, Supervisors, President and Senior Vice President ........... 25
(4)Analysis and description of the net profits macro or individual financial report after
payment of remuneration made out to directors, supervisors, president, and vice
president in the last 2 years......................................................................................................... 30
3. Operation of Corporate Governance ..................................................................................................... 31
(1) Operational Status of the Board of Directors .................................................................................. 31
(2) Operational Status of the Audit Committee .................................................................................... 33
(3) The Attendance of Directors and Supervisors and Operational Status of the Board of Directors ... 34
(4) The Difference in Contrast to the Operation of Corporate Governance and the Listed / OTC
Company's Corporate Governance Codes of Practice and Reasons ................................................ 35
(5) Remuneration Committee .............................................................................................................. 44
(1) Data of Remuneration Committee Members ............................................................................. 44
(2) Operational Status of Remuneration Committee ....................................................................... 45
(6) Implementing Corporate Social Responsibility ............................................................................... 46
(7) Status of Honest Operation Implemented by the Company and the Adopted Measures: ................ 51

Contents

(8) Inquiry Method of Governance Codes, Important Information for enhancing realization of Operation of Corporate Goverance and Relevant Regulations Established by the Company. ........ 54 (9) Execution Status of Internal Control System ................................................................................... 55 1. Statement of Internal Control System .......................................................................................... 55 2. Project Examination Report of CPAs’ Internal Control System .................................................. 55 (10) Company or Employees, who have been penalized by Laws, or Employees received penalties From Company for Violating the Internal Control Regulations, Major Shortcomings and Status of Improvements in Fiscal Year 2017 and prior to the Publication Date of the Annual Report ... 56 (11) Major Resolutions made by the Shareholders Meeting and Board of Directors Meeting in Fiscal year 2017 and prior to the Publication Date of Annual Report ............................................. 56 (12) Major Issues on Record or Written Statements Made by any Director or Supervisor which Specified his/her Dissent to Important Resolutions Passed by the Board of Directors Meeting in Fiscal year 2017 and Prior to the Publication Date of the Annual Report................................... 57 (13) The discharge and resignation of Chairman, President, Accounting Chief, Financial Affairs Chief, Internal Audit Chief, and R&D supervisors for 2016 and Prior to the Publication Date of the Annual Report ........................................................................................................................ 57 4. Information on CPA Audit Fees ............................................................................................................ 58 (1) Information on CPA Audit Fees ...................................................................................................... 58 (2) Amount of Audit and Non-Audit Fees and Contents of Non-Audit Services .................................. 58 (3) The Change of CPA Firms and the Audit Fees after change is Lower than that before change, the Reduced Amount, Proportion and Reason ................................................................................ 58 (4) The Audit Fees after Change is More than 15% lower than that before Change, the Reduced Fee Amount, Proportion and Reason .............................................................................................. 58 5. Information on Change of CPAs ........................................................................................................... 59 (1) Information of the Previous CPAs ................................................................................................... 59 (2) Information of the Successive CPAs ............................................................................................... 59 (3) Previous CPAs' Reply of Article 10-5-1 and 10-5-2-3 of Guidelines Governing the Preparation of Financial Reports by Securities Issuers ....................................................................................... 59 6. Upon the Company's Chairman, General Manager or Financial / Accounting Manager Employed by the Verifying CPA Firm within one year, the Name, the Position, and Time Period in the CPA firm or its Affiliates should be Disclosed ................................................................ 60 7. Changes of Share and Share Collateralizing for Directors, Supervisors, Managers and Shareholders with over 10% of Shares Held During the 2017 Fiscal year and Prior to the Publication Date of the Annual Report ....................................................................................................................................... 60 (1) Changes of Share for Directors, Supervisors, Managers and Major Shareholders .......................... 60 (2) Information of Share Changes ......................................................................................................... 62 (3) Information of Share Collateralizing ............................................................................................... 62 8. Information on the top-10 shareholders who are affiliates or related as spouse or second cousins ....... 63 9. The Number of Shares held by the Company, the Company's Directors, Supervisors, Managers and its Directly or Indirectly Controlled Business Toward the same Investment Businesses, as well as the Combined Calculated Shareholding Percentage .............................................................................. 64

裕隆日產 YULON NISSAN

IV. Capital Raising Status 1. Capital and Shares ................................................................................................................................. 65 (1) Source of Share Capital ................................................................................................................... 65 (2) Structure of Shareholders ................................................................................................................ 65 (3) Status of Ownership Dispersion ...................................................................................................... 66 (4) List of Major Shareholders .............................................................................................................. 66 (5) Information about Market Price per share, Net Value, Earnings, Dividends and Related Information in Recent 2 Years ......................................................................................................... 67 (6) Dividend Policy and Execution Status ............................................................................................ 67 (7) The Effect of the Distribution of Stock Dividend as Proposed by this Shareholders Meeting on Operation Performance and Earning per Share .......................................................................... 68 (8) Compensation of the Employee, Directors and Supervisors. ........................................................... 68 (9) Status of Company’s Repurchased Treasury Shares ....................................................................... 69 2. Corporate Bonds issued ......................................................................................................................... 69 3. Preferred Stock issued ........................................................................................................................... 69 4. GDR (Global Depositary Receipt) Issued ............................................................................................. 69 5. Employee Stock Options Issued ............................................................................................................ 69 6. Restricted Stock Dividends of Employee Issued ................................................................................... 69 7. New Shares Issued for Merger or Acquisition ....................................................................................... 69 8. Recorded up to the Previous one quarter of the Date of the Report is in Printing, Previously Issued or Privately Raised Marketable Securities that are still not Completed or the Completed and Planned Benefits but not shown over the Recent 3 years ................................................................ 69 V. Highlights of Operations 1. Business Content ................................................................................................................................... 70 (1) Business Scope ................................................................................................................................. 70 (2) Industry Summary ............................................................................................................................ 70 (3) Technology, Research and Development (R&D) ............................................................................. 72 (4) Long, Short term Business Development Plan ................................................................................. 73 2. Market, Production & Sales Review...................................................................................................... 77 (1) Market Analysis ............................................................................................................................... 77 (2) The major usage and production processes of main products .......................................................... 78 (3) Supplies of main raw materials ........................................................................................................ 79 (4) List of Major Suppliers and Clients Over the Recent 2 Fiscal Years ............................................... 79 (5) Production Volume over the recent 2 years ...................................................................................... 79 (6) Sales Volume of Recent 2 Fiscal Years ............................................................................................ 79 3. Employee Data for the Recent Two Years and as of the Publication Date of Annual Report .............. 80 4. Expenditures on Environmental Protection ........................................................................................... 80 (1) Losses and Disposal caused by environmental pollution over the recent years. .............................. 80 (2) Probable environmental expenditures .............................................................................................. 80

Contents

  1. Labor-Capital Relationship .................................................................................................................... 80 (1) Current Prominent Labor-Capital Agreements, Employee Benefits and Their Implementation ...... 80 (2) Labor Dispute ................................................................................................................................... 81 6. Prominent Contracts .............................................................................................................................. 82 VI. FINANCIAL INFORMATION 1. Condensed Financial Statements for the recent 5 fiscal year ............................................................... 83 (1) Condensed Balance Sheet and Comprehensive Income Statement– IFRS ....................................... 83 (2) CPAs’ Name and Auditor opinions .................................................................................................. 86 2. Financial Analysis in Recent 5 years ..................................................................................................... 87 3. Supervisor Audit Report ........................................................................................................................ 91 4. Recent Annual Financial Statements ................................................................................................... 92 5. The Audited Consolidated Financial Statements of the Parent Company and Subsidiaries in Recent Year ......................................................................................................................................... 157 6. The company and its Affiliates have not encountered any Financial Difficulties over the Last years and as of the Publication Date of the Annual Report ................................................................. 229 VII. Review and Analysis of Financial Conditions and Operation Performance and Risk Management 1. Financial Conditions ............................................................................................................................ 230 2.Financial Performance .......................................................................................................................... 231 (1) Comparison and Analysis of Financial Performance ..................................................................... 231 (2) Gross Profit Analysis ...................................................................................................................... 232 3. Cash Flow Analysis ............................................................................................................................. 232 (1) Cash Flow Analysis for the Recent 2 Years ................................................................................... 232 (2) Cash Flow Analysis for the Next Year ........................................................................................... 232 4. Influence on Financial Condition caused by Prominent Capital Expenditures in Fiscal year 2017 .... 233 (1) The Use and Capital Source of Prominent Capital Expenditure ..................................................... 233 (2) Anticipated Benefits ....................................................................................................................... 233 5. Investment Policy in Fiscal Year 2017, Major Reasons for Profit and Loss, Its Improvement Plan and Next Year's Investment Plan ................................................................................................. 233 6. Risk Management and Evaluation ....................................................................................................... 234 (1) Influence of the Interest Rate, Foreign Exchange Rate and Rate of Inflation on Company's Profit / Loss and Plans to Encounter these Risks in the Future ...................................................... 234 (2) Policy on High Risk, High Leverage Investment, Capital Loans to Others, Endorsement and Trade on Derivatives, Major Reason for Profit/Loss and plans to encounter these risks in the future ............................................................................................................................................... 234 (3) Future Research/Development Plans and Estimated Investing R&D Expenditure ........................ 234 (4) Important Changes of Local and Foreign Government Policies and Regulations and Their Influence Over Company's Financial Condition and Plans to Encounter these Risks in the Future .............................................................................................................................................. 234

裕隆日產 YULON NISSAN

(5) Changes on Technology and Industrial Change Influence toward the company's Finance Business and Coping Strategies ..................................................................................................... 234 (6) Changes on Corporate Image that Influence Company's Risk Management and Contingency Plans ............................................................................................................................................... 234 (7) Benefit Anticipated and Possible Risks of Merge and Acquisition ................................................ 235 (8) Benefit Anticipated and Possible Risks of Plant Site Expansion ................................................... 235 (9) Risks of having Purchase or Sales Centralization .......................................................................... 235 (10) The Impact and the Risk of having a big Volume of Transferring or Changes of Shareholders Equity of the Directors, Supervisors or Shareholders who Hold more than 10% Shares, Except for the Releasing of Shares ......................................................................................................... 235 (11) The Impact and Risk of Changing Operating Rights of the Company ........................................... 235 (12) Litigation/Non-Litigation Events ................................................................................................... 235 (13) Other Important Risks and Actions to be Taken ............................................................................ 235 7. Other Important Items ......................................................................................................................... 235 VIII. Special Noted Items 1. Affiliates Information .......................................................................................................................... 236 (1) Affiliates Consolidated Operation Statement ................................................................................. 236 (2) Affiliates Consolidated Financial Report ....................................................................................... 238 (3) Consolidated Report of Public Companies and their Affiliates ...................................................... 238 2. Fiscal Year 2017 and Prior to the Publication Date of the Annual Report, The Status of Issuing Private Placement Securities ................................................................................................................ 238 3. Fiscal Year 2017 and Prior to the Publication Date of the Annual Report, Acquisitionor Disposal of Yulon Shares by Subsidiaries .......................................................................................................... 238 4. Other Necessary Supplementary Notes ............................................................................................... 238 5. Any Events that had Significant Impacts on Shareholders' Right or Securities Prices as Stated in Section 2 Paragraph 2 in Article 36 of the Securities Transaction Law for Fiscal year 2017 and Prior to the Publication date of the Annual Report .............................................................................. 238

Letter to Shareholders

I. Letter to Shareholders

Dear Shareholders,

In 2017, Taiwan’s economy benefited from the rising prices of international raw materials and the increase of exported electronic products. Owing to robust export growth and moderate rise of private consumption, the economic performance improved gradually quarter by quarter, with the annual economic growth rate reaching 2.86%. In 2017, driven by the facts that the government continued to promote the subsidy program for replacing old vehicles with new ones and that automakers actively introduced new vehicle models, the total sales of Taiwan’s automobile market amounted to 435,000 units, increasing by 1.0% compared to 2016, and domestic auto sales declined by 4.1% while imported car grew by 8.8%. In 2017, NISSAN launched TIIDA and SENTRA, two car models that boast NISSAN’s next-generation V-Motion 2.0 concept car design features, and INFINITI Q60 Coupe, the all-new flagship high-performance sports car, and the overall sales momentum was boosted. The total of 42,630 vehicles were sold in the year, with a market share of 9.8%.

In 2017, a total of 28.879 million vehicles were sold in the Chinese automotive market, which was 3.0% higher than 2016. Dongfeng Nissan Passenger Vehicle Company sold 1.251 million units, which represented a growth of 11.9% compared to 2016. According to the estimates of China Association of Automobile Manufacturers (CAAM), the sales volume of cars in mainland China will reach 29.42 million units in 2018, which is 1.9% higher than the previous year. It is expected that the sales performance of Dongfeng Nissan will exceed the growth rate of the total market. NISSAN TAIWAN’s auto parts sales revenue in 2017 totaled NT$ 150 million, and the export regions cover Thailand, Malaysia, the Philippines, China, South Korea, Japan, Egypt, Indonesia, and Vietnam. In 2018, we will continue to expand the market of exported auto parts to create greater growth momentum for the Company's revenue.

Benefited from the launch of new car models, the investment in mainland China, and the export revenue of auto parts, NISSAN TAIWAN’s operating revenue for 2017 was NT$ 33.22 billion, and the operating profit was NT$ 2.08 billion, which was 72.7% higher than 2016; the pre-tax income was NT$ 8 billion, which was 43.3% higher than 2016; the EPS after tax was NT$ 22.14, which was 43.4% higher than 2016.

2017 Annual Report

1

裕隆日產

YULON NISSAN

In the face of fierce competition in the automotive market, NISSAN TAIWAN will actively introduce new vehicles in 2018 to meet the diverse needs of consumers. NISSAN will launch the all-new facelifted X-TRAIL with upgraded safety features in May and the 2018 Nissan Kicks, a brand-new crossover, in the fourth quarter to enhance the competitive edge of the product portfolio; INFINITI introduced the new QX30 compact crossover in April and is expected to introduce the all-new high-tech QX50 SUV in the fourth quarter so as to consolidate the market with outstanding product competitiveness. n terms of customer service, NISSAN claimed first place, once again, of non-luxury auto brands in the J.D. Power 2017 Taiwan Customer Service Index (CSI) Study SM. NISSAN has won the honor for 4 consecutive years and won the trust and recognition of all customers. In the future, NISSAN will continue to enhance sales and service quality, improve hardware and software equipment, and apply innovative information technology to provide instant services and maintain a high level of customer satisfaction. INFINITI will continue to upgrade its dealerships in accordance with the internationally renowned "IREDI” (INFINITI Retail Environment Design Initiative) design specifications for global display sites to create spacious, bright and gallery-like showrooms that boast five-star services to give customers a wonderful home-like experience.

Looking into the future and under the support from all shareholders and efforts from all employees, Yulon Nissan will continue to increase revenue and profits through the strengthening of products, services and brand value. Yulon Nissan is confident in maximizing the benefits from the intensely competitive market.

Finally we would like to express our gratitude for the support from all shareholders on behalf of all employees at Yulon Nissan Motor Co., Ltd. We wish your health and success.

Thank you.

Chairman Kenneth K. T. Yen

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Letter to Shareholders

1. 2017 Operating Performance:

  • (1) Operating Performance
Operating Performance Operating Performance Operating Performance
Unit：NTD thousand
Fiscal Year
Item		 Fiscal year 2016 Fiscal year 2017
OperatingRevenue 34,860,446 33,221,774
Profit Before Tax 5,586,104 8,003,421
Net Profit For The Year 4,630,615 6,642,500
Earnings Per Share 15.44 22.14
  • (2) Profitability Analysis perating Performance
Fiscal Year
Item		 Fiscal year 2016 Fiscal year 2017
Profit Margin On Sales 3.45% 6.25%
Income after Tax（％） 13.28% 19.99%
Return on assets（％） 15.30% 23.96%
Return on equity（％） 21.29% 31.08%
  • (3) Comparison of Sales Performance in Major Competitors
Fiscal Year Fiscalyear 2016 Fiscalyear 2016 Fiscalyear 2017 Fiscalyear 2017
Brands
units share units share
NISSAN 44,723 10.4% 42,630 9.8%
TOYOTA 142,670 33.2% 128,069 29.5%
MITSUBISHI 46,327 10.8% 48,184 11.1%
HONDA 27,355 6.4% 34,070 7.8%
FORD 19,630 4.6% 20,185 4.6%
OTHER 149,647 34.6% 161,519 37.2%
TOTAL 430,352 100.0% 434,657 100.0%

2. Highlights of Business Operation Plans for 2018 ：

(1)Management Guidelines

Yulon Nissan integrates the abundant management resources from Nissan Motor Company Global and Yulon Group to develop the following company management guidelines:

  1. Build strategy-oriented organizations to form sustained competitive advantage.

  2. Lead the market trends and style through innovative products and services.

  3. Use macro environmental resources to create synergies for business operation.

  4. Implement profit growth model to maximize values for customers.

(2) Expected Business Objectives

To strengthen the permeability of brand commutation and brand publication, the company emphasizes the development on “NISSAN INTELLIGENT MOBILITY (NIM)brand image communication,” and promoting advertising and promotional performance,” to effectively convert brand value into the performance of market sales. Meanwhile the core advantage of models are developed with high

2017 Annual Report

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裕隆日產 YULON NISSAN

explicitness, high usability, high technology, and high price-performance-ratio, creating the appealing products that meet consumer requirement and forming portfolios of best-model sales through the complementary strategies between domestic cars and imported cars. Moreover, the company applies customer value promotion campaigns held for years to gradually establish a benchmark enterprise of example in customer satisfaction. Through solid foundation of competitiveness, the company will stabilize the growth in intensely competitive market and re-produce excellence in operating performance.

3. Future Development Strategy Of The Company ：

To sustain the demand for company growth, NISSAN Motor reexamines the mid and long-term internal and external environmental impact assessment and identifies the future potential market risks and opportunities. The Company prudently designs the “One-Two-Three Mid-Term Strategic Plan” and expects to establish the core competitive advantage for the next generation in 3 years, in order to assure the accomplishment of mid-term strategic objectives.

The framework of “One-Two-Three” Mid-Term Strategic Plan includes two principal objectives, 3S Strategic Framework, and Nine Major Strategic Supports:

  • (1) Two Principal Objectives: Set up the certain market share and objectives in operating profits before 2020.

  • (2) The 3S Strategic Framework includes the following three strategic constituents and the different strategic supports of composition:

  • A. Sell More – Sales growth strategy based on “innovation.”

  • B. Spend Wise – Cost thinning strategy based on “reciprocity.”

  • C. Share with Hearts – Corporate rooting strategy based on “sharing.”

The company will comprehensively examine the changes in corporate nature and competitive environment through the formulation of mid-term strategy plans; setting up mid and long-term strategic objectives, designing mid and long-term strategic orientation, and refining the corporate cultural value with effective repurposing of organization management.

The mid-term strategic plan will establish a “people-oriented” corporate foundation with the purpose to create resource sharing, responsibility sharing, and outcome sharing “inclusive environment.” The plan will expand the potential and value of employees so that employees will incessantly discover innovation and take challenge with courage. All employees will develop consensus through intense communication and good interaction in the process, which will become the specific contribution of compelling power in “Sell More” and “Spend Wise.”

4. Impact of External Environment (including competitors, regulations, macroeconomics and other factors) ：

In recent years, the development of the automotive market has remained stable as a result of the replacement policy and new model launches. Looking at the economy in 2018, major research institutions predicted that that the global economy will continue seeing the cyclical recovery of the past, which is expected to continuously boost Taiwan’s export momentum and stabilize the moderate growth of the domestic market.To continuously maintain a stable growth and secure the corporate sustainable development, the Company has to actively plan and carry out the short-term and long-term action plans periodically.

2017 Annual Report

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Company Brief Introduction

II. Company Brief Introduction

1. Established Date:

October 22, 2003.

2. Highlights of Development:

  • Oct. 2003: To ehance competiveness, participate in international division of labor and carry out the professional management, Yulon Motor spun off R&D, sales and other businesses to set up this company in accordance with corporation merge and accquisition regulations. The capital was NT 3bn. Yulon Motor owned 100% of the shares of this company at the time of its establishment and has transferred 40% of the shares to Nissan Motor on Oct. 30 2003.

Jun. 2004: The company’s stock processed a public issuance.

Nov. 2004: NISSAN has been certified with ISO 9001 and ISO 14001.

Dec. 2004: Yulon Nissan Motor Co., Ltd., went IPO officially.

  • Mar. 2005: The largest innovation contest “2005 Innovation Award of Yulon Nissan Motor” began. Jul 2005: INFINITI flagshop opened in AUTOMALL Shindian.

  • Sep 2005: Yulon Nissan Motor was awarded the most satisfied automaker of non-luxury cars in Taiwan by J.D.POWER.

  • Jun. 2006: The whole new NISSAN TIIDA featuring “Magical Big Space” made its stage debut.

  • Aug. 2006: Yulon Nissan Motor was honored to receive the award as the automobile manufacturer with the highest proportion of export to Japan.

  • May. 2007: Yulon Nissan Motor received “the Third Anniversary of Great Vision Magazine Society Responsibility Award 2007”

  • Jun. 2007: Yulon Nissan Motor received “Certification of NISSAN secure burglarproof code” from Ministry of the Interior.

  • Oct. 2007: Yulon Nissan Motor launched X-level SUV of NISSAN LIVINA 1.6L and 1.8L.

  • Nov. 2008: Launch of NISSAN GT-R press conference

  • Jan. 2009: NISSAN was awarded the No. 1 Ideal Domestic Car Brand

  • Apr. 2009: Launch of NISSAN ALL NEW TEANA of car craft revitalization

  • May. 2010: NISSAN TIIDA has been awarded by the Environmental Protection Department the “Annual Green Car” for three consecutive years.

  • May. 2011: Yulon-Nissan took the lead in cooperating with Taichung City Government in jointly implementing the Smart Electric Car Pilot Program initiated by the Ministry of Economic Affairs.

Dec. 2012: NISSAN BIG TIIDA hatchbacks and turbocharged cars was launched.

  • Feb. 2013: Grand opening of INFINITI IREDI showroom in Xindian, New Taipei City, Taiwan.

  • Oct. 2013: Introduction of all new NISSAN SUPER SENTRA.

  • Mar. 2014: NISSAN ALL NEW LIVINA was launched.

  • Mar. 2015: Power saving NISSAN ALL NEW LIVINA 2015 was officially released.

  • Mar. 2015: INFINITI Q50 2015 model was launched.

  • May. 2015: NISSAN “perfect” X-TRAIL was launched.

May. 2015: INFINITI QX60 2015 model was launched.

  • Oct. 2015: NISSAN J.D. Power dual champion in 2015 non-luxury Customer Service Index (CSI) and Sales Satisfaction Index (SSI).

  • Dec. 2015: NISSON SUPER SENTRA 2016 revolutionary model was launched.

  • Jan. 2016: NISSAN JUKE 2016 was launched.

  • Jan. 2016: INFINITI Q30/Q80 was on display in Taipei Auto Show for the first time.

Mar. 2016: NISSAN SUPER SENTRA was launched.

  • Mar. 2016: NISSAN launched BIG TIIDA TURBO with a special offer.

  • Mar. 2016: 2016 INFINITI Q50 HYBRID was launched officially.

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裕隆日產 YULON NISSAN

  • Jun. 2016: 2016 NISSAN X-TRAIL 2.0L features the upgraded safety equipment. Jun. 2016: The inauguration of the IREDI flagship display center in Taipei Songjiang was held. Jul. 2016: INFINITI Q30 was launched. Sep. 2016: NISSAN MURANO HYBRID was launched officially at NT$1.99 million. Sep. 2016: Based on a true story, NISSAN’s Newbie microfilm was released. Sep. 2016: 2017 INFINITI QX60 was launched officially. Sep. 2016: The inauguration of the IREDI flagship display centers in Kaohsiung and Taichung was held. Oct. 2016: NISSAN launched BIG TIIDA featuring a smart audio/video integration system in celebration of its top sales over the past decade.

  • Oct. 2016: 2017 NISSAN ALL NEW LIVINA Flagship features an upgraded audio/video security system.

Nov. 2016: The topic of NISSAN Innovation Design Competition was NISSAN Crossover. Dec. 2016: INFINITI Q60 was on display in Taipei Auto Show for the first time.

3. 2017 Operation Results:

  • January 2017: NISSAN will offer maintenance services at Chinese New Year to ensure safe drives. January 2017: INFINITI Q30 is launched in 2017. February 2017: NISSAN released its brand-new brand image advertisement. March 2017: NISSAN NEW MARCH is launched at the amount of NT$539,000. March 2017: INFINITI IREDI Flagship Exhibition Center launched brand-new Q60 at its grand opening in Hsinchu.

  • April 2017: NISSAN Gangshan Flagship Exhibition Center is the world’s first across NISSAN that obtains NREDI 2.1 certification.

  • April 2017: NISSAN iTIIDA made its world premiere at the amount of NT$659,000. May 2017: NISSAN provided a limited time offer for the celebration of its 60th anniversary. May 2017: INFINITI QX60 was awarded the Best 7-seater SUV. June 2017: More than 2000 NISSAN owners participated in handmade leather rings & beads making.

  • July 2017: NISSAN X-TRAIL achieved the world’s No.1 sales with advanced SUV safety equipment.

  • July 2017: NISSAN JUKE was awarded the Best Compact SUV. July 2017: INFINITI series were displayed in 2017 Taipei International Autoshow. August 2017: 2017 NISSAN National Puzzle Challenge was organized. September 2017: NISSAN sponsored 2017 NISSAN ACTION ASIA X-TRAIL TAIWAN. October 2017: NISSAN offered iTIIDA SR to celebrate its 60th anniversary in Taiwan. November 2017: Pre-order for remodeled NISSAN SENTRA was provided with the limited number of additional offers.

  • November 2017: INFINITI TAIWAN advocated the spirit of the brand ambassador STEPHEN CURRY and launched INFINITI Q50 (MY18).

  • December 2017: NISSAN provided the limited time offer with two additional gifts.

  • December 2017: NISSAN displayed 2020 Vision Gran Turismo and KICKS in 2018 Taipei International Autoshow.

  • December 2017: NISSAN displayed INFINITI QX50 and initiated the pre-order for QX30 in 2018 Taipei International Autoshow.

4. Others

  1. Mergers & Acquisitions, invested companies and reconstructions in fiscal year 2017 and until the Annual Report published date: Nil

  2. Large Transfer volume or Changes made by the Board Members, Supervisors or Big Shareholders holding more than 10% shares in fiscal year 2017 and until the Annual Report published date: Nil

  3. Change of Business Operation Rights and other important matters that are enough to influence the shareholders equity in the fiscal year 2017 and until the Annual Report published dated: Nil

2017 Annual Report

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Company Management Report

III. Company Management Report

1. Organizational System:

(1) Organization chart:

==> picture [474 x 547] intentionally omitted <==

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

Shareholders' Meeting
Remuneration Committee
Board of Directors
Chairman
Auditing Office
CSR Committee Special Assistant
to the Chairman
Ethical Management President
Committee
Corporate Governance
Committee
Senior Vice
President
Vice Vice Vice Vice
President President President President
t
t
MIS Centre
D
Technology Center
Purchasing Department Marketing Department Offshore Business Office Safety & Health Office
Production Technology Office Parts and Service Department INFINITI Business Department Total Customer Satisfaction Product Planning Department Business Planning & Finance Administration Department Public Relations Department
----- End of picture text -----

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裕隆日產 YULON NISSAN

(2) Organization Functions

Department Title Occupational Activities
AuditingOffice Establish a Strong, Reasonable and Effective Internal Control System
1. Planning and guiding a product that conforms to the market needs and with competitive
strength
2. Plans IT product and strategy, enhance the product’s added value
3. Conduct market survey and information gathering; get hold of consumer’s
requirements and evaluation on the product
4. Perform long term pricing management, institute accurate pricing strategy so as to
ensure product competitive strength
Product Planning

Department
1. Brand Marketing Planning and Management
2. Strengthen the difference strategy buildup the brand value
3. Management and motivation of Dealers as well as management of car production, sales
and distribution
Marketing

Department
1. Plans Brand Operation Strategy, and building up brand’s value
2. Distribution channel development, planning and implementing operation management
criteria
3. Actively utilize market information, to predict and guide the marketing direction
4. Regulation and implementation of service policy and management standards
5. Planning and implementation of educational training for Distributors
INFINITI Business
Department
1. Regulation and implementation of service policy and standard management
2. Planning and deployment of educational training for the Dealers
3. Establish and deployment of customer satisfaction enhancement standard and
management
4. Parts distribution and management
5. Parts procurement and inventory volume control
Parts and service
Department
Total Customer 1. Planning and promotion of the QA strategies and the QA system
2. Quality supervision business
3. Product quality information feedback and improvement
Satisfaction
Department
1. Car model and parts development
2. Subcontracted parts component quality verification and engineering specification test
confirmation
3. Vehicle’s Regulation related verification/application and supervisory confirmation
Technology Center
Purchasing 1. Purchasing business planning and management, and parts subcontractors management
2. Car parts purchasing

Department
1. Deployment, production and sorting of the manufacturing plans
2. Equipment Investment Planning, applying, and management
3. Technology Information Authorization
4. Planning and Deployment of Factory Annual Plans
5. As a window between the NML, responsible for technology guidance and assigning,
maintenance research
Production
Technology Office
1.Operation Planning, monitoring and management of achieving goals
2.Provide analysis data of Corporate Financial Meeting, Taxation relevant business and
operation
3. Management of fund utilization.
4. Law, Stock Affair, Shareholders Meeting relevant business
Business Planning

& Finance
Department
1. Human Resources Management and Labor-Capital Relation Development and Benefits
Planning
2. General miscellaneous affairs management
Administration
Department
MIS centre System Maintenance and management
Public Relations Planning and implementation of public relation image activities
Department
1. Stipulating the Offshore Business Strategy Plans and Target control
2. Management of Offshore Business
3. Investment Evaluation of Offshore Business
Offshore Business
Office

2017 Annual Report

8

Company Management Report

2 Information of Directors, Supervisors, President, Senior Vice President, Vice President, General Manager : (1) Directors and Supervisors' Information:
Nationa Shareholdings
Current Shareholdings
lity or Elected First when Elected
Title
Place of
Name		 Gender (Sworn-in) Term Elected
Registra Date Date
tion
Share Share
Shares Shares
Holding Holding
Chairman R.O.C Yulon Motor
Co., Ltd.
Representative
:
Kenneth K. T.
Yen		 Male 2015.
6.30		 3 2003.
10.1		 180,000,000
* 0		 60.00
*0.00		 143,500,000
* 0		 47.83
*0.00
Director R.O.C Yulon Motor
Co., Ltd.
Representative
:Kuo-Rong
Chen		 Male 2015.
6.30		 3 2003.
10.1		 180,000,000
* 0		 60.00
*0.00		 143,500,000
* 5,000
47.83
*0.00
Director R.O.C Yulon Motor
Co., Ltd.
Representative
:Chen-Hsiang
Yao		 Male 2015.
6.30		 3 2013.
4.1		 143,500,000
* 0
47.83
*0.00		 143,500,000
* 0
47.83
*0.00

2017 Annual Report

9

裕隆日產 YULON NISSAN

May 24, 2018

Other competent Other competent Other competent
Current
Officer, Director or
Shareholdings in
shareholding of Supervisor who is


the names of

spouse and minor
the Spouse or the

others		 Main Experience Positions concurrently held in

children
second-degree

(Education)
this company and other company
relative
Title
Share Share Relatio
Shares Shares Name
Holding Holding nship
0 0.00 0 0.00 Honorary Doctor
of Commerce,
University of Saint
John,USA		 Chairman, Yulon Motor Co., Ltd.
Chairman, China Motor Corporation.
Chairman, Tai-Yuen Textile Co., Ltd.
Chairman, Hualing Motor Co., Ltd.
Chairman, Hwa-chuan Auto Technology
Center Co., Ltd.
Chairman, LUXGEN Motor Co., Ltd.
Chairman, Hui-Fong Motor Co., Ltd.
Vice Chairman, Winsome Co., Ltd.
Please refer to the “Information on Affiliated
Companies” for details.
Nil		 Nil Nil
0 0.00 0 0.00 NCTU Executive
Master of Business
Administration
President, Yulon
Motor Co., Ltd.
Executive Vice
President, Yulon
Motor Co., Ltd.		 Vice Chairman, Yulon Motor Co., Ltd.
Director, China Motor Corporation
Chairman, Taiwan Acceptance Corporation
Director, Tai-Yuen Textile Co., Ltd.
Director, Hwa-chuan Auto Technology Center
Co., Ltd.
Vice Chairman, Luxgen Motor Co., Ltd.
Director, Winsome Co., Ltd.
Director, Dongfeng Yulon Motor Co., Ltd.
Please refer to the “Information on Affiliated
Companies” for details.
Nil		 Nil Nil
0 0.00 0 0.00 Master of
International
Business
Management,
Curtin University
of Technology
VicePresident,
Yulon Motor Co.,
Ltd.
Factory Director,
Yulon Motor Co.,
Ltd.		 Director and President, Yulon Motor Co., Ltd.
Director, Taiwan Acceptance Corporation
Director, Lexgen Motors Co., Ltd.
Director, China Engine Corporation
Please refer to the “Information on Affiliated
Companies” for details.		 Nil Nil Nil
  • which are personal own

2017 Annual Report

10

Company Management Report

Nation
ality Shareholdings
or Elected Term First
when Elected		 Current Shareholdings
Title Place Name Gender (Sworn-in) Elected
of
 Date Date
Regist
 Share Share
ration Shares
Holding		 Shares Holding
Director R.O.C Yulon Motor
Co., Ltd.
Representative:
Leman
C.C. Lee		 Male 2017.
4.7		 1.25
(Note)		 2017.
4.7		 143,500,000
* 0
47.83
*0.00		 143,500,000
* 0
47.83
*0.00
Director Japan Nissan Motor
Co., Ltd.
Representative:
Takashi
NISHIBAYAS
HI		 Male 2015.
6.30		 3 2011.
3.21		 120,000,000
* 0		 40.00
*0.00		 120,000,000
* 0		 40.00
*0.00
Director Japan Nissan Motor
Co., Ltd.
Representative:
Atsushi KUBO		 Male 2015.
6.30		 3 2012.
7.1		 120,000,000
* 0		 40.00
*0.00		 120,000,000
* 0		 40.00
*0.00
Director Japan Nissan Motor
Co., Ltd.
Representative:
Junichi OHORI
Male		 2015.
6.30		 3 2014.
4.1		 120,000,000
* 0		 40.00
*0.00		 120,000,000
* 0		 40.00
*0.00
Director Japan Nissan Motor
Co., Ltd.
Representative:
Kenji
SHIMOYAMA		 Male 2015.
6.30		 3 2015.
6.30		 120,000,000
* 0		 40.00
*0.00		 120,000,000
* 0		 40.00
*0.00
Independ
ent
Director		 R.O.C Jin-Shun Wu Male 2015.
6.30		 3 2015.
6.30		 0 0.00 0 0.00

Note: Appointed on Apr. 7, 2017.

2017 Annual Report

11

裕隆日產 YULON NISSAN

May 24, 2018

Other competent Other competent Other competent
Current
 Shareholdings in
Officer, Director
shareholding of
the names of		 or Supervisor who
spouse and
i hild
others		 Main Experience
 Positions concurrently held in
 is the Spouse or
the second-degree
mnor cren (Education) this company and other company
relative
Share Share Title Relati
Shares Shares
Name
Holding Holding onship
0 0.00 0 0.00 National Taiwan
University of Science
and Technology
VicePresident,
Yulon-Nissan Motor
Co., Ltd.		 Director, Taiwan Acceptance Corporation
Director, Yuan Long Motor Co., Ltd.
Director, Yu Chang Motor Co., Ltd.
Director, Tian Wang Motor Co., Ltd.
Director, Sin Jang Chang Corporation
Director, Kaixing Insurance agent Co., Ltd
Director, Tokio Marine Newa Insurance
Co., Ltd.
Director, Yen Tjing-Ling Industrial
Development Foundation
Director, Jetford , Inc.
Director, Guangzhou Aeolus Automobile
Co., Ltd.
Director, Aeolus Automobile Co., Ltd.
Director, Aeolus Xiangyang Automobile
Co., Ltd.
Chairman, Shenzhen Lan You Technology
Co., Ltd.
Director, Dong Feng Yulon Used Cars Co.,
Ltd.		 Nil Nil Nil
0 0.00 0 0.00 Bachelor of Commerce,
Commercial Science,
Waseda University,
Japan		 VP, China Division GM, Nissan Motor Co.,
Ltd.
President, Nissan (China) Investment Co.,
Ltd.
Director, Dongfeng Nissan Auto Finance
Co., Ltd.		 Nil Nil Nil
0 0.00 0 0.00 Bachelor of Political
Science and Economics,
Waseda University,
Japan		 General Manager of China Department,
Nissan Motor Co., Ltd.		 Nil Nil Nil
0 0.00 0 0.00 Master of Engineering,
Faculty of Engineering,
Musashi Institute of
Technology, Japan		 SVP, Yulon-Nissan Motor Co., Ltd Nil Nil Nil
0 0.00 0 0.00 Bachelor of Engineering,
Department of
Mechanical Engineering,
Kogakuin University,
Japan

VP, Yulon Nissan Motor Co., Ltd		 Nil Nil Nil
0 0.00 0 0.00 Master of Professional
Accounting, National
Chengchi University		 Independent Director and
Remuneration
Committee member of On-Bright
Electronics Incorporated		 Nil Nil Nil
  • which are personal own

2017 Annual Report

12

Company Management Report

Shareholdings Current
Nationality Elected First

when Elected		 Shareholdings
Title
or Place of		 Name Gender (Sworn-in) Term Elected
Registration Date Date
Share Share
Shares Shares
Holding Holding
Independ
ent
Director		 R.O.C Robert Mao Male 2015.
06.30		 3 2003.
10.01		 0 0.00 0 0.00
Supervi
sor		 R.O.C Wei Wen
Investment
Co., Ltd
Representativ
e:
Kwan-Tao Li		 Male 2015.
06.30		 3 2012.
07.01		 1,880,000
* 0		 0.63
*0.00		 1,878,000
* 0		 0.63
*0.00
Supervi
sor		 R.O.C Wei Wen
Investment
Co., Ltd
Representativ
e:
Tai-Ming
Chen		 Male 2015.
06.30		 3 2013.
06.14		 1,878,000
* 0		 0.63
*0.00		 1,878,000
* 0		 0.63
*0.00
Supervi
sor		 Japan Takahiko
Ikushima		 Male 2017.
06.26		 1
(Note)		 2017.
06.26		 0 0.00 0 0.00

Note: Appointed on Jun. 26, 2017.

2017 Annual Report

13

裕隆日產 YULON NISSAN

May 24, 2018

Other competent Other competent Other competent
Current
Shareholdings
Officer, Director or
shareholding of

in the names of
h		 Positions concurrently held in
 Supervisor who is the
S h
spouse and minor Main Experience
children oters
(Education)		 this company and other company pouse or te
second-degree relative
Share
Share		 Relation
Shares Shares Title Name
Holding
Holding		 ship
0 0.00 0 0.00 Master of Management,
Massachusetts Institute
of Technology, U.S.A
Master of Engineering,
Cornell University,
U.S.A		 Director, Energy Recovery Inc.
Director, Hon Hai Co., Ltd.		 Nil Nil Nil
0 0.00 0 0.00 Member of New
York State Bar
MBA, J.L. Kellogg
Graduate School of
Management,
Northwestern
University/Hong
Kong University of
Science &
Technology
LLM, New York
University Law
Graduate School,
U.S.A.
LLB, National
Taiwan University
Law Department		 Chief Counselor, Lee & Li
Attorneys-at-Law
Chairman, Lee & Li Foundation
Director, Yen Tjing Ling Medical
Foundation
Director, Far Eastern Medical
Foundation
Director, Far Eastern Y.Z. Hsu
Science & Technology Memorial
Foundation
Director, Far Eastern Memorial
Foundation
Director, Tai Yuen Textile Co.,
Ltd.
Director, Diamond Hosiery &
Thread Co., Ltd.
Director, Far Eastern New Century
Corporation
Director, Asia Cement Corporation		 Nil Nil Nil
0 0.00 0 0.00 Member of New
York Bar
Adjunct Assistant
Professor, National
Chengchi University
LL. B., National
Taiwan University
LL. M., Boston
University		 Independent Director, Simplo
Technology Co., Ltd.
Independent Director, PCL
Technologies, Inc.
Independent Director, Orient
Pharma (OP) Co., Ltd.
Supervisor, Otsuka Information
Technology Corp.		 Nil Nil Nil
0 0.00 0 0.00 Bachelor of Faculty
of Economics,
Rikkyo University,
Japan		 General Manager of Budget and
Accounting Department, Financial
Management Group, Nissan Motor
Co., Ltd.		 Nil Nil Nil
  • which are personal own

2017 Annual Report

14

Company Management Report

The Major Stockholders of Corporation Shareholders

May 24, 2018

Names of Major Stockholders The Major Stockholders of Corporation Shareholders
Yulon Motor Company Ltd. 1. Tai Yuen Textile Co., Ltd., (18.11%)
2. China Motor Co., Ltd., (16.67%)
3. Kenneth K. T. Yen (10.18%)
4. Nanshian Life Insurance Co., Ltd. (3.7%)
5. Fan De Investment Co., Ltd. (1.58%)
6. Labor Insurance Fund (1.47%)
7. Management of Board Public Service Pension Fund (1.34%)
8. Mercuries Life Insurance Co., Ltd. (1.25%)
9. Yen Tjing-Ling Industrial Development Foundation(1.09%)
10. New Labor Retirement Fund(1.07%)
Nissan Motor Co., Ltd. 1. Renault S.A.(43.40%)
2.The Chase Manhattan Bank, N.A. London Special Account
No. 1(3.37%)
3. Japan Trustee Services Bank Ltd. (Trust account) (2.74%)
4. The Master Trust Bank of Japan (Trust account) (2.54%)
5. Japan Trustee Services Bank Ltd. (Trust account 9) (1.43%)
6. Nippon Life Insurance Company (1.28%)
7. Japan Trustee Services Bank Ltd. (Trust account 5) (1.03%)
8. JP Morgan Chase Bank 385632 (1.00%)
9. State Street Bank West Client - Treaty 505234 (0.81%)
10.Moxley and CoLLC (0.81%)
Wei Wen Investment Co., Ltd. 1. Kenneth K. T. Yen (99.4%)
2. Le Wen Investment Co., Ltd. (0.10%)
3. Fan De Investment Co., Ltd. (0.10%)
4. Yu Xin Investment Co., Ltd. (0.10%))
5. Lilian Chen (0.10%)
6. Wei Tai Investment Co., Ltd.(0.10%)
7. Jing Yu Investment Co., Ltd. (0.10%)

If the Legal Persons are the Major Shareholders, their major Stockholders

May 24, 2017

Legal Person’s Name Shareholders of Natural persons
1.Tai-Yuen Textile Co., Ltd. 1. Yulon Motor Company Ltd. (20.85%)
2. Yen Tjing-Ling Industrial Development Foundation (14.24%)
3. Hoffman Brothers Investment Co., Ltd. (9.80%)
4. Evans Co., Ltd. (9.71%)
5. Westbridge Investment Co., Ltd. (9.13%)
6. Lee Yuan Investment Co., Ltd. (7.17%)
7. Yun Shueng Investment Corp. (6.82%)
8. Ly Pon Investment Corp. (5.61%)
9. Diamond Hosiery & Thread Co., Ltd. (4.55%)
10.Yuen Wei Investment Corp. (3.10%)

2017 Annual Report

15

裕隆日產 YULON NISSAN

Legal Person’s Name Shareholders of Natural persons
2.China Motor Co., Ltd. 1. Tai-Yuen Textile Co., Ltd. (25.18%)
2. Mitsubishi Motors Co., Ltd. (14.00%)
3. Yulon Motor Company Ltd. (8.05%)
4. Diamond Hosiery & Thread Co., Ltd. (6.76%)
5. Mitsubishi Corp. (4.79%)
6. Cathay Life Insurance Co., Ltd. (3.64%)
7. Nanshian Life Insurance Co., Ltd. (1.27%)
8. Kenneth K. T. Yen ( 1.20% )
9. Citibank Norway investment trust account.(1.13%)
10.Taiwan Life Insurance Co., Ltd. (0.95%)
3. Nanshian Life Insurance Co., Ltd 1.Trust Account of First Bank hoding by Ruen Chen Investment
Holding Co., Ltd. (76.46%)
2. Ruen Chen Investment Holding Co., Ltd. (14.16%)
3. Ying-Zong Du (3.25%)
4. Ruen Hua Dyeing & Weaving Co., Ltd. (0.28%)
5. Ruen Tai Leasing Co., Ltd. (0.15%)
6. Ji Pin Investment Co., Ltd. (0.11%)
7. Wen-Te Kuo (0.11%)
8. Pao Huang Investment Co., Ltd. (0.05%)
9. Pao Hui Investment Co., Ltd. (0.05%)
10. Pao Yi Investment Co., Ltd. (0.05%)
11. Pao Ji Investment Co., Ltd. (0.05%)
4.Fan De Xin Investment Co., Ltd. 1. Wei Wen Investment Co., Ltd. (33.30%)
2. Le Wen Investment Co., Ltd. (33.30%)
3. Wei-Kung Chi (0.02%)
4. Jerry Chu (0.02%
5. Labor Insurance Fund Non-juristic person, not applicable
6 Management of Board Public Service
Pension Fund		 Non-juristic person, not applicable
7. Mercuries Life Insurance Co., Ltd. 1. Mercuries & Associates Holding Ltd (43.14%)
2. Shang Lin Investment Co., Ltd (6.11%)
3. Shu Ren Investment Co., Ltd (5.44%)
4. Mercuries Fu Bao Ltd (2.74%)
5. Labor Pension Fund (the NewFund) (1.63%)
8. Yen Tjing-Ling Industrial
Development Foundation		 Not applicable
9.New pension fund Non-juristic person, not applicable
10.Renault S.A. Subject to local restrictions, not available
11.The Chase Manhattan Bank, N.A.
London Special AccountNo. 1		 Subject to local restrictions, not available
12.Japan Trustee Services Bank Ltd.
(Trust account)
Subject to local restrictions, not available
13. The Master Trust Bank of Japan
(Trust account)		 Subject to local restrictions, not available
14.Japan Trustee Services Bank Ltd.
(Trust account 9)		 Subject to local restrictions, not available

2017 Annual Report

16

Company Management Report

Legal Person’s Name Shareholders of Natural persons
15.Nippon Life Insurance Company Subject to local restrictions, not available
16.Japan Trustee Services Bank Ltd.
(Trust account 5)		 Subject to local restrictions, not available
17.JP Morgan Chase Bank 385632 Subject to local restrictions, not available.
18.State Street Bank West Client -
Treaty 505234		 Subject to local restrictions, not available.
19.Moxley and Co LLC Subject to local restrictions, not available.
20. Le Wen Investment Co., Ltd. 1. Kenneth K. T. Yen (64.79%)
2. Wei Tai Investment Co., Ltd. (19.05%)
3. Wei Wen Investment Co., Ltd. (16.08%)
3. Fan De Investment Co., Ltd. (0.04%)
4. Wei-Kung Chi (0.02%)
5.LilianChen(0.02%)
21. Yu Xin Investment Co., Ltd. 1. Evans Co., Ltd. (99.96%)
2. Wei Tai Investment Co., Ltd. (0.01%)
3. Fan De Investment Co., Ltd. (0.01%)
4. Wei-KungChi(0.01%)
22. Wei Tai Investment Co., Ltd. 1. Kenneth K. T. Yen (99.9%)
2. Fan De Investment Co., Ltd. (0.04%)
3. Lilian Chen (0.02%)
4. Wei-Kung Chi (0.02%)
5. Jerry Chu (0.02%)
23. Jing Yu Investment Co., Ltd... 1. Evans Co., Ltd. (99.96%)
2. Fan De Investment Co., Ltd. (0.01%)
4. Wei-Kung Chi (0.01%)
5.Kuo-RongChen (0.01%

2017 Annual Report

17

裕隆日產 YULON NISSAN

Professionalism and Independence of Directors and Supervisors

With over 5 years of work experience and With over 5 years of work experience and With over 5 years of work experience and Conformed to the Conformed to the Conformed to the Conformed to the Conformed to the Conformed to the Conformed to the Conformed to the Conformed to the Conformed to the
Diversification of Board members

the following professional qualifications		 requirements of
（Note 2）
Independence (Note 1)
Lecturer (or Specialized and Work The number

above) of
technical		 experience of other
Conditions

public/private		 personnel with
required for		 public

colleges/universit
national exam
business,		 companies
ies for relevant qualified law, Operational Finance & Indus that an
subjects required
ertificates required
finance,		 1 2 3 4 5 6 8 9 10
decision-m		 accounting trial Foreign independent
Name
for business, law,
for judges, public
accounting		 7 aking
and legal		 know
nationality		 director
finance, procurators, or company ability expertise -how concurrently
accounting or
lawyers,
businesses		 serves in

company
ccountants or
businesses other company
businesses
Yulon Motor Co., Ltd.
Representative:
Kenneth K.T.Yen		 v v v v v v v
Yulon Motor Co., Ltd.
Representative:
Kuo-Rong Chen		 v v v v v v v
Yulon Motor Co., Ltd.
Representative::
Chen-HsiangYao		 v v v v v v v
Yulon Motor Co., Ltd.
Representative:
Leman C.C.Lee		 v v v v v v v
Nissan Motor Co., Ltd.
Representative:
Takashi NISHIBAYASHI		 v v v v v v v v v v
Nissan Motor Co., Ltd.
Representative:
Atsushi KUBO		 v v v v v v v v
Nissan Motor Co., Ltd.
Representative:
JunichiOHORI		 v v v v v v v v
Nissan Motor Co., td.
Representative:
KenjiSHIMOYAMA		 v v v v v v v v
Jin-ShunWu v v v v v v v v v v v v v v 1
Robert Mao v v v v v v v v v v v v
Wei Wen Investment Co.,
Ltd.
Representative:
Kwan-TaoLi		 v v v v v v v v v v v v v
Wei Wen Investment Co.,
Ltd.
Representative:
Tai-Ming Chen
v		 v v v v v v v v v v v 3
Takahiko IKUSHIMA v v v v v v v v v

Note: Directors and supervisors who meet the following conditions 2 years prior to the election and during the post, are marked “v” in each qualification columns.

(1) Not an employee of the company or its affiliates

(2) Not a director or a supervisor of the company or its affiliates (excluding the independent directors of the company’s or the mother company’s subsidiaries that directly or indirectly hold over 50% shares of the voting right)

(3) Not a natural person shareholder who or whose spouse, minor child, or who on behalf of other people, holds over 1% of the company’s total issued shares or is one of the first 10 shareholders

(4) Not a spouse, or within a second-degree relative or a fifth-degree direct relative of the above 3 parties

(5) Not a director, supervisor or an employee who is a legal person shareholder directly holding 5% of the company’s total issued shares, or a director, supervisor or an employee who is one of the first five legal person shareholders

(6) Not a director, supervisor, manager or a shareholder with over 5% shares who are from specific companies or organizations that have that have financial or business transactions with the company

(7) Not an enterprise owner, a partner, director, supervisor, manager or their spouse who is a professional or from an independent venture, a partner, a company or an organization providing business, legal, financial, accounting services or consultation for the company or its affiliates

(8) Neither a spouse nor within a second-degree relative of other directors

(9) Without any of the circumstances mentioned in the provisions of Article 30 of the Company Law

(10)Not a government, legal person or representative elected according to Article 27 of the Company Law

Note 2: The composition of the Board of Directors follows the policy on diversification of Board members required by the Company’s “Code of Practice for Corporate Governance,” in hopes of benefiting from the diversified expertise of directors and supervisors and enabling the Board to perform its duties.。

2017 Annual Report

18

Company Management Report

(2) Information of President, Senior Vice President, Vice President and General Manager
Shareholding of Shareholdings in
Elected Shares spouse and minor the names of
Title Nation
 Name Gender (Sworn-in) children others
ality Date
Share Share
Share
Shares h h
Holding Sares Holding Sares
Holding
President R.O.C Leman
C.C. Lee		 Male 2017.04.01 0 0.00 0 0.00 0 0.00
Special
Assistant
to the
Chairman
R.O.C		 Kuo-Rong
Chen		 Male 2003.11.1 5,000 0.00 0 0.00 0 0.00

2017 Annual Report

19

裕隆日產 YULON NISSAN

May 24, 2018

Any manager who is Any manager who is Any manager who is

the spouse or blood

relative within the
Main Experience Concurrent positions at other companies second order to the
(Education) principal
Title

Relation

Name

ship
National Taiwan
University of Science
and Technology
VicePresident,
Yulon-Nissan Motor
Co., Ltd.		 Director, Taiwan Acceptance Corporation
Director, Yuan Long Motor Co., Ltd.
Director, Yu Chang Motor Co., Ltd.
Director, Tian Wang Motor Co., Ltd.
Director, Sin Jang Chang Corporation
Director, Kaixing Insurance agent Co., Ltd
Director, Tokio Marine Newa Insurance Co., Ltd.
Director, Yen Tjing-Ling Industrial Development Foundation
Director, Jetford , Inc.
Director, Guangzhou Aeolus Automobile Co., Ltd.
Director, Aeolus Automobile Co., Ltd.
Director, Aeolus Xiangyang Automobile Co., Ltd.
Chairman, Shenzhen Lan You Technology Co., Ltd.
Director, Dong Feng Yulon Used Cars Co., Ltd.		 Nil Nil Nil
NCTU Executive
Master of Business
Administration
President, Yulon Motor
Co., Ltd.
Executive Vice
President, Yulon Motor
Co., Ltd.

Vice Chairman, Yulon Motor Co., Ltd.
Director, China Motor Corporation
Chairman, Taiwan Acceptance Corporation
Director, Tai-Yuen Textile Co., Ltd.
Director, Hwa-chuan Auto Technology Center Co., Ltd.
Vice Chairman, Luxgen Motor Co., Ltd.
Director, Winsome Co., Ltd.
Director, Dongfeng Yulon Motor Co., Ltd.
Please refer to the “Information on Affiliated Companies” for
details.		 Nil Nil Nil

2017 Annual Report

20

Company Management Report

Shareholding of
Shares

Shareholdings in

spouseand minor
Elected

the name of others
Nation
children
Title Name Gender
(Sworn-in)
ality
Date Share Share Share
Shares Shares Shares
Holding Holding Holding
Senior
Vice
President		 Japan Junichi
OHORI		 Male 2014.4.1 0 0.00 0 0.00 0 0.00
Vice
President		 Japan Kenji
SHIMOYA
MA		 Male 2014.4.1 0 0.00 0 0.00 0 0.00
Vice
President		 Japan Mochizuki
MASAHIR
O		 Male 2017.4.1 0 0.00 0 0.00 0 0.00
Vice
President		 R.O.C Wen-Chuan
Chung		 Male 2017.4.1 0 0.00 0 0.00 0 0.00
Vice
President		 R.O.C Joseph
Hsiung		 Male 2017.5.15 0 0.00 0 0.00 0 0.00
Senior
General
Manager		 Japan Nishii
TARO		 Male 2018.5.1 0 0.00 0 0.00 0 0.00
General
Manager		 R.O.C Tsan-Huang
Lin		 Male 2009.2.15 0 0.00 0 0.00 0 0.00
General
Manager		 R.O.C Yu-Chou
Hsieh		 Male 2009.7.1 1,000 0.00 0 0.00 0 0.00

2017 Annual Report

21

裕隆日產 YULON NISSAN

May24,2018
Any manager who is the
spouse or blood relative
within the second order
to theprincipal
Title
Name
Relationship
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil


Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil		 May24,2018
Any manager who is the
spouse or blood relative
within the second order
to theprincipal
Title
Name
Relationship
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil


Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil		 May24,2018
Any manager who is the
spouse or blood relative
within the second order
to theprincipal
Title
Name
Relationship
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil


Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Any manager who is the

spouse or blood relative

within the second order
Main Experience Concurrent positions at other companies
to theprincipal

(Education)
Title

Name
Relationship
Master of Engineering, Faculty of
Engineering,Musashi Institute of
Technology, Japan		 ─ Nil Nil Nil
Bachelor of Engineering, Department of
Mechanical Engineering,Kogakuin
University, Japan		 ─ Nil Nil Nil
Bachelor of Mechanical Engineering,
Department of Mechanical Engineering,
Tokyo University of Science, Japan		 ─ Nil Nil Nil
Bachelor, Industrial Design, National Cheng
Kung University, Taiwan.
Master, Industrial Management,
National Taiwan University of Science and
Technology, Taiwan.
Master, International Business Management,
Curtin University of Technology, Australia
Director, Yuan Long Motor Co., Ltd.
Director, Hui Lian Motor Co., Ltd.
Director, Yu Shin Motor Co., Ltd.
Director, Yu Tang Motor Co. Ltd.
Director, Yu Shin Motor Co., Ltd.
Director, Chen Long Motor Co. Ltd.
Director, Chen Long Co. Ltd.
Director, Fengye Vehicle Rental Co., Ltd.		 Nil Nil Nil
Department of Aeronautics and
Astronautics, National Cheng Kung
University
Department of Management
Science,National Chiao Tung Universsity		 Director, Guangzhou Aeolus Automobile Co.,
Ltd.
Director, Aeolus Automobile Co., Ltd.
Director, Shenzhen Lan You Technology Co.,
Ltd.

Nil		 Nil Nil
MBA, Graduate School of Commerce,
Waseda University, Japan		 ─ Nil Nil Nil
Department of Aerospace Engineering,
Tamkang University		 Director,Yueki Industrial Co., Ltd Nil Nil Nil
Chung Cheng Institute of Technology
National Defense University
Department of Vehicle Engineering		 ─ Nil Nil Nil

2017 Annual Report

22

Company Management Report

Natio Elected
Shareholding of
spouseand minor
children
Shares

Shareholdings in
the name of others
Title nality Name Gender (Sworn-in)
Date		 Shares
Share
Holding
Shares
Share
Holding		 Shares
Share
Holding
Shares Shares Shares
Holding Holding Holding
General
Manager		 R.O.C Wen-Chi
Mao		 Male 2010.12.1 0 0.00 0 0.00 0 0.00
General
Manager		 R.O.C Wen-Chiang
Shu		 Male 2011.05.18 0 0.00 0 0.00 0 0.00
General
Manager		 R.O.C Dennis
Chang		 Male 2012.10.1 0 0.00 0 0.00 0 0.00
General
Manager		 R.O.C Chiung-Ming
Chou		 Male 2013.05.17 0 0.00 0 0.00 0 0.00
General
Manager		 R.O.C Chao-Yen
Liang		 Male 2015.1.1 0 0.00 0 0.00 0 0.00
General
Manager		 R.O.C Yen Chou Male 2016.4.15 0 0.00 0 0.00 0 0.00
General
Manager		 R.O.C Jacky Lee Male 2016.11.16 0 0.00 0 0.00 0 0.00
General
Manager		 R.O.C Jen-Chung Tu
Male		 2018.01.01 0 0.00 0 0.00 0 0.00
Accounting
Manager
R.O.C		 Chen-Hua,
Chi		 Male 2015.05.11 0 0.00 0 0.00 0 0.00

2017 Annual Report

23

裕隆日產 YULON NISSAN

May24, 2018
Any manager who is the
spouse or blood relative
within the second order
to theprincipal
Title
Name
Relationship
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil		 May24, 2018
Any manager who is the
spouse or blood relative
within the second order
to theprincipal
Title
Name
Relationship
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil		 May24, 2018
Any manager who is the
spouse or blood relative
within the second order
to theprincipal
Title
Name
Relationship
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Any manager who is the

spouse or blood relative
Main Experience Concurrent positions at other companies within the second order

(Education)		 to theprincipal
Title

Name
Relationship
Master of Business Administration ,
National Cheng Kung University.		 ─ Nil Nil Nil
Department of Navigation, National
Taiwan Ocean University		 Director, Yu Shin Motor Co., Ltd Nil Nil Nil
Department of Business Administration ,
Tunghai University		 Director, Yu Chang Motor Co., Ltd
Director, Yu Shin Motor Co., Ltd.
Director, Yu Tang Motor Co. Ltd
Director, Chen Long Motor Co. Ltd
Director, Car-Plus Auto Leasing Co., Ltd.		 Nil Nil Nil
Department of Mechanical Engineering,
National United University		 ─ Nil Nil Nil
Department of Mechanical Engineering,
National Chung Hsing University
Master of High Level Management,
Chiao Tung University		 ─ Nil Nil Nil
Master of International Business M
anagement, Curtin University of
Technology
Mechanical Engineering, National Central
University
Director, Yuan Long Motor Co., Ltd.
Director, Yu Ming Motor Co., Ltd.
Director, Singan Co. Ltd
Director, Chen Long Motor Co. Ltd
Director, Yu Shin Motor Co., Ltd		 Nil Nil Nil
Master of Industrial Engineering and
Engineering Management, National
Tsing-Hua University		 Director, Ding Long Motor Co., Ltd.
Director, Yu Ming Motor Co., Ltd.
Director, Qunmin Motor Co., Ltd.
Director, Yumin Insurance broker Co., Ltd.		 Nil Nil Nil
National Taiwan Institute of Technology,
Taipei, Taiwan, R.O.C.,
B.A.in Mechanical Engineer		 ─ Nil Nil Nil
University of Idaho (USA)
Master of Accountancy		 ─ Nil Nil Nil

2017 Annual Report

24

(3) Payment of Remuneration to Directors, Supervisors, President and Senior Vice President

1.Director’s Compensation

Dec. 31, 2017

Unit: NTD Thousand

Title Name Director Compensation
Compensation (A)
Severance Pay and
Pensions (B)
(Note 2)
Compensation to
Directors (C)
Business Execution
Expense (D)
All the
All the
All the
All the		 Director Compensation
Compensation (A)
Severance Pay and
Pensions (B)
(Note 2)
Compensation to
Directors (C)
Business Execution
Expense (D)
All the
All the
All the
All the		 Director Compensation
Compensation (A)
Severance Pay and
Pensions (B)
(Note 2)
Compensation to
Directors (C)
Business Execution
Expense (D)
All the
All the
All the
All the		 Director Compensation
Compensation (A)
Severance Pay and
Pensions (B)
(Note 2)
Compensation to
Directors (C)
Business Execution
Expense (D)
All the
All the
All the
All the		 Director Compensation
Compensation (A)
Severance Pay and
Pensions (B)
(Note 2)
Compensation to
Directors (C)
Business Execution
Expense (D)
All the
All the
All the
All the		 Director Compensation
Compensation (A)
Severance Pay and
Pensions (B)
(Note 2)
Compensation to
Directors (C)
Business Execution
Expense (D)
All the
All the
All the
All the		 Director Compensation
Compensation (A)
Severance Pay and
Pensions (B)
(Note 2)
Compensation to
Directors (C)
Business Execution
Expense (D)
All the
All the
All the
All the		 Director Compensation
Compensation (A)
Severance Pay and
Pensions (B)
(Note 2)
Compensation to
Directors (C)
Business Execution
Expense (D)
All the
All the
All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Compensation Received byEmployees with Concurrent Posts
Salary, Reward and
Special Allowance (E)
(Note 1)
Severance Pay and
Pensions (F)
(Note 3)
Employees’ Profit
Sharing
Bonus (G)
Exercisable
Employee
Stock Option (H)
Granted Employee
Restricted Stock (I)
All the
All the
All the

All the
All the		 Whether
Reinvestme
nt Business
Compensati
on is
% of Total Amount
of A, B,C and D
against Net Profit
after Tax
All the		 % of Total Amount
of A, B, C, D ,E,F
and G against Net
Profit after Tax
All the
The
Company
companies
included in
this
consolidated
statement
The
Company
companies
included in
this
consolidated
statement		 The
Company		 companies
included in
this
consolidated
statement		 The
Company		 companies
included in
this
consolidated
statement		 The
Company		 companies
included in
this
consolidated
statement		 The
Company		 companies
included in
this
consolidated
statement		 The
Company
companies
included in
this
consolidated
statement		 The
Company
Cash
Stock		 companies
included in
this
consolidated
statement
Cash
Stock		 The
Company		 companies
included in
this
consolidated
statement		 The
Company		 companies
included in
this
consolidated
statement		 The
Company		 companies
included in
this
consolidated
statement		 Received
from
Companies
other than
Subsidiaries
Chairman Yulon Motor Co., Ltd.
Representative:
Kenneth K. T. Yen		 12,000 12,000 0 0 0 0 0 0 0.19% 0.19% 18,198
Housing
Rent
864
Car
Rental
3,276
Driver
0		 18,198
Housing
Rent
864
Car
Rental
3,276
Driver
0		 360 360 87 0 87 0 0 0 0 0 0.56% 0.56% Nil
Director Yulon Motor Co., Ltd.
Representative:
Kuo-RongChen
Director Yulon Motor Co., Ltd.
Representative::
Chen-HsiangYao
Director Yulon Motor Co., Ltd.
Representative:
Leman C.C. Lee (Note 4)
Director Yulon Motor Co., Ltd.
Representative:
Wen -RongTsay (Note 5)
Director Nissan Motor Co., Ltd.
Representative:
Takashi NISHIBAYASHI
Director Nissan Motor Co., Ltd.
Representative:
Atsushi KUBO
Director Nissan Motor Co., Ltd.
Representative:
Junichi OHORI
Director Nissan Motor Co., td.
Representative:
Kenji SHIMOYAMA
Independent
director		 Jin-Shun Wu
Independent
director		 Robert Mao

Note 1: The driver payment is disclosed for reference only but not regarded as part of the compensation. Note 2: (1)Actual pensions account: 0 NTD Thousand (2)recognized pensions account:0 NTD Thousand Note 3: (1)Actual pensions account: 0 NTD Thousand (2)recognized pensions account:360 NTD Thousand Note 4: Appointed on Apr. 7, 2017 Note 5: Resigned on Apr. 7, 2017

Compensation Range Table

Number of Directors Number of Directors Number of Directors Number of Directors
The Compensation Range for Total Compensation Amount of A+B+C+D Total Compensation Amount of A+B+C+D+E+F+G
Directors of the Company All the Companies in financial All the Companies in financial
The Company The Company
statement statement
Less than NT 2,000,000 Kenneth K.T. Yen、
Kuo-Rong Chen、 Leman C.C.
Lee (Note 1)、Wen -Rong
Tsay (Note 2)、Chen –Xiang
Yao、Takashi Nishibayashi、
Atsushi Kubo、Junichi Ohori、
Kenji Shimoyama、Jin-Shun
Wu、Robert Mao		 Kenneth K.T. Yen、Kuo-Rong
Chen、 Leman C.C. Lee (Note
1)、Wen –Rong Tsay (Note 2)、
Chen –Xiang Yao、Takashi
Nishibayashi、Atsushi Kubo、
Junichi Ohori、Kenji
Shimoyama、Jin-Shun Wu、
Robert Mao		 Kuo-Rong Chen、Wen –Rong
Tsay (Note 2)、Chen –Xiang
Yao、Takashi Nishibayashi、
Atsushi Kubo、Jin-Shun Wu、
Robert Mao		 Kuo-Rong Chen、Wen –Rong
Tsay (Note 2)、Chen –Xiang
Yao、Takashi Nishibayashi、
Atsushi Kubo、Jin-Shun Wu、
Robert Mao
NT2,000,000～NT5,000,000 Junichi Ohori、Kenji Shimoyama Junichi Ohori、Kenji Shimoyama
NT5,000,000～NT10,000,000 Leman C.C. Lee (Note 1) Leman C.C. Lee (Note 1)
NT10,000,000～NT15,000,000 Kenneth K.T. Yen Kenneth K.T. Yen
NT15,000,000～NT30,000,000
NT30,000,000～NT50,000,000
NT50,000,000～NT100,000,000
More than NT100,000,000
Total 11 11 11 11

Note 4: Appointed on Apr. 7, 2017 Note 5: Resigned on Apr. 7, 2017

2.Compensation of supervisors

Dec. 31, 2017

Unit: NTD Thousand

Supervisor Compensation Supervisor Compensation Supervisor Compensation Supervisor Compensation Supervisor Compensation Supervisor Compensation Supervisor Compensation Supervisor Compensation % of Total Amount of A,
 % of Total Amount of A,
Whether Reinvestment
Business Execution
 B and C against Net Profit
Remuneration (A) Compensation ( B) Business Compensation is
Title Name Expense (C) after Tax
Received from
The All the Companies
 The All the Companies
 The All the Companies
The		 All the Companies
Companies other than

Company		 in financial
Company		 in financial
Company		 in financial
Company		 in financial Subsidiaries
statement statement statement statement
Superv
isor		 Wei Wen Investment
Co.,Ltd Representive:
Kwan-Tao Li		 3,600 3,600 0 0 0 0 0.06% 0.06% 無
Superv
isor		 Wei Wen Investment
Co.,Ltd Representive:
Tai-Ming Chen
Superv
isor
Takahiko IKUSHIMA
(Note 1)
Toru NAKANO
(Note 2)
Note 1: Appointed on Jun. 26, 2017
Note 2:Resignedon Jun. 26, 2017
Compensation Range Table
NumberofSupervisors
The Compensation Range for Supervisors of the
TotalCompensation Amountof A+B+C
Company
The Company All the Companies in financial statement
Less than NT 2,000,000 Kwan-Tao Li、Tai-Ming Chen、Takahiko IKUSHIMA
(Note 1)、ToruNAKANO(Note 2)		 Kwan-Tao Li、Tai-Ming Chen、Takahiko IKUSHIMA
(Note 1)、ToruNAKANO (Note 2)
NT2,000,000～NT5,000,000
NT5,000,000～NT10,000,000
NT10,000,000～NT15,000,000
NT15,000,000～NT30,000,000
NT30,000,000～NT50,000,000
NT50,000,000～NT100,000,000
More than NT100,000,000
Total 4 4

Note 1: Appointed on Jun. 26, 2017 Note 2: Resigned on Jun. 26, 2017

3: Compensation of the President and Senior Vice President

Dec. 31, 2017

Dec. 31, 201 Dec. 31, 201 Dec. 31, 201 Dec. 31, 201 Dec. 31, 201 Dec. 31, 201 Dec. 31, 201 Dec. 31, 201 Dec. 31, 201 Dec. 31, 201 Dec. 31, 201
Unit: NTD Thousan
% of Total Whether
% of Total Amount of Number of Employee Amount of Reinvestment
Reward and Secial Surlus Divided Emloee
Salary (A) Pension (B) p
Allowance (C)		 p py
Bonus (D)		 A, B，C and D against Stock Options A, B, C, D ,E,F Business
Net Profit after Tax Acquired and G Compensatio
against Net Profit n is
Title Name All the Companies Received
All the All the All the The Company in financial All the All the h All the from
The Companies The Companies The Companies statement The Companies The Companies Te
C		 Companies Companies
Company in financial Company in financial Company in financial Cash Stock Cash Stock Company in financial Company in financial om
 in financial other
statement statement statement statement statement pany statement than
Subsidiaries
President Leman C.C. Lee
(Note 1)		 6,769 6,769 452 452 3,356
HousingRent
432
Car Rental
878
Driver
0		 3,356
Housing
Rent432
Car Rental
878
Driver
0		 110 0 110 0 0.19% 0.19% 0 0 0 0 Nil
President
Wen -Rong
Tsay (Note 2)
Special
Assistant
to the
Chairman
Kuo-Rong Chen
Senior Vice
President		 Atsushi Kubo
Senior Vice
President		 Leman C.C. Lee
(Note 3)

Note 1: Appointed on Apr. 1, 2017 Note 2: Resigned on Apr. 1, 2017 Note 3: Resigned on Apr. 1, 2017

Compensation Range Table

The Compensation Range for General Managers and Vice Number of President and Senior Vice President Number of President and Senior Vice President
General Managers of the Company The Company All the Companies in financial statement
Less than NT 2,000,000 Kuo-RongChen Kuo-RongChen
NT2,000,000～NT5,000,000 Atsushi Kubo、Wen –RongTsay Atsushi Kubo、Wen –RongTsay
NT5,000,000～NT10,000,000 Leman C.C. Lee Leman C.C. Lee
NT10,000,000～NT15,000,000
NT15,000,000～NT30,000,000
NT30,000,000～NT50,000,000
NT50,000,000～NT100,000,000
More than NT100,000,000
Total 4 4

Note (1)Actual pensions account: 0 NTD Thousand (2)recognized pensions account:452 NTD Thousand Note 2: The driver payment is disclosed for reference only but not regarded as part of the compensation.

Company Management Report

4.Manager’s Name of the employees’ compensation and allocation situation

Dec. 31, 2017 Unit: NTD thousand

Dec. 31, 2017
Unit: NTD thousand
manager Stock % of Total Amount
Title(Note 1) Name(Note 1) (Fair Market Cash Total against
Value) NetProfitAfter Tax
President Leman C.C. Lee(Note2) - 562
(Note1)		 562
(Note1)
0.01%
(Note1)
President Wen -RongTsay(Note3)
Special
Assistant to the
Chairman
Kuo-Rong Chen
Senior Vice
President		 Junichi OHORI
Senior Vice
Presiden		 Leman C.C. Lee(Note4)
VicePresident KenjiSHIMOYAMA
VicePresident Mochizuki MASAHIRO(Note5)
VicePresident Moritami MATSUMOTO(Note6)
VicePresident Wen-ChuanChung(Note7)
VicePresident Joseph Hsiung(Note8)
Senior General
Manager		 Yoshihiro TAKAHAMA
Manager Wen-ChuanChung(Note9)
Manager Shun-Chi Tsai(Note10)
Manager Tsan-HuangLin
Manager Yu-ChouHsieh
Manager Wen-Chi Mao
Manager Wen-Chiang Shu
Manager Dennis Chang
Manager Chiung-Ming, Chou
Manager Chao-Yen Liang
Manager YenChou
Manager JackyLee
Accounting
Manager		 Chen-Hua Chi

Note1：The individual name and title should be disclosed; however, the distribution may be disclosed in summary.

Note 2：Appointed on Apr 1, 2017. Note 3：Resigned on Apr 1, 2017. Note 4：Resigned on Apr 1, 2017. Note 5：Appointed on Apr 1, 2017. Note 6：Resigned on Apr 1, 2017. Note 7：Appointed on Apr 1, 2017. Note 8：Appointed on May 15,2017. Note 9：Resigned on Apr 1, 2017. Note 10：Resigned on Apr 7, 2017.

2017 Annual Report

29

裕隆日產 YULON NISSAN

(4) Analysis and description of the net profits macro or individual financial report after payment of remuneration made out to directors, supervisors, president, and vice president in the last 2 years.

The percentages of the total remuneration amount paid to the company’s directors, supervisors, general managers and vice general managers against the net profit after tax are respectively compared and analyzed, and the relationship among the policies, standards and combinations of compensation payment, the procedures of the compensation establishment and the operational performance is also described.

Unit: NTD thousand

2016 year 2016 year 2016 year 2017 year 2017 year 2017 year
% of Total % of Total
Total Total

Net Profit After
Remuneration		 Net Profit After
Remuneration
Title Compensation Compensation

Tax		 against Net Tax against Net
(Note) (Note)
Profit after Tax Profit after Tax
12,000 4,630,615 0.26% 12,000 6,642,500 0.18%
Director
3,600 4,630,615 0.08% 3,600 6,642,500 0.05%
Supervisor
President and
14,685		 4,630,615 0.32% 11,997 6,642,500 0.18%
Senior Vice
President
30,285 4,630,615 0.65% 27,597 6,642,500 0.42%
Total

Note：Compensation includes the company and all consolidated companies

The company’s directors and supervisors should receive a total of NTD 100,000 (including transportation allowances) per month. The chairman’s remuneration should be paid according to the negotiation of the authorized Board of Directors in terms of his participation frequency in the company’s operation and the contributions without exceeding the standard of the highest salary level established by the company. In 2017, the directors and supervisors remuneration were compliance with the articles of incorporation and there is no variable remuneration.

The company’s overall compensation combinations mainly include three parts: basic salaries, rewards and welfare. For the payment standards, basic salaries are appraised based on the employees’ market quotations of their served posts; rewards are granted for the employees’ and the departments’ achievement of goals or the company’s operation performance; as for the setting of welfare, welfare measures the employees can share are designed to conform to regulations as well as cater for the employees’ needs.

2017 Annual Report

30

Company Management Report

3. Operation of Corporate Governance

(1) Operational Status of the Board of Directors

There have been 7 annual meetings held for the Board of Directors recently. The attendance of directors and supervisors is as follows:

Number of Times Number of Times
% of Actual
Title Name for Actual for Authorized

Note
Attendance
Attendance Attendance
Corporation Director Yulon Motor Co.,
Ltd.
Corporation Director
Representative and
Chairman
Kenneth K.T. Yen		 6 1 86%
Corporation Director
Representative
Kuo-Rong Chen		 6 1 86%
Corporation Director
Representative
Chen-Hsiang Yao		 7 0 100%
Corporation Director
Representative
Leman C.C. Lee		 6 0 100% Appointed on
Apr 1,2017.
Corporation Director
Representative
Wen-Rong Tsay		 1 0 100% Resigned on
Apr 1,2017.
Corporation Director Nissan Motor
Co.,Ltd.
Corporation Director
Representative
Takashi
NISHIBAYASHI		 7 0 100%
Corporation Director
Representative
Atsushi KUBO		 6 1 86%
Corporation Director
Representative
Junichi OHORI		 7 0 100%
Corporation Director
Representative
Kenji
SHIMOYAMA		 7 0 100%
Independent Director Jin-Shun Wu 7 0 100%
Independent Director Robert Mao 7 0 100%
Corporation
Supervisor		 Wei Wen Investment
Co.,Ltd.
Corporation
Supervisor
Representive		 Kwan-Tao Li 6 1 86%
Corporation
Supervisor
Representive		 Tai-Ming Chen 5 2 71%
Supervisor Takahiko
IKUSHIMA		 3 0 100% Appointed on
June 26,2017
Supervisor Toru NAKANO 4 0 100% Resigned on
June 26,2017.

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31

裕隆日產 YULON NISSAN

Other Notes:

  • 1.The content listed in Article 14-3 of the Stock Exchange Law and other recorded or written resolutions of the meetings of the Board of Directors, which are objected or retained by independent directors, should specify the dates, terms, motion content, all of the independent directors’ comments and the company’s handling of these comments:
Board
meeting
date		 Board
meeting
term		 Summary of motions Independent
director’s
opinions		 Response to the
independent
director’s
opinion
March 27,
2017		 The 6th
meeting of
the 11th
term		 1.Amendment to "Operational
Procedures for Acquisition and
Disposal of Assets" and related
"Internal Control System".
2.Amendment to "Internal Audit
Implementation Rules of
Operational Procedures for
Acquisition and Disposal of
Assets".		 Approved
as proposed		 To be executed
in accordance
with the
resolution
reached
May 12,
2017		 The 6th
meeting of
the 12th
term		 Approval to Review the Candidate
List of Supervisor for 2017
Ordinary Shareholders’ Meeting.		 Approved
as proposed		 To be executed
in accordance
with the
resolution
reached
June 26,
2017		 The 6th
meeting of
the 13th
term		 Amendments to the Company’s
"Stocks Affair Internal Control
Systems".		 Approved
as proposed		 To be executed
in accordance
with the
resolution
reached
Novembe
r 6, 2017		 The 6th
meeting of
the 15th
term		 To change the company’s CPA and
evaluation
of
new
CPA’s
independence and competence.		 Approved
as proposed		 To be executed
in accordance
with the
resolution
reached
March 26,
2018		 The 6th
meeting of
the 16th
term		 1.Approval of "YNM Audit
Committee Charter" and related
Internal Control System and Audit
Implementation Rules.
2.Amendment to "Regulations
Governing Procedure for Board of
Directors".
3.Approval of Amendment
Company's "Internal Control
System" and "Audit
Implementation Rules"
4.Approval of an Election of
Directors.		 Approved
as proposed		 To be executed
in accordance
with the
resolution
reached
May 11,
2018		 The 6th
meeting of
the 17th
term		 1.Election of the 7th directors .
2.The Lift on the Prohibition on 7th
Directors from "Concurrently Act
as a Director and/or Manager of
another company".		 Approved
as proposed		 To be executed
in accordance
with the
resolution
reached
  1. When directors avoid attending the discussions about proposals that involve conflicts of interests, the name of directors, the proposals, and the reasons for avoidance, and participation in voting shall be specified: The

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32

Company Management Report

Company has formulated the Rules of Procedures for Meetings of the Board of Directors, which specify that “the proposals involving conflicts of interests with directors or corporations which directors represent shall be explained in the meeting of the board of directors; if the proposals have a risk of damaging the interests of the Company, they shall be excluded from the discussion or voting, and the directors shall avoid attending the discussion or voting and are not allowed to vote on behalf of other directors”, and abided by the Rules accordingly.

  1. The goals for strengthening the functions of the Board of Directors in the fiscal year and the recent fiscal year (e.g., establish an audit committee, increase information transparency, etc.) and the evaluation of the operation status:

  2. (1)Established functional committee: Yulon Nissan established the Salary Remuneration Committee upon adoption by the Board of Directors meeting on December 16, 2011 in accordance with the Securities and Exchange Act. Yulon Nissan is scheduled to establish an Audi Committee during the 2018 Board of the Directors re-election to continue improving the management quality of the company.

  3. (2)Strengthened functions of Board of Directors members: Yulon Group organizes independent courses to strengthen the operation decision of Board of the Directors, risk management, laws and regulations for compliance, and corporate sustainability as well as professional knowledge. The Company organized the Yulon Group Continuing Education for Directors and Supervisors of TWSE Listed Companies on July 6, 2016. The topic of the training is Exploring Corporate Governance and Sustainable Development through Legal Responsibility of Directors and Supervisors and Forensic Accounting.

  4. (3)Improving information transparency: Apart from the information disclosure in Chinese on the Public Observation Post System, the company also established the company website available in Chinese and English, which discloses required information on the Public Observation Post System in English language in step to enhance the understanding of our company by international investors.

  5. (4)Evaluation of Execution: Yulon NISSAN developed the “Board of the Directors Performance Appraisal Procedures” on December 21, 2015. The Board of Directors members and meeting units shall routinely conduct performance appraisal and emphasize on the weakness to develop improvement practice. The latest performance evaluation of the board of directors was completed in January 2018. The self-evaluation of the board’s performance and the self-evaluation of the board members scored 3.89 points and 3.93 points (full score is 4 points) respectively; the above result and subsequent remedial measures were reported to the Company’s board of directors on March 26, 2018.

  6. (5)To make sure that the Company’s management constitution responds to the recent issues of social concerns and the global trend of corporate governance, the Company has approved the second amendments to the Corporate Governance Best Practice Principles and the Ethical Corporate Management Best Practice Principles in the meeting of the board of directors on March 26, 2018. These two Principles have been published on the Company’s website and the Market Observation Post System.

(2) Operational Status of the Audit Committee: Nil

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裕隆日產 YULON NISSAN

(3) The attendance of directors and supervisors and Operational Status of the Board of Directors

There have been 7annual meetings held for the Board of Directors recently. The attendance is as follows:

Number of Times
% of Actual
Title Name for Actual Note
Attendance
Attendance
Corporation Person
Supervisor		 Wei Wen Investment
Co.,Ltd.
Natural Person Supervisor
Representive		 Kwan-Tao Li 6 86%
Natural Person Supervisor
Representive		 Tai-Ming Chen 5 71%
Supervisor Takahiko IKUSIMA 3 100% Appointed on June
26,2017
Supervisor Toru NAKANO 4 100% Resigned on June
26,2017.

Other items that should be stated:

  1. Composition and Duties of Supervisors:

  2. (1) Communication between the Supervisor(s) and the Company’s employee(s) and/or shareholder(s) (e.g. communication channel and the way of communication): NIL

  3. (2) Communication between the Supervisor(s) and Superintendent of Internal Audit and Certified Public Accountant (e.g., communication items, method and results in respect to the Company’s financial and business status):

business status):
Date Object Matter
November 6,
2017		 CPA 1. CPA explained the operations of existing audit process,
introduction to audit team and independent CPA assessment in
addition to explaining the statement without material and false
matters and without material fraudulence.
2. The independent directors queried on IT audit matters while
the CPA will describe the responsibility of the IT Team of the
accounting firm for IT audit. The audit conducted once a year
without discovery of material problems during the audit
process.
Manager of
Internal Audit Dep.		 1. Audit result of 2017.
2. Audit plan in 2018.
  1. If a Supervisor attends the Board meeting and express his/her opinion, it is required to record the date and term of the Board meeting, content of the proposal discussed and resolution thereof and the action taken by the Company to reflect such Supervisor’s opinion: NIL

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34

Company Management Report

(4)The difference in contrast to the operation of corporate governance and the listed / OTC company’s corporate governance codes of practice and reasons

Operations(Note 1) Discretions with
Yes No Corporate Governance
Best Practice Principles
Evaluation Items
Summary and Description for TWSE/GTSM
Listed Companies and
the Reasons
1. Does the company develops and
discloses corporate governance
practice principles in accordance
with “Governance Best Practice
Principles for TWSE/GTSM
Listed Companies.”		 V The Company formulated the Corporate
Governance Best Practice Principles in the
meeting of the board of directors on August 4,
2014 based on the Corporate Governance Best
Practice Principles for TWSE/TPEx Listed
Companies. The first amendment was
approved by the board of directors on March
23, 2015, the second amendment was
approved on December 19, 2016 and the third
amendment was approved on March 26, 2018.
The above Principle has also been published
on the Market Observation Post System and
the Company’s website.		 The company has
complied with the
Corporate Governance
Best Practice
Principles for
TWSE/GTSM Listed
Companies and
executed the matters
prescribed on the left.
2. Corporate shareholding structure
and shareholders’ equity
(1) Does the company develop
internal operation procedures
to for shareholders’
suggestions, doubts, disputes,
and complaints with
implementation according to
the procedures?
(2) Does the company actually
control the main
shareholders and the final
control list of major
shareholders of the
company?
(3) Does the company establish
and execute the risk control
and firewall mechanism
with the affiliated
enterprise?		 V
V

V		 The Company calls for the Shareholder’s
Meeting according to the Company Act and
relevant regulations in addition to formulating
the complete meeting rules and executing the
matters resolved by the Shareholder’s Meeting
according to the meeting rules. Moreover, the
Company shall assign special department of
stock affairs as the service window for
processing relevant affairs apart from
assigning a spokesperson responsible for the
explanation of suggestions or questions
proposed by the shareholders.
The company controls the major
shareholders and the final control list of the
company in addition to disclosing such
information on the annual report on
“Directors, Supervisors, Managers, and
Major Shareholders’ Equity Change.”
The company’s corporate governance
practice principles specifies the risk
assessment with affiliated companies and
the importance of necessary control
mechanism in addition to developing the
“Operational Procedures for Acquisition
and Disposal of Assets,” “Operational
Procedures for Making of Endorsements
and Guarantees,” “Operational Procedures
for Loaning of Funds to Other Parties,”
“Operational Procedures for Handling
Internal Material Information,”
“Operational Procedures for Insider Trading		 The company has
complied with the
Corporate Governance
Best Practice
Principles for
TWSE/GTSM Listed
Companies and
executed the matters
prescribed on the left.

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裕隆日產 YULON NISSAN

Operations(Note 1) Discretions with
Yes No Corporate Governance
Best Practice Principles
Evaluation Items
Summary and Description for TWSE/GTSM
Listed Companies and
the Reasons
(4) Does the company develop
internal specification to
prohibit insiders from using
undisclosed information
from the market to buy or
sell securities?		 V Prevention.” The company also establishes
spokesperson, investor’s contact window,
established good internal major information
processing and disclosure mechanism to
avoid improper information leakage as well
as assuring the consistency and accuracy of
information published.
To prevent company insiders from buying
and selling securities using information
unpublished, the company has specified the
“Internal Major Information Processing
Operation Process” and “Prevention of
Insider Trading Management Operation
Procedure” through the announcement of the
company website and routine promotion to
directors, supervisors, manager, and
employee (e-mail, company internal
network).
3. Composition and function of
Board of Directors
(1) Does the Board of
Directors develop
diversified guidelines and
implement execution in
terms of member
composition?		 V According to the Corporate Governance Best
Practice Principles for TWSE/TPEx Listed
Companies, the Company has specified in its
Corporate Governance Best Practice
Principles that the board of directors shall be
equipped with diverse capacities, including
but not limited to basic requirements (such
as age and nationality) and professional
knowledge and skills (such as specialty and
industrial experience). Currently, incumbent
directors and supervisors of the Company
are equipped with diverse capacities, such as
Kenneth K.T. Yen, Kuo-Rong Chen, Leman
C.C. Lee, Chen-Hsiang Yao,Takashi
NISHIBAYASHI, Atsushi KUBO, Junichi
OHORI, and Kenji SHIMOYAMA have the
skills in operational judgment, business
management, industrial knowledge, crisis
management. Jin-Shun Wu, Kwan-Tao Li,
and Tai-Ming Chen have the skills in finance
and accounting, law, information
technology, leadership and decision making.
Several directors and supervisors are from
foreign countries. Such a board of directors
combining different nationalities,
perspectives, and cultural backgrounds may
provide multi-oriented advice for the
Company.


The company has
complied with the
Corporate Governance
Best Practice
Principles for
TWSE/GTSM Listed
Companies and
executed the matters
prescribed on the left.

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36

Company Management Report

Operations(Note 1) Discretions with
Yes No Corporate Governance
Best Practice Principles
Evaluation Items
Summary and Description for TWSE/GTSM
Listed Companies and
the Reasons
(2) Does the company also
voluntarily establish other
functional committee apart
from the salary
remuneration committee
and audit committee?
(3) Does the company develop
Board of Directors
Performance Assessment
Guidelines and Evaluation
Method in addition to
conduct annual
performance assessment?		 V V To improve the corporate governance, the
company has established the salary
remuneration committee to supervise and
suggest salary for directors, supervisors and
managers in addition to establishing the
audit committee on the election of 7th
Board of Directors.
The Company developed Board of Directors
Performance Appraisal Procedures on
December 21, 2015 and has been
distributing performance self-evaluation
questionnaires to all members of the Board
of Directors at the end of each December.
The members not only need to evaluate the
overall operations of the Board of the
Directors but also conduct self-evaluation.
The overall performance self-evaluation
conducted by the Board of the Directors
covers the following five major constructs:
1. Level of participation in company
operations.
2. Improvement on the decision-making
quality by the Board of the Directors.
3. Board of the Directors constitution and
structure.
4. Board of the Directors election and
continuous advanced study.
5. Internal control
The items of evaluation in the Board of
Directors member performance appraisal
should at least include the following four
dimensions:
1. Understanding of the company and
responsibility recognition.
2. Level of participation in company
operations.
3. Professional and continuous advanced
study by the directors.
4. Internal control
Upon recovering the questionnaires by the
end of each January, the organizer of the
Board of the Directors shall conduct
analysis in accordance with the
aforementioned procedures and report the
results to the Board of the Directors, in
addition to proposing suggestions for
improvement on areas to be strengthened.
The aforementioned procedures are also
disclosed on the company website.
The latest result of the evaluation of the
board’sperformance(2017)is as follows:

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37

裕隆日產 YULON NISSAN

Operations(Note 1) Discretions with
Yes No Corporate Governance
Best Practice Principles
Evaluation Items
Summary and Description for TWSE/GTSM
Listed Companies and
the Reasons
(4) Does the company
routinely assess the
independence of attesting
CPA?		 V 1. The overall self-evaluation of the board’s
performance is 3.89 points (full score is
4.00 points).
2. The overall self-evaluation of the board
members is 3.93 points (full score is 4.00
points).
The details of the above performance
evaluation and subsequent remedial
measures have been reported to the board of
directors on March 26, 2018.
The company refers to the Bulletin of Norm
of Professional Ethics for Certified Public
Accountant of the Republic of China
No.10 “Integrity, Objectivity and
Independence” to develop the CPA
independence evaluation form. The Board
of Directors will use the aforementioned
evaluation form (Note 2) to review the
independence and competence of the
attesting ACP based on the financial
interests matters, financing and guarantee,
commercial relation with the company, and
the enterprise of the attesting CPA and their
family.


4. Have the listed/OTC
companies had the full-time
(part-time) corporate
governance department or
personnel designated to
manage the corporate
governance related matters
(including but not limited to
providing directors and
supervisors with the data
needed for business
operation, arranging the
board meeting and
shareholders’ meeting
related matters lawfully,
handling company
registration and change
registration, preparing the
minutes of board meeting
and shareholders’ meeting,
etc.)?
V		 The unit in charge of corporate governance
is Business Planning and Finance
Department, whose duties include meetings
of the board of directors and shareholders’
meetings, business registration and changes
in registration, and establishment and
improvement of corporate governance.
Business Planning and Finance Department
also works with related units to promote the
corporate governance and enhances the
weaknesses identified in the evaluation of
the board’s performance and the corporate
governance assessment.
This year, the Company will continuously
facilitate the interaction with foreign
shareholders, foreign investors and
stakeholders by increasing and deepening
the disclosures on the Company’s Chinese
and English website, in addition to
performing duties in accordance with related
operatinglaws and regulations.		 The company has
complied with the
Corporate Governance
Best Practice
Principles for
TWSE/GTSM Listed
Companies and
executed the matters
prescribed on the left.

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Company Management Report

Operations(Note 1) Discretions with
Yes No Corporate Governance
Best Practice Principles
Evaluation Items
Summary and Description for TWSE/GTSM
Listed Companies and
the Reasons
5. Does the company establish
communication channel with
the stakeholders, establish
stakeholder section on the
company website, and properly
respond to the key corporate
social responsibility issues
concerned by the stakeholders?

V		 The stakeholders can communicate via
business transaction or spokesperson while
the company also establishes an investor
section on the company website to disclose
the contact/complaint window and contact
methods for investors and stakeholders, in
order to provide immediate response of
issues concerned by all stakeholders with
response.		 The company has
complied with the
Corporate Governance
Best Practice
Principles for
TWSE/GTSM Listed
Companies and
executed the matters
prescribed on the left.
6. Does the company commission
professional registrar for
handling of shareholder
meeting affairs?		 V Based on the operational considerations, the
Company handles the stock affairs by itself.
The Company also formulated the rules of
implementing the internal control and the
internal audit of stock affairs to make sure
that the shareholders’ meeting is held
legally, safely, and effectively.		 The Company
designates the
shareholders’ service
office in order to
handle the information
of the list of major
shareholders and
beneficial owners of
these major
shareholders.
7. Public information
(1) Does the company establish
website to disclose
information on the financial
operations and corporate
governance?
(2) Does the company adopt
other information disclosure
methods (i.e. establishing
English website, assigning
specialist to collect and
disclose the corporate
information, implement
spokesperson system and
displaying corporate
website at investor
meeting?
V

V		 The company has established a corporate
website to disclose product information,
management, finance, and key corporate
regulations and articles regarding corporate
governance.
(http://new.nissan.com.tw/nissan/)
To treat domestic and foreign shareholders
and stakeholders with equity, the company
establishes a company website in English
(http://www.nissan.com.tw/en/) to disclose
the company introduction, management and
finance, and social welfare as well as other
corporate governance information in
English. The investor meeting information
is also available in Chinese and English
versions which are disclosed at the company
website in Chinese and English versions. In
case the company holds the investor
meeting independently, the company will
upload video file for investors to review
(currently investors are on invitation basis).
In addition, the Company also has disclosed
the names and contact details of the
spokesperson and the active spokesperson
to substantiate the spokesman system in
order to meet the communication needs of
the various stakeholders.		 The company has
complied with the
Corporate Governance
Best Practice
Principles for
TWSE/GTSM Listed
Companies and
executed the matters
prescribed on the left.

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39

裕隆日產 YULON NISSAN

Operations(Note 1) Discretions with
Yes No Corporate Governance
Best Practice Principles
Evaluation Items
Summary and Description for TWSE/GTSM
Listed Companies and
the Reasons
8. Does the company also hold
important information that will
help understand the corporate
governance operation
(including but not limited to
employee rights, care for
employees, investor relation,
supplier relation, stakeholders’
rights, advanced study by the
directors and supervisors, risk
management policy and
execution of risk evaluations
standards, and the company
purchasing liability insurance
for directors and supervisors).		 V 1. Employee benefits and care: In addition
to building a Yulon community in Sanyi,
Miaoli, the Company has worked with the
Hsinchu Lifeline Association to
implement the employee assistance
program (EAP) and provide a
professional and confidential channel of
consultancy for employees since 2015.
The Company also improved the
employee satisfaction and the partnership
between the Company and employees
through labor meetings, e-publications,
and seminars. For more information,
please refer to V. Business Review V.
Labor Relations of the Annual Report.
2. Relationship with investors and
stakeholders:
In addition to setting up the spokesperson
and the unit in charge of stock affairs, the
Company also posts important
information in Chinese and English on
the Market Observation Post System. The
Chinese and English website was also
established to provide investors and
stakeholders at home and abroad with the
fair access to the disclosures. Besides, the
Company set up an area for investors on
the website to disclose the related contact
windows, which are responsible to have a
thorough understanding of and respond to
the major issues of concern.
3. Relationship with suppliers:
As a member of the society, the Company
continuously pays close attention to
environmental protection, safety and
health, and labor rights, values the
sustainable relationship with suppliers,
and exerts its influence on suppliers to set
up the guidelines for sustainable
development and organize related
activities, including management policy,
code of conduct, evaluation, guidance,
and performance management. The above
principles were also published on the
Company’s website. The Regulations
Governing Supplier Management,
collaboration meetings, and training
programs are also channels of
communication between the Company
and suppliers.		 The company has
complied with the
Corporate Governance
Best Practice
Principles for
TWSE/GTSM Listed
Companies and
executed the matters
prescribed on the left.

2017 Annual Report

40

Company Management Report

Operations(Note 1) Discretions with
Yes No Corporate Governance
Best Practice Principles
Evaluation Items
Summary and Description for TWSE/GTSM
Listed Companies and
the Reasons
4. Advanced study and liability insurance
for directors and supervisors
To strengthen the functions of the board
members, Yulon Group organizes internal
training programs every year on a regular
basis; the latest training was held on
August 9, 2017 and the topic is Exploring
Corporate Governance and Sustainable
Development through Legal
Responsibility of Directors and
Supervisors and Forensic Accounting.
The details of training programs attended
or hosted by the Company’s directors and
supervisors will be disclosed on Market
Observation Post System from time to
time. In addition, the Company also
purchased the liability insurance for all
directors and supervisors at the estimated
amount of US$135 million (exchange
rate: 29.76 on December 29, 2017).
5. Operation of the risk management policy
and risk measurement standards:
For the detailed information, please refer
to Section 6 Risk Management and
Assessment in Chapter 7 of the Annual
Report.
6. Operation of the consumer/customer
protection policy:
The Company set up the toll-free
customer service hotline for 24 hours.
Through the Speed-up One Stop (SOS)
solution, consumer service personnel can
promptly solve customers’ problems from
answers to phones, personnel dispatch,
progress follow-up, subsequent handling,
to post-accident care. In addition,
customers may give their feedback
through the following channels: NISSAN
Care APP, NISSAN and INFINITI
websites, and satisfaction telephone
interview and surveyfrom time to time.
9. Please explain the
improvements made based on
the latest Corporate
Governance Evaluation
published by Taiwan Stock
Exchange Corporate
Governance Center and
propose priorities and remedial
measures to be taken (only
filled by those participating in
the evaluation).		 V The term of the incumbent members of the
board of directors will expire in 2018. To
strengthen the structure of corporate
governance, the Company will add seats of
independent directors and establish the
Audit Committee when reelecting the
members of the board of directors in the
2018 shareholders’ meeting.		 According to the
regulations of the
competent
authorities, the Audit
Committee will be
established upon
expiration of the
term of the
incumbent members
of the board of
directors in 2018.

Note1 : Provide description on the summary and description column regardless of checking on “ yes ” or “ no ” for the operations.

2017 Annual Report

41

裕隆日產 YULON NISSAN

Note2 :

Accountant Independence Evaluation Checklist –Wan-I Liao & Chien-Hsin Hsieh

Accountant Independence Evaluation Checklist –Wan-I Liao & Chien-Hsin Hsieh Accountant Independence Evaluation Checklist –Wan-I Liao & Chien-Hsin Hsieh
Date: July10,2017
Evaluation Items Yes／N0
1.Neither A member of the audit team nor their family relatives have direct or indirect material
financial interest in the Company.		 No
2.No borrowing, lending, or guarantee relation exists between the Company, its Directors or
Supervisors and A member of the audit team or their family relatives (except for commercial loans
from financial institutions).		 No
3.No close business relation exists between the Accounting Firm or A member of the audit team and
the Companyor its affiliates.		 No
4.No potential employment relationship exists currently between A member of the audit team and the
Company.		 No
5.Within the past two years, none of No potential employment relationship exists currently between A
member of the audit team and the Company. have acted as the Company’s Director, Supervisor, or
anyemployee who has material influence over audit cases.		 No
6.
1) The Company shall pay the Accountant a fixed audit fee, not in the form of contingent fee.
2)No duepayments exists that maylead to influence on the auditor independence.		 Yes
No
7.All of the non audit services provided by the Accounting Firm to the Company and its affiliates,
including Tax Returns Assessment and Certification, and consultant services on accounting, tax
issues and other laws and regulations etc., has no direct influence on any important accounting
subject in the audit cases, and does not involve the Company’s management, make decisions for the
Companyor affect the Company’s independence.		 No
8.No member of the Audit Team is appointed as defender for the Company’s position or opinions or
acts as a mediator between the Companyand a conflictingthirdparty.		 No
9.Upon appointment this year, the accountant shall have served for the Company for not exceeding
sevenyears.		 No
10.No member of the Audit Team is a relative of the Directors, Supervisors, Managers, or any
employee of the Companywho has material influence on the audit case.		 No
11.No valuable gift has been given by any Director, Supervisor, or Manager of the Company to any
member of the Audit Team.		 No
12.None of the Directors, Supervisors, Managers, or any employees of the Company who has material
influence on the audit case retired from or ceased services in the AccountingFirm within oneyear.		 No
13.None of the independent Directors of the Company have worked in the Accounting Firm during his
or her act as Director or within two years prior to such appointment. No member of the Company’s
Remuneration Committee is in the profession of providing business, legal, financial, accounting or
other kind of services or consultation within twoyearsprior to such appointment.
No

The above lists have been evaluated where no exceptional case is found. Evaluated by : Yulon Nissan Motor Business Planning & Finance Dept.

2017 Annual Report

42

Company Management Report

Accountant Independence Evaluation Checklist –Robert Yu

Accountant Independence Evaluation Checklist –Robert Yu Accountant Independence Evaluation Checklist –Robert Yu
Date: October 11,2017
Evaluation Items Yes／N0
1.Neither A member of the audit team nor their family relatives have direct or indirect material
financial interest in the Company.		 No
2.No borrowing, lending, or guarantee relation exists between the Company, its Directors or
Supervisors and A member of the audit team or their family relatives (except for commercial loans
from financial institutions).		 No
3.No close business relation exists between the Accounting Firm or A member of the audit team and
the Company or itsaffiliates.		 No
4.No potential employment relationship exists currently between A member of the audit team and the
Company.		 No
5.Within the past two years, none of No potential employment relationship exists currently between A
member of the audit team and the Company. have acted as the Company’s Director, Supervisor, or
any employee whohasmaterial influence over auditcases.		 No
6.
1)The Company shall pay the Accountant a fixed audit fee, not in the form of contingent fee.
2)No due payments existsthat mayleadtoinfluence on theauditor independence.		 Yes
No
7.All of the non audit services provided by the Accounting Firm to the Company and its affiliates,
including Tax Returns Assessment and Certification, and consultant services on accounting, tax
issues and other laws and regulations etc., has no direct influence on any important accounting
subject in the audit cases, and does not involve the Company’s management, make decisions for the
Company or affect the Company’sindependence.		 No
8.No member of the Audit Team is appointed as defender for the Company’s position or opinions or
actsasa mediatorbetween the Companyandaconflictingthird party.		 No
9.Upon appointment this year, the accountant shall have served for the Company for not exceeding
sevenyears.		 No
10.No member of the Audit Team is a relative of the Directors, Supervisors, Managers, or any
employee of the Company whohasmaterial influence on theauditcase.		 No
11.No valuable gift has been given by any Director, Supervisor, or Manager of the Company to any
memberof theAudit Team.		 No
12.None of the Directors, Supervisors, Managers, or any employees of the Company who has material
influence on theauditcaseretiredfromorceased servicesin theAccountingFirmwithinone year.		 No
13.None of the independent Directors of the Company have worked in the Accounting Firm during his
or her act as Director or within two years prior to such appointment. No member of the Company’s
Remuneration Committee is in the profession of providing business, legal, financial, accounting or
other kind ofservices orconsultationwithin two years prior to such appointment.
No
The above lists have been evaluated where no exceptional case is found.
Evaluated by : Yulon Nissan Motor Business Planning & Finance Dept.

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裕隆日產 YULON NISSAN

(5) Remuneration Committee ：

(1) Data of Remuneration Committee Members

Meet the Following Professional Qualification Requirements, Meet the Following Professional Qualification Requirements, Meet the Following Professional Qualification Requirements, Criteria (Note) Criteria (Note) Criteria (Note) Criteria (Note) Criteria (Note) Criteria (Note) Criteria (Note) Criteria (Note)
Together with at Least Five Years Work Experience
An Instructor or Higher A Judge, Public Have Work Number of Other

Position in a Department
Prosecutor, Attorney,		 Experience in Taiwanese

of Commerce, Law,
Certified Public
the Area of		 Public
Name Finance, Accounting, Accountant, or Other Commerce, Companies NOTE
Title/Criteria or Other Academic Professional or Technical Law, Finance, Concurrently
Department Related to Specialists Who Has or Accounting Serving as a (Note 3)

the Business Needs of
Passed a National		 ,
or Otherwise		 1 2 3 4 5 6 7 8
Compensation
the Company in a Public Examination and Been Necessary for Committee

or Private Junior		 Awarded a Certificate in
the Business of		 Member in
College, College or a Profession Necessary for the Company Taiwan
University the Business of the
Company
Independent
Director
Jin-Shun Wu		 V V V V V V V V V V
1
Independent
Director
Robert Mao		 V V V V V V V V V
0
Other
Yun-Hua Yang		 V V V V V V V V V V
1

Note 1: Please specify the identity of director, independent director, or others.

  • Note 2: If the respective member meets any of the following conditions within 2 years prior to his/her service and during the service period, please put a check mark (v) in the blank space under the code representing the respective condition.

  • (1) Not an employee of the Company or its affiliated companies.

  • (2) Not a director/supervisor of the Company or its affiliated companies, unless he/she serves as an independent director of the Company or its parent company or a subsidiary of the Company in accordance with this law or local law.

  • (3) The outstanding shares of the Company held under the names of the director/supervisor, their spouses, minor children, and those held under the name of other parties are less than 1% of the total outstanding shares of the Company or not a member listed as one of the top 10 individual shareholders of the Company.

  • (4) Not the spouse, relative(s) within the second degree of kinship or the relative(s) by blood within the third degree of consanguinity of any person indicated in the foregoing three categories.

  • (5) The Company or a director, supervisor, or employee of the top-five institutional shareholders.

  • (6) Not a director, supervisor, manager, or an institutional shareholder with more than 5% shareholding of a specific company or an institution that has conducted finance or business transactions with the Company.

  • (7) Not a professional, sole proprietorship profit-seeking enterprise, or partnership that provides commercial, legal, financial, or accounting service to the Company or to any affiliate of the Company; not a owner, partner, director, supervisor, or manager of a company or an institution that provides commercial, legal, financial, or accounting service to the Company or to any affiliate of the Company; or not the spouse of any of the above persons.

  • (8) Not subject to any condition under Article 30 of the Company Law.

  • Note 3: If member identity is director, please explain if the identity conforms to the provision prescribed in paragraph 5, Article 6 of “Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.”

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(2) Operational Status of Remuneration Committee ：

  • 1.There are 3 members in the Remuneration Committee.

2.Term of Committee Members: The term for thied Salary Remuneration Committee was expired on June 29, 2018 .The third Salary Remuneration Committees held 3 meetings (A) ,the eligibility of committee members and the 2017 attendance are outlined below:

Title Name Attendance in Person
(B)		 By Proxy Attendance Rate Notes
in Person (%)(B/A)
(Note)
Chair Jin-Shun Wu 3 0 100%
Member Robert Mao 2 0 67%
Member Yun-Hua Yang 3 0 100%
Annotation:
1. In case the Board of Directors does not agree to adopt or correct suggestions proposed by Salary Remuneration Committee,
the Board of Directors shall describe the date and session of Board of Director meeting, content of proposition, results of
BOD resolution as well as company handling on comments from Salary Remuneration Committee (in case the BOD
adopts the salary remuneration better than the suggestions proposed by the Salary Remuneration Committee, describe the
discrepancy and reason): None.
2. In case members oppose to hold conservation opinions on the matters resolved by the Salary Remuneration Committee
with records or written statement, describe the date and session of Salary Remuneration Committee, content of
proposition, all member opinions and handling of member opinion: None.

Note：

  • (1)In case members of Salary Remuneration Committee resigns before the end of the year, remark the date of resignation on the remark column while the actual attendance rate (%) will be calculated according to the number of meeting sessions and actual number of attendances during the resigned member’s term at the Salary Remuneration Committee.

  • (2)In case of reelection held for Salary Remuneration Committee prior to the end of the year, fill out the members of the new and former members of Salary Remuneration Committee and mark the members on the remark column as the former, new, re-elected, and date of re-election. The actual attendance rate (%) will be calculated according to the number of meeting sessions and actual number of attendances during the resigned member’s term at the Salary Remuneration Committee.

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裕隆日產 YULON NISSAN

(6) Implementing Corporate Social Responsibility:

Operations Discretions with
Corporate
Governance Best
Evaluation Items Summary and Practice Principles
Yes No
Description		 for TWSE/GTSM
Listed Companies
and the Reasons
1. Implementation of corporate governance
(1) Does the company develop corporate
social responsibility policy or system
and review the effectiveness of
implementation?
(2) Does the company routinely organize
social responsibility education
training?
(3) Does the company establish and
promote full-time(part-time) corporate
social responsibility department,
where the Board of Directors
authorize senior management to
process and report to the Board of
Directors of the processing?
(4) Does the company develop reasonable
salary and remuneration policy in
addition to combining employee
performance appraisal system and
corporate social responsibility, as well
as establishing explicit and effective
rewards and punishment system?		 V
V
V
V		 The company has developed
corporate social responsibility
policy at the Board of Directors
on May 11, 2015 and established
project committee to promote
the different activities with
routine reporting of the
corporate performance in
corporate social responsibility to
the Board of Directors. The
promotion performance was
already disclosed in the “2014
CSR Report” in November 2015
while the 2015 promotion
performance will be disclosed
on the CSR report to be
published in June, 2016.
The Company's Total donation
amount in 2017 was NT$ 4,488,525, and the receivers
included Automobile Safety
Association and Taipei City
Environmental Protection
Department.
Organizing different corporate
social responsibility education
training from time to time.
The company has established
CSR Project Committee in
March 2015, where the
President serves as the
coordinator, the Vice President
as the vice coordinator, and the
responsible human HR
department shall be responsible
for promoting relevant activities
with routine reporting to the
Board of Directors.
1. The company has established
the Remuneration Committee
in 2011 and routinely calls for
meetings to develop
reasonable salary system.
2. Corporate social responsibility
is part of the work and has
been managed and required by
improved performance and
reward/punishment system.		 In compliance with
the philosophy of
Corporate
Governance Best
Practice Principles
for TWSE/GTSM
Listed Companies.

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Company Management Report

Operations Discretions with
Corporate
Governance Best
Evaluation Items Summary and Practice Principles
Yes No
Description		 for TWSE/GTSM
Listed Companies
and the Reasons
2. Development of sustainable environment
(1) Does the company devote in the
improvement on the utilization
efficiency of various resources and use
recycled materials with low
environmental impact?
(2) Does the company establish proper
environmental management system in
accordance with its characteristics of
industry?
(3) Does the company pay attention on the
impact of climate change on
operational activating and execute
strategies on greenhouse gas
inventory, develop corporate
energy-conservation and carbon
emission reduction, and greenhouse
gas reduction?

V
V

V		 1. Establishing environmental
safety official organization in
charge of promotion and
advocacy of various
energy-saving policies to
upgrade the resource
utilization efficiency.
2. New cars released to the
market starting in 2009 shall
comply with the “Voluntary
Automobile Resource
Recycling and Reuse
Specification” for
R&D/design of products, to
promote the voluntary
automobile resources
Recycling and reuse
specification.
1) The vehicle recovery rate
has far exceeded the
standard (80%) and
reached 92.7%.
2) Vehicle recovering and
reuse rate has far exceeded
the standard (85%) and
reached 95.0%.
3) Restriction on the use of
four environmentally
hazardous heavy metals,
including lead, mercury,
cadmium, and hexavalent
chromium.
Established environmental
management system in April
2015 to promote relevant
environmental management
policies. The Company has
passed the ISO 14001
certification in Nov. 2015
1. The company started
conducting greenhouse gas
inventory in 2013 and the
result of 2015 inventory is
1,425.9 metric tons of
CO2e/year. The result of 2016
inventory is1,329.01metric
tons of CO2e/year. The result
of 2017 inventory is1317.9
metric tons of CO2e/year.		 In compliance with
the philosophy of
Corporate
Governance Best
Practice Principles
for TWSE/GTSM
Listed Companies.

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裕隆日產 YULON NISSAN

Operations Discretions with
Corporate
Governance Best
Evaluation Items Summary and Practice Principles
Yes No
Description		 for TWSE/GTSM
Listed Companies
and the Reasons
2. Continuous promotion of
energy-saving and carbon
reduction measures and
introducing multiple Grade-1
oil consumption
energy-saving models with
recognition by the
environmental and
energy-saving marks from the
government.
3. Continuing to introduce low
oil-consumption car models,
zero-emission electric vehicles
and other green products to
achieve the objectives in
energy conservation and
carbon reduction.
3. Maintenance of social welfare
(1) Does the company develop relevant
management policy and procedures in
accordance with relevant laws and
regulations and International Bill of
Human Rights?
(2) Does the company establish employee
complaint mechanism and channel
with proper handling?
(3) Does the company routinely provide
safe and healthy work environment for
employees in addition to
implementing safety and health
education?
(4) Does the company establish routine
communication mechanism with
employees and notify the employees
of the operational change that could
possibly cause major impact through
reasonable means?		 V
V

V
V		 The company has developed
management policy and
procedure in accordance with
relevant laws and regulation and
International Bill of Human
Rights
Establishes diverse employee
communication channel,
complaint regulation and
handles employee problems
immediately.
1. Complying with safety health
regulations and provide safe
and healthy work
environment with routine
implementation of education
and training to assure the
safety of employees at work.
2. Provide proper protection
equipment for employees
engaging in special
operations.
3. Routinely inspect on all
equipment and implement
equipment operation training
for employees.
Monthly publication of “YNM
Operation Report” that allows
employees to fully grasp the
current corporate operations and
major events.		 In compliance with
the philosophy of
Corporate
Governance Best
Practice Principles
for TWSE/GTSM
Listed Companies.

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Company Management Report

Operations Discretions with
Corporate
Governance Best
Evaluation Items Summary and Practice Principles
Yes No
Description		 for TWSE/GTSM
Listed Companies
and the Reasons
(5) Does the company establish effective
career competence development
training program for employees?
(6) Does the company develop relevant
rights/interest policy and complaint
procedures to protect consumers in
accordance with the R&D, purchase,
production, operation, and service
process?
(7) Does the company comply with all
relevant laws and regulations and
international standards for the
marketing and labeling of products
and services?
(8) Does the company evaluate the past
records of vendors with impact on the
environment and society prior to the
business?
(9) Does the contract signed between the
company and the major vendors
include policy on vendor involving the
violation of corporate social
responsibility with significant impact
on the environment and society and
clauses that could terminate or cancel
the contract at any time?		 V
V
V
V

V		 Diverse career competency
development training system is
available and employees are
encouraged to develop
multi-task and shift rotation.
Establishing 0800 toll-free
24-hour customer service hotline
with routine organization of
associate supplier assembly to
facilitate the communication
channel.
The marketing and labeling of
products and services are in
compliance with the relevant
laws and regulations as well as
NISSAN specification to assure
the rights and interests of
consumers.
1. Comply with ISO
H00-B-A003 V Supplier
Environment Impact
Management Procedures. New
vendors must be evaluated for
their impact on the
environment in accordance
New Vendor Environment
Impact Assessment Form.
2.The outsourcing of new cars
after X-Trail will increase the
environmental investigation
items on the Vendor Quotation
Form.
The contract with vendor,
“Vehicle Components Sales
Contract,” specifies the follows:
(1) Environmental Protection
Clause (Clause 56).
(2)Electroplating Process
Warranty Clause (Clause 57).
(3) Integrity Management
Clause (Clause 58)
(4) Compliance with Laws and
Regulations (Clause 59)
If was involved the violation that
could terminate or cancel the
contract
4. Strengthen information disclosure
(1) Does the company disclose relevant
corporate social responsibility with
relevance and reliability on the
company website and Market
Observation Post System?		 V The relevant information is
disclosed on the company
website
http://www.nissan.com.tw and
the Market Observation Post
System on a regular basis.		 In compliance with
the philosophy of
Corporate
Governance Best
Practice Principles
for TWSE/GTSM
Listed Companies.

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裕隆日產 YULON NISSAN

Operations Discretions with
Corporate
Governance Best
Evaluation Items Summary and Practice Principles
Yes No
Description		 for TWSE/GTSM
Listed Companies
and the Reasons
5. If the Company has enacted its code of corporate social responsibility in accordance with the Code of Practice for
Corporate Social Responsibility by Listed and OTC Companies, please describe its operation and the difference from
the Code of Practice:
In compliance with the policies promoted by the “Corporate Social Responsibility Practice Principles” of the company.
6. Other critical information that helps understand the operation of corporate social responsibility: N/A.
7. Provide description if the corporate social responsibility report has been met the certification standard of relevant
certification institute: N/A.

  • Note 1: Provide description on the summary and description column regardless of checking on “ yes ” or “ no ” for the operations.

  • Note 2: For companies having prepared the Social Corporate Responsibility Report, provide remarks on the summary and description to check through the Corporate Social Responsibility Report or index page.

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Company Management Report

(7) Status of Honest Operation Implemented by the Company and the Adopted Measures:

Implementation of Integrity Operation

Discretions with
Operations (Note 1)
Corporate

Governance Best
Evaluation Items Practice Principles
Yes No Summary and Description for TWSE/GTSM
Listed Companies
and the Reasons
1. Develop ethical management policy
and program
(1) Does the company specify the
policy and approach regarding
ethical management on articles
and outbound documents as well
as the commitment from Board
of Directors and management to
implement management policy?		 V To declare the resolve to fulfill the
ethical corporate management, the
Company has established the Ethical
Corporate Management Best Practice
Principles on August 4, 2014. The first
and the second amendments were
approved in the meetings of the board of
directors on March 23, 2015 and March
26, 2018, respectively.The above
Principles were disclosed on the Market
Observation Post System and the
Company’s website.In addition to
specifying the company policy on ethical
management and prevention programs
through the aforementioned practice, the
company also develops work conducts
according to the organizational structure,
department and sections, requiring all
company employees including the
directors and management to implement
ethical management.		 Compliance with
Ethical Corporate
Management Best
Practice Principles for
TWSE/GTSM Listed
Companies and
implementation of the
matters mentioned on
the left.
(2) Does the company develop
prevention on non-integral
conducts program to specify the
operation procedures, conduct
guide, punishment and complain
system for violation with
implementation in all programs?
(3) Does the company adopt
prevention measures according
to Article 7, Paragraph 2 of
“Ethical Corporate Management
Best Practice Principles for
TWSE/GTSM Listed
Companies” or other operational
activities of other business
scope without higher unethical
behavior risk?
V
V		 The Company set up the Work Rules, the
Procedures for Handling Internal Major
Information, the Procedures for
Preventing Insider Trading, the
Regulations Governing Management
Review, and the Regulations Governing
Reporting of Sexual Harassment to
prohibit employees from engaging in
fraudulence, misappropriating public
funds, and destroying gender equality in
the workplace. Once violations are
identified and verified to be true, the
Company will make a claim against
employees and their guarantors
according to related regulations.
The company establishes one complete
management system to explicitly specify
the rights and obligations between the
labor and employers with reference on
relevant laws and regulation on work
conducts as the
guidelines for company operation and
employees in the execution of
operations. In case the company
personnel encounter unethical behaviors
from others with involvement of legal

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裕隆日產 YULON NISSAN

Discretions with
Operations (Note 1)
Corporate

Governance Best
Evaluation Items Practice Principles
Yes No Summary and Description for TWSE/GTSM
Listed Companies
and the Reasons
violations, the company shall report the
relevant facts to the judicial or
prosecuting agency. In the event public
service agency or public service officials
are involved, the company shall also
report the anti-corruption agency of the
government toprocess.
2. Implementation ethical management
(1) Does the company evaluate the
ethical records of transacting
targets and specify the ethical
behavior clauses in the contract
signed with the transacting
targets.
(2) Does the company establish a
full-time (part-time)
organization promoting
corporate ethical management
under the Board of Directors in
addition to routinely report to
the Board of the Directors for
execution?		 V
V		 In addition to having the contracts
entered into with trading partners
reviewed by professional lawyers, the
Company also sets up the provisions of
ethical corporate management in these
contracts to prevent both parties from
bribery and other dishonest behavior.
Once violations are verified to be true,
the Company will terminate or rescind
the contracts and request damages
accordingly.
The Board of Directors shall appoint the
person in charge of the corporate
business planning and financial
department as the promotional
department for corporate integrity
management to promote integrity
management related matters in addition
to collaborate with relevant department
for the formulation of prevention
solutions. Such solutions will be
included in the matters of BOD report
and shall be routinely reported to the
BOD for the annual execution status
(report at least once ayear).		 Compliance with
Ethical Corporate
Management Best
Practice Principles for
TWSE/GTSM Listed
Companies and
implementation of the
matters mentioned on
the left.
(3) Does the company develop
conflict of interest policy,
provide proper petition channel
and implement the execution?		 V The company develops “Regulations
Governing the Board of Director
Meeting” with specification that in case
the matters of that Board of Director
meeting is in conflict of interest with the
stakeholders or the corporation
represented, the directors shall explain
the significant content of stakeholder
relation at the Board of Directors. In case
the content in concern for jeopardizing
the company interest, the directors may
not join the discussion and voting while
avoiding during discussion and voting.
The directors may not act on other
directors to exercise their voting right.

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Company Management Report

Discretions with
Operations (Note 1)
Corporate

Governance Best
Evaluation Items Practice Principles
Yes No Summary and Description for TWSE/GTSM
Listed Companies
and the Reasons
(4) Has the company established
valid accounting system and
internal control system to
implement ethical management
with the internal audit
department routinely audit or
the CPA executes inspection?
(5) Does the company routinely
hold domestic and external
educational training for ethical
management?		 V
V		 Apart from developing relevant ethical
management practice and regulations,
the audit office conducts audit on
stakeholder transactions and inside
trading each year according to the
“Regulations Governing Establishment
of Internal Control Systems by Public
Companies.” In the event of receiving
any reporting on violations, the Board of
Directors and relevant competent
authorizes will be reported for handling.
Additionally the company will hold
internal control systems self-evaluation
operations to assure the validity of
internal control and audit.
The company implements education
training for ethical behavior for all new
employees. The company also develops
ethical behavior related content in work
conducts in addition to promoting
“internal significant information process
operation procedures” through internal
website and “prevention of inside trading
management operation process” to
prevent unethical conducts and to
advocate the importance of ethical
management in routine education and
training.
3. Operations of company reporting
system
(1) Does the company develop
specific reporting and incentive
system and establishing
convenient reporting channel in
addition to assigning proper
handling specialist for the target
reported?
(2) Does the company develop
investigation standard operation
process and relevant
confidential mechanism for
accepting reported matters?		 V
V		 In case the company personnel is
discovered with violation of ethical
management, follow the work conducts
and employee complaint processing
system to claim and report to the
company supervisor, audit office,
business planning and financial
department, and management
department. In case the investigation is
verified, the personnel shall be punished
according to the internal regulation and
laws.
There are 400 employee finished the
Nissan antibribery and Export control
online course which issued on April
2017.
To implement the regulations specified
in Article 23 of the Ethical Corporate
Management Best Practice Principles,
the Company set up the independent
reporting mailbox as well as the
procedures for handling reported cases.
The above reporting mailbox was also
disclosed on the Company’s website.
In case of a violation of ethical conduct
in a serious manner,the Companyshall		 Compliance with
Ethical Corporate
Management Best
Practice Principles for
TWSE/GTSM Listed
Companies and
implementation of the
matters mentioned on
the left.

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裕隆日產 YULON NISSAN

Discretions with
Operations (Note 1)
Corporate

Governance Best
Evaluation Items Practice Principles
Yes No Summary and Description for TWSE/GTSM
Listed Companies
and the Reasons
dismiss or lay off the employees
according to related laws or the
Company’spersonnel regulations.
(3) Does the company adopt
measures that protect the
informer without facing
improper treatment due to
reporting?		 V The establishment of aforementioned
report mailbox takes into account the
validity of system operation with
stipulation that the accepting
department may not discriminate or
punish the informer in addition to
protecting his/her identify and
preventing disclosure. Upon receiving
reporting, confidential measures will be
immediately activated to assure
non-disclosure of the name and labor
number of the informer or other
personal information that could be used
to identify the employees.
4. Strengthen information disclosure
(1) Does the company disclose the
content of ethical management
practice developed and promote
the effectiveness on the
company website and Public
Observation Post System?		 V In addition to disclosing the full content
of the Ethical Corporate Management
Best Practice Principles on the
Company’s website and the Market
Observation Post System, the Company
also reports the implementation and the
result to the board of directors every
year on a regular basis and publishes
such information on the Company’s
website from time to time.		 Compliance with
Ethical Corporate
Management Best
Practice Principles for
TWSE/GTSM Listed
Companies and
implementation of the
matters mentioned on
the left.
5.For companies having developed independent ethical management practice in accordance with “Ethical Corporate
Management Best Practice Principles for TWSE/GTSM Listed Companies,” please describe the discretion between the
operation and practice developed：
The company has developed shareholder’s meeting regulations, Board of Directors meeting standards, internal major
information processing operation procedures, prevention of insider transaction management operation procedures,
classified document management guidelines, and public announcement and promotion to the company personnel
(directors, supervisors, employees, and appointed personnel). Additionally the company has followed “Ethical
Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies” to develop the ethical
management practice of the company that has been reviewed without discretion between the actual operations and the
aforementioned practice.
6.Other critical information that helps understand the operations of the ethical corporate management: (ethical
management practice that has been revised and developed under corporate review).
The Company has established the Ethical Corporate Management Best Practice Principles, which were approved in the
meeting of the board of directors on August 4, 2014, based on the Ethical Corporate Management Best Practice
Principles for TWSE/GTSM Listed Companies. The first and the second amendments were approved in the meetings of
the board of directors on March 23, 2015 and March 26, 2018, respectively.

Note 1: Provide description on the summary and description column regardless of checking on “yes” or “no” for the operations.

(8)Inquiry Method of Governance Codes, Important Information for enhancing realization of Operation of Corporate Goverance and Relevant Regulations Established by the Company

The “For Investors” on the company website has disclosed relevant corporate governance, integrity management practice and other regulations, and will be updated from time to time.

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(9) Execution Status of Internal Control System

1. Statement of Internal Control System

Yulon Nissan Motor Co., Ltd. Statement of Internal Control System

Date: March 26, 2018

Yulon Nissan Motor Company (Yulon Nissan) has conducted a self- assessment of internal control for the period of January 1, 2017 to December 31, 2017. The results are as follows:

  1. Yulon Nissan acknowledges that the Board of Directors and management personnel are responsible for establishing, performing, and maintaining an Internal Control System. The said system has already been duly established at Yulon Nissan. The purposes of the Internal Control System is to provide a reasonable assurance for the Company’s efficient and effective operations (including profit, performance and safeguard of assets, and etc.), reliability, timeliness, transparency of our reporting, and the compliance with applicable laws and regulations.

  2. Yulon Nissan also acknowledges that the Internal Control System possesses inherent constraints irrespective of the intended impeccability of the system design and therefore could only provide a reasonable assurance of the three aforementioned goal. Due to the changes in environment and circumstances, the effectiveness of the internal control system may vary accordingly. Nevertheless, the Internal Control System is equipped with self-monitoring mechanisms. Should any flaws be recognized, the Company would enforce corrective measures immediately.

  3. The company evaluates the effectiveness of the design and implementation of its Internal Control System in accordance with the Guidelines for the Establishment of Internal Control System by Public Companies (the “Guidelines”). The said Guidelines divide internal control into five components: (1) Control Environment. (2) Risk Assessments, (3) Control Operations, (4) Information and Communication, and (5) Monitoring. Each component comprises certain factors. More information regarding the said factors is available in the aforesaid Guidelines.

  4. Yulon Nissan has assessed and evaluated the design and effectiveness in the design and performance of the aforementioned system.

  5. Based on the findings of such evaluation, Yulon Nissan believes that, on December 31, 2015, it has maintained, in all material respects, an effective internal control system (that includes the supervision and management of our subsidiaries), to provide reasonable assurance over our operational effectiveness and efficiency, reliability, timeliness, transparency of reporting, and compliance with applicable rulings, laws and regulations.

  6. The Statement of Internal Control System will be a prominent feature of Yulon Nissan annual report and prospectus, and will be released to the public. Should any statement herein involve forgery, concealment or any other illegality, Articles 20, 32, 171 and 174 of the Security Exchange Law shall apply.

  7. This Statement of Internal Control System has been approved by Yulon Nissan Board of Directors at the meeting of March 26 2016 with 10 directors present at the meeting and none disagreeing with this Statement of Internal Control System.

Yulon Nissan Motor Co., Ltd.

Chairman: Kenneth K. T. Yen

President: Leman C.C. Lee

  1. Project Examination Report of CPAs’ Internal Control System：Nil

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裕隆日產 YULON NISSAN

  • (10) Company or employees, who have been penalized by laws, or employees received penalties From company for violating the internal control regulations, major Shortcomings and Status of improvements in Fiscal Year 2017 and prior to the publication date of the Annual Report ： Nil

(11) Major resolutions made by the Shareholders Meeting and Board of Directors Meeting in fiscal year 2017 and prior to the publication date of annual report

Title of
Meeting		 Date of
Meeting		 Important Resolutions
Board of
Directors		 Mar. 27,
2017		 1. Approval of the 2016 Employee Compensation Distribution.
2. Recognition of 2016 Operating Report and Financial Statements.
3. Approval of the YNM ”2016 Internal Control System Statement”.
4. Approval of the amendment to the management of “Operational Procedures for
Acquisition and Disposal of Assets”.
5.Approval of the amendment to the Internal Audit Implementation Rules of
Operational Procedures for Acquisition and Disposal of Assets.
6. Approve to hold the 2017 Annual Shareholders’ Meeting.
7.Approvalof themanagerialpersonnel’s discharge and assignment.
Board of
Directors		 Apr. 10,
2017		 1. Approval of the By-election of the supervisor
2. Agpprove to Add theproposal of 2017 shareholders’ meeting.
Board of
Directors		 May 12
2017		 1. Approval of the Company’s surplus distribution proposal for fiscal year 2016 each
stock is issued with a total of NTD 22.
2. Approve to Review the Candidate List of Supervisor for 2017 Ordinary Shareholders’
Meeting.
3. Approve the 2017 Operational Objectives.
4. Approval of discharge and assignment the representative in Yulon Nissan Taipei
branch.
5.Approvalof Add the proposalof 2017 shareholders’ meeting.
Board of
Directors		 May 16
2017		 1. Approval of amendment to “Articles of Incorporation”.
2. Approval of amendment to “Rules of Directors and Supervisors Election”.
3.Approvalof Add the proposalof 2017 shareholders’ meeting.
Shareholders
Meeting		 Jun 26
2017		 1. Approve to acknowledge the Company’s final statement of fiscal year 2016
2. Approval of the Company’s surplus distribution proposal for fiscal year 2016 each
stock is issued with a total of NTD 22.(Note 1)
3. Approval of amendment to ”Articles of Incorporation”. (Note 2)
4. Approval of amendment to ” Rules of Directors and Supervisors Election” (Note 3).
5. Approval of amendment to ” Operational Procedures for Acquisition and Disposal of
Assets”(Note4).
Board of
Directors		 Jun 26
2017		 1. Approval of the target date for distributing 2016 cash dividend.
2. Amendment to “Stocks Affair Internal Control Systems”.
3. Amendment to “Stocks Affair Internal Audit Implementation Rules”
Board of
Directors		 Agu. 7,
2017		 1.Evaluation of CPA independence and competency
2.Release the prohibition on managerial personnel from act as a managerial
personnel of another company
Board of
Directors		 Nov. 6,
2017		 1.Approval of the changing of the company’s CPA and evaluation of new CPA’s
independence and competence.
2.Approval of the remuneration increase of managerial officer.
3.Approval of “Annual Audit Plan 2018”.
4.Approval of the amendment to “Regulations Governing Procedure for Board of
Directors”

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Company Management Report

Title of
Meeting		 Date of
Meeting		 Important Resolutions
Board of
Directors		 Mar. 26,
2018		 1.Approval of 2017 Employee Compensation Distribution
2.Approval of 2017 Operating Report and Financial Statements
3.Approval of YNM ”2017 Internal Control System Statement”
4.Approval of ”YNM Audit Committee Charter” and related Internal Control System
and Audit Implementation Rules.
5.Amendment to “Regulations Governing Procedure for Board of Directors”.
6.Approval of amendment the“Internal Control System” and ”Audit Implementation
Rules”
7.Approval of an Election of Directors.
8.Conventionof 2018 Shareholders’ Meeting.
Board of
Directors		 May 11,
2018		 1.Approval of the Company’s surplus distribution proposal for fiscal year 2017 each
stock is issued with a total of NTD 20.
2.Approval of distribution by cash from legal reserve, each stock is issued with a total of
NTD 1.
3.Addition of The Proposal “ Approval of distribution by cash from legal reserve” to
2018 Ordinary Shareholders’ Meeting Agenda.
4.Approve the 2018 Operational Objectives.
5.Approve to Review the Candidate List of Directoes for 2018 Ordinary Shareholders’
Meeting.
6.The Lift on the Prohibition on 7th Directors from “Concurrently Act as a Director
and/or Manager of another company”.
7.Release the prohibition on managerial personnel from acting as a managerial
personnel of another company
Major Resolutions of Shareholders’ Meeting and Implementation Status
Note (1) Recognized the company 2016 surplus distribution proposal and each share is distributed with
cash dividend of NT22.

Execution: Auguest 29, 2017 was assigned as the target date while September 20, 2017 was assigned as the distribution date.

  • (2) Approval of amendment to ” Articles of Incorporation”

Execution: Approved by the Ministry of Economic Affairs with registration on Auguest 1, 2017 in addition to making announcement in the company website on June 26, 2017.

  • (3) Approval of amendment to ” Rules of Directors and Supervisors Election”

    • Execution: According to the rules execution and making announcement in the company website on June 26, 2017.

  • (4) Approval of amendment to ” Operational Procedures for Acquisition and Disposal of Assets”. Execution: According to the rules execution and making announcement in the company website on June 26, 2017.

  • (12) Major Issues on record or written statements made by any director or supervisor which specified his/her dissent to important resolutions passed by the Board of Directors Meeting in fiscal year 2017 and prior to the publication date of the annual report: Nil

(13)The discharge and resignation of chairman, president, accounting chief, financial affairs chief, internal audit chief, and R&D supervisors for 2017 and prior to the Publication Date of the Annual Report ：

Consideration of President Wen-Rong Tsay’s mission in Yulon Nissan Motor has been completed, Yulon Motor Company intends to reassign him from the President position. According to the discharge mentioned above, the job position of President is to be promoted by the incumbent SVP Leman C.C. Lee and valid from April 1st, 2017.

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裕隆日產 YULON NISSAN

4. Information on CPA Audit fees

(1) Information on CPA Audit Fees ：

CPA firms
Deloitte &
Touche CPA Firm
Deloitte &
Touche CPA Firm		 CPA’s Name CPA’s Name Audit Period Note
Wan-Yi
Liao		 Chien-Hsin
Hsieh		 2017.01.01-2017.09.30
Wan-Yi
Liao		 Robert Yu 2017.10.01-2017.12.31

Unit: NTD thousand

Fee Item
Compensation Range		 Fee Item
Compensation Range		 Audit Fee Non-Audit Fee Total Amount
1 Less than 2,000 v
2 2,000～4,000
3 4,000～6,000
4 6,000～8,000
5 8,000～10,000 v v
6 More than 10,000

(2) Amount of audit and non-audit fees and contents of non-audit services:

Unit: NTD thousand

CPA firms
CPA’s
Name		 Audit
Fee		 Non-Audit Fee Non-Audit Fee Non-Audit Fee Non-Audit Fee Non-Audit Fee Audit Period Note
System
Design		 Company
Registration		 Human
Resource		 Others Subtotal Tax service
Deloitte &
Touche		 Wan-Yi
Liao		 9,600 695 695 2017.01.01-
2017.12.31

Chien-Hsin
Hsieh		 2017.01.01-
2017.09.30
Robert Yu 2017.10.01-
2017.12.31

  • (3) The change of CPA firms and the audit fees after change is lower than that before change, the reduced amount, proportion and reason: N/A.

  • (4) The audit fees after change is more than 15% lower than that before change, the reduced fee amount, proportion and reason: N/A.

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Company Management Report

5. Information on Change of CPAs

(1) Information of the Previous CPAs:

Date of Change
November 6, 2017
Reasons and Explanation The former CPAs in charge of the Company's 2017 annual financial
statements wereWan-Yi LiaoandChien-Hsin Hsiehof Deloitte &
Touche. Due to the firm’s internal work arrangements and
schedules, the successive CPAsWan-Yi LiaoandRobert Yuwere
appointed to take overthe2017 annual financialstatements.
Specify whether the
appointment is terminated or
unaccepted by the Client or CPA		 Related parties
Status		 CPA Client
Appointment
terminated voluntarily		 NA NA
Appointment rejected
(discontinued)
NA		 NA
Opinion and reason for any audit
report other than unqualified
opinion in thelast two years
None
Any disagreement with the
issuer		 Yes Accounting principles or practices
Disclosure of financial statements
Scope or steps of audit
Others
None v
Remarks NA
Other Disclosures
(Previous CPA’s response to the
items in Article 10.5.2.3 of the
“Criteria Governing Information
to be Published in Annual
Reports of Public Companies”)



NA

(2) Information of the Successive CPAs:

(2) Information of the Successive CPAs:
CPA firms Deloitte & Touche CPA Firm
CPA’s Name Wan-Yi Liao & Robert Yu
Appointed Date Passed byBoard of Director on November 6,2017
Consultations and results about
accounting treatments or accounting
principles for a specific transaction and the
possible opinion on the financial report prior to
the appointment of the successive CPA		 NA
The successive CPA’s written opinion on
disagreements with the former CPA		 NA

(3) Previous CPAs’ reply of article 10-5-1 and 10-2-3 of Guidelines Governing the Preparation of Financial Reports by Securities Issuers: N/A.

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YULON NISSAN

  • 6.Upon the Company’s chairman, general manager or financial/ accounting manager employed by the Verifying CPA firm within one year, the name, the position, and time period in the CPA firm or its affiliates should be disclosed: N/A.

  • 7.Changes of Share and Share Collateralizing for Directors, Supervisors, Managers and Shareholders with over 10% of shares held during the 2017 fiscal year and prior to the publication date of the annual report

  • (1) Changes of Share for Directors, Supervisors, Managers and Major shareholders

Unit:thousand Share

Current Fiscal Year and Current Fiscal Year and
Fiscal year 2017
before May24,2018
Number of Increased Number of Increased
Title Name holding (Decreased) holding (Decreased)
Shares Number of Shares Number of
Increased Shares Increased Shares
(Decreased) Collateralized (Decreased) Collateralized
Corporation
Director		 Yulon Motor Co., Ltd.
Chairman Yulon Motor Co., Ltd.
Representative: Kenneth K.T. Yen		 - - - -
Director Yulon Motor Co., Ltd.
Representative:Kuo-RongChen		 - - - -
Director Yulon Motor Co., Ltd.
Representative: Chen-HsiangYao		 - - - -
Director Yulon Motor Co., Ltd.
Representative: Leman C.C. Lee
(Note 1)		 - - - -
Director Yulon Motor Co., Ltd.
Representative: Wen-Rong Tsai
(Note 2)		 - - - -
Corporation
Director		 Nissan Motor Co., Ltd.
Director Nissan Motor Co., Ltd.
Representative:
Takashi NISHIBAYASHI		 - - - -
Director Nissan Motor Co., Ltd.
Representative: Atsushi KUBO		 - - - -
Director Nissan Motor Co., Ltd.
Representative: Junichi OHORI		 - - - -
Director Nissan Motor Co., Ltd.
Representative:
Kenji SHIMOYAMA		 - - - -
Independent
Director		 Jin-Shun Wu

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Current Fiscal Year and Current Fiscal Year and
Fiscal year 2017
before May24,2018
Number of Increased Number of Increased
Title Name holding (Decreased) holding (Decreased)
Shares Number of Shares Number of
Increased Shares Increased Shares
(Decreased) Collateralized (Decreased) Collateralized
Independent
Director		 Robert Mao - - - -
Corporation
Supervisor		 Wei Wen Investment Co., Ltd - - - -
Supervisor Wei Wen Investment Co., Ltd
Representative: Kwan-Tao Li		 - - - -
Supervisor Wei Wen Investment Co., Ltd
Representative: Tai-MingChen		 - - - -
Supervisor Takahiko IKUHIMA(Note 3) - - - -
Supervisor Toru NAKANO(Note 4) - - - -
President Leman C.C. Lee(Note 5) - - - -
President Wen-RongTsai(Note 6) - -
Special
Assistant to
the Chairman		 Kuo-Rong Chen - - - -
Senior Vice
President		 Junichi OHORI - - - -
Senior Vice
President		 Leman C.C. Lee(Note 7) - - - -
Vice President Mochizuki MASAHIRO(Note 8) - -
Vice President Moritami MATSUMOTO(Note 9) - - - -
Vice President Kenju SHIMOYAMA - - - -
Vice President Wen-Chuan Chung (Note 10)
Vice President Joseph Hsiung(Note 11)
Senior
General
Manager		 NISHII TARO (Note 12) - -
Senior
General
Manager		 Yoshihiro TAKAHAMA(Note 13) - - - -
Manager Wen-Chuan Chung (Note 14) - - - -
Manager Shun-Chi Tsai(Note 15) - - - -
Manager Tsan-HuangLin - - - -
Manager Yu-Chou Hsieh - - - -
Manager Wen-Chi Mao - - - -
Manager Wen-ChiangShu - - - -
Manager Dennis Chang - - - -
Manager Chiung-Ming,Chou - - - -
Manager Chao-Yen Liang - - - -

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YULON NISSAN

Current Fiscal Year and Current Fiscal Year and
Fiscal year 2017
before May24,2018
Number of Increased Number of Increased
Title Name holding (Decreased) holding (Decreased)
Shares Number of Shares Number of
Increased Shares Increased Shares
(Decreased) Collateralized (Decreased) Collateralized
Manager Yen Chou - - - -
Manager JackyLee - - - -
Manager Tu,Jen-Chung(Note 16) - - - -
Accounting
Manager		 Chen-Hua, Chi - - - -
Note 1：Appointed on Apr. 7, 2017.
Note 2：Resigned on Apr. 7, 2017.
Note 3：Appointed on Jun. 26, 2017.
Note 4：Resigned on Jun. 26, 2017.
Note 5：Appointed on Apr. 1, 2017..
Note 6：Resigned on Apr. 1, 2017.
Note 7：Resigned on Apr. 1, 2017.
Note 8：Appointed on Apr. 1, 2017.
Note 9：Resigned on Apr. 1, 2017.
Note 10：Appointed on Apr. 1, 2017.
Note 11：Appointed on May 15, 2017.
Note 12：Appointed on May 1, 2018.
Note 13：Resigned on Apr. 1, 2018.
Note 14：Resigned on Apr. 1, 2016.
Note 15：Resigned on Apr. 7, 2016.
Note 16：Appointed on Jan. 1, 2018.

(2)Information of Share Changes:Nil

(3)Information of Share Collateralizing:Nil

2017 Annual Report

62

Company Management Report

8.Information on the top-10 shareholders who are affiliates or related as spouse or second cousins:

The Information of Shareholders with Shareholding Percentage as the Top 10, who are Mutually Related

Shareholding of Shareholding of Shareholdings in Shareholdings in Title, name, and relationship of the top-10 Title, name, and relationship of the top-10
Shareholding of the
Spouse and the Names of shareholders who are affiliates or related as spouse or
Person
Underage Children Others second cousins
Name Note
Share Share Share
Number of Number Number
holding
holding		 holding Name Relationship
Shares of Shares of Shares
Rate
Rate		 Rate
143,500,000 47.83 - - - - Yu Ching Business Co., Ltd.
Sin Chi Co., Ltd.
Diamond Hosiery & Thread
Co., Ltd.
Lo-Wen Enterprises Co.,Ltd		 Affiliates
Affiliates
Affiliates
Affiliates		 Director
Yulon Motor Co., Ltd.
Kenneth K.T.Yen - - - - - - - - Representative of
Director
Kuo-RongChen 5,000 - - - - - - -
Zhen –XiangYao - - - - - - - -
Leman C.C. Lee - - - - - - - -
Nissan Motor 120,000,000 40.00 - - - - - - Director
Corporation
Takashi - - - - - - - - Representative of
Director
NISHIBAYASHI
Atsushi KUBO - - - - - - - -
Junichi OHORI - - - - - - - -
Kenji SHIMOYAMA - - - - - - - -
3,500,000 1.17 - - - - Yulon Motor Co., Ltd.
Sin Chi Co., Ltd.
Diamond Hosiery & Thread
Co., Ltd.
Lo-Wen Enterprises Co.,Ltd		 Affiliates
Affiliates
Affiliates
Affiliates		 Representative:
Kuo-Rong Chen
Yu Ching Business
Co., Ltd.
3,050,000 1.02 - - - - Yulon Motor Co., Ltd.
Yu Ching Business Co., Ltd.
Diamond Hosiery & Thread
Co., Ltd.
Lo-Wen Enterprises Co.,Ltd		 Affiliates
Affiliates
Affiliates
Affiliates		 Representative:
Kuo-Rong Chen
Sin Chi Co., Ltd.
1,878,000 0.63 - - - - Yulon Motor Co., td. The chairman is the
large shareholder
who has ability to
control company.		 Supervisor
Wei Wen Investment
Co., Ltd.
- - - - - - - - Representative of
Supervisor
Kwan-Tao Li
- - - - - - - - Representative of
Supervisor
Tai-Ming Chen
1,778,000 0.59 - - - - Yulon Motor Co., td. The chairman is the
large shareholder
who has ability to
control company.		 Representative:
JIan Lin Zhu
Wei Tai Investment
Co., Ltd.
1,768,000 0.59 - - - - Yulon Motor Co., Ltd.
Yu Ching Business Co., Ltd.
Sin Chi Co., Ltd.
Lo-Wen Enterprises Co.,Ltd		 Affiliates
Affiliates
Affiliates
Affiliates		 Representative:
Kenneth K.T. Yen
Diamond Hosiery &
Thread Co., Ltd.
1,700,000 0.57 - - - - Yulon Motor Co., Ltd.
Yu Ching Business Co., Ltd.
Sin Chi Co., Ltd.
Diamond Hosiery & Thread
Co.,Ltd.		 Affiliates
Affiliates
Affiliates
Affiliates		 Representative:
Wei Gong Chi
Lo-Wen Enterprises
Co., Ltd
Newpension fund. 1,258,500 0.42 - - - - - - -
Taiwan Life Insurance 1,042,000 0.35 - - - - - - Representative:
Si-Guo Huang
Co.,Ltd

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63

裕隆日產 YULON NISSAN

9.The number of shares held by the company, the company’s directors, supervisors, managers and its directly or indirectly controlled business toward the same investment businesses, as well as the combined calculated shareholding percentage

Unit：number of shares:％ Unit：number of shares:％ Unit：number of shares:％ Unit：number of shares:％ Unit：number of shares:％ Unit：number of shares:％
Invested from directors,
supervisors and managers,
Invested from Yulon Nissan
or companies that are Total investment
Motor Co., Ltd.
Reinvested Companies directly or indirectly
controlled byYulon Nissan
Shares Percentage Shares Percentage Shares Percentage
84,986,756 100% - - 84,986,756 100%
Yi-Jan Overseas
Investment Co., Ltd.

2017 Annual Report

64

Capital Raising Status

、 IV Capital Raising Status

1. Capital and Shares

(1)Source of Share Capital

1.Source of Share Capital

Unit：thousand Shares：NTD：thousand Dollars

Authorized Capital Authorized Capital Paid-upCapital Stock Paid-upCapital Stock Remark Remark Remark
Year
Month		 Par Invested with
Source of
Value Shares Amount Shares Amount Assets Other Other
Share Capital
than Cash
2003/10 10 600,000 6,000,000 300,000 3,000,000 Separately
Established
3,000,000		 - Note

Note :Approved in the letter No. Shang-Zi-Di 09201296600, dated October 22,2003

2.Class of Shares

Unit：thousand Shares

Authorized Capital Authorized Capital Authorized Capital
Class of Shares Remark
Issued Unissued Capital Total
300,000(Listed) 300,000 600,000 -
Common Stock
  • 3.Securities under the sum-up reporting method：N/A

(2)Structure of Shareholders

Apr. 24, 2018

Structure of
Governme		 Foreign
Financial Other
Shareholders ntal Natural Person Institutional and Total
Institution Institution
Quantity(Qty) Institution Natural Person
Number 1 8 83 4,608 77 4,777
Shares 1,258,500 1,914,000 162,019,754 11,514,859 123,292,887 300,000,000
Percentage 0.42% 0.64% 54.00% 3.84% 41.10% 100%

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裕隆日產 YULON NISSAN

(3)Status of Ownership Dispersion

Par value per share: NTD 10.00 Apr. 24, 2018

Shareholding class No. of shareholders Shares Percentage
1～ 999 864 85,097 0.02%
1,000～5,000 3,427 5,706,100 1.90%
5,001～10,000 258 2,046,101 0.68%
10,001～15,000 70 921,373 0.30%
15,001～20,000 37 691,000 0.23%
20,001～30,000 38 987,000 0.32%
30,001～40,000 16 570,751 0.19%
40,001～50,000 12 548,704 0.18%
50,001～100,000 18 1,212,358 0.40%
100,001～200,000 15 2,059,465 0.68%
200,001～400,000 6 1,799,863 0.59%
400,001～600,000 3 1,396,188 0.46%
600,001～800,000 2 1,500,500 0.50%
800,001～1,000,000 0 0 0%
Make a self classification based on
the actual situation when above
1,000,001		 11 280,475,500 93.49%
Total 4,777 300,000,000 100.00%

(4) List of Major Shareholders

No. of shares
Names of Shares Percentage %
Major shareholders
Yulon Motor Co., Ltd.
Nissan Motor Co., Ltd.
Yu Ching Business Co., Ltd.
Sin-Chi Co., Ltd
Wei Wen Investment Co., Ltd.
Wei Tai Investment Co., Ltd
Diamond Hosiery & Thread Co., Ltd.
Lo-Wen Enterprises Co., Ltd.
New pension fund
Taiwan Life Insurance Co., Ltd		 143,500,000
120,000,000
3,500,000
3,050,000
1,878,000
1,778,000
1,768,000
1,700,000
1,258,500
1,042,000		 47.83
40.00
1.17
1.02
0.63
0.59
0.59
0.57
0.42
0.35

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66

Capital Raising Status

(5) Information about Market Price per share, Net Value, Earnings, Dividends and Related Information in Recent 2 Years

Current Fiscal Year
Fiscal Year
2016 year 2017 year and before May 24,
Item
2018
Highest 279.0 332.0 274.0
Market value
Lowest 191.0 195.5 249.0
Per share
Average 210.83 248.18 259.84
Nest Assets Before distribution 71.85 70.65 83.95
Per share After distribution - - -
EPS(Earning Weighted average number of shares 300,000,000 300,000,000 300,000,000
Per Share) EPS(Earning Per Share) 15.44 22.14 5.37
Cash Dividend 22 20
Dividend
Stock - - - -
Dividend - - - -
P h
er sare Cumulative un-paid dividend - - -
Analysis on Price-Earnings(P/E) Ratio 13.65 11.21 -
ROI(Return Price-Dividend Ratio - - -
on
- - -
Dividend Yield
Investment)

(6)Dividend Policy and Execution Status

  1. Dividend Policy governed by this Company By-Laws

For the Company’s net income at the end of each fiscal year, it shall cover the accumulated losses first, then, appropriating 10% as legal reserve, and set aside or reverse special reserve in accordance with the law. The shareholders' dividend or bonuses out of remaining current profit and undistributed retained earnings shall be proposed first by the Board of Directors and to be resolved in the shareholders meeting.

The Company is in a stable and mature industry. Factors such as Company's profitability, funding of future operation and change in industrial environment, shareholder's interest and long term financial planning shall be considered in planning the Company's dividend distribution scheme. The amount shall not exceed 90% of current net income as the principal, however, the final dividend distribution ratio shall be proposed first by the board of directors and to be resolved in the shareholders meeting, regardless of such principle. Distribution of dividend is in the form of cash or shares. Cash dividend each year shall not be less than 20% of the total amount of the appropriated dividend of current year.

  1. The proposal to this Shareholders Meeting for dividend distribution as follows

  2. The proposal to the Shareholders General Meeting for 2017 for the dividend distribution is cash dividend at NT$20 per share and cash from legal reserve is NT$1.

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YULON NISSAN

(7) The effect of the distribution of stock dividend as proposed by this Shareholders Meeting on operation performance and earning per share ： Nil

  • (8) Compensation of the Employee, Directors and Supervisors

  • 1.The articles of association indicate the percentage or scope of compensation for the employees, directors and supervisors:

  • If the Company has profits for the current year, it shall be distributed not less than 0.1% as employees' compensation. The employees' compensation to be resolved in the form of shares or in cash, is agreed upon by a resolution of the Board of Directors and shall be submitted to the shareholders' meeting. However, if the Company has the accumulated losses, the profits must be reserved in advance to offset such losses. Then according to the ratio mentioned in preceding paragraph, to be reserved for such employees' compensation.

Apart from the appropriation of aforementioned employee remuneration, the Company also distributes three holiday bonuses, annual bonus, operating team growth performance bonus, and other incentive awards based on factors such as operation performance and the individual work performance of employees. The company intends to encourage employees with producing better performance for the company and shareholders.

Directors and supervisors of the Company may be paid NTD 100,000 (including the transportation allowances) monthly.

  • 2 Yulon Nissan adopted the distribution proposal of the company’s 2017 cash remuneration payable to employees at the Board of Directors Meeting on March 26, 2018 in accordance with the estimation of certain ratio from the profits of current year. In the event of discrepancy between the aforementioned estimation amount and the actual amount distributed, the accounting department shall process in according with variation in estimation and adjust to account in the year of distribution.

  • Information on the Board of the Directors adopting distribution compensation:

2017 director, supervisor and employee compensation

Board Resolution (03/26/2018) Board Resolution (03/26/2018)
Amount (NT$)
Directors’ and Supervisors ’ Compensation (Cash) 0
Employee’s Compensation (Cash) 8,011,433
Total 8,011,433
The employee’s bonus and directors/supervisors’ remunerationpaid from last fiscalyear’s earnings is:
Board Resolution (03/27/2017) Actual Result
Amount (NT$) Amount (NT$)
Directors/Supervisors remuneration(Cash) 0 0
Employee bonus(Cash) 5,772,860 5,772,860
Total 5,772,860 5,772,860
  1. The employee’s bonus and directors/supervisors’ remuneration paid from last fiscal year’s earnings is:

Note:The employee bonus $5,772,860 had distrubuted after the 2017 shareholdings’ meeting.

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Capital Raising Status

  • (9) Status of company’s repurchased Treasury Shares ： Nil

2. Corporate Bonds issued ： Nil

3. Preferred Stock issued ： Nil

4. GDR(Global Depositary Receipt) issued ： Nil

5. Employee Stock Options issued ： Nil

6. Restricted Stock Dividends of Employee Issued ： Nil

7. New shares issued for merger or acquistion ： Nil

8. Recorded up to the previous one quarter of the Date of the Report is in Printing, previously issued or privately raised marketable securities that are still not completed or the completed and planned benefits but not shown over the recent 3 years ： Nil

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裕隆日產 YULON NISSAN

、 V Hightlights Of Operations

1.Business Content

(1) Business Scope

  1. Business Scope

  2. (1) Business Content: The company’s main operating items include the design, research, development, sales and spare parts of cars products:

  3. A. Passenger Vehicles: Sedan, RV and its components

  4. B. Commercial Vehicles: Diesel Truck, Diesel Chassis and its components

  5. (2) Operating weight

Unit：NTD thousand

Fiscal year 2016 Fiscal year 2016 Fiscal year 2017 Fiscal year 2017
Business Content
Amount Percentage(%) Amount Percentage(%)
Finished cars 30,964,440 88.82 29,274,487
88.12
Parts 3,828,126 10.98 3,818,369 11.49
Other 67,880 0.2 128,918
0.39
Total 34,860,446 100.00 33,221,774 100.00

  • (3) Current main products

  • A. NISSAN brand:

MEW MaARCH series: 1.5L 4-speed automatic 5-door sedan

ALL NEW LIVINA series: 1.6L: featuring continuously variable transmission, 5-door RV

TIIDA series: 1.6 L continuous variable speed hatchback

SENTRA series: 1.8L all-speed automatic transmission, 4-door sedan

TEANA series: 2.0/2.5L all-spee automatic transmission, 4-door sedan

370Z series: 3.7L imported 6-speed automatic/manual transmission sports car

X-TRAIL model: 2.0/2.5L CVT Continuously Variable Transmission 4WD SUV. JUKE series: 1.6 L Imported SUV featuring continuously variable transmission (CVT) GTR series: 3.8L imported six-speed powershift sports car.

B. INFINITI:

Q30: L4 2.0L Turbo / 1.6 Turbo 7-Speed Automatic/Manual 5-Door Luxury Hatchback

Q50:L4 2.0L Turbo/V6 3.5L Hybrid/Automatic 7-speed, 4-door mid-sized luxury compact sport

car.

Q60: L4 2.0L Turbo/V6 3.5L Hybrid/Automatic 7-speed, 2-door luxury sport car. Q70: V6 2.5L/V6 3.7L/Automatic 7-speed, 4-door luxury compact sport car.

QX30: L4 2.0L Turbo Automatic 7-speed, luxury sport car.

QX50: V6 3.7L Manual/Automatic 7-speed, 5-door mid-sized luxury crossover SUV.

QX60:V6 3.5L CVT Continuously Variable Transmission, 5-Door seven-passenger luxury SUV. QX60:V6 2.5L Hybrid CVT Continuously Variable Transmission, 5-Door seven-passenger luxury SUV

QX70:V6 3.7L Manual/Automatic 7-Speed, 5-Door luxury SUV

(2) Industry Summary

1. Industry Environment Analysis

  • (1) Global Economic Environment

Favored by the circular recovery of global trade, continuous lifting of financial environment and

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the various economies maintaining robust growing trends, IMF report points out that the 2017 global economic growth rate reached 3.7%.

Looking into 2018, the global economy will still continue the momentum of past economic recovery while all research institutes are optimistic in predicting stronger economy compared with 2017. Nonetheless attention must be drawn to the monetary tightening policy and intensified trade protectionism in countries with advanced development.The estimation of the global economic growth in 2018 made by research institutions is shown in the following table:

2018 Global Economic Growth RateForecast 2018 Global Economic Growth RateForecast 2018 Global Economic Growth RateForecast
Research Institute Latest Forecast Date of
Announcement
IMF International MonetaryFund 3.9% Apr. 2018
IHS Global Insight 3.4% Apr. 2018

(2) China Economic Environment

Due to stimulus policy and stabilizing overseas demand, the economic growth rate in mainland China in 2017 was 6.9%, up 0.2% compared with 2016. However following the launch of de-leveraging, control of underground finance and contamination prevention actions, the economic growth rate of mainland China in 2018 is estimated to fall slightly behind compared with the economic growth performance last year. The estimation of the economic growth in mainland China made by research institutions is shown in the following table:

2018 ChinaEconomic Growth RateForecast 2018 ChinaEconomic Growth RateForecast 2018 ChinaEconomic Growth RateForecast
Research Institute Latest Forecast Date of
Announcement
China Government 6.5% Mar 2018
IMF International Monetary Fund 6.6% Apr 2018

(3) Domestic Economic Environment

Due to the stable economic growth in 2017, the annual economic growth of 2.86% outperformed the 1.50% in 2016 mainly because of the export in favor of global economic recovery, companied by the moderate growth in private-sector spending.

Looking into 2018, in favor of the continuous economic recovery linking to export momentum and the expansion of semiconductor industries for advanced processing investment, the overall investment strength will significantly expand while all major research institutes predict Taiwan’s economy to still present moderate growth. The estimation of the economic growth in Taiwan made by research institutions is shown in the following table:

2018Taiwan Economic Growth RateForecast 2018Taiwan Economic Growth RateForecast 2018Taiwan Economic Growth RateForecast
Research Institute Latest Forecast Date of Announcemt
Directorate-General of Budget,
Accounting and Statistics,
ExecutiveYuan.R.O.C.(Taiwan)		 2.42% Feb 2018
Chung Hua
Institute for Economic
Research		 2.47% Apr 2018
Asian Development Bank 1.9% Apr 2018

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  1. Industry Overview and Development

With the implementation of the government policy, which allowed citizens to exempt the goods tax through replacement, the total sales in 2017 increased slightly compared with 2016. In 2017, the total sales was 434,657 cars, an increase of 1.0% compared with 2016. The sale of made-in-Taiwan vehicle was 249,215 cars, which declined by 4.1% than 2016; imported vehicle was 185,442 cars,which grown by 8.8%than 2016; market share grown to 42.8%.

  1. Relationships of the industry’s upper, middle and down streams.

Upper streams: partners of manufacturing car parts and components. Middle streams: center of manufacturing, R&D, and marketing.

Down streams: dealers directly dealing with customers and being responsible for car sales and after-sale services.

  1. Development trend and competition by each product line

  2. (1) Small family car(1600cc below):

In 2017. 52,234 domestic small saloon cars under 1600cc were sold, indicating a decreased rate of 8.7% compared to 2016, accounting for 29.9% of the domestic passenger car market.

  • (2) 2.0L or below car models(1600~2000cc):

In 2017. The medium sedan market sales reached 70,279 cars , indicating a decreased rate of 10.5% compared to 2016, accounting for 40.2% of the domestic passenger car market.

  • (3) Decline of 2.0L or above car models

The sales volume in the large-sized car market in 2016 amounts to 6,694 cars, indicating a decreased rate of 13.9% compared to 2016.

  • (4) RV car models

In 2017.The sales volume in the RV car market is 174,761 vehicles, the sales volume with an increase of 13.2% from 2016.

(3) Technology, Research and Development (R&D)

  1. As of the most recent years and Printing of the Annual Report, the total R&D expenditure invested

Unit：NTD thousand

Fiscal Year
Current Fiscal Year and before
Item Fiscal year 2016 Fiscal year 2017
May 24,2018(Note)
525,674 672,305
163,366
R&D expenditure
34,860,446 33,221,774 12,578,012
Net Sales
Percentage of R&D 1.5% 2% 1.3%
expenditure over Net Sales

Note：The figures are self-totaled number

  1. The technology and product successfully developed

  2. (1) September 2007: Completed the development of LIVINA new model.

  3. (2) November 2007: Completed the development of CABSTAR new model.

  4. (3) February 2009: Completed the development of new TEANA 08 model.

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(4) October 2011: Completed the development of new NEW MARCH model.

(5) October 2012: Completed the development of new BIG TIIDA model.

  • (6) October 2013: Completed the development of SUPER SENTRA model.

  • (7) October 2013: Completed the Taiwan emission phase 5 development of TEANA / MARCH / TIIDA 4-door.

(8) Jan. 2014 completed the development for ALL NEW LIVINA.

(9) Oct. 2014 completed the development for modified model of SENTRA AERO.

(10) Mar. 2015 completed the development of new-generation X-Trail model.

(11) Apr. 2016 completed 6 car models, TEANA / MARCH / TIIDA 4-door/BIG TIIDA / SUPER SENTRA / ALL NEW LIVINA in accordance with the TPMS regulations.

(12) Feb. 2017 completed the development for modified model of iTIIDA.

(13)October 2017: Completed the development of remodeled SENTRA.

(14)May 2018: Completed the development of remodeled X-Trail.

3.R&D Plan

  • (1) Products to Be Developed & Time

Our Company continues to collaborate and communicate with NISSAN Japan closely to introduce new products that meet the market demand, on the basis of Taiwan market trend analysis and consumer requirement. The current selling models of LIVINA, SENTRA, TIIDA, MARCH and X-TRAIL are all best-selling models in the market. In response to the rise of energy saving and environmental awareness, not only will our Company follows NISSAN’s global product strategy by launching the EV/HEV models in near future, but we will also strengthen the SUV/CROSSOVER product lines to cope with the increasingly booming SUV market in order to continue expanding the market share.

  • (2) Expected Development Costs
Expected Development Costs Expected Development Costs Expected Development Costs
Unit：NTD thousand
2018 2019 2020
546,494 466,527 511,162

(4) Long, short term business development plan

Due to the global economic recovery and the stable rebound of raw material price, Taiwan’s economic environment became stable. In 2016, the growth momentum in the automotive market gradually improved as a result of the government’s replacement subsidies and the new models launched by each brand.

To continuously maintain a stable growth and secure the corporate sustainable development and long-term profitability, the Company has to actively plan and carry out the short-term and long-term action plans periodically.

  1. Short -term business development plan

  2. (1) Product strategy

Design the optimal combination of car models and boost market share via a complementary strategy with domestic made car and imported car models incorporated.

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Meanwhile, we also plan product lines close to the market trends , strive to produce the most attracting and needs-based products with an emphasized vehicle core value on better appearance, more durable usability, advanced technology and higher performance.

  • (2) Marketing strategy

  • A.Nissan:

  • (A).NIM (NISSAN INTELLIGENT MOBILITY) include the three core technologies for “smart driving,” “smart energy” and “smart integration,” which will re-shape brand value and drive brand rejuvenation for expansion in target customers.

  • (B).To advocate activities of “promoting brand image,” “enhanced internal consensus,” “promotion activities for all car models/CRM” and “promotion activities for car types” to increase the brand penetration for our goal.

  • (C).In order to enhance Car Advisor competitiveness, improve successful transaction rate, and provide more convenient purchasing experience, “ interactive experience platform ＂ , “ test drive at your home ＂ ,and ICT （ Information and Communication Technology ） tools such as "Nissan PAD APP" are introduced.

  • B.Infiniti:

  • (A).To stress the brand core value of “Inspired performance ”.

  • (B).To stress activities of “product experience marketing development,” “well-defined brand orientation” and “increased promotion effectiveness” to raise brand awareness.

  • (C).To strengthen its distribution, NISSAN will continue to build offices meeting the “IREDI INFINITI Retail Environment Design Initiative,” expand digital assisting tool application and P.C.E (Premium Customer Experience, five-star prestigious services with continuous improvement on SSL and CSI.

  • (3) Customer satisfaction strategies

  • A.Sales Service Satisfaction: Speed up and improve sales satisfaction through marketing management campaigns such as brand propaganda, elite sales cultivation, customer care and information, and aid tools (i.e. NISSAN PAD and interactive experience platform).

  • B . Post-Service Satisfaction: Develop CSI in attempt to become the leading brand in domestic post-sales service satisfaction in addition to reengineer customer issues quickly and customer relation management to enhance customer service satisfaction .

  • (4) Profit increasing strategies

To achieve the best profit efficacy by enhancing car model combination management, and to effectively increase car model sales and profits by continuous implementation of car model profit and cost management.

  • (5)Cooperate with global trends in environmental protection, energy-conservation and carbon reduction to develop clean automobiles.

  • To shape the image of green brand, the company will continue and expand the introduction of green and clean-energy vehicles to build a green traffic vision comprising the co-existence concept of people, cars and nature.

  • (6)Proactively response to government policy on five-year commodity replacement funding In early 2016, the government announced the implementation of old vehicles replacement with new commodity tax exemption and has effectively increased consumer intention to

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purchase new cars. To control the policy trend and strengthen competitive advantage, the company has formulated sales strategies with more ambition and built the one-stop management process to capture the policy related business opportunities through optimal service content and quality.

  1. Long-term business development plan

To sustain the demand for company growth, NISSAN Motor reexamines the mid and long-term internal and external environmental impact assessment and identifies the future potential market risks and opportunities. The Company prudently designs the “One-Two-Three Mid-Term Strategic Plan” and expects to establish the core competitive advantage for the next generation in 3 years, in order to assure the accomplishment of mid-term strategic objectives.

The framework of “One-Two-Three” Mid-Term Strategic Plan includes two principal objectives, 3S Strategic Framework, and Nine Major Strategic Supports, as described below: (1)Two Principal Objectives: Set up the certain market share and objectives in operating profits before 2020.

  • (2)The 3S Strategic Framework includes the following three strategic constituents and the different strategic supports of composition:

  • A. Sell More – Sales growth strategy based on “innovation.”

    • The mid and long-term core competitive advantages will develop from “innovation” and cooperate with big data analysis for the application of identifying potential customer of development, precision analysis of different customer demand, and development of differentiated marketing to effectively conduct marketing strategy. Meanwhile the strategy will unfold the overall brand development strategy, customer access process management strategy, channel competition strategy, and customer-oriented product development strategies as well as other core strategic supports to examine the overall precision combat approach and to substantially improve resource allocation effect and the growth in sales momentum.

  • B. Spend Wise – Cost thinning strategy based on “reciprocity.”

    • The management consisting of revenue generation and saving will supplement each other and effectively improve the nature and profits of the company. Such management will not only expand the sales in breadth and depth but also initiate TdC (Total delivery Cost) for management improvement, reviewing and implementing nodes improvement comprehensively to substantially improve the competitive advantage in cost and to inject stable profit source for marketing resource and the company.

  • C. Share with Hearts – Corporate rooting strategy based on “sharing.”

    • The company will comprehensively examine the changes in corporate nature and competitive environment through the formulation of mid-term strategy plan. The setup of mid and long-term strategic objectives and designing mid and long-term strategic orientation will refine the corporate cultural value with effective repurposing of organization management.

The mid-term strategic plan will establish a “people-oriented” corporate foundation with the purpose to create resource sharing, responsibility sharing, and outcome sharing “inclusive environment.” The plan will expand the potential and value of employees so that employees

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YULON NISSAN

will incessantly discover innovation and take challenge with courage. All employees will develop consensus through intense communication and good interaction in the process, which will become the specific contribution of compelling power in “Sell More” and “Spend Wise.”

  • A. Launching next-generation human resource system

  • The system will continue building a strategic-oriented learning organization as the key development, upgrading organizational operation efficiency through organization process reengineering, V-up Nissan Motors system analysis and problem-solving approach, and cost and carbon reduction. Meanwhile the system will continue expand the scope and application of knowledge management platform to create opportunities of constant learning growth for employees and build the environment and culture of learning-based organization.

  • Remarkable marketing team plan: Update capacity of marketing team.

  • Distinguished supervisor plan: Intensify the managerial capacity of management.

  • Supervisor successor plan: Develop entry-level officers and successor for mid-level supervisor.

  • Key talent retention: Retain the core talents for the company effectively through reasonable and transparent assessment system.

  • Dual-track system: Build professional technological position and managerial positions in terms of long-term development orientation so employees will receive explicit development path.

  • Key process document systematization: Document the company knowledge with core value and record and retain through systematic approach to facilitate management and use.

  • B. Introduce next-generation information system

    • The corporate smart decision supporting system is equipped with the supplementing features of real-time information management and mobile adjustment strategy with effective integration of existing system. The system simplifies the operation process and bring management synergy into full play to facilitate the decision making support for different level of personnel at the company. Moreover, the company also continues to develop and improve Smart DMS to strengthen the competitiveness in distributors, upgrade the sales power in distributors, customer satisfaction and operational benefits, and thereby improve the overall operational performance of the company.

  • C. Continue to refine “innovative” corporate culture

    • The future core competitive advantage will continue to develop from “innovation” with introduction of innovative products and services to effectively utilize the core intelligence capital of the company and comprehensively build customer values.

In terms of product innovation, the company will collect and manage customer opinions with introduction or mainstream models into process management, thereby to discover the potential demand for consumers, develop and introduce products meeting customer expectation, and create maximum values for customers and shareholders.

Continue to strengthen “quick service” in terms of service innovation: Effectively improve customer satisfaction through professional and trustworthy after-sales service and quick solution of customer problems.

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2. Market, Production & Sales Review

(1) Market Analysis

  1. Sales Area of company’s Main Products

This company’s products are designing, R&D, Sales of Sedan, RV vehicles and commercial vehicles, and sales of other components. Taiwan area is our main sales area, in 2017, the local sales weight is 99%, and Indonesia and Egypt are the main export sales areas, the sales weight is 1%.

  1. Market Share

In 2017, we sold 39,220 general cars with a market share of 15.7% and 3,410 import ones, with a market share of 1.8%. The total sales volume is 42,630 units and the market share is 9.8%. The total sales volume in 2017 is decreases 4.7% than 2016.

  1. Analysis and Description of 2017 Market Sales Status and Growth

  2. Due to the government’s replacement subsidy policy implemented in 2017, the number of registered cars nationwide was 43,500 in 2017, In 2017, the luxury imported car brand continued to introduce low-priced models and expand the chips, making the market share hit a record high; on the other hand, the market share of domestic cars throughout the year was 57.3%, a decrease of 4.1% compared to 60.4% in 2016. This showed that the operation of domestic cars became more and more difficult.

  3. Market Sales Forecast for This Year (2018)

Due to the government’s goods tax subsidy policy and preferential programs promoted by car companies to stimulate replacement, the sales in the automotive market boomed in the beginning of 2018. From January to April 2018, 145,854 cars were sold in the market, an increase of 5.0% over the same period last year. Looking at 2017, with the replacement policy and new model launches in the automotive market, the sales may reach 42,000 cars. In 2018, the Company will continue to improve its brand image of “innovation that excites” and favorability through face-lifted launches of ALL NEW LIVINA,TIIDA, SENTRA and X-TRAIL and will also enhance the power of basic models to meet the needs of economical consumers who intend to replace their old cars in response to the government’s eco-friendly policy. Besides, a series of brand experience activities will be held this year, including DIY classes, NISSAN Care APP, and NISSAN Nature Trip, to promote the Company’s brand spirit of safety, comfort, and energy-saving. With the focus on ALL NEW LIVINA,TIIDA, SENTRA, and X-TRAIL, the Company aims to achieve the sales target of 2018 by organizing physical and audio/video marketing activities in an innovative way.

  1. Competitive Niche

  2. (1) Advantageous Operation and Management Ability

  3. A. Expand combined operational effects across the strait and of the group.

  4. B. Leverage Nissan’s global resources to reduce part costs.

  5. C. Strengthen our financial management ability and investment performance.

  6. (2) A Superior and Complete Product Line

  7. A. Introduce products that meet market and customer needs to create customers’ value.

  8. B. Innovate IT to strengthen product variation and competitive advantages.

  9. C. Increase brand name celebrity of our imported cars to continuously grow our sales volume.

  10. D. To develop a green brand image and increase product value and brand awareness

  11. (3) Chinese Style of Design Ability

  12. A. Play an important role in Nissan’s global R&D centers and dominate the design of some of our car models.

  13. B. Create profits through our technical output.

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  - C. Cater to the tastes of the Chinese market and design/develop products that can better meet customers’ needs.

  • (4) A Comprehensive Service System

    • A. Provide real-time and comprehensive value-added services through our e-platform.

    • B. Increase our dealers’ overall operating and management ability.

    • C. To promote “Service Express” to effectively increase customer satisfaction

  • (5) A Learning Organization

    • A. Increase our employees’ core, management and professional competency.

    • B. Mold a knowledge sharing culture and create a new operating pattern.

    • C. Increase the use of Nissan’s V-UP (DECIDE, V-FAST) system problem solving approach and gradually accumulate our acquired successful experience to form an innovative learning organization and establish long-term competitive advantages.

  • Advantageous and Disadvantageous Factors of Perspective Development and Strategies to Address

  • (1) Advantageous Factors

Our company will continue to use “innovation” as the core of our entire development, and center on our consumers’ value to increase our “product power” and “service quality” to create a higher competitive edge. For our “product power”, we will successively introduce Nissan’s quality car designs (NISSAN and INFINITI brands) and combine the personalized IT interface with our products to provide our consumers with a more convenient and mobile life.

  • A.In respect to NISSAN service, For our “service quality”, we will continue to provide our consumers with “genial”, “speedy”, “professional”, and “reliable” service with our thoughtful service ideal.

  • B.In terms of service, INFINITI will continue to build offices meeting the specification of IREDI (INFINITI Retail Environment Design Initiative)” in addition to offering P.C.E (Premium Customer Experience), 5-start prestigious services for car owners to experience premium service quality. Meanwhile INFINIT will introduce digital assisting tools to provide more superior service experience, creating higher added-value and customer satisfaction for consumers.

  • (2) Disadvantageous Factors

  • A.The expansion of imported luxury brands with introductory entry-level car models with lower price consumes the price and market of existing domestic cars.

  • B.The initiative of quantitative currency loosening policy by Japan and EU substantially enhances the price competitiveness of Japanese and European imported cars, causing the market share of domestic cars to substantially shrink.

  • C.In cooperation with government eco-friendly policy, the increase of convenience and availability of mass traffic transport network will affect consumers’ use of car and intention to purchase cars.

  • (3) Countermeasures

Nissan Motor Co., Ltd. will continue to uphold to “innovation” and introduce superior products and services in order to strengthen its competitiveness. The company will devote in creating higher values for consumers and thoroughly implement customer-oriented management philosophy to fully achieve the corporate vision in “becoming the benchmark enterprise of cross-strait automobile industry in “product innovation” and “service innovation.”

(2) The major usage and production processes of main products: The company’s main business is design, research, develop, sale and components sales of car products, and there are no production processes, therefore it’s not applicable.

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(3) Supplies of main raw materials: The company is not a production manufacturing industry; therefore it’s not applicable.

(4) List of Major Suppliers and Clients Over the Recent 2 Fiscal Years

1. Data of suppliers accounting for more than 10% of total purchases over the recent 2 fiscal years

Unit：NTD thousand

Fiscalyear 2016 Fiscalyear 2016 Fiscalyear 2016 Fiscalyear 2016 Fiscalyear 2017 Fiscalyear 2017 Fiscalyear 2017 Fiscalyear 2017 FirstQuarter in 2018 FirstQuarter in 2018 FirstQuarter in 2018 FirstQuarter in 2018
Rank
Relationsh Relationshi

Relationship

Supplier’s		 % to Net ip with Supplier’s % to Net
p with		 Supplier’s % to Net
Amount Amount
Amount


with
Name Purchase Yulon- Name Purchase Yulon- Name Purchase

Yulon-Motor
Motor Motor
1 Yulon
Motor
Co., Ltd.		 28,288,848
99		 Relative
Party		 Yulon
Motor
Co., Ltd.		 25,632,031 99 Relative
Party		 Yulon
Motor
Co., Ltd.		 6,362,996
98		 Related
Party
2 Others 416,200
1		 Others 298,657 1 Others 123,768
2
Net
Purchase
amoust		 28,705,048
100		 Net
Purchase
amoust		 25,930,688 100 Net
Purchase
amoust		 6,486,764
100

2. Data of clients accounting for more than 10% of total sales over the recent 2 fiscal years

Unit：NTD thousand

Rank Fiscal year 2016 Fiscal year 2016 Fiscal year 2016 Fiscal year 2017 Fiscal year 2017 Fiscal year 2017 First Quarter in 2018 First Quarter in 2018 First Quarter in 2018
Supplier’s Relationship Relationship Relationship
Name Amount % to Net
with		 Amount % to Net
with		 Amount % to Net
with
Purchase Yulon-Motor Purchase Yulon-Motor Purchase Yulon-Motor
1 30,841,817
89		 Relative
Party		 29,166,734
88		 Relative Party 7,287,064
87		 Related Party
Taiwan
Acceptance
Corporation
2 4,018,629
11		 4,055,040
12		 1,071,384
13
Others

34,860,446		 100 33,221,774 100 8,358,448
100
Net Purchase
amoust
  • (5) Production Volume over the recent 2 years: This company is not a production manufacturer industry; therefore it’s not applicable.

(6) Sales Volume of Recent 2 Fiscal Years

Unit： Volume \ NTD thousand

Fiscal Year
Sales Fiscal year 2016 Fiscal year 2017
Volume
Local Sales Export Sales Local Sales Export Sales
Main Produces Volume Amount Volume Amount Volume Amount Volume Amount
(or byDepartment）
44,699 30,964,440 - - 42,668 29,273,945 - 542
Vehicle
- 3,612,327 - 215,800 - 3,670,158 - 148,211
Parts
- 67,880 - - - 96,367 - 32,551
Other
- 34,644,646 - 215,800 - 33,040,470 - 181,304
Total

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3. Employee Data for the Recent Two Years and as of the Publication Date of Annual Report

Current Fiscal Year and
Fiscal Year Fiscal year 2016 Fiscal year 2017
before May24,2018
181 178 174
Marketing
87 87 87
Management
No. of
Employee Reserch & 165 167 170
Development
433 432 431
Total
41.00 42.30 42.55
Average age
12.74 13.87 14.12
Average seniority
1 0 1
Doctor
226 227 225
Master
Academy College 178 177 176
Ratio
Senior High School 27 27 28
Below Senior 2 1 1
High School

4. Expenditures on Environment Protection

(1) Losses and Disposal caused by environmental pollution over the recent 2 years: Nil

(2) Probable environmental expenditures:

The Company has passed the ISO 14001 certification in Nov. 2015 and will continue to support the environment protection in the future. No major probable environmental expenditures are expected in the future.

5. Labor-Capital Relationship

(1) Current Prominent Labor-Capital Agreements, Employee Benefits and Their

Implementation

  1. Status of Labor-Capital Agreements

  2. (1) This company holds a monthly meeting with the labor representatives for proper communication of problems and improvements between the proprietor and the laborers.

  3. (2) Understand and pay more attention the needs and voice of the employee to promote the Labor-Capital harmony.

  4. (3) Ask for the opinions from the officials of the labor authorities, scholars or lawyers on relevant issues and hold seminars of relevant topics regularly.

  5. (4) Continue to strengthen our effort in educating the employees to enhance convergence.

  6. Employee Benefits

  7. (1) Provide commuter’s transportation and scheduled home-returning transportation free of charge before holiday.

  8. (2) Provides safe, convenient, quiet dormitory environment and free of charge.

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  • (3) Establish employee welfares zone, which includes tennis court, indoor and outdoor basketball court, warm water swimming pool, sauna facilities, video/audio center, gymnasium, etc.

  • (4) Hold family day on May 1 labour day, annual domestic and foreign tourism, year-end lucky draw and banquet.

  • (5) Set up Worker’s Complaint Handling System to assist colleagues to solve working problems and to maintain their rights and privileges.

  • (6) The Employee Assistance Program (EAP) was set up, with specialized professionals to assist employees with consultations on various problems encountered in their work and life, so as to relieve employees' work-life pressure and maintain their mental health.

  • (7) Institutionalize regulations on the prevention of sexual harassment to provide a harassment-free environment for the employees and employee-to-be. Necessary actions would be taken to prevent, correct, punish and handle acts of harassment, and to ensure the protection of the privacy of the victims as well as the rights of all employees.

  • Retirement System

  • (1) This company complies with the requirements set forth in the Labor Standards Law and institutionalized relevant regulations on retirement and pecuniary aid in case of death.

  • (2) For enhancing the quality of human resources and proper mechanism for replacing the old with the young employees, we have institutionalized a flexible retirement and resignation program.

  • (3) The employee retirement regulations developed in accordance with “Labor Pension Act” belongs to the regulation governing pension appropriation. The Company has appropriated 6% from the monthly salary of employees to the individual pension fund accounts at the Bureau of Labor Insurance since July 1st, 2005. The 2017 and 2016, the Company has recognized the amount of appropriation according to the ration stipulated in the appropriation program to the Statement of Comprehensive Income in the amount of NT14,440 thousand and NT14,060 thousand, respectively.

  • (4) The Company adopted the defined benefit plan under the Labor Standards Law, under which pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name.

(2) Labor Dispute

This company has always treats our employees as its most valuable assets, and very serious about employees future development. Therefore, harmonized Labor-Capital has been maintained since the very beginning, and labor dispute that had caused company loss has never happened.

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裕隆日產 YULON NISSAN

6. Prominent Contracts

Contract Counterparty Contract Period Highlights of Provisions Restrictive Terms
Nissan Motor
Co., Ltd.		 2003.11.1~
2008.10.31
Note(1)		 Technical cooperation to
develop and manufacture a
variety of vehicles

1. Restriction on sub-licensing to a
third party
2. Restriction on sales beyond
licensed territories
Technical
cooperation
agreement
Nissan Motor
Co., Ltd.		 2003.11.1~
2008.10.31
Note(1)		 Dealing
matters
with
import cars
1. Restriction on sales beyond
licensed territories
2. Confidential responsibility on
thirdpartybusiness
Dealing
agreement on
import cars
OEM, Yulon Motor
Co., Ltd.		 2015.5.1~
2020.4.30
Note(2)		 Aseembly for variety of
vehicles and auto parts
1. Restriction on sub-licensing to a
third party
2. Restriction on sales beyond
licensed territories
Substitute
Materials
Contract

Taiwan
Acceptance
Corporation		 Note(3) Provide Car Financing to
Dealers
1. Restriction on sub-licensing to a
third party
2. Confidential responsibility on
thirdpartybusiness
Sales Contract
Yu Chang
Motor Co.,
Ltd.		 2014.3.1~
2019.2.28		 Sales of Nissan a variety of
vehicles and auto parts
1. Restriction on sub-licensing to a
third party
2. Confidential responsibility on
third party business
Distribution
agreement
Yu Hsin Motor
Co., Ltd.
2015.3.1~
2019.2.28		 Sales of Nissan a variety of
vehicles and auto parts
1. Restriction on sub-licensing to a
third party
2. Confidential responsibility on
third party business
Distribution
agreement
Yu Tang
Motor Co.,
Ltd. and other
2companies
2017.3.1~
2022.2.28		 Sales of Nissan a variety of
vehicles and auto parts
1. Restriction on sub-licensing to a
third party
2. Confidential responsibility on
third party business
Distribution
agreement
Yu SingMotor
Co., Ltd. and
other 2
companies
2018.3.1~
2019.2.28		 Sales of Nissan a variety of
vehicles and auto parts
1. Restriction on sub-licensing to a
third party
2. Confidential responsibility on
third party business
Distribution
agreement
Yuan Long
Motor Co.,
Ltd. and other
3 companies
2017.3.1~
2021.2.28		 Sales of Nissan a variety of
vehicles and auto parts
1. Restriction on sub-licensing to a
third party
2. Confidential responsibility on
third party business
Distribution
agreement
Chen Long
Motor Co.,
Ltd. and other
2 companies
2016.3.1~
2019.2.29		 Sales of Nissan a variety of
vehicles and auto parts
1. Restriction on sub-licensing to a
third party
2. Confidential responsibility on
thirdpartybusiness
Distribution
agreement

Note(1): If no action is taken to renew or non renew the contract at least 6 months prior to its expiration, the contract will automatically be renewed for 1 years.

  • Note(2): If no action is taken to renew or non renew the contract at least 3 months prior to its expiration, the contract will automatically be renewed for 1 years.

  • Note(2): Yulon Nissan Motor Co., Ltd., and Taiwan Acceptance Corporation are affiliates, and Dealers collections are made through Taiwan Acceptance Corp.; therefore contract duration was not specifically instituted.

2017 Annual Report

82

Financial Information

、 VI Financial Information

1. Condensed Financial Statements for the recent 5 fiscal year

(1) Condensed Balance Sheet and Comprehensive Income Statement Individual Condensed Balance Sheets-IFRS

1. Condensed Financial Statements for the recent 5 fiscal year
(1) Condensed Balance Sheet and Comprehensive Income Statement
Individual Condensed Balance Sheets-IFRS		 1. Condensed Financial Statements for the recent 5 fiscal year
(1) Condensed Balance Sheet and Comprehensive Income Statement
Individual Condensed Balance Sheets-IFRS		 1. Condensed Financial Statements for the recent 5 fiscal year
(1) Condensed Balance Sheet and Comprehensive Income Statement
Individual Condensed Balance Sheets-IFRS		 1. Condensed Financial Statements for the recent 5 fiscal year
(1) Condensed Balance Sheet and Comprehensive Income Statement
Individual Condensed Balance Sheets-IFRS		 1. Condensed Financial Statements for the recent 5 fiscal year
(1) Condensed Balance Sheet and Comprehensive Income Statement
Individual Condensed Balance Sheets-IFRS		 1. Condensed Financial Statements for the recent 5 fiscal year
(1) Condensed Balance Sheet and Comprehensive Income Statement
Individual Condensed Balance Sheets-IFRS		 1. Condensed Financial Statements for the recent 5 fiscal year
(1) Condensed Balance Sheet and Comprehensive Income Statement
Individual Condensed Balance Sheets-IFRS		 1. Condensed Financial Statements for the recent 5 fiscal year
(1) Condensed Balance Sheet and Comprehensive Income Statement
Individual Condensed Balance Sheets-IFRS
Unit：NTD thousand
Financial Data in recent 5 years The financial
Fiscal Year data as of March
Item 31, 2018
2013 2014 2015 2016 2017
(Note 1)
Current Assets 4,939,631
10,174,765		 10,473,513 12,208,994 8,005,623
8,233,842
Property, plant and 1,748,604
1,758,753		 1,936,231 1,703,040 1,479,225
1,464,022
equipment
7,887
12,346		 14,330 17,407 20,882
21,580
Intangible assets
28,622,496
24,538,542		 18,736,489 15,797,481 16,264,911
17,844,399
Other assets
35,318,618
36,484,406		 31,160,563 29,726,922 25,770,641
27,563,843
Total Assets
Before
5,172,176
6,369,203		 6,988,624 6,310,765 2,545,626
2,491,469
Current distribution
Liabilities After 11,013,176
15,369,203		 10,738,624 12,910,765 -
-
distribution
5,105,965
3,184,691		 2,216,761 1,861,814 2,030,391
2,521,692
Non-current liabilities
Before
10,278,141
9,553,894		 9,205,385 8,172,579 4,576,017
5,013,161
Total distribution
Liabilities After
16,119,141
18,553,894		 12,955,385 14,772,579 -
-
distribution
Equity attributable to 25,040,477
26,930,512		 21,955,178 21,554,343 21,194,624
22,550,682
owners of the company
3,000,000
3,000,000		 3,000,000 3,000,000 3,000,000
3,000,000
Share Capital
Capital Reserves 6,129,405
6,129,405		 6,129,405 6,129,405 6,129,405
6,129,405
Before
15,700,634
16,384,208		 11,523,312 12,387,086 12,440,237
13,559,312
Retained distribution
Earnings After
9,859,634
7,384,208		 7,773,312 5,787,086 (Note2) -
distribution
210,438
1,416,899		 1,302,461 37,852 (375,018) (138,035)
Other equity
Treasurystock -
-		 - - -
-
Noncontrolling interest -
-		 - - -
-
(NCI)
Before
25,040,477
26,930,512		 21,955,178 21,554,343 21,194,624
22,550,682
Total distribution
equity After
19,199,477
17,930,512		 18,205,178 14,954,343 (Note 2)
distribution

Note 1: Quarterly Statement of the First Quarter of 2018 has not been reviewed by CPAs. Note 2: Earnings distribution proposal will be confirmed by 2018 general meeting of shareholders.

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裕隆日產 YULON NISSAN

Consolidated Condensed Balance Sheets-IFRS

Unit：NTD thousand

The financial
Financial Data in recent 5 years
Fiscal Year data as of March

Item
31, 2018
2013 2014 2015 2016 2017
(Note 1)
18,135,802 16,262,960 12,313,731 12,843,955 8,783,713 9,023,783
Current Assets
Property, plant and 1,748,604 1,758,753 1,936,231 1,703,040 1,479,225 1,464,022

equipment
7,887 12,346 14,330 17,407 20,882 21,580
Intangible assets
15,426,672 18,472,488 16,914,743 15,175,346 15,492,967 17,058,881
Other assets
35,318,965 36,506,547 31,179,035 29,739,748 25,776,787 27,568,266
Total Assets
Before 5,172,523 6,369,203 6,989,699 6,310,765 2,545,626 2,491,469
Current distribution
Liabilities After
 11,013,523 15,369,203 10,739,699 12,910,765 (Note2) -
distribution
5,105,965 3,206,832 2,234,158 1,874,640 2,036,537 2,526,115
Non-current liabilities
Before
 10,278,488 9,576,035 9,223,857 8,185,405 4,582,163 5,017,584
Total distribution
Liabilities After
 16,119,488 18,576,035 12,973,857 14,785,405 (Note2) -
distribution
Equity attributable to
 25,040,477 26,930,512 21,955,178 21,554,343 21,194,624 22,550,682

owners of the company
3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000
Share Capital
6,129,405 6,129,405 6,129,405 6,129,405 6,129,405 6,129,405
Capital Reserves
Before
 15,700,634 16,384,208 11,523,312 12,387,086 12,440,237 13,559,312
Retained distribution
Earnings After 9,859,634 7,384,208 7,773,312 5,787,086 (Note2) -
distribution
210,438 1,416,899 1,302,461 37,852 (375,018) (138,035)
Other equity
- - - - - -
Treasury stock
Noncontrolling interest - - - - - -

(NCI)
Before
 25,040,477 26,930,512 21,955,178 21,554,343 21,194,624 22,550,682
Total distribution
equity After
 19,199,477 17,930,512 18,205,178 14,954,343 (Note2) -
distribution

Note 1: Quarterly Statement of the First Quarter of 2018 has been reviewed by CPAs. Note 2: Earnings distribution proposal will be confirmed by 2018 general meeting of shareholders.

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84

Financial Information

Individual Condensed Income Statement-IFRS

Individual Condensed Income Statement-IFRS Individual Condensed Income Statement-IFRS Individual Condensed Income Statement-IFRS Individual Condensed Income Statement-IFRS Individual Condensed Income Statement-IFRS Individual Condensed Income Statement-IFRS Individual Condensed Income Statement-IFRS
Unit：NTD thousand
Fiscal Year
Item
Financial Data in recent 5 years
The financial
data as of March
31, 2018
(Note)
2013
2014
2015
2016
2017
Operating Revenue
31,486,050 33,170,141 33,218,394
34,860,446
33,221,774
8,358,448
Gross Profit
5,448,850
4,314,965
5,305,213
5,046,649
6,184,455
1,661,383
Operating profit or loss
1,856,646
801,184
1,256,316
1,224,263
2,096,150
434,139
Non-operating
Income
and Expenses
6,950,244
7,225,493
3,743,371
4,361,841
5,907,271
1,267,288
Profit before tax
8,806,890
8,026,677
4,999,687
5,586,104
8,003,421
1,701,427
Net income (loss)
7,299,997
6,523,759
4,165,901
4,630,615
6,642,500
1,111,027
Other comprehensive
profit andloss (net)
1,115,187
1,207,276
(141,235)
(1,281,450)
(402,219)
245,031
Total current
comprehensive profit and
loss
8,415,184
7,731,035
4,024,666
3,349,165
6,240,281
1,356,058
Net income attributable to
parent company’s
shareholders
7,299,997
6,523,759
4,165,901
4,630,615
6,642,500
1,111,027
Net income attributable to
unrestrictive equity
-
-
-
-
-
-
Total comprehensive
profit and loss attributable
to parent company’s
shareholders
8,415,184
7,731,035
4,024,666
3,349,165
6,240,281
1,356,058
Total comprehensive
profit and loss attributable
to unrestrictive equity
-
-
-
-
-
EPS (Earning Per Share)
24.33
21.75
13.89
15.44
22.14
3.7
Fiscal Year The financial
Financial Data in recent 5 years
data as of March
31, 2018
2013 2014 2015 2016 2017
Item (Note)
31,486,050 33,170,141 33,218,394 34,860,446 33,221,774 8,358,448
Operating Revenue
5,448,850 4,314,965 5,305,213 5,046,649 6,184,455 1,661,383
Gross Profit
1,856,646 801,184 1,256,316 1,224,263 2,096,150 434,139
Operating profit or loss
Non-operating
Income		 6,950,244 7,225,493 3,743,371 4,361,841 5,907,271 1,267,288
and Expenses
8,806,890 8,026,677 4,999,687 5,586,104 8,003,421 1,701,427
Profit before tax
7,299,997 6,523,759 4,165,901 4,630,615 6,642,500 1,111,027
Net income (loss)
Other comprehensive 1,115,187 1,207,276 (141,235) (1,281,450) (402,219) 245,031
profit andloss (net)
Total current 8,415,184 7,731,035 4,024,666 3,349,165 6,240,281 1,356,058
comprehensive profit and
loss
Net income attributable to 7,299,997 6,523,759 4,165,901 4,630,615 6,642,500 1,111,027
parent company’s
shareholders
Net income attributable to - - - - - -
unrestrictive equity
Total comprehensive 8,415,184 7,731,035 4,024,666 3,349,165 6,240,281 1,356,058
profit and loss attributable
to parent company’s
shareholders
Total comprehensive - - - - -
profit and loss attributable
to unrestrictive equity
24.33 21.75 13.89 15.44 22.14 3.7
EPS (Earning Per Share)

Note : Quarterly Statement of the First Quarter of 2017 has not been reviewed by CPAs.

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裕隆日產 YULON NISSAN

Consolidated Condensed Income Statement-IFRSs

Unit：NTD thousand

Fiscal Year The financial
Financial Data in recent 5 years
data as of
March 31, 2018
2013 2014 2015 2016 2017
Item (Note)
OperatingRevenue 31,486,050 33,176,837 33,218,394 34,860,446 33,221,774 8,358,448
Gross Profit 5,448,850 4,321,661 5,305,213 5,046,649 6,184,455 1,661,383
Operating profit or loss 1,832,179 786,229 1,234,816 1,202,037 2,075,688 428,864
Non-operating Income 6,974,711 7,240,448 3,764,871 4,384,067 5,927,733 1,272,563
and Expenses
Profit before tax 8,806,890 8,026,677 4,999,687 5,586,104 8,003,421 1,701,427
Net income(loss) 7,299,997 6,523,759 4,165,901 4,630,615 6,642,500 1,111,027
Other comprehensive 1,115,187 1,207,276 (141,235) (1,281,450) (402,219) 246,031
profit and loss(net)
Total current 8,415,184 7,731,035 4,024,666 3,349,165 6,240,281 1,356,058
comprehensive
profit and loss
Net income attributable to 7,299,997 6,523,759 4,165,901 4,630,615 6,642,500 1,111,027
parent company’s
shareholders
Net income attributable to - - - - - -
unrestrictive equity
Total comprehensive 8,415,184 7,731,035 4,024,666 3,349,165 6,240,281 1,356,058
profit and loss attributable
to parent company’s
shareholders
Total comprehensive - - - - -
profit and loss attributable
to unrestrictive equity
EPS (Earning Per Share) 24.33 21.75 13.89 15.44 22.14 3.7

Note : Quarterly Statement of the First Quarter of 2017 has been reviewed by CPAs.

(2) CPAs’ Name and Auditor opinions
Fiscal Year 2013 2014 2015 2016 2017
CPA Chien-Hsin Hsieh
En-in Wu
Chien-Hsin Hsieh
Wan-Yi Liao
Wan-Yi Liao
Chien-Hsin Hsieh
Wan-Yi Liao
Chien-Hsin Hsieh
Wan-Yi Liao
Robert Yu
(Certified public
accountant)
Auditors’ Unqualified
Opinion		 Unqualified
Opinion		 Unqualified
Opinion		 Unqualified
Opinion		 Unqualified
Opinion
opinions

2017 Annual Report

86

Financial Information

2. Financial analysis in recent 5 years

Financial Ratio Analysis complying with IFRS - individual

Fiscal Year Fiscal Year The financial
Financial analysis in recent 5 years
data as of
Analysis items 2013 2014 2015 2016 2017 March 31, 2018
(Note1)
Finance
Structure%		 29 26 30 27 18 18
Debt to assets ratio
Long term funds to Property, plant
1,724		 1,712 1,248 1,375 1,570 1,713
and equipment ratio
Liquidity
％		 Current Ratio 96 160 150 193 314 330
Quick Ratio 95 160 150 193 314 320
Interest coverage ratio 519 189 137 162 718 7,431
Operating Performance Receivables turnover（times） 66 105 93 69 43 50
Average number days receivables
5		 3 4 5 8 7
outstanding
Inventory turnover（times） 14,489 12,058 9,694 10,785 21,552 468
Payable turnover（times） 16 31 36 23 26 32
Average inventory turnover days - - - - - -
Property,
plant
and
equipment
18		 19 18 19 21 23
turnover（times）
Total asset turnover（times） 1 1 1 1 1 1
Profitability Return on assets（％） 23 18 12 15 24 17
Return on equity（％） 32 25 17 21 31 20
Pre-tax Income to Paid-in Capital 294 268 166 186 267 227
Ratio (%)
Profit margin（％） 23 20 13 13 20 13
Earning Per Share（NT dollar） 24.33 21.75 13.89 15.44 22.14 3.7
Cash Flow Cash flow from operations ratio（％） 27 3 (Note 3) (Note 3) 107 (Note 3)
Cash flow adequacy ratio（％） 64 46 29 17 12 (Note 3)
Cash Flow Re-investment Ratio（％） (Note 2) (Note 2) (Note 3) (Note 3) (Note 2) (Note 3)
Leverage 1 2 2 1 1 1
Operating leverage
1 1 1 1 1 1
Financial leverage
Explanation of the changes in each financial ratio in recent two years:
1.The reduction in liability to asset ratio was because of the full repayment of short-term loans.
2.The rise in lowered current ratio and quick ratio was because of reduction in both current assets and current
liabilities. Reduced current assets were because of fund redemption with current cash paid to cash dividends
and repayment of short-term loans. The reduction in current liabilities was because of the full repayment of
short-term loans.
3.Interest protection multipliers was increased compared with the same period last year due to the reduction in
current repayment of short-term loans that led to lower interest expenses and the improved current operations
that led to increase in earnings before tax.
4.Reduced average collection turnover and increased in average collection days were caused by the increase in
the number of vehicles for receivables in currentperiod leadingto the rise in average account receivables.

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裕隆日產 YULON NISSAN

5.The rise in inventory turnover and reduced average inventory turnover days were because of inventory deduction for current period that led to the reduction in average inventory. 6 The increase in Return on Total Assets Ratio,Return on equityand EPS was because of the lower importing cost from JPY deflation and the increase in profits from reinvested company this year that led to increased net profit. 7.Increased cash flow rate was because of current increased net profit and fund redemption converted into cash that generates net cash inflow from operation and current liabilities due to reduced repayment of short-term loans. 8.The decrease in the cash flow adequacy ratio is mainly due to the increase in cash dividends over the past five years. Note1 : Financial Statement of 2013- 20167 has been reviewed by CPAs. Quarterly individual Statement of the First Quarter in 2018 has not been reviewed by CPAs. Note2 : 2013, 2014 & 2017 cash flow from operating activities subtracting cash dividends becomes negative value and is hence not calculated. Note3 : 2015 andf2016 was a net cash outflow from operating activities, therefore it is not counted. Note4: The formula is as follows: 1.Finance structure (1) Debt to assets ratio = total liabilities/total assets. (2) Long term funds to property, plant and equipment ratio = (net shareholders’ equity + Long term liabilities)/net fixed assets. 2.Liquidity (1) Current ratio = current assets/current liabilities. (2) Quick ratio = (current assets - inventory - prepaid expenses)/current liabilities. (3) Interest coverage ratio = before income tax expenses and interest expense/current interest expense. 3.Operating Performance (1) Receivables (including Account Receivable and Note Receivable from operating) turnover = cost of goods sold/average accounts Receivable (including Account Receivable and Note Receivable from operating). (2) Average number days receivables outstanding = 365 days/average receivable turnover. (3) Inventory turnover (times) = cost of goods sold/average inventory. (4) Payable (including Account Payable and Note Payable from operating) turnover = cost of goods sold/average accounts payable (including Account Payable and Note Payable from operating). (5) Average inventory turnover days = 365 days/average inventory turnover. (6) Property, plant and equipment turnover (times) = net sales/net fixed assets. (7) Total asset turnover = net sales/total assets. 4.Profitability (1) Return on assets = [net income after tax + interest expense x (1-tax ratio)]/average total assets. (2) Return on equity = shareholders’ equity/net income after tax. (3) Profit margin = net income after tax/net sales. (4) Earning Per Share = (net income after tax - preferred dividend)/weighted average number of shares. 5.Cash flow (1) Cash flow from operations ratio = cash flow from operations/current liabilities. (2) Net Cash flow adequacy ratio = cash flow from operations of recent five fiscal years/recent five fiscal years’ (capital expenditure + increase in inventory + cash dividend). (3) Cash flow re-investment ratio= (cash flow from operations - cash dividend)/(gross fixed assets + long-term investment + other asset + operation capital).

  • 6.Leverage:

  • (1) Operating leverage = (net operating revenue - variable operating cost and expense)/operating net income.

  • (2) Financial leverage = operating revenue/(operating revenue - interest expense).

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88

Financial Information

Financial Ratio Analysis complying with IFRS - Consolidated

Fiscal Year Fiscal Year Financial analysis in recent 5 years Financial analysis in recent 5 years Financial analysis in recent 5 years Financial analysis in recent 5 years Financial analysis in recent 5 years The financial
data as of
Analysis items 2013 2014 2015 2016 2017 March 31, 2018
(Note 1)
Finance
Structure%		 29 26 30 28 18 18
Debt to assets ratio
Long term funds to Property, plant
1,724		 1,714 1,249 1,376 1,571 1,713
and equipment ratio
Liquidity
％		 Current Ratio 350 255 176 204 345 362
Quick Ratio 334 247 175 203 344 351
Interest coverage ratio 519 189 137 162 718 7,431
Operating Performance Receivables turnover（times） 66 106 75 56 44 50
Average number days receivables
5		 3 5 6 8 7
outstanding
Inventory turnover（times） 14,489 12,058 9,694 10,785 21,552 468
Payable turnover（times） 16 31 26 31 26 32
Average inventory turnover days - - - - - -
Property,
plant
and
equipment
18		 19 18 19 21 23
turnover（times）
Total asset turnover（times） 1 1 1 1 1 1
Profitability Return on assets（％） 23 18 12 15 24 17
Return on equity（％） 32 25 17 21 31 20
294 268 167 186 267 227
Pre-tax Income to Paid-in Capital
Ratio (%)
23 20 13 13 20 13
Profit margin（％）
Earning Per Share（NT dollar） 24.33 21.75 13.89 15.44 22.14 3.7
Cash Flow
 Cash flow from operations ratio（％） 27 (Note 3) (Note 3) (Note 3) 85 (Note 3)
Cash flow adequacy ratio（％） 108 69 39 8 2 (Note 3)
Cash Flow Re-investment Ratio（％） (Note 2) (Note 3) (Note 3) (Note 3) (Note 2) (Note 3)
Leverage Operating leverage 1 2 2 1 1 1
1 1 1 1 1 1
Financial leverage
Explanation of the changes in each financial ratio in recent two years:
1.The reduction in liability to asset ratio was because of the full repayment of short-term loans.
2.The rise in lowered current ratio and quick ratio was because of reduction in both current assets and current
liabilities. Reduced current assets were because of fund redemption with current cash paid to cash dividends
and repayment of short-term loans. The reduction in current liabilities was because of the full repayment of
short-term loans.
3.Interest protection multipliers was increased compared with the same period last year due to the reduction in
current repayment of short-term loans that led to lower interest expenses and the improved current operations
that led to increase in earnings before tax.
4. Reduced average collection turnover and increased in average collection days were caused by the increase in
the number of vehicles for receivables in current period leading to the rise in average account receivables.
5.The rise in inventoryturnover and reduced average inventoryturnover days were because of inventory

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裕隆日產 YULON NISSAN

deduction for current period that led to the reduction in average inventory. 6 The increase in Return on Total Assets Ratio,Return on equityand EPS was because of the lower importing cost from JPY deflation and the increase in profits from reinvested company this year that led to increased net profit. 7.Increased cash flow rate was because of current increased net profit and fund redemption converted into cash that generates net cash inflow from operation and current liabilities due to reduced repayment of short-term loans. 8.The decrease in the cash flow adequacy ratio is mainly due to the increase in cash dividends over the past five years. Note1 : Financial Statement of 2013- 2017 has been reviewed by CPAs. Quarterly Statement of the First Quarter in 2018 has been reviewed by CPAs. Note2 : 2013&2017 cash flow from operating activities subtracting cash dividends becomes negative value and is hence not calculated. Note3 : 2014, 2015 and 2016 operational activities were net cash outflow and therefore not included in the calculation. Note4: The formula is as follows: 1.Finance structure (1) Debt to assets ratio = total liabilities/total assets. (2) Long term funds to property, plant and equipment ratio = (net shareholders’ equity + Long term liabilities)/net fixed assets. 2.Liquidity (1) Current ratio = current assets/current liabilities. (2) Quick ratio = (current assets - inventory - prepaid expenses)/current liabilities. (3) Interest coverage ratio = before income tax expenses and interest expense/current interest expense. 3.Operating Performance (1) Receivables (including Account Receivable and Note Receivable from operating) turnover = cost of goods sold/average accounts Receivable (including Account Receivable and Note Receivable from operating). (2) Average number days receivables outstanding = 365 days/average receivable turnover. (3) Inventory turnover (times) = cost of goods sold/average inventory. (4) Payable (including Account Payable and Note Payable from operating) turnover = cost of goods sold/average accounts payable (including Account Payable and Note Payable from operating). (5) Average inventory turnover days = 365 days/average inventory turnover. (6) Property, plant and equipment turnover (times) = net sales/net fixed assets. (7) Total asset turnover = net sales/total assets. 4.Profitability (1) Return on assets = [net income after tax + interest expense x (1-tax ratio)]/average total assets. (2) Return on equity = shareholders’ equity/net income after tax. (3) Profit margin = net income after tax/net sales. (4) Earning Per Share = (net income after tax - preferred dividend)/weighted average number of shares. 5.Cash flow (1) Cash flow from operations ratio = cash flow from operations/current liabilities.

  • (2) Net Cash flow adequacy ratio = cash flow from operations of recent five fiscal years/recent five fiscal years’ (capital expenditure + increase in inventory + cash dividend).

(3) Cash flow re-investment ratio= (cash flow from operations - cash dividend)/(gross fixed assets + long-term investment + other asset + operation capital).

6.Leverage:

  • (1) Operating leverage = (net operating revenue - variable operating cost and expense)/operating net income.

  • (2) Financial leverage = operating revenue/(operating revenue - interest expense).

2017 Annual Report

90

Financial Information

3. Supervisor Audit Report

Yulon Nissan Motor Co., Ltd.

Supervisors Audit Written Report

The Board of Directors has prepared and submitted to us the Company’s operations report, financial statements and earnings distribution proposal of fiscal year 2017 together with auditors’ report prepared and certified by 2 authorized CPAs: Ms. Wan-Yi Liao and Mr. Robert Yu from Deloitte Touche Tohmatsu. The documents mentioned above have been further audited as being correct and accurate by the undersigned, the supervisors of Yulon Nissan Motor Company Limited. According to Article 219 of Company Law, we hereby submit this report.

Yours truly

2018 Shareholders’ Meeting

Supervisors:

==> picture [193 x 201] intentionally omitted <==

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

Wei Wen Investment Co., Ltd.
Representative: Kwan-Tao Li
Representative: Tai-Ming Chen
Supervisors:
Takahiko Ikushima
----- End of picture text -----

May 11, 2018

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裕隆日產 YULON NISSAN

4. Recent Annual Financial Statements

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders Yulon Nissan Motor Company, Ltd.

Opinion

We have audited the accompanying financial statements of Yulon Nissan Motor Company, Ltd. (the Company), which comprise the balance sheets as of December 31, 2017 and 2016, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2017. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Depreciation of Molds and Dies

In the application of IAS 16 “Property, Plant and Equipment”, the depreciable amount of an asset should be allocated on a systematic basis over its useful life. The Company depreciates molds and dies on the basis of the unit of production method and examines the estimated units sold of each model according to the changes of the market semiannually as a basis to calculate amounts allocated to each mold and die. The depreciation of molds and dies in 2017 was $450,244 thousand. The amount of depreciation of molds and dies is significant and estimates of units sold are highly dependent on management’s judgment. Therefore, the depreciation of molds and dies is considered to be a key audit matter.

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Financial Information

The related accounting policy and critical accounting judgments are disclosed in Notes 4 and 5 to the financial statements, respectively; the related amounts are disclosed in Note 11 to the financial statements.

We obtained the information and documents regarding the estimated number of units of future sales by each model from management and assessed the rationality and reliability of the supporting information. In addition, we sampled the transactions of molds and dies to verify original documents and cash flows and performed procedures such as field inventory and confirmation. Besides, we recalculated the amount of depreciation of molds and dies on the basis of estimated production volume in order to assess the rationality of calculated depreciation and the accuracy of the carrying amount. Moreover, we compared whether there was a significant difference between the amended estimated number of units of future sales used in the financial statement of the last year and the actual sales units, so as to evaluate the appropriateness of management’s estimation.

Provisions for Warranties

According to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, provisions are recognized at the best estimate of the expenditure required to settle the present obligation at the end of the reporting date. The provisions for warranties are calculated on the basis of the estimate of quarterly warranty expenditure per car and estimated units subject to warranty during the future warranty period. The estimate of quarterly warranty expenditure per car is calculated based on the average of actual warranty expense in the past and the estimated number of units of cars subject to warranty at the end of every quarter. As of December 31, 2017, the carrying amount of the provisions for warranties was $151,484 thousand. Due to management’s use of judgments in estimating the number of units of cars subject to warranties, warranty provisions recognized is considered to be a key audit matter.

The related accounting policy and critical accounting judgments are disclosed in Notes 4 and 5 to the financial statements, respectively; the related amounts are disclosed in Note 16 to the financial statements.

We obtained from management the information and documents regarding the estimated number of units of cars subject to warranty during the warranty period from management and assessed the rationality and reliability of the supporting information. In addition, we sampled the ledgers of actual warranty expenditure this year to verify original documents and cash flows, and we recalculated the amount that should be provided for as warranty according to the warranty policy. Moreover, we compared whether there was a significant difference between the estimated number of units of cars subject to warranty used in the financial statements last year and the actual units of cars subject to warranty, so as to evaluate the appropriateness of management’s estimation.

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

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

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裕隆日產

YULON NISSAN

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

Those charged with governance, including independent directors and supervisors, are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

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

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

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

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

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

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

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

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

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Financial Information

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2017 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors’ report is Wan-I Liao.

Deloitte & Touche Taipei, Taiwan Republic of China

March 26, 2018

Notice to Readers

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

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

2017 Annual Report

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裕隆日產

YULON NISSAN

YULON NISSAN MOTOR COMPANY, LTD.

BALANCE SHEETS

DECEMBER 31, 2017 AND 2016

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)
Financial assets at fair value through profit or loss
(Notes 4 and 7)
Notes receivable - related parties (Notes 4 and 27)
Trade receivables (Notes 4 and 8)
Trade receivables - related parties (Notes 4 and 27)
Other receivables (Notes 4 and 8)
Inventories (Notes 4 and 9)
Prepayments (Note 27)
Total current assets
NON-CURRENT ASSETS
Investments accounted for using equity method
(Notes 4 and 10)
Property, plant and equipment (Notes 4, 11 and 27)
Computer software (Notes 4 and 12)
Deferred tax assets (Notes 4 and 21)
Other non-current assets (Notes 13 and 27)
Total non-current assets
TOTAL		 2017
Amount
%
$ 6,045,156
23
874,052
3
1,612
-
39,135
-
902,139
4
123,460
1
-
-

20,069

-

8,005,623
31
16,023,303
62
1,479,225
6
20,882
-
127,060
1

114,548

-
17,765,018
69
$ 25,770,641
100		 2016












Amount
%
$ 9,268,414 31
2,275,103
8
4,174
-
40,532
-
545,098
2
57,311
-
2,509
-

15,853

-
12,208,994
41
15,281,346 51
1,703,040
6
17,407
-
128,364
1

387,771

1
17,517,928
59
$ 29,726,922
100

2017 Annual Report

96

Financial Information

(In Thousands of New Taiwan Dollars, Except Par Value)

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Note 14)
Notes payable - related parties (Note 27)
Trade payables
Trade payables - related parties (Note 27)
Other payables (Note 15)
Current tax liabilities (Notes 4 and 21)
Provisions (Notes 4, 5 and 16)
Other current liabilities (Notes 17 and 27)
Total current liabilities
NON-CURRENT LIABILITIES
Provisions (Notes 4, 5 and 16)
Net defined benefit liabilities (Notes 4 and 18)
Deferred tax liabilities (Notes 4 and 21)
Other non-current liabilities (Notes 17 and 27)
Total non-current liabilities
Total liabilities
EQUITY
Capital stock - NT$10 par value; authorized -
600,000 thousand stocks; issued and outstanding
- 300,000 thousand stocks
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Total retained earnings
Other equity
Total equity
TOTAL		 2017
Amount
%
$ -
-
-
-
55,385
-
875,464
3
913,372
4
442,943
2
192,278
1

66,184

-

2,545,626
10
62,931
-
392,625
2
1,511,815
6

63,020

-

2,030,391

8

4,576,017
18

3,000,000
12

6,129,405
24
4,519,914
17
788,877
3

7,131,446
28
12,440,237
48

(375,018
)

(2
)
21,194,624
82
$ 25,770,641
100		 2016
























Amount
%
$ 3,630,000 12
1,536
-
33,967
-
1,083,176
4
886,241
3
452,079
1
196,036
1

27,730

-

6,310,765
21
65,387
-
441,009
2
1,315,478
4

39,940

-

1,861,814

6

8,172,579
27

3,000,000
10

6,129,405
21
4,056,853 14
788,877
3

7,541,356
25
12,387,086
42

37,852

-
21,554,343
73
$ 29,726,922
100

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

2017 Annual Report

97

裕隆日產 YULON NISSAN

YULON NISSAN MOTOR COMPANY, LTD.

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

OPERATING REVENUE (Note 27)
Sales (Note 4)
Service revenue (Note 4)
Other operating revenue
Total operating revenue
OPERATING COSTS (Notes 9, 20 and 27)
GROSS PROFIT
OPERATING EXPENSES (Notes 18, 20 and 27)
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Total operating expenses
OTHER OPERATING INCOME AND EXPENSES
(Notes 20 and 27)
PROFIT FROM OPERATIONS
NON-OPERATING INCOME AND EXPENSES
Share of profit of subsidiary
Interest income (Note 4)
Gain on financial assets at fair value through profit or
loss, net
Other revenue
Gain (loss) on disposal of investments, net (Note 20)
Net foreign exchange loss (Note 20)
Interest expenses (Note 27)
Overseas business expenses (Note 27)
Other losses (Note 27)
Total non-operating income and expenses
PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSES (Notes 4 and 21)
NET PROFIT FOR THE YEAR		 2017
Amount
%
$ 33,092,856
100
32,551
-

96,367

-
33,221,774
100
27,037,319
82

6,184,455
18
3,092,559
9
322,756
1

672,305

2

4,087,620
12

(685
)
-

2,096,150

6
6,225,205
19
139,956
-
4,052
-
2,000
-
1,945
-
(441,720 )
(1)
(11,158 )
-
(10,915 )
-

(2,094
)
-

5,907,271
18
8,003,421
24

1,360,921

4

6,642,500
20		 2016
























Amount
%
$ 34,792,566 100
6,173
-

61,707

-
34,860,446 100
29,813,797
86

5,046,649
14
2,938,452
8
372,841
1

525,674

2

3,836,967
11

14,581

-

1,224,263

3
4,536,994 13
65,702
-
10,103
-
1,521
-
(19,444 )
-
(180,828 )
-
(34,726 )
-
(13,259 )
-

(4,222
)
-

4,361,841
13
5,586,104 16

955,489

3

4,630,615
13
(Continued)

2017 Annual Report

98

Financial Information

YULON NISSAN MOTOR COMPANY, LTD.

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement of defined benefit plans (Note 18)
Share of the other comprehensive loss of
subsidiaries accounted for using equity method
Income tax relating to items that will not be
reclassified subsequently to profit or loss
(Notes 4 and 21)
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations
Other comprehensive loss for the year, net of
income tax
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR
EARNINGS PER SHARE (Note 22)
Basic
Diluted		 2017
Amount
%
$ 12,930
-
(98 )
-

(2,181
)

-

10,651

-

(412,870
)

(1
)

(402,219
)

(1
)
$ 6,240,281
19
$22.14
$22.14		 2016










Amount
%
$ (20,226 )
-
(64 )
-

3,449

-

(16,841
)
-
(1,264,609
)
(3
)
(1,281,450
)
(3
)
$ 3,349,165
10
$15.44
$15.43

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

(Concluded)

2017 Annual Report

99

裕隆日產 YULON NISSAN

YULON NISSAN MOTOR COMPANY, LTD.

STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

(In Thousands of New Taiwan Dollars, Except Cash Dividends Per Share)

BALANCE AT JANUARY 1, 2016

Appropriation of 2015 earnings
Legal reserve
Cash dividends distributed by the Company - NT$12.5 per
share


Net profit for the year ended December 31, 2016
Other comprehensive loss for the year ended December 31,
2016, net of income tax

Total comprehensive income (loss) for the year ended
December 31, 2016

BALANCE AT DECEMBER 31, 2016

Appropriation of 2016 earnings
Legal reserve
Cash dividends distributed by the Company - NT$22 per
share


Net profit for the year ended December 31, 2017
Other comprehensive income (loss) for the year ended
December 31, 2017, net of income tax

Total comprehensive income (loss) for the year ended
December 31, 2017

BALANCE AT DECEMBER 31, 2017
 Capital Surplus
Capital Stock
(Note 19)
$ 3,000,000
$ 6,129,405
-
-

-

-

-

-
-
-

-

-

-

-

3,000,000

6,129,405
-
-

-

-

-

-
-
-

-

-

-

-
$ 3,000,000
$ 6,129,405

2017 Annual Report

100

Financial Information

(In Thousands of New Taiwan Dollars, Except Cash Dividends Per Share)
Other Equity
Exchange
Retained Earnings (Notes 19 and 21)
Differences on
Unappropriated
Translating
Legal Reserve
Special Reserve
Earnings
Foreign Operations
Total Equity
$ 3,640,263
$ 788,877

$ 7,094,172
$ 1,302,461
$ 21,955,178
416,590
-
(416,590)
-
-
-

-


(3,750,000
)

-

(3,750,000
)
416,590

-


(4,166,590
)

-

(3,750,000
)
-
-
4,630,615
-
4,630,615
-

-


(16,841
)

(1,264,609
)

(1,281,450
)
-

-


4,613,774

(1,264,609
)

3,349,165
4,056,853

788,877


7,541,356

37,852

21,554,343
463,061
-
(463,061)
-
-
-

-


(6,600,000
)

-

(6,600,000
)
463,061

-


(7,063,061
)

-

(6,600,000
)
-
-
6,642,500
-
6,642,500
-

-


10,651

(412,870
)

(402,219
)
-

-


6,653,151

(412,870
)

6,240,281
$ 4,519,914
$ 788,877

$ 7,131,446
$ (375,018
)
$ 21,194,624










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

2017 Annual Report

101

裕隆日產 YULON NISSAN

YULON NISSAN MOTOR COMPANY, LTD.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

(In
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax

Adjustments for:
Depreciation expenses
Amortization expenses
Gain on financial assets at fair value through profit or loss, net
Interest expense
Interest income
Share of the profit of subsidiary
Loss (gain) on disposal of property, plant and equipment, net
Loss (gain) on disposal of investment, net
Net foreign exchange loss
Net changes in operating assets and liabilities
Financial assets at fair value through profit or loss
Notes receivable - related parties
Trade receivables
Trade receivables - related parties
Other receivables
Inventories
Prepayments
Notes payable
Notes payable - related parties
Trade payables
Trade payables - related parties
Other payables
Other current liabilities
Provisions
Other non-current liabilities
Net defined benefit liabilities

Cash generated from operations
Interest paid
Income tax paid

Net cash generated from (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received
Interest received
Payments for property, plant and equipment (Note 23)
Proceeds from disposal of property, plant, and equipment
Payments for computer software
Decrease in refundable deposits

Net cash generated from investing activities
 Thousands of New
2017
$ 8,003,421
483,121
5,280
(4,052)
11,158
(139,956)
(6,225,205)
685
(1,945)
197,778
1,407,048
2,562
1,393
(357,071)
(81,761)
2,509
(4,216)
-
(1,536)
21,418
32,266
28,325
38,454
(6,214)
23,080

(35,454
)
3,401,088
(12,352)

(662,080
)

2,726,656

4,563,252
155,568
(505,559)
3,986
(11,460)

277,532


4,483,319
 Taiwan Dollars)
2016
$ 5,586,104

442,764

4,941

(10,103)

34,726

(65,702)

(4,536,994)

(14,581)

19,444

69,364

(792,901)

1,965

30,400

(43,370)

(2,545)

511

53

(243,000)

1,536

(20,006)

(57,363)

(15,701)

(3,702)

14,873

39,940

(152,580
)

288,073

(34,714)

(867,376
)

(614,017
)

5,549,705

49,405

(281,772)

22,478

(8,018)

29,410

5,361,208

(Continued)

2017 Annual Report

102

Financial Information

YULON NISSAN MOTOR COMPANY, LTD.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

(In
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of short-term borrowings

Payments of dividends

Cash used in financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON THE
BALANCE OF CASH HELD IN FOREIGN CURRENCIES

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE YEAR

CASH AND CASH EQUIVALENTS AT THE END OF THE
YEAR
 Thousands of New
2017
$ (3,630,000)
(6,600,000
)
(10,230,000
)
(203,233
)
(3,223,258)

9,268,414

$ 6,045,156
 Taiwan Dollars)
2016
$ -

(3,750,000
)

(3,750,000
)

(92,389
)

904,802

8,363,612
$ 9,268,414

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

(Concluded)

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YULON NISSAN MOTOR COMPANY, LTD.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

1. GENERAL INFORMATION

Yulon Nissan Motor Company, Ltd. (the “Company”) is a business focused on the research and development of vehicles and the sale of vehicles. The Company started its operations in October 2003, after Yulon Motor Co., Ltd. (“Yulon”) transferred its sales and research and development businesses to the Company in October 2003 through a spin-off. The Company’s spin-off from Yulon intended to increase Yulon’s competitive advantage and participation in the global automobile network and to enhance its professional management. The spin-off date was October 1, 2003.

Yulon initially held 100% equity interest in the Company but then transferred 40% of its equity to Nissan Motor Co., Ltd. (“Nissan”), a Japanese motor company, on October 30, 2003. The Company became listed on December 21, 2004 after the initial public offering application of the Company was accepted by the Taiwan Stock Exchange Corporation on October 6, 2004.

2. APPROVAL OF FINANCIAL STATEMENTS

The accompanying financial statements were approved by the Company’s board of directors on March 26, 2018.

3. APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS 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 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 Company’s accounting policies:

Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed and issued into effect by the FSC. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition and

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measurement considerations and add requirements for disclosures of related party transactions.

The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Company are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationship with whom the Company has transaction. If the transaction or balance with a specific related party is 10% or more of the Company’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

When the amendments are applied retrospectively from January 1, 2017, the disclosures of related party transactions are enhanced. Refer to Note 27 for related disclosures.

  • b. The Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2018
New IFRSs
Annual Improvements to IFRSs 2014-2016 Cycle
Amendment to IFRS 2 “Classification and Measurement of
Share-based Payment Transactions”
Amendments to IFRS 4 “Applying IFRS 9 Financial
Instruments with IFRS 4 Insurance Contracts”
IFRS 9 “Financial Instruments”
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective
Date of IFRS 9 and Transition Disclosures”
IFRS 15 “Revenue from Contracts with Customers”
Amendments to IFRS 15 “Clarifications to IFRS 15
Revenue from Contracts with Customers”
Amendment to IAS 7 “Disclosure Initiative”
Amendments to IAS 12 “Recognition of Deferred Tax
Assets for Unrealized Losses”
Amendments to IAS 40 “Transfers of Investment Property”
IFRIC 22 “Foreign Currency Transactions and Advance
Consideration”		 Effective Date
Announced by IASB (Note 1)
Note 2
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018

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 amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

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  • 1) IFRS 9 “Financial Instruments” and related amendments

Classification, measurement and impairment of financial assets

With regard to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Company’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

  • a) For debt instruments, if they are held within a business model whose objective is to collect contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with any impairment loss recognized in profit or loss. Interest revenue is recognized in profit or loss by using the effective interest method;

  • b) For debt instruments, if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gains or losses shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other financial assets are measured at fair value through profit or loss.

The Company analyzed the facts and circumstances of its financial assets that existed at December 31, 2017 and performed an assessment of the impact of IFRS 9 on the classification and measurement of factored trade receivables. The factored trade receivables classified as loans and receivables and measured at amortized cost will be classified as at fair value through profit or loss under IFRS 9, because, on initial recognition, the contractual cash flows that are solely payments of principal and these investments are held within a business model whose objective is achieved by selling financial assets without recourse.

IFRS 9 requires impairment loss on financial assets to be recognized by using the “Expected Credit Losses Model”. A loss allowance is required for financial assets measured at amortized cost, investments in debt instruments measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full-lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full-lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

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For purchased or originated credit-impaired financial assets, the Company takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

The Company has performed a preliminary assessment in which it will apply the simplified approach to recognize full-lifetime expected credit losses for trade receivables. In general, the Company anticipates that the application of the expected credit losses model of IFRS 9 will result in an earlier recognition of credit losses for financial assets.

The Company elects not to restate prior reporting periods when applying the requirements for the classification, measurement and impairment of financial assets under IFRS 9 with the cumulative effect of the initial application recognized at the date of initial application and will provide the disclosures related to the classification and the adjustment information upon initial application 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 will supersede IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations.

When applying IFRS 15, the Company recognizes revenue by applying the following steps:

  • Identify the contract with the customer;

  • Identify the performance obligations in the contract;

  • Determine the transaction price;

  • Allocate the transaction price to the performance obligations in the contract; and

  • Recognize revenue when the Company satisfies a performance obligation.

The Company elects to retrospectively apply IFRS 15 to contracts that are not complete on January 1, 2018 and recognize the cumulative effect of the change in retained earnings on January 1, 2018.

In addition, the Company will disclose the difference between the amount that results from applying IFRS 15 and the amount that results from applying current standards for 2018.

The application of IFRS 15 is not expected to have a material impact on the assets, liabilities and equity of the Company as of January 1, 2018.

Except for the above impact, as of the date the financial statements were authorized for issue, the Company assess the possible impact that the application of other standards and interpretations will not have any material impact on the Company’s financial position and financial performance.

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

Effective Date New IFRSs Announced by IASB (Note 1) Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019 Amendments to IFRS 9 “Prepayment Features with Negative January 1, 2019 (Note 2) Compensation” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of To be determined by IASB Assets between an Investor and its Associate or Joint Venture” IFRS 16 “Leases” January 1, 2019 (Note 3) IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 19 “Plan Amendment, Curtailment or January 1, 2019 (Note 4) Settlement” Amendments to IAS 28 “Long-term Interests in Associates January 1, 2019 and Joint Ventures” IFRIC 23 “Uncertainty Over Income Tax Treatments” January 1, 2019

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

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

  • Note 3: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting from January 1, 2019.

  • Note 4: The Company 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 Company is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the balance sheets except for low-value and short-term leases. The Company may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the statements of comprehensive income, the Company should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities.

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

When IFRS 16 becomes effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

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

Basis of Preparation

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

The fair value measurements 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, which are described as follows:

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

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

  • c. Level 3 inputs are unobservable inputs for the asset or liability.

When preparing its financial statements, the Company used equity method to account for its investment in subsidiaries. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the financial statements to be the same with the amounts attributable to the owner of the Company in its consolidated financial statements, adjustments arising from the differences in accounting treatment between basis and consolidated basis were made to investments accounted for by equity method, share of profit or loss of subsidiaries, share of other comprehensive income of subsidiaries, as appropriate, in the financial statements.

Classification of Current and Non-current Assets and Liabilities

Current assets include cash, cash equivalents, assets held for trading purposes and assets that are expected to be converted into cash or consumed within one year from the balance sheet date; assets other than current assets are non-current assets. Current liabilities include liabilities due to be settled within one year from the balance sheet date; liabilities other than current liabilities are non-current liabilities.

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Foreign Currencies

The functional currency of Company and presentation currency of the financial statements are both New Taiwan dollars (NT$). Functional currency is the currency of the primary economic environment in which the Company operates.

In preparing the financial statements, transactions in currencies other than the New Taiwan dollars 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. Such exchange differences are recognized in profit or loss in the year in which they arise. Non-monetary items that are measured in terms of historical cost in foreign currencies are not retranslated.

The financial statements of foreign subsidiaries prepared in foreign currencies are translated into New Taiwan dollars at the following exchange rates: Assets and liabilities - year-end rates; profit and loss - average rates during the year; equity - historical rates. The resulting differences are recorded as other comprehensive income.

Inventories

Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

Investments in Subsidiaries

The Company uses the equity method to account for its investments in subsidiaries. Subsidiary is an entity that is controlled by the Company.

Under the equity method, the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary after the date of acquisition. Besides, the Company also recognizes the Company’s share of the change in other equity of the subsidiaries.

Investments accounted for using equity method are assessed for indicators of impairment at the end of each reporting period. When there is objective evidence that the investments accounted for using equity method have been impaired, the impairment losses are recognized in profit or loss.

Property, Plant and Equipment

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

The Company depreciates molds and dies on the basis of estimated units sold. Other property, plant and equipment are depreciated by using straight-line method. The estimated sales volume, useful lives, residual values and depreciation method of an asset are reviewed at the end of each reporting period, with the effect of any changes in estimate 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.

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Computer Software

Computer software is stated at cost, less subsequent accumulated amortization. The amortization is recognized on a straight-line basis over 3 years. The estimated useful life, residual value and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of computer software shall be assumed to be zero unless the Company expects to dispose of the asset before the end of its economic life.

Impairment of Assets

When the carrying amount of property, plant and equipment and computer software exceeds its recoverable amount, the excess is recognized as an impairment loss. When an impairment loss is subsequently reversed, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized in profit or loss.

Financial Instruments

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

Financial assets and financial liabilities are initially recognized at fair values. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) 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 fair value through profit or loss are recognized immediately in profit or loss.

  • a. Financial assets

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

1) Measurement category

  • a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are stated 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 does not incorporate any dividend or interest (included dividend or interest received in the investment year) earned on the financial asset. Method to determine the fair value please refer to Note 26.

  • b) Loans and receivables

Loans and receivables are non-derivative financial assets, with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

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Cash equivalent includes time deposits and repurchase agreements collateralized by bonds 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.

2) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, 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 that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivables and other receivables, such assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually.

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

For financial assets measured 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 the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable and other receivables are considered uncollectible, it is 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.

  • 3) Derecognition of financial assets

The Company 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.

  • b. Financial liabilities

  • 1) Subsequent measurement

All the financial liabilities are measured at amortized costs using the effective interest method.

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2) Derecognition of financial liabilities

The Company derecognizes a financial liability only when the obligation specified in the contract is discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

Provisions

  • a. Inventory purchase commitments

Where the Company has a commitment under which the unavoidable costs of meeting the obligations under the commitment exceed the economic benefits expected to be received from the commitment, the present obligations arising under such commitments are recognized and measured as provisions.

  • b. Warranties

Provisions for the expected cost of warranty obligations are recognized at the date of sale of the relevant products, at the best estimate by the management of the Company of the expenditure required to settle the Company’s obligation.

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable.

  • a. Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed.

  • b. Rendering of services

Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract.

  • c. Dividend and interest income

Dividend income from investments is recognized when the stockholder’s right to receive payment has been established.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Employee Benefits

  • a. Short-term employee benefits

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

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b. Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost and net interest on the net defined benefit liability are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability represents the actual deficit in the Company’s defined benefit plan.

  • c. Termination benefits

A liability for a termination benefit is recognized at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognizes any related restructuring costs.

Taxation

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

a. Current tax

Current tax payable depends on current taxable profit. Taxable income is different from the net income before tax on the statement of comprehensive income for the reason that partial revenue and expenses are taxable or deductible items in other period, or not the taxable or deductible items according to related Income Tax Law. The Company’s current tax liabilities are calculated by the legislated tax rate on balance sheet date.

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the stockholders approve to retain the earnings as the status of appropriations of earnings is uncertain.

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

  • b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the

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temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset 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 assets and liabilities 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.

  • c. Current and deferred taxes for the year

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

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company’s accounting policies, management is required to make judgments, estimates 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 estimate is 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.

The following are the key assumptions and other key sources of estimation uncertainty at the end of the reporting period.

  • a. Property, plant and equipment - molds and dies

The Company depreciates molds and dies on the basis of a units of production method and examines the estimated units sold of each model according to the changes in the market semiannually as a basis to calculate amounts allocated to each mold and die.

  • b. Provisions for the expected cost of warranties

The provisions for warranties are calculated on the basis of the estimate of quarterly warranty expenditure per car and the estimated units subject to warranty during the future warranty period. The estimate of quarterly warranty expenditure per car is calculated based on the average of actual warranty expense in the past and the estimated number of units of cars subject to warranty at the end of every quarter. As of December 31, 2017 and 2016, the carrying amounts of provisions for warranties were $151,484 thousand and $136,731 thousand, respectively.

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6. CASH AND CASH EQUIVALENTS

Cash on hand
Checking accounts and demand deposits
Foreign currency demand deposits
Cash equivalents
Foreign currency time deposits
Time deposits
Repurchase agreements collateralized by bonds		 December 31 December 31


2017
$ -

925,330
2,173,566
2,328,150
6,900

611,210

$ 6,045,156
 2016
$ 20
984,164
261,676
7,458,316
206,900

357,338
$ 9,268,414

Cash equivalents include time deposits and repurchase agreements collateralized by bonds 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 change in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

The market interest rates intervals of demand deposits, time deposits and repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

Demand deposits and time deposits
Repurchase agreements collateralized by bonds		 December 31
2017
2016
0.001%-4.10% 0.001%-9.00%
1.85%-2.00%
1.50%

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets held for trading
Non-derivative financial assets
Mutual funds		 December 31 December 31
2017
$ 874,052
 2016
$ 2,275,103

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8. TRADE RECEIVABLES AND OTHER RECEIVABLES

Trade receivables
Other receivables
Interest receivables
Disposal of mutual funds receivables
Others		 December 31



2017
$ 39,135

$ 2,525

98,000

22,935

$ 123,460
 2016
$ 40,532
$ 18,137
17,198

21,976
$ 57,311

a. Trade receivables

For the trade receivables balances that were past due at the end of the reporting period, the Company did not recognize an allowance for impairment loss, because there was not a significant change in credit quality and the amounts were still considered recoverable. The Company did not hold any collateral or other credit enhancements for these balances.

The aging of receivables based on the past due days from invoice date was as follows:

0-60 days
61-90 days		 December 31


2017
$ 39,135


-

$ 39,135
 2016
$ 37,202

3,330
$ 40,532

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

1-60 days December 31
2017
$ 3,088
 2016
$ 4,907

b. Other receivables

The Company will assess other receivables for impairment when there is objective evidence of impairment; the assessment is done on every account individually.

There were no past due other receivables balances at the end of the reporting period and the Company did not recognize an allowance for impairment loss.

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9. INVENTORIES

Parts December 31
2017
$ -
 2016
$ 2,509

The cost of inventories recognized as cost of goods sold for the year ended December 31, 2017 was $27,037,319 thousand, which included warranty costs of $156,914 thousand and reversals of losses on inventory purchase commitments of $20,967 thousand. The cost of inventories recognized as cost of goods sold for the year ended December 31, 2016 was $29,813,797 thousand, which included warranty costs of $127,316 thousand and losses on inventory purchase commitments of $1,197 thousand.

10. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investment in subsidiary
Yi-Jan Overseas Investment Co., Ltd.		 December 31 December 31
2017
$ 16,023,303
 2016
$ 15,281,346

As the end of the reporting period, the proportion of ownership and voting rights in subsidiary was as follow:

Yi-Jan Overseas Investment Co., Ltd. Proportion of Ownership and
Voting Rights
December 31
2017
2016
100%
100%

Refer to Table 5 for the details of the subsidiaries indirectly held by the Company.

The investments in subsidiaries accounted for using equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2017 and 2016 was based on the subsidiaries’ financial statements audited by the auditors for the same years.

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11. PROPERTY, PLANT AND EQUIPMENT

Cost
Balance at January 1,
2016

Additions
Disposals
Reversal

Balance at
December 31, 2016

Accumulated
depreciation and
impairment
Balance at January 1,
2016

Depreciation expenses
Disposals

Balance at
December 31, 2016

Carrying amount, net,
December 31, 2016

Cost
Balance at January 1,
2017

Additions
Reclassification
Disposals

Balance at
December 31, 2017

Accumulated
depreciation and
impairment
Balance at January 1,
2017

Depreciation expenses
Disposals

Balance at
December 31, 2017

Carrying amount, net,
December 31, 2017
 Molds
$ 4,463,975

288,885
-

(109,395
)

$ 4,643,465

(2,950,144 )


(333,085 )

-

$ (3,283,229
)

$ 1,360,236

$ 4,643,465

182,418
-

(1,050
)

$ 4,824,833

$ (3,283,229 )


(373,151 )

1,050

$ (3,655,330
)

$ 1,169,503
 Dies
$ 854,314

-
-

-

$ 854,314

(527,202 )
(79,186 )

-

$ (606,388
)
$ 247,926

$ 854,314

46,121
-

-

$ 900,435

$ (606,388 )
(77,093 )

-

$ (683,481
)
$ 216,954
 Computer
Equipment
$ 78,353

6,144
(7,427 )

-

$ 77,070


(68,095 )

(4,309 )

7,350

$ (65,054
)

$ 12,016

$ 77,070


9,509
2,705

(6,701
)

$ 82,583

$ (65,054 )


(5,756 )

6,668

$ (64,142
)

$ 18,441
 Other
Equipment
Transportation
Equipment
Machinery and
Equipment
Leasehold
Improvements
$ 151,582
$ 8,408
$ 15,784
$ 8,903

21,802
10,034
-
-
(13,774 )
-
(9,122 )
-

-

-

-

-

$ 159,610
$ 18,442
$ 6,662
$ 8,903

(79,339 )
(3,118 )
(14,985 )
(2,394 )
(22,528 )
(1,624 )
(170 )
(1,772 )

5,954

-

9,122

-

$ (95,913
)
$ (4,742
)
$ (6,033
)
$ (4,166
)
$ 63,697
$ 13,700
$ 629
$ 4,737

$ 159,610
$ 18,442
$ 6,662
$ 8,903

18,574
4,650
-
-
-
-
-
-

(545
)

(4,070
)

-

(4,510
)
$ 177,639
$ 19,022
$ 6,662
$ 4,393

$ (95,913 )
$ (4,742 )
$ (6,033 )
$ (4,166 )
(22,856 )
(2,353 )
(168 )
(1,688 )

530

226

-

3,731

$ (118,239
)
$ (6,869
)
$ (6,201
)
$ (2,123
)
$ 59,400
$ 12,153
$ 461
$ 2,270
 Tools
$ 5,694
-
-

-

$ 5,694


(5,505 )

(90 )

-

$ (5,595
)
$ 99

$ 5,694
-
-

-

$ 5,694

$ (5,595 )

(56 )

-

$ (5,651
)
$ 43
 Total
$ 5,587,013

326,865

(30,323

(109,395
$ 5,774,160

(3,650,782

(442,764

22,426
$ (4,071,120


$ 1,703,040

$ 5,774,160

261,272

2,705

(16,876
$ 6,021,261

$ (4,071,120

(483,121

12,205
$ (4,542,036


$ 1,479,225

The above reversal is due to the decline of the original cost of molds.

There were no signs of impairment losses of assets for the years ended December 31, 2017 and 2016; therefore, the Company did not assess for impairment.

Except molds and dies which are depreciated on an estimated units-sold basis, other property, plant and equipment are depreciated on a straight-line basis over the assets’ estimated useful lives. The estimated useful lives are as follows:

Computer equipment 3 to 5 years
Other equipment
Powered equipment 15 years
Experimental equipment 3 to 8 years
Office and communication equipment 3 years
Other equipment 1 to 10 years
Transportation equipment 4 to 5 years
Machinery and equipment 3 to 10 years
Leasehold improvements 5 years
Tools 2 to 5 years

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12. COMPUTER SOFTWARE

Cost
Balance at January 1, 2016

Additions
Disposals
Balance at December 31, 2016

Accumulated amortization
Balance at January 1, 2016

Amortization expenses
Disposals
Balance at December 31, 2016

Carrying amount at December 31, 2016

Cost
Balance at January 1, 2017

Reclassification
Additions
Disposals

Balance at December 31, 2017


Accumulated amortization
Balance at January 1, 2017

Amortization expenses
Disposals
Balance at December 31, 2017

Carrying amount at December 31, 2017
 Amount
$ 20,685
8,018
(1,414
)
$ 27,289
$ (6,355)
(4,941)
1,414
$ (9,882
)
$ 17,407
$ 27,289
(2,705)
11,460
(10,742
)
$ 25,302
$ (9,882)
(5,280)
10,742
$ (4,420
)
$ 20,882

There were no signs of impairment losses of assets for the years ended December 31, 2017 and 2016; therefore, the Company did not assess for impairment.

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Financial Information

13. OTHER NON-CURRENT ASSETS

Refundable deposits (Note 27)
Prepayments for equipment
14. SHORT-TERM BORROWINGS		 December 31 December 31


2017
$ 98,575


15,973

$ 114,548
 2016
$ 376,107

11,664
$ 387,771
Unsecured bank loans
Range of interest rates
15. OTHER PAYABLES
Advertising and promotion fees
Salaries and bonuses
Others
16. PROVISIONS
Current
Inventory purchase commitments
Warranties
Non-current
Warranties		 December 31 December 31 December 31
2017
2016
$ -
$ 3,630,000
-
0.89%-1.06%
December 31



2017
2016
$ 452,021
$ 480,992
344,476
316,620
116,875

88,629
$ 913,372
$ 886,241
December 31





2017
$ 103,725

88,553

$ 192,278

$ 62,931
 2016
$ 124,692

71,344
$ 196,036
$ 65,387

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Inventory
Purchase
Commitments
Warranties
Balance at January 1, 2016
$ 123,495
$ 123,055

Additional provisions recognized
1,197
127,316
Paid

-
(113,640
)

Balance at December 31, 2016
$ 124,692
$ 136,731

Balance at January 1, 2017
$ 124,692
$ 136,731

Additional provisions recognized
(reversed)
(20,967)
156,914
Paid

-
(142,161
)

Balance at December 31, 2017
$ 103,725
$ 151,484
 Total
$ 246,550
128,513
(113,640
)
$ 261,423
$ 261,423
135,947
(142,161
)
$ 255,209

The provisions for losses on inventory purchase commitments represent the present obligations of which the unavoidable costs for meeting the obligations under the commitments exceed the economic benefits expected to be received from the commitments.

The provisions for warranty claims represent the present value of management’s best estimate of the future outflow of economic benefits that will be required under the Company’s obligations for warranties under the local sale of goods legislation. The estimate had been made on the basis of historical warranty trends.

17. OTHER LIABILITIES

Current
Receipts in advance (Note 27)
Withholding
Others
Non-current
Receipts in advance (Note 27)		 December 31



2017
$ 59,052

3,107

4,025

$ 66,184

$ 63,020
 2016
$ 21,719
2,000

4,011
$ 27,730
$ 39,940

18. RETIREMENT BENEFIT PLANS

a. Defined contribution plan

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

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122

Financial Information

The total expense recognized in profit or loss for the years ended December 31, 2017 and 2016 was $14,440 thousand and $14,060 thousand, respectively, represents contributions payable to these plans by the Company at rates specified in the rules of the plans.

An analysis by function of the amounts recognized in profit or loss in respect of the defined contribution plan is as follows:

Selling and marketing expenses
General and administrative expenses
Research and development expenses
Non-operating expenses		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
$ 4,924
4,385
4,875

256
$ 14,440		 2016
$ 4,731
4,322
4,766

241
$ 14,060

b. Defined benefit plan

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

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

Present value of funded defined benefit obligation
Fair value of plan assets
Deficit
Net defined benefit liabilities		 December 31 December 31



2017
$ 597,831

(205,206
)

$ 392,625

$ 392,625
 2016
$ 609,866
(168,857
)
$ 441,009
$ 441,009

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Movements in net defined benefit liabilities (assets) were as follows:

Present Value Net Defined
of the Defined Fair Value of Benefit
Benefit the Plan Liabilities
Obligation Assets (Assets)
Balance at January 1, 2016 $ 583,971 $ (10,608
)		 $ 573,363
Service cost
Current service cost 5,251 -
5,251
Past service cost 4,608 -
4,608
Net interest expense (income)
8,578
(207
)
8,371
Recognized in profit or loss
18,437
(207
)
18,230
Remeasurement
Return on plan assets (excluding amounts
included in net interest) - (906)
(906)
Actuarial loss - changes in demographic
assumptions 6,372 -
6,372
Actuarial loss - changes in financial
assumptions 22,425 -
22,425
Actuarial gain - experience adjustments
(7,665
)
-
(7,665
)
Recognized in other comprehensive income
21,132
(906
)
20,226
Contributions from the employer
-		 (157,136
)		 (157,136
)
Benefits paid
-
-
-
Liabilities extinguished on settlement
(13,674
)
-
(13,674
)
Balance at December 31, 2016 $ 609,866 $ (168,857
)		 $ 441,009
Balance at January 1, 2017 $ 609,866 $ (168,857)
 $ 441,009
Service cost
Current service cost 5,305 -
5,305
Past service cost - -
-
Net interest expense (income)
6,861
(1,936
)
4,925
Recognized in profit or loss
12,166
(1,936
)
10,230
Remeasurement
Return on plan assets (excluding amounts
included in net interest) - 139
139
Actuarial loss - changes in demographic
assumptions 9,243 -
9,243
Actuarial loss - changes in financial
assumptions - -
-
Actuarial loss - experience adjustments
(22,312
)
-
(22,312
)
Recognized in other comprehensive income
(13,069
)
139
(12,930
)
Contributions from the employer
-
(41,920
)
(41,920
)
Benefits paid
(7,368
)
7,368
-
Liabilities extinguished on settlement
(3,764
)
-
(3,764
)
Balance at December 31, 2017 $ 597,831 $ (205,206
)		 $ 392,625

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124

Financial Information

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

Selling and marketing expenses
General and administrative expenses
Research and development expenses
Non-operating expenses		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 2,522

3,277
4,046

385

$ 10,230
 2016
$ 4,595
7,158
5,993

484
$ 18,230

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

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

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

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

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

Discount rate(s)
Expected rate(s) of salary increase		 December 31
2017
2016
1.125%
1.125%
2.50%
2.50%

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

Discount rate(s)
0.25% increase
0.25% decrease		 December 31
2017
$ (14,238
)
$ 14,762		 2016
$ (15,158
)
$ 15,733

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Expected rate(s) of salary increase
0.25% increase
0.25% decrease		 December 31

2017
$ 14,313


$ (13,879
)
 2016
$ 15,257

$ (14,779
)

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

The expected contributions to the plan for the next year
The average duration of the defined benefit obligation		 December 31
2017
$ 6,584

9.8 years		 2016
$ 6,454
10.3 years

19. EQUITY

a. Capital surplus

Excess from spin-off
Generated from investments accounted for using equity
method		 December 31 December 31


2017
$ 5,986,507

142,898

$ 6,129,405
 2016
$ 5,986,507

142,898
$ 6,129,405

The capital surplus arising from shares issued in excess of par (including excess from spin-off) may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital stock (limited to a certain percentage of the Company’s capital surplus and to once a year).

The capital surplus from investments accounted for using equity method may not be used for any purpose.

  • b. Retained earnings and dividend policy

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to stockholders and do not include employees. The stockholders held their regular meeting on June 30, 2016 and, in that meeting, had resolved amendments to the Company’s Articles of Incorporation (the “Articles”), particularly the amendment to the policy on dividend distribution and the addition of the policy on distribution of employees’ compensation.

Under the dividend policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of

2017 Annual Report

126

Financial Information

previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the stockholders’ meeting for distribution of dividends and bonus to stockholders. For the policies on the distribution of employees’ compensation after the amendment, refer to Note 20-e. on employees’ compensation.

The Company operates in a mature and stable industry. In determining the distribution of dividends, the Company considers factors such as the impact of dividends on reported profitability, cash required for future operations, any potential changes in the industry, interest of the stockholders and the effect on the of Company’s financial ratios. The amount of dividends, which can be cash dividends or stock dividends, is formulated to be less than 90% of net income, though the final issued ratios would be proposed and approved by the board of directors. Cash dividends should be at least 20% of total dividends to be distributed to the stockholders.

Under Rule No. 1010012865 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, the Company should appropriate or reverse to a special reserve.

Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s capital surplus. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s capital surplus, the excess may be transferred to capital or distributed in cash.

The appropriations of earnings for 2016 and 2015 had been approved in the stockholders’ meetings on June 26, 2017 and June 30, 2016, respectively, were as follows:

Legal reserve

Cash dividends		 Appropriation of Earnings
For the Year Ended
December 31
2016
2015
$ 463,061
$ 416,590
6,600,000
3,750,000		 Dividends Per Share(NT$)
For the Year Ended
December 31
2016
2015
$ 22.0
$ 12.5

20. NET PROFIT

a. Other operating income and expenses

Other operating income and expenses
Gains on disposal of property, plant and equipment
Losses on disposal of property, plant and equipment
Net (loss) profit		 For the Year Ended December 31

2017
$ 104

(789
)

$ (685
)
 2016
$ 14,669

(88
)
$ 14,581

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b. Depreciation and amortization

Property, plant and equipment
Computer software
An analysis of depreciation by function
Operating costs
Operating expenses
An analysis of amortization by function
Operating expenses
Technical cooperation agreement
Operating costs		 For the Year Ended For the Year Ended December 31
2017
$ 483,121


5,280

$ 488,401

$ 450,244


32,877

$ 483,121

$ 5,280

For the Year Ended		 2016
$ 442,764

4,941
$ 447,705
$ 412,271

30,493
$ 442,764
$ 4,941
December 31
2017
$ 517,931
 2016
$ 539,184

c. Technical cooperation agreement

The Company has a technical cooperation agreement (the “TCA”) with Nissan and Autech Japan, Inc.

The TCA with Nissan is based on purchase costs less commodity tax. The TCA with Autech Japan, Inc. is based on development expenses together with royalty expenses.

d. Employee benefits expense

Post-employment benefits (Note 18)
Defined contribution plans
Defined benefit plans
Termination benefits
Labor and health insurance
Salary
Other employee benefits
Total employee benefits expense		 For the Year Ended For the Year Ended December 31
2016
$ 14,060

18,230

32,290
4,550
36,573
556,366

49,178

646,667
$ 678,957
(Continued)





2017
$ 14,440

10,230


24,670

-
37,940
592,325
53,527


683,792

$ 708,462

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128

Financial Information

An analysis of employee benefits expense by function
Operating costs
Operating expenses
Non-operating expenses		 For the Year Ended For the Year Ended December 31


2017
$ 409

$ 707,412

$ 641
 2016
$ 632
$ 677,600
$ 725

(Concluded)

e. Employees’ compensation

The Company accrued employees’ compensation at the rates no less than 0.1% of net profit before income tax, and employees’ compensation. The employees’ compensation for the years ended December 31, 2017 and 2016, which have been approved by the Company’s board of directors on March 26, 2018 and March 27, 2017, respectively, were as follows:

Accrual rate

Employees’ compensation
Amount
Employees’ compensation		 For the Year Ended December 31 For the Year Ended December 31
2017
2016
0.10%
0.10%
For the Year Ended December 31
2017
Cash
$ 8,011		 2016
Cash
$ 5,773

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

There was no difference between the actual amounts of employees’ compensation paid and the amounts recognized in the financial statements for the years ended December 31, 2016 and 2015.

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

  • f. Gain or loss on foreign currency exchange, net
Foreign exchange gains
Foreign exchange losses
Net loss		 For the Year Ended For the Year Ended December 31


2017
$ 86,289

(528,009
)

$ (441,720
)
 2016
$ 119,816
(300,644
)
$ (180,828
)

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  • g. Gain or loss on disposal of investments, net
Gain on disposal of investments
Loss on disposal of investments
Net profit (loss)		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 14,047

(12,102
)

$ 1,945

 2016
$ 3,124
(22,568
)
$ (19,444
)

21. INCOME TAXES

  • a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

Current tax
In respect of the current year
Adjustments for prior years
Deferred tax
In respect of the current year
Income tax expense recognized in profit or loss		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 1,167,101

(1,640)
195,460

$ 1,360,921
 2016
$ 1,210,994

896

(256,401
)
$ 955,489

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

Profit before tax
Income tax expense calculated at the statutory rate
(17%)
Adjustments of expenses in determining taxable
income
Tax-exempt income
Adjustments for prior years’ tax
Income tax expense recognized in profit or loss		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31



2017
$ 8,003,421

$ 1,360,582

2,999
(1,020)

(1,640
)
$ 1,360,921
 2016
$ 5,586,104
$ 949,637

6,674

(1,718)

896
$ 955,489

In February 2018, it was announced that the Income Tax Act in the ROC was amended and, starting from 2018, the corporate income tax rate will be adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%. Deferred tax assets and deferred tax liabilities recognized as at December 31, 2017 are expected to be adjusted and would increase by $22,422 thousand and $266,790 thousand, respectively, in 2018.

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130

Financial Information

As the status of the 2017 appropriation of earnings is uncertain, the potential income tax consequences of the 2017 unappropriated earnings are not reliably determinable.

  • b. Income tax recognized in other comprehensive income
Deferred tax
In respect of the current year
Share of other comprehensive income of subsidiary
accounted for using equity method
Remeasurement on defined benefit plans
Recognized in other comprehensive income (loss)
Current tax assets and liabilities
Current tax liabilities
Income tax payable		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
$ 17
(2,198
)
$ (2,181
)
December		 2016
$ 11

3,438

$ 3,449

31
2017
$ 442,943
 2016
$ 452,079

c. Current tax assets and liabilities

  • d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2016

Recognized in Recognized in
Recognized Other
Opening in Profit or Comprehen- Closing
Balance Loss sive Income Balance
Deferred tax assets
Temporarily difference
Defined benefit obligation $
97,753		 $ (25,939) $ 3,438 $
75,252
Impairment losses 13,005 (13,005) - -
Provisions for warranties 20,919 2,326 - 23,245
Provisions for loss on
inventory purchase
commitments 20,995 203 - 21,198
(Continued)

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裕隆日產 YULON NISSAN

Unrealized exchange loss,
net
Share of other
comprehensive loss of
subsidiaries accounted
for using equity method

Deferred tax liabilities
Temporarily difference
Shares of profit of
subsidiaries

Unrealized exchange gain,
net

 Opening
Balance
Recognized
in Profit or
Loss
Recognized in
Other
Comprehen-
sive Income
-
8,602
-

56

-

11

$ 152,728
$ (27,813
)
$ 3,449

$ 1,592,467
$ (276,989)
$ -

7,225

(7,225
)

-

$ 1,599,692
$ (284,214
)
$ -
 Closing
Balance

8,602

67
$ 128,364
$ 1,315,478

-
$ 1,315,478
(Concluded)

For the year ended December 31, 2017

Deferred tax assets
Temporarily difference
Defined benefit obligation
Provisions for warranties
Provisions for loss on
inventory purchase
commitments
Unrealized exchange loss,
net
Share of other
comprehensive loss of
subsidiaries accounted
for using equity method
 Opening
Balance
Recognized
in Profit or
Loss
Recognized in
Other
Comprehen-
sive Income
$ 75,252
$ (6,026 )
$ (2,198)
23,245
2,508
-
21,198
(3,564 )
-
8,602
7,959
-

67

-

17

$ 128,364
$ 877
$ (2,181
)		 Closing
Balance
$ 67,028

25,753

17,634

16,561

84
$ 127,060
(Continued)

2017 Annual Report

132

Financial Information

Recognized in Recognized in
Recognized Other
Opening in Profit or Comprehen- Closing
Balance Loss sive Income Balance
Deferred tax liabilities
Temporarily difference
Shares of profit of
subsidiaries $ 1,315,478 $ 196,337 $ -
 $ 1,511,815
(Concluded)
Integrated income tax
December 31
2017 2016
Unappropriated earnings
Generated on and after January 1, 1998 Note
$		 7,541,356
Stockholder-imputed credits accounts (“ICA”) Note
$
674,872
For the Year Ended December 31
2017
2016 (Actual)
Creditable ratio for distribution of earnings Note 14.92%
  • e. Integrated income tax

Note: Since the amended Income Tax Act announced in February 2018 abolished the imputation tax system, no creditable ratio for distribution of earnings in 2018 is expected.

  • f. Income tax assessments

The tax returns through 2014 have been assessed by the tax authorities.

22. EARNINGS PER SHARE

The earnings and weighted-average number of common stock outstanding in the computation of earnings per share were as follows:

Net Profit for the Year
Earnings used in the computation of basic and diluted
earnings per share		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
$ 6,642,500
 2016
$ 4,630,615

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Weighted-average Number of Common Stock Outstanding (In Thousands of Shares)

Weighted average number of common stock in
computation of basic earnings per share
Effect of potential dilutive common stock:
Employees’ compensation
Weighted average number of common stock used in the
computation of diluted earnings per share		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
300,000
22
300,022		 2016
300,000

38
300,038

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

23. NON-CASH TRANSACTIONS

For the years ended December 31, 2017 and 2016, the Company entered into the following non-cash investing activities:

Investing activities affecting both cash and non-cash
transactions
Increase in property, plant and equipment
Net changes of prepayment for equipment
Net changes of trade payables
Cash paid for acquisition of property, plant and equipment		 For the Year Ended For the Year Ended December 31


2017
$ 261,272

4,309
239,978


$ 505,559
 2016
$ 326,865
8,784

(53,877
)
$ 281,772

24. OPERATING LEASE ARRANGEMENTS

The Company as Lessee

Operating leases relate to leases of office with lease terms between 6 and 20 years.

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Financial Information

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

No later than 1 year
Later than 1 year and not later than 3 years		 December 31

2017
$ 1,871

-

$ 1,871
 2016
$ 10,474

1,871
$ 12,345

25. CAPITAL MANAGEMENT

The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximizing the return to stockholders through the optimization of the debt and equity balance.

26. FINANCIAL INSTRUMENTS

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

The carrying amounts of the financial assets and financial liabilities that are not measured at fair value are approximately equal to their fair values.

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

  • 1) Fair value hierarchy

December 31, 2017

Financial assets at FVTPL
Non-derivative financial
assets held for trading

December 31, 2016
Financial assets at FVTPL
Non-derivative financial
assets held for trading
 Level 1
$ 874,052

Level 1
$2,275,103
 Level 2
$ -

Level 2
$ -
 Level 3
$ -

Level 3
$ -
 Total
$ 874,052
Total
$2,275,103

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

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  • 2) Valuation techniques and assumption applied for the purpose of measuring fair value

The fair value of mutual funds traded on active market is the net asset value on the balance sheet date. If there is no market price, the fair value is determined by the redemption value. The estimates and assumptions used by the Company were consistent with those that market participants would use in setting a price for the financial instrument.

  • c. Categories of financial instruments
Financial assets
Fair value through profit or loss (FVTPL)
Held for trading
Loans and receivables (Note 1)
Financial liabilities
Amortized cost (Note 2)		 December 31
2017
2016
$ 874,052
$ 2,275,103
7,111,502
9,915,529
1,499,745
5,318,300

  • Note 1: The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables and other receivables.

  • Note 2: The balances included financial liabilities measured at amortized cost, which comprise short-term borrowings, notes payable, trade payables and part of other payables.

  • d. Financial risk management objectives and policies

The Company’s major financial instruments include trade receivables, trade payables and borrowings. The Company’s Corporate Treasury function coordinates access to domestic and international financial markets, manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk.

1) Market risk

The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.

There had been no change to the Company’s exposure to market risks or the manner in which these risks were managed and measured. Sensitivity analysis evaluates the impact of a reasonably possible change in interest or foreign currency rates over a year. Details of sensitivity analysis for foreign currency risk and for interest rate risk are set out in (a) and (b) below.

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Financial Information

a) Foreign currency risk

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 29.

Sensitivity analysis

The Company is mainly exposed to the RMB, U.S. dollar and Japanese yen.

The following table details the Company’s sensitivity to a 5% increase and decrease in the functional currency against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items, and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. A positive number below indicates an increase in pre-tax profit associated with the functional currency strengthen 5% against the relevant currency. For a 5% weakening of the functional currency against the relevant currency, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative.

Gain (loss) RMB
For the Year Ended
December 31
2017
2016
$ (193,447) $ (279,105)		 U.S. Dollar
For the Year Ended
December 31
2017
2016
$ (58,047)
$ (117,953)		 Japanese Yen
For the Year Ended
December 31
2017
2016
$ (4,646) $ (7,009)

These were mainly attributable to the exposure outstanding on RMB-, U.S. dollarsand Japanese yen-denominated cash in bank, repurchase agreement collateralized by bonds, receivables and payables, which were not hedged at the end of the reporting period.

b) Interest rate risk

The carrying amount of the Company’s financial assets and financial liabilities with exposure to interest rate at the end of the reporting period were as follows:

Fair value interest rate risk
Financial assets
Financial liabilities
Cash flows interest rate risk
Financial assets
Financial liabilities		 December 31
2017
2016
$ 2,944,331
$ 7,919,560
-
500,000
3,100,825
1,348,834
-
3,130,000

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Sensitivity analysis

The sensitivity analyses below were determined based on the Company’s exposure to interest rates for non-derivative instruments at the end of the reporting period. A 25-basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Company’s pre-tax profit for the years ended December 31, 2017 would increase/decrease by $7,752 thousand, which was mainly attributable to the Company’s exposure to interest rates on its demand deposits and time deposits.

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Company’s pre-tax profit for the years ended December 31, 2016 would decrease/increase by $4,453 thousand, which was mainly attributable to the Company’s exposure to interest rates on its demand deposits, time deposits and short-term borrowings.

2) Credit risk

The Company’s concentration of credit risk of 48% and 54% in total trade receivables as of December 31, 2017 and 2016, respectively, was related to the Company’s largest customer within the vehicle department and the five largest customers within the parts department.

3) Liquidity risk

The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Company’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 Company relies on bank borrowings as a significant source of liquidity. As of December 31, 2017 and 2016, the available unutilized borrowings facilities were $5,700,000 thousand and $2,070,000 thousand, respectively.

The following table details the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Company can be required to pay.

December 31, 2017

Weighted-
average Effective
Interest Rate (%)
Within One
Month
Non-derivative
financial liabilities

Non-interest bearing
-
$ 1,382,883
 1 to 3
Months
3 Months to
1 Year
$ 62,984
$ 53,878

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Financial Information

December 31, 2016

Weighted-
average Effective
Interest Rate (%)
Within One
Month
Non-derivative
financial liabilities

Non-interest bearing
-
$ 1,349,976

Floating interest rate
instrument
0.89
3,132,720
Fixed interest rate
instrument
1.06

500,174

$ 4,982,870
 1 to 3
Months
3 Months to
1 Year
$ 92,693 $ 244,436
-
-

-

-
$ 92,693
$ 244,436

27. TRANSACTIONS WITH RELATED PARTIES

In addition to those disclosed in other notes, the Company had business transactions with the following related parties:

a. Related parties

Related Party

Relationship with the Company

Investors that have significant influence over the Company Nissan Motor Corporation (“Nissan”) Yulon Motor Co., Ltd. (“Yulon”) Subsidiaries

Yi-Jan Overseas Investment Co., Ltd. Jetford, Inc.

Parent Company Equity-method investor of the Company

Subsidiary Subsidiary of Yi-Jan Overseas Investment Co., Ltd.

Other parties

Nissan Trading Co., Ltd. Subsidiary of Nissan Nissan Trading Europe Ltd. Same as above Nissan Trading (Thailand) Co., Ltd. Same as above Nissan Trading China Co., Ltd. Same as above Nissan Motor Egypt S.A.E. Same as above Nissan Import Egypt, Ltd. Same as above PT. Nissan Motor Indonesia (“NMI”) Same as above Nissan Mexicana, S.A. De C. V. Same as above Nissan Motor (Thailand) Co., Ltd. Same as above PT Nissan Motor Distributor Indonesia Same as above Nissan North America, Inc. Same as above Nissan International SA Same as above Nissan Vietnam Co., Ltd. Substantial related party of Nissan (Continued)

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Related Party
Nissan Philippines Inc.
INFINITI Motor Co., Ltd.
Renault Nissan Automotive India Private Ltd.
Autech Japan, Inc.
Dongfeng Nissan Passenger Vehicle Co.
Zhenzhou Nissan Automobile Co., Ltd.
Allied Engineering Co., Ltd.
Chien Tai Industry Co., Ltd.
Taiwan Calsonic Co., Ltd.
Taiwan Acceptance Corporation
Yueki Industrial Co., Ltd.
Yu Pong Business Co., Ltd.
Yushin Motor Co., Ltd.
Yu Chang Motor Co., Ltd.
Ka-Plus Automobile Leasing Co., Ltd.
Yu Sing Motor Co., Ltd.
Empower Motor Co., Ltd.
Uni Auto Parts Co., Ltd.
Chan Yun Technology Co., Ltd.
Singan Co., Ltd.
Y-teks Co., Ltd.
Sinjang Co., Ltd.
Luxgen Motor Co., Ltd.
Yue Sheng Industrial Co., Ltd.
Yulon Energy Service Co., Ltd.
Univation Motor Philippines, Inc.
Uni Calsonic Corporation
China Ogihara Corporation
Yuan Lon Motor Co., Ltd.
Chen Long Co., Ltd.
Yulon Management Co., Ltd.
ROC Spicer Co., Ltd.
Chi Ho Corporation
Yu Tang Motor Co., Ltd.
Tokio Marine Newa Insurance Co., Ltd.
Hua-Chuang Automobile Information
Technical Center Co., Ltd.
Taiway, Ltd.
Kian Shen Corporation
Hui-Lian Motor Co., Ltd.
Le-Wen Co., Ltd.
Visionary International Consulting Co., Ltd.
Tai Yuen Textile Co., Ltd.
San Long Industrial Co., Ltd.		 Relationship with the Company
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Subsidiary of Yulon
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Subsidiary of Yulon
Substantial related party of Yulon
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
Same as above
(Continued)

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Financial Information

Related Party
Sin Etke Technology Co., Ltd.
Singgual Technology Co., Ltd.
Hsiang Shou Enterprise Co., Ltd.
Hong Shou Culture Enterprise Co., Ltd.
Shinshin Credit Corporation
Yu Pool Co., Ltd.
Yu-Jan Co., Ltd.
Tang Li Enterprise Co., Ltd.
Ding Long Motor Co., Ltd.
Lian Cheng Motor Co., Ltd.
CL Skylite Trading Co., Ltd.
Yuan Jyh Motor Co., Ltd.
Diamond Leasing Service Co., Ltd.
Hsieh Kuan Manpower Service Co., Ltd.
Tan Wang Co., Ltd.
Carnival Textile Industrial Corporation
Y.M. Hi-Tech Industry Ltd.
DFS Industrial Group Co., Ltd.
Luxgen Taoyuan Motor Co., Ltd.
Luxgen Taichung Motor Co., Ltd.
Luxgen Kaohsiung Motor Co., Ltd.
ROC-Keeper Industrial Ltd.		 Relationship with the Company
Subsidiary of Hua-Chuang Automobile
Information Technical Center Co., Ltd.
Subsidiary of Singan Co., Ltd.
Same as above
Same as above
Subsidiary of Taiwan Acceptance
Corporation
Subsidiary of Yushin Motor Co., Ltd.
Subsidiary of Yu Sing Motor Co., Ltd.
Subsidiary of Yu Tang Motor Co., Ltd.
Subsidiary of Chen Long Co., Ltd.
Same as above
Sub-subsidiary of Chen Long Co., Ltd.
Subsidiary of Yuan Lon Motor Co., Ltd.
Subsidiary of Ka-Plus Automobile
Leasing Co., Ltd.
Subsidiary of Diamond Leasing Service
Co., Ltd.
Subsidiary of Yu Chang Motor Co., Ltd.
Substantial related party of the Company
Subsidiary of China Ogihara Corporation
Substantial related party of Dongfeng
Nissan Passenger Vehicle Co.
Subsidiary of Luxgen Motor Co., Ltd.
Same as above
Same as above
Subsidiary of ROC Spicer Co., Ltd.
(Concluded)

b. Relate party transaction details

Balances and transactions between the Company and related parties are based on agreements. Details of transactions between the Company and related parties were disclosed below:

1) Operating transactions

Sales
Taiwan Acceptance Corporation
Investors that have significant influence
Other parties		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 29,166,734
20,736
3,418,576

$ 32,606,046
 2016
$ 30,841,817

40,202

3,383,978
$ 34,265,997
(Continued)

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Service revenue
Autech Japan, Inc.
Nissan		 For the Year Ended December 31
2017
2016
$ 21,628 $ -

10,923

6,173
$ 32,551
$ 6,173
(Concluded)		 For the Year Ended December 31
2017
2016
$ 21,628 $ -

10,923

6,173
$ 32,551
$ 6,173
(Concluded)


2017
$ 21,628

10,923

$ 32,551

The Company designs and performs R&D of cars mainly for Autech Japan, Inc. Service revenue is recognized according to the related contracts.

Other operating revenue
Yulon
Other parties		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017

$ 31,480
59,618

$ 91,098
 2016
$ 12,392

41,974
$ 54,366

Other operating revenue mainly arose from selling steel plates, steel and aluminum parts.

Operating costs-purchases
Yulon
Investors that have significant influence
Other parties
Operating costs-TCA
Nissan
Autech Japan, Inc.		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31





2017
$ 25,632,031
24,148
34,018

$ 25,690,197

$ 463,879

54,052

$ 517,931
 2016
$ 28,288,848

79,553

104,378
$ 28,472,779
$ 526,172

13,012
$ 539,184

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Financial Information

The Company’s TCA is the payment for technical cooperation agreements.

Operating expenses-rental
Yulon
Ka-Plus Automobile Leasing Co., Ltd.
Other parties		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 14,892
9,041
4,767

$ 28,700
 2016
$ 15,073

8,284

3,267
$ 26,624

The Company’s rental expenses paid monthly are primarily comprised of customer service system, building property, car testing expenses, cars and driving service for its executives.

Selling and marketing expenses
Yu Chang Motor Co., Ltd.
Investors that have significant influence
Other parties
General and administrative expenses
Yulon Management Co., Ltd.
Investors that have significant influence
Other parties
Research and development expenses
Investors that have significant influence
Other parties		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31








2017
$ 350,981
15,333
1,788,563

$ 2,154,877

$ 174,773
21,336
8,688

$ 204,797

$ 60,693
27,720

$ 88,413
 2016
$ 306,415

13,357

1,530,268
$ 1,850,040
$ 174,997

27,535

6,228
$ 208,760
$ 31,956

22,862
$ 54,818

Selling and marketing expenses are payments to other parties for advertisement and promotion.

General and administrative expenses are payments to Yulon Management Co., Ltd. for consulting, labor dispatch and IT services.

Research and development expenses are payments for sample products, trial fee, and System.

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Purchases of property, plant and equipment from related parties are detailed as follows:

Investors that have significant influence
Other parties		 For the Year Ended December 31 For the Year Ended December 31


2017
2016
$ 2,673 $ -
10,767

8,417
$ 13,440
$ 8,417

The Company sold property, plant and equipment from related parties are detailed as follows:

Investors that have
significant influence		 Proceeds
For the Year Ended
December 31
2017
2016
$ -
$ 9,530		 Gain(Loss) on Disposal Gain(Loss) on Disposal Gain(Loss) on Disposal
For the Year Ended
December 31
2017
$ -
 2017
$ -
 2016
$ 1,721
  • 2) Non-operating transactions
3) Overseas business expenses
Yulon Management Co., Ltd.
Other parties
Other losses
Investors that have significant influence
Receivables from related parties
Notes receivable
Yushin Motor Co., Ltd.
Yuan Lon Motor Co., Ltd.		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31



2017
2016
$ 2,224 $ 2,474
479

1,293
$ 2,703
$ 3,767
$ 46
$ 213
December 31


2017
$ 1,235
377

$ 1,612
 2016
$ 3,847

327
$ 4,174
(Continued)

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Financial Information

Trade receivables
Taiwan Acceptance Corporation
Yulon
Investors that have significant influence
Subsidiary
Other parties		 December 31 December 31


2017
$ 412,802
382,335
8,528
4,414
94,060

$ 902,139
 2016
$ 272,888

157,046

9,256

6,844

99,064
$ 545,098
(Concluded)

Trade receivables from Yulon are mainly commodity tax paid by the Company on behalf of Yulon.

Trade receivables from related parties are unsecured. For the years ended December 31, 2017 and 2016, no impairment loss was recognized for trade receivables from related parties.

4) Payables to related parties

Notes payable
Investors that have significant influence
Trade payables
Yulon
Nissan
Other parties		 December 31 December 31



2017
$ -

$ 419,184
84,896
371,384

$ 875,464
 2016
$ 1,536
$ 343,671

151,755

587,750
$ 1,083,176

Trade payables from related parties are unsecured.

5) Refundable deposits

Yulon
Other parties		 December 31 December 31


2017
$ 96,770
800

$ 97,570
 2016
$ 373,496

800
$ 374,296

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Refundable deposits are mainly for materials the Company paid to Yulon.

6) Prepayments

Yulon
Prepayments to Yulon are for office rental.		 December 31 December 31
2017

$ 10,866
 2016
$ 11,995
  • 7) Receipts in advance
Autech Japan, Inc. **December 31 ** **December 31 **
2017

$ 113,331
 2016
$ 52,918

The Company designs and develops car models for Autech Japan, Inc., and according to the related contracts to receive payments in advance. Those service revenue receipts in advance are recognized as current and non-current liabilities according to the timing of revenue recognition.

  • c. Compensation of key management personnel
Short-term employee benefits
Post-employment benefits		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 44,525
2,205

$ 46,730
 2016
$ 38,664

1,931
$ 40,595

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

  • d. Other transactions with related parties

  • 1) The Company sold trade receivables to Taiwan Acceptance Corporation

The Company sold to Taiwan Acceptance Corporation trade receivables which amounted to $2,032,306 thousand and $1,963,839 thousand for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, the Company had received $1,997,141 thousand and $1,928,674 thousand, respectively. Based on the related contract, the amount of receivables sold is limited to the amount of pledges from the original debtor to Taiwan Acceptance Corporation. The Company’s interest intervals of the rates for trade receivable sold to Taiwan Acceptance Corporation for the years ended December 31, 2017 and 2016 were 2.32%-2.33% and 2.30%-2.37%, respectively; and the interest expenses recognized were $1,019 thousand and $1,034 thousand, respectively.

  • 2) The Company signed a molds contract with Diamond Leasing Service Co., Ltd.

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Financial Information

The molds contract is valid from the date of the contract to the end of production of the car model. The Company re-signed the molds contract in June 2016. The revised contract amount is $1,021,491 thousand (excluding of tax), which was originally $1,080,206 thousand (excluding of tax). The total newly-signed contract amount in 2016 November and December was $262,139 thousand (excluding of tax), and the installment payments will be disbursed according to the progress under the contract schedule. As of December 31, 2017, the Company had already paid $1,250,544 thousand (recognized as property, plant and equipment). Besides, within the contract period, the Company should pay to Diamond Leasing Service Co., Ltd., before the end of January of every year, the amount of $2.6 for every ten thousand dollars of the accumulated amounts paid for molds in the prior year.

3) The Company signed a molds contract with Shinshin Credit Corporation

The molds contract is valid from the date of the contract to the end of production of the car model. The contract amount is $56,828 thousand (excluding of tax). As of December 31, 2017, the Company had already paid the contract amount in full (recognized as property, plant and equipment). Besides, within the contract period, the Company should pay to Shinshin Credit Corporation, before the end of January of every year, the amount of $2.6 for every ten thousand dollars of the accumulated amounts paid for molds in the prior year.

4) The Company signed a molds contract with Sinjang Co., Ltd.

The molds contract is valid from the date of the contract to the end of production of the car model. The contract amount is $56,176 thousand (excluding of tax). As of December 31, 2017, the Company had already paid the contract amount in full (recognized as property, plant and equipment). Besides, within the contract period, the Company should pay to Sinjang Co., Ltd., before the end of January of every year, the amount of $2.6 for every ten thousand dollars of the accumulated amounts paid for molds in the prior year.

  • 5) The Company signed a molds contract with Chan Yun Technology Co., Ltd.

The molds contract is valid from the date of the contract to the end of production of the car model. The contract amount is $27,744 thousand (excluding of tax). As of December 31, 2017, the Company had already paid the contract amount in full (recognized as property, plant and equipment). Besides, within the contract period, the Company should pay to Chan Yun Technology Co., Ltd., before the end of January of every year, the amount of $2.6 for every ten thousand dollars of the accumulated amounts paid for molds in the prior year.

28. SIGNIFICANT CONTINGENCIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Company as of December 31, 2017 were as follows:

  • a. The Company re-signed a manufacturing contract with Yulon, effective on or after May 1, 2015, for 5 years. This contract, for which the first expiry date was on April 30, 2020, is automatically extended annually unless either party issues a termination notice at least three months before expiry. The contract states that the Company authorizes Yulon to manufacture Nissan automobiles and parts, and the Company is responsible for the subsequent

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development of new automobile parts. The manufacturing volume of Yulon under the contract should correspond to the Company’s sales projection for the year. In addition, the Company has authorized Yulon as the original equipment manufacturer (“OEM”) of automobile parts and after-sales service.

The Company is responsible for developing new car models, refining designs, and providing the sales projection to Yulon. Yulon is responsible for transforming the sales projections into manufacturing plans, making the related materials orders and purchases, providing product quality assurance, delivering cars, and shouldering warranty expenses due to any defects in products made by Yulon.

  • b. The Company has a contract with Taiwan Acceptance Corporation for sale and purchase of vehicles. Besides, Taiwan Acceptance Corporation separately signed with dealers contracts for display of vehicles. If any dealer violates the display contract, resulting in the need for Taiwan Acceptance Corporation to recover the display vehicles, the Company must assist in the settlement or buy-back the vehicles at the original price. From the date of signing the sale and purchase contract to December 31, 2017, no buy-back of vehicles has occurred.

  • c. Unrecognized commitments

Acquisition of property, plant, and equipment December 31 December 31
2017
$ 180,059
 2016
$ 3,518

29. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

(In Thousands of New Taiwan Dollars and Foreign Currency)

December 31, 2017

Foreign
Currencies
Exchange Rate
Financial assets
Monetary items
RMB
$ 847,522
4.5650 (RMB:NTD)
USD

39,010
29.760 (USD:NTD)
JPY

351,864
0.2642 (JPY:NTD)



Non-monetary items

USD

538,417
29.760 (USD:NTD)
Carrying
Amount
$ 3,868,938

1,160,938
92,962
$ 5,122,838
$ 16,023,303
(Continued)

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Financial Information

Foreign
Currencies
Exchange Rate

Financial liabilities


Monetary items

JPY

179
0.2642 (JPY:NTD)
December 31, 2016
Foreign
Currencies
Exchange Rate
Financial assets
Monetary items
RMB
$ 1,209,033
4.6170 (RMB:NTD)
USD

73,149
32.250 (USD:NTD)
JPY

508,852
0.2756 (JPY:NTD)




Non-monetary items

USD

473,767
32.250 (USD:NTD)

Financial liabilities


Monetary items

JPY

204
0.2756 (JPY:NTD)		 Carrying
Amount
$ 47
(Concluded)
Carrying
Amount
$ 5,582,106

2,359,058
140,239
$ 8,081,403
$ 15,281,346
$ 56

The significant realized and unrealized foreign exchange gains (losses) were as follows:

Foreign
Currencies
RMB

USD

JPY		 For the Year Ended December 31 For the Year Ended December 31
2017
Exchange Rate
Net Foreign
Exchange
Gain (Loss)
4.5070 (RMB:NTD)
$ (270,850)
30.432 (USD:NTD)
(175,577)
0.2713 (JPY:NTD)

4,707
$ (441,720
)		 2016
Exchange Rate
Net Foreign
Exchange
Gain (Loss)
4.8490 (RMB:NTD) $ 61,981
32.263 (USD:NTD) (227,580)
0.2972 (JPY:NTD)
(15,229
)
$ (180,828
)

30. SEPARATELY DISCLOSED ITEMS

  • a. Information about significant transactions and investees:

  • 1) Financing provided to others: None

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149

裕隆日產 YULON NISSAN

  • 2) Endorsements/guarantees provided: None

  • 3) Marketable securities held (excluding investment in subsidiaries and associates): Table 1 (attached)

  • 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Table 2 (attached)

  • 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 (attached)

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

  • 9) Trading in derivative instruments: None

  • 10) Information on investees: Table 5 (attached)

  • b. Information on investments in mainland China

  • 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income or loss, investment income or loss, carrying amount of the investment at the end of the period, repatriated investment income, and limit on the amount of investment in the mainland China area: Table 6 (attached)

  • 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses: None

    • a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.

    • b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.

    • c) The amount of property transactions and the amount of the resultant gains or losses.

    • d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.

    • e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.

    • f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

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TABLE 1

YULON NISSAN MOTOR COMPANY, LTD.

MARKETABLE SECURITIES HELD DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars)

Investor Securities Type and Name Relationship
with the
Investor		 Financial Statement Account December 31, 2017 December 31, 2017 Note
Stocks
(Thousands)		 Carrying
Amount		 Percentage of
Ownership		 Market Value
or Net Asset
Value (Note)
Yulon Nissan Motor Company, Ltd. Beneficiary certificates
PineBridge Taiwan Money
Markey Found
The RSIT Enhanced Money
Market
Nomura money market fund
Jih Sun money market fund
SinoPac TWD money market
fund
Taishin Ta-Chong money market
fund
PineBridge Emerging Market
Asia-Pacific Strategic Bond
Fuh Hwa Global Fixed Income
Fund of Fund
Nomura Global Equity Fund		 -
-
-
-
-
-
-
-
-		 Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss		 14,685
16,808
6,781
6,790
7,223
7,081
2,713
1,347
800		 $ 200,082
200,046
110,002
100,003
100,002
100,002
31,246
20,189
12,480		 -
-
-
-
-
-
-
-
-		 $ 200,082
200,046
110,002
100,003
100,002
100,002
31,246
20,189
12,480

Note: The fair value of the financial asset at fair value through profit or loss is calculated based on the asset’s net value as of December 31, 2017.

TABLE 2

YULON NISSAN MOTOR COMPANY, LTD.

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Company Name Type and Name of
Marketable Securities		 Financial Statement
Account		 Counterparty Relationship Beginning Balance Beginning Balance Acquisition Acquisition Disposal Disposal Disposal Disposal Ending Balance Ending Balance
Stocks
(Thousands)		 Amount Stocks
(Thousands)		 Amount Stocks
(Thousands)		 Amount Carrying
Amount		 Gain (Loss)
on Disposal		 Stocks
(Thousands)		 Amount
(Note)
Yulon Nissan Motor
Company, Ltd.		 Beneficiary certificates
FSITC Taiwan Money
Market Fund
Mega Diamond Money
Market
Allianz Global Investors
Taiwan Money
Market Fund
Taishin 1699 Money
Market
The RSIT Enhanced
Money Market
Taishin Ta-Chong
Money Market Fund
Jih Sun Money Market
Fund
Cathay Taiwan Money
Market Fund		 Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
-

-

-

-

-

-

-

-		 -
-
-
-
-
-
-
-		 33,137
24,249
24,234
22,452
8,461
-
-
-		 $ 500,000
300,000
300,000
300,000
100,000

-

-

-		 -
-
-
-
33,652
35,467
27,202
24,252
$ -

-

-

-

400,000

500,000

400,000

300,000
33,137

24,249

24,234

22,452

25,305

28,386

20,412

24,252		 $ 503,305
301,887
301,494
301,008
300,749
400,414
300,243
300,070
$ 500,000

300,000

300,000

300,000

300,000

400,000

300,000

300,000
$ 3,305

1,887

1,494

1,008

749

414

243

70
-

-

-

-

16,808

7,081

6,790

-
$ -

-

-

-

200,000

100,000

100,000

-

Note: Shown at their original investment amount.

==> picture [60 x 119] intentionally omitted <==

TABLE 3

YULON NISSAN MOTOR COMPANY, LTD.

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Company Name Related Party Nature of Relationship Transaction Details Transaction Details Transaction Details Transaction Details Abnormal Transaction
(Note 1)		 Abnormal Transaction
(Note 1)
Note/Accounts Payable
or Receivable
Note/Accounts Payable
or Receivable		 Note
Purchase/
Sale		 Amount % to
Total		 Payment Terms Unit Price Payment
Terms		 Ending Balance % to
Total
(Note 2)
Yulon Nissan Motor
Company, Ltd.		 Yulon
Taiwan Acceptance
Corporation
Yu Sing Motor Co., Ltd.
Yuan Lon Motor Co., Ltd.
Yu Chang Motor Co., Ltd.
Hui-Lian Motor Co., Ltd.
Empower Motor Co., Ltd.
Chen Long Co., Ltd.
Yu Tang Motor Co., Ltd.
Yushin Motor Co., Ltd.
Tan Wang Co., Ltd.		 Equity-method investor of the
Company
Subsidiary of Yulon
Subsidiary of Yulon
Substantial related party of
Yulon
Subsidiary of Yulon
Substantial related party of
Yulon
Subsidiary of Yulon
Substantial related party of
Yulon
Substantial related party of
Yulon
Subsidiary of Yulon
Subsidiary of Yu Chang Motor
Co., Ltd.		 Purchase
Sale
Sale
Sale
Sale

Sale
Sale
Sale
Sale
Sale
Sale		 $ 25,632,031
29,166,734
439,382
438,021
421,410
353,849
341,818
317,221
308,267
254,372
101,916		 99
88
1
1
1
1
1
1
1
1
-		 4 days after sales for parts
3 days after sales for vehicles
Same as above
14 days after sales for parts
14 days after sales for parts
Immediate payment for vehicles
14 days after sales for parts
Same as above
14 days after sales for parts
Immediate payment for vehicles
Same as above
14 days after sales for parts
14 days after sales for parts
Immediate payment for vehicles
14 days after sales for parts		 $ -
-
-
-
-
-
-
-
-
-
-		 -
-
-
-
-
-
-
-
-
-
-		 $ (419,184)
412,802
7,591
12,944
9,814
1,228
7,535
2,805
1,295
1,836
5,133		 (45)
44
1
1
1
-
1
-
-
-
1		 -
-
-
-
-
-
-
-
-
-
-

Note 1: Transaction terms are based on agreements.

Note 2: Balances shown here are based on the carrying amount of the Company.

TABLE 4

YULON NISSAN MOTOR COMPANY, LTD.

TRADE RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Company Name Related Party Nature of Relationship Ending Balance Turnover Rate
(Note 1)		 Overdue Overdue Amounts
Received in
Subsequent
Period		 Allowance for
Bad Debts
Amount Action
Taken
Yulon Nissan Motor
Company, Ltd.		 Taiwan Acceptance Corporation
Yulon		 Subsidiary of Yulon
Equity-method investor of the
Company		 Trade receivables
$ 412,802
Trade receivables
382,335		 85.07
Note 2		 $ -
-		 -
-		 $ 412,802
342,421		 $ -

-

Note 1: The turnover rate was based on the carrying amount of the Company.

Note 2: Trade receivables from Yulon are mainly commodity tax paid by the Company on behalf of Yulon, not arose from sales; therefore, turnover rate is not calculated.

==> picture [60 x 119] intentionally omitted <==

TABLE 5

YULON NISSAN MOTOR COMPANY, LTD.

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars and U.S. Dollars)

Investor Company Investee Company Location Main Businesses and Products Original Investment Amount Original Investment Amount As of December 31, As of December 31, 2017 Net Income of
the Investee		 Share of
Profit		 Note
December 31,
2017		 December 31,
2016		 Stocks
(Thousands)		 % Carrying
Amount
Yulon Nissan Motor Company, Ltd.
Yi-Jan Overseas Investment Co., Ltd.		 Yi-Jan Overseas Investment Co., Ltd.
Jetford Inc.		 Cayman Islands
British Virgin Islands		 Investment
Investment		 $ 1,847,983
(US$ 57,371)
US$ 57,171		 $ 1,847,983
(US$ 57,371)
US$ 57,171		 84,987

71,772		 100.00
100.00		 $ 16,023,303
US$ 538,223		 $ 6,225,205
US$ 204,570		 $ 6,225,205
US$ 240,570		 Note
Note

Note: The carrying amount and related shares of profit of the equity investment were calculated based on the audited financial statements and percentage of ownership.

TABLE 6

YULON NISSAN MOTOR COMPANY, LTD.

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, U.S. Dollars and RMB)

Investee Company Main Businesses and Products Main Businesses and Products Paid-in Capital Paid-in Capital Method of
Investment
(e.g., Direct
or Indirect)		 Accumulated
Outward
Remittance for
Investment
from Taiwan as
of
January 1, 2017		 Investment Flows Investment Flows Accumulated
Outward
Remittance for
Investment
from Taiwan
as of
December 31,
2017		 %
Ownership
of Direct or
Indirect
Investment		 Net Income of
the Investee		 Investment
Gain
(Note 2)		 Carrying
Amount as of
December 31,
2017		 Accumulated
Repatriation of
Investment
Income as of
December 31,
2017
Outflow Inflow
Aeolus Xiangyang
Automobile Co.,
Ltd.
Aeolus Automobile
Co., Ltd.
Guangzhou Aeolus
Automobile Co.,
Ltd.
Shenzhen Lan You
Technology Co.,
Ltd.
Dong Feng Yulon
Used Cars Co.,
Ltd. (Note 4)		 Developing and manufacturing of parts
and vehicles and related services
Consulting
Developing and manufacturing of parts
and vehicles and related services
Developing, manufacturing and selling of
computer software and hardware and
computer technology consulting
Valuation, purchase, renovation, rental,
selling of used cars and training		 $ 3,581,037
(RMB 826,000)
761,964
(RMB 194,400)
8,969,950
(RMB2,200,000)
57,450
(RMB
15,000)
38,300
(RMB
10,000)
Note 1

Note 1

Note 1

Note 1

Note 1		 $ 716,856
(US$ 21,700)
533,109
(US$ 16,812)
537,199
(US$ 16,941)
35,674
(US$ 1,125)
18,804
(US$ 593)		 $ -
-
-
-
-		 $ -
-
-
-
-		 $ 716,856
(US$ 21,700)
533,109
(US$ 16,812)
537,199
(US$ 16,941)
35,674
(US$ 1,125)
18,804
(US$ 593)		 16.55
33.12
40.00
45.00
49.00		 $ 2,792,746
(US$ 91,770)
17,205
(US$ 565)
13,798,035
(US$ 453,405)
188,861
(US$ 6,206)
12,942
(US$ 425)
$ 454,997
(US$ 14,951)

5,698
(US$ 187)

5,519,214
(US$ 181,362)

84,987
(US$ 2,793)

6,342
(US$ 208)		 $ 1,426,870
(US$ 47,946)
729,383
(US$ 24,509)
12,375,179
(US$ 415,833)
719,927
(US$ 24,191)
(6,146)
(US$ -207)		 $ 2,971,576
(US$ 94,087)
7,478,304
(US$ 237,559)
24,606,052
(US$ 788,646)
-
-
Accumulated Outward Upper Limit on the Amount of
Remittance for Investment in
Mainland China as of
December 31, 2017		 Investment Amounts Authorized by
Investment Commission, MOEA
Investment Stipulated by
Investment Commission, MOEA
(Note 3)
$1,841,642 (US$57,171) $1,917,100 (US$59,660) $12,716,774

Note 1: The Company indirectly owns these investees through Jetford Inc., an investment company registered in a third region.

Note 2: The carrying amount and related investment income of the equity investment were calculated based on the audited financial statements and percentage of ownership.

Note 3: The upper limit was calculated in accordance with the “Regulation Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission under the Ministry of Economic Affairs on August 22, 2008.

Note 4: The Company’s share of losses exceeds its interest in Dong Feng Yulon Used Cars Co., Ltd. The Company recognized additional loss on constructive future obligations to settle Dong Feng Yulon Used Cars Co., Ltd.

==> picture [60 x 119] intentionally omitted <==

Financial Information

5. The Audited Consolidated Financial Statements of the Parent Company and Subsidiaries in Recent Year

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders Yulon Nissan Motor Company, Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Yulon Nissan Motor Company, Ltd. and its subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2017. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Depreciation of Molds and Dies

In the application of IAS 16 “Property, Plant and Equipment”, the depreciable amount of an asset should be allocated on a systematic basis over its useful life. The Group depreciates molds and dies on the basis of the unit production method and examines the estimated units sold of each model according to the changes of the market semiannually as a basis to calculate amounts allocated to each mold and die. The depreciation of molds and dies in 2017 was $450,244 thousand. The amount of depreciation of molds and dies is significant and estimates of units sold are highly dependent on

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裕隆日產

YULON NISSAN

management’s judgment. Therefore, the depreciation of molds and dies is considered to be a key audit matter.

The related accounting policy and critical accounting judgments are disclosed in Notes 4 and 5 to the consolidated financial statements, respectively; the related amounts are disclosed in Note 12 to the consolidated financial statements.

We obtained the information and documents regarding the estimated number of units of future sales by each model from management and assessed the rationality and reliability of the supporting information. In addition, we sampled the transactions of molds and dies to verify original documents and cash flows and performed procedures such as field inventory and confirmation. Besides, we recalculated the amount of depreciation of molds and dies on the basis of estimated production volume in order to assess the rationality of calculated depreciation and the accuracy of the carrying amount. Moreover, we compared whether there was a significant difference between the amended estimated number of units of future sales used in the consolidated financial statements of the last year and the actual sales units, so as to evaluate the appropriateness of management’s estimation.

Provisions for Warranties

According to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, provisions are recognized at the best estimate of the expenditure required to settle the present obligation at the end of the reporting date. The provisions for warranties are calculated on the basis of the estimate of quarterly warranty expenditure per car and estimated units subject to warranty during the future warranty period. The estimate of quarterly warranty expenditure per car is calculated based on the average of actual warranty expense in the past and the estimated number of units of cars subject to warranty at the end of every quarter. As of December 31, 2017, the carrying amount of the provisions for warranties was $151,484 thousand. Due to management’s use of judgments in estimating the number of units of cars subject to warranties, warranty provisions recognized is considered to be a key audit matter.

The related accounting policy and critical accounting judgments are disclosed in Notes 4 and 5 to the consolidated financial statements, respectively; the related amounts are disclosed in Note 17 to the consolidated financial statements.

We obtained from management the information and documents regarding the estimated number of units of cars subject to warranty during the warranty period from management and assessed the rationality and reliability of the supporting information. In addition, we sampled the ledgers of actual warranty expenditure this year to verify original documents and cash flows, and we recalculated the amount that should be provided for as warranty according to the warranty policy. Moreover, we compared whether there was a significant difference between the estimated number of units of cars subject to warranty used in the consolidated financial statements last year and the actual units of cars subject to warranty, so as to evaluate the appropriateness of management’s estimation.

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

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

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158

Financial Information

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

Those charged with governance, including independent directors and supervisors, are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

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

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

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

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

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

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2017 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors’ report is Wan-I Liao.

Deloitte & Touche Taipei, Taiwan Republic of China

March 26, 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 audit such consolidated financial statements are those generally applied in the Republic of China.

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

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160

Financial Information

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)
Financial assets at fair value through profit or loss
(Notes 4 and 7)
Notes receivable - related parties (Notes 4 and 28)
Trade receivables (Notes 4 and 8)
Trade receivables - related parties (Notes 4 and 28)
Other receivables (Notes 4 and 8)
Inventories (Notes 4 and 9)
Prepayments (Note 28)
Total current assets
NON-CURRENT ASSETS
Investments accounted for using equity method
(Notes 4 and 11)
Property, plant and equipment (Notes 4, 12 and 28)
Computer software (Notes 4 and 13)
Deferred tax assets (Notes 4 and 22)
Other non-current assets (Notes 14 and 28)
Total non-current assets		 2017
Amount
%
$ 6,822,021
26
874,052
3
1,612
-
39,135
-
897,956
4
125,753
1
-
-

23,184

-

8,783,713
34
15,251,359
59
1,479,225
6
20,882
-
127,060
1

114,548

-

16,993,074
66		 2016









Amount
%
$ 9,909,754
33
2,275,103
8
4,174
-
40,532
-
538,408
2
57,622
-
2,509
-

15,853

-
12,843,955
43
14,659,211
49
1,703,040
6
17,407
-
128,364
1

387,771

1
16,895,793
57

TOTAL

$ 25,776,787 100 $ 29,739,748 100

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(In Thousands of New Taiwan Dollars, Except Par Value)

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Note 15)
Notes payable - related parties (Note 28)
Trade payables
Trade payables - related parties (Note 28)
Other payables (Note 16)
Current tax liabilities (Notes 4 and 22)
Provisions (Notes 4, 5 and 17)
Other current liabilities (Notes 18 and 28)
Total current liabilities
NON-CURRENT LIABILITIES
Provisions (Notes 4, 5 and 17)
Credit balance of investments accounted for using
equity method (Notes 4 and 11)
Net defined benefit liabilities (Notes 4 and 19)
Deferred tax liabilities (Notes 4 and 22)
Other non-current liabilities (Notes 18 and 28)
Total non-current liabilities
Total liabilities
EQUITY ATTRIBUTABLE TO OWNER OF THE
COMPANY
Capital stock - NT$10 par value; authorized -
600,000 thousand stocks; issued and outstanding
- 300,000 thousand stocks
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Total retained earnings
Other equity
Total equity
TOTAL		 2017
Amount
%
$ -
-
-
-
55,385
-
875,464
3
913,372
4
442,943
2
192,278
1

66,184

-

2,545,626
10
62,931
-
6,146
-
392,625
2
1,511,815
6

63,020

-

2,036,537

8

4,582,163
18

3,000,000
12

6,129,405
24
4,519,914
17
788,877
3

7,131,446
28

12,440,237
48

(375,018
)

(2
)

21,194,624
82
$ 25,776,787
100		 2016
























Amount
%
$ 3,630,000
12
1,536
-
33,967
-
1,083,176
4
886,241
3
452,079
1
196,036
1

27,730

-

6,310,765
21
65,387
-
12,826
-
441,009
2
1,315,478
5

39,940

-

1,874,640

7

8,185,405
28

3,000,000
10

6,129,405
20
4,056,853
14
788,877
3

7,541,356
25
12,387,086
42

37,852

-
21,554,343
72
$ 29,739,748
100

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

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162

Financial Information

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

OPERATING REVENUE (Note 28)
Sales (Note 4)
Service revenue (Note 4)
Other operating revenue
Total operating revenue
OPERATING COSTS (Notes 9, 21 and 28)
GROSS PROFIT
OPERATING EXPENSES (Notes 19, 21 and 28)
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Total operating expenses
OTHER OPERATING INCOME AND
EXPENSES (Notes 21 and 28)
PROFIT FROM OPERATIONS
NON-OPERATING INCOME AND EXPENSES
Share of profit of associates
Interest income (Note 4)
Gain on financial assets at fair value through
profit or loss, net
Other revenue
Gain (loss) on disposal of investments, net (Note
21)
Net foreign exchange loss (Note 21)
Interest expenses (Note 28)
Overseas business expenses (Note 28)
Other losses (Note 28)
Total non-operating income and expenses
PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSES (Notes 4 and 22)
NET PROFIT FOR THE YEAR		 2017
Amount
%
$ 33,092,856
100
32,551
-

96,367

-
33,221,774
100

27,037,319
82

6,184,455
18
3,092,559
9
343,218
1

672,305

2

4,108,082
12

(685
)

-

2,075,688

6
6,071,238
18
197,870
1
4,052
-
2,000
-
1,945
-
(325,205)
(1)
(11,158)
-
(10,915)
-

(2,094
)

-

5,927,733
18
8,003,421
24

1,360,921

4

6,642,500
20		 2016






















Amount
%
$ 34,792,566 100
6,173
-

61,707

-
34,860,446 100

29,813,797
86

5,046,649
14
2,938,452
8
395,067
1

525,674

2

3,859,193
11

14,581

-

1,202,037

3
4,904,037 14
140,726
1
10,103
-
1,541
-
(19,444)
-
(600,689)
(2)
(34,726)
-
(13,259)
-

(4,222
)
-

4,384,067
13
5,586,104 16

955,489

3

4,630,615
13
(Continued)

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YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently
to profit or loss:
Remeasurement of defined benefit plans
(Note 19)
Share of other comprehensive loss of
associates accounted for using equity
method
Income tax relating to items that will not be
reclassified subsequently to profit or loss
(Notes 4 and 22)
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translating foreign
operations
Other comprehensive loss for the year, net
of income tax
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR
NET PROFIT ATTRIBUTABLE TO:
Owner of the Company
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owner of the Company
EARNINGS PER SHARE (Note 23)
Basic
Diluted		 2017
Amount
%
$ 12,930
-
(98)
-

(2,181
)

-

10,651

-

(412,870
)

(1
)

(402,219
)

(1
)
$ 6,240,281
19
$ 6,642,500
20
$ 62,240,281
187
$22.14
$22.14		 2016














Amount
%
$ (20,226)
-
(64)
-

3,449

-

(16,841
)
-

(1,264,609
)
(3
)

(1,281,450
)
(3
)
$ 3,349,165
10
$ 4,630,615
13
$ 3,349,165
10
$15.44

$15.43

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

(Concluded)

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164

Financial Information

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

BALANCE AT JANUARY 1, 2016

Appropriation of 2015 earnings
Legal reserve
Cash dividends distributed by the Company - NT$12.5 per
share


Net profit for the year ended December 31, 2016
Other comprehensive loss for the year ended December 31,
2016, net of income tax

Total comprehensive income (loss) for the year ended
December 31, 2016

BALANCE AT DECEMBER 31, 2016

Appropriation of 2016 earnings
Legal reserve
Cash dividends distributed by the Company - NT$22 per
share


Net profit for the year ended December 31, 2017
Other comprehensive income (loss) for the year ended
December 31, 2017, net of income tax

Total comprehensive income (loss) for the year ended
December 31, 2017

BALANCE AT DECEMBER 31, 2017
 Capital Surplus
Capital Stock
(Note 20)
$ 3,000,000
$ 6,129,405
-
-

-

-

-

-
-
-

-

-

-

-

3,000,000

6,129,405
-
-

-

-

-

-
-
-

-

-

-

-
$ 3,000,000
$ 6,129,405

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(In Thousands of New Taiwan Dollars, Except Cash Dividends Per Share)

Retained Earnings (Notes 20and 22)
Unappropriated
Legal Reserve
Special Reserve
Earnings
$ 3,640,263

$ 788,877

$ 7,094,172
416,590
-
(416,590)

-


-


(3,750,000
)

416,590


-


(4,166,590
)
-
-
4,630,615

-


-


(16,841
)

-


-


4,613,774

4,056,853


788,877


7,541,356
463,061
-
(463,061)

-


-


(6,600,000
)

463,061


-


(7,063,061
)
-
-
6,642,500

-


-


10,651

-


-


6,653,151
$ 4,519,914

$ 788,877

$ 7,131,446		 Other Equity
Exchange
Differences on
Translating
Foreign Operations
$ 1,302,461

-

-


-

-

(1,264,609
)


(1,264,609
)


37,852

-

-


-

-

(412,870
)


(412,870
)

$ (375,018
)
 Total Equity
$ 21,955,178
-

(3,750,000
)

(3,750,000
)
4,630,615

(1,281,450
)

3,349,165

21,554,343
-

(6,600,000
)

(6,600,000
)
6,642,500

(402,219
)

6,240,281
$ 21,194,624

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

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Financial Information

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

(In Thousands of New Taiwan Dollars)
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax $
8,003,421 $
5,586,104
Adjustments for:
Depreciation expenses 483,121 442,764
Amortization expenses 5,280 4,941
Gain on financial assets at fair value through profit or loss, net (4,052) (10,103)
Interest expense 11,158 34,726
Interest income (197,870) (140,726)
Share of profit of associates (6,071,238) (4,904,037)
Loss (gain) on disposal of property, plant and equipment, net 685 (14,581)
Loss (gain) on disposal of investment, net (1,945) 19,444
Net foreign exchange loss 46,992 522,564
Net changes in operating assets and liabilities
Financial assets at fair value through profit or loss 1,407,048 (792,901)
Notes receivable - related parties 2,562 1,965
Trade receivables 1,393 30,622
Trade receivables - related parties (359,577) (41,556)
Other receivables (81,761) (2,545)
Inventories 2,509 511
Prepayments (4,216) 53
Notes payable - (243,000)
Notes payable - related parties (1,536) 1,536
Trade payables 21,418 (20,006)
Trade payables - related parties 32,266 (57,363)
Other payables 28,325 (15,701)
Other current liabilities 38,454 (4,777)
Provisions (6,214) 14,873
Other non-current liabilities 23,080 39,940
Net defined benefit liabilities (35,454
)		 (152,580
)
Cash generated from operations 3,343,849 300,167
Interest paid (12,352) (34,714)
Income tax paid (1,174,805
)		 (1,379,706
)
Net cash generated from (used in) operating activities 2,156,692
 (1,114,253
)
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received 5,168,975 5,123,304
Interest received 211,500 124,627
Payments for property, plant and equipment (Note 24) (505,559) (281,772)
Proceeds from disposal of property, plant and equipment 3,986 22,478
Payments for computer software (11,460) (8,018)
Decrease in refundable deposits 277,532
 29,410
Net cash generated from investing activities 5,144,974
 5,010,029
(Continued)

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YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

(In Thousands of New Taiwan Dollars)
2017 2016
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of short-term borrowings $
(3,630,000)		 $
-
Payments of dividends (6,600,000
)		 (3,750,000
)
Cash used in financing activities (10,230,000
)		 (3,750,000
)
EFFECTS OF EXCHANGE RATE CHANGES ON THE
BALANCE OF CASH HELD IN FOREIGN CURRENCIES (159,399
)		 (372,854
)
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,087,733) (227,078)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF
THE YEAR 9,909,754
 10,136,832
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $
6,822,021
 $
9,909,754
The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

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Financial Information

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

1. GENERAL INFORMATION

Yulon Nissan Motor Company, Ltd. (the “Company,” the Company and its subsidiaries are collectively referred to as the “Group”) is a business focused on the research and development of vehicles and the sale of vehicles. The Company started its operations in October 2003, after Yulon Motor Co., Ltd. (“Yulon”) transferred its sales and research and development businesses to the Company in October 2003 through a spin-off. The Company’s spin-off from Yulon intended to increase Yulon’s competitive advantage and participation in the global automobile network and to enhance its professional management. The spin-off date was October 1, 2003.

Yulon initially held 100% equity interest in the Company but then transferred 40% of its equity to Nissan Motor Co., Ltd. (“Nissan”), a Japanese motor company, on October 30, 2003. The Company became listed on December 21, 2004 after the initial public offering application of the Company was accepted by the Taiwan Stock Exchange Corporation on October 6, 2004.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on March 26, 2018.

3. APPLICATION OF NEW AND REVISED STANDARDS, AMENDMENTS 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 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:

Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed and issued into effect by the FSC. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party

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裕隆日產 YULON NISSAN

transactions.

The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Group are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationship with whom the Group has transaction. If the transaction or balance with a specific related party is 10% or more of the Group’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

When the amendments are applied retrospectively from January 1, 2017, the disclosures of related party transactions are enhanced. Refer to Note 28 for related disclosures.

  • b. The Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2018
New IFRSs
Annual Improvements to IFRSs 2014-2016 Cycle
Amendment to IFRS 2 “Classification and Measurement of
Share-based Payment Transactions”
Amendments to IFRS 4 “Applying IFRS 9 Financial
Instruments with IFRS 4 Insurance Contracts”
IFRS 9 “Financial Instruments”
Amendments to IFRS 9 and IFRS 7 “Mandatory Effective
Date of IFRS 9 and Transition Disclosures”
IFRS 15 “Revenue from Contracts with Customers”
Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue
from Contracts with Customers”
Amendment to IAS 7 “Disclosure Initiative”
Amendments to IAS 12 “Recognition of Deferred Tax
Assets for Unrealized Losses”
Amendments to IAS 40 “Transfers of Investment Property”
IFRIC 22 “Foreign Currency Transactions and Advance
Consideration”		 Effective Date
Announced by IASB (Note 1)
Note 2
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018

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 amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

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Financial Information

IFRS 9 “Financial Instruments” and related amendments

  • 1) Classification, measurement and impairment of financial assets

With regard to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

  • a) For debt instruments, if they are held within a business model whose objective is to collect contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with any impairment loss recognized in profit or loss. Interest revenue is recognized in profit or loss by using the effective interest method;

  • b) For debt instruments, if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gains or losses shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other financial assets are measured at fair value through profit or loss.

The Group analyzed the facts and circumstances of its financial assets that existed at December 31, 2017 and performed an assessment of the impact of IFRS 9 on the classification and measurement of factored trade receivables. The factored trade receivables classified as loans and receivables and measured at amortized cost will be classified as at fair value through profit or loss under IFRS 9, because, on initial recognition, the contractual cash flows that are solely payments of principal and these investments are held within a business model whose objective is achieved by selling financial assets without recourse.

IFRS 9 requires impairment loss on financial assets to be recognized by using the “Expected Credit Losses Model”. A loss allowance is required for financial assets measured at amortized cost, investments in debt instruments measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full-lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full-lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

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For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

The Group has performed a preliminary assessment in which it will apply the simplified approach to recognize full-lifetime expected credit losses for trade receivables. In general, the Group anticipates that the application of the expected credit losses model of IFRS 9 will result in an earlier recognition of credit losses for financial assets.

The Group elects not to restate prior reporting periods when applying the requirements for the classification, measurement and impairment of financial assets under IFRS 9 with the cumulative effect of the initial application recognized at the date of initial application and will provide the disclosures related to the classification and the adjustment information upon initial application 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 will supersede IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations.

When applying IFRS 15, the Group recognizes revenue by applying the following steps:

  • Identify the contract with the customer;

  • Identify the performance obligations in the contract;

  • Determine the transaction price;

  • Allocate the transaction price to the performance obligations in the contract; and

  • Recognize revenue when the Group satisfies a performance obligation.

The Group elects to retrospectively apply IFRS 15 to contracts that are not complete on January 1, 2018 and recognize the cumulative effect of the change in retained earnings on January 1, 2018.

In addition, the Group will disclose the difference between the amount that results from applying IFRS 15 and the amount that results from applying current standards for 2018.

The application of IFRS 15 is not expected to have a material impact on the assets, liabilities and equity of the Group as of January 1, 2018.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group assess the possible impact that the application of other standards and interpretations will not have any material impact on the Group’s financial position and financial performance.

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Financial Information

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

Effective Date New IFRSs Announced by IASB (Note 1) Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019 Amendments to IFRS 9 “Prepayment Features with January 1, 2019 (Note 2) Negative Compensation” Amendments to IFRS 10 and IAS 28 “Sale or Contribution To be determined by IASB of Assets between an Investor and its Associate or Joint Venture” IFRS 16 “Leases” January 1, 2019 (Note 3) IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 19 “Plan Amendment, Curtailment or January 1, 2019 (Note 4) Settlement” Amendments to IAS 28 “Long-term Interests in Associates January 1, 2019 and Joint Ventures” IFRIC 23 “Uncertainty Over Income Tax Treatments” January 1, 2019

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

  • Note 2: The FSC permits the election for early adoption of the amendments starting from 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 and short-term leases. The Group may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Group should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of the lease liability are classified within financing activities; cash payments for interest portion are classified within operating activities.

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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.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and IFRSs as endorsed and issued into effect by the FSC.

Basis of Preparation

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

The fair value measurements 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, which are described as follows:

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

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

  • c. Level 3 inputs are unobservable inputs for the asset or liability.

Classification of Current and Non-current Assets and Liabilities

Current assets include cash, cash equivalents, assets held for trading purposes and assets that are expected to be converted into cash or consumed within one year from the balance sheet date; assets other than current assets are non-current assets. Current liabilities include liabilities due to be settled within one year from the balance sheet date; liabilities other than current liabilities are non-current liabilities.

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Financial Information

Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (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 Group.

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

See Note 10 and Table 5 for the detailed information of subsidiaries (including the percentage of ownership and main business).

Foreign Currencies

The financial statements of each individual group entity are presented in its functional currency, which is the currency of the primary economic environment in which the entity operates. The consolidated financial statements are presented in the Company’s functional currency, New Taiwan dollars (NT$). Upon preparing the consolidated financial statements, the operations and financial positions of each individual entity are translated into New Taiwan dollars.

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (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 that are measured at historical cost in foreign currencies are not retranslated.

The foreign currency financial statements of the foreign associates accounted for using equity method prepared in their functional currencies are translated into New Taiwan dollars at the following exchange rates: Assets and liabilities - period-end rates; profit and loss - average rates for the period; equity - historical rate. Exchange differences arising are recognized in other comprehensive income.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expenses items are translated at the average rates for the period; stockholders’ equity items are translated using historical rate. Exchange differences arising are recognized in other comprehensive income.

Inventories

Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

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Investment in Associates

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

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

When the Group’s share of losses of an associate equals 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.

Investments accounted for using equity method are assessed for indicators of impairment at the end of each reporting period. When there is objective evidence that the investments accounted for using equity method has been impaired, the impairment losses are recognized in profit or loss.

Property, Plant and Equipment

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

The Group depreciates molds and dies on the basis of estimated unit sold. Other property, plant and equipment are depreciated by using straight-line method. The estimated sales volume, useful lives, residual values and depreciation method of an asset are reviewed at the end of each reporting period, with the effect of any changes in estimate 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.

Computer Software

Computer software is stated at cost, less subsequent accumulated amortization. The amortization is recognized on a straight-line basis over 3 years. The estimated useful, residual value and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of computer software shall be assumed to be zero unless the Group expects to dispose of the asset before the end of its economic life.

Impairment of Assets

When the carrying amount of property, plant and equipment and computer software exceeds its recoverable amount, the excess is recognized as an impairment loss. When an impairment loss is subsequently reversed, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized in profit or loss.

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Financial Information

Financial Instruments

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

Financial assets and financial liabilities are initially recognized at fair values. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) 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 fair value through profit or loss are recognized immediately in profit or loss.

  • a. Financial assets

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

  • 1) Measurement category

  • a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are stated 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 does not incorporate any dividend or interest (included dividend or interest received in the investment year) earned on the financial asset. Please refer to Note 27 for the method of determining fair value.

  • b) Loans and receivables

Loans and receivables are non-derivative financial assets, with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalents include time deposits and repurchase agreements collateralized by bonds 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 change in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

  • 2) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, 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 that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivables and other receivables, such assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually.

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

For financial assets measured 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 the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable and other receivables are considered uncollectible, it is 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.

  • 3) 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.

  • b. Financial liabilities

  • 1) Subsequent measurement

All the financial liabilities are measured at amortized costs using the effective interest method.

  • 2) Derecognition of financial liabilities

The Group derecognizes a financial liability only when the obligation specified in the contract is discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

Provisions

  • a. Inventory purchase commitments

Where the Group has a commitment under which the unavoidable costs of meeting the obligations under the commitment exceed the economic benefits expected to be received from the commitment. The present obligations arising under such commitments are recognized and measured as provisions.

  • b. Warranties

Provisions for the expected cost of warranty obligations are recognized at the date of sale of the relevant products, at the best estimate by the management of the Group of the expenditure

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Financial Information

required to settle the Group’s obligation.

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable.

  • a. Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and the title has passed.

  • b. Rendering of services

Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract.

  • c. Dividend and interest income

Dividend income from investments is recognized when the stockholder’s right to receive payment has been established.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Employee Benefits

  • a. Short-term employee benefits

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

  • b. Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service 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 and net interest on the net defined benefit liability are recognized as employee benefit expenses in the period they occur. Remeasurement, comprising actuarial gains and losses, and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability represents the actual deficit in the Group’s defined benefit plan.

  • c. Termination benefits

A liability for a termination benefit is recognized at the earlier of when the Group can no longer withdraw the offer of the termination benefit and when the Group recognizes any related restructuring costs.

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Taxation

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

a. Current tax

Current taxable payable depends on current tax income. Taxable income is different from the net income before tax on the consolidated statement of comprehensive income for the reason that partial revenue and expenses are taxable or deductible items in other period, or not the taxable or deductible items according to related Income Tax Law. The Group’s current tax liabilities are calculated by the legislated tax rate on the balance sheet date.

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the stockholders approve to retain the earnings as the status of appropriations of earnings is uncertain.

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

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset 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 assets and liabilities 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.

c. Current and deferred tax for the year

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

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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, estimates 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 estimate is 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.

The following are the key assumptions and other key sources of estimation uncertainty at the end of the reporting period.

  • a. Property, plant and equipment - molds and dies

The Group depreciates molds and dies on the basis of a units of production method and examines the estimated units sold of each model according to the changes in the market semiannually as a basis to calculate amounts allocated to each mold and die.

  • b. Provisions for the expected cost of warranties

The provisions for warranties are calculated on the basis of the estimate of quarterly warranty expenditure per car and the estimated units subject to warranty during the future warranty period. The estimate of quarterly warranty expenditure per car is calculated based on the average of actual warranty expense in the past and the estimated number of units of cars subject to warranty at the end of every quarter. As of December 31, 2017 and 2016, the carrying amounts of provisions for warranties were $151,484 thousand and $136,731 thousand, respectively.

6. CASH AND CASH EQUIVALENTS

Cash on hand
Checking accounts and demand deposits
Foreign currency demand deposits
Cash equivalents
Foreign currency time deposits
Time deposits
Repurchase agreements collateralized by bonds		 December 31 December 31


2017
$ -

1,001,974
2,174,847
3,027,090
6,900

611,210

$ 6,822,021
 2016
$ 20
1,091,124
263,000
7,991,372
206,900

357,338
$ 9,909,754

Cash equivalents include time deposits and repurchase agreements collateralized by bonds 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 change in value.

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These cash equivalents are held for the purpose of meeting short-term cash commitments.

The market interest rates intervals of demand deposits, time deposits and repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

Demand deposits and time deposits
Repurchase agreements collateralized by bonds		 December 31
2017
2016
0.001%-4.10% 0.001%-9.00%
1.85%-2.00%
1.50%

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets held for trading
Non-derivative financial assets
Mutual funds		 December 31 December 31
2017
$ 874,052
 2016
$ 2,275,103

8. TRADE RECEIVABLES AND OTHER RECEIVABLES

Trade receivables
Other receivables
Interest receivables
Disposal of mutual fund receivables
Others		 December 31 December 31



2017
$ 39,135

$ 4,818

98,000

22,935

$ 125,753
 2016
$ 40,532
$ 18,448
17,198

21,976
$ 57,622

a. Trade receivables

For the trade receivables balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss, because there was not a 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.

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Financial Information

The aging of receivables based on the past due days from invoice date was as follows:

0-60 days
61-90 days		 December 31


2017
$ 39,135


-

$ 39,135
 2016
$ 37,202

3,330
$ 40,532

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

1-60 days December 31
2017
$ 3,088
 2016
$ 4,907

b. Other receivables

When there is objective evidence that other receivables were impaired, the Group assesses impairment loss on other receivables for impairment individually.

There were no past due other receivables balances at the end of the reporting period and the Group did not recognize an allowance for impairment loss.

9. INVENTORIES

Parts December 31
2017
$ -
 2016
$ 2,509

The cost of inventories recognized as cost of goods sold for the year ended December 31, 2017 was $27,037,319 thousand, which included warranty costs of $156,914 thousand and reversals of losses on inventory purchase commitments of $20,967 thousand. The cost of inventories recognized as cost of goods sold for the year ended December 31, 2016 was $29,813,797 thousand, which included warranty costs of $127,316 thousand and losses on inventory purchase commitments of $1,197 thousand.

10. SUBSIDIARIES

Subsidiaries Included in Consolidated Financial Statements

Investor
Investee
Main Business
Yulon Nissan Motor Company, Ltd
Yi-Jan Overseas Investment Co., Ltd.
Investment
Yi-Jan Overseas Investment Co., Ltd. Jetford Inc.
Investment		 % of Ownership
December 31

2017
2016
100.00
100.00
100.00
100.00

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11. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

December 31
2017
2016
Material associate
Guangzhou Aeolus Automobile Co., Ltd.
$ 12,375,179
$ 11,354,893
Associates that are not individually material
Aeolus Xiangyang Automobile Co., Ltd.
1,426,870
1,917,714
Aeolus Automobile Co., Ltd.
729,383
739,065
Shenzhen Lan You Technology Co., Ltd.
719,927
647,539
Dong Feng Yulon Used Cars Co., Ltd.

(6,146
)
(12,826
)
2,870,034
3,291,492
Add: Credit balance of investments accounted for using
equity method

6,146

12,826

2,876,180

3,304,318
$ 15,251,359
$ 14,659,211
a. Material associate
Proportion of Ownership
and Voting Rights
December 31
Company Name
Main Business
Location
2017
2016
Guangzhou Aeolus
Automobile Co.,
Ltd.
Developing and
manufacturing of
parts and vehicles and
related services
Guangdong
Province
40%
40%		 December 31 December 31
December 31
2017
2016
40%
40%

The summarized financial information below represents amounts shown in the associates’ financial statements prepared in accordance with IFRSs purposes.

Guangzhou Aeolus Automobile Co., Ltd.

Current assets
Non-current assets
Current liabilities
Non-current liabilities		 December 31 December 31

2017
$ 9,860,622
34,726,040
(9,729,550)

(3,919,165
)		 2016
$ 8,611,439

34,273,813
(13,511,540)

(986,480
)
(Continued)

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Financial Information

Equity
Equity attributable to the Group
Carrying amount
Revenue
Net profit for the year
Dividends received from Guangzhou Aeolus
Automobile Co., Ltd.		 December 31 December 31
2017
2016
$ 30,937,947
$ 28,387,232
$ 12,375,179
$ 11,354,893
$ 12,375,179
$ 11,354,893
(Concluded)
For the Year Ended December 31


2017
$ 33,245,993

$ 13,798,035

$ 4,262,688
 2016
$ 29,463,547
$ 11,211,237
$ 5,123,304

b. Aggregate information of associates that are not individually material

The Group’s share of:
Net profit for the year
Other comprehensive loss
Total comprehensive income for the year		 For the Year Ended For the Year Ended December 31


2017
$ 552,024


(98
)

$ 551,926
 2016
$ 419,542

(64
)
$ 419,478

c. Other information

The investments accounted for using equity method and the share of profit of those investments for the years ended December 31, 2017 and 2016 was based on the associates’ financial statements audited by the auditors for the same years.

12. PROPERTY, PLANT AND EQUIPMENT

Cost
Balance at January 1,
2016

Additions
Disposals
Reversal

Balance at
December 31, 2016
 Molds
$ 4,463,975

288,885
-

(109,395
)

$ 4,643,465
 Dies
$ 854,314
-
-

-

$ 854,314
 Computer
Equipment
Other
Equipment
Transportation
Equipment
Machinery and
Equipment
Leasehold
Improvements
$ 78,353
$ 151,582
$ 8,408
$ 15,784
$ 8,903


6,144
21,802
10,034
-
-

(7,427 )
(13,774 )
-
(9,122 )
-

-

-

-

-

-

$ 77,070
$ 159,610
$ 18,442
$ 6,662
$ 8,903
 Tools
Total
$ 5,694 $ 5,587,013
-
326,865
-
(30,323 )

-

(109,395
)
$ 5,694
$ 5,774,160
(Continued)

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Accumulated
depreciation and
impairment
Balance at January 1,
2016

Depreciation expenses
Disposals

Balance at
December 31, 2016

Carrying amount, net,
December 31, 2016

Cost
Balance at January 1,
2017

Additions
Reclassification
Disposals

Balance at
December 31, 2017

Accumulated
depreciation and
impairment
Balance at January 1,
2017

Depreciation expenses
Disposals

Balance at
December 31, 2017

Carrying amount, net,
December 31, 2017
 Molds
$ (2,950,144 )


(333,085 )

-

$ (3,283,229
)

$ 1,360,236

$ 4,643,465

182,418
-
(1,050
)

$ 4,824,833

$ (3,283,229 )


(373,151 )

1,050

$ (3,655,330
)

$ 1,169,503
 Dies
$ (527,202 )
(79,186 )

-

$ (606,388
)
$ 247,926

$ 854,314
46,121
-

-

$ 900,435

$ (606,388 )
(77,093 )

-

$ (683,481
)
$ 216,954
 Computer
Equipment
Other
Equipment
Transportation
Equipment
Machinery and
Equipment
Leasehold
Improvements
$ (68,095 )
$ (79,339 )
$ (3,118 )
$ (14,985 )
$ (2,394 )

(4,309 )
(22,528 )
(1,624 )
(170 )
(1,772 )

7,350

5,954

-

9,122

-

$ (65,054
)
$ (95,913
)
$ (4,742
)
$ (6,033
)
$ (4,166
)
$ 12,016
$ 63,697
$ 13,700
$ 629
$ 4,737

$ 77,070
$ 159,610
$ 18,442
$ 6,662
$ 8,903


9,509
18,574
4,650
-
-

2,705
-
-
-
-

(6,701
)

(545
)

(4,070
)

-

(4,510
)
$ 82,583
$ 177,639
$ 19,022
$ 6,662
$ 4,393

$ (65,054 )
$ (95,913 )
$ (4,742 )
$ (6,033 )
$ (4,166 )

(5,756 )
(22,856 )
(2,353 )
(168 )
(1,688 )

6,668

530

226

-

3,731

$ (64,142
)
$ (118,239
)
$ (6,869
)
$ (6,201
)
$ (2,123
)
$ 18,441
$ 59,400
$ 12,153
$ 461
$ 2,270
 Tools
Total
$ (5,505 ) $ (3,650,782 )

(90 )
(442,764 )

-

22,426
$ (5,595
)$ (4,071,120
)
$ 99
$ 1,703,040
$ 5,694 $ 5,774,160
-
261,272
-
2,705

-

(16,876
)
$ 5,694
$ 6,021,261
$ (5,595 ) $ (4,071,120 )

(56 )
(483,121 )

-

12,205
$ (5,651
)$ (4,542,036
)
$ 43
$ 1,479,225
(Concluded)

The above reversal is due to the decline of the original cost of molds.

There were no signs of impairment losses of assets for the years ended December 31, 2017 and 2016; therefore, the Group did not assess for impairment.

Except molds and dies which are depreciated on an estimated units-sold basis, other property, plant and equipment are depreciated on a straight-line basis over the assets’ estimated useful lives. The estimated useful lives are as follows:

Computer equipment 3 to 5 years
Other equipment
Powered equipment 15 years
Experimental equipment 3 to 8 years
Office and communication equipment 3 years
Other equipment 1 to 10 years
Transportation equipment 4 to 5 years
Machinery and equipment 3 to 10 years
Leasehold improvements 5 years
Tools 2 to 5 years

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Financial Information

13. COMPUTER SOFTWARE

Cost
Balance at January 1, 2016

Additions
Disposals
Balance at December 31, 2016

Accumulated amortization
Balance at January 1, 2016

Amortization expenses
Disposals
Balance at December 31, 2016

Carrying amount at December 31, 2016

Cost
Balance at January 1, 2017

Reclassification
Additions
Disposals

Balance at December 31, 2017

Accumulated amortization
Balance at January 1, 2017

Amortization expenses
Disposals
Balance at December 31, 2017

Carrying amount at December 31, 2017
 Amount
$ 20,685
8,018
(1,414
)
$ 27,289
$ (6,355)
(4,941)
1,414
$ (9,882
)
$ 17,407
$ 27,289
(2,705)
11,460
(10,742
)
$ 25,302
$ (9,882)
(5,280)
10,742
$ (4,420
)
$ 20,882

There were no signs of impairment losses of assets for the years ended December 31, 2017 and 2016; therefore, the Group did not assess for impairment.

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14. OTHER NON-CURRENT ASSETS

Refundable deposits (Note 28)
Prepayments for equipment		 December 31 December 31


2017
$ 98,575


15,973

$ 114,548
 2016
$ 376,107

11,664
$ 387,771

15. SHORT-TERM BORROWINGS

Unsecured bank loans
Range of interest rates		 December 31 December 31
2017
$ -

-
 2016
$ 3,630,000
0.89%-1.06%

16. OTHER PAYABLES

Advertising and promotion fees
Salaries and bonuses
Others		 December 31 December 31


2017
$ 452,021

344,476
116,875

$ 913,372
 2016
$ 480,992
316,620

88,629
$ 886,241

17. PROVISIONS

Current
Inventory purchase commitments
Warranties
Non-current
Warranties		 December 31 December 31



2017
$ 103,725

88,553

$ 192,278

$ 62,931
 2016
$ 124,692

71,344
$ 196,036
$ 65,387

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Financial Information

Inventory
Purchase
Commitments
Warranties
Balance at January 1, 2016
$ 123,495
$ 123,055

Additional provisions recognized
1,197
127,316
Paid

-
(113,640
)

Balance at December 31, 2016
$ 124,692
$ 136,731

Balance at January 1, 2017
$ 124,692
$ 136,731

Additional provisions recognized
(reversed)
(20,967)
156,914
Paid

-
(142,161
)

Balance at December 31, 2017
$ 103,725
$ 151,484
 Total
$ 246,550
128,513
(113,640
)
$ 261,423
$ 261,423
135,947
(142,161
)
$ 255,209

The provisions for losses on inventory purchase commitments represent the present obligations of which the unavoidable costs for meeting the obligations under the commitments exceed the economic benefits expected to be received from the commitments.

The provisions for warranty claims represent the present value of management’s best estimate of the future outflow of economic benefits that will be required under the Group’s obligations for warranties under the local sale of goods legislation. The estimate had been made on the basis of historical warranty trends.

18. OTHER LIABILITIES

Current
Receipts in advance (Note 28)
Withholding
Others
Non-current
Receipts in advance (Note 28)		 December 31



2017
$ 59,052

3,107

4,025

$ 66,184

$ 63,020
 2016
$ 21,719
2,000

4,011
$ 27,730
$ 39,940

19. RETIREMENT BENEFIT PLANS

a. Defined contribution plan

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

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The total expense recognized in profit or loss for the years ended December 31, 2017 and 2016 was $14,440 thousand and $14,060 thousand, respectively, represents contributions payable to these plans by the Company at rates specified in the rules of the plans.

An analysis by function of the amounts recognized in profit or loss in respect of the defined contribution plan is as follows:

Selling and marketing expenses
General and administrative expenses
Research and development expenses
Non-operating expenses		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
$ 4,924
4,385
4,875

256
$ 14,440		 2016
$ 4,731
4,322
4,766

241
$ 14,060

There were no regular employees for Yi-Jan Overseas Investment Co., Ltd. and Jetford Inc. as of December 31, 2017; therefore, the subsidiaries had no pension plan for employees.

b. Defined benefit plan

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

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

Present value of funded defined benefit obligation
Fair value of plan assets
Deficit
Net defined benefit liabilities		 December 31 December 31



2017
$ 597,831

(205,206
)

$ 392,625

$ 392,625
 2016
$ 609,866
(168,857
)
$ 441,009
$ 441,009

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Financial Information

Movements in net defined benefit liabilities (assets) were as follows:

Present Value of Present Value of Net Defined
the Defined Benefit
Benefit Fair Value of the Liabilities
Obligation Plan Assets (Assets)
Balance at January 1, 2016 $
583,971		 $
(10,608
)		 $ 573,363
Service cost
Current service cost 5,251 - 5,251
Past service cost 4,608 - 4,608
Net interest expense (income) 8,578 (207
)		 8,371
Recognized in profit or loss 18,437 (207
)		 18,230
Remeasurement
Return on plan assets (excluding
amounts included in net interest) - (906) (906)
Actuarial loss - changes in
demographic assumptions 6,372 - 6,372
Actuarial loss - changes in financial
assumptions 22,425 - 22,425
Actuarial gain - experience adjustments (7,665
)		 - (7,665
)
Recognized in other comprehensive
income 21,132 (906
)		 20,226
Contributions from the employer - (157,136
)		 (157,136
)
Benefits paid - - -
Liabilities extinguished on settlement (13,674
)		 - (13,674
)
Balance at December 31, 2016 $
609,866		 $ (168,857
)		 $ 441,009
Balance at January 1, 2017 $
609,866		 $ (168,857) $ 441,009
Service cost
Current service cost 5,305 - 5,305
Past service cost - - -
Net interest expense (income) 6,861 (1,936
)		 4,925
Recognized in profit or loss 12,166 (1,936
)		 10,230
Remeasurement
Return on plan assets (excluding
amounts included in net interest) - 139 139
Actuarial loss - changes in
demographic assumptions 9,243 - 9,243
Actuarial loss - changes in financial
assumptions - - -
Actuarial loss - experience adjustments (22,312
)		 - (22,312
)
Recognized in other comprehensive
income (13,069
)		 139
 (12,930
)
Contributions from the employer - (41,920
)		 (41,920
)
Benefits paid (7,368
)		 7,368 -
Liabilities extinguished on settlement (3,764
)		 - (3,764
)
Balance at December 31, 2017 $
597,831		 $ (205,206
)		 $ 392,625

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An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

Selling and marketing expenses
General and administrative expenses
Research and development expenses
Non-operating expenses		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 2,522

3,277
4,046

385

$ 10,230
 2016
$ 4,595
7,158
5,993

484
$ 18,230

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

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

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

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

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

Discount rate(s)
Expected rate(s) of salary increase		 December 31
2017
2016
1.125%
1.125%
2.50%
2.50%

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Financial Information

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

Discount rate(s)
0.25% increase
0.25% decrease
Expected rate(s) of salary increase
0.25% increase
0.25% decrease		 December 31



2017
$ (14,238
)

$ 14,762

$ 14,313


$ (13,879
)
 2016
$ (15,158
)
$ 15,733
$ 15,257

$ (14,779
)

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

The expected contributions to the plan for the next year
The average duration of the defined benefit obligation		 December 31
2017
$ 6,584

9.8 years		 2016
$ 6,454
10.3 years

20. EQUITY

a. Capital surplus

Excess from spin-off
Generated from investments accounted for using equity
method		 December 31 December 31


2017
$ 5,986,507

142,898

$ 6,129,405
 2016
$ 5,986,507

142,898
$ 6,129,405

The capital surplus arising from shares issued in excess of par (including excess from spin-off) may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital stock (limited to a certain percentage of the Company’s capital surplus and to once a year).

The capital surplus from investments accounted for using equity method may not be used for any purpose.

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b. Retained earnings and dividend policy

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to stockholders and do not include employees. The stockholders held their regular meeting on June 30, 2016 and, in that meeting, had resolved amendments to the Company’s Articles of Incorporation (the “Articles”), particularly the amendment to the policy on dividend distribution and the addition of the policy on distribution of employees’ compensation.

Under the dividend policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the stockholders’ meeting for distribution of dividends and bonus to stockholders. For the policies on the distribution of employees’ compensation after the amendment, refer to Note 21-e. on employees’ compensation.

The Company operates in a mature and stable industry. In determining the distribution of dividends, the Company considers factors such as the impact of dividends on reported profitability, cash required for future operations, any potential changes in the industry, interest of the stockholders and the effect on the of Company’s financial ratios. The amount of dividends, which can be cash dividends or stock dividends, is formulated to be less than 90% of net income, though the final issued ratios would be proposed and approved by the board of directors. Cash dividends should be at least 20% of total dividends to be distributed to the stockholders.

Under Rule No. 1010012865 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, the Company should appropriate or reverse to a special reserve.

Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s capital surplus. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s capital surplus, the excess may be transferred to capital or distributed in cash.

The appropriations of earnings for 2016 and 2015 had been approved in the stockholders’ meetings on June 26, 2017 and June 30, 2016, respectively, were as follows:

Legal reserve

Cash dividends		 Appropriation of Earnings
For the Year Ended
December 31
2016
2015
$ 463,061
$ 416,590
6,600,000
3,750,000		 Dividends Per Share(NT$)
For the Year Ended
December 31
2016
2015
$ 22.0
$ 12.5

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21. NET PROFIT

a. Other operating income and expenses

Gains on disposal of property, plant and equipment
Losses on disposal of property, plant and equipment
Net (loss) profit
b. Depreciation and amortization
Property, plant and equipment
Computer software
An analysis of depreciation by function
Operating costs
Operating expenses
An analysis of amortization by function
Operating expenses
c. Technical cooperation agreement
Operating costs		 For the Year Ended For the Year Ended December 31
2017
$ 104
(789
)
$ (685
)
For the Year Ended		 2016
$ 14,669

(88
)
$ 14,581
December 31
2017
$ 483,121


5,280

$ 488,401

$ 450,244


32,877

$ 483,121

$ 5,280

For the Year Ended		 2016
$ 442,764

4,941
$ 447,705
$ 412,271

30,493
$ 442,764
$ 4,941
December 31
2017
$ 517,931
 2016
$ 539,184

The Company has a technical cooperation agreement (the “TCA”) with Nissan and Autech Japan, Inc. The TCA with Nissan is based on purchase costs less commodity tax. The TCA with Autech Japan, Inc. is based on development expenses together with royalty expenses.

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d. Employee benefits expense

Post-employment benefits (Note 19)
Defined contribution plans
Defined benefit plans
Termination benefits
Labor and health insurance
Salary
Other employee benefits
Total employee benefits expense
An analysis of employee benefits expense by function
Operating costs
Operating expenses
Non-operating expenses		 For the Year Ended For the Year Ended December 31








2017
$ 14,440

10,230


24,670

-
37,940
592,325
53,527


683,792

$ 708,462

$ 409

$ 707,412

$ 641
 2016
$ 14,060

18,230

32,290
4,550
36,573
556,366

49,178

646,667
$ 678,957
$ 632
$ 677,600
$ 725

e. Employees’ compensation

The Company accrued employees’ compensation at the rates no less than 0.1% of net profit before income tax, and employees’ compensation. The employees’ compensation for the years ended December 31, 2017 and 2016, which have been approved by the Company’s board of directors on March 26, 2018 and March 27, 2017, respectively, were as follows:

Accrual rate

Employees’ compensation
Amount
Employees’ compensation		 For the Year Ended December 31 For the Year Ended December 31
2017
2016
0.10%
0.10%
For the Year Ended December 31
2017
Cash
$ 8,011		 2016
Cash
$ 5,773

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

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Financial Information

There was no difference between the actual amounts of employees’ compensation paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2016 and 2015.

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

  • f. Gain or loss on foreign currency exchange, net
Foreign exchange gains
Foreign exchange losses
Net loss
Gain or loss on disposal of investments, net
Gains on disposal of investments
Losses on disposal of investments
Net profit (loss)		 For the Year Ended For the Year Ended December 31
2017
$ 202,872

(528,077
)

$ (325,205
)

For the Year Ended		 2016
$ 190,631
(791,320
)
$ (600,689
)
December 31
2017
$ 14,047
(12,102
)
$ 1,945		 2016
$ 3,124
(22,568
)
$ (19,444
)

g. Gain or loss on disposal of investments, net

22. INCOME TAXES

  • a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

Current tax
In respect of the current year
Adjustments for prior years
Deferred tax
In respect of the current year
Income tax expense recognized in profit or loss		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 1,167,101

(1,640)
195,460

$ 1,360,921
 2016
$ 1,210,994

896

(256,401
)
$ 955,489

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

Profit before tax
Income tax expense calculated at the statutory rate
(17%)
Adjustments of expenses in determining taxable
income
Tax-exempt income
Adjustments for prior years’ tax
Income tax expense recognized in profit or loss		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31



2017
$ 8,003,421


$ 1,360,582

2,999

(1,020)

(1,640)


$ 1,360,921
 2016
$ 5,586,104
$ 949,637

6,674
(1,718)
896
$ 955,489

In February 2018, it was announced that the Income Tax Act in the ROC was amended and, starting from 2018, the corporate income tax rate will be adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to 2018 unappropriated earnings will be reduced from 10% to 5%. Deferred tax assets and deferred tax liabilities recognized as at December 31, 2017 are expected to be adjusted and would increase by $22,422 thousand and $266,790 thousand, respectively, in 2018.

As the status of the 2017 appropriation of earnings is uncertain, the potential income tax consequences of the 2017 unappropriated earnings are not reliably determinable.

  • b. Income tax recognized in other comprehensive income
Deferred tax
In respect of the current year
Share of other comprehensive income of subsidiary
accounted for using equity method
Remeasurement on defined benefit plans
Recognized in other comprehensive income (loss)
Current tax assets and liabilities
Current tax liabilities
Income tax payable		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
$ 17
(2,198)
$ (2,181
)
Decembe		 2016
$ 11

3,438
$ 3,449
r 31
2017
$ 442,943
 2016
$ 452,079

c. Current tax assets and liabilities

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Financial Information

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2016

Deferred tax assets
Temporarily difference
Defined benefit obligation
Impairment losses
Provisions for warranties
Provisions for loss on
inventory purchase
commitments
Unrealized exchange loss,
net
Share of other
comprehensive loss of
associates accounted for
using equity method


Deferred tax liabilities
Temporarily difference
Shares of profit of
associates

Unrealized exchange gain,
net

 Opening
Balance
Recognized
in Profit or
Loss
Recognized in
Other
Comprehen-
sive Income
$ 97,753
$ (25,939)
$ 3,438
13,005
(13,005)
-
20,919
2,326
-
20,995
203
-
-
8,602
-
56

-

11

$ 152,728
$ (27,813
)
$ 3,449

$1,592,467
$ (276,989)
$ -

7,225

(7,225
)

-

$1,599,692
$ (284,214
)
$ -
 Closing
Balance
$ 75,252

-

23,245

21,198

8,602

67
$ 128,364

$ 1,315,478

-
$ 1,315,478

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For the year ended December 31, 2017

e. Opening
Balance
Recognized
in Profit or
Loss
Recognized in
Other
Comprehen-
sive Income
Closing
Balance
Deferred tax assets
Temporarily difference
Defined benefit obligation $ 75,252
$ (6,026 )
$ (2,198) $ 67,028
Provisions for warranties
23,245
2,508
-
25,753
Provisions for loss on
inventory purchase
commitments
21,198
(3,564 )
-
17,634
Unrealized exchange loss,
net
8,602
7,959
-
16,561
Share of other
comprehensive loss of
associates accounted for
using equity method

67

-

17

84
$ 128,364
$ 877
$ (2,181
) $ 127,060
Deferred tax liabilities
Temporarily difference
Shares of profit of
associates
$ 1,315,478
$ 196,337
$ -
$1,511,815
Integrated income tax
December 31
2017
2016
Unappropriated earnings
Generated on and after January 1, 1998
Note
$ 7,541,356
Stockholder-imputed credits accounts (“ICA”)
Note
$ 674,872
For the Year Ended December 31
2017
2016 (Actual)
Creditable ratio for distribution of earnings
Note
14.92%		 Opening
Balance
Recognized
in Profit or
Loss
Recognized in
Other
Comprehen-
sive Income
Closing
Balance
Deferred tax assets
Temporarily difference
Defined benefit obligation $ 75,252
$ (6,026 )
$ (2,198) $ 67,028
Provisions for warranties
23,245
2,508
-
25,753
Provisions for loss on
inventory purchase
commitments
21,198
(3,564 )
-
17,634
Unrealized exchange loss,
net
8,602
7,959
-
16,561
Share of other
comprehensive loss of
associates accounted for
using equity method

67

-

17

84
$ 128,364
$ 877
$ (2,181
) $ 127,060
Deferred tax liabilities
Temporarily difference
Shares of profit of
associates
$ 1,315,478
$ 196,337
$ -
$1,511,815
Integrated income tax
December 31
2017
2016
Unappropriated earnings
Generated on and after January 1, 1998
Note
$ 7,541,356
Stockholder-imputed credits accounts (“ICA”)
Note
$ 674,872
For the Year Ended December 31
2017
2016 (Actual)
Creditable ratio for distribution of earnings
Note
14.92%		 Opening
Balance
Recognized
in Profit or
Loss
Recognized in
Other
Comprehen-
sive Income
Closing
Balance
Deferred tax assets
Temporarily difference
Defined benefit obligation $ 75,252
$ (6,026 )
$ (2,198) $ 67,028
Provisions for warranties
23,245
2,508
-
25,753
Provisions for loss on
inventory purchase
commitments
21,198
(3,564 )
-
17,634
Unrealized exchange loss,
net
8,602
7,959
-
16,561
Share of other
comprehensive loss of
associates accounted for
using equity method

67

-

17

84
$ 128,364
$ 877
$ (2,181
) $ 127,060
Deferred tax liabilities
Temporarily difference
Shares of profit of
associates
$ 1,315,478
$ 196,337
$ -
$1,511,815
Integrated income tax
December 31
2017
2016
Unappropriated earnings
Generated on and after January 1, 1998
Note
$ 7,541,356
Stockholder-imputed credits accounts (“ICA”)
Note
$ 674,872
For the Year Ended December 31
2017
2016 (Actual)
Creditable ratio for distribution of earnings
Note
14.92%
2017
2016
Note
$ 7,541,356
Note
$ 674,872
For the Year Ended December 31
2017
2016 (Actual)
Note
14.92%

Note: Since the amended Income Tax Act announced in February 2018 abolished the imputation tax system, no creditable ratio for distribution of earnings in 2018 is expected.

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Financial Information

f. Income tax assessments

The Company’s tax returns through 2014 have been assessed by the tax authorities.

23. EARNINGS PER SHARE

The earnings and weighted-average number of common stock outstanding in the computation of earnings per share were as follows:

Net Profit for the Year

For the Year Ended December 31
2017
2016
Earnings used in the computation of basic and diluted
earnings per share
$ 6,642,500
$ 4,630,615
Weighted-average Number of Common Stock Outstanding (in Thousands of Shares)
For the Year Ended December 31
2017
2016
Weighted-average number of common stock in computation
of basic earnings per share
300,000
300,000
Effect of potential dilutive common stock:
Employees’ compensation
22

38
Weighted average number of common stock used in the
computation of diluted earnings per share
300,022
300,038		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31

2017
300,000

22

300,022
 2016
300,000

38
300,038

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

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24. NON-CASH TRANSACTIONS

For the years ended December 31, 2017 and 2016, the Group entered into the following non-cash investing activities:

Investing activities affecting both cash and non-cash
transactions
Increase in property, plant and equipment
Net changes of prepayment for equipment
Net changes of trade payables
Cash paid for acquisition of property, plant and equipment		 For the Year Ended For the Year Ended December 31


2017
$ 261,272

4,309
239,978

$ 505,559
 2016
$ 326,865
8,784

(53,877
)
$ 281,772

25. OPERATING LEASE ARRANGEMENTS

The Company as lessee

Operating leases relate to leases of office with lease term between 6 and 20 years.

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

No later than 1 year
Later than 1 year and not later than 3 years		 December 31

2017
$ 1,871

-

$ 1,871
 2016
$ 10,474

1,871
$ 12,345

26. 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.

27. FINANCIAL INSTRUMENTS

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

The carrying amounts of the financial assets and financial liabilities that are not measured at fair value are approximately equal to their fair values.

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Financial Information

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

  • 1) Fair value hierarchy

December 31, 2017
Financial assets at FVTPL

Non-derivative financial
assets held for trading

December 31, 2016
Financial assets at FVTPL

Non-derivative financial
assets held for trading
 Level 1
$ 874,052

Level 1
$ 2,275,103
 Level 2
$ -

Level 2
$ -
 Level 3
$ -

Level 3
$ -
 Total
$ 874,052
Total
$ 2,275,103		 Total
$ 874,052

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

  • 2) Valuation techniques and assumption applied for the purpose of measuring fair value

The fair value of mutual funds traded on active market is the net asset value on the balance sheet date. If there is no market price, the fair value is determined by the redemption value. The estimates and assumptions used by the Group were consistent with those that market participants would use in setting a price for the financial instrument.

  • c. Categories of financial instruments
Financial assets
Fair value through profit or loss (FVTPL)
Held for trading
Loans and receivables (Note 1)
Financial liabilities
Amortized cost (Note 2)		 December 31
2017
2016
$ 874,052 $ 2,275,103
7,886,477
10,550,490
1,499,745
5,318,300
  • Note 1: The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables, other receivables.

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  • Note 2: The balances included financial liabilities measured at amortized cost, which comprise short-term borrowings, notes payable, trade payables and part of other payables.

  • d. Financial risk management objectives and policies

The Group’s major financial instruments include trade receivables, trade payables, and borrowings. The Group’s Corporate Treasury function coordinates access to domestic and international financial markets, and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk and interest rate 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 exchange rates and interest rates.

There had been no change to the Group’s exposure to market risks or the manner in which these risks were managed and measured. Sensitivity analysis evaluates the impact of a reasonably possible change in interest or foreign currency rates over a year. Details of sensitivity analysis for foreign currency risk and for interest rate risk are set out in (a) and (b) below.

a) Foreign currency risk

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 30.

Sensitivity analysis

The Group is mainly exposed to the RMB, U.S. dollar and Japanese yen.

The following table details the Group’s sensitivity to a 5% increase and decrease in the functional currency against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items, and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. A positive number below indicates an increase in pre-tax profit associated with the functional currency strengthen 5% against the relevant currency. For a 5% weakening of the functional currency against the relevant currency, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative.

Gain (loss)
 RMB
For the Year Ended
December 31
2017
2016
$ (228,573)
$ (305,839)		 U.S. Dollar
For the Year Ended
December 31
2017
2016
$ (58,047) $ (117,953)		 Japan Yen
For the Year Ended
December 31
2017
2016
$ (4,646) $ (7,009)

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These were mainly attributable to the exposure outstanding on RMB-, U.S. dollarsand Japanese yen-denominated cash in bank, repurchase agreement collateralized by bonds, receivables and payables, which were not hedged at the end of the reporting period.

b) Interest rate risk

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

Fair value interest rate risk
Financial assets
Financial liabilities
Cash flows interest rate risk
Financial assets
Financial liabilities
Sensitivity analysis		 December 31
2017
2016
$ 3,643,271
$ 8,452,615
-
500,000
3,178,750
1,457,119
-
3,130,000

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for non-derivative instruments at the end of the reporting period. A 25-basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2017 would increase/decrease by $7,947 thousand which were mainly attributable to the Group’s exposure to interest rates on its demand deposits and time deposits.

If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2016 would decrease/increase by $4,182 thousand which were mainly attributable to the Group’s exposure to interest rates on its demand deposits, time deposits and short-term borrowings.

2) Credit risk

The Group’s concentration of credit risk of 48% and 54% in total trade receivables as of December 31, 2017 and 2016, respectively, were related to the Group’s largest customer within the vehicle department and the five largest customers within the parts department.

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.

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The Group relies on bank borrowings as a significant source of liquidity. As of December 31, 2017 and 2016, the available unutilized borrowings facilities were $5,700,000 thousand and $2,070,000 thousand, respectively.

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay.

December 31, 2017

Weighted-
average
Effective
Interest Rate
(%)
Non-derivative
financial liabilities
Non-interest bearing
-

December 31, 2016
Weighted-
average
Effective
Interest Rate
(%)
Non-derivative
financial liabilities
Non-interest bearing
-

Floating interest rate
instrument
0.89
Fixed interest rate
instrument
1.06

 Within One
Month
$ 1,382,883

Within One
Month
$ 1,349,976

3,132,720
500,174

$ 4,982,870
 1 to 3
Months
3 Months to
1 Year
$ 62,984
$ 53,878
1 to 3
Months
3 Months to
1 Year
$ 92,693 $ 244,436
-
-

-

-
$ 92,693
$ 244,436

28. TRANSACTIONS WITH RELATED PARTIES

In addition to those disclosed in other notes, the Group had business transactions with the following related parties:

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a. Related parties

Related Party

Investors that have significant influence over the Group Nissan Motor Corporation (“Nissan”) Yulon Motor Co., Ltd. (“Yulon”) Other parties Nissan Trading Co., Ltd. Nissan Trading Europe Ltd. Nissan Trading (Thailand) Co., Ltd. Nissan Trading China Co., Ltd. Nissan Motor Egypt S.A.E. Nissan Import Egypt, Ltd. PT. Nissan Motor Indonesia (“NMI”) Nissan Mexicana, S.A. De C. V. Nissan Motor (Thailand) Co., Ltd. PT Nissan Motor Distributor Indonesia Nissan North America, Inc. Nissan International SA Nissan Vietnam Co., Ltd. Nissan Philippines Inc. INFINITI Motor Co., Ltd. Renault Nissan Automotive India Private Ltd. Autech Japan, Inc. Dongfeng Nissan Passenger Vehicle Co. Zhenzhou Nissan Automobile Co., Ltd. Allied Engineering Co., Ltd. Chien Tai Industry Co., Ltd. Taiwan Calsonic Co., Ltd. Taiwan Acceptance Corporation Yueki Industrial Co., Ltd. Yu Pong Business Co., Ltd. Yushin Motor Co., Ltd. Yu Chang Motor Co., Ltd. Ka-Plus Automobile Leasing Co., Ltd. Yu Sing Motor Co., Ltd. Empower Motor Co., Ltd. Uni Auto Parts Co., Ltd. Chan Yun Technology Co., Ltd. Singan Co., Ltd. Y-teks Co., Ltd. Sinjang Co., Ltd. Luxgen Motor Co., Ltd. Yue Sheng Industrial Co., Ltd. Yulon Energy Service Co., Ltd. Univation Motor Philippines, Inc. Uni Calsonic Corporation

Relationship with the Group

Parent company Equity-method investor of the Company Subsidiary of Nissan Same as above Same as above Same as above Same as above Same as above Same as above Same as above Subsidiary of Nissan Same as above Same as above Same as above Substantial related party of Nissan Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Subsidiary of Yulon Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Substantial related party of Yulon Same as above (Continued)

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Related Party

China Ogihara Corporation Yuan Lon Motor Co., Ltd. Chen Long Co., Ltd. Yulon Management Co., Ltd. ROC Spicer Co., Ltd. Chi Ho Corporation Yu Tang Motor Co., Ltd. Tokio Marine Newa Insurance Co., Ltd. Hua-Chuang Automobile Information Technical Center Co., Ltd. Taiway, Ltd. Kian Shen Corporation Hui-Lian Motor Co., Ltd. Le-Wen Co., Ltd. Visionary International Consulting Co., Ltd. Tai Yuen Textile Co., Ltd. San Long Industrial Co., Ltd. Sin Etke Technology Co., Ltd.

Singgual Technology Co., Ltd. Hsiang Shou Enterprise Co., Ltd. Hong Shou Culture Enterprise Co., Ltd. Shinshin Credit Corporation

Yu Pool Co., Ltd. Yu-Jan Co., Ltd. Tang Li Enterprise Co., Ltd. Ding Long Motor Co., Ltd. Lian Cheng Motor Co., Ltd. CL Skylite Trading Co., Ltd. Yuan Jyh Motor Co., Ltd. Diamond Leasing Service Co., Ltd.

Hsieh Kuan Manpower Service Co., Ltd.

Tan Wang Co., Ltd. Carnival Textile Industrial Corporation Y.M. Hi-Tech Industry Ltd.

DFS Industrial Group Co., Ltd.

Luxgen Taoyuan Motor Co., Ltd. Luxgen Taichung Motor Co., Ltd. Luxgen Kaohsiung Motor Co., Ltd. ROC-Keeper Industrial Ltd.

Relationship with the Group

Substanial related party of Yulon Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above

Same as above Same as above Same as above Same as above Same as above Same as above Same as above Subsidiary of Hua-Chuang Automobile Information Technical Center Co., Ltd. Subsidiary of Singan Co., Ltd. Same as above Subsidiary of Singan Co., Ltd. Subsidiary of Taiwan Acceptance Corporation Subsidiary of Yushin Motor Co., Ltd. Subsidiary of Yu Sing Motor Co., Ltd. Subsidiary of Yu Tang Motor Co., Ltd. Subsidiary of Chen Long Co., Ltd. Same as above Sub-subsidiary of Chen Long Co., Ltd. Subsidiary of Yuan Lon Motor Co., Ltd. Subsidiary of Ka-Plus Automobile Leasing Co., Ltd. Subsidiary of Diamond Leasing Service Co., Ltd. Subsidiary of Yu Chang Motor Co., Ltd. Substantial related party of the Company Subsidiary of China Ogihara Corporation Substantial related party of Dongfeng Nissan Passenger Vehicle Co. Subsidiary of Luxgen Motor Co., Ltd. Same as above Same as above Subsidiary of ROC Spicer Co., Ltd. (Concluded)

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Financial Information

b. Relate party transaction details

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

1) Operating transactions

Sales
Taiwan Acceptance Corporation
Investors that have significant influence
Other parties
Service revenue
Autech Japan, Inc.
Nissan		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31





2017
$ 29,166,734
20,736
3,418,576

$ 32,606,046

$ 21,628

10,923

$ 32,551
 2016
$ 30,841,817

40,202

3,383,978
$ 34,265,997
$ -

6,173
$ 6,173

The Company designs and performs R&D of cars mainly for Autech Japan, Inc. Service revenue is recognized according to the related contracts.

Other operating revenue
Yulon
Other parties		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 31,480
59,618

$ 91,098
 2016
$ 12,392

41,974
$ 54,366

Other operating revenue mainly arose from selling steel plates, steel and aluminum parts.

Operating costs-purchases
Yulon
Investors that have significant influence		 For the Year Ended December 31
2017
2016
$ 25,632,031 $ 28,288,848
24,148
79,553
(Continued)

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Other parties
Operating costs-TCA
Nissan
Autech Japan, Inc.		 For the Year Ended December 31
2017
2016

34,018

104,378
$ 25,690,197
$ 28,472,779
$ 463,879 $ 526,172

54,052

13,012
$ 517,931
$ 539,184
(Concluded)		 For the Year Ended December 31
2017
2016

34,018

104,378
$ 25,690,197
$ 28,472,779
$ 463,879 $ 526,172

54,052

13,012
$ 517,931
$ 539,184
(Concluded)




2017
34,018

$ 25,690,197

$ 463,879

54,052

$ 517,931

The Company’s TCA is the payment for technical cooperation agreements.

Operating expenses-rental
Yulon
Ka-Plus Automobile Leasing Co., Ltd.
Other parties		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 14,892
9,041
4,767

$ 28,700
 2016
$ 15,073

8,284

3,267
$ 26,624

The Company’s rental expenses paid monthly are primarily comprised of customer service system, building property, car testing expenses, cars and driving service for its executives.

Selling and marketing expenses
Yu Chang Motor Co., Ltd.
Investors that have significant influence
Other parties
General and administrative expenses
Yulon Management Co., Ltd.
Investors that have significant influence
Other parties		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
$ 350,981
15,333
1,788,563
$ 2,154,877


$ 174,773
21,336
8,688
$ 204,797
 2016
$ 306,415

13,357

1,530,268
$ 1,850,040
$ 174,997

27,535

6,228
$ 208,760
(Continued)

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Financial Information

Research and development expenses
Investors that have significant influence
Other parties		 For the Year Ended December 31
2017
2016
$ 60,693 $ 31,956
27,720
22,862
$ 88,413
$ 54,818
(Concluded)		 For the Year Ended December 31
2017
2016
$ 60,693 $ 31,956
27,720
22,862
$ 88,413
$ 54,818
(Concluded)
2017
$ 60,693
27,720
$ 88,413

Selling and marketing expenses are payments to other parties for advertisement and promotion.

General and administrative expenses are payments to Yulon Management Co., Ltd. for consulting, labor dispatch and IT services.

Research and development expenses are payments for sample products, trial fee, and System.

Purchases of property, plant and equipment from related parties are detailed as follows:

Investors that have significant influence
Other parties		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 2,673
10,767

$ 13,440
 2016
$ -

8,417
$ 8,417

The Group sold property, plant and equipment to related parties are detailed as follows:

Investors that have
significant influence		 Proceeds
For the Year Ended
December 31
2017
2016
$ -
$ 9,530		 Gain(Loss) on Disposal Gain(Loss) on Disposal Gain(Loss) on Disposal
For the Year Ended
December 31
2017
$ -
 2017
$ -
 2016
$ 1,721

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2) Non-operating transactions

3) Overseas business expenses
Yulon Management Co., Ltd.
Other parties
Other losses
Investors that have significant influence
Receivables from related parties
Notes receivable
Yushin Motor Co., Ltd.
Yuan Lon Motor Co., Ltd.
Trade receivables
Taiwan Acceptance Corporation
Yulon
Investors that have significant influence
Other parties		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31



2017
2016
$ 2,224 $ 2,474
479

1,293
$ 2,703
$ 3,767
$ 46
$ 213
December 31





2017
$ 1,235
377

$ 1,612

$ 412,802
382,335
8,528
94,291

$ 897,956
 2016
$ 3,847

327
$ 4,174
$ 272,888

157,046

9,256

99,218
$ 538,408

Trade receivables from Yulon are mainly commodity tax paid by the Company on behalf of Yulon.

Trade receivables from related parties are unsecured. For the years ended December 31, 2017 and 2016, no impairment loss was recognized for trade receivables from related parties.

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Financial Information

4) Payables to related parties

Notes payable
Investors that have significant influence
Trade payables
Yulon
Nissan
Other parties		 December 31 December 31



2017
$ -

$ 419,184
84,896
371,384

$ 875,464
 2016
$ 1,536
$ 343,671

151,755

587,750
$ 1,083,176

Trade payables from related parties are unsecured.

  • 5) Refundable deposits
Yulon
Other parties		 December 31 December 31


2017
$ 96,770
800

$ 97,570
 2016
$ 373,496

800
$ 374,296

Refundable deposits are mainly for materials the Company paid to Yulon.

6) Prepayments

Yulon
Prepayments to Yulon are for office rental.
7) Receipts in advance
Autech Japan, Inc.		 December 31 December 31
2017
2016
$ 10,866
$ 11,995
December 31
2017
$ 113,331
 2016
$ 52,918

The Company designs and develops car models for Autech Japan, Inc., and according to the related contracts to receive payments in advance. Those service revenue receipts in

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advance are recognized as current and non-current liabilities according to the timing of revenue recognition.

  • c. Compensation of key management personnel
Short-term employee benefits
Post-employment benefits		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 44,525
2,205

$ 46,730
 2016
$ 38,664

1,931
$ 40,595

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

  • d. Other transactions with related parties

  • 1) The Company sold trade receivables to Taiwan Acceptance Corporation

The Company sold to Taiwan Acceptance Corporation trade receivables which amounted to $2,032,306 thousand and $1,963,839 thousand for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017 and 2016, the Company had received $1,997,141 thousand and $1,928,674 thousand, respectively. Based on the related contract, the amount of receivables sold is limited to the amount of pledges from the original debtor to Taiwan Acceptance Corporation. The Company’s interest intervals of the rates for trade receivable sold to Taiwan Acceptance Corporation for the years ended December 31, 2017 and 2016 were 2.32%-2.33% and 2.30%-2.37%, respectively; and the interest expenses recognized were $1,019 thousand and $1,034 thousand, respectively.

  • 2) The Company signed a molds contract with Diamond Leasing Service Co., Ltd.

The molds contract is valid from the date of the contract to the end of production of the car model. The Company re-signed the molds contract in June 2016. The revised contract amount is $1,021,491 thousand (excluding of tax), which was originally $1,080,206 thousand (excluding of tax). The total newly-signed contract amount in 2016 November and December was $262,139 thousand (excluding of tax), and the installment payments will be disbursed according to the progress under the contract schedule. As of December 31, 2017, the Company had already paid $1,250,544 thousand (recognized as property, plant and equipment). Besides, within the contract period, the Company should pay to Diamond Leasing Service Co., Ltd., before the end of January of every year, the amount of $2.6 for every ten thousand dollars of the accumulated amounts paid for molds in the prior year.

3) The Company signed a molds contract with Shinshin Credit Corporation

The molds contract is valid from the date of the contract to the end of production of the car model. The contract amount is $56,828 thousand (excluding of tax). As of December 31, 2017, the Company had already paid the contract amount in full (recognized as property, plant and equipment). Besides, within the contract period, the Company should pay to Shinshin Credit Corporation, before the end of January of every year, the amount of $2.6 for every ten thousand dollars of the accumulated amounts paid

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Financial Information

for molds in the prior year.

  • 4) The Company signed a molds contract with Sinjang Co., Ltd.

The molds contract is valid from the date of the contract to the end of production of the car model. The contract amount is $56,176 thousand (excluding of tax). As of December 31, 2017, the Company had already paid the contract amount in full (recognized as property, plant and equipment). Besides, within the contract period, the Company should pay to Sinjang Co., Ltd., before the end of January of every year, the amount of $2.6 for every ten thousand dollars of the accumulated amounts paid for molds in the prior year.

  • 5) The Company signed a molds contract with Chan Yun Technology Co., Ltd.

The molds contract is valid from the date of the contract to the end of production of the car model. The contract amount is $27,744 thousand (excluding of tax). As of December 31, 2017, the Company had already paid the contract amount in full (recognized as property, plant and equipment). Besides, within the contract period, the Company should pay to Chan Yun Technology Co., Ltd., before the end of January of every year, the amount of $2.6 for every ten thousand dollars of the accumulated amounts paid for molds in the prior year.

29. SIGNIFICANT CONTINGENCIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of December 31, 2017 were as follows:

  • a. The Company re-signed a manufacturing contract with Yulon, effective on or after May 1, 2015, for 5 years. This contract, for which the first expiry date was on April 30, 2020, is automatically extended annually unless either party issues a termination notice at least three months before expiry. The contract states that the Company authorizes Yulon to manufacture Nissan automobiles and parts, and the Company is responsible for the subsequent development of new automobile parts. The manufacturing volume of Yulon under the contract should correspond to the Company’s sales projection for the year. In addition, the Company has authorized Yulon as the original equipment manufacturer (“OEM”) of automobile parts and after-sales service.

The Company is responsible for developing new car models, refining designs, and providing the sales projection to Yulon. Yulon is responsible for transforming the sales projections into manufacturing plans, making the related materials orders and purchases, providing product quality assurance, delivering cars, and shouldering warranty expenses due to any defects in products made by Yulon.

  • b. The Company has a contract with Taiwan Acceptance Corporation for sale and purchase of vehicles. Besides, Taiwan Acceptance Corporation separately signed with dealers contracts for display of vehicles. If any dealer violates the display contract, resulting in the need for Taiwan Acceptance Corporation to recover the display vehicles, the Company must assist in the settlement or buy-back the vehicles at the original price. From the date of signing the sale and purchase contract to December 31, 2017, no buy-back of vehicles has occurred.

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  • c. Unrecognized commitments
Acquisition of property, plant, and equipment December 31 December 31
2017
$ 180,059
 2016
$ 3,518

30. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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

(In Thousands of New Taiwan Dollars and Foreign Currency)

December 31, 2017

Foreign
Currencies
Exchange Rate
Financial assets
Monetary items
RMB
$ 847,522
4.5650 (RMB:NTD)
USD
39,010
29.760 (USD:NTD)
RMB
154,288
0.1530 (RMB:USD)
JPY
351,864
0.2642 (JPY:NTD)

Financial liabilities
Monetary items
JPY
179
0.2642 (JPY:NTD)
December 31, 2016
Foreign
Currencies
Exchange Rate
Financial assets
Monetary items
RMB
$ 1,209,033
4.617 (RMB:NTD)
USD
73,149
32.250 (USD:NTD)
RMB
114,975
0.1442 (RMB:USD)
JPY
508,852
0.2756 (JPY:NTD)
 Carrying
Amount
$ 3,868,938

1,160,938

702,520
92,962
$ 5,825,358
$ 47
Carrying
Amount
$ 5,582,106

2,359,058

534,692
140,239
$ 8,616,095
(Continued)

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Financial Information

Foreign
Currencies
Exchange Rate
Financial liabilities
Monetary items
JPY
204
0.2756 (JPY:NTD)		 Carrying
Amount
$ 56
(Concluded)

The significant realized and unrealized foreign exchange gains (losses) were as follows:

Foreign
Currencies
RMB

RMB

USD

JPY		 For the Year Ended December 31 For the Year Ended December 31
2017
Exchange Rate
Net Foreign
Exchange
Gain (Loss)
4.5070 (RMB:NTD)
$ (270,850)
0.1480 (RMB:USD)
116,515
30.432 (USD:NTD)
(175,577)
0.2713 (JPY:NTD)

4,707
$ (325,205
)		 2016
Exchange Rate
Net Foreign
Exchange
Gain (Loss)
4.8490 (RMB:NTD) $ 61,981
0.1506 (RMB:USD) (419,861)
32.263 (USD:NTD) (227,580)
0.2972 (JPY:NTD)
(15,229
)
$ (600,689
)

31. SEPARATELY DISCLOSED ITEMS

  • a. Information about significant transactions and investees:

  • 1) Financing provided to others: None

  • 2) Endorsements/guarantees provided: None

  • 3) Marketable securities held (excluding investment in subsidiaries and associates): Table 1 (attached)

  • 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Table 2 (attached)

  • 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 (attached)

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

  • 9) Trading in derivative instruments: None

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  • 10) Information on investees: Table 5 (attached)

  • 11) Intercompany relationships and significant intercompany transactions: Table 6 (attached)

  • b. Information on investments in mainland China

  • 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income or loss, investment income or loss, carrying amount of the investment at the end of the period, repatriated investment income, and limit on the amount of investment in the mainland China area: Table 7 (attached)

  • 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses: None

    • a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.

    • b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.

    • c) The amount of property transactions and the amount of the resultant gains or losses.

    • d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.

    • e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.

    • f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

32. SEGMENTS INFORMATION

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group’s reportable segments were as follows:

Vehicle segment: Vehicle sales Part segment: Parts sales Investment segment: Overseas business activities Other segment: Other operating activities other than the above segments

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Financial Information

a. Segment revenues and results

The following was an analysis of the Group’s revenue and results from continuing operations by reportable segments.

Vehicle segment

Part segment
Investment segment
Other segment


(Loss) gain on disposal of
property, plant and
equipment
Interest income
Gain on financial assets at
fair value through profit
or loss, net
Foreign exchange loss, net
Interest expense
Gain (loss) on disposal of
investments, net
Central administration
costs
Profit before tax		 Revenue
For the Year Ended
December 31
2017
2016
$ 29,274,487
$ 30,964,440
3,818,369
3,828,126
-
-

128,918

67,880
$ 33,221,774
$ 34,860,446
 Profit Before Tax Profit Before Tax
For the Year Ended
December 31



2017
$ 29,274,487

3,818,369
-

128,918

$ 33,221,774


2017
$ 1,878,694
642,416
6,060,323

(429,231
)
8,152,202
(685)
197,870
4,052
(325,205)
(11,158)
1,945

(15,600
)
$ 8,003,421
 2016
$ 1,229,719

621,461

4,890,778

(650,805
)

6,091,153

14,581

140,726

10,103

(600,689)

(34,726)

(19,444)

(15,600
)
$ 5,586,104

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales for the years ended December 31, 2017 and 2016.

Segment profit represents the profit earned by each segment, excluding the allocation of gain (loss) on disposal of property, plant and equipment, net, interest income, gain on fair value changes of financial assets at fair value through profit or loss, net, foreign exchange loss, net, interest expense, gain (loss) on disposal of investments, net, central administration costs and directors’ compensation, and income tax expense. The amount is provided to the chief operating decision maker for allocating resources and assessing the performance.

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b. Segment total assets

Vehicle segment
Part segment
Investment segment
Other segment
Unallocated assets
Consolidated total assets		 December 31 December 31



2017
$ 1,392,785
28,623
15,251,359
57,817

16,730,584

9,046,203

$ 25,776,787
 2016
$ 1,617,002

43,908

14,659,211

42,130

16,362,251

13,377,497
$ 29,739,748

c. Revenue from major products and services

The following is an analysis of the Group’s revenue from its major products and services.

Vehicles
Parts
Others		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 29,274,487
3,818,369
128,918

$ 33,221,774
 2016
$ 30,964,440

3,828,126

67,880
$ 34,860,446
  • d. Geographical information

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

Domestic
Overseas		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31


2017
$ 33,040,470
181,304

$ 33,221,774
 2016
$ 34,653,329

207,117
$ 34,860,446

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

Domestic
Overseas		 December 31 December 31


2017
$ 1,614,655


-

$ 1,614,655
 2016
$ 2,108,218

-
$ 2,108,218

2017 Annual Report

220

Financial Information

  • e. Information about major customers

The Group’s revenue from major customers is detailed below.

Certain customer from the vehicle segment For the Year Ended December 31 For the Year Ended December 31
2017
2016
$ 29,166,734
$ 30,841,817

No other single customers contributed 10% or more to the Group’s revenue for both 2017 and 2016.

2017 Annual Report

221

TABLE 1

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars)

Investor Securities Type and Name Relationship with
the Investor		 Financial Statement Account December 31, 2017 December 31, 2017 Note
Stocks
(Thousands)		 Carrying
Amount		 Percentage of
Ownership		 Market Value
or Net Asset
Value (Note)
Yulon Nissan Motor
Company, Ltd.		 Beneficiary certificates
PineBridge Taiwan Money Markey Found
The RSIT Enhanced Money Market
Nomura money market fund
Jih Sun money market fund
SinoPac TWD money market fund
Taishin Ta-Chong money market fund
PineBridge Emerging Market Asia-Pacific
Strategic Bond
Fuh Hwa Global Fixed Income Fund of Fund
Nomura Global Equity Fund		 -
-
-
-
-
-
-
-
-		 Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss		 14,685
16,808
6,781
6,790
7,223
7,081
2,713
1,347
800		 $ 200,082

200,046

110,002

100,003

100,002

100,002

31,246

20,189

12,480		 -
-
-
-
-
-
-
-
-		 $ 200,082
200,046
110,002
100,003
100,002
100,002
31,246
20,189
12,480

Note: The fair value of the financial asset at fair value through profit or loss is calculated based on the asset’s net value as of December 31, 2017.

==> picture [59 x 118] intentionally omitted <==

TABLE 2

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Company Name Type and Name of
Marketable Securities		 Financial Statement
Account		 Counterparty Relationship Beginning Balance Beginning Balance Acquisition Acquisition Disposal Disposal Disposal Disposal Ending Balance Ending Balance
Stocks
(Thousands)		 Amount Stocks
(Thousands)		 Amount Stocks
(Thousands)		 Amount Carrying
Amount		 Gain (Loss) on
Disposal		 Stocks
(Thousands)		 Amount
(Note)
Yulon Nissan Motor
Company, Ltd.		 Beneficiary certificates
FSITC Taiwan Money
Market Fund
Mega Diamond Money
Market
Allianz Global Investors
Taiwan Money
Market Fund
Taishin 1699 Money
Market
The RSIT Enhanced
Money Market
Taishin Ta-Chong
Money Market Fund
Jih Sun Money Market
Fund
Cathay Taiwan Money
Market Fund		 Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
Financial assets at fair value
through profit or loss
-

-

-

-

-

-

-

-		 -
-
-
-
-
-
-
-		 33,137
24,249
24,234
22,452
8,461
-
-
-
$ 500,000

300,000

300,000

300,000

100,000

-

-

-		 -
-
-
-
33,652
35,467
27,202
24,252		 $ -
-
-
-
400,000
500,000
400,000
300,000		 33,137
24,249
24,234
22,452
25,305
28,386
20,412
24,252		 $ 503,305
301,887
301,494
301,008
300,749
400,414
300,243
300,070		 $ 500,000
300,000
300,000
300,000
300,000
400,000
300,000
300,000
$ 3,305

1,887

1,494

1,008

749

414

243

70
-

-

-

-

16,808

7,081

6,790

-		 $ -
-
-
-
200,000
100,000
100,000
-

Note: Shown at their original investment amount.

TABLE 3

YULON NISSAN MOTOR COMPANY LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Company Name Related Party Nature of Relationship Transaction Details Transaction Details Transaction Details Transaction Details Abnormal
Transaction (Note 1)		 Abnormal
Transaction (Note 1)		 Note/Accounts
Payable or Receivable		 Note/Accounts
Payable or Receivable		 Note
Purchase/
Sale		 Amount % to
Total		 Payment Terms Unit Price Payment
Terms		 Ending
Balance		 % to
Total
(Note 2)
Yulon Nissan Motor
Company, Ltd.		 Yulon
Taiwan Acceptance
Corporation
Yu Sing Motor Co., Ltd.
Yuan Lon Motor Co., Ltd.
Yu Chang Motor Co., Ltd.
Hui-Lian Motor Co., Ltd.
Empower Motor Co., Ltd.
Chen Long Co., Ltd.
Yu Tang Motor Co., Ltd.
Yushin Motor Co., Ltd.
Tan Wang Co., Ltd.		 Equity-method investor of the
Company
Subsidiary of Yulon
Subsidiary of Yulon
Substantial related party of
Yulon
Subsidiary of Yulon
Substantial related party of
Yulon
Subsidiary of Yulon
Substantial related party of
Yulon
Substantial related party of
Yulon
Subsidiary of Yulon
Subsidiary of Yu Chang Motor
Co., Ltd.		 Purchase
Sale
Sale
Sale
Sale

Sale
Sale
Sale
Sale
Sale
Sale		 $ 25,632,031
29,166,734
439,382
438,021
421,410
353,849
341,818
317,221
308,267
254,372
101,916		 99
88
1
1
1
1
1
1
1
1
-		 4 days after sales for parts
3 days after sales for vehicles
Same as above
14 days after sales for parts
14 days after sales for parts
Immediate payment for vehicles
14 days after sales for parts
Same as above
14 days after sales for parts
Immediate payment for vehicles
Same as above
14 days after sales for parts
14 days after sales for parts
Immediate payment for vehicles
14 days after sales for parts		 $ -
-
-
-
-
-
-
-
-
-
-		 -
-
-
-
-
-
-
-
-
-
-		 $ (419,184 )
412,802
7,591
12,944
9,814
1,228
7,535
2,805
1,295
1,836
5,133		 (45)
44
1
1
1
-
1
-
-
-
1		 -
-
-
-
-
-
-
-
-
-
-

Note 1: Transaction terms are based on agreements.

Note 2: Balances shown here are based on the carrying amount of the Company.

==> picture [59 x 118] intentionally omitted <==

TABLE 4

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

TRADE RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Company Name Related Party Nature of Relationship Ending Balance Turnover Rate
(Note 1)		 Overdue Overdue Amounts
Received in
Subsequent
Period		 Allowance for
Bad Debts
Amount Action
Taken
Yulon Nissan Motor
Company, Ltd.		 Taiwan Acceptance Corporation
Yulon		 Subsidiary of Yulon
Equity-method investor of the Company		 Trade receivables
$ 412,802
Trade receivables
382,335		 85.07
Note 2		 $ -
-		 -
-		 $ 412,802
342,421		 $ -
-

Note 1: The turnover rate was based on the carrying amount of the Company.

Note 2: Trade receivables from Yulon are mainly commodity tax paid by the Company on behalf of Yulon, not arose from sales; therefore, turnover rate is not calculated.

TABLE 5

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars and U.S. Dollars)

Investor Company Investee Company Location Main Businesses and
Products		 Original Investment Amount Original Investment Amount As of December 31, 2017 of December 31, 2017 Net Income of
the Investee		 Share of Profit Note
December 31,
2017		 December 31,
2016		 Stocks
(Thousands)		 % Carrying
Amount
Yulon Nissan Motor Company, Ltd.
Yi-Jan Overseas Investment Co., Ltd.		 Yi-Jan Overseas Investment Co., Ltd.
Jetford Inc.		 Cayman Islands
British Virgin Islands		 Investment
Investment		 $ 1,847,983
(US$ 57,371 )
US$ 57,171		 $ 1,847,983
(US$ 57,371 )
US$ 57,171		 84,987
71,772		 100.00
100.00		 $ 16,023,303
US$ 538,223		 $ 6,225,205
US$ 204,570		 $ 6,225,205
US$ 240,570		 Note
Note

Note 1: The carrying amount and related shares of profit of the equity investment were calculated based on the audited financial statements and percentage of ownership.

Note 2: Eliminated.

==> picture [59 x 118] intentionally omitted <==

TABLE 6

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars)

Number
(Note 1)		 Company Name Related Party Relationship
(Note 2)		 Transaction Details Transaction Details Transaction Details Transaction Details
Financial Statement Account Amount
(Note 3)		 Payment Terms
(Note 4)		 % to Total
Sales or Assets
(Note 5)
0 Yulon Nissan Motor Company, Ltd. Jetford Inc. 1 Trade receivables - related parties
Reduction of general and administrative expenses		 $ 4,414

19,979		 -
-		 -
-

Note 1: Intercompany relationships are numbered as follows:

a. The Company is numbered as 0.

b. Subsidiaries are numbered from number 1.

Note 2: Nature of relationships is numbered as follows:

a. The Company to subsidiaries is numbered as 1.

b. Subsidiaries to the Company is numbered as 2.

c. Subsidiaries to subsidiaries is numbered as 3.

Note 3: Eliminated.

Note 4: The prices and payment terms for related-party transactions were based on agreements.

  • Note 5: If the transaction amounts are related to the balance sheet accounts, the percentages are those of the year-end balances to the consolidated total assets. If the transaction amounts are related to the income statement accounts, the percentages are the total amounts of the year to the consolidated total sales.

TABLE 7

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands of New Taiwan Dollars, U.S. Dollars and RMB)

Investee Company Main Businesses and Products Main Businesses and Products Paid-in Capital Paid-in Capital Method of
Investment
(e.g., Direct
or Indirect)		 Accumulated
Outward
Remittance for
Investment
from Taiwan as
of
January 1, 2017		 Investment Flows Investment Flows Accumulated
Outward
Remittance for
Investment
from Taiwan as
of
December 31,
2017		 %
Ownership
of Direct or
Indirect
Investment		 Net Income of
the Investee
Investment
Gain
(Note 2)		 Carrying
Amount as of
December 31,
2017		 Accumulated
Repatriation of
Investment
Income as of
December 31,
2017
Outflow Inflow
Aeolus Xiangyang
Automobile Co., Ltd.
Aeolus Automobile Co.,
Ltd.
Guangzhou Aeolus
Automobile Co., Ltd.
Shenzhen Lan You
Technology Co., Ltd.
Dong Feng Yulon Used
Cars Co., Ltd. (Note 4)		 Developing and manufacturing of parts and
vehicles and related services
Consulting
Developing and manufacturing of parts and
vehicles and related services
Developing, manufacturing and selling of
computer software and hardware and
computer technology consulting
Valuation, purchase, renovation, rental,
selling of used cars and training		 $ 3,581,037
(RMB 826,000)
761,964
(RMB 194,400)
8,969,950
(RMB2,200,000)
57,450
(RMB
15,000)
38,300
(RMB
10,000)
Note 1

Note 1

Note 1

Note 1

Note 1		 $ 716,856
(US$ 21,700)
533,109
(US$ 16,812)
537,199
(US$ 16,941)
35,674
(US$ 1,125)
18,804
(US$ 593)		 $ -
-
-
-
-		 $ -
-
-
-
-		 $ 716,856
(US$ 21,700)
533,109
(US$ 16,812)
537,199
(US$ 16,941)
35,674
(US$ 1,125)
18,804
(US$ 593)		 16.55
33.12
40.00
45.00
49.00		 $ 2,792,746
(US$ 91,770)
17,205
(US$ 565)
13,798,035
(US$ 453,405)
188,861
(US$ 6,206)
12,942
(US$ 425)		 $ 454,997
(US$ 14,951)
5,698
(US$ 187)
5,519,214
(US$ 181,362)
84,987
(US$ 2,793)
6,342
(US$ 208)
$ 1,426,870
(US$ 47,946)

729,383
(US$ 24,509)

12,375,179
(US$ 415,833)

719,927
(US$ 24,191)

(6,146)
(US$ -207)		 $ 2,971,576
(US$ 94,087)
7,478,304
(US$ 237,559)
24,606,052
(US$ 788,646)
-
-
Accumulated Outward Upper Limit on the Amount of
Remittance for Investment in
Mainland China as of
December 31, 2017		 Investment Amounts Authorized by
Investment Commission, MOEA
Investment Stipulated by
Investment Commission, MOEA
(Note 3)
$1,841,642 (US$57,171) $1,917,100 (US$59,660) $12,716,774

Note 1: The Company indirectly owns these investees through Jetford Inc., an investment company registered in a third region.

  • Note 2: The carrying amount and related investment income of the equity investment were calculated based on the audited financial statements and percentage of ownership.

Note 3: The upper limit was calculated in accordance with the “Regulation Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission under the Ministry of Economic Affairs on August 22, 2008.

Note 4: The Company’s share of losses exceeds its interest in Dong Feng Yulon Used Cars Co., Ltd. The Company recognized additional loss on constructive future obligations to settle Dong Feng Yulon Used Cars Co., Ltd.

==> picture [59 x 118] intentionally omitted <==

Financial Information

6. The company and its affiliates have not encountered any financial difficulties over the last years and as of the the publication date of the annual report:

No applicable. This company and its affiliates have not encountered any financial difficulties.

2017 Annual Report

229

裕隆日產

YULON NISSAN

、 VII Review and Analysis of Financial Conditions and Operation Performance and Rist Management

1. Financial Conditions

Unit：NTD thousand

Fiscal Year Difference Difference
Fiscal year 2016 Fiscal year 2017
Item Amount ％
Current Assets $ 12,843,955 $ 8,783,713 ($ 4,060,242) (32)
Long-Term Equity 14,659,211 15,251,359 592,148
4
Investments
Fixed Assets 1,703,040 1,479,225 (223,815) (13)
Other Assets 533,542 262,490 (271,052)
(51)
Total Assets 29,739,748 25,776,787 (3,962,961)
(13)
Current Liabilities 6,310,765 2,545,626 (3,765,139) (60)
Other Liabilities 1,874,640 2,036,537 161,897
9
Total Liabilities 8,185,405 4,582,163 (3,603,242)
(44)
Share Capital 3,000,000 3,000,000 0 0
Capital Reserves 6,129,405 6,129,405 0 0
Retained Earnings 12,387,086 12,440,237 53,151
1
Other adjustment items 37,852 ( 375,018) (412,870)
(1,091)
shareholders’ equity
Total share holder equity 21,554,343 21,194,624 (359,719)
(2)

Variance Analysis

The reduction of current assets were because of fund redemption with current cash paid to cash dividends and repayment of short-term loans.

The reduction of other assets was because of reduced refund of some guarantee deposit.

The reduction of total amount of current liabilities and liabilities was because of the full repayment of short-term loans.

The reduction of other shareholder’s equity was caused by the fluctuations in foreign currency exchange from USD to NTD.

2017 Annual Report

230

Review and Analysis of Financial Conditions and Operation Performance and Rist Management

2. Financial Performance

(1) Comparison and Analysis of Financial Performance

Unit：NTD thousand

Fiscal Year Increase
Fiscal year 2016 Fiscal year 2017 (Decrease) Changes(％)
Item Amount
Gross Revenue
Less:Sales Returns
Sales Allowances
Net Operating Revenue
Operating Cost
Operating margin
Operating Expenses
Operating Profit
Non-Operating Revenue and Gain
Non-Operating Expense and Loss
Income Before Income Tax
Income Tax Expense
Net Income		 $ 34,880,118
19,672
34,860,446
29,813,797
5,046,649
3,844,612
1,202,037
5,056,407
672,340
5,586,104
955,489
$ 4,630,615		 $ 33,247,970
26,196
33,221,774
27,037,319
6,184,455
4,108,767
2,075,688
6,277,105
349,372
8,003,421
1,360,921
$ 6,642,500		 (1,632,148)
6,524
(1,638,672)
(2,776,478)
1,137,806
264,155
873,651
1,220,698
(322,968)
2,417,317
405,432
2,011,885		 (5)
33
(5)
(9)
23
7
73
24
(48)
43
42
43

Variance Analysis :

(1) The increase of operating profits and operating income was because of the deflation of Japanese Yen that led to reduction in purchase cost.

(2) The increase in non-operating income was caused by the increase in profits from reinvested company this year.

(3)The reduction in non-operating expense was because of RMB inflation against USD and hence the reduction of loss in foreign currency exchange.

(4) The increase in earnings before tax, income tax expense and EPS was because of the lower importing cost from JPY deflation and the increase in profits from reinvested company this year.

2017 Annual Report

231

裕隆日產 YULON NISSAN

(2) Gross profit analysis ：

Unit：NTD thousand

Variance Difference sources Difference sources Difference sources Difference sources
Item between two Selling Price Cost Price Combined Sales
Volume difference
periods Difference Difference Difference
Gross Profit 1,137,806 173,959 (1,235,183) (201,824) (158,818)
1. Favorable cost variance was caused by the increase in sales price for cars in 2017.
2. Favorable cost variance was caused by the reduction of purchase price for cars in 2017.
3. Unfavorable sales mix variance was caused by the reduce in sales for cars with higher gross
profit in 2017.
4. Unfavorable volume variance was caused by the reduction in sales volume of cars in 2017.
5. The Company accepted the commission from Autech Japan, Inc and NISSAN Motor Corp.
to engage in the research and design with service revenue increased by NTD26,378
thousand in 2017.
6. For the company income from the sales of steel plates, aluminum alloy and involvement in
certification and testing, the non-operating income was increased by NTD34,660 thousand
in 2017.
Content

3. Cash Flow Analysis

(1) Cash Flow Analysis for the Recent 2 years

Fiscal Year Increase (Decrease)
Fiscal year 2016 Fiscal year 2017 Ratio
Item (%)
Cash Flow Ratio (%) (Note) (Note) -
Cash Flow Adequacy Ratio (%) 8 2 (75)
Cash Reinvestment Ratio (%) (Note) (Note) -
Difference Analysis and Description of Changes in Increase and Decrease Ratio:
(1) Increased cash flow rate was because of current increased net profit and fund redemption converted
into cash that generates net cash inflow from operation and current liabilities due to reduced
repayment of short-term loans.
(2) Reduced cash flow adequacy ratio was caused by more cash dividends paid over the last five years.
(Note 1) Operating activities are net cash outflows and excluded from calculation.
(Note 2) Net cash inflow from operations deducting cash dividend is a negative number and hence
excluded from calculation.

(2) Cash Flow Analysis for the Next Year

Unit:NTD thousand

Expected Expected annual Expected contingency plan for Expected contingency plan for
Cash balance at annual net cash net cash flow from Expected cash

insufficient cash
the beginning flow from investment and

of the year
operating
accommodation		 balance Investment Financial plan

activities		 activities plan
6,822,021 1,625,207 (2,507,576) 5,939,652 - -

2017 Annual Report

232

Review and Analysis of Financial Conditions and Operation Performance and Rist Management

4. Influence on Financial Condition caused by Prominent Capital

Expenditures in fiscal year 2017

(1) The Use and Capital Source of Prominent Capital Expenditure

Unit：NTD thousand

Actual and Actual or Actual or estimated use of capital Actual or estimated use of capital Actual or estimated use of capital Actual or estimated use of capital Actual or estimated use of capital Actual or estimated use of capital
Program estimated estimated Total fund
Fiscal year Fiscal year
Fiscal year		 Fiscal year Fiscal Fiscal year
items source of date of needed
2015 2016 2017 2018 year 2019 2020
capital completion
Model
Clamp
Lifting Tool
Other
equipment
MIS
equipment		 Self-owned
fund
Self-owned
fund
Self-owned
fund
2019.12.31

2019.12.31

2019.12.31		 3,320,498
236,113
80,243		 439,933
20,352
9,913		 536,295
80,996
7,541		 258,288
36,469
10,762		 426,745
11,007
20,419		 1,012,560
78,975
23,043		 646,677
8,314
8,565

(2) Anticipated benefits

  1. Invested in new model mold, increase production line to raise market shares.

  2. The investment in information system related hardware and software, updating management information system will increase the managerial efficiency and strengthen market competition capabilities.

  3. Increase the degree of automation, reduce the labor costs.

5. Investment Policy in Fiscal Year 2017, Major Reasons for Profit and Loss,

Its Improvement Plan and Next Year’s Investment Plan

Unit：USD thousand \ NTD thousand

Percentage of
Investor Investee Investment Cause of Improvement
Investment plan in
Ownership on
Company Company Gain (Loss) Gain(Loss) plan the currently year
December 31,2017
Yulon Nissan
Motor Company,
Ltd.
Yi-Jan
Overseas
Investment
Co., Ltd.		 100 $ 6,225,205 Growing Status of
China Car Market
Nil		 Nil
Yi-Jan Overseas
Investment
Co., Ltd.
Jet Ford, Inc.		 100 USD204,570 Growing Status of
China Car Market
Nil		 Nil
Jet Ford, Inc. Aeolus
Xiangyang
Automobile
Co.,Ltd.		 16.55 USD 14,951 Growing Status of
China Car Market
Nil		 Nil
Aeolus
Automobile
Co., Ltd.		 33.12 USD 187 Business Growth Nil Nil
Guangzhou
Aeolus
Automobile
Co., Ltd.		 40 USD181,362 Growing Status of
China Car Market
Nil		 Nil
Shenzhen Lan
You
Technology
Co., Ltd.		 45 USD 2,793 Business Growth Nil Nil
Dong Feng
Yulon Used
Cars Co.,
Ltd.		 49 USD 208 Change and
reduction in
operation.		 Nil Nil

2017 Annual Report

233

裕隆日產 YULON NISSAN

6. Risk Management and Evaluation

(1) Influence of the interest rate, foreign exchange rate and rate of inflation on company’s profit/loss and plans to encounter these risks in the future:

  1. Influence of interest rate fluctuation on the company’s profit/loss and future coping strategies:

The market interest rate is quite low in recent years, so the affect of fluctuation on the company’s profit/loss is limited.

  1. Influence of foreign exchange rate fluctuation on the company’s profit/loss and future coping strategies

  2. To avoid potential risks, the company has not specially manipulated the foreign exchange rate; the exchange rate difference is utilizing the sharing method agreed with Nissan.

  3. Influence of inflation on the company’s profit/loss and future coping strategies: Nil.

(2) Policy on High Risk, High Leverage Investment, Capital Loans to Others, Endorsement and Trade on Derivatives, Major Reason for Profit/Loss and plans to encounter these risks in the future:

  1. This company has not involved in High Risk, High Leverage Investment.

  2. As to the Capital Loans to Others, Endorsement and Trade on Derivatives, these activities are governed by company’s ‘Procedure of Capital Loans to Others’, ‘Procedure of Endorsement’ and ‘Procedure of Trade on Derivatives’. There was no related activity in 2017.

(3) Future research/development plans and estimated investing R&D expenditure:

Please refer to ：V、Hightlights of Operations 1.Business Scope (3)Technology, Research and Development (R&D)

(4) Important Changes of Local and Foreign Government Policies and Regulations and Their Influence Over Company’s Financial Condition and Plans to Encounter these Risks in the Future:

After entering the WTO, the company has not enjoyed the favorable tax exemption/deduction of goods since the fiscal year 2005, but the company has reduced the purchasing cost and expenses, therefore the influence on the company’s profit/loss is limited.

(5) Changes on technology and industrial change influence toward the company’s finance business and coping strategies:

The company has the best car research/development team and personnel in the country, to quickly handle the technology changes and industrial change.

(6) Changes on Corporate Image that Influence Company’s Risk Management and Contingency Plans:

The company has a good corporate reputation, and there has been no negative report in connection with the corporation.

2017 Annual Report

234

Review and Analysis of Financial Conditions and Operation Performance and Rist Management

(7) Benefit anticipated and possible risks of merge and acquisition:

It’s not applicable, because the company was not involved in any merge and acquisition.

(8) Benefit anticipated and possible risks of plant site expansion: N/A.

(9) Risks of having purchase or sales centralization

  1. Purchase: The company incoming shipment is Yulon Motor Company, Ltd., it’s a listed company that has an outstanding credibility, excellent production technology and strong finance, so the company has no need of worrying about the interruption of incoming shipment.

  2. Sales: Local market is the main selling of the company, selling cars and parts to the consumers through each location dealer. The company has an exclusive department responsible for supervising the sales development of each dealer, after a long period, the dealers’ sales are pretty stable, so there is no risk of having sales centralization

(10)The impact and the risk of having a big Volume of transferring or changes of Shareholders equity of the Directors, Supervisors or holding more than10% shares shareholders, Except for the releasing of shares : Nil.

(11)The impact and risk of changing operating rights of the company: Nil.

(12)Litigation/Non-Litigation Events:

  1. The company: Nil.

  2. The proportion of shares that the owned by big shareholders like the Company’s Board Members, Supervisors, General Manager, Real Owner that exceeds 10% and the belonging company: Nil.

(13)Other Important Risks and actions to be taken: Nil.

7. Other Important Items: Nil

2017 Annual Report

235

裕隆日產 YULON NISSAN

、 VIII Special Noted Items

1. Affiliates information

(1) Affiliates Consolidated Operation Statement

  1. Organization Chart of Yulon Motor’s Affiliated Companies

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

Yulon Nissan Motor Co., Ltd.
Yi-Jan Overseas Investment Co., Ltd.
100%
Jet Ford, Inc.
100%
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  1. Basic information of affiliates

Dec. 31, 2017 Unit：USD thousand

Establishing Actually accrued
Name Address Main Business Items
Date capital amount
Yi-Jan Overseas
Investment Co., Ltd.		 1999.11.17 2F,Cayside,Harbour Drive
P.O.Box
30592 S.M.B. George
Town Grand
Cayman Island B.W.I.		 USD 84,987 Investments
Jet Ford, Inc. 1994.01.12 P.O.Box 3151 Road Town,
Tortola British Virgin
Islands		 USD 71,772 Investments
  1. Shareholders representing both holding companies and subordinates: Nil

2017 Annual Report

236

Special Noted Items

  1. Information of the directors, supervisors, and general managers of the affiliates

Dec. 31, 2017

Name Shares Shares
Title Name or representative
Shares Percentage
Yi-Jan Overseas
Investment Co., Ltd.		 Director Yulon Nissan Motor Co., Ltd.
Representative: Kenneth K. T. Yen		 84,986,756 100%
Jet Ford, Inc. Director
Director
Director		 Yi-Jan Overseas Investment Co., Ltd.
Representative：Kenneth K. T. Yen
Kuo-Rong Chen
Leman C.C. Lee		 71,771,793 100%
  1. Affiliates’ Operating Results

Dec. 31, 2017

Unit：NTD thousand

Net Earning
Affiliate
Total Operating Operating
Name Capital Total Assets Net Value Income / Per Share
Code
Liabilities Revenue net income
Loss		 (NT dollar)
Number
(after-tax) (after-tax)
22270001
Yi-Jan
Overseas
Investment
Co., Ltd.		 2,571,699 16,023,303
0		 16,023,303 6,225,471 6,225,205 6,225,205
73.25
22270002 Jet Ford,
Inc.		 2,347,251 16,028,066
10,560		 16,017,506 6,245,665 6,225,469 6,225,469
86.74

2017 Annual Report

237

裕隆日產 YULON NISSAN

(2) Affiliates Consolidated Financial Report:

Statement

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2017 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standards No.10, ”Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed is included in the consolidated financial statements of parent and subsidiary companies. Hence, we do not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours

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Company Name: Yulon Nissan Motor Co., Ltd.

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Responsible person: Kenneth K. T. Yen

March 26, 2018

(3) Consolidated report of public companies and their affiliates: Nil

2. Fiscal Year 2017 and prior to the publication date of the annual report, The Status of Issuing Private Placement Securities: Nil

3. Fiscal Year 2017 and prior to the publication date of the annual report, Acquisition or Disposal of Yulon Shares by Subsidiaries: Nil

4. Other necessary supplementary notes: Nil

5. Any events that had significant impacts on shareholders’ right or securities prices as stated in Section 2 Paragraph 2 in Article 36 of the Securities Transaction Law for fiscal year 2017 and prior to the publication date of the annual report: Nil

2017 Annual Report

238

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Yulon Nissan Motor Co., Ltd.

Chairman Kenneth K. T. Yen

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Corporate Vision

Becoming the Benchmark Company of “Product Innovation” and “Service Innovation” in the Cross Strait Auto Industry

YULON NISSAN MOTOR CO., LTD

39-2Po Kung Keng, Shi Hu Tsuen, San Yi, Miao Li Hsien, Taiwan, R.O.C 24Hour Service hot-line 0800-088-888 http://www.nissan.com.tw

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