Taiwan Acceptance Corporation and Subsidiaries Consolidated Financial Statements for the Years Ended December 31, 2017 and 2016 and Independent Auditors’ Report

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DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The entities required to be included in the combined financial statements in accordance with the “Criteria

Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial

Statements of Affiliated Enterprises” as of and for the year ended December 31, 2017 are the same as

those included in the consolidated financial statements prepared in conformity with International

Financial Reporting Standard 10 “Consolidated Financial Statements.” Relevant information that should

be disclosed in the combined financial statements has all been disclosed in the consolidated financial

statements. Consequently, we have not prepared a separate set of combined financial statements.

Very truly yours,

TAIWAN ACCEPTANCE CORPORATION

By:

KUO-RONG CHEN

Chairman

March 26, 2018

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The descriptions of key audit matters of 2017 consolidated financial statement are as follows:

Estimated Impairment of Trade Receivable

As described in Note 5 to the accompanying consolidated financial statements, the determination of estimated

impairment of trade receivable takes into consideration the present value of estimated future cash flows forecast

by management based on foreseeable economic status. This is determined to be material to the financial

statements as a whole and involves significant management judgment; thus, this is determined as a key audit

matter. As of December 31, 2017, allowance for impairment loss of trade receivables was NT$2,495,848

thousand, representing 2.67% of total trade receivables; impairment loss of trade receivables recognized in the

consolidated statements of comprehensive income for the year ended December 31, 2017 was NT$1,429,980

thousand, representing 22.59% of operating expenses.

Our audit procedures included:

1. We understood the policies on impairment of trade receivable and assessed the reasonableness of

impairment of receivables by performing inquiry, inspection and re-performance of related internal

controls.

2. We involved our IT specialists in testing the system that generated trade-receivable related documents used

by management in performing controls.

3. We performed analytical procedures on current and prior years’ receivable balances and write-offs of

allowances for impairment to assess the reasonableness of the recognized impairment loss.

4. We assessed the data and model used in the estimation of receivable impairment, including collection of

impaired receivables and discount rates.

5. We calculated the impairment based on the impairment policy of the Group.

Calculation of Interest Revenue from Acquired Accounts Receivable

As described in Note 4 to the accompanying consolidated financial statements, interest revenue from acquired

accounts receivable consists of small amounts from a large number of debtors; interest revenue is recognized

throughout the periods of individual receivable acquisition contracts using effective interest rates. Contracts

involve various contract periods, principal amounts and interest rates, resulting in large data processing and

complex calculation. Thus, we determined calculation of interest revenue from acquired accounts receivable

as a key audit matter. For the year ended December 31, 2017, interest revenue recognized from acquired

accounts receivable was NT$3,888,908 thousand, representing 19.96% of operating revenue.

Our audit procedures included:

1. We involved our IT specialists in the evaluation of IT general control environment and logic of accounts

receivable interest revenue calculation system used by management.

2. We calculated interest revenue from acquired accounts receivable using effective interest rate to assess the

reasonableness of recognized revenue.

3. We performed analytical procedures using the ratio of the balances of receivables acquired to the

recognized interest revenue of current and prior years to assess the reasonableness of recognized revenue.

Other Matter

We have also audited the parent company only financial statements of the Company as of and for the years

ended December 31, 2017 and 2016 on which we have issued an unmodified opinion.

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

Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in

accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and

International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC

Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial

Supervisory Commission of the Republic of China, and for such internal control as management determines is

necessary to enable the preparation of consolidated financial statements that are free from material misstatement,

whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability

to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going

concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or

has no realistic alternative but to do so.

Those charged with governance, including the audit committee, are responsible for overseeing the Group’s

financial reporting process.

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.

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5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including

the disclosures, and whether the consolidated financial statements represent the underlying transactions and

events in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business

activities within the Group to express an opinion on the consolidated financial statements. We are

responsible for the direction, supervision, and performance of the group audit. We remain solely

responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and

timing of the audit and significant audit findings, including any significant deficiencies in internal control that

we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical

requirements regarding independence, and to communicate with them all relationships and other matters that

may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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 partners on the audit resulting in this independent auditors’ report are Hsin-Wei Tai and

Yu-Wei Fan.

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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TAIWAN ACCEPTANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2017 AND 2016

(In Thousands of New Taiwan Dollars)

2017 2016

ASSETS Amount % Amount %

CURRENT ASSETS

Cash and cash equivalents (Notes 4 and 6) $ 2,861,100 2 $ 2,397,020 2

Financial assets at fair value through profit or loss - current (Notes 4 and 7) 19,728 - 11,155 -

Available-for-sale financial assets - current (Notes 4 and 8) - - 19,088 -

Debt investments with no active market - current (Notes 4, 11 and 33) 811,813 1 640,631 1

Notes and trade receivables from unrelated parties (Notes 4, 12 and 33) 90,033,859 66 74,041,648 67

Notes and trade receivables from related parties (Notes 4, 12 and 32) 1,107,904 1 524,052 1

Finance lease receivables (Notes 4 and 13) 17,952,213 13 12,648,089 11

Other receivables 478,477 1 466,415 -

Inventories (Notes 4 and 14) 452,006 - 252,489 -

Prepayments (Notes 4 and 32) 3,126,277 2 2,643,786 2

Other current assets (Note 32) 152,037 - 135,080 -

Total current assets 116,995,414 86 93,779,453 84

NON-CURRENT ASSETS

Held-to-maturity financial assets - non-current (Notes 4 and 9) 16,632 - 17,095 -

Debt investment with no active market - non-current (Notes 4, 11 and 33) 3,551 - 3,854 -

Investments accounted for using equity method (Notes 4 and 16) 261,461 - 237,281 -

Property, plant and equipment (Notes 4 and 17) 17,203,207 13 15,542,679 14

Intangible assets (Notes 4 and 18) 249,012 - 234,249 -

Deferred tax assets (Notes 4 and 26) 542,044 - 457,671 1

Long-term finance lease receivables (Notes 4 and 13) 948,688 1 1,019,284 1

Other non-current assets 93,523 - 103,309 -

Total non-current assets 19,318,118 14 17,615,422 16

TOTAL $ 136,313,532 100 $ 111,394,875 100

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Short-term borrowings (Note 19) $ 37,290,248 27 $ 29,139,641 26

Short-term bills payable (Note 19) 63,867,603 47 52,438,927 47

Financial liabilities at fair value through profit or loss - current (Notes 4 and 7) - - 1,145 -

Derivative financial liabilities for hedging - current (Notes 4 and 10) 201 - - -

Notes and trade payables to unrelated parties 609,271 - 330,654 -

Notes and trade payables to related parties (Note 32) 838,321 1 526,326 1

Other payables 1,342,354 1 1,077,291 1

Current tax liabilities (Notes 4 and 26) 378,364 - 290,177 -

Provisions - current (Notes 4 and 21) 295,236 - 334,057 -

Current portion of long-term borrowings (Notes 4 and 19) 749,240 1 1,197,964 1

Bonds payable (Notes 4 and 20) 4,342,919 3 3,000,000 3

Guarantee deposits received 9,103,468 7 8,295,432 8

Other current liabilities 1,419,611 1 1,336,357 1

Total current liabilities 120,236,836 88 97,967,971 88

NON-CURRENT LIABILITIES

Long-term borrowings (Note 19) 1,199,177 1 748,936 1

Deferred tax liabilities (Notes 4 and 26) 765,878 1 693,913 -

Deferred revenue - non-current 416 - 4,012 -

Net defined benefit liabilities (Notes 4 and 22) 104,765 - 86,503 -

Total non-current liabilities 2,070,236 2 1,533,364 1

Total liabilities 122,307,072 90 99,501,335 89

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 23)

Capital stock 2,746,292 2 2,746,292 3

Capital surplus 2,541,960 2 2,541,960 2

Retained earnings

Legal reserve 1,677,032 1 1,503,725 1

Special reserve 266,047 - 35,588 -

Unappropriated earnings 3,682,666 3 3,096,921 3

Total retained earnings 5,625,745 4 4,636,234 4

Other equity (312,040) - (230,459) -

Total equity attributable to owners of the Company 10,601,957 8 9,694,027 9

NON-CONTROLLING INTERESTS (Note 23) 3,404,503 2 2,199,513 2

Total equity 14,006,460 10 11,893,540 11

TOTAL $ 136,313,532 100 $ 111,394,875 100

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

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TAIWAN ACCEPTANCE CORPORATION 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)

2017 2016

Amount % Amount %

OPERATING REVENUE (Notes 4, 24 and 32)

Rental revenue $ 7,182,730 37 $ 6,835,538 39

Sales 3,215,449 16 3,370,006 19

Interest revenue from acquired accounts receivable 3,888,908 20 3,355,585 19

Interest revenue from loan 602,090 3 4,240 -

Interest revenue from installment sales 1,282,701 7 1,037,527 6

Agency revenue 613,540 3 768,211 4

Interest revenue from capital leases 2,207,081 11 1,704,557 10

Other operating revenue 489,606 3 498,589 3

Total operating revenue 19,482,105 100 17,574,253 100

OPERATING COSTS (Notes 25 and 32)

Rental cost 6,200,521 32 5,904,802 33

Cost of goods sold 2,976,058 15 3,124,633 18

Financing cost 1,488,810 8 923,554 5

Other operating cost 166,615 1 105,731 1

Total operating costs 10,832,004 56 10,058,720 57

GROSS PROFIT 8,650,101 44 7,515,533 43

OPERATING EXPENSES (Notes 25 and 32) 6,331,461 32 5,581,747 32

OTHER OPERATING INCOME AND EXPENSES,

NET (Notes 25 and 32) 730,684 4 574,770 3

PROFIT FROM OPERATIONS 3,049,324 16 2,508,556 14

NON-OPERATING INCOME AND EXPENSES

Other gains and losses (Note 25) 6,789 - (326,190) (2)

Other income 137,625 1 105,835 1

Share of profit or loss of associates and joint

ventures (Notes 4 and 16) 18,386 - 15,509 -

Gain (loss) from financial assets and liabilities at fair

value through profit or loss (Notes 4 and 7) 1,218 - 1,711 -

Net gain (loss) on disposal of property, plant and

equipment 4,040 - 51 -

Total non-operating income and expenses 168,058 1 (203,084) (1)

(Continued)

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TAIWAN ACCEPTANCE CORPORATION 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)

2017 2016

Amount % Amount %

PROFIT BEFORE INCOME TAX $ 3,217,382 17 $ 2,305,472 13

INCOME TAX EXPENSE (Notes 4 and 26) 688,101 4 467,835 2

NET PROFIT FOR THE YEAR 2,529,281 13 1,837,637 11

OTHER COMPREHENSIVE INCOME (Note 23)

Items that will not be reclassified subsequently to

profit or loss:

Remeasurement of defined benefit plans (19,706) - (10,350) -

Share of the other comprehensive income of

associates and joint ventures accounted for

using the equity method (370) - (948) -

Income tax relating to items that will not be

reclassified subsequently to profit or loss 3,260 - 1,673 -

Items that may be reclassified subsequently to profit

or loss:

Exchange differences on translating foreign

operations (126,497) (1) (470,486) (3)

Cash flow hedges (201) - 721 -

Share of the other comprehensive income of

associates and joint ventures accounted for

using the equity method 2,722 - (2,145) -

Other comprehensive income (loss) for the year,

net of income tax (140,792) (1) (481,535) (3)

TOTAL COMPREHENSIVE INCOME FOR THE

YEAR $ 2,388,489 12 $ 1,356,102 8

NET PROFIT ATTRIBUTABLE TO:

Owners of the Company $ 2,324,227 12 $ 1,733,071 10

Non-controlling interests 205,054 1 104,566 -

$ 2,529,281 13 $ 1,837,637 10

TOTAL COMPREHENSIVE INCOME

ATTRIBUTABLE TO:

Owners of the Company $ 2,228,897 11 $ 1,401,088 8

Non-controlling interests 159,592 1 (44,986) -

$ 2,388,489 12 $ 1,356,102 8

(Continued)

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TAIWAN ACCEPTANCE CORPORATION 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)

2017 2016

Amount % Amount %

EARNINGS PER SHARE (Note 27)

Basic $8.46 $6.41

Diluted $8.46 $6.32

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

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TAIWAN ACCEPTANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

(In Thousands of New Taiwan Dollars)

Equity Attributable to Owners of the Company

Other Equity

Exchange Unrealized

Unregistered Differences on Gain (Loss) on Unrealized

Capital from Retained Earnings Translating Available-for- (Losses) Gains Non-

Bond Capital Special Unappropriated Foreign sale Financial of Cash Flow controlling

Capital Stock Conversion Surplus Legal Reserve Reserve Earnings Operations Assets Hedges Total Total Interests Total Equity

BALANCE, JANUARY 1, 2016 $ 2,672,883 $ 6,299 $ 2,236,636 $ 1,361,220 $ 35,588 $ 2,784,503 $ 95,083 $ (1,053) $ (721) $ 93,309 $ 9,190,438 $ 2,242,326 $ 11,432,764

Appropriation of 2015 earnings:

Legal reserve - - - 142,505 - (142,505) - - - - - - -

Cash dividends distributed by the Company - - - - - (1,269,933) - - - - (1,269,933) - (1,269,933)

Cash dividends distributed by the subsidiaries - - - - - - - - - - - (110,668) (110,668)

Other changes in capital surplus

Changes in capital surplus from investments in

associates and joint ventures accounted for by using

the equity method - - 1,017 - - - - - - - 1,017 (1,017) -

Change in non-controlling interests - - - - - - - - - - - 113,858 113,858

Net profit for the year ended December 31, 2016 - - - - - 1,733,071 - - - - 1,733,071 104,566 1,837,637

Other comprehensive income (loss) for the year ended

December 31, 2016, net of income tax - - - - - (8,215) (323,310) (1,179) 721 (323,768) (331,983) (149,552) (481,535)

Total comprehensive income (loss) for the year ended

December 31, 2016 - - - - - 1,724,856 (323,310) (1,179) 721 (323,768) 1,401,088 (44,986) 1,356,102

Unregistered capital converted to capital stock 6,299 (6,299) - - - - - - - - - - -

Convertible bonds converted to capital stock 67,110 - 304,307 - - - - - - - 371,417 - 371,417

BALANCE, DECEMBER 31, 2016 2,746,292 - 2,541,960 1,503,725 35,588 3,096,921 (228,227) (2,232) - (230,459) 9,694,027 2,199,513 11,893,540

Appropriation of 2016 earnings:

Legal reserve - - - 173,307 - (173,307) - - - - - - -

Special reserve - - - - 230,459 (230,459) - - - - - - -

Cash dividends distributed by the Company - - - - - (1,320,967) - - - - (1,320,967) - (1,320,967)

Cash dividends distributed by the subsidiaries - - - - - - - - - - - (128,367) (128,367)

Net profit for the year ended December 31, 2017 - - - - - 2,324,227 - - - - 2,324,227 205,054 2,529,281

Other comprehensive income (loss) for the year ended

December 31, 2017, net of income tax - - - - - (13,749) (84,343) 2,963 (201) (81,581) (95,330) (45,462) (140,792)

Total comprehensive income (loss) for the year ended

December 31, 2017 - - - - - 2,310,478 (84,343) 2,963 (201) (81,581) 2,228,897 159,592 2,388,489

Issuance of common stock of subsidiaries - - - - - - - - - - - 1,173,765 1,173,765

BALANCE, DECEMBER 31, 2017 $ 2,746,292 $ - $ 2,541,960 $ 1,677,032 $ 266,047 $ 3,682,666 $ (312,570) $ 731 $ (201) $ (312,040) $ 10,601,957 $ 3,404,503 $ 14,006,460

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

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TAIWAN ACCEPTANCE CORPORATION 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

Profit before income tax $ 3,217,382 $ 2,305,472

Adjustments for:

Interest income (8,647,375) (7,011,740)

Depreciation expenses 4,896,647 4,633,072

Impairment loss recognized on trade receivables 1,664,162 1,431,729

Finance costs 1,488,810 923,554

Net (gain) loss on foreign currency exchange (160,984) 88,478

Reversal of provisions (38,821) (93,115)

Share of profit of associates and joint ventures (18,386) (15,509)

Amortization expenses 16,740 14,507

Net gain (loss) on disposal of property, plant and equipment (4,040) (51)

Government grants revenue (3,596) (20,504)

Impairment loss recognized on assets leased to others 1,299 30,372

Gain on disposal of investments accounted for using equity

method - (1,094)

Changes in operating assets and liabilities

Financial assets at fair value through profit or loss (8,573) 10,259

Notes and trade receivables from unrelated parties (17,518,628) (14,342,706)

Notes and trade receivables from related parties (583,852) (180,608)

Other receivables (18,669) (11,541)

Inventories (199,517) 152,540

Prepayments (507,318) 227,148

Other current assets (16,957) (8,146)

Finance lease receivables (5,438,567) (3,511,859)

Other operating assets (40,007) (50)

Financial liabilities at fair value through profit or loss (1,145) (1,759)

Notes and trade payables to unrelated parties 278,617 41,616

Notes and trade payables to related parties 311,995 47,131

Other payables 150,616 78,650

Available-for-sale operating assets held for rental to others (6,488,767) (4,561,225)

Proceeds from guarantee deposits received 863,617 720,609

Other current liabilities 83,251 10,242

Net defined benefit liabilities 1,816 (36,128)

Deferred revenue 3 (494)

Cash used in operations (26,720,247) (19,081,150)

Interest received 8,508,294 6,951,624

Interest paid (1,448,373) (887,724)

Income tax paid (605,731) (383,267)

Net cash used in operating activities (20,266,057) (13,400,517)

(Continued)

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TAIWAN ACCEPTANCE CORPORATION 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 INVESTING ACTIVITIES

Decrease (increase) in debt investments with no active market $ (170,683) $ 2,372,294

Acquisition of property, plant and equipment (128,574) (112,131)

Decrease in refundable deposits 49,793 5,991

Proceeds from disposal of property, plant and equipment 43,092 41,882

Acquisition of intangible assets (32,532) (97,761)

Proceeds from sale of available-for-sale financial assets 18,497 13,022

Acquisition of associates investment accounted for using equity

method (10,812) (8,746)

Dividend received 7,265 6,556

Net cash (outflow) inflow on acquisition of subsidiaries (1,235) 6,612

Net cash (used in) generated from investing activities (225,189) 2,227,719

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from short-term bills payable 11,505,000 5,975,000

Proceeds from short-term borrowings 8,403,609 6,482,441

Dividends paid (1,449,334) (1,380,601)

Proceeds from issue of bonds payable 4,341,475 -

Repayments of bond payables (3,000,000) -

Proceeds from long-term borrowings 1,517 52,483

Increase in non-controlling interests 1,173,765 -

Net cash generated from financing activities 20,976,032 11,129,323

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE

OF CASH AND CASH EQUIVALENTS HELD IN FOREIGN

CURRENCIES (20,706) (94,770)

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS 464,080 (138,245)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE

YEAR 2,397,020 2,535,265

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 2,861,100 $ 2,397,020

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

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TAIWAN ACCEPTANCE CORPORATION 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

Taiwan Acceptance Corporation (the “Company”) was incorporated in Taipei, Taiwan, Republic of China

(ROC) on April 12, 1990. The Company and its subsidiaries mainly focus on accounts receivable

purchasing and the equipment leasing business of related products such as automobiles namely new and

used cars, motorcycles, scooters, and consumer goods.

The Company’s shares were listed on the Taipei Exchange (formerly called the Taiwan GreTai Securities

Market) on December 4, 1999, and have been listed on the Taiwan Stock Exchange since September 19,

2001.

The Company’s parent company is Yulon Motor Company Ltd. (“Yulon Company”) which held 45.75% of

ordinary shares of the Company as of December 31, 2017 and 2016, respectively. The Company’s

ultimate parent company is Yulon Company.

The financial statements are presented in New Taiwan dollars, which is the Company’s functional currency.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors, and authorized

for issue on March 26, 2018.

3. APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports

by Securities Issuers and the International Financial Reporting Standards (IFRS), International

Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC)

(collectively, the “IFRSs”) endorsed and issued into effect by the 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 transactions and goodwill.

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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 significant 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 32 for related disclosures.

b. The Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs

endorsed by the FSC for application starting from 2018.

New, Amended or Revised Standards and Interpretations

(the “New IFRSs”)

Effective Date

Announced by IASB (Note 1)

Annual Improvements to IFRSs 2014-2016 Cycle Note 2

Amendment to IFRS 2 “Classification and Measurement of

Share-based Payment Transactions”

January 1, 2018

Amendments to IFRS 4 “Applying IFRS 9 Financial Instruments with

IFRS 4 Insurance Contracts”

January 1, 2018

IFRS 9 “Financial Instruments” January 1, 2018

Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of

IFRS 9 and Transition Disclosures”

January 1, 2018

IFRS 15 “Revenue from Contracts with Customers” January 1, 2018

Amendments to IFRS 15 “Clarifications to IFRS 15 Revenue from

Contracts with Customers”

January 1, 2018

Amendment to IAS 7 “Disclosure Initiative” January 1, 2017

Amendments to IAS 12 “Recognition of Deferred Tax Assets for

Unrealized Losses”

January 1, 2017

Amendments to IAS 40 “Transfers of Investment Property” January 1, 2018

IFRIC 22 “Foreign Currency Transactions and Advance

Consideration”

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.

Except for the following explanations, the Company considers that the application of the above

standards and interpretations will not cause any material changes to the accounting policies of the

Group.

- 15 -

IFRS 9 “Financial Instruments” and related amendment

1) Recognition, measurement and impairment of financial assets

With regards 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 the

contractual cash flows, the financial assets are measured at amortized cost and are assessed for

impairment continuously with impairment loss recognized in profit or loss, if any. 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 the collecting of contractual cash flows and the selling of 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 gain or loss 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.

However, the Group may make an irrevocable election to present subsequent changes in the fair

value of an equity investment (that is not held for trading) in other comprehensive income, with

only dividend income generally recognized in profit or loss. No subsequent impairment

assessment is required, and the cumulative gain or loss previously recognized in other

comprehensive income cannot be reclassified from equity to profit or loss.

Based on an analysis of the Group’s financial assets as at December 31, 2017 on the basis of the

facts and circumstances that exist at that date, the Group has performed an assessment of the impact

of IFRS 9 to the classification and measurement of financial assets as follows:

Debt investments classified as held-to-maturity financial assets and measured at amortized cost will

be classified as measured at amortized cost under IFRS 9 because on initial recognition, the

contractual cash flows that are solely payments of principal and interest on the principal outstanding

and these investments are held within a business model whose objective is to collect the contractual

cash flows.

IFRS 9 requires impairment loss on financial assets to be recognized by using the “Expected Credit

Losses Model”. The credit 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 the 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.

- 16 -

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 an assessment that the Group will apply the simplified approach to

recognize lifetime expected credit losses for trade receivables and lease receivables. In relation to

the debt instrument investments and the financial guarantee contracts, the Group will assess whether

there has been a significant increase in the credit risk to determine whether to recognize 12-month

or lifetime expected credit losses.

The Group has assessed that retrospectively applying the requirements for the classification,

measurement and impairment of financial assets under IFRS 9 will have no material impact on

assets, liabilities and equity as of January 1, 2018.

2) Hedge accounting

The main changes in hedge accounting amended the application requirements for hedge accounting

to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes

include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening

the risks eligible for hedge accounting of non-financial items; (2) changing the way the hedging cost

of derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing

retrospective effectiveness assessment with the principle of economic relationship between the

hedging instrument and the hedged item.

An assessment of the Group’s current hedging relationships indicates that they will qualify as

continuing hedging relationships upon application of IFRS 9.

Except for the above impacts, as of the date the consolidated financial statements were authorized for

issue, the Group continues assessing other possible impacts that application of the aforementioned

amendments and the related amendments to the Regulations Governing the Preparation of Financial

Reports by Securities Issuers will have on the Group’s financial position and financial performance, and

will disclose these other impacts when the assessment is completed.

c. New IFRSs in issue but not yet endorsed by the FSC

New IFRSs

Effective Date

Announced by IASB (Note 1)

Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019

Amendments to IFRS 9 “Prepayment Features with Negative

Compensation”

January 1, 2019 (Note 2)

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets

between an Investor and its Associate or Joint Venture”

To be determined by IASB

IFRS 16 “Leases” January 1, 2019 (Note 3)

IFRS 17 “Insurance Contracts” January 1, 2021

Amendments to IAS 19 “Plan Amendment, Curtailment or

Settlement”

January 1, 2019 (Note 4)

Amendments to IAS 28 “Long-term Interests in Associates and Joint

Ventures”

January 1, 2019

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.

- 17 -

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.

Except for the following explanations, the Company considers that the application of the above

standards and interpretations will not cause any material changes to the accounting policies of the

Group.

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.

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.

IFRIC 23 “Uncertainty Over Income Tax Treatments”

IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Group should assume

that the taxation authority will have full knowledge of all related information when making related

examinations. If the Group concludes that it is probable that the taxation authority will accept an

uncertain tax treatment, the Group should determine the taxable profit, tax bases, unused tax losses,

unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its

income tax filings. If it is not probable that the taxation authority will accept an uncertain tax

treatment, the Group should make estimates using either the most likely amount or the expected value

of the tax treatment, depending on which method the entity expects to better predict the resolution of

the uncertainty. The Group has to reassess its judgments and estimates if facts and circumstances

change.

On initial application, the Group shall either apply IFRIC 23 retrospectively to each prior reporting

period presented and restate the information of comparative period, if this is possible without the use of

hindsight, or recognize the cumulative effect of the initial application of IFRIC 23 at the date of initial

application.

Except for the above impact, as of the date the 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.

- 18 -

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 by the FSC.

Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis, except for financial

instruments that are measured at fair value and net defined benefit liabilities which are recognized at the

present value of the defined benefit obligations less the fair value of the 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 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:

a. Assets held primarily for the purpose of trading;

b. Assets expected to be realized within an operating cycle after the reporting period; and

c. Cash and cash equivalents.

Current liabilities include:

a. Liabilities held primarily for the purpose of trading;

b. Liabilities due to be settled within an operating cycle after the reporting period; and

c. Liabilities for which the Company does not have an unconditional right to defer settlement for at least

an operating cycle after the reporting period. Terms of a liability that could, at the option of the

counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other assets and liabilities are classified as noncurrent.

The operating cycle of the Company, Shinshin Credit Corporation (“Shinshin”), TAC Leasing (Suzhou)

Co., Ltd. (“TAC Leasing (Suzhou)”), TAC Financial Leasing Co., Ltd., Yulon Motor Finance (China) Co.,

Ltd. and Yu Rich Financial Services Co., Ltd. (“Yu Rich”), all of which are more than one year, is used as

the basis for determining liquidity in the classification of balance sheet accounts.

- 19 -

Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company, and the entities

controlled by the Company. Income and expenses of subsidiaries acquired or disposal of during the period

are included in the consolidated statement of profit or loss and other comprehensive income from the

effective date of acquisition up to the effective date of disposal. When necessary, adjustments are made to

the financial statements of subsidiaries to bring their accounting policies into line with those used by the

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

consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company,

and to the non-controlling interests even if this results in the non-controlling interests having a deficit

balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control

over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s

interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the

subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and

the fair value of the consideration paid or received is recognized directly in equity and attributed to the

owners of the Company.

See Note 15, Table 8 and Table 9 for the detailed information of subsidiaries (including the percentage of

ownership and main business).

Foreign Currencies

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 year in which they arise.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s

foreign operations (including of the subsidiaries, associates and joint ventures in other countries or

currencies used different with the Company) are translated into New Taiwan dollars using exchange rates

prevailing at the end of each reporting period. Income and expense items are translated at the average

exchange rates for the year. Exchange differences arising are recognized in other comprehensive income,

attributed to the owners of the Company and non-controlling interests as appropriate.

Inventories

Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made by

item. The Group provides dealers with display areas, and cars for display, and for sale, and charges

display fees till the cars are sold. Before the ownership of cars is transferred to dealers, the cars are treated

as the Group’s inventories.

Investments in Associates and Joint Ventures

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor

an interest in a joint venture.

The Group uses the equity method to account for its investments in associates and joint ventures.

Under the equity method, investments in an associate and a joint venture are initially recognized at cost and

adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of

the associate. The Group also recognizes the changes in the Group’s share of equity of associates and

joint ventures attributable to the Group.

- 20 -

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets

and liabilities of an associate at the date of acquisition is recognized as goodwill, which is included within

the carrying amount of the investment and is not amortized. Any excess of the Group’s share of the net

fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is

recognized immediately in profit or loss.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset

by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is

deducted from the carrying amount of the investment. Any reversal of that impairment loss is recognized

to the extent that the recoverable amount of the investment subsequently increases.

When a Group entity transacts with its associate, profits and losses resulting from the transactions with the

associate are recognized in the Group’ consolidated financial statements only to the extent of interests in the

associate that are not related to the Group.

Property, Plant and Equipment

Property, plant and equipment (including assets held under finance leases) are stated at cost, less recognized

accumulated depreciation and recognized accumulated impairment loss.

Depreciation of property, plant and equipment is recognized using the straight-line method. Each

significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are

depreciated over the lease term. The estimated useful lives, residual values and depreciation method 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.

Intangible Assets

a. Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and

subsequently measured at cost less accumulated amortization and accumulated impairment loss.

Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and

amortization method are reviewed by the Company at the end of each reporting period, with the effect

of any changes in estimate accounted for on a prospective basis. Intangible assets with indefinite

useful lives that are acquired separately are measured at cost less accumulated impairment loss.

b. Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the

carrying amount of the asset is recognized in profit or loss.

Impairment of Tangible and Intangible Assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible

assets for any indication of impairment loss. If any such indication exists, the recoverable amount of the

asset is estimated in order to determine the extent of the impairment loss. When it is not possible to

estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the

cash-generating unit to which the asset belongs.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for

impairment at least annually, and wherever there is an indication that the asset may be impaired.

- 21 -

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable

amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying

amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting

impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit

is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount

(amortization or depreciation subtracted) that would have been determined had no impairment loss been

recognized on the asset or cash-generating unit in prior years. A reversal of an impairment loss is

recognized in profit or loss.

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 measured at fair value. 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 FVTPL) are added to or deducted from the fair value of the

financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly

attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized

immediately in profit or loss.

a. Financial assets

All regular way purchases or sales of financial assets are recognized, and derecognized on a settlement

date basis.

1) Measurement category

Financial assets are classified into the following categories: Financial assets at FVTPL,

held-to-maturity investments, available-for-sale financial assets, and loans and receivables.

a) Financial assets at fair value through profit or loss

Financial assets are classified as at FVTPL when the financial assets is either held for trading or

it is designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, with any gain or loss arising on

remeasurement recognized in profit or loss. Fair value is determined in the manner described

in Note 31.

b) Held-to-maturity financial assets

The central government bond which the Group has the positive intent and ability to hold until

maturity is classified as held-to maturity financial assets.

After initial recognition, held-to-maturity investments are measured at amortized cost using the

effective interest method less any impairment.

c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as

available-for-sale or are not classified as loans and receivables, held-to-maturity investments or

financial assets at fair value through profit or loss.

- 22 -

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount

of available-for-sale monetary financial assets relating to changes in foreign currency exchange

rates, interest income calculated using the effective interest method and dividends on

available-for-sale equity investments are recognized in profit or loss. Other changes in the

carrying amount of available-for-sale financial assets are recognized in other comprehensive

income and accumulated under the investments revaluation reserve account. When the

investment is disposed of or is determined to be impaired, the cumulative gain or loss that was

previously accumulated in the investments revaluation reserve account is reclassified to profit or

loss.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the

Company’s right to receive the dividends is established.

d) Loans and receivables

Loans and receivables (including cash and cash equivalents, notes and trade receivables, finance

lease receivables, debt investments with no active market and other 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 equivalent includes time deposits with original maturities within 3 months from the date of

acquisition, highly liquid, readily convertible to a known amount of cash, and 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 measured at FVTPL, are assessed for indicators of impairment at

the end of each reporting period. Financial assets are considered 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 notes and trade receivables, finance lease

receivables and other receivables, assets are assessed for objective evidence of impairment

collectively even if they have been assessed as not impaired individually. Objective evidence of

impairment for a portfolio of receivables could include the Group’s past experience of collecting

payments, and an increase in the number of delayed payments, as well as observable changes in

national or local economic conditions that correlate with default on trade receivables.

For financial assets carried at amortized cost, 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.

If the impairment loss decreases, and the decrease can be related objectively to events occurring

after the recognition of impairment, the previously recognized impairment losses is reversed

through profit or loss to the extent that the carrying amount of the investment at the date the

impairment is reversed do not exceed what the amortized cost would have been had the impairment

not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the

security below its cost is considered to be objective evidence of impairment.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses

previously recognized in other comprehensive income are reclassified to profit or loss in the period

the asset is impaired.

- 23 -

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or

loss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment

loss is recognized in other comprehensive income. In respect of available-for-sale debt securities,

the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of

the investment can be objectively related to an event occurring after the recognition of the

impairment loss.

3) Derecognition of financial assets

The Group derecognizes financial assets only when the contractual rights to the cash flows from the

assets expire, or when it transfers the financial assets and substantially all the risks and rewards of

ownership of the asset to another party.

On the full derecognition of a financial asset, the differences between the assets’ carrying amount,

and the sum of the consideration received, and receivable, and the cumulative gain or loss that had

been recognized in other comprehensive income are recognized in profit or loss.

b. Equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as

equity in accordance with the substance of the contractual arrangements and the definitions of a

financial liability and an equity instrument.

Equity instruments issued by a group entity are recognized at the proceeds received, net of direct issue

costs.

Repurchase of the Company’s own equity instruments is recognized in and deducted directly from

equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the

Company’s own equity instruments.

c. Financial liabilities

1) Subsequent measurement

Financial liabilities, other than those measured at FVTPL are measured at amortized cost using the

effective interest method.

Financial liabilities are classified as at FVTPL when the financial liabilities are held for trading.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on

remeasurement recognized in profit or loss. Fair value is determined in the manner described in

Note 31.

2) Derecognition of financial liabilities

The Group derecognizes financial liabilities only when the contractual obligation is dissolved,

canceled or expired. The difference between the carrying amount of the financial liability

derecognized, and the consideration paid is recognized in profit or loss.

d. Convertible bonds

Convertible bonds issued by the Group are classified into financial liabilities and equity separately in

accordance to the nature of the contractual arrangements, and the definitions of financial liability, and

equity instrument.

- 24 -

Upon initial recognition, the fair value of the liability component is estimated using the prevailing

market interest rate for similar nonconvertible instruments. This amount is recorded as a liability on

an amortized cost basis using the effective interest method until extinguished upon conversion or on

bond maturity. Any embedded derivative liability is measured at fair value.

The conversion option classified as equity is determined by deducting the amount of the liability

component from the fair value of the compound instrument as a whole. The conversion option is

recognized, and included in equity, net of income tax effects, and is not subsequently remeasured. In

addition, the conversion option classified as equity will remain in equity, and when the conversion

option is exercised, the balance recognized in equity will be transferred to capital surplus - share

premium. When the conversion option remains unexercised on bond maturity, the balance recognized

in equity will be transferred to capital surplus - share premium. No gain or loss is recognized in profit

or loss upon conversion or upon expiration of the conversion option.

Transaction costs that relate to the issue of the convertible bonds are allocated to the liability and equity

components in proportion to the allocation of the gross proceeds.

e. Derivative financial instruments

The Group manages its exposure to interest rate risks and foreign exchange rate risks through derivative

financial instruments - interest rate swaps and cross currency swaps.

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into, and

are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain

or loss is recognized in profit or loss immediately, but if the derivative is designated, and effective as a

hedging instrument, the timing of the recognition in profit or loss depends on the nature of the hedge

relationship. When the fair value of a derivative financial instrument is positive, the derivative is

recognized as a financial asset; otherwise, the derivative is recognized as a financial liability.

Hedge Accounting

The Group designates certain hedging instruments as cash flow hedges.

The effective portion of changes in the fair value of derivatives that are designated, and qualify as cash flow

hedges is recognized in other comprehensive income. The gain or loss on the ineffective portion is

recognized immediately in profit or loss.

Hedge accounting is discontinued prospectively when the Group revokes the designated hedging

relationship; when the hedging instrument expires or is sold, terminated, or exercised; or when the hedging

instrument no longer meets the criteria for hedge accounting.

The cumulative gain or loss on the hedging instrument that has been previously recognized in other

comprehensive income from the period when the hedge was effective remains separately in equity until the

forecast transaction occurs. When a forecast transaction is no longer expected to occur, the gain or loss

accumulated in equity is recognized immediately in profit or loss.

Provisions

Provisions are measured at the best estimate of the consideration required to settle the present obligation at

the end of the reporting period, taking into account the risks, and uncertainties surrounding the obligation.

- 25 -

The Group’s provision is for contracts with guarantees which include (1) car loan contracts signed by the

Group’s customers with financial institutions in which the Group provides payment guarantees as well as

account management services; the Group is responsible for the collection of loan repayments and will

assume the risk of loss on uncollectable loans in the event of default; (2) assessed free service costs that the

Group may incur during the warranty period. The provision is subsequently measured under IAS 37

“Provision, Contingent Liabilities and Contingent Assets”.

Revenue Recognition

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

a. Rental income

A lease is classified as a finance lease if it transfers substantially all the risks, and rewards upon transfer

of property or asset. Otherwise, it is classified as an operating lease.

Amounts due from lessees under finance leases are recognized as receivables at the amount of the

Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to

reflect a constant periodic rate of return on the Group’s net investment outstanding on the leases.

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

b. Sales revenue

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

1) The Group has transferred the significant risks and rewards of ownership of the goods to the buyer;

2) The Group retains neither continuing managerial involvement nor effective control over the goods

sold;

3) The amount of revenue can be measured reliably;

4) It is probable that the economic benefits associated with the transaction will flow to the Group; and

5) The transaction costs incurred or to be incurred can be measured reliably.

c. Interest revenue from acquired accounts receivable.

The Company, Shinshin and Yu Rich undertake business regarding the acquisition of accounts

receivable. After transferring accounts receivable, the seller is not responsible for unpaid overdue

accounts of the debtor. The difference between acquisition payment, and account receivable principal

is recognized as unearned interest revenue, and amortized as interest revenue from acquired accounts

receivable using effective interest method throughout the contract term. In addition, the deferred gain

recognized from acquiring the service contract between third party, and financial institutions is

recognized evenly throughout the contract period as interest revenue from acquired accounts receivable.

d. Installment sales interest revenue

The main business of the Company and Shinshin is installment financing services. The difference

between installment price and sales price is recognized as unrealized interest revenue, and is recognized

as installment sales interest revenue using interest method during the installment period. Unrealized

interest revenue is deducted from notes, and accounts receivable.

- 26 -

e. Interest revenue from loan

Yulon Motor Finance (China) Co., Ltd. engages in vehicle and dealer operating equipment loans in

China. The difference between payment, and loan principal is recognized as unearned interest revenue,

and amortized as interest revenue from loan using effective interest method throughout the loan period.

f. Agency revenue

The customers of the Company and Shinshin signed car loan contracts with banks. The Company and

Shinshin act as car loan agents and provided customers with account management services. Under the

contracts, banks pay agency fees to the Company and Shinshin based on the payment terms of each

contract. The Company and Shinshin recognize this agency revenue on an accrual basis. The

Company and Shinshin are responsible for repaying any uncollectable loans arising from customer

defaults.

g. Other operating revenue

Other operating revenue is recognized when the profit earning process is complete or near complete,

and realized or realizable. Related cost is recognized under matching principle.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and

rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessee

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

Government Grants

Government grants are recognized when there is reasonable assurance that the Group will comply with the

conditions attached to them, and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the

Group recognizes as expenses the related costs for which the grants are intended to compensate.

Specifically, government grants whose primary condition is that the Group should buy, construct or

otherwise acquire non-current assets are recognized as deferred revenue, and transferred to profit or loss on

a systematic and rational basis over the useful lives of the related assets.

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.

- 27 -

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit

retirement benefit plans are determined using the projected unit credit method. Service cost (including

current service cost), and net interest on the net defined benefit liability (asset) 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 (asset) represents the actual deficit (surplus) in the Group’s defined benefit

plan. Any surplus resulting from this calculation is limited to the present value of any refunds from

the plans or reductions in future contributions to the plans.

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.

Taxation

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

a. Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for

as income tax in the year the shareholders approve the retention of these earnings.

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 future taxable temporary differences. Deferred

tax assets are generally recognized for all future deductible temporary differences and unused loss

carryforward to the extent that it is probable that taxable profits will be available for deduction.

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

subsidiaries and associates, and interests in joint arrangements, 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. Deferred tax assets arising from deductible temporary differences

associated with such investments and interests are only recognized to the extent that it is probable that

there will be sufficient taxable profits against which to utilize the benefits of the temporary differences

and they are expected to reverse in the foreseeable future.

The carrying amounts of deferred tax assets are 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. Previously unrecognized deferred tax assets are also

reviewed at the end of each reporting period and recognized to the extent that they have become

probable that future taxable profit will allow the deferred tax asset to be recovered.

- 28 -

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in

which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted

or substantively enacted by the end of the reporting period. The measurement of deferred tax

liabilities and assets reflects the tax consequences of how the Company expects, at the end of the

reporting period, to recover or settle the carrying amount of its assets and liabilities.

c. Current and deferred tax

Current and deferred tax are recognized in profit or loss, except when they relate to items that are

recognized in other comprehensive income or directly in equity, in which case, the current and deferred

tax are also recognized in other comprehensive income or directly in equity respectively. Where

current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is

included in the accounting for the business combination.

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.

Main source of assumptions and uncertainties are as follows. Such assumptions and uncertainties may

lead to material adjustments toward to assets, and liabilities in the following fiscal year.

Estimated Impairment of Trade Receivable

When there is objective evidence of impairment loss, the Company takes into consideration the estimation

of future cash flows. The amount of the impairment loss is measured as 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. Where the actual future cash flows are less than expected, a material

impairment loss may arise.

Impairment of Property, Plant and Equipment

The impairment of property, plant and equipment was based on the recoverable amount of those assets,

which is the higher of their fair value less costs to disposal or their value in use. Any changes in the

market price or future cash flows will affect the recoverable amount of those assets, and may lead to

recognition of additional loss or reversal of impairment losses.

6. CASH AND CASH EQUIVALENTS

December 31

2017 2016

Cash on hand $ 2,499 $ 1,455

Checking accounts and demand deposits 2,804,106 2,233,571

Time deposits 54,495 161,994

$ 2,861,100 $ 2,397,020

- 29 -

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS - CURRENT

December 31

2017 2016

Financial assets held for trading

Non-derivative financial assets

Beneficiary certificates - mutual funds $ 19,728 $ 11,155

Financial liabilities held for trading

Derivative financial liabilities

Interest rate swap contracts $ - $ 1,145

The Group entered into interest rate swap contracts to hedge against exposures due to interest rate

fluctuations of assets and liabilities. Interest rate swap contracts in the Group’s possession did not qualify

for hedge accounting; thus, the Company did not apply hedge accounting.

At the end of the reporting period, outstanding interest rate swap contracts not under hedge accounting were

as follows:

Notional Amounts

(In Thousands) Maturity Date

Interest Rates -

Payment Interest Rates - Receipt

December 31, 2016

$ 200,000 2017.03.27 0.950% Note

300,000 2017.06.01 0.975% Note

200,000 2017.06.19 0.970% Note

200,000 2017.07.31 0.950% Note

Note: The receipt interest rates are based on the three months TAIBOR - Reuters interest rate prevailing

on two operating days before the IRS contract issue date.

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31

2017 2016

Current

Foreign investments

Non-guaranteed wealth management products $ - $ 19,088

The counterparties to the wealth management products of the Group are Agricultural Bank of China and

China Minsheng Bank, both renowned banks in mainland China.

- 30 -

9. HELD-TO-MATURITY FINANCIAL ASSETS - NON-CURRENT

December 31

2017 2016

Domestic investments

Central Government Development Bonds $ 16,632 $ 17,095

a. The Company and Shinshin invested in Central Government Development Bonds which are recognized

as held to maturity financial assets - non-current with yearly payment coupon rates of 3.75% and 1.42%

and with maturity dates of August 16, 2022 and February 13, 2021, respectively.

b. As of December 31, 2017 and 2016, the Company and Shinshin pledged Central Government

Development Bonds with face values of $11,000 thousand and $7,200 thousand, respectively, as

guarantee deposits for evidence of claims in the courthouse.

10. DERIVATIVE FINANCIAL INSTRUMENTS FOR HEDGING - CURRENT

December 31

2017 2016

Derivative financial liabilities under hedge accounting

Cash flow hedges - interest rate swaps $ 201 $ -

The Group entered into interest rate swap (IRS) contracts to mitigate the risk of adverse changes in interest

rates on the cash flow exposure related to outstanding floating-rate debts. The terms of IRS contracts are

identical to those for debts under hedging; thus, the Company’s management considered these contracts a

highly effective tool for hedging. The outstanding IRS contracts at the end of the reporting period were as

follows:

Notional Amounts

(In Thousands) Maturity Date Interest Rates - Receipt

Interest Rates -

Payment

December 31, 2017

$ 300,000 108.4.25 Note 0.745%

200,000 108.4.25 Note 0.740%

Note: The receipt interest rates are based on the three months TAIBOR - Reuters interest rate prevailing

on two operating days before the IRS contract issue date.

- 31 -

11. DEBT INVESTMENTS WITH NO ACTIVE MARKET

December 31

2017 2016

Reserve account $ 285,410 $ 275,663

Pledged time deposits 10,951 11,554

Time deposits with original maturity more than 3 months 461,068 343,234

Bank deposit for specified purpose 57,935 14,034

$ 815,364 $ 644,485

Current $ 811,813 $ 640,631

Non-current 3,551 3,854

$ 815,364 $ 644,485

Refer to Note 33 for information relating to debt investments with no active market pledged as security.

12. NOTES AND TRADE RECEIVABLES

All notes and trade receivables of the Group are from operating activities.

December 31

2017 2016

Classified according to installment and non-installment

accounts receivable

Installment accounts receivable

Less than one year $ 39,327,551 $ 35,565,729

1-2 years 28,120,811 24,108,286

2-3 years 19,886,327 14,773,022

Over 3 years 13,093,027 9,167,740

100,427,716 83,614,777

Less: Unrealized interest revenue (10,399,348) (7,760,402)

Less: Allowance for impairment loss (2,495,848) (2,073,883)

87,532,520 73,780,492

Non-installment accounts receivable 3,609,243 785,208

Accounts receivable, net $ 91,141,763 $ 74,565,700

a. Installment account receivables

Installment accounts receivable include accounts receivable from acquisitions, installment sales, and

promotions of car loans.

Principal and interest are collected monthly. For delayed payments, interest is accrued on the basis of

the number of days that payments are overdue. Based on past experience and macroeconomic factors,

the overdue receivables that are over 180 days due are considered uncollectible or default will likely

occur. Therefore, for receivables which remain unsettled after 180 days of due date, the amounts are

written off. For receivables within the above mentioned time period, uncollectable amounts are

estimated according to past experience and macroeconomic factors.

- 32 -

b. Non-installment accounts receivable

These are mainly accounts receivable for auto vehicles on display. Most of the related customers are

car dealers within Yulon Group; the accounts receivable did not exhibit signs of default or impairment.

The clients of the Group are widely dispersed and are unrelated; thus, credit risk is limited.

c. The aging of receivables was as follows:

December 31

2017 2016

Not past due $ 92,734,763 $ 75,954,665

1-180 days 842,828 635,573

More than 180 days 60,020 49,345

$ 93,637,611 $ 76,639,583

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

d. Movements in the allowance for impairment loss recognized on notes receivable, and trade receivables

were as follows:

Assessed

Impairment

Individually

Assessed

Impairment by

Group Total

Balance at January 1, 2016 $ 11,393 $ 1,627,253 $ 1,638,646

Add: Impairment losses (reversed)

recognized on receivables (1,200) 1,229,425 1,228,225

Deduct: Amounts written off as

uncollectible - (784,572) (784,572)

Foreign exchange translation gains and losses - (8,416) (8,416)

Balance at December 31, 2016 10,193 2,063,690 2,073,883

Add: Impairment losses (reversed)

recognized on receivables (1,200) 1,431,180 1,429,980

Deduct: Amounts written off as

uncollectible - (1,008,369) (1,008,369)

Foreign exchange translation gains and losses - 354 354

Balance at December 31, 2017 $ 8,993 $ 2,486,855 $ 2,495,848

As of December 31, 2017 and 2016, the allowance for impairment loss included allowances for

individually impaired trade receivables from customers that were in the process of liquidation or

experiencing severe financial difficulties and were in the amounts of $8,993 thousand and $10,193

thousand, respectively. The Group did not hold any collateral over these balances.

- 33 -

13. FINANCE LEASE RECEIVABLES

December 31

2017 2016

Gross investment in leases

Up to one year $ 9,672,348 $ 8,138,905

More than one year and up to five years 12,804,654 8,244,486

More than five year 7,447 10,339

22,484,449 16,393,730

Less: Unearned finance income (2,612,540) (1,975,414)

Less: Allowance for uncollectible lease payments (971,008) (750,943)

Present value of minimum lease payments $ 18,900,901 $ 13,667,373

Finance lease receivables

Up to one year $ 8,638,488 $ 7,183,165

More than one year and up to five years 11,226,480 7,225,562

More than five year 6,941 9,589

19,871,909 14,418,316

Less: Allowance for uncollectible lease payments (971,008) (750,943)

Finance lease receivables $ 18,900,901 $ 13,667,373

The Group’s lease agreements for cars and equipment have an average lease term of 2.45 years.

The implicit interest rates for finance leases were determined at the contract date and will not be adjusted.

The interest rates inherent in finance leases were approximately 4.14%-14.83% and 4.43%-14.57% per

annum as of December 31, 2017 and 2016, respectively.

The aging of receivables was as follows:

December 31

2017 2016

Not past due $ 18,603,940 $ 12,987,816

1-180 days 709,548 873,910

More than 180 days 558,421 556,590

$ 19,871,909 $ 14,418,316

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

Movements in the allowance for impairment loss recognized on finance lease receivables were as follows:

For the Year Ended December 31

2017 2016

Balance at January 1 $ 750,943 $ 603,356

Add: Impairment losses recognized on receivables 234,182 203,504

Foreign exchange translation gains and losses (14,117) (55,917)

Balance at December 31 $ 971,008 $ 750,943

- 34 -

14. INVENTORIES

December 31

2017 2016

Motor vehicles $ 452,006 $ 252,489

Under transaction contracts between suppliers and the Company, suppliers agree to sell automobiles to auto

dealers through the Company. In addition, display contracts were also signed between the Company and

auto dealers. Under such contracts, auto dealers are not entitled to alter the position or dispose of the auto

vehicles on display. Display fees were charged by the Company during the display period. The

Company is fully responsible in the event of any vehicle damage. However, auto dealers are responsible

to provide auto insurance for vehicles on display with the Company as the only beneficiary.

15. SUBSIDIARIES

a. Subsidiaries included in the consolidated financial statements

Entities included in the Group’s consolidated financial statements were as follows:

% of Ownership

December 31

Investor Investee Main Businesses 2017 2016

The Company Shinshin Credit Corporation (“Shinshin”) Installment financing services for car and truck purchases

100.00 100.00

Car-plus Auto Leasing Corporation

(“Car-plus Corporation”)

Car lease and trade 68.57 68.57

TAC Global Investment (Samoa) Co.,

Ltd. (“TAC Global”)

Holding company 100.00 100.00

Sin Jang Enterprises (“Sin Jang”) Sales and brokerage of secondhand vehicles

40.00 40.00

Yulon Motor Finance (China) Co., Ltd. Car loans and loans to car dealers for

purpose of purchasing automobiles

49.00

(Note 1)

49.00

(Note 1) Yu Rich Financial Services Co., Ltd.

(“Yu Rich”)

Installment financing services for

consumer goods and wholesale of

cars and parts

82.12

(Note 2)

82.12

(Note 2)

Shinshin Shinshin Global Investment (Samoa) Co.,

Ltd. (“Shinshin Global”)

Holding Company 100.00 100.00

Car-plus Corporation Diamond Leasing Service Corporation (“Diamond Leasing”)

Car loans and loans to car dealers for purpose of purchasing automobiles

100.00 100.00

Car-Plus Global Investment (Samoa) Co., Ltd. (“Car-Plus Samoa”)

Holding company 100.00 100.00

Sin Jang Sales and brokerage of secondhand

vehicles

19.99 19.99

Da-Wei Technology Co., Ltd. (“Da-Wei”) Brokerage of electric vehicles 100.00

(Note 6)

100.00

(Note 6)

Diamond Leasing H. K. Manpower Service Co., Ltd. (“H. K. Manpower”)

Temporary labor services 100.00 100.00

Sin Jang Sinjang International Investment (Samoa)

Co., Ltd. (“Sin Jang International”)

Holding company 71.34

(Note 3)

71.34

(Note 3) Da-Wei Da-Teng Transportation Co., Ltd.

(“Da-Teng”)

Taxi transportation 100.00

-

TAC Global Car-Plus China Investment (Samoa) Co., Ltd. (“Car-Plus China”)

Holding company 40.00 40.00

Car-Plus Shanghai Investment (Samoa)

Co., Ltd. (”Car-Plus Shanghai”)

Holding company 40.00 40.00

Yu Rong International Investment

(Samoa) Co., Ltd. (“Yu Rong”)

Holding company 100.00 100.00

Sinjang International Investment (Samoa) Co., Ltd. (“Sin Jang International”)

Holding company 28.66 (Note 3)

28.66 (Note 3)

Sinjang International Zhejiang ChengYi Auto Service Co., Ltd.

(“Zhejiang ChengYi”)

Advisory services and business agent

of secondhand vehicles

66.00

(Note 4)

66.00

(Note 4)

(Continued)

- 35 -

% of Ownership

December 31

Investor Investee Main Businesses 2017 2016

Zhejiang ChengYi Hangzhou Cheng Yi Jian Used-cars

Authenticate & Evaluation Service Co., Ltd.

Secondhand vehicles authentication

and evaluation service

100.00

(Note 5)

100.00

(Note 5)

Zhejiang ChengYi Auction Co., Ltd. Secondhand vehicles auction service 100.00

(Note 7)

-

Shinshin Global TAC Financial Leasing Co., Ltd. (“TAC

Financial Leasing”)

Financial lease of equipment and car 40.00 40.00

Car-Plus Samoa Car-Plus China Investment (Samoa) Co.,

Ltd.

Holding company 60.00 60.00

Car-Plus Shanghai Investment (Samoa) Co., Ltd.

Holding company 60.00 60.00

Car-Plus China Car-Plus (Suzhou) Auto Leasing Co., Ltd. Lease of cars and related services 100.00 100.00

Car-Plus Shanghai Car-Plus Leasing (Shanghai) Co., Ltd. (“Car-Plus Leasing (Shanghai)”)

Lease of cars and related services 100.00 100.00

Yu Rong TAC Leasing (Suzhou) Co., Ltd. (“TAC

Leasing (Suzhou)”)

Financial lease of equipment and car 100.00 100.00

TAC Financial Leasing Financial lease of equipment and car 40.00 40.00

TAC Financial Leasing Zhejiang ChengYi Advisory services and business agent

of secondhand vehicles

24.00

(Note 4)

24.00

(Note 4) Wuhan TAC Auto Trade Co., Ltd. Car trade 100.00

(Note 8)

-

(Concluded)

Note 1: The Company and the Company’s parent company, Yulon Company, were approved and

registered by the Investment Commission on June 29, 2015 to invest and had invested

RMB245,000 thousand (equivalent to US$40,833 thousand) and RMB255,000 thousand

(equivalent to US$42,500 thousand), respectively, in Yulon Motor Finance (China) Co., Ltd.

in China. The Company and Yulon Company respectively hold 49% and 51% of the shares.

Due to the Company’s substantive control over Yulon Motor Finance (China) Co., Ltd., it is

listed as a subsidiary of the Company. Yulon Motor Finance (China) Co., Ltd. obtained a

business license in China on February 19, 2016 and will be engaged in car loans, loans to car

dealers for purpose of purchasing automobiles, loans to facilities for operations and car

financial leasing business, etc. Also the Company and the Company’s parent company,

Yulon Company were approved and registered by the Investment Commission on August 23,

2017 and August 28, 2017 to increase share capital investment of RMB245,000 thousand

(equivalent to US$40,833 thousand) and RMB255,000 thousand (equivalent to US$42,500

thousand), respectively, in Yulon Motor Finance (China) Co., Ltd.

Note 2: The Company invested Yu Rich Financial Services Co., Ltd. on January 20, 2016 and held

82.12% of its shares (see Note 28).

Note 3: Sinjang International Investment (Samoa) Co., Ltd. increased its capital by $531 thousand on

September 1, 2016, fully subscribed by Sin Jang Enterprises. The consolidated company

holds 100% if its equity.

Note 4: Sinjang International Investment (Samoa) Co., Ltd. and TAC Financial Leasing Co., Ltd.

purchased 50% equity stakes of Zhejiang ChengYi Auto Service Co., Ltd. from Zhejiang

Kangda Automobile Industrial & Commercial Co., Ltd. Equity of the consolidated company

increased from 40% to 90% after purchase (see Note 28).

Note 5: Zhejiang ChengYi Auto Service Co., Ltd. acquired 10% equity stakes of Hangzhou Cheng Yi

Jian used-cars Authenticate & Evaluation Service Co., Ltd. in November 2016. Percentage

of shares held by the Group increased from 90% to 100% after purchase.

Note 6: Car-plus Corporation established Da-Wei Technology Co., Ltd. with $10,000 thousand on

September 2016, and held 100% of its shares.

- 36 -

Note 7: Zhejiang ChengYi Auto Service Co., Ltd. established Zhejiang ChengYi Auction Co., Ltd.

with RMB2,000 thousand on February 2017 and held 100% of its shares.

Note 8: TAC Financial Leasing established Wuhan TAC Auto Trade Co., Ltd. with RMB2,000

thousand in July 2017 and held 100% of its shares.

b. Subsidiaries excluded from the consolidated financial statements: None.

c. Details of subsidiaries that have material non-controlling interests

Proportion of Ownership and

Voting Rights Held by

Non-controlling Interests

December 31

Name of Subsidiary 2017 2016

Car-plus Corporation 31.43% 31.43%

Yulon Motor Finance (China) Co., Ltd. 51.00% 51.00%

Refer to Table 8 “Information on Investees” and Table 9 “Information on investments in Mainland

China” for the information on places of incorporation and principal places of business. The

summarized financial information below represents amounts before intragroup eliminations.

Car-plus Corporation and subsidiaries:

December 31

2017 2016

Current assets $ 3,706,338 $ 4,549,945

Non-current assets 17,545,863 15,914,624

Current liabilities 17,114,517 16,847,843

Non-current liabilities 1,920,859 1,441,495

Equity $ 2,216,825 $ 2,175,231

Equity attributable to:

Owners of Car-plus Corporation $ 1,638,821 $ 1,602,176

Non-controlling interests of Car-plus Corporation 578,004 573,055

$ 2,216,825 $ 2,175,231

For the Year Ended December 31

2017 2016

Revenue $ 10,891,417 $ 10,796,941

Profit for the year $ 443,335 $ 423,347

Other comprehensive loss for the year (17,209) (75,721)

Total comprehensive income for the year $ 426,126 $ 347,626

(Continued)

- 37 -

For the Year Ended December 31

2017 2016

Profit attributable to:

Owners of Car-plus Corporation $ 314,274 $ 292,959

Non-controlling interests of Car-plus Corporation 129,061 130,388

$ 443,335 $ 423,347

Total comprehensive income attributable to:

Owners of Car-plus Corporation $ 300,333 $ 231,506

Non-controlling interests of Car-plus Corporation 125,793 116,120

$ 426,126 $ 347,626

Net cash inflow (outflow) from:

Operating activities $ 5,612,938 $ 8,505,364

Investing activities (6,265,320) (7,892,833)

Financing activities 581,414 (836,002)

Net cash outflow $ (70,968) $ (223,471)

Dividends paid to non-controlling interests

Car-plus Corporation $ 117,988 $ 103,829

(Concluded)

Yulon Motor Finance (China) Co., Ltd.:

December 31

2017 2016

Current assets $ 10,437,269 $ 4,475,921

Non-current assets 86,506 66,066

Current liabilities 5,990,251 2,297,865

Equity $ 4,533,524 $ 2,244,122

Equity attributable to:

Owners of Yulon Motor Finance (China) Co., Ltd. $ 2,221,426 $ 1,099,620

Non-controlling interests of Yulon Motor Finance (China) Co.,

Ltd. 2,312,098 1,144,502

$ 4,533,524 $ 2,244,122

For the Year Ended December 31

2017 2016

Revenue $ 602,456 $ 66,750

Profit for the year $ 56,999 $ (83,999)

Other comprehensive income for the year - -

Total comprehensive income (loss) for the year $ 56,999 $ (83,999)

(Continued)

- 38 -

For the Year Ended December 31

2017 2016

Profit (loss) attributable to:

Owners of Yulon Motor Finance (China) Co., Ltd. $ 27,930 $ (41,160)

Non-controlling interests of Yulon Motor Finance (China) Co.,

Ltd. 29,069 (42,839)

$ 56,999 $ (83,999)

Total comprehensive income (loss) attributable to:

Owners of Car-plus Corporation $ 27,930 $ (41,160)

Non-controlling interests of Car-plus Corporation 29,069 (42,839)

$ 56,999 $ (83,999)

Cash inflow (outflow) from:

Operating activities $ (2,786,625) $ (3,993,203)

Investing activities (4,394) (76,759)

Financing activities 3,054,657 2,018,170

Net cash inflow (outflow) $ 263,638 $ (2,051,792)

(Concluded)

16. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

December 31

2017 2016

Investments in associates $ 244,706 $ 227,976

Investments in joint ventures 16,755 9,305

$ 261,461 $ 237,281

a. Investment in associates

December 31

2017 2016

Associates that are not individually material

Tokio Marine Newa Insurance Co., Ltd. $ 153,763 $ 140,922

Empower Motor Co., Ltd. 90,943 87,054

$ 244,706 $ 227,976

For the Year Ended December 31

2017 2016

The Group’s share of:

Net profit for the year $ 21,642 $ 20,981

Other comprehensive income 2,352 (3,093)

Total comprehensive income for the year $ 23,994 $ 17,888

- 39 -

Refer to Table 8 “Information on Investees” for the nature of activities, principal place of business and

country of incorporation of the associates.

The investment in Tokio Marine Newa Insurance Co., Ltd. (Tokio Marine Newa Insurance) was

accounted for using the equity method because, despite the individual investment being less than 20%,

the ultimate parent company, Yulon Company, and its subsidiaries exercised significant influence over

the investee’s operating and financial policy decisions.

b. Investments in joint ventures

December 31

2017 2016

Joint ventures that are not individually material

Shanghai TAC Auto Trade Co., Ltd. $ 3,182 $ 3,090

Hefi TAC Auto Trade Co., Ltd. 2,557 -

Suzhou TAC Auto Trade Co., Ltd. 2,477 1,907

Qingdao TAC Auto Trade Co., Ltd. 2,353 -

Dongguan TAC Auto Trade Co., Ltd. 2,211 1,352

Kunming TAC Auto Trade Co., Ltd. 2,144 -

Chengdu TAC Auto Trade Co., Ltd. 1,043 -

Xiamen TAC Auto Trade Co., Ltd. 788 2,956

$ 16,755 $ 9,305

For the Year Ended December 31

2017 2016

The Group’s share of:

Net profit for the year $ (3,256) $ (5,473)

Other comprehensive income - -

Total comprehensive income for the year $ (3,256) $ (5,473)

Refer to Table 9 “Information on Investments in Mainland China” for the nature of activities, principal

place of business and country of incorporation of the joint ventures.

17. PROPERTY, PLANT AND EQUIPMENT

Freehold Land

Buildings

Equipment

Vehicles

Leasehold

Leased Assets

Total

Cost

Balance at January 1, 2016 $ 93,401 $ 243,838 $ 155,527 $ 79,989 $ 175,180 $ 24,206,326 $ 24,954,261

Acquisitions through business

combinations - - 2,919 1,693 - - 4,612

Additions - - 36,518 26,472 49,141 7,836,485 7,948,616

Disposals - - (9,343 ) (78,446 ) (2,082 ) (7,718,290 ) (7,808,161 )

Reclassification - - - 76,867 - (76,867 ) -

Effect of foreign currency exchange

differences - (16,358 ) (4,679 ) (7,656 ) (2,847 ) (166,719 ) (198,259 )

Balance at December 31, 2016 $ 93,401 $ 227,480 $ 180,942 $ 98,919 $ 219,392 $ 24,080,935 $ 24,901,069

(Continued)

- 40 -

Freehold Land

Buildings

Equipment

Vehicles

Leasehold

Leased Assets

Total

Accumulated depreciation and

impairment

Balance at January 1, 2016 $ - $ (47,318 ) $ (107,658 ) $ (41,276 ) $ (95,173 ) $ (8,953,951 ) $ (9,245,376 )

Acquisitions through business

combinations - (1,764 ) (582 ) - - (2,346 )

Disposals - 8,445 37,512 2,082 4,443,030 4,491,069

Impairment losses recognized in profit or

loss - - - - - (30,372 ) (30,372 )

Reclassification - - - (34,775 ) - 34,775 -

Depreciation expense - (10,196 ) (21,991 ) (16,450 ) (35,750 ) (4,548,685 ) (4,633,072 )

Effect of foreign currency exchange

differences - 2,992 2,454 3,955 1,403 50,903 61,707

Balance at December 31, 2016 $ - $ (54,522 ) $ (120,514 ) $ (51,616 ) $ (127,438 ) $ (9,004,300 ) $ (9,358,390 )

Carrying amount at December 31, 2016 $ 93,401 $ 172,958 $ 60,428 $ 47,303 $ 91,954 $ 15,076,635 $ 15,542,679

Cost

Balance at January 1, 2017 $ 93,401 $ 227,480 $ 180,942 $ 98,919 $ 219,392 $ 24,080,935 $ 24,901,069

Additions 20.928 35,307 10,567 35,153 26,619 9,608,412 9,736,986

Disposals - - (36,525 ) (83,312 ) (17,130 ) (7,413,647 ) (7,550,614 )

Reclassification - - 4,280 58,802 - (58,802 ) 4,280

Effect of foreign currency exchange

differences - (3,804 ) (1,303 ) (1,887 ) (793 ) (26,107 ) (33,894 )

Balance at December 31, 2017 $ 114,329 $ 258,983 $ 157,961 $ 107,675 $ 228,088 $ 26,190,791 $ 27,057,827

Accumulated depreciation and

impairment

Balance at January 1, 2017 $ - $ (54,522 ) $ (120,514 ) $ (51,616 ) $ (127,438 ) $ (9.004,300 ) $ (9,358,390 )

Disposals - - 35,617 46,462 15,836 4,294,002 4,391,917

Impairment losses recognized in profit or

loss - - - - - (1,299 ) (1,299 )

Reclassification - - - (28,068 ) - 28,068 -

Depreciation expense - (9,910 ) (24,742 ) (18,735 ) (36,412 ) (4,806,848 ) (4,896,647 )

Effect of foreign currency exchange

differences - 688 567 1,048 416 7,080 9,799

Balance at December 31, 2017 $ - $ (63,744 ) $ (109,072 ) $ (50,909 ) $ (147,598 ) $ (9,483,297 ) $ (9,854,620 )

Carrying amount at December 31, 2017 $ 114,329 $ 195,239 $ 48,889 $ 56,766 $ 80,490 $ 16,707,494 $ 17,203,207

(Concluded)

As the result of the declining sale of car models in the market, the estimated future cash flows expected to

arise from the related model has decreased. The Group carried out a review of the recoverable amount of

that related model and determined that the carrying amount exceeded the recoverable amount. The review

led to the recognition of an impairment loss of $1,299 thousand and $30,372 thousand for the years ended

December 31, 2017 and 2016, respectively.

The above items of property, plant and equipment are depreciated on a straight-line basis over the estimated

useful life of the assets:

Buildings 20-44 years

Equipment 3-10 years

Vehicles 5-7 years

Leasehold 2-12 years

Leased assets 3 years or according to terms of lease

- 41 -

18. INTANGIBLE ASSETS

The

Ownership

of Vehicle

Registration

Plates

Computer

Software Others Total

Cost

Balance at January 1, 2016 $ 145,049 $ 51,959 $ 6,947 $ 203,955

Acquisitions through business combinations - 8,374 64 8,438

Additions 27,493 70,254 14 97,761

Effect of foreign currency exchange

differences (12,830) (4,562) (1) (17,393)

Balance at December 31, 2016 159,712 126,025 7,024 292,761

Accumulated amortization and impairment

Balance at January 1, 2016 - (35,192) (6,168) (41,360)

Acquisitions through business combinations - (3,981) - (3,981)

Amortization expense - (14,374) (133) (14,507)

Effect of foreign currency exchange

differences - 1,335 1 1,336

Balance at December 31, 2016 - (52,212) (6,300) (58,512)

Carrying amount at December 31, 2016 $ 159,712 $ 73,813 $ 724 $ 234,249

Cost

Balance at January 1, 2017 $ 159,712 $ 126,025 $ 7,024 $ 292,761

Acquisitions through business combinations 1,235 - - 1,235

Additions 5,493 26,982 57 32,532

Disposals - (1,363) - (1,363)

Reclassification - 2,345 - 2,345

Effect of foreign currency exchange

differences (3,181) (1,761) (1) (4,943)

Balance at December 31, 2017 163,259 152,228 7,080 322,567

Accumulated amortization and impairment

Balance at January 1, 2017 - (52,212) (6,300) (58,512)

Amortization expense - (16,587) (153) (16,740)

Disposals - 1,363 - 1,363

Effect of foreign currency exchange

differences - 334 - 334

Balance at December 31, 2017 - (67,102) (6,453) (73,555)

Carrying amount at December 31, 2017 $ 163,259 $ 85,126 $ 627 $ 249,012

The ownership of vehicle registration plates was acquired by Car-Plus (Suzhou) Auto Leasing Co., Ltd. and

Car-Plus Leasing (Shanghai) for operating purposes. The ownership, which can be transacted in the

market and can also be transferred to various vehicles, was classified as an intangible asset with infinite

useful life.

- 42 -

The above intangible assets are depreciated on a straight-line basis over the following estimated useful lives

of the assets:

Computer software 3-5 years

Others 10 years

19. BORROWINGS

a. Short-term borrowings

December 31

2017 2016

Secured borrowings $ 2,681,000 $ 4,260,000

Credit borrowings 34,609,248 24,879,641

$ 37,290,248 $ 29,139,641

The ranges of interest rates on bank loans were 0.66%-6.70% and 0.70%-5.60% per annum as of

December 31, 2017 and 2016, respectively.

The Company pledged installment notes and trade receivables as collateral for short-term loans (see

Note 33).

b. Short-term bills payable

December 31

2017 2016

Commercial paper $ 64,020,000 $ 52,515,000

Less: Unamortized discount on bills payable 152,397 76,073

$ 63,867,603 $ 52,438,927

The range of interest rates 0.57%-1.47% 0.51%-1.47%

c. Long-term borrowings

December 31

2017 2016

Long-term commercial paper payable - unsecured $ 1,948,417 $ 1,946,900

Less: Current portion 749,240 1,197,964

$ 1,199,177 $ 748,936

December 31, 2017

Promissory Institutions Nominal

Amount

Discount

Amount Carrying Value

Non-guaranteed $ 1,950,000 $ (1,583) $ 1,948,417

Less: Current portion 750,000 (760) 749,240

$ 1,200,000 $ (823) $ 1,199,177

- 43 -

The range of interest rates was 0.68%-1.49% per annum.

December 31, 2016

Promissory Institutions Nominal

Amount

Discount

Amount Carrying Value

Non-guaranteed $ 1,950,000 $ (3,100) $ 1,946,900

Less: Current portion 1,200,000 (2,036) 1,197,964

$ 750,000 $ (1,064) $ 784,936

The range of interest rates was 0.68%-1.49% per annum.

20. BONDS PAYABLE

December 31

2017 2016

Unsecured domestic bonds $ 4,350,000 $ 3,000,000

Less: Discounts on bonds payable 7,081 -

$ 4,342,919 $ 3,000,000

a. Unsecured domestic bonds

The Company issued three-year maturity unsecured corporate bonds on June 20, 2014, October 17,

2014, May 12, 2017 and August 11, 2017, with issuance amounts of NT$1.5 billion, NT$1.5 billion,

NT$2 billion and $2.35 billion and simple interest rates of 1.12%, 1.25%, 1.07% and 1.02% payable

annually, respectively. The principal amounts of the bonds are repayable on the maturity date.

Among them, the principal amount of the bonds issued on June 20, 2014 and October 17, 2014 were

repaid on June 20, 2017 and October 17, 2017, respectively.

b. Unsecured domestic convertible bonds

On June 20, 2012, the Company issued its first five-year unsecured domestic convertible bonds, with a

face value of $100 thousand and a total amount of NT$2.5 billion at a conversion rate of 100.5% and

coupon rate of 0%. These bonds began to be traded on the Taipei Exchange (formerly the GreTai

Securities Market) on the issue date. During the issuance period between July 21, 2012 and June 10,

2017, except for the book closing period, bondholders are entitled to convert bonds into the Company’s

common stocks at a conversion price of NT$72.15 per stock. In their meetings in 2016 and 2015, the

Company’s shareholders approved the payment of cash dividends of NT$4.74 and NT$5.19 per stock,

respectively; thus, the bond conversion prices were adjusted to NT$55.48 and NT$59.21, respectively.

In the period between 1 month after issuance and 40 days before the maturity date, if the closing price

of the Company’s stock listed on the Taiwan Stock Exchange exceeds 30% of the conversion price for

30 consecutive days or the total amount outstanding is below 10% of the amount at initial issuance, the

Company has the right to redeem all of the bonds outstanding at face value.

Thirty days before the end of the three years from the bond issuance, bondholders have the right to

exercise their put options and can request that the Company redeem the convertible bonds at face value.

As of June 20, 2016 (the maturity date of redemption), there was no redemption right which had been

exercised by bondholders.

- 44 -

The convertible bond has two components: The liability component and the equity component

accounted for as “capital surplus - options.” This capital surplus was initially recognized at $179,204

thousand. Transaction costs are apportioned between the liability and equity component of the

convertible bonds on the basis of the allocation of proceeds to the liability and equity component when

the bonds are initially recognized. Derivative and non-derivative components recognized amounted to

NT$6,489 thousand and NT$2,322,657 thousand, respectively.

The convertible bonds issued by the Company have been converted into common stocks on October

2016.

Proceeds of the issue (less transaction costs $5,000 thousand) $ 2,507,500

Equity component (179,204)

Deferred tax assets 850

Derivative financial liability component (6,489)

Liability component at the date of issue 2,322,657

Interest charged at an effective interest rate of 1.471606585% 75,070

Convertible bonds converted into common stocks (2,397,727)

Liability component as of December 31, 2016 $ -

21. PROVISIONS - CURRENT

December 31

2017 2016

Financial guarantee provisions $ 293,579 $ 332,021

Warranty provisions 1,657 2,036

$ 295,236 $ 334,057

The customers of the Company and Shinshin signed car loan contracts with banks, with the Company and

Shinshin acting as car loan agents and providing customers with account management services. Under the

contracts, the Company and Shinshin are responsible for repaying any uncollectable loans arising from

customer defaults. The Company and Shinshin have estimated their potential financial guarantee loss on

any default on the basis of past experience.

Sin Jang recognized provisions based on the estimated amount of service costs during the terms of service

warranties of the products.

22. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Group 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.

- 45 -

b. Defined benefit plans

The defined benefit plan adopted by the Group 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 six months before retirement. The Group 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 Group assesses the balance in the pension fund. If the amount of the

balance in the pension fund is inadequate to pay retirement benefits for employees who conform to

retirement requirements in the next year, the Group is required to fund the difference in one

appropriation that should be made before the end of March of the next year. The pension fund is

managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to

influence the investment policy and strategy.

The amounts included in the consolidated balance sheet in respect of the Group’s defined benefit plans

were as follows:

December 31

2017 2016

Present value of defined benefit obligation $ 202,714 $ 184,376

Fair value of plan assets (97,949) (97,873)

Net defined benefit liability $ 104,765 $ 86,503

Movements in net defined benefit liability were as follows:

Present Value

of the Defined

Benefit

Obligation

Fair Value of

the Plan Assets

Net Defined

Benefit

Liability (Asset)

Balance at January 1, 2016 $ 176,383 $ (62,428) $ 113,955

Service cost

Current service cost 2,425 - 2,425

Interest expense (income) 2,646 (1,011) 1,635

Recognized in profit or loss 5,071 (1,011) 4,060

Remeasurement

Return on plan assets (excluding amounts

included in net interest) - 372 372

Actuarial loss - changes in demographic

assumptions 5,713 - 5,713

Actuarial gain - changes in financial

assumptions 6,403 - 6,403

Actuarial loss - experience adjustments (2,138) - (2,138)

Recognized in other comprehensive income 9,978 372 10,350

Contributions from the employer - (41,862) (41,862)

Benefits paid (7,056) 7,056 -

Balance at December 31, 2016 $ 184,376 $ (97,873) $ 86,503

(Continued)

- 46 -

Present Value

of the Defined

Benefit

Obligation

Fair Value of

the Plan Assets

Net Defined

Benefit

Liability (Asset)

Balance at January 1, 2017 $ 184,376 $ (97,873) $ 86,503

Service cost

Current service cost 2,087 - 2,087

Interest expense (income) 2,169 (1,197) 972

Recognized in profit or loss 4,256 (1,197) 3,059

Remeasurement

Return on plan assets (excluding amounts

included in net interest) - 266 266

Actuarial loss - changes in demographic

assumptions 5,000 - 5,000

Actuarial gain - changes in financial

assumptions (356) - (356)

Actuarial loss - experience adjustments 14,796 - 14,796

Recognized in other comprehensive income 19,440 266 19,706

Contributions from the employer - (4,503) (4,503)

Benefits paid (5,358) 5,358 -

Balance at December 31, 2017 $ 202,714 $ (97,949) $ 104,765

(Concluded)

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

following risks:

1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities,

bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the

mandated management. However, the return generated by plan assets should not be below the

interest rate for a 2-year time deposit with local banks.

2) Interest risk: A decrease in the government bond interest rate will increase the present value of the

defined benefit obligation; however, this will be partially offset by an increase in the return on the

plan’s debt investments.

3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the

future salaries of plan participants. As such, an increase in the salary of the plan participants will

increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by

qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were

as follows:

December 31

2017 2016

Discount rate 1.13%-1.38% 0.88%-1.50%

Long-term average adjustment rate of salary 2.25%-3.00% 2.25%-3.00%

- 47 -

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:

December 31

2017 2016

Discount rate

0.25% increase $ (5,597) $ (5,296)

0.25% decrease $ 5,823 $ 5,518

Long-term average adjustment rate of salary

0.25% increase $ 5,642 $ 5,348

0.25% decrease $ (5,453) $ (5,161)

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 average due date of the Group’s expected defined benefit plan and defined benefit obligation within

1 year is as follows:

December 31

2017 2016

The expected contributions to the plan for the next year $ 3,485 $ 2,732

The average duration of the defined benefit obligation 10.0-14.2 years 9.9-14.7 years

23. EQUITY

a. Common stock capital

December 31

2017 2016

Number of stocks authorized (in thousands) 350,000 350,000

Stocks authorized $ 3,500,000 $ 3,500,000

Number of stocks issued and fully paid (in thousands) 274,629 274,629

Stocks issued $ 2,746,292 $ 2,746,292

Fully paid common stocks, which have a par value of $10, carry one vote per stock and carry a right to

dividends.

The change of the Company’s capital is due to convertible bonds converted into common stocks.

- 48 -

b. Capital surplus

December 31

2017 2016

May be used to offset a deficit, distributed as cash dividends, or

transferred to capital stock

Recognized from issuance of common stocks (1) $ 2,539,791 $ 2,539,791

May be used to offset a deficit only

Changes in percentage of ownership interest in subsidiaries (2) 1,017 1,017

Recognized from change in capital surplus of associates or

joint venture 1,152 1,152

$ 2,541,960 $ 2,541,960

1) The capital surplus recognized from stocks issued in excess of par 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).

2) The capital surplus arose from the effect of changes in ownership interest that resulted from equity

transactions other than actual disposal or acquisition.

c. Retained earnings and dividends policy

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and

bonuses are limited to shareholders and do not include employees. The shareholders held their regular

meeting on June 22, 2016 and, in that meeting, had resolved amendments to the Company’s Articles of

Incorporation (the “Articles”), particularly the amendment to the policy on dividends distribution and

the addition of the policy on the distribution of employees’ compensation.

Under the dividends 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 a legal reserve 10% of the remaining profit unless the legal reserve equals the Company’s

paid-in capital, 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 shareholders’ meeting for the distribution of dividends and bonuses to shareholders.

1) The Company’s operating environment is in a mature industry. The Company shall consider

profitability, future operating plans and funding needs, industry conditions, shareholders’ rights and

a balanced dividends policy in the distribution of earnings. Dividends may be paid in cash or

stock, and should not be lower than 50% of distributable net profit. Each year’s cash dividends

should not be lower than 20% of total dividends.

2) The Company shall not pay dividends or bonuses if there is no surplus of earnings.

3) Where the legal reserve is distributed by issuing new shares or by cash, only the portion of legal

reserve in excess of 25% of the paid-in capital may be distributed.

For the policies on the distribution of employee’s compensation and remuneration of directors and

supervisors before and after amendment, refer to employees’ compensation and remuneration of

directors and supervisors in Note 25 f.

- 49 -

Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s

paid-in capital. 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 paid-in capital, the excess may be either transferred

to capital or distributed in cash.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax

credit equal to their proportionate share of the income tax paid by the Company.

The appropriations of earnings for 2016 and 2015 approved in the shareholders’ meetings on June 27,

2017 and June 22, 2016, respectively, were as follows:

Appropriation of Earnings Dividends Per Share (NT$)

For the Year Ended

December 31

For the Year Ended

December 31

2016 2015 2016 2015

Legal reserve $ 173,307 $ 142,505

Special reserve 230,459 -

Cash dividends 1,320,967 1,269,933 $4.81 $4.74

The appropriations of earnings for 2017 had been proposed by the Company’s board of directors on

March 26, 2018. The appropriations and dividends per share were as follows:

Appropriation

of Earnings

Dividends Per

Share (NT$)

Legal reserve $ 232,423

Reversal of special reserve 35,588

Special reserve 81,580

Cash dividends 1,620,312 $5.90

The appropriations of earnings for 2017 are subject to the resolution of the shareholders’ meeting to be

held on June 26, 2018.

d. Special reserve

Items referred to under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and in the

directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of

IFRSs” should be appropriated to or reversed from a special reserve by the Company.

The Company’s special reserve appropriated following first-time adoption of IFRSs was $35,588

thousand.

According to the regulation of special reserve appropriation, additional special reserve should be

appropriated at the amount equal to the difference between the net debit balance of reserves and the

amount of special reserve that was appropriated on the first-time adoption of IFRSs. Any special

reserve appropriation may be reversed to the extent that the net debit balance reverses and thereafter

distributed. In 2017 and 2016, since the Company had a net debit balance, special reserve was

appropriated from the earnings following these rules.

- 50 -

e. Other equity items

Movements in the other equity items in 2017 and 2016 were as follows:

Exchange

Differences on

Translating

Foreign

Operations

Unrealized

Gains

(Losses) on

Available-for-

sale Financial

Assets

Unrealized

Gains (Losses)

on Cash Flow

Hedge Total

Balance at January 1, 2016 $ 95,083 $ (1,053) $ (721) $ 93,309

Changes in the fair value of

hedging instruments -

interest rate swaps - - 721 721

Share of subsidiaries and

associates accounted for

using the equity method (323,310) (1,179) - (324,489)

Balance at December 31, 2016 $ (228,227) $ (2,232) $ - $ (230,459)

Balance at January 1, 2017 $ (228,227) $ (2,232) $ - $ (230,459)

Changes in the fair value of

hedging instruments -

interest rate swaps - - (201) (201)

Share of subsidiaries and

associates accounted for

using the equity method (84,343) 2,963 - (81,380)

Balance at December 31, 2017 $ (312,570) $ 731 $ (201) $ (312,040)

f. Non-controlling interests

For the Year Ended December 31

2017 2016

Balance at January 1 $ 2,199,513 $ 2,242,326

Attributable to non-controlling interests:

Non-controlling interest arising from acquisition of

subsidiaries - 113,858

Non-controlling interest arising from cash capital increase of

subsidiaries 1,173,765 -

Exchange difference arising on translation of foreign entities (42,395) (148,143)

Cash dividends from subsidiaries paid to minority

shareholders (128,367) (110,668)

Share of profit for the year 205,054 104,566

Remeasurement on defined benefit plans (3,067) (1,409)

Adjustment relating to changes in capital surplus of associates

and joint ventures accounted for using the equity method - (1,017)

Balance at December 31 $ 3,404,503 $ 2,199,513

- 51 -

24. REVENUE

a. Interest revenue from acquired accounts receivable

Interest revenue from the accounts receivable acquired in the years ended December 31, 2017 and 2016

was $3,888,908 thousand and $3,355,585 thousand, respectively. As of December 31, 2017 and 2016,

the uncollected accounts receivable of the Company, Shinshin and Yu Rich collectively were

$66,619,790 thousand and $54,195,274 thousand, respectively, and were recognized as accounts

receivable.

b. Agency revenue

Agency revenue recognized for the years ended December 31, 2017 and 2016 was $613,540 thousand

and $768,211 thousand, respectively. In the event that payments were not made by the due dates, the

Company and Shinshin reimbursed the bank of the loan and assumes all collection rights against the

debtor. As of December 31, 2017 and 2016, the managerial service account balances of the loans

provided by the Company and Shinshin collectively were $7,795,491 thousand and $8,803,363

thousand, respectively. The reimbursements from the Company and Shinshin to banks as of

December 31, 2017 and 2016 were $1,495,445 thousand and $2,818,948 thousand, respectively. The

reimbursements to banks were listed as accounts receivable before recognition of interest revenue from

the acquired accounts receivable.

The amounts of financial guarantee contracts listed above were the maximum total managerial service

loans provided by the Group that require full payment by the Group in the event of a debtor’s default.

The Group had estimated the potential financial guarantee loss on any default on the basis of past

experience (see Note 21).

25. NET PROFIT AND OTHER COMPREHENSIVE INCOME (LOSS)

Net profit for the years ended December 31, 2017 and 2016 contained the following components:

a. Other operating income and expense, net

For the Year Ended December 31

2017 2016

Commission revenue $ 450,916 $ 343,265

Gain on reversal of bad debts 190,565 204,904

Impairment losses on rental assets (1,299) (30,372)

Government subsidy revenue 3,596 20,504

Others 86,906 36,469

$ 730,684 $ 574,770

b. Finance costs

For the Year Ended December 31

2017

2016

Interest on bank loans

$ 1,387,376

$ 825,132

Interest on corporate bonds 47,225 38,947

Others 54,209 59,475

$ 1,488,810 $ 923,554

- 52 -

c. Depreciation and amortization

For the Year Ended December 31

2017

2016

Property, plant and equipment $ 4,896,647 $ 4,633,072

Intangible assets 16,740 14,507

$ 4,913,387 $ 4,647,579

An analysis of depreciation by function

Operating costs $ 4,806,848 $ 4,548,685

Operating expenses 89,799 84,387

$ 4,896,647 $ 4,633,072

An analysis of amortization by function

Operating expenses $ 16,740 $ 14,507

d. Other gains and losses

For the Year Ended December 31

2017 2016

Net foreign exchange gains (losses) $ 39,546 $ (291,601) Others (32,757) (34,589)

$ 6,789 $ (326,190)

e. Employee benefits expense

For the Year Ended December 31

2017 2016

Short-term benefits

Payroll expenses $ 1,674,156 $ 1,492,894

Labor insurance and health insurance expenses 113,271 96,522

Other personnel expenses 67,926 35,956

1,855,353 1,625,372

Post-employment benefits (Note 22)

Defined contribution plans 53,258 46,312

Defined benefit plans 3,059 4,060

56,317 50,372

$ 1,911,670 $ 1,675,744

An analysis of employee benefits expense by function

Operating costs $ 54,557 $ 54,566

Operating expenses 1,857,113 1,621,178

$ 1,911,670 $ 1,675,744

- 53 -

f. Employees’ compensation and remuneration of directors and supervisors for 2017 and 2016

The Company accrued employees’ compensation and remuneration of directors and supervisors at the

rates no less than 0.1% and no higher than 0.5%, respectively, of net profit before income tax,

employees’ compensation, and remuneration of directors and supervisors. The employees’

compensation and remuneration of directors and supervisors for the years ended December 31, 2017

and 2016 which have been approved by the Company’s board of directors on March 26, 2018 and

March 20, 2017, respectively, were as follows:

For the Year Ended December 31

2017 2016

Amount

Accrual Rate

(%) Amount

Accrual Rate

(%)

Employees’ compensation $ 21,563 0.80 $ 10,942 0.55

Remuneration of directors and

supervisors 13,518 0.50 10,003 0.50

If there is a change in the amounts after the annual consolidated 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 and remuneration of

directors and supervisors paid and the amounts recognized in the consolidated financial statements for

the year ended December 31, 2016 and 2015.

Information on the employees’ compensation and remuneration of directors and supervisors resolved by

the board of directors in their meeting in 2018 and in 2017 is available at the Market Observation Post

System website of the Taiwan Stock Exchange.

26. INCOME TAXES

a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

For the Year Ended December 31

2017 2016

Current tax

In respect of the current year $ 690,011 $ 498,352

In respect of prior years 1,152 3,131

691,163 501,483

Deferred tax

In respect of the current year (3,062) (33,648)

Income tax expense recognized in profit or loss $ 688,101 $ 467,835

- 54 -

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

For the Year Ended December 31

2017 2016

Profit before tax from continuing operations $ 3,217,382 $ 2,305,472

Income tax expense calculated at the statutory rate $ 771,505 $ 551,838

Add (deduct) tax effect of

Nondeductible expenses in determining taxable income 4,627 906

Tax-exempt income (157,593) (117,948)

Unrecognized temporary differences 64,803 29,894

Additional income tax on unappropriated earnings 3,607 13

Adjustments for prior years’ tax 1,152 3,132

Income tax expense recognized in profit or loss $ 688,101 $ 467,835

The applicable tax rate used above is the corporate tax rate of 17% payable by the Group in ROC.

In February 2018, it was announced by the President 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 $71,331 thousand and $135,155 thousand, respectively, in 2018.

As the status of the 2018 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

For the Year Ended December 31

2017 2016

Deferred tax

In respect of the current year:

Remeasurement on defined benefit plan $ 3,260 $ 1,673

c. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2017

Opening

Balance

Recognized

in Profit or

Loss

Recognized

in Other

Comprehen-

sive Income Exchange

Differences Closing

Balance

Deferred tax assets

Allowance for doubtful

accounts $ 276,891 $ 63,214 $ - $ 4,009 $ 344,114

Property, plant and

equipment 156,074 10,241 - 2,077 168,392

(Continued)

- 55 -

Opening

Balance

Recognized

in Profit or

Loss

Recognized

in Other

Comprehen-

sive Income Exchange

Differences Closing

Balance

Loss carryforward $ 7,231 $ (7,231) $ - $ - $ -

Others 17,475 8,803 3,260 - 29,538

$ 457,671 $ 75,027 $ 3,260 $ 6,086 $ 542,044

Deferred tax liabilities

Property, plant and

equipment $ 614,758 $ 12,013 $ - $ - $ 626,771

Share of profit of

associates - foreign 79,143 57,943 - - 137,086

Others 12 2,009 - - 2,021

$ 693,913 $ 71,965 $ - $ - $ 765,878

(Concluded)

For the year ended December 31, 2016

Opening

Balance

Recognized

in Profit or

Loss

Recognized

in Other

Comprehen-

sive Income Exchange

Differences Closing

Balance

Deferred tax assets

Allowance for doubtful

accounts $ 228,228 $ 55,452 $ - $ (6,789) $ 276,891

Property, plant and

equipment 160,073 799 - (4,798) 156,074

Loss carryforward 15,164 (7,933) - - 7,231

Others 17,570 (1,768) 1,673 - 17,475

$ 421,035 $ 46,550 $ 1,673 $ (11,587) $ 457,671

Deferred tax liabilities

Property, plant and

equipment $ 598,500 $ 16,258 $ - $ - $ 614,758

Share of profit of

associates - foreign 82,511 (3,368) - - 79,143

Others - 12 - - 12

$ 681,011 $ 12,902 $ - $ - $ 693,913

- 56 -

d. Integrated income tax

December 31

2017 2016

Unappropriated earnings

Generated before January 1, 1998 $ - $ 212,608

Generated on and after January 1, 1998 - 2,884,313

$ - $ 3,096,921

(Note)

Imputation credits account $ - $ 372,568

(Note)

For the Year Ended December 31

2017 2016

Creditable ratio for distribution of earnings Note 23.10%

Note: Since the amended Income Tax Act announced in February 2018 abolished the imputation tax

system, related information for 2017 is not applicable.

e. Income tax assessments

The latest year of income tax returns of the Company and its subsidiaries which had been assessed and

cleared by the tax authorities were as follows:

Company Year

The Company 2015

Shinshin 2015

Car-plus Corporation 2015

Diamond Leasing 2015

H. K. Manpower 2015

Sin Jang 2015

Yu Rich 2015

Da-Wei -

Da-Teng 2016

The tax returns of the Company through 2015 have been assessed by the tax authorities. The

Company disagreed with the tax authorities’ assessment of its 2014 and 2015 tax return and applied for

a re-examination. The Company has recorded related estimated income tax expenses accordingly.

27. EARNINGS PER SHARE

Unit: NT$ Per Share

For the Year Ended December 31

2017 2016

Basic earnings per share $ 8.46 $ 6.41

Diluted earnings per share $ 8.46 $ 6.32

- 57 -

The net profit for the year and the weighted average number of stocks outstanding used for the earnings per

share computation were as follows:

Net Profit for the Year

For the Year Ended December 31

2017 2016

Profit for the period attributable to owners of the Company $ 2,324,227 $ 1,733,071

Effect of potentially dilutive common stocks:

Interest on convertible bonds (after tax) - 3,454

Earnings used in the computation of diluted earnings per share from

continuing operations $ 2,324,227 $ 1,736,525

Stocks

Unit: Thousand Stocks

For the Year Ended December 31

2017 2016

Weighted average number of common stocks in computation of basic

earnings per share 274,629 270,460

Effect of potentially dilutive common stocks:

Conversion of convertible bonds - 4,188

Employees’ compensation or bonuses issued to employees 222 194

Weighted average number of common stocks used in the

computation of diluted earnings per share 274,851 274,842

Since the Group offered to settle compensation or bonuses paid to employees by cash or stocks, the Group

assumed the entire amount of the compensation or bonuses will 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.

28. BUSINESS COMBINATIONS

a. Subsidiaries acquired

Principal Activity

Date of

Acquisition

Proportion of

Voting Equity

Interests

Acquired (%)

Consideration

Transferred

Yu Rich Installment financing

services for consumer

goods, and wholesale

of cars and parts

January 20, 2016 82.12 $ 500,001

Zhejiang Cheng Yi

Auto Service Co.,

Ltd.

Advisory services and

business agent of

secondhand vehicles

August 22, 2016 50.00 $ 32,419

(Note)

(Continued)

- 58 -

Principal Activity

Date of

Acquisition

Proportion of

Voting Equity

Interests

Acquired (%)

Consideration

Transferred

Hangzhou Cheng Yi

Jian Used-cars

Authenticate &

Evaluation Service

Co., Ltd. (Subsidiary

of Zhejiang

Cheng-Yi Auto

Service Co., Ltd.)

Secondhand vehicle

authenticate and

evaluation service

August 22, 2016 90.00 $ -

Da-Teng Taxi Transportation April 6, 2017 100.00 $ 1,235

(Concluded)

Note: The transfer price includes the price paid for acquiring Hangzhou Cheng Yi Jian Used-cars

Authenticate & Evaluation Service Co., Ltd.

The Company invested in Yu Rich Financial Services Co., Ltd., Zhejiang Cheng-Yi Auto Service Co.,

Ltd. and Hangzhou Cheng Yi Jian Used-cars Authenticate & Evaluation Service Co., Ltd. in 2016 to

expand the Group’s business in installment financing services for consumer goods, sale and brokerage

of secondhand vehicles and secondhand vehicles authentication and evaluation service, respectively.

b. Assets acquired and liabilities assumed at the date of acquisition

Yu Rich

Zhejiang

Cheng-Yi Auto

Service Co.,

Ltd. and Its

Subsidiaries

Current assets

Cash and cash equivalents $ 520,243 $ 18,789

Available-for-sale financial assets - 32,151

Financial assets at fair value through profit or loss 10,199 -

Trade receivables - 135

Other receivables 119 352

Prepayments 77,319 -

Other current assets 2,820 10,313

Property, plant and equipment - 2,266

Intangible assets - 4,457

Non-current assets

Refundable deposits 11 -

Current liabilities

Trade payables (359) (494)

Other payables (2,065) -

Other current liabilities - (3,812)

$ 608,287 $ 64,157

- 59 -

c. Net cash (inflow) outflow on acquisition of subsidiaries

Yu Rich

Zhejiang

Cheng-Yi Auto

Service Co.,

Ltd. and Its

Subsidiaries

Consideration paid in cash $ 500,001 $ 32,419

Less: Cash and cash equivalent balances acquired (520,243) (18,789)

$ (20,242) $ 13,630

d. Impact of acquisitions on the results of the Group

The results of the acquirees as of December 31, 2017 included in the consolidated statements of

comprehensive income were as follows:

Yu Rich

Zhejiang

Cheng-Yi Auto

Service Co.,

Ltd. and Its

Subsidiaries

Revenue $ 548,826 $ 17,514

Profit (Loss) $ 95,799 $ (7,509)

29. OPERATING LEASE ARRANGEMENTS

The Company and its subsidiaries lease offices with monthly rental payments and a maturity date in

September 2026. For the years ended December 31, 2017 and 2016, rental expenses were $186,394

thousand and $168,644 thousand, respectively. The future five-year minimum lease payments under

operating lease commitments were as follows:

Year Amount

Not later than 1 year $ 144,045

Later than 1 year, and not later than 5 years 329,181

Later than 5 years 46,459

$ 519,685

30. CAPITAL MANAGEMENT

The Group manages its capital to ensure it will be able to continue as going concern while maximizing the

return to shareholders through maintaining a strong credit rating and optimization of the debt and equity

balance. The Group’s management reviews the capital structure whenever necessary. As part of this

review, the management considers the cost of capital and the risks associated with each class of capital.

Based on the management’s recommendations, the Group expects to balance its capital structure by paying

dividends issuing new shares, buying treasury stocks, borrowing new loans or repaying original loans.

- 60 -

31. FINANCIAL INSTRUMENTS

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

1) Financial instruments with carrying amounts and fair values that have significant differences were

as follows:

December 31

2017 2016

Carrying

Amount Fair Value

Carrying

Amount Fair Value

Financial assets

Held-to-maturity

investments-central

government development

bonds $ 16,632 $ 17,058 $ 17,095 $ 17,327

Financial liabilities

Unsecured bonds 4,342,919 4,350,436 3,000,000 3,003,797

2) Fair value hierarchy

Financial assets and liabilities above that are not measured at fair value are measured using Level 1

inputs.

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

1) Fair value hierarchy

December 31, 2017

Level 1 Level 2 Level 3 Total

Financial assets at FVTPL

Non-derivative financial

assets held for trading $ 19,728 $ - $ - $ 19,728

Financial liabilities at

FVTPL

Derivative financial

liabilities $ - $ 201 $ - $ 201

- 61 -

December 31, 2016

Level 1 Level 2 Level 3 Total

Financial assets at FVTPL

Non-derivative financial

assets held for trading $ 11,155 $ - $ - $ 11,155

Available-for-sale financial

assets

Wealth management

product $ - $ 19,088 $ - $ 19,088

Financial liabilities at

FVTPL

Derivative financial

liabilities $ - $ 1,145 $ - $ 1,145

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

2) Valuation techniques and inputs applied for the purpose of measuring Level 2 fair value

measurement

Financial Instruments Valuation Techniques and Inputs

Derivatives - foreign exchange

forward contracts

Discounted cash flow.

Future cash flows were estimated based on observable forward

exchange rates at the end of the reporting period and contract

forward rates, discounted at a rate that reflects the credit risk

of various counterparties.

Convertible bond redemption

rights and put provisions

Binomial tree model.

Fair value of financial asset component of convertible bonds was

assessed by the following factors: Market price of stock,

risk-free interest rate, and risk discount rate.

Wealth management product Discounted cash flow.

Fair value of financial asset component of wealth management

product was assessed by the generally accepted pricing model

on the basis of a discounted cash flow analysis.

- 62 -

c. Categories of financial instruments

December 31

2017 2016

Financial assets

Fair value through profit or loss (FVTPL)

Held for trading $ 19,728 $ 11,155

Available-for-sale financial assets - 19,088

Held-to-maturity investments 16,632 17,095

Loans and receivables (1) 114,197,605 91,740,993

Financial liabilities

Fair value through profit or loss (FVTPL)

Held for trading - 1,145

Designated hedging instruments 201 -

Amortized cost (2) 119,342,601 96,755,171

1) The balances included cash and cash equivalents, notes and trade receivables, finance lease

receivables, debt investments with no active market, and other receivables.

2) The balances included financial liabilities measured at amortized cost, which comprise of short-term

borrowings, short-term bills payable, notes and trade payable, other payables, guarantee deposits

received, current portion of long-term borrowings, bonds payable and long-term borrowings.

d. The purpose and strategy of financial risk management

The objective of financial risk management policy of the Group is to identify and analyze the financial

risk the Group faces, to assess its impact and to execute financial risk avoidance policy. Financial risk

management policy is periodically reviewed and monitored, through in depth and broad risk analysis

report of the financial risk of the Group, to reflect market conditions and daily operation of the

Company and subsidiaries. Financial risks include market risk (foreign exchange rate risk, interest

rate risk, other price 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 (see (a) below) and interest rates (see (b) below).

a) Foreign currency risk

The carrying amounts of the Group’s non-functional currency denominated monetary assets and

monetary liabilities (including the non-functional currency monetary items that have been

written off within the consolidated statement) and of the derivatives are exposed to foreign

currency risk at the end of the reporting period (see Note 34).

Sensitivity analysis

The Group was mainly exposed to the fluctuation of USD and RMB.

- 63 -

The following table details the Group’s sensitivity to a 5% increase and decrease in New

Taiwan dollars (the functional currency) against the relevant foreign currencies. The

sensitivity rate of 5% is 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.

USD Impact RMB Impact

For the Year Ended

December 31

For the Year Ended

December 31

2017 2016 2017 2016

Profit or loss $ (56,457) $ (51,703) $ 5 $ 6

b) Interest rate risk

The Group issues corporate bonds, issues fixed rate commercial paper and enters into New

Taiwan dollar interest rate swap contracts according to market and capital conditions, in order to

reduce the risk of increasing interest expense due to rising interest rates.

The carrying amount of the Group’s financial assets and financial liabilities with exposure to

interest rates at the end of the reporting period were as follows:

December 31

2017 2016

Fair value interest rate risk

Financial assets $ 81,876,480 $ 75,014,705

Financial liabilities 88,282,418 75,635,800

Cash flow interest rate risk

Financial assets 2,967,908 2,449,217

Financial liabilities 21,969,151 12,399,641

Sensitivity analysis

The sensitivity analyses below were determined based on the Group’s exposure to interest rates

for both derivatives and non-derivative instruments at the end of the reporting period.

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 and 2016 would decrease by

$47,503 thousand and $24,876 thousand, respectively.

c) Other price risk

The Group was exposed to equity price risk through its investments in securities.

Sensitivity analysis

The sensitivity analyses below were determined based on the exposure to equity price risks at

the end of the reporting period.

If equity prices had been 5% higher/lower, as of December 31, 2017 and 2016, fair values of

available-for-sale investments would have decreased/increased by $986 thousand and $1,512

thousand, respectively.

- 64 -

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in

financial loss to the Group. To enhance the Group’s credit risk control mechanism, the Group

exchanges information with companies within its industry to build customer blacklists. Also, the

Group reviews customers’ credit statuses through China Credit Information Service Ltd. upon

approval of each loan. These procedures are taken as ways of preventing losses due to fraud.

The clients of the Group are widely dispersed and are unrelated; thus, credit risk is limited.

3) Liquidity risk

The Group analyzes its assets and liabilities to examine capital shortages on a monthly basis.

Adequate liquidity ratio and high quality current assets are also maintained simultaneously. The

management monitors the usage of credit limits to ensure compliance with loan contracts.

Liquidity and interest risk tables

The following table shows the remaining contractual maturity of the Group’s non-derivative

financial liabilities with agreed-upon repayment periods. The table had been drawn up on the

basis of the undiscounted cash flows of financial liabilities from the earliest date on which the

Company is required of payment.

December 31, 2017

Less than

1 Year 1-2 Years 2+ Years

Non-derivative financial liabilities

Non-interest bearing $ 1,447,592 $ - $ -

Variable interest rate liabilities 21,969,248 - -

Fixed interest rate liabilities 84,933,159 1,200,000 -

Financial guarantee contracts 7,795,491 - -

$ 116,145,490 $ 1,200,000 $ -

December 31, 2016

Less than

1 Year 1-2 Years 2+ Years

Non-derivative financial liabilities

Non-interest bearing $ 856,980 $ - $ -

Variable interest rate liabilities 12,399,641 - -

Fixed interest rate liabilities 73,452,964 750,000 -

Financial guarantee contracts 8,803,363 - -

$ 95,512,948 $ 750,000 $ -

The amount of variable interest rate liabilities included above varies as the different floating rates

estimated at the balance sheet date change.

- 65 -

The amounts included above for financial guarantee contracts were the maximum amounts the

Group could be required to settle under the arrangement for the full guaranteed amount if that

amount is claimed by the counterparty to the guarantee. The Group has estimated the probabilities

of default and recognized related provisions (see Note 21).

32. TRANSACTIONS WITH RELATED PARTIES

The Company’s parent company is Yulon Motor Company Ltd. (“Yulon Company”) which held 45.75% of

ordinary shares of the Company for the years ended December 31, 2017 and 2016. The Company’s

ultimate parent company is Yulon Company.

Balances and transactions between the Company and its subsidiaries, which are related parties of the

Company, have been eliminated on consolidation and are not disclosed in this note. Details of

transactions between the Group and other related parties are disclosed below.

a. Related party name and nature of relationship

Related Party Nature of Relationship

Yulon Motor Co., Ltd. Parent entity

Qinton Motor Co., Ltd. Fellow subsidiaries related to the others

Singgual Travel Service Co., Ltd. Fellow subsidiaries related to the others

Yu Sing Motor Co., Ltd. Fellow subsidiaries related to the others

Yu Pool Co., Ltd. Fellow subsidiaries related to the others

Yushin Motor Co., Ltd. Fellow subsidiaries related to the others

Yu Chia Motor Co., Ltd. Fellow subsidiaries related to the others

Singan Co., Ltd. Fellow subsidiaries related to the others

Y-Teks Co., Ltd. Fellow subsidiaries related to the others

Union & NKH Auto Parts Co., Ltd. Fellow subsidiaries related to the others

Yueki Industrial Co., Ltd. Fellow subsidiaries related to the others

Yu Chang Motor Co., Ltd. Fellow subsidiaries related to the others

Tian Wang Co., Ltd. Fellow subsidiaries related to the others

Hsiang Shou Enterprise Co., Ltd. Fellow subsidiaries related to the others

Hong Shou Culture Enterprise Co., Ltd. Fellow subsidiaries related to the others

Luxgen Motor Co., Ltd. Fellow subsidiaries related to the others

Luxgen Motor Taipei Co., Ltd. Fellow subsidiaries related to the others

Luxgen Motor Taoyuan Co., Ltd. Fellow subsidiaries related to the others

Luxgen Motor Tainan Co., Ltd. Fellow subsidiaries related to the others

Luxgen Motor Kaohsiung Co., Ltd. Fellow subsidiaries related to the others

Yulon Energy Service Co., Ltd. Fellow subsidiaries related to the others

Shen Jun Yu Peng Auto Sale & Service Co., Ltd. Fellow subsidiaries related to the others

Nanjing Hanhong Motor Trading Co., Ltd. Fellow subsidiaries related to the others

Wuhan Yu Hsin Auto Sale & Service Co., Ltd. Fellow subsidiaries related to the others

Suzhou Yueshun Auto Sale & Service Co., Ltd. Fellow subsidiaries related to the others

Zhuhai Yuhsin Auto Sales & Parts Co., Ltd. Fellow subsidiaries related to the others

Ning Bo Yu Cheng Auto Sales & Services Co., Ltd. Fellow subsidiaries related to the others

Fu Jian Yu Xin Auto Sales & Services Co., Ltd. Fellow subsidiaries related to the others

Guang Zhou Yuan Zhi Auto Sales & Services Co., Ltd. Fellow subsidiaries related to the others

Xiao Gan Yu Feng Auto Sale & Service Co., Ltd. Fellow subsidiaries related to the others

Shenzhen Yu Zhi Auto Sales & Services Co., Ltd. Fellow subsidiaries related to the others

Chang Sha Yu Lu Auto Sale & Service Co., Ltd. Fellow subsidiaries related to the others

Jiangmen Yuli Auto Sale & Service Co., Ltd. Fellow subsidiaries related to the others

(Continued)

- 66 -

Related Party Nature of Relationship

An Hui Min Tung Co., Ltd. Fellow subsidiaries related to the others

An Ching Tsai Tung Co., Ltd. Fellow subsidiaries related to the others

Tung Ling Kuo Tung Co., Ltd. Fellow subsidiaries related to the others

Zi Bo Yu An Auto Sale & Service Co., Ltd. Fellow subsidiaries related to the others

Yulon Motor Investment Limited Fellow subsidiaries related to the others

Ka Shing Yu Da Auto Sale & Service Co., Ltd. Fellow subsidiaries related to the others

Yue Sheng Industrial Co., Ltd. Fellow subsidiaries related to the others

Chan Yun Technology Co., Ltd. Fellow subsidiaries related to the others

Yulon Tobe Motor Co., Ltd. Fellow subsidiaries related to the others

Yu Pong Business Co., Ltd. Fellow subsidiaries related to the others

Hang Zhou Hua You Auto Sales & Services Co., Ltd. Fellow subsidiaries related to the others

Qingdao Yuanhuang Auto Sale & Service Co., Ltd. Fellow subsidiaries related to the others

Hang Zhou Hua Zhi Auto Sales & Services Co., Ltd. Fellow subsidiaries related to the others

Chanchen Inter Consulting Fellow subsidiaries related to the others

Yu-Jan Co., Ltd. Fellow subsidiaries related to the others

SinYi Co., Ltd. Other related parties

Yulon Nissan Motor Co., Ltd. Other related parties

China Motor Company Other related parties

Yuan Lon Motor Co., Ltd. Other related parties

Yu Tang Motor Co., Ltd. Other related parties

Cheng Long Co., Ltd. Other related parties

ROC-Spicer Ltd. Other related parties

Uni-calsonic Co., Ltd. Other related parties

China Ogihara Company Other related parties

China Engine Company Other related parties

Yuan Zhi Motor Co., Ltd. Other related parties

Lian Cheng Motor Co., Ltd. Other related parties

Ding Long Motor Co., Ltd. Other related parties

Haitec Co., Ltd. Other related parties

Yuen-jin Industrial Co., Ltd. Other related parties

Taiway Industrial Co., Ltd. Other related parties

ROC-Keeper Co., Ltd. Other related parties

Kian-shen Industrial Co., Ltd. Other related parties

Hui-Fong Motor Co., Ltd. Other related parties

Hui-Lian Motor Co., Ltd. Other related parties

Yulon Management Co., Ltd. Other related parties

Zhe Jiang Kang Da Co., Ltd. Other related parties

Shug Ye Motor Co., Ltd. Other related parties

Hua Ling Co., Ltd. Other related parties

Chi Ho Company Other related parties

Lin Wei Co., Ltd. Other related parties

Diamond Hosiery & Thread Co., Ltd. Other related parties

Hua Chiun Motor Co., Ltd. Other related parties

Xiang Wei Co., Ltd. Other related parties

ChangYu Co., Ltd. Other related parties

Dongguan HuaShun Co., Ltd. Other related parties

Tianjin HuaHong Co., Ltd. Other related parties

Guangzhou HuaYou Co Ltd. Other related parties

Empower Motor Co., Ltd. Associates

Tokio Marine Newa Insurance Co., Ltd. Associates

Shanghai Yuming Auto Sale & Service Co., Ltd. Associates

Chunmin Enterprise Co., Ltd. Associates

(Concluded)

- 67 -

b. Operating revenue

For the Year Ended December 31

Line Items Related Party Categories 2017 2016

Sales of goods Fellow subsidiaries related to the

others

Yu Chang Motor $ 4,472,038 $ 4,788,489

Others 16,541,040 18,357,279

21,013,078 23,145,768

Other related parties 14,009,842 15,224,268

Associates 3,059,283 2,955,685

$ 38,082,203 $ 41,325,721

Leasing revenue Fellow subsidiaries related to the

others

Yu Sing Motor $ 20,444 $ 16,106

Hsiang Shou 16,092 7,980

Luxgen Motor. 13,856 14,872

Others 17,726 20,796

68,118 59,754

Other related parties 53,984 52,486

Parent entity 7,525 7,615

Associates 3,910 2,851

$ 133,537 $ 122,706

Other operating revenue Fellow subsidiaries related to the

others

$ 60,113

$ 48,041

Other related parties 15,205 14,823

Associates 4,828 3,751

Parent entity 1,849 1,622

$ 81,995 $ 68,237

The Group sells cars from Yulon Company to dealers at cost or no mark-up. Therefore, the sales and

cost of goods sold resulted in zero-profit and were not included in the accompanying consolidated

statements of comprehensive income. Such sales and cost of goods sold together amounted to

$40,146,679 thousand for the year ended December 31, 2017 and $56,550,184 thousand for the year

ended December 31, 2016, respectively.

The Group’s lease contracts with and rental charged to related parties are the same as normal

transactions.

- 68 -

c. Purchases of goods

For the Year Ended December 31

Related Parties Categories 2017 2016

Other related parties

Yulon Nissan Motor $ 29,375,994 $ 31,125,416

Others 4,630 4,748

29,380,624 31,130,164

Fellow subsidiaries related to the others

Luxgen Motor. 10,968,721 12,201,486

Others 2,795 620

10,971,516 12,202,106

$ 40,352,140 $ 43,332,170

d. Operating cost - leasing cost

For the Year Ended December 31

Related Parties Categories 2017 2016

Other related parties

Hui-Fong Motor $ 52,960 $ 52,492

Shug Ye Motor 33,704 32,134

Others 16,543 15,742

103,207 100,368

Associates

Tokio Marine Newa Insurance 77,412 74,898

Others 5,630 3,331

83,042 78,229

Fellow subsidiaries related to the others 53,323 47,889

Parent entity 938 975

$ 240,510 $ 227,461

e. Installment sales interest subsidies revenue

For the Year Ended December 31

Related Parties Categories 2017 2016

Other related parties

Yulon Nissan Motor $ 353,997 $ 491,097

Others 8,908 10,601

362,905 501,698

Fellow subsidiaries related to the others 59,014 56,997

Associates 4,393 2,959

$ 426,312 $ 561,654

- 69 -

f. Acquisition of receivables

For the Year Ended December 31

Related Parties Categories 2017 2016

Fellow subsidiaries related to the others

Yu Chang Motor $ 1,703,773 $ 1,973,981

Others 6,487,069 5,798,956

8,190,842 7,772,937

Other related parties

Yulon Nissan Motor 2,032,306 1,963,839

Others 4,197,264 4,929,087

6,229,570 6,892,926

Associates 1,286,986 1,190,076

$ 15,707,398 $ 15,855,939

g. Acquisition of property, plant and equipment (acquisition of assets for lease)

For the Year Ended December 31

Related Parties Categories 2017 2016

Fellow subsidiaries related to the others

Yu Sing Motor $ 336,714 $ 315,095

Others 463,814 492,614

800,528 807,709

Other related parties

Hui-Fong Motor 450,257 493,494

Others 397,152 231,433

847,409 724,927

Associates 67,559 47,724

$ 1,715,496 $ 1,580,360

h. Commissions paid (recognized as prepaid commission and allocated according to lease term)

For the Year Ended December 31

Related Parties Categories 2017 2016

Other related parties

Yulon Nissan Motor $ 137,210 $ 213,081

Others 18,090 7,665

155,300 220,746

Fellow subsidiaries related to the others 51,370 37,976

Associates 4,604 1,833

$ 211,274 $ 260,555

- 70 -

i. Receivables from related parties

December 31

Line Items Related Party Categories 2017 2016

Notes and trade receivables

from related parties

Fellow subsidiaries related to the

others

$ 572,067

$ 274,786

Other related parties

Zhe Jiang Kang Da 181,024 46,505

Others 222,262 176,336

403,286 222,841

Associates 131,604 25,504

Parent entity 947 921

$ 1,107,904 $ 524,052

j. Payables to related parties

December 31

Line Items Related Party Categories 2017 2016

Notes and trade payables to Other related parties

related parties Yulon Nissan Motor $ 397,862 $ 254,984

Others 140,475 81,886

538,337 336,870

Fellow subsidiaries related to the

others

288,760

184,112

Associates 11,139 4,574

Parent entity 85 770

$ 838,321 $ 526,326

k. At the end of the reporting period, the amounts of prepayments to related parties were as follows:

December 31

Related Parties Categories 2017 2016

Associates

Tokio Marine Newa Insurance $ 32,775 $ 33,051

Fellow subsidiaries related to the others - 891

Other related parties - 46

Parent entity 5,247 11

$ 38,022 $ 33,999

Other related parties include entities that were accounted for using the equity method by the parent

company and those entities’ subsidiaries and investments accounted for using the equity method.

- 71 -

l. Compensation of key management personnel

For the Year Ended December 31

2017 2016

Short-term employee benefits $ 153,286 $ 112,579

Post-employment benefits 837 901

$ 154,123 $ 113,480

The remuneration of directors and key executives was determined based on the performance of

individuals and market trends.

33. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings:

December 31

2017 2016

Notes and trade receivables $ 2,799,852 $ 4,686,175

Reserve account and pledged time deposits (classified as debt

investments with no active market) 296,361 287,217

$ 3,096,213 $ 4,973,392

34. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currencies of the

group entities and the exchange rates between foreign currencies and respective functional currencies were

disclosed. The significant assets and liabilities denominated in foreign currencies were as follows:

December 31, 2017

Foreign

Currencies

(In Thousands) Exchange Rate

Carrying

Amount

Financial assets

Monetary items

RMB $ 24 4.5546 (RMB:NTD) $ 107

USD $ 53 29.7600 (USD:NTD) $ 1,574

6 6.5340 (USD:RMB) 173

$ 59 $ 1,747

Non-monetary items

Investments accounted for using equity

method

RMB $ 3,679 4.5546 (RMB:NTD) $ 16,755

(Continued)

- 72 -

Foreign

Currencies

(In Thousands) Exchange Rate

Carrying

Amount

Financial liabilities

Monetary items

USD $ 38,000 6.5340 (USD:RMB) $ 1,130,880

(Concluded)

December 31, 2016

Foreign

Currencies

(In Thousands) Exchange Rate

Carrying

Amount

Financial assets

Monetary items

RMB $ 26 4.649 (RMB:NTD) $ 119

USD $ 5 32.250 (USD:NTD) $ 146

232 6.937 (USD:RMB) 7,471

$ 237 $ 7,617

Non-monetary items

Investments accounted for using equity

method

RMB $ 2,001 4.649 (RMB:NTD) $ 9,304

Financial liabilities

Monetary items

USD $ 32,300 6.937 (USD:RMB) $ 1,041,675

35. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees:

1) Financing provided to others (Table 1)

2) Endorsements/guarantees provided (Table 2)

3) Marketable securities held (Table 3)

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 4)

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)

- 73 -

7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the

paid-in capital (Table 5)

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

(Table 6)

9) Trading in derivative instruments (Notes 7 and 10)

10) Others: Intercompany relationships and significant intercompany transactions (Table 7)

11) Information on investees (Table 8)

b. Information on investments in mainland China are as follows: Investee company, main business and

products, paid-in capital, method of investment, outward/inward remittance of funds, ownership of

investment, investment gain (loss), carrying amount as of December 31, 2017, accumulated repatriation

of investment income and upper limit on the amount of investment (Table 9)

36. SEGMENT INFORMATION

The 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, Group reportable segments under IFRS 8 “Operating Segments” were “Financing segments”,

“Leasing segments”, and “Others”.

a. Segment revenues and results

The following was an analysis of Group revenue and results from continuing operations by reportable

segment.

Segment Revenue Segment Profit (Loss)

For the Year Ended

December 31

For the Year Ended

December 31

2017 2016 2017 2016

Financing segments $ 6,490,967 $ 5,300,836 $ 2,103,696 $ 1,674,715

Leasing segments 12,682,533 12,033,052 936,455 799,664

Others 308,605 240,365 9,173 34,177

Total from continuing

operations $ 19,482,105 $ 17,574,253 3,049,324 2,508,556

Other income 137,625 105,835

Share of profits of associates

and joint ventures 18,386 15,509

Gain from financial assets at

FVTPL 1,218 1,711

Net loss on disposal of

property, plant and

equipment 4,040 51

Other gains or loss 6,789 (326,190)

Income before income tax $ 3,217,382 $ 2,305,472

Segment revenue reported above represents revenue generated from external customers.

- 74 -

Segment profit represented the profit before tax earned by each segment without other income, share of

profits of associates and jointly controlled entities accounted for using the equity method, gain or loss

from financial assets at FVTPL, other profit or loss, net gain or loss on disposal of property, plant and

equipment, and tax expenses.

This was the measure reported to the chief operating decision maker for the purpose of resource

allocation and assessment of segment performance.

b. Segment assets and liabilities

December 31

2017 2016

Segment assets

Financial segment $ 96,559,155 $ 78,866,168

Leasing segment 38,961,361 31,770,029

Others 793,016 758,678

Consolidated total assets $ 136,313,532 $ 111,394,875

Segment liabilities

Financial segment $ 87,430,755 $ 71,568,031

Leasing segment 34,594,238 27,689,715

Others 282,079 243,589

Consolidated total liabilities $ 122,307,072 $ 99,501,335

c. Geographical information

The Group operates in two principal geographical areas - Taiwan and China.

The Group’s revenue from continuing operations from external customers by location of operations and

information about its non-current assets by location of assets are detailed below.

Revenue from External

Customers Non-current Assets

For the Year Ended December 31 December 31

2017 2016 2017 2016

Taiwan $ 15,530,784 $ 14,796,354 $ 16,127,942 $ 15,192,875

China 3,951,321 2,777,899 2,631,500 1,947,781

$ 19,482,105 $ 17,574,253 $ 18,759,442 $ 17,140,656

Non-current assets do not include the assets that are classified as financial instruments and deferred tax.

d. Information about major customers

No other single customer contributed 10% or more to the Group’s revenue for the years ended

December 31, 2017 and 2016.

- 75 -

TABLE 1

TAIWAN ACCEPTANCE CORPORATION AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS

FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Lender Borrower

Financial

Statement

Account

Related

Parties

Highest

Balance for

the Period

Ending

Balance

Actual

Borrowing

Amount

Interest

Rate

Nature of

Financing

(Note 1)

Business

Transaction

Amounts

Reasons for

Short-term

Financing

Allowance for

Impairment

Loss

Collateral Financing

Limit for

Each

Borrower

Aggregate

Financing

Limits

(Note 2)

Note Item Value

The Company Yu Rich Other receivable Yes $ 800,000 $ 800,000 $ 800,000 1.15% b $ - Operating capital $ - $ - $ 1,060,196 $ 4,240,783 2

TAC Leasing (Suzhou) TAC Financial Leasing Co., Ltd. Trade receivable Yes 45,700 - - - b - Operating capital - - 533,569 533,569 3

TAC Financial Leasing Co., Ltd. Zhe Jiang Kang Da Trade receivable Yes 45,700 - - - b - Operating capital - - 379.864 379,864 3

Shinshin Yu Rich Other receivable Yes 800,000 800,000 800,000 1.16% b - Operating capital - - 1,063,180 1,063,180 4

Note 1: Explanation of nature of financing:

a. Transactions.

b. Short-term financing.

Note 2: Aggregate financing was limited to 40% of the lender’s net equity. Credit financing limit for each borrower was limited to 10% of the lender’s net equity.

Note 3: Credit financing limits for each associate and aggregate financing were limited to 40% of the lender’s net equity. While the financing was provided to non-associates, credit financing limit for each borrower was limited to 20% of the lender’s net equity.

Note 4: Aggregate financing was limited to 40% of the lender’s net equity. Credit financing limits for each borrower were limited to 40% of the lender’s net equity.

- 76 -

TABLE 2

TAIWAN ACCEPTANCE CORPORATION AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Endorser/Guarantor

Guaranteed Party

Limits on

Endorsement/

Guarantee

Given to Each

Party (Note)

Maximum

Amount

Endorsed/

Guaranteed

During the

Period

Outstanding

Endorsement/

Guarantee at

the End of the

Period

Actual

Borrowing

Amount

Amount

Endorsed/

Guaranteed by

Collaterals

Ratio of

Accumulated

Endorsement/

Guarantee to

Net Equity in

Latest Financial

Statements (%)

Maximum

Collateral/

Guarantee

Amounts

Allowable

(Note)

Name Relationship

The Company TAC Leasing (Suzhou) Subsidiaries $ 26,504,895 $ 3,657,628 $ 3,644,000 $ 2,550,800 $ - 34.37 $ 53,009,790

Car-Plus Leasing (Shanghai) Subsidiaries 26,504,895 320,000 320,000 - - 3.02 53,009,790

TAC Financial Leasing Co., Ltd. Subsidiaries 26,504,895 10,000,000 10,000,000 8,360,640 - 94.32 53,009,790

Car-plus Corporation Diamond Leasing Subsidiaries 4,598,118 500,000 500,000 100,000 - 27.19 9,196,235

Car-Plus Leasing (Shanghai) Subsidiaries 4,598,118 480,000 480,000 - - 26.10 9,196,235

Note: The aggregate endorsement/guarantee limit is 500% of the endorser’s/guarantor’s net equity. The limit on each endorsement/guarantee given to each party is 50% of the endorser’s/guarantor’s net equity.

- 77 -

TABLE 3

TAIWAN ACCEPTANCE CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES HELD

DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Holding Company

Name

Type of Marketable

Securities Name of Marketable Securities

Relationship

with the Holding

Company

Financial Statement Account

December 31, 2017

Note Shares or

Units

Carrying

Amount

Percentage

of

Ownership

(%)

Fair Value

`

The Company Bonds Central Government Development Bonds - Held-to-maturity financial assets - non-current - $ 5,578 - $ 5,693 -

Shinshin Bonds Central Government Development Bonds - Held-to-maturity financial assets - non-current - 11,054 - 11,354 -

H. K. Manpower Beneficiary certificates Union Money Market - Financial assets at fair value through profit or loss - current 234,676 3,082 - 3,082 -

Beneficiary certificates RSIT Enhanced Money Market - Financial assets at fair value through profit or loss - current 253,867 3,021 - 3,021 -

Beneficiary certificates Jih Sun Money Market Fund - Financial assets at fair value through profit or loss - current 205,727 3,029 - 3,029 -

Beneficiary certificates Capital Money Market - Financial assets at fair value through profit or loss - current 128,651 2,063 - 2,063 -

Da-Wei Beneficiary certificates Jih Sun Money Market Fund - Financial assets at fair value through profit or loss - current 579,351 8,533 - 8,533 -

- 78 -

TABLE 4

TAIWAN ACCEPTANCE CORPORATION 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 Acquisition Disposal Ending Balance

Shares/Units Amount Shares/Units Amount Shares/Units Amount Carrying Value Gain (Loss) on

Disposal Shares/Units Amount (Note)

The Company Yulon Motor Finance

(China)

Investments accounted for

using equity method

Issuance of common

stock for cash

The Company’s

subsidiary

245,000,000 $ 1,099,619 245,000,000 $ 1,128,439 - $ - $ - $ - 490,000,000 $ 2,221,426

Note: The amount is form after adjustments of investments accounted for using the equity method.

- 79 -

TABLE 5

TAIWAN ACCEPTANCE CORPORATION 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)

Purchasing or

(Selling) Company

Name

Related Party Relationship

Transaction Details Abnormal Transaction Notes/Accounts

(Payable) or Receivable Note

Purchase/

(Sale) Amount

% to

Total Payment Terms Unit Price Payment Terms

Ending

Balance

% to

Total

The Company Yulon Nissan Motor Co., Ltd. Yulon Company’s associate accounted for using equity method Purchase $ 29,375,994 65 Within 3 days Same as normal transactions Same as normal transactions $ (397,862) (58) -

Luxgen Motor Co., Ltd. Yulon Company’s subsidiary Purchase 10,967,160 24 Within 3 days Same as normal transactions Same as normal transactions (72,177) (11) -

Sin Jang The Company’s subsidiary Purchase 5,034,276 11 Within 3 days Same as normal transactions Same as normal transactions (960) - -

Yu Chang Motor Co., Ltd. Yulon Company’s subsidiary Sales (4,472,038) (11) Receipt of payment on the day Same as normal transactions Same as normal transactions 44,336 - -

Luxgen Motor Taipei Co., Ltd. Luxgen Motor Co., Ltd.’s subsidiary Sales (3,625,814) (9) Receipt of payment on the day Same as normal transactions Same as normal transactions 23,447 - -

Yuan Lon Motor Co., Ltd. Yulon Company’s associate accounted for using equity method Sales (3,608,350) (9) Receipt of payment on the day Same as normal transactions Same as normal transactions 8,008 - -

Hui-Lian Motor Co., Ltd. Yulon Company’s associate accounted for using equity method Sales (3,345,218) (8) Receipt of payment on the day Same as normal transactions Same as normal transactions 17,813 - -

Yu Sing Motor Co., Ltd. Yulon Company’s subsidiary Sales (3,216,501) (8) Receipt of payment on the day Same as normal transactions Same as normal transactions 15,027 - -

Empower Motor Co., Ltd. An associate accounted for using equity method by the Company Sales (3,059,283) (8) Receipt of payment on the day Same as normal transactions Same as normal transactions 86,385 - -

Yu Tang Motor Co., Ltd. Yulon Company’s associate accounted for using equity method Sales (2,539,411) (6) Receipt of payment on the day Same as normal transactions Same as normal transactions 13,741 - -

Yushin Motor Co., Ltd. Yulon Company’s subsidiary Sales (2,483,437) (6) Receipt of payment on the day Same as normal transactions Same as normal transactions 9,791 - -

Cheng Long Motor Co., Ltd. Yulon Company’s associate accounted for using equity method Sales (2,391,845) (6) Receipt of payment on the day Same as normal transactions Same as normal transactions 27,723 - -

Luxgen Motor Taichung Co., Ltd. Luxgen Motor Co., Ltd.’s subsidiary Sales (2,196,992) (5) Receipt of payment on the day Same as normal transactions Same as normal transactions 7,107 - -

Luxgen Motor Taoyuan Co., Ltd. Luxgen Motor Co., Ltd.’s subsidiary Sales (2,076,170) (5) Receipt of payment on the day Same as normal transactions Same as normal transactions 13,531 - -

Luxgen Motor Kaohsiung Co., Ltd. Luxgen Motor Co., Ltd.’s subsidiary Sales (1,567,345) (4) Receipt of payment on the day Same as normal transactions Same as normal transactions 5,078 - -

Luxgen Motor Tainan Co., Ltd. Luxgen Motor Co., Ltd.’s subsidiary Sales (1,374,781) (3) Receipt of payment on the day Same as normal transactions Same as normal transactions 5,024 - -

Ding Long Motor Co., Ltd. Cheng Long Motor Co., Ltd.’s subsidiary Sales (1,211,136) (3) Receipt of payment on the day Same as normal transactions Same as normal transactions 61 - -

Lian Cheng Motor Co., Ltd. Cheng Long Motor Co., Ltd.’s subsidiary Sales (476,844) (1) Receipt of payment on the day Same as normal transactions Same as normal transactions 1,050 - -

Yuan Zhi Co., Ltd. Yuan Lon Motor Co., Ltd.’s subsidiary Sales (437,038) (1) Receipt of payment on the day Same as normal transactions Same as normal transactions 1,994 - -

Sin Jang The Company Parent company Sales (5,034,276) (94) Receipt of payment on the day Same as normal transactions Same as normal transactions 960 2 -

Car-plus Corporation Diamond Leasing Car-plus Corporation’s subsidiary Purchase 751,083 8 Within 1 day Same as normal transactions Same as normal transactions (27,200) (8) -

Hui-Fong Motor Co., Ltd. Related party in substance Purchase 445,868 6 Within 10 days Same as normal transactions Same as normal transactions (9,616) (3) -

Yu Sing Motor Co., Ltd. Yulon Company’s subsidiary Purchase 332,896 4 Within 30 days Same as normal transactions Same as normal transactions (21,648) (6) -

Luxgen Motor Taipei Co., Ltd. Luxgen Motor Co., Ltd. subsidiary Purchase 178,475 2 Within 1 day Same as normal transactions Same as normal transactions (1,552) - -

Diamond Leasing Car-plus Corporation Diamond Leasing’s parent company Sales (751,083) (100) Within 1 day Same as normal transactions Same as normal transactions 27,200 17 -

- 80 -

TABLE 6

TAIWAN ACCEPTANCE CORPORATION AND SUBSIDIARIES

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 Relationship Ending Balance Turnover Rate

Overdue Amounts

Received in

Subsequent

Period

Allowance for

Impairment

Loss Amount Actions Taken

Car-plus Corporation Diamond Leasing Car-plus Corporation’s subsidiary $ 348,118 70% $ - Depends on status of fund $ 62,405 $ -

- 81 -

TABLE 7

TAIWAN ACCEPTANCE CORPORATION AND SUBSIDIARIES

BUSINESS RELATIONSHIP AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Company Name Counterparty Relationship

(Note)

Transaction Details % to Total

Revenue or

Assets Financial Statement Account Amount Transaction Terms

The Company Sin Jang 1 Operating expenses $ 33,874 Based on regular terms -

1 Accrued expenses 1,156 Based on regular terms -

Yu Rich 1 Operating expenses 54,440 Based on regular terms -

1 Accrued expenses 5,606 Based on regular terms -

1 Other non-operating income 7,466 Based on regular terms -

1 Other receivables 807,466 Based on regular terms -

Car-plus Corporation 1 Operating expenses 3,515 Based on regular terms -

1 Other non-operating income 3,801 Based on regular terms -

Shinshin The Company 2 Operating expenses 21,084 Based on regular terms -

Yu Rich 3 Other receivables 803,014 Based on regular terms -

Car-plus Corporation 3 Operating expenses 2,702 Based on regular terms -

Car-plus Corporation Diamond Leasing 1 Other receivables 345,191 Based on regular terms -

1 Trade receivables 2,927 Based on regular terms -

1 Trade payables 27,276 Based on regular terms -

1 Operating expenses 1,517 Based on regular terms -

1 Rental revenue-lease car (operating revenue) 7,743 Based on regular terms -

1 Other operating revenue (operating revenue) 2,826 Based on regular terms -

1 Rental cost 2,433 Based on regular terms -

H. K. Manpower 1 Other payables 1,862 Based on regular terms -

1 Trade payables 2,173 Based on regular terms

1 Rental cost 19,828 Based on regular terms -

Sin Jang 1 Rental revenue 4,322 Based on regular terms -

TAC Leasing (Suzhou) TAC Financial Leasing 3 Other operating revenue 1,057 Based on regular terms -

Note: The following numerals indicate the directional flow of the transaction based on the parties’ relationships to one another:

1. From the parent company to a subsidiary.

2. From a subsidiary to the parent company.

3. Between subsidiaries.

- 82 -

TABLE 8

TAIWAN ACCEPTANCE CORPORATION AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE CORPORATION EXERCISES SIGNIFICANT INFLUENCE

FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Investor Company Investee Company Location Main Businesses and Products

Investment Amount Balance as of December 31, 2017 Net Income

(Loss) of the

Investee

Share of Profits

(Loss) December 31,

2017

December 31,

2016 Shares

Percentage of

Ownership Carrying Value

The Company Car-plus Corporation Taipei, Taiwan Car lease and trade $ 757,288 $ 757,288 51,491,530 68.57 $ 1,261,245 $ 410,682 $ 281,621

Shinshin Taipei, Taiwan Installment financing services for cars and trucks 419,808 419,808 134,000,000 100.00 2,657,949 480,044 480,044

TAC Global Investment (Samoa) Co., Ltd. Samoa Holding company 1,564,612 1,564,612 50,536,903 100.00 2,082,694 263,935 263,935

Tokio Marine Newa Insurance Co., Ltd. Taipei, Taiwan Property insurance 58,070 58,070 5,807,000 1.94 153,763 888,988 17,259

Empower Motor Co., Ltd. Taichung, Taiwan Retail of cars and related parts 48,843 48,843 7,560,000 27.00 90,943 16,232 4,383

Sin Jang Taipei, Taiwan Sale and brokerage of secondhand vehicles 181,731 181,731 17,128,300 40.00 193,912 30,503 12,200

Yu Rich Taipei, Taiwan Installment financing services for consumer goods and

wholesale of cars and parts

500,001 500,001 45,454,599 82.12 578,389 100,423

82,462

Shinshin Shinshin Global Investment (Samoa) Co., Ltd. Samoa Holding company 389,077 389,077 12,000,000 100.00 400,023 34,510 Not applicable

Car-plus Corporation Diamond Leasing Taipei, Taiwan Car lease and trade 85,000 85,000 8,500,000 100.00 91,771 9,540 Not applicable

Car-Plus Global Investment (Samoa) Co., Ltd. Samoa Holding company 378,187 378,187 12,000,000 100.00 566,367 48,979 Not applicable

Sin Jang Taipei, Taiwan Sale and brokerage of secondhand vehicles 90,811 90,811 8,559,000 19.99 96,898 30,503 Not applicable

Da-Wei Technology Co., Ltd. (“Da-Wei”) Taipei, Taiwan Brokerage of electric vehicles 10,000 10,000 1,000,000 100.00 10,146 164 Not applicable

Da-Wei Technology Co., Ltd. Da-Teng Transportation Co. Taipei, Taiwan Taxi Transportation 1,235 - 500,000 100.00 1,375 140 Not applicable

Diamond Leasing H. K. Manpower Taipei, Taiwan Temporary labor services 10,000 10,000 1,000,000 100.00 15,973 996 Not applicable

Sin Jang Sinjang International Investment (Samoa) Co., Ltd. Samoa Holding company 42,790 42,790 1,336,683 71.34 28,538 (3,327) Not applicable

Car-Plus Global Investment Car-Plus China Investment (Samoa) Co., Ltd. Samoa Holding company 193,004 193,004 6,000,000 60.00 369,953 59,035 Not applicable

(Samoa) Co., Ltd. Car-Plus Shanghai Investment (Samoa) Co., Ltd. Samoa Holding company 185,183 185,183 6,000,000 60.00 196,415 22,596 Not applicable

TAC Global Investment (Samoa) Car-Plus China Investment (Samoa) Co., Ltd. Samoa Holding company 128,647 128,647 4,000,000 40.00 246,635 59,035 Not applicable

Co., Ltd. Car-Plus Shanghai Investment (Samoa) Co., Ltd. Samoa Holding company 123,455 123,455 4,000,000 40.00 130,943 22,596 Not applicable

Yu Rong International Investment (Samoa) Co., Ltd. Samoa Holding company 1,296,290 1,296,290 42,000,000 100.00 1,693,649 232,236 Not applicable

Sinjang International Investment (Samoa) Co., Ltd. Samoa Holding company 16,220 16,220 536,903 28.66 11,465 (3,327) Not applicable

- 83 -

TABLE 9

TAIWAN ACCEPTANCE CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA

FOR THE YEAR ENDED DECEMBER 31, 2017

(In Thousands of New Taiwan Dollars)

Investee Company Main Businesses and Products Paid-in

Capital

Method of Investment

(Note 1)

Accumulated

Outward

Remittance

for Investment

from Taiwan

as of

January 1,

2017

Remittance of Funds Accumulated

Outward

Remittance

for Investment

from Taiwan

as of

December 31,

2017

Net Income

(Loss) of the

Investee

% Ownership

of Direct or

Indirect

Investment

Investment

Gain (Loss)

Carrying

Amount as of

December 31,

2017

Accumulated

Repatriation

of Investment

Income as of

December 31,

2017

Outward Inward

Car-Plus (Suzhou) Auto Leasing Co., Ltd. Lease of cars and related services $ 297,600 b.

Car-Plus China Investment (Samoa)

Co., Ltd.

$ 119,040 $ - $ - $ 119,040 $ 59,035 81.14 $ 47,901

(Note 2, b, 2)

$ 615,464 $ -

Car-Plus Leasing (Shanghai) Lease of cars and related services 297,600 b.

Car-Plus Shanghai Investment

(Samoa) Co., Ltd.

119,040 - - 119,040 22,596 81.14 18,334

(Note 2, b, 2)

327,338 -

TAC Leasing (Suzhou) Financial lease of equipment and car 892,800 b.

Yu Rong International Investment

(Samoa) Co., Ltd.

892,800 - - 892,800 197,725 100.00 197,725

(Note 2, b, 2)

1,333,924 -

TAC Financial Leasing Co., Ltd. Financial lease of equipment and car 892,800 b.

Yu Rong International Investment

(Samoa) Co., Ltd.

Shinshin Global Investment (Samoa)

Co., Ltd.

357,120 - - 357,120 86,276 80.00 69,021

(Note 2, b, 2)

379,864 -

Zhejiang ChengYi Auto Service Co., Ltd. Advisory services and business agent of

secondhand vehicles

91,093 b.

Sinjang International Investment

(Samoa) Co., Ltd.

15,981 - - 15,981 (4,987) 63.40 (3,162)

(Note 4)

45,801 -

Hangzhou Cheng Yi Jian Used-cars Authenticate

& Evaluation Service Co., Ltd.

Secondhand vehicles authenticate and

evaluation service

2,277 c.

Zhejiang ChengYi Auto Service Co.,

Ltd.

- - - - (4) 63.40 (3)

(Note 4)

2,182 -

Zhejiang ChengYi Auction Co., Ltd. Secondhand vehicles auction service 9,109 c.

Zhejiang ChengYi Auto Service Co.,

Ltd.

- - - - (2,101) 63.40 (1,332)

(Note 4)

6,982 -

Yulon Motor Finance (China) Co., Ltd. Car loans and loans to car dealers for purpose

of purchasing automobiles

4,554,637 a.

1,115,886 1,128,439 - 2,231,772 56,999 49.00 27,930

(Note 2, b, 2)

2,221,426 -

Suzhou TAC Auto Trade Co., Ltd. Car trade 9,109 c.

TAC Financial Leasing Co., Ltd.

- - - - 2,009 24.00 482

(Note 4)

2,477 -

Shanghai TAC Auto Trade Co., Ltd. Car trade 9,109 c.

TAC Financial Leasing Co., Ltd.

- - - - 509 24.00 122

(Note 4)

3,182 -

Dongguan TAC Auto Trade Co., Ltd. Car trade 9,109 c.

TAC Financial Leasing Co., Ltd.

- - - - 2,924 24.00 703

(Note 4)

2,211 -

Xiamen TAC Auto Trade Co., Ltd. Car trade 9,109 c.

TAC Financial Leasing Co., Ltd.

- - - - (6,951) 24.00 (1,667)

(Note 4)

788 -

(Continued)

- 84 -

Investee Company Main Businesses and Products Paid-in

Capital

Method of Investment

(Note 1)

Accumulated

Outward

Remittance

for Investment

from Taiwan

as of

January 1,

2017

Remittance of Funds Accumulated

Outward

Remittance

for Investment

from Taiwan

as of

December 31,

2017

Net Income

(Loss) of the

Investee

% Ownership

of Direct or

Indirect

Investment

Investment

Gain (Loss)

(Note 2)

Carrying

Amount as of

December 31,

2017

Accumulated

Repatriation

of Investment

Income as of

December 31,

2017

Outward Inward

Chengdu TAC Auto Trade Co., Ltd. Car trade $ 9,109 c.

TAC Financial Leasing Co., Ltd.

$ - $ - $ - $ - $ (5,573) 24.00 $ (1,338)

(Note 4)

$ 1,043 $ -

Hefei TAC Auto Trade Co., Ltd. Car trade 9,109 c.

TAC Financial Leasing Co., Ltd.

- - - - (577) 24.00 (140)

(Note 4)

2,557 -

Qingdao TAC Auto Trade Co., Ltd. Car trade 9,109 c.

TAC Financial Leasing Co., Ltd.

- - - - (1,252) 24.00 (302)

(Note 4)

2,353 -

Wuhan TAC Auto Trade Co., Ltd. Car trade 9,109 c.

TAC Financial Leasing Co., Ltd.

- - - - (135) 80.00 (108)

(Note 4)

8,973 -

Kunming TAC Auto Trade Co., Ltd. Car trade 9,109 c.

TAC Financial Leasing Co., Ltd.

- - - - (1,942) 24.00 (464)

(Note 4)

2,144 -

Accumulated Outward Remittance for Investment

from Taiwan as of December 31, 2017

Investment Amounts Authorized by Investment

Commission, MOEA

Upper Limit on the Amount of Investment

Stipulated by Investment Commission, MOEA

$3,735,753 $3,793,867 $8,403,876 (Note 5)

Note 1: Methods of investment are the following:

a. Direct investment in mainland China.

b. Indirect investment in a company in mainland China through incorporating a company in a third region.

c. Other.

Note 2: a. The Company should be disclosed if it is in its incorporation stage, with no gain (loss) from investment.

b. The amount of investment gain (loss) was recognized on the following bases:

1) Based on the financial statements audited by an international CPA firm cooperating with an ROC CPA firm.

2) Based on the financial statements audited by the auditor of the parent company.

3) Other.

Note 3: Except for the share of profit recognized under the equity method, which was translated at the average exchange rate for the period, the others were translated at the rate prevailing at December 31, 2017, which was US$1=NT$29.76/RMB1=NT$4.5546.

Note 4: The investment gain (loss) was calculated on the basis of financial statements which were not audited by certified public accountants.

Note 5: The upper limit was 60% of the consolidated’s net equity.

(Concluded)