Stock Code：2204

China Motor Corporation 2014 Annual Report (Translation)

Printed on April 30, 2015

Notice to Readers The Annual Report have been translated into English from the original Chinese version. 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 version shall prevail.

I. Information regarding Spokesperson, Deputy Spokesperson Spokesperson: Te-Chao Huang Title: Vice President Deputy Spokesperson: Ling-Chun Lin Title: General Manager, Corporate Planning Division, Motor Corporation Tel: 886-3-4783191 Email: [email protected] II. Contact Information of Headquarter, Branch Company and Plant Headquarter Address: 11F., No.2, Sec. 2, Dunhua S. Rd., Da’an Dist., Taipei City 106, Tel: 886-2-23250000 China Motor Training Center Address: 8F., No.160, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 104, Taiwan Tel: 886-2-23250000 Yang Mei Plant Address: No.618, Xiucai Rd., Yangmei Dist.,Taoyuan City 326, Taiwan Tel: 886-3-4783191 Hsin Chu Plant Address: No.2, Guangfu Rd., Hukou Township, Hsinchu County 303, Taiwan Tel: 886-3-5985841 III. Common Share Transfer Agent and Registrar Company: Address: 7F., No.150, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 104, Taiwan Tel: 886-2-25156421 Website: http:// www.china-motor.com.tw IV. Information regarding 2014 Auditors Company: Deloitte & Touche Auditors: Eddie Shao, Lilac Shue Address: 12F, 156, Sec. 3, Min-Sheng E. Rd., Taipei 105-96, Taiwan Tel: 886-2-25459988 Website: http://www.deloitte.com.tw V. Information regarding Depositary: N.A. VI. Corporation Website: http:// www.china-motor.com.tw Table of Contents

[Letter to Shareholders]────────────────────────── 4 [Company Profile]──────────────────────────── 6 I. Founding Date ································································································· 6 II. Company History ····························································································· 6 III. Business Results ····························································································· 12 IV. Charity ········································································································ 13 [Corporate Governance]────────────────────────── 17 I. Organization ···································································································· 17 II. Directors, Supervisors and Management Team ······················································ 18 (I) Information Regarding Board of Directors and Supervisors ················································· 18 (II) Directors' and Supervisors' Professional Qualifications and Independent Analysis ····················· 31 (III) Information Regarding President, Executive Vice President, Vice President, and General Manager of Each Department ······························································································ 32 (IV) Remuneration Paid to Board of Directors, Supervisors, President, and Executive Vice President in the Latest Year ································································································· 42 (V) Employment Profit Sharing Granted to Management Team ················································ 48 III. Implementation of Corporate Governance ······························································· 49 (I) Board of Directors Meeting Status ··············································································· 49 (II) Attendance of Supervisors for Board Meetings ······························································· 50 (III) Audit Committee Meeting Status··············································································· 50 (IV) Corporate Governance Execution Status and Deviations from “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies” ··········································· 51 (V) Composition, Responsibilities and Operations of Compensation Committee ···························· 54 (VI) Social Responsibility ···························································································· 56 (VII) Taiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory Commission ··········································································· 60 (VIII) Corporate Governance Guidelines and Regulations ······················································ 62 (IX) Other Important Information Regarding Corporate Governance ·········································· 62 (X) Internal Control System Execution Status ····································································· 63 (XI) Punishment and Improvement Status of Violation Internal Control System during the 2014 Calendar Year and up to April 30, 2015 ·················································································· 64 (XII) Major Resolutions at Shareholders Meetings and Board of Directors Meetings during the 2014 Calendar Year and up to April 30, 2015 ······································································ 64 (XIII) Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors during the 2014 Calendar Year and up to April 30, 2015 ··································································································· 65 (XIV) Resignation or Dismissal of Chairperson, President, and General Manager of Accounting, Finance, Internal Audit and R&D during the 2014 Calendar Year and up to April 30, 2015 ·················· 65 IV. Information Regarding Audit Fees ········································································ 66 V. Information Regarding Replacement or Rotation of Accountants ····································· 67 VI. Chairperson, Prisident and General Manager of Financial Affairs or Accounting Working in CMC’s Independent Audit Firm or its affiliates during 2014 ········································· 67 VII. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders ········ 68 VIII. Information Disclosing the Relationship between any of the Top 10 Shareholders ·············· 70 IX. Long-Term Investment Ownership ······································································· 71

1 Table of Contents

[Capital Overview]──────────────────────────── 72 I. Capital and Shares ····························································································· 72 (I) Sources of Capital ·································································································· 72 (II) Type of Stock ······································································································· 72 (III) Status of Shareholders ··························································································· 72 (IV) Shareholding Distribution Status ··············································································· 73 (V) List of Major Shareholders ······················································································· 73 (VI) Market Price, Net Worth, Earnings, and Dividends per Share ············································· 74 (VII) Corporate Dividend Policy and Implementation Status ··················································· 74 (VIII) The Impact of Stock Dividend Issuance on Business Performance and EPS ·························· 75 (IX) Employee Bonus and Directors' and Supervisors' Remuneration ········································· 75 (X) Buyback of Treasury Stock ······················································································ 77 II. Issurance of Corporate Bonds ··············································································· 77 III. Issurance of Preferred Stock ··············································································· 77 IV. Issuance of Depository Receipts ··········································································· 77 V. Status of Employee Stock Option Plan and Employee Restricted Stock ······························ 77 VI. Status of New Share Issuance in Connection with Mergers and Acquisitions ······················ 77 VII. Financing Plans and Implementation ···································································· 77 [Operational Highlights]────────────────────────────78 I. Business Activities ···························································································· 78 (I) Business Scope ····································································································· 78 (II) Industry Overview ································································································· 81 (III)Technology and R&D Overview ················································································ 82 (IV) Long- and Short-term Business Development Plan ························································· 83 II. Market, Production, and Sales Overview ································································· 84 (I) Market Analysis ···································································································· 84 (II) Main Uses and Production Processes of Major Products ···················································· 88 (III) Supply Status of Main Materials ··············································································· 89 (IV) Major Suppliers and Clients Taking over 10% of the Amount of Incoming (Sales) over the Last Two Years ········································································································· 89 (V) Production over the Last Two Years ············································································ 91 (VI) Sales over the Last Two Years ·················································································· 91 III. Human Resources ··························································································· 91 IV. Environmental Cost ························································································· 92 (I) Losses and Fines Caused by Environmental Pollution during the 2014 Calendar Year and up to April 30, 2015 ······································································································· 92 (II) Forecast of Environmental Cost for the Next Three Years ·················································· 92 V. Labor and Management Relationship ······································································ 92 (I) Employee's Benefits, Training, Retirement Measures and Implementation ······························· 92 (II) Dispute between Labor and Management during the 2014 Calendar Year and up to April 30, 2015 · 97 VI. Major Contracts ····························································································· 98 [Financial Highlights]──────────────────────────── 99 I. Condensed Balance Sheet and Statement of Comprehensive Income over the Last Five Years ···· 99 (I) Condensed Balance Sheet and Statement of Comprehensive Income ······································ 99 (II) Condensed Balance Sheet and Statement of Income - ROC GAAP ······································· 103 (III) Auditors' Opinions over the Last Five Years ································································· 104 II. Financial Analysis over the Last Five Years ······························································ 105

2 Table of Contents

III. Supervisors' Review Report ················································································ 110 IV. Consolidated Financial Statements and Appendix ······················································ 111 V. Financial Statements and Appendix of the Corporation ················································· 189 VI. Financial Difficulties during the 2014 Calendar Year and up to April 30, 2015 ···················· 244 [Review of Financial Status, Operating Results, and Risk Management]─────────────────────────────────── 245 I. Analysis of Financial Status ·················································································· 245 II. Analysis of Operating Results ·············································································· 246 III. Analysis of Cash Flow ······················································································ 247 IV. Major Capital Expenditure ················································································· 247 V. Re-investment Policies in last year and Major causes for Profit/Loss and Improvement, and Investment Plans in the coming year ······································································· 248 VI. Risk Management ··························································································· 249 (I) Impact on profits/losses of Interest rate volatility, Exchange rate volatility and Inflation and the Future Countermeasures ······················································································ 249 (II) Risks Associated with High-risk/High-leveraged Investment; Lending, Endorsement and Guarantees; and Derivative Transactions····················································································· 249 (III) Future R&D Plans and Expected R&D Spending ··························································· 250 (VI) Effects of and Response to Changes of Government Policies and Regulatory Environment ········· 250 (V) Effects of and Response to Changes in Technology and Industry ·········································· 250 (VI) Effects of and Response to Changes in Corporate Image on Company's Crisis Management ········ 250 (VII) Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans ········· 250 (VIII) Expected Benefits from, Risks Relating to and Response to Capacity Expansion ···················· 250 (IX) Risks Associated with Sales and Purchase Concentration ·················································· 250 (X) Effects of, Risks Relating to and Response to Sales of Significant Numbers of Shares by Directors, and/ or Major Shareholders Who Own 10% or More of the Corporation’s Total Outstanding Share · 251 (XI) Effects of, Risks Relating to and Response to Changes in Control over the Corporation ············· 251 (XII) Risks Associated with Litigation or Non-litigation Matters ··············································· 251 (XIII) Other Risks ······································································································ 251 VII. Other Information Matters ················································································· 251 [Special Disclosure]────────────────────────────────── 252 I. Summary of Affiliated Companies ·········································································· 252 (I) Consolidated Business Report of Affiliated Enterprises ······················································ 252 (II) Consolidated Financial Statement of Affiliated Enterprises ················································· 263 (III) Affiliation Report ································································································· 264 II. Private Placement Securities during the 2014 Calendar Year and up to April 30, 2015 ············ 265 III. Status of Shares Held or,Disposed of, by Subsidiaries during the 2014 Calendar Year and up to April 30, 2015 ································································································ 265 IV. Other Special Notes ························································································· 265 V. Impacts of Significant Events on Shareholders' Rights or Stock Value during the 2014 Calendar Year and up to April 30, 2015 ··············································································· 265

3 Letter to Shareholders

Thanks to the fall in oil prices and the propensity to change automobiles every 10 years, the auto

market in Taiwan in 2014 heated up, and the total number of vehicle registration was 423.8 thousand

cars, 12% up from last year.

To stimulate market demand, the Corporation launched a number of new models and improved

product competitiveness in 2014. For example, the Corporation launched the Colt Plus X-Sports

demonstrating cross-country functions, the revised Lancer Fortis/iO, and last December the brand new

Outlander and import Outlander PHEV. With these new models, sales in 2014 was up to 43,225 cars

to create consolidated operating revenue of up to NT$35.95 billion, consolidated operating profit

came in at NT$1.97 billion, consolidated net profit after tax was NT$2.82 billion, and EPS after tax

was NT$1.88. In export sales, due to the unfavorable price condition from the Japanese Yen

depreciation, export sales reduced compared to 2013, and 1,782 cars were sold.

Looking to 2015, the Corporation are aggressively promoting domestic and export sales, and

continuously implement model revision to enhance brand competitiveness. In domestic sales, apart

from launching the Lancer iO SE with checkered interior design in the first half of the year, the

Corporation will continue to launch the special edition (SE) for the Zinger, Outlander, and Colt Plus.

In export sales, the Corporation will continue to cultivate markets in the Philippines, Middle East, and

the USA to spur sales by about 20% of last year (2014). In the high-end electric bike kit, apart from

increasing sales in the main market in Europe, we will expand sales to Singapore, Columbia, Australia,

and South Africa in 2015.

In China market cultivation, South East Motor (SEM), a CMC re-invested enterprise, will

continue to cultivate the China market with both Mitsubishi and SEM brands. In 2014, the sales space

of own-brand products was reduced due to the low-price competition of local JV brands car

companies, and 68 thousand cars were sold. Looking to 2015, SEM will launch modification or SE of

the SEM V5, SEM V6, and EX in the first half of the year and the brand new SUV

DX-7 in the second half of the year. With the launch of DX-7 and other modifications, the

4 Letter to Shareholders

Corporation believes that sales of SEM in 2015 will increase significantly.

Eyeing the developmental potential of the green economy, the Corporation will continue to promote green energy products. By the end of 2014, over 22 thousand e-scooters were sold cumulatively, making CMC the leading e-scooter brand in Taiwan. Although the Corporation launched the lithium battery version of the e-moving Bobe for more convenient charging last year, due to the late subsidization announcement, e-scooter registration reduced by 1.7% compared to 2013 and only 3,688 scooters were sold, with 72.6% market share. There were over 5,000 e-scooters & e-bikes sold in 2014. This year the Corporation is still optimistic about the e-scooter market and will provide consumers with more options with better quality in 2015. The Corporation believes that as the e-scooter market matures and more scooter makers enter the market, growth momentum will increase incessantly.

CMC is wholeheartedly grateful to all shareholders for their long-term support and encouragement. The Corporation will continue to uphold our spirit of research, development, innovation, and quality first, so as to create better sales for the Corporation to repay shareholders.

Kenneth K.T. YEN

Chairperson

April 30, 2015

5 Company Profile

I. Founding Date June 13, 1969

II. Company History June 1969: The Corporation was founded by late Yen Tjing Ling with capital NT$100 million. October 1970: The Corporation signed technique cooperation contract with Corporation. December 1973: Yangmei Plant was built, manufacturing Fuso and Delica. November 1983: A new paiting plant was built. October 1984: Equipment for processing crank shafts and cam shafts were implemented and started production. June 1986: Mitsubishi Motors Corporation (MMC) and Mitsubishi Corporation officially invested the Corporation, holding 19% and 6% of the stock respectively. December 1988: Verica, a light commercial vehicle, was developed by the Corporation successfully, launched for formal production. May 1989: Practicing two-shift rotation production. December 1990: Mechanical stamping plant was built, and Hsinchu Plant was built. March 1991: The stock of the Corporation was officially listed in Taiwan Stock Market. September 1993: Authorized ISO 9002 certification by Bureau of Standards, Metrology, and Inspection. October 1993: Won National Quality Award, Executive Yaun. December 1993: Lancer was released. March 1994: Authorized ISO 9002 certification by BSI. June 1994: Libero was released. June 1994: China Motor Training Center was initiated. November 1995: Founded South East () Motor Co., Ltd.(SEM) with Fujian Motor Industry Group Co., Ltd.(FJMOTOR) November 1996: Lancer Virage was released. April 1997: Authorized ISO 14001 certification by BSI. July 1997: Space Gear was released, the Corporation entering RV market.

6 Company Profile

July 1997: Authorized ISO 14001 certification by Bureau of Standards, Metrology, and Inspection. September 1997: Freeca was released. The Corporation initiated international division of labor model. March 1998: Automatic multiple car body welding production line was launched. May 1998: All New Galant was released. June 1998: Over 1 million cars were sold. July 1998: SEM, invested by the Corporation, was allowed to make construction and production. July 1999: China-Motor Indigenous Culture and Education Foundation was founded. September 1999: SEM, a company in China invested by the Corporation, was completed for production. October 1999: Authorized ISO 9001 certification by BSI. December 1999: The main building of CARTEC was completed. February 2000: Freeca was released by SEM. March 2000: A store with the brand CMC was built in Muscat, Oman. September 2000: Veryca was released. February 2001: Veryca Magic was released. July 2001: ERP system was launched, the Corporation becoming the first motor company using SAP system in Taiwan. October 2001: Savrin was released. November 2001: Hsinchu Plant was honored TPM Excellence Award by Japan Institute of Plant Maintenance (JIPM). November 2002: SEM was approved to manufacture automobiles in China. December 2002: A facelift of All New Gallant was released. May 2003: A facelift of Global Lancer was released. May 2003: Space Gear was exported to the Philipines. December 2003: Freeca was released. December 2003: Chinese Government approved the cooperation of Benz light passenger car between the Corporation, Daimler AG, and FJMOTOR. December 2003: Yangmei Plant was honored TPM Excellence Award by JIPM.

7 Company Profile

June 2004: New Savrin was released. November 2004: Chinese Government approved the Corporation's investing feasibility analysis about the production of "passenger vehicle, commercial vehicle, and related components" in cooperation with Daimler AG, and FJMOTOR. December 2004: Grunder 2.4L was released. December 2004: Hsinchu Plant received a cross-level Special Award for TPM Achievement from JIPM. June 2005: New Space Gear was released. October 2005: Over 300 thousand cars of Lancer were sold. October 2005: The Corporation signed a cooperation contract with AMG, the second largest automobile selling group in Kuwait to release Veryca 1.2L/1.6L and Varica 1.2L commercial vehicle with CMC brand in The United Arab Emirates from 2006 on. December 2005: Zinger was released. January 2006: Complete Built Unit (CBU) of Grunder was exported to the Philipines, the first export of high-level car in Taiwan. February 2006: Authorized TS 16949 certification by BSI. April 2006: The Corporation signed an agreement to sell 25% of the SEM issuing stocks to MMC. April 2006: The Corporation undertook the prodution of Chrysler’s Town & Country RV, which was the first time of it to be techinically authorized and produced overseas. November 2006: SEM released Galant 2.4L into high-level car market in China. November 2006: The Corporation signed a letter of intent with Chrysler to produce brand vehicles and exported them to Mexico from Taiwan. December 2006: SEM signed an export contract with Mehreghan Investment Corporation, Iran and its agency Setareh Nik Aria Vehicle Manufacturing Co. in Beijing to export 8,000 Delica to Iran in 2007. January 2007: To promote the quality of customer service, from January 1, 2007 on, the warranty period of all the cars, RVs, small commercial vehicles is extended from two years or 50,000 kilograms to three years or 100,000 kilograms.

8 Company Profile

January 2007: Hsinchu Plant received Advanced Special Award for TPM Achievement from JIPM, being the first in Taiwan and the 13th in the world to win this award. January 2007: Yangmei Plant received Special Award for TPM Achievement from JIPM. January 2007: Ministry of Commerce of the People's Republic of China approved the Corporation invested by the Corporation, Daimler AG, and FJMOTOR. March 2007: A facelift of All New Canter/Fuso was released. March 2007: Announced Driving Vision, a new manifesto of the brand. March 2007: Colt Plus 1.6L was released. May 2007: The first batch of CBU car of Zinger was exported to Mitsubishi Motors Philippines Corporation (MMPC). June 2007: The Corporation co-founded Fujian Daimler Motors Industry Co., Ltd. with Daimler AG, and FJMOTOR. (in 2012, it was renamed as Automotive Co., Ltd.(FBAC)) September 2007: Lancer Fortis 2.0L was released. October 2007: The ceromony of plant contruction for Fujian Daimler Motors Industry Co., Ltd. (now Fujian Benz Automotive Co., Ltd.) was held. December 2007: A facelift of New Grunder was released. April 2008: Outlander 2.4L was released. April 2008: Imported with original packaging from Japan, All New Pajero 3.2L diesel edition and Outland 3.0L were released. May 2008: LANCER iO/LANCER FORTIS 1.8L/1.8L with aero kit Edition was released. September 2008: A new edition of Super Zinger 2.4L with MIVEC engine was released. September 2008: The first batch of Completely Knocked-Down (CKD) of Zinger was exported to Vietnam. April 2009: Announced 「Drive@earth」as the new spirit of of MMC. April 2009: A limited edition of Lancer Fortis 1.8L/2.0L was released. May 2009: Imported 2009 edition Pajero 3.2L/Outlander 3.0L was released. May 2009: A new edition of Outlander 2.4L was released. June 2009: The third generation of Savrin was released. June 2009: Ralliart, mini foldable bike, sports edition, was released. September 2009: Lancer Ex was released by SEM,

9 Company Profile

October 2009: Colt Plus 1.6L/Colt Plus iO was released. October 2009: The first time Veryca was exported as CBU to the US. October 2009: The safety-upgraded Super Zinger 2010 Edition was released. November 2009: 2010 edition of New Grunder was released. November 2009: 2010 edition of Lancer Fortis 1.8L/Lancer iO 2.0L was released. November 2009: Veryca 1.3L with a upgraded powerful engine, was released. December 2009: The Corporation joined in green energy industry, releasing "e-moving", an electric scooter. January 2010: Ralliart's mountain bike/road bike was released. March 2010: A new green energy brand for export「GreenTrans」was announced. May 2010: A special edition of Lancer Fortis 1.8L was released. June 2010: "E-moving" electric scooter and "e-moving" electric mini foldable bike were released October 2010: A special edition of Colt Plus was released. October 2010: A new edition of Outlander 2.4L was released. December 2010: Light passenger car, C1, was released by SEM. March 2011: GreenTrans' e-moving electric scooters were exported to Europe. April 2011: A more spacious edition Colt Plus was released. September 2011: A new Outlander iO was released. November 2011: A facelift of Boss Zinger was released. March 2012: Lancer iO was released. March 2012: E-moving plus and e-moving young were released. September 2012: Lancer Fortis was exported to Middle East. September 2012: V5 was released by SEM. December 2012: A new style of Delica was released. May 2013: Pro Canter eco-friendly edition which comply with 5th emission standard was released. May 2013: Imported Lancer Sportback , three-door and five-door off-road diesel RV Pajero was released. June 2013: E-moving Super was released. August 2013: V6 was released by SEM.

10 Company Profile

September 2013: Electric bike, e-moving Bobe, was released. Product series of electric two-wheeled were complete. September 2013: Colt Plus mini RV was released. September 2013: A new style of Super Veryca was released. October 2013: 3.5T Leadca commercial vehicle was released. May 2014: The electric 2-wheel products with GreenTrans brand will be sold in Germany,. June 2014: A facelift of LANCER iO/FORTIS was released. September 2014: Imported the LANCER SPORTBACK 1.8L/PAJERO 3.2L diesel 2015 version was released. November 2014: The Outlander was selected as the appointed timer car for the 2014 Yi-lan Chiang Wei-shui Memorial Freeway Marathon. December 2014: The new-generation OUTLANDER and imported OUTLANDER PHEV were released. December 2014: The Colt Plus X-Sports was released.

11 Company Profile

III. Business Results (1) Won the first place in Award of Coporate Social Responsiblity, traditional industry group, Global Views Monthly, three years in a row, and was listed in CSR three times. (2) COLT PLUS, LANCER iO, and OUTLANDER were certified with energy label by Ministry of Economic Affairs. (3) Received the Award of Corporation with the Highest Average Asset Return in the Past 20 Years from China Credit Information Service, Ltd. (4) Selected as 2010 Excellent Company with Friendly Working Space by Ministry of Labor. (5) China Motor Training Center was honored as Excellent Training Unit in Taoyuan Area, Vocational Training Bureau, Executive Yuan. (6) E-moving electric scooter was certified TES (Taiwan E-scooter Standard) by Industrial Development Bureau, Ministry of Economic Affairs and honored as Eco-Friendly Vehicle of the Year by Environmental Protection Agency. (7) In 2010, e-moving electric motorcycle received iF Design Award, Germany, Taiwan Excellence, Award of Good Design Mark, and Golden Pin Design Award, Industrial Development Bureau, Ministry of Economic Affairs. (8) OUTLANDER and LANCER FORTIS received Award of High Efficient Dynamics and Award of Energy Conservation in Yahoo! 2010 Outstanding Vehicle Competition respectively. (9) Received Award of Outstanding Corporation for Environmental Protection and Green Energy, Taoyuan County. (10) Received double award in the first National Training Quality Award. (11) Lancer received Award of High Efficiency in Energy Conservation and Award of Fun in Driving in Yahoo! 2011 Outstanding Vehicle Competition. (12) Won the second Taiwan Green Classics Award, Ministry of Economic Affairs. (13) Won "Quality Award" in 2013 Business Next Green Brand Survey. (14) Ranked Number 2 in 2013 Automobile Industry of the Excellence of Corporate Social Responsibility of Common Wealth Magazine. (15) The Electric Scooter, e-moving-Super won the 22th Taiwan Excellence. (16) The Mid-Motor Kit of GreenTrans has won the 23rd Taiwan Excellence from Ministry of Economic Affairs.

12 Company Profile

(17) Won the 2014 9th National HRD InnoPrize from Ministry of Labor. (18) Ranked number 1 in 2014 Automobile Industry of the Excellence of Corporate Social Responsibility of Common Wealth Magazine. (19) The China Motor Mitsubishi service system ranked number 1 in 2014 J.D. Power Customer Satisfaction Study of domestic car. (20) Taiwan Stock Exchange released the First Corporate Governance Evaluation results in which China Motor Corporation was in the top 5% among listed company group.

IV. Charity (1) Since 2007, a series of activities of Mitsubishi Motors for Children has been held to cultivate children's idea for safe driving. So far, over 50,000 children have driven electric BuBu cars. By experiencing how to drive, children are able to learn correct safe driving ideas and Mitsubishi Motors' spirit of environmental protection and energy conservation.

(2) Sending a Car to Wu Feng Elementary School

To reduce the differences between urban and rural areas and balance resource distribution, the Corporation worked with Charity Association led by Fu Juan and Dun Hua Elementary School to hold a fundraising activity to help Wu Feng Elementary School to own a school bus of their own. Children held a charity concert and donated their allowance to give Wu Feng Elementary School a hand. The Corporation sponsored half of the amount for the vehicle in order to realize the children's dream. This Veryca was like a angel fulfilling children in Wu Feng Elementary School's dream of moving around freely.

(3) To sponsor Taipei International Flora Exposition

To support the government's international activity and display the results of Taiwan Electric Scooter, the Corporation provided 20 e-moving Electric Scooters as police's vehicles for patroling at 2011 Flora Exposition to keep millions of tourists safe.

(4) To sponsor Lovely Taiwan Foundation with one Colt Plus for residents in Jialan Village Taitung to rebuild their home.

To help rebuild Jialan Village, destroyed by Typhoon Morakot, the Corporation established a tribe square and provided Lovely Taiwan Foundation with one Colt Plus to assist the

13 Company Profile

industrial development. The construction of the tribe square of Jialan Village was initiated in January 2011, whereas the Colt Plus joined to rebuilding work from August 2011 on.

(5) To sponsor St. John's University with one Delica for teachers and students in their community services.

The Corporation participated in Group's talent training program "10 Years for 1000 People," providing resources in automobile industry to cultural education. To help St. John's University with better education resources, in 2011, the Corporation donated one Delica to serve as a vehicle for administration support and community services for teachers and students.

(6) The project for Travelling Library was initiated.

To reduce the differences between urban and rural areas, the Corporation sponsored Common Wealth Educational Foundation for the project of Travelling Library in a long run, enabling students in 200 elementary schools in rural areas to the world of reading. In 2004, 2005, and 2007, the Corporation exclusively sponsored 3 vehicles for travelling libraries. For many years, they have travelled around the rural elementary schools in Taiwan for over 90,000 kilometers. In 2011, cooperating with CommonWealth Educational Foundation, the Corporation refurnished Travel Library No.2 and No.3 and rebuilt NO.4, bringing more good books to students in rural elementary schools.

(7) To support a film made by indigenous people in Taiwan Finding Sayun

To encourage the development of cultural and creative industries in Taiwan, during 2009 and 2011, the Corporation sponsored the production of the movie Finding Sayun, made by indigenous people and provided Outlander and Delica for the movie. It became a new model for the cooperation between art and enterprise.

(8) To sponsor the tour performance of "Telling a Story around the World--Mitsubishi Earth Saving Team" around the rural areas in Taiwan

The Corporation promoted reading in 2011, hoping to help people in rural indigenous villages to have more opportunities to read books. During November 2011 and January 2012, cooperating with Ifkids Troupe, China-Motor Indigenous Culture and Education Foundation held "Telling a Story around the World." Ifkids Troupe created a play "Mitsubishi Earth Saving Team" and toured around four rural elementary schools, Zhong 14 Company Profile

Xiao Elementary School in Taipei City, Sai Jia Elementary School in Pingtung, Bai Leng Elementary School in Taichung, and Xia Yun Elementary School in Taoyuan County to teach children the ideas to protect the Earth, conserve energy, and reduce carbon.

(9) The Corporation sponsored vehicles for Ping Deng Elementary School, Taichung City

The Corporation has been caring about minority groups for long time. In early 2012, the Corporation learned that because Ping Deng Elementary School was located in remote mountain area in Taichung Heping District, it was very inconvenient for students to commute back and forth. To solve the problem, the Corporation donated one Delica as a shuttle bus and for administration support.

(10) Through "cooperation between agriculture and corporation," the Corporation participated in the produce marketing project by the indigenous in Jianshi Township, Hsinchu County, promoting organic fruit and vegetable charity bazaar in the Corporation. The employees even bought 600 kilograms of persimmons from the indigenous farmers in Jianshi Township. Besides, the Corporation also offered NT$600,000 to serve as subsidy for farmers in Jianshi Township to buy a new commericial vehicle.

(11) Cooperating with Taiwan Black Bear Conservation Association, the Corporation held a press for the campaign of 2012 Taiwan black bears conservation promotion, spreading the ideas of Taiwan black bear conservation.

(12) In 2014, CMC and farmers of the Olalip Community from Amis in Hegang Village, Hualien, co-organized the “Celebrating Mid-autumn Festival with Laocong Pomelo Group Buying” and “Heart Sweet Heart Painted Pomelo” employee pomelo painting competition. With the heated support of employees, employee s purchased nearly 3,500kg of pomelos to create excellent sales achievements.

(13) In 2014, CMC employees and family voluntarily launched the “Books for Yisheng Elementary School” dream actualization activity. Great amount books from employees and families were collected and distributed to elementary schools in remote areas or schools to share resources with indigenous children, hoping to cultivate reading habits in these children and thereby prepare them for a better future.

(14) In 2014, CMC launched cooperation with “Buy Nearby” to organize vegetable and fruit

15 Company Profile

charity sale at Simple Life Festival to realize philanthropy with the public in real action by purchasing homegrown organic vegetables and fruit from nearby farmers.

(15) In February 2015, CMC recruited supplies from employees and distributed them to Qoyaw Community in Fuxing District, Taoyuan City, for indigenous peoples living in remote areas to feel the warmth from CMC before Chinese New Year.

16 Corporate Governance

I. Organization Shareholders' Meeting

Supervisor

Board of Directors Chairperson Vice Chairman(Note) Audit Division

President

Headquarter

Executive Vice Executive Vice Executive Vice President President President

Vice President Vice President Vice President

Production Control Division Financial and Accounting Quality Control Division Health and Safety Office Health and Safety Product Program Division Program Product Electrical and Electronic and Electronic Electrical Management Information General Administration Advanced Technology Production Engineering Procurement Division Engineering Division Product Engineering Service Division Overseas Business Parts Development Corporate Planning Planning Corporate Sales Division Sales Electric Scooter Electric Yang Mei Plant S Sales Division Hsin Chu Plant

y stem Division Division Division Division Division Division Division Division Division

oneiga Counseling Product planning, domestic sale To Tomaterials and e purchase raw Promotion and management of sales overseas To manage security and health factory To plan and maintain automation To manufacture and the components, automobiles and to resea aei awn made in Taiwan To research, develop, and contro manufacturing and the equipment process welfare related affairs To make human resource policy, to recruitemployees, and train and to handle Electric Scoote Electric delivery, and inventory management the pre-launch of the research and development Planning and design of vehicle electrical validating new products Technology development, domestic production projectmaking, testing an advanced components of vehicle comm The establishment researchand develop the manufactur To manufacture and assemble automobile p p Quality research and development, insp Quality research and Component sales, afte To introduce, improve, research,and develop production technology and p To makemanage and production pl shareholders capital, and to serve To makeexecute financialmanagefund and accounting systems, and and to To plan and analyze business strategi

romotion of customers' level of satisfaction roducts roduction lines p lan new

p dmngmn ftedaesi China in dealers the of management nd roduct develo r

domestic sales, product pla s' r planning, an CS market investigation -sales service, p ment and control the s, and channel management. quipment in Taiwanand abroad l new car models and componentsl new car models and and information systems networking ans and to manage warehouses unication network, developingunication ing process and the equipment. es, and to cultivate corporation image corporation image es, and to cultivate

and supervision certification, for ection, and electronic system, introduction to s, engines, and components, and to nning, channel management, goods p ro g

ress r ch and develop the ch d d

Note: The Board of Direstors has appointed Mr. Hsin-Tai Liu as Vice Chairman of CMC on the meeting of May 11,2015. The effective date will start from June 1, 2015. 17 Corporate Governance

II. Directors, Supervisors and Management Team (I) Information Regarding Board of Directors and Supervisors

Spouse and Nationality or First Shareholding When Current Date Minor Title Country of Name Elected Term Elected Shareholding Elected Shareholding Incorporation Date

Shares % Shares % Shares %

Yulon Motor Co., Ltd. 3 111,480,444 8.05 111,480,444 8.05 Chairperson R.O.C. 2013/6/18 1986/7/1 - - Representative: years *16,621,212 1.20 *16,621,212 1.20 Kenneth K. T. Yen

* indicates personal owned shares

(Continued on the next page)

18 Corporate Governance

April 30, 2015

Other Directors, Board of Directors, or Supervisors Who Shareholdings in Education and Selected Past are Spouses or within Others’ Names Current Positions Positions Second-degree Relative of Consanguinity to Each Other Shares % Title Name Relation

Chairperson, Yulon Motor Co., Ltd. Chairperson, Yulon Motor Co., Ltd. Chairperson, Taiwan Acceptance Corporation Chairperson, Tai Yuen Textile Co., Ltd. Chairperson, Sino Diamond Motor Corporation Chairperson, Hua-chuang Automobile Information Technical Center Co., Ltd. Honorary Doctor of Chairperson, Motor Co., Ltd. Business, St. John's Chairperson, Fortune Motors Co., Ltd. Li-lien - - University of New York Director, South East (Fujian) Motor Co., Ltd. Director Spouse Chen (Positions are described as Chairperson, Yen Tjing-Ling Industrial those in the right column.) Development Foundation Director, Yen Tjing Ling Medical Foundation Chairperson, Vivian Wu Journalism Award Foundation Chairperson, Vivian Wu Industry and Commerce ECCC Foundation, etc. For details, please refer “Summary of Affiliated Companies.”

19 Corporate Governance

(Continued from the previous page)

Spouse and Nationality Shareholding When Current Date Date First Minor Title or Country of Name Term Elected Shareholding Elected Elected Shareholding Incorporation

Shares % Shares % Shares %

Tai Yuen Textile Vice Co., Ltd. 3 348,589,538 25.19 348,589,538 25.19 R.O.C. 2013/6/18 2008/8/18 - - Chairman Representative: years *14,560 - *14,560 - (Note) Hsin-Tai Liu

Mitsubishi Motors

Corporation 3 Director Japan 2013/6/18 2013/4/1 193,768,273 14.00 193,768,273 14.00 - - Representative: years

Katsuro Asaoka

Tai Yuen Textile Co., Ltd., 3 Director R.O.C. 2013/6/18 1984/7/20 348,589,538 25.19 348,589,538 25.19 - - Representative: years Hsin-I Lin

Note: The Board of Direstors has appointed Mr. Hsin-Tai Liu to as Vice Chairman of CMC and Mr. Chao-Wen Chen as President on the meeting of May 11, 2015. The effective date will start from June 1, 2015.

* indicates personal owned shares. (Continued on the next page)

20 Corporate Governance

Other Directors, Board of Shareholdings Directors, or Supervisors in Others’ Who are Spouses or within Education and Selected Past Positions Current Positions Names Second-degree Relative of Consanguinity to Each Other

Shares % Title Name Relation

Supervisor, Yulon Motor Co., Ltd. Director, Hua-chuang Automobile Information Executives Program of Graduate Technical Center Co., Ltd. School of Business Administration, Director, China Engine Corporation National Chengchi Univeristy Director, South East (Fujian) Motor Co., Ltd. Dept. of Mechanical Engineering, Director, Fortune Motors Co., Ltd. - - National Cheng Kung University - - - Director, Yen Tjing Ling Industrial President, China Motors Development Foundation Corporation(Note) Chairperson, Automotive Research & Testing Positions are described as those in the Center, etc. right column. For details, please refer “Summary of Affiliated Companies.”

Program on Chinese, Dept. of Director, Fortune Motors Co., Ltd. Tokyo University of Foreign Studies Senior Expert, North Asia Office, Overseas - - - - - Positions are described as those in the Operations Group Headquarters A, Mitsubishi right column. Motors Corporation

Dept. of Mechanical Engineering, National Cheng Kung University Vice Chairman and President,China Director, Yulon Motor Co., Ltd. Motor Corporation Director, Tai-Yuen Textile Co., Ltd. Chairman, Taiwan Transportation Director, Acer Inc. - - Vehicle Manufacturers Association - - - Independent Director, E. SUN Financial Minister, Ministry of Economic Holding Co., Ltd. Affairs Independent Director, Sin Yi Realty Inc., , etc. Deputy Minister, Executive Yuan and Minister, Council for Economic Planning and Development

21 Corporate Governance

(Continued from the previous page)

Spouse and Nationality or Shareholding When Current Date Date First Minor Title Country of Name Term Elected Shareholding Elected Elected Shareholding Incorporation Shares % Shares % Shares %

Yulon Motor Co., Ltd. 3 Director R.O.C. Representative: 2013/6/18 1994/7/1 111,480,444 8.05 111,480,444 8.05 16,621,212 1.20 years Li-Lien Chen

Tai-Yuen Textile Co., Ltd., 3 Director R.O.C. 2013/6/18 2004/6/24 348,589,538 25.19 348,589,538 25.19 - - Representative: years Kuo-Rong Chen

Mitsubishi

Corporation, 3 Director Japan 2013/6/18 2013/3/29 66,404,796 4.80 66,404,796 4.80 - - Representative: years (Note) Hiroshi Miyazeki (Note) Note: Mitsubishi Corporation assigns Mr. Ishikawa Zenta in replacement of Mr. Hiroshi Miyazeki as its representative from May 1, 2015. * indicates personal owned shares. (Continued on the next page)

22 Corporate Governance

Other Directors, Board of Directors, or Supervisors Shareholding in Who are Spouses or within Others' Names Education and Selected Past Current Positions Second-degree Relative of Positions Consanguinity to Each Other

Shares % Title Name Relation

Department of Physical Director, Yulon Motor Co., Ltd. Education, Chinese Culture General Director, Tai-Yuen Textile Co., Ltd Chair- Kenneth - - University Director, Yen Tjing Ling Medical Foundation, etc. Spouse person K. T. Yen Positions are described as For details, please refer “Summary of Affiliated those in the right column. Companies.”

Vice Chairman, Yulon Motor Co., Ltd. Director, Yulon Nissan Motor Co., Ltd. Director, Taiwan Acceptance Corporation Director, Hua-chuang Automobile Information Technical Center Co., Ltd. Director, Tai-Yuen Textile Co., Ltd. Executive Master of Vice Chairman, Luxgen Motor Co., Ltd. Business Administration, Director, Dong Feng Yulon Motor Co., Ltd. National Chiao Tung Vice Chairman, Shenzun Feng Shen Motor Co. - - - - - University Vice Chairman, Guangzhou Feng Shen Motor Co. President, Yulon Motors Director, Yen Tjing Ling Industrial Development Co., Ltd. Foundation Director, Yen Tjing Ling Medical Foundation Director, Vivian Wu Journalism Award Foundation Director, Vivian Wu Industry and Commerce ECCC Foundation, etc. For details, please refer “Summary of Affiliated Companies.”

Director, Mitsubishi Motor Sales (China) Co., LTD. Faculty of Law and Director, Shenyang Aerospace Mitsubishi Motors Economics, Chiba Engine Manufacturing Co., Ltd. - - University - - - General Manager, Motor Vehicle North Asia Positions are described as Dept.,Motor Vehicle Business Division, Mitsubishi those in the right column. Corporation

23 Corporate Governance

(Continued from the previous page)

Spouse and Nationality or Shareholding Current Date Date First Minor Title Country of Name Term When Elected Shareholding Elected Elected Shareholding Incorporation Shares % Shares % Shares %

Independent 3 R.O.C. Tsung-Jen Huang 2013/6/18 2013/6/18 ------Director years

Independent 3 R.O.C. Robert Y.L., Mao 2013/6/18 2013/6/18 ------Director years

Le Wen Enterprise Co., 3 Supervisor R.O.C. Ltd. 2013/6/18 1998/7/1 5,539,400 0.40 5,539,400 0.40 - - years Representative: Wei-Kung Chi

Le Wen Enterprise Co., 3 Supervisor R.O.C. Ltd. 2013/6/18 2013/6/18 5,539,400 0.40 5,539,400 0.40 - - years Representative: Tai-Ming Chen

* indicates personal owned shares..

24 Corporate Governance

Other Managers, Directors, Shareholdings or Supervisors Who are in Others’ Education and Selected Spouses or within Current Positions Names Past Positions Second-degree Relative of Consanguinity to Each Other Shares % Title Name Relation

Chairperson, SYSTEX Corporation Independent Director, Yulon Nissan Motor Co., Ltd. PhD of Computer Director, Taiwan Hopax Chemicals MGF Co., Ltd. Science, University of Chairperson (Legal Representative), AsiaVest Partners, Wisconsin - - TCW/YFY (Taiwan) Ltd. - - - Positions are described Chairperson, Jing Pu Investment Co. as those in the right Director (Legal Representative), Kimo.com (BVI) Corp. column. Director(Legal Representative), Systex Capital Group Inc. (BVI) Director(Legal Representative), Systex Solutions (HK) Ltd.

Master of Administration, MIT Master of Engineering, Chairperson, Hewlett-Packard Development Company, China - - Cornell University Director, Ambit Broadband Corp. - - - Positions are described Independent Director, Yulon Nissan Motor Co., Ltd. as those in the right column.

Supervisor, Yulon Motor Co., Ltd. Supervisor, Taiwan Acceptance Corporation Master of Management Chairperson, Carnival Co., Ltd. Science, National Chao General Director and President, Tai-Yuen Textile Co., Ltd. Tung University - - Director, Yen Tjing Ling Industrial Development Foundation - - - Positions are described Director, Yen Tjing Ling Medical Foundation as those in the right Director, Vivian Wu Industry and Commerce ECCC Foundation column. Independent Director, Jintex Co., Ltd., etc. For details, please refer “Summary of Affiliated Companies.”

Bachelor of Law, National Taiwan University Senior Consultant, Jones Day Attorneys-at-Law Master of Law, Boston Director, Taiwan Acceptance Corporation University - - Independent Director, SIMPLO Technology Co., Ltd., etc. - - - New York State Attorney Supervisor, Yulon Nissan Motor Co., Ltd. Adjunct Assistant Supervisor, Carnival Co., Ltd. Professor, Graduate Institute of Law, National Chengchi University

25 Corporate Governance

Table 1: Major Shareholders of the Institutional Shareholders April 30, 2015 Name of Institutional Major Shareholders of the Institutional Shareholders Shareholder 1. Yulon Motor Co., Ltd. (20.85%) 2. Yen Tjing Ling Industrial Development Foundation (14.24%) 3. British Virgin Islands Hoffman Brother Investment Company (9.80%) 4. British Virgin Islands Evans Corporation (9.71%) 5. Cayman Islands West Bridge Investment Company (9.13%) 1. Tai-Yuen Textile Co., Ltd. 6. Li Yuan Investment Co., Ltd. (7.17%) 7. Yong Shun Investment Corporation (6.82%) 8. Li Peng Investment Co., Ltd. (5.61%) 9. Diamond Hosiery & Thread Co., Ltd. (4.55%) 10. Yuan Wei Investment Co., Ltd. (3.10%) 1. Tai-Yuen Textile Co., Ltd. (18.11%) 2. China Motors Corporation (15.06%) 3. Kenneth K. T. Yen (10.18%) 4. Nan Shan Life Insurance Company, Ltd. (4.50%) 5. CMC Investment Co., Ltd. (1.61%) 2. Yulon Motor Co., Ltd. 6. Public Service Pension Fund Management Board (1.46%) 7. Fan-Terh Investment Co., Ltd. (1.35%) 8. Labor Insurance Fund (1.13%) 9. Yen Tjing Ling Industrial Development Foundation (1.09%) 10. Shin Kong Life Insurance Co., Ltd. (1.08%) 1. Mitsubishi Heavy Industries, Ltd (12.63%) 2. Mitsubishi Corporation (10.06%) 3. MHI Automotive Capital LLC MMC stock management anonymous combination 1 (3.92%) 4. Bank of Tokyo-Mitsubishi UFJ, Ltd (3.91%) 5. MHI Automotive Capital LLC MMC stock management anonymous 3. Mitsubishi Motors combination 2 (3.45%) Corporation 6. Japan Trustee Services Bank (Trust Account) (2.67%) 7. The Master Trust Bank of Japan (Trust Account)(2.32%) 8. THE CHASE MANHATTAN BANK, N.A. LONDON S.L. OMNIBUS ACCOUNT (1.72%) 9. Mitsubishi UFJ Trust and Banking Corporation (1.32%) 10. JP Morgan Chase Bank (1.20%) 1. Japan Trustee Services Bank (Trustee) (5.69%) 2. Tokyo Marine & Nichido Fire Insurance Co., Ltd. (4.60%) 4. Meiji Yasuda Life Insurance Company (4.00%) 3. The Master Trust Bank of Japan (Trust Account) (3.84%) 5. The Master Trust Bank of Japan (Mitsubishi Heavy Industries Ltd..･Retirement Benefits Trust Account) (3.02%) 4. Mitsubishi Corporation 6. Bank of Tokyo-Mitsubishi UFJ, Ltd. (1.58%) 7. State Street Bank and Trust Company ｰ 505223 (1.53%) 8. The Nomura Trust and Banking Co., Ltd. (Retirement Benefits Trust･Mitsubishi UFJ Trust and Banking Corporation Account) (1.36%) 9. THE BANK OF NEW YORK MELLON SA/NV 10 (1.23%) 10. The Master Trust Bank of Japan (Mitsubishi Electric Corporation･Retirement Benefits Trust Account) (1.09%)

26 Corporate Governance

Name of Institutional Major Shareholders of the Institutional Shareholders Shareholder 1. Kenneth K. T. Yen (99.88%) 2. Wavin Investment Corp. (0.04%) 5. Le Wen Enterprise 3. Fan-Terh Investment Co., Ltd. (0.04%) Co., Ltd. 4. Li-lien Chen (0.02%) 5. Wei-kung Chi (0.02%)

Table 2: The Major Shareholders of the Major Shareholders of the Institutional Shareholders in Table 1

April 30, 2015

Corporation Name Major Shareholders of the Corporation

1. Yen Tjing Ling Industrial Foundation constituted as a juristic person Development Foundation 2. British Virgin Islands Hoffman The information is not available due to the limitations of local practices. Brother Investment Company 3. British Virgin Islands Evans The information is not available due to the limitations of local practices. Corporation 4. Cayman Islands West Bridge The information is not available due to the limitations of local practices. Investment Company 1. Vivian Wu Industry and Commerce ECCC Foundation (99.126%) 2. Diamond Hosiery & Thread Co., Ltd. (0.869%) 3. Fan-Terh Investment Co., Ltd. (0.001%) 5. Li Yuan Investment Co., Ltd. 4. Wei Tai Investment Co., Ltd. (0.001%) 5. Le Wen Enterprise Co., Ltd. (0.001%) 6. Vincent Investment Co., Ltd. (0.001%) 7. Wavin Investment Corp. (0.001%) 1. Vivian Wu Industry and Commerce ECCC Foundation (99.083%) 2. Diamond Hosiery & Thread Co., Ltd. (0.912%) 3. Fan-Terh Investment Co., Ltd. (0.001%) 6. Yong Shun Investment 4. Wei Tai Investment Co., Ltd. (0.001%) Corporation 5. Le Wen Enterprise Co., Ltd. (0.001%) 6. Vincent Investment Co., Ltd. (0.001%) 7. Wavin Investment Corp. (0.001%) 1. Vivian Wu Industry and Commerce ECCC Foundation (98.993%) 2. Diamond Hosiery & Thread Co., Ltd. (1.002%) 3. Fan-Terh Investment Co., Ltd. (0.001%) 7. Li Peng Investment Co., Ltd. 4. Wei Tai Investment Co., Ltd. (0.001%) 5. Le Wen Enterprise Co., Ltd. (0.001%) 6. Vincent Investment Co., Ltd. (0.001%) 7. Wavin Investment Corp. (0.001%) 1. British Virgin Islands Wanda Company (72.51%) 2. Tai -Yuen Textile Co., Ltd. (21.97%) 3. Yulon Motor Co., Ltd. (5.09%) 8. Diamond Hosiery & Thread 4. Vivian Wu Industry and Commerce ECCC Foundation (0.1694%) Co., Ltd. 5. Le Wen Enterprise Co., Ltd. (0.13%) 6. Wavin Investment Corp. (0.13%) 7. Kenneth K. T. Yen (0.0006%)

27 Corporate Governance

Corporation Name Major Shareholders of the Corporation 1. Vivian Wu Industry and Commerce ECCC Foundation (91.513%) 2. Diamond Hosiery & Thread Co., Ltd (8.477%) 3. Fan-Terh Investment Co., Ltd. (0.002%) 9. Yuan Wei Investment Co., 4. Wei Tai Investment Co., Ltd. (0.002%) Ltd. 5. Le Wen Enterprise Co., Ltd. (0.002%) 6. Vincent Investment Co., Ltd. (0.002%) 7. Wavin Investment Corp. (0.002%) 1. Tai-Yuen Textile Co., Ltd. (25.19%) 2. Mitsubishi Motors Corporation (14.00%) 3. Yulon Motor Co., Ltd. (8.05%) 4. Diamond Hosiery & Thread Co., Ltd (6.76%) 5. Mitsubishi Corporation (4.80%) 10. China Motor Corporation 6. Cathay Life Insurance Co., Ltd. (3.81%) 7. Nan Shan Llife Insurance Company, Ltd. (1.72%) 8. Kenneth K. T. Yen (1.20%) 9. Vanguard Emerging Markets Stock Index Fund (0.95%) 10. New Labor Pension Fund (0.84%) 1. First Commercial Bank Trustee Account For Representative of Ruen Chen Investment Holding Co., Ltd. (83.1053%) 2. Ruen Chen Investment Holding Co., Ltd. (7.5207%) 3. Y. T. Du (3.2468%) 4. Taishin International Bank Trustee Account For Nan Shan Life Insurance Co., Ltd. (0.8807%) 11. Nan Shan Life Insurance 5. Ruen Hua Dyeing & Weaving Co., Ltd. (0.2766%) Company, Ltd. 6. Ruentex Leasing Co., Ltd. (0.1461%) 7. Chi-Pin Investment Company (0.1082%) 8. Boon-Teik Koay (0.1082%) 9. Pou Huei Investments Co., Ltd. (0.0541%) 10. Pou Hwang Investments Co., Ltd. (0.0541%) 11. Pou Yih Investments Co., Ltd. (0.0541%) 12. Pou Chi Investments Co., Ltd. (0.0541%)

12. CMC Investment Co., Ltd. China Motor Corporation (100%)

13. Public Service Pension Fund Not applicable Management Board 1. Wei Tai Investment Co., Ltd. (33.36%) 2. Wavin Investment Corp. (33.30%) 14. Fan-Terh Investment Co., Ltd. 3. Le Wen Enterprise Co., Ltd. (33.30%) 4. Chuan-Lin Zhu (0.02%) 5. Wei Kung Chi (0.02%)

15. Labor Insurance Fund Not applicable

16. Shin Kong Life Insurance Co., Shin Kong Financial Holdings Co., Ltd. (100%) Ltd.

28 Corporate Governance

Corporation Name Major Shareholders of the Corporation 1. The Master Trust Bank of Japan (Trustee Account) (4.32%) 2. Japan Trustee Services Bank (Trustee Account) (3.99%) 3. The Nomura Trust and Banking Co., Ltd. (Retirement Benefits Trust･ Bank of Tokyo-Mitsubishi UFJ, Ltd. Account)(3.72%) 4. Meiji Yasuda Life Insurance Company (2.37%) 17. Mitsubishi Heavy Industries 5. THE BANK OF NEW YORK MELLON SA/NV (1.70%) Co., Ltd. 6. The Nomura Trust and Banking Co., Ltd. (Retirement Benefits Trust ･Mitsubishi UFJ Trust and Banking Corporation Account)(1.36%) 7. Tokio Marine & Nichido Fire Insurance Co., Ltd. (1.30%) 8. STATE STREET BANK WEST CLIENT - TREATY (1.21%) 9. CBNY-GOVERNMENT OF NORWAY (1.13%) 10. Japan Trustee Services Bank (Trustee Account 1) (1.04%)

18. MHI Automotive Capital G.K. The information is not available due to the limitations of local practices.

19. Bank of Tokyo-Mitsubishi Mitsubishi UFJ FINANCIAL GROUP (100%) UFJ, Ltd. 20. Japan Trustee Service 1. Sumitomo TRUST HOLDINGS (66.66%) Bank(Trustee Account) 2. RESONA Bank (33.33%) 1. Mitsubishi UFJ Trust and Banking Corporation (46.50%) 21. The Master Trust Bank of 2. Nippon Life Insurance Co. (33.50%) Japan (Trustee Account) 3. Meiji Yasuda Life Insurance Co. (10.00%) 4. The Norinchukin Trust & Banking Co., Ltd. (10.00%) 23.THE CHASE MANHATTAN BANK, N.A. LONDON S.L. The information is not available due to the limitations of local practices. OMNIBUS ACCOUNT 24. Mitsubishi UFJ Trust and Mitsubishi UFJ FINANCIAL GROUP (100%) Banking Corporation

25. JP Morgan Bank The information is not available due to the limitations of local practices.

26. Tokio Marine & Nichido Fire Tokio Marine Holdings Co. (100%) Insurance Co., Ltd. 27. Meiji Yasuda Life Insurance The information is not available due to the limitations of local practices. Company 28. State Street Bank and Trust The information is not available due to the limitations of local practices. Company 29. The Nomura Trust and The Nomura Holdings Co. (100%) Banking Co., Ltd. 30. THE BANK OF NEW YORK The information is not available due to the limitations of local practices. MELLON SA/NV 10

29 Corporate Governance

Corporation Name Major Shareholders of the Corporation

1. Kenneth K. T. Yen (99.4%) 2. Wei Tai Investment Co., Ltd. (0.1%) 3. Le Wen Enterprise Co., Ltd. (0.1%) 31. Wavin Investment Co., Ltd. 4. Fan-Terh Investment Co., Ltd. (0.1%) 5. Jing Yu Investment Co., Ltd. (0.1%) 6. Yu Xin Investment Co., Ltd. (0.1%) 7. Li-Lien Chen (0.1%)

30 Corporate Governance

(II) Directors' and Supervisors' Professional Qualifications and Independent Analysis April 30, 2015 Criteria Meet the Following Professional Number of Qualification Requirements Together with at Least Five Criteria (Note) Other Years Work Experience Taiwanese An Instructor or A Judge, Public Have Work Public Higher Position in a Prosecutor, Attorney, Experience Companies Department of Certified Public in the Area of Currently Commerce, Law, Accountant, or Other Commerce, Serving as Finance, Accounting, Professional or Law, an or Other Academic Technical Specialists Finance, or Independen Department Related Who Has Passed a Accounting, 1 2 3 4 5 6 7 8 9 10 t Director to the Business Needs National Examination or Otherwise of the Company in a and Been Awarded a Necessary Public or Private Certificate in a for the Junior College, Profession Necessary Business of College, or for the Business of the the Company Name University Company Kenneth K. T. Yen - -   - - - - -  -  -- Hsin-Tai Liu - -  --  - -    -- Katsuro Asaoka - -   -   - -    -- Hsin I Lin - -   -   - -    -2 Li-Lien Chen - -   - - - - -  -  -- Kuo-Rong Chen - -   -   - -    -- Hiroshi Miyazeki - -   -   - -    -- Tsung-Jen Huang - -            1 Robert Y.L., Mao - -            1 Wei-Kung Chi - -   -   - -    -1 Tai-Ming Chen     -   - - -   -1 Note: If the Directors or Supervisors meet any of the following situations two years before being elected or during the term of office, please mark “”in the appropriate corresponging boxes. 1. Not an employee of the Corporation or any of its affiliates. 2. Not a director or supervisor of the Corporation or any of its affiliates. (The same does not apply, however, in cases where the person is an independent director of the Corporation, its parent company, or any subsidiary in which the Corporation holds, directly or indirectly, more than 50% of the voting shares.) 3. Not a natural-person shareholder who holds shares, together with those held by the person's spouse, , minor children, or held by the person under others' names, in an aggregate amount of one percent or more of the total number of issued shares of the Corporation or ranks as one of its top ten shareholders. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the Corporation or ranks as one of its top five shareholders. 6. Not a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the Corporation. 7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the Corporation or to any affiliate of the Corporation, or a spouse thereof. 8. Not a spouse, or relative within the second degree of the kinship with other directors. 9. Not been a person of any conditions defined in Article 30 of the Company Law. 10. Not a government, juridical person, or its representative elected under the definition of Article 27 of the Company Law.

31 Corporate Governance

(III) Information Regarding President, Executive Vice President, Vice President, and General Manager of Each Department Spouse and Minor Shareholdings in Date Shareholding Title Nationality Name Shareholding Others’ Names Effective Shares % Shares % Shares %

Vice Chairman R.O. C. Hsin-Tai Liu 2015/6/1 14,560 - - - - - (Note) (Note)

President R.O. C. Chao-Wen Chen 2015/6/1 ------(Note) (Note)

Special Assistant of Chairperson R.O. C. Ching-Kuo Sung 2009/6/16 16,779 - - - - - (Executive Vice President)

Executive Vice Chung-Chou R.O. C. 2004/9/1 23,496 - - - - - President Huang

Executive Vice R.O. C. Chi-Se Tso 2010/12/1 7,812 - - - - - President

Note: The Board of Direstors has appointed Mr. Hsin-Tai Liu to as Vice Chairman of CMC and Mr. Chao-Wen Chen as President on the meeting of May 11, 2015. The effective date will start from June 1, 2015. (Continued on the next page)

32 Corporate Governance

April 30, 2015 Managers Who are Spouses or within Second-degree Relative Education and Selected Past Positions Current Positions in Other Companies of Consanguinity to Each Other Title Name Relation

Executives Program of Graduate School of Business Administration, National Chengchi Univeristy Dept. of Mechanical Engineering, National Cheng For details, please refer 【Information Regarding Kung University - - - Board of Directors and Supervisors】 President, China Motor Corporation (Note) Chief Executive Vice President, China Motor Corporation

Executives Program of Graduate School of Business Director, Taiwan Acceptance Corporation Administration, National Chengchi Univeristy Director, Fortune Motors Co., Ltd. Dept. of Chemical Engineering, Chung Yuan Christian Director, Shung Ye Motor Enterprise University Director, Tokio Marine Newa Insurance Co., Ltd. - - - ExecutiveVice President, China Motor Corporation Director, Sinjang Co., Ltd. (Note) Director, CARPLUS Auto Leasing Corporation General Manager, Production Engineering Division, For details, please refer “Summary of Affiliated China Motor Corporation Companies.”

Executives Program of Graduate School of Business Administration, National Chengchi Univeristy Director and Special Assistant of Chairperson, MBA Program, National Chengchi University Fortune Motors Co., Ltd. - - - Executive Vice President, China Motor Corporation Independent Director, Intai Technology Corp. President, Fortune Motors Co., Ltd. Independent Director, Yusin Holding Corp. Chief Counselor, Executive Yuan

Graduate Institute of Mechanical Engineering, National Chairman, ROC Spicer Ltd. Cheng Kung University Director, Uni-Calsonic Corp. Supervisor Uni Auto Parts Manufacture Co., Ltd. Vice President, China Motor Corporation - - - Director, Fujian Benz Automotive Co., Ltd. President, Automobile Research and Testing Center, For details, please refer “Summary of Affiliated Ministry of Economic Affairs Companies.”

Executives Program of Graduate School of Business Administration, National Chengchi Univeristy Department of Systems and Naval Mechatronic Engineering, National Cheng Kung University Vice President, China Motor Corporation Project Vice President, Product Program Division, China President, South East (Fujian) Motor Co., Ltd. - - - Motor Corporation General Manager, Engineering Division, China Motor Corporation General Manager, Overseas Business Division, China Motor Corporation

33 Corporate Governance

(Continued from the previous page) Spouse and Minor Shareholdings in Date Shareholding Title Nationality Name Shareholding Others’ Names Effective Shares % Shares % Shares %

Executive Vice R.O. C. Te-Jun Lo 2011/2/1 47,356 - 231 - - - President

Executive Vice R.O. C. Ching-Ya Chen 2015/1/1 27,661 - - - - - President

Special Assistant R.O. C. Ming-Lin Chang 2014/1/21 15 - - - - -

Vice President R.O. C. Shih-Ho Chang 2007/6/4 ------

Vice President R.O. C. Kuo-Chi Wang 2008/1/1 20,163 - 583 - - -

(Continued on the next page)

34 Corporate Governance

Managers Who are Spouses or within Second-degree Relative Education and Selected Past Positions Current Positions in Other Companies of Consanguinity to Each Other Title Name Relation Executive Master of Business Administration, School of Management, National Central University Vice President, China Motor Corporation General Manager, Marketing Division, China Motor Corporation Director, Sino Diamond Motor Corporation Plant General Manager, Yang Mei Plant, China For details, please refer “Summary of Affiliated - - - Motor Corporation Companies.” General Manager, Procurement Division, China Motor Corporation General Manager, Service Division, China Motor Corporation General Manager, Quality Control Division, China Motor Corporation Executives Program of Graduate School of Business Administration, National Chengchi Director, Uni-Calsonic Corp. Univeristy Director, ROC Spicer Ltd. Graduate Institute of Mechanical Engineering, Director, Taiway Industry Co., Ltd. - - - National Cheng Kung University Director, Yueki Industry Co. Ltd. Vice President, China Motor Corporation For details, please refer “Summary of Affiliated General Manager, Parts Development Division, Companies.” China Motor Corporation

Graduate Institute of Business Administration, Dayeh University Director and President, Shung Ye Motor Enterprise General Manager, Service Division, China Motor - - - - Corporation General Manager, Sales Division, China Motor Corporation

Graduate Institute of Finance, National Taiwan University Executive Vice President, Fujian Benz General Manager, Corporate Planning Division, Automotive Co., Ltd. China Motor Corporation - - - For details, please refer “Summary of Affiliated General Manager, Service Division, China Motor Companies.” Corporation President, Chrysler LLC, Taiwan

Director and President, Shung Ye Motor Enterprise MBA Program, National Chengchi University Director, An Er Fu Co., Ltd. General Manager, Sales Division, China Motor - - - Director, Hwa Chung Insurance Agency Co., Corporation Ltd. Director, Shun Xin Motor Corporation

35 Corporate Governance

(Continued from the previous page) Spouse and Minor Shareholdings in Date Shareholding Title Nationality Name Shareholding Others’ Names Effective Shares % Shares % Shares %

Vice President R.O. C. Chih-Hsiung Wu 2012/1/1 4,000 - - - - -

Vice President R.O. C. Hsin-Cheng Tseng 2012/1/1 ------

Vice President R.O. C. Ya-Cheng Hsiao 2013/1/1 ------

Vice President R.O. C. Allan Yang 2013/2/1 28,487 - - - - -

Vice President R.O. C. Te-Chao Huang 2014/1/1 661 - 95 - - -

Vice President R.O. C. Ching-Wu Chien 2014/1/1 ------

(Continued on the next page)

36 Corporate Governance

Managers Who are Spouses or within Second-degree Relative Education and Selected Past Positions Current Positions in Other Companies of Consanguinity to Each Other Title Name Relation

Graduate Institute of Business Administration, National Central University Executive Vice President, Fujian Benz Automotive - - - - Co., Ltd. General Manager, Product Program Division, China Motor Corporation

MBA Program, National Chengchi University Special Assistant, China Motor Corporation Executive Vice President, South East (Fujian) - - - General Manager, Service Division, China Motor Motor Co., Ltd. Corporation

Department of Mechanical Engineering, National Taiwan University of Science and Technology Director and President, Gatetec Technology Inc. Project General Manager, Procurement Division, For details, please refer “Summary of Affiliated China Motor Corporation Companies.” General Manager, Procurement Division, South East (Fujian) Motor Co., Ltd.

Department of Mechnical Engineering, Feng Chia President, Uni Auto Parts Manufacture Co., Ltd. University Director, Uni Auto Investment Co., Ltd. General Manager, Product Program Division, China Director, Hangzhou Lien Jun Transportation Motor Corporation Equipment Co., Ltd. - - - Project General Manager, Engineering Division, Director, Lien Hong Transportation China Motor Corporation Equipment Co., Ltd. Project General Manager, Parts Development Director, Guangzhou Ri Cheng Spring Co., Ltd. Division, China Motor Corporation Director, Yulon IT Solutions Inc. Director, Tokio Marine Newa Insurance Co., Ltd. Department of Law, Chinese Culture University Supervisor, Fortune Motors Co., Ltd. General Manager, General Administration Division, Supervisor, Shung Ye Motor Enterprise China Motor Corporation - - - Supervisor, Hua-chuang Automobile Information Project General Manager, General Administration Technical Center Co., Ltd. Division, China Motor Corporation For details, please refer “Summary of Affiliated Companies.” Supervisor, Fortune Motors Co., Ltd. MBA Program, National Chengchi University Director, Shung Ye Motor Enterprise General Manager, Sales Division, China Motor Director, Singan Co., Ltd. Corporation - - - Supervisor, Fortune Motors Co., Ltd. General Manager, Marketing Division, China Motor For details, please refer “Summary of Affiliated Corporation Companies.”

37 Corporate Governance

(Continued from the previous page)

Spouse and Minor Shareholdings in Date Shareholding Title Nationality Name Shareholding Others’ Names Effective Shares % Shares % Shares %

General Manager, Product Engineering R.O. C. Shing JuChen 2004/1/1 11,553 - - - - - Division

General Manager, R.O. C. Chiung-chih Tseng 2005/1/1 46,415 - - - - - Procurement Division

Plant General Manager, Hsin Chu R.O. C. Chun-Hung Hu 2003/2/1 251 - - - - - Plant

General Manager, Management R.O. C. Cheng-Chang Huang 2009/2/1 26,644 - - - - - Information System Division

General Manager, Li-Wei Wang 2013/4/1 ------Service Division R.O. C.

General Manager, Parts Development R.O. C. Hung-Ching Yang 2006/8/1 ------Division

Plant General Manager, Yang Mei R.O. C. Fu-Ping Kuo 2012/1/1 251 - 109 - - - Plant

General Manager, Electrical and R.O. C. Tsung-Yih Tsai 2007/1/1 2,076 - 3,193 - - - Electronic Engineering Division (Continued on the next page)

38 Corporate Governance

Managers Who are Spouses or within Second-degree Relative Education and Selected Past Positions Current Positions in Other Companies of Consanguinity to Each Other Title Name Relation

Department of Mechnical and Computer-Aided Engineering, Feng Chia University - - - - General Manager, Product Program and Testing Division, China Motor Corporation

Director, Fuzhou Fushiang Motor Co., Ltd Department of Mechanical and Electro-Mechanical Director, Fuzhou Lien Hong Transportation Engineering, Tamkang University Equipment Co., Ltd. - - - Project General Manager, Procurement Division, Director, Xin Mi Co., Ltd. China Motor Corporation For details, please refer “Summary of Affiliated Companies.”

Department of Mechanical Engineering, Minghsin University of Science and Technology Director, Gatetec Technology Inc. - - - Project General Manager, Hsin Chu Plant, China Motor Corporation

Department of Industrial Engineering and Engineering Management, National Tsing Hua University Director, Yulon IT Solutions Inc. - - - Project General Manager, Management Information System Division, China Motor Corporation

Graduate Institute of Mechanical Engineering, National Chiao Tung University General Manager, Electric Scooter Sales Division, China Motor Corporation General Manager, Overseas Business Division, China Director, Ling Wei Motor Co., Ltd. - - - Motor Corporation General Manager of SEM, China Motor Corporation Project General Manager, Sales Division, China Motor Corporation

Department of Mechanical and Electromechanical Engineering, National Sun Yat-sen University Director, COC Tooling & Stamping Co., Ltd. - - - Project General Manager, Electrical and Elctronic Engineering Division, China Motor Corporation

Department of Mechanical Engineering, National United University - - - - General Manager, Quality Control Division, China Motor Corporation

Master of Science (Mechanical and Aerospace - - - - Engineering) , State University of New York(Buffalo)

39 Corporate Governance

(Continued from the previous page)

Spouse and Minor Shareholdings in Date Shareholding Title Nationality Name Shareholding Others’ Names Effective Shares % Shares % Shares %

General Manager, Financial and R.O. C. Mei-Chu Tai 2010/4/1 ------Accounting Division

General Manager , Production Control R.O. C. Ching-Chi Chen 2009/2/1 172 - - - - - Division

General Manager, Corporate Planning R.O. C. Ling-Chun Lin 2011/2/1 21,634 - 650 - - - Division

General Manager, Sales R.O. C. Kuo-Hsiung Peng 2014/1/1 29,038 - - - - - Division

General Manager, Production Engineering R.O. C. Tung-Tai Hsiung 2011/2/1 ------Division

General Manager, Overseas Business R.O. C. Hsuan-Kuo Wang 2014/3/1 ------Division

General Manager, Product Program R.O. C. Ching-Yun Liao 2015/4/1 73 - - - - - Division

General Manager, R.O. C. Yueh-Feng Wu 2012/1/1 ------Quality Control Division

General Manager, General Administration R.O. C. Yu-Chun Su 2015/1/1 ------Division

General Manager, R.O. C. Fu-Tang Hou 2014/1/1 386 - - - - - Audit Division

40 Corporate Governance

Managers Who are Spouses or within Second-degree Relative Education and Selected Past Positions Current Positions in Other Companies of Consanguinity to Each Other Title Name Relation

Supervisor, Fuzhou Fushiang Motor Co., Ltd. Supervisor, Zhejiang Kangda Motor Industry And Executive Master of Business Administration, Trading Co., Ltd. National Chiao Tung University Supervisor, Xin Mi Co., Ltd. Department of Business Administration, Minghsin Supervisor, Fuzhou Xin Mi Electric Co., Ltd. - - - University of Science and Technology Supervisor, Fuzhou Xin Long Mechanical Project General Manager, Financial and Accounting Engineering Co., Ltd. Division, China Motor Corporation For details, please refer “Summary of Affiliated Companies.”

Department of Business Administration, Aletheia University - - - - Project General Manager, Production Control Division, China Motor Corporation

MBA, National Taiwan University Project General Manager, Corporate Planning - - - - Division, China Motor Corporation

Department of Industrial and Information Management, National Cheng Kung University Director, Ling Wei Motor Co., Ltd. - - - Project General Manager, Sales Division, China Motor Corporation

Graduate Institute of Business Administration, National Central University Graduate Institute of Mechanical Engineering, - - - - National Cheng Kung University Project General Manager, Production Engineering Division, China Motor Corporation

Institute of Manufacturing Management, University of South Australia Director and President, GreenTrans Corporation - - - General Manager of SEM, China Motor Corporation

Graduate Institute of Mechanical Engineering, National Cheng Kung University - - - - Project General Manager, Product Engineering Division, China Motor Corporation

Department of Mechanical Engineering, National - - - - Pingtung University of Science and Technology

Institute of Public Affairs Management, National Sun Yat-sen University Director, Brilliant Insight International Consultancy - - - Project General Manager, Financial and Accounting Service Co., Ltd. Division, China Motor Corporation

Graduate Institute of Management, National Central - - - - University

41 Corporate Governance

(IV) Remuneration Paid to Board of Directors, Supervisors, President, and Executive Vice President in the Latest Year 1. Remuneration Paid to Directors

Director's Remuneration Total Remuneration Earnings (A+B+C+D) as a Compensation (A) Pensions(B) Allowances(D) Distribution (C) % of Net Income Title Name

From All From All From All From All From All From the From the From the From the From the Consolidated Consolidated Consolidated Consolidated Consolidated Corporation Corporation Corporation Corporation Corporation Entities Entities Entities Entities Entities

Chairperson Kenneth K. T. Yen Vice Hsin-Tai Liu(Note1) Chairman Director Katsuro Asaoka

Director Hsin I Lin

Director Li-Lien Chen 30,076 30,076 - - 9,594 9,594 9,283 9,343 1.91 1.92 （Note1） （Note3） Director Kuo-Rong Chen Hiroshi Miyazeki Director (Note 1) Independent Tsung-Jen Huang Director Independent RobertY.L., Mao Director Kenneth K. T. Yen Chairperson 30,076 30,076 - - 3,837 3,837 1,576 1,576 1.39 1.39 (Note2) Note： 1. The earnings distribution was paid to Corporate Directors but not its representatives. (1) Chairperson Kenneth K. T. Yen and Li-Lien Chen are representatives of Yulon Motor Co., Ltd. (2) Director Hsin-Tai Liu, Hsin-I Lin and Kuo-Rong Chen are representatives of Tai-Yuen Textile Co., Ltd. The Board of Direstors has appointed Mr. Hsin-Tai Liu as Vice Chairman of CMC on the meeting of May 11, 2015. The effective date will start from June 1, 2015. (3) Director Katsuro Asaoka is representative of Mitsubishi Motors Corporation. (4) Director Hiroshi Miyazeki is representative of Mitsubishi Corporation. Mitsubishi Corporation assigns Mr. Ishikawa Zenta in replacement of Mr. Hiroshi Miyazeki as its representative from May 1, 2015. 2. To disclose individually by Art 10 of “Regulations Governing Information to be published in Annual Reports of Public Companies”. 3. The above-mentioned figures include depreciation expense for official business cars NT$178 thousand, gasoline NT$257 thousand, rent NT$844 thousand, and other expenses NT$116 thousand. Besides, compensation paid to the drivers is NT$1,798 thousand.

42 Corporate Governance

Unit: NT$thousands/thousand shares Compensation Earned by a Director Who is an Employee of the Corporation or of the Corporation’s Consolidated Entities Total Compensation Compensation, (A+B+C+D+E+F+ Compensation Earnings Distribution as Exercisable Granted “new Bonuses, and G) as a % of Net Paid to Allowances (E) Pensions (F) Employee Profit Sharing “Employee Stock restricted employee Income (%) (G) Options” (H) shares” (I) Directors from Non- From All From the consolidated From All From All Consolidated From All From All From All From the From the Corporation From the From the From the Consolidated Consolidated Entities Consolidated Consolidated Consolidated Affiliates (J) Corporation Corporation Corporation Corporation Corporation Entities Entities Entities Entities Entities Cash Stock Cash Stock

18,733 19,441 - - 42 - 42 - - - - - 2.65 2.68 21,294

(Note 3)

------1.39 1.39 14,733

43 Corporate Governance

Name of Director Total Remuneration(A+B+C+D) Total Compensation(A+B+C+D+E+F+G) From All Consolidated Remuneration From All Consolidated Entities and From the Corporation From the Corporation Entities Non-consolidated Affiliate (Note) Mitsubishi Motors Mitsubishi Motors Mitsubishi Motors Mitsubishi Motors Corporation representative Corporation representative Corporation representative Corporation representative Katsuro Asaoka Katsuro Asaoka Katsuro Asaoka Katsuro Asaoka Yulon Motor Co., Ltd. Yulon Motor Co., Ltd. Yulon Motor Co., Ltd. Yulon Motor Co., Ltd. representative representative representative representative Li-Lien Chen Li-Lien Chen Li-Lien Chen Li-Lien Chen Tai-Yuen Textile Co., Ltd. Tai-Yuen Textile Co., Ltd. Tai-Yuen Textile Co., Ltd. Mitsubishi Corporation representative representative representative representative Under NT$2,000,000 Hsin-Tai Liu Hsin-Tai Liu Kuo-Rong Chen Hiroshi Miyazeki Kuo-Rong Chen Kuo-Rong Chen Mitsubishi Corporation Independent Director Mitsubishi Corporation Mitsubishi Corporation representative Tsung-Jen Huang representative representative Hiroshi Miyazeki Independent Director Hiroshi Miyazeki Hiroshi Miyazeki Independent Director RobertY.L., Mao Independent Director Independent Director Tsung-Jen Huang Tsung-Jen Huang Tsung-Jen Huang Independent Director Independent Director Independent Director RobertY.L., Mao RobertY.L., Mao RobertY.L., Mao Tai-Yuen Textile Co., Ltd. NT$2,000,000 - - - representative ～ NT$5,000,000 Kuo-Rong Chen Tai-Yuen Textile Co., Ltd. Tai-Yuen Textile Co., Ltd. Tai-Yuen Textile Co., Ltd. NT$5,000,000 representative representative representative - ～ NT$10,000,000 Hsin-I Lin Hsin-I Lin Hsin-I Lin Tai-Yuen Textile Co., Ltd. NT$10,000,000 - - - representative ～ NT$15,000,000 Hsin-I Lin Tai-Yuen Textile Co., Ltd. Tai-Yuen Textile Co., Ltd. NT$15,000,000 - - representative representative ～ NT$30,000,000 Hsin-Tai Liu Hsin-Tai Liu Yulon Motor Co., Ltd. Yulon Motor Co., Ltd. Yulon Motor Co., Ltd. NT$30,000,000 representative representative representative - ～ NT$50,000,000 Kenneth K. T. Yen Kenneth K. T. Yen Kenneth K. T. Yen Yulon Motor Co., Ltd. NT$50,000,000 - - - representative ～NT$100,000,000 Kenneth K. T. Yen

Over NT$100,000,000 - - - -

Total 9 9 9 9

Note: The remuneration paid to Director from non-consolidated affiliates shall be included in this column.

44 Corporate Governance

2. Remuneration Paid to Supervisors Unit: NT$ thousands

Remuneration Paid to Supervisors Total Remuneration Compensation Earnings Distribution (A+B+C+D) as a % Paid to Compensation(A) Allowances(C) Supervisors (B) of Net Income Title Name from From All From All From All From All Nonconsolidated From the From the From the From the Affiliates Consolidated Consolidated Consolidated Consolidated Corporation Corporation Corporation Corporation Entities Entities Entities Entities Wei-Kung Supervisor Chi - - 1,919 1919 240 264 0.08 0.09 122 Tai-Ming Supervisor （Note） Chen Note：The earnings distribution was paid to Corporate Supervisors but not its representatives.

Name of Supervisor Total Remuneration （A + B + C） Remuneration From All Consolidated Entities and From the Corporation Non-consolidated Affiliates (Note) Le Wen Enterprise Co., Le Wen Enterprise Co., Ltd.representative Ltd.representative Under NT$2,000,000 Wei-Kung Chi Wei-Kung Chi Tai-Ming Chen Tai-Ming Chen NT$ 2,000,000～ NT$5,000,000 - - NT$ 5,000,000～ NT$10,000,000 - - NT$10,000,000～ NT$15,000,000 - - NT$15,000,000～ NT$30,000,000 - - NT$30,000,000～ NT$50,000,000 - - NT$50,000,000～ NT$100,000,000 - - Over NT$100,000,000 - - Total 2 2

Note: The remuneration paid to Supervisor from non-consolidated affiliates shall be included in this column.

45 Corporate Governance

3. Remuneration Paid to President and Executive Vice President Unit: NT$ thousands/thousand shares

Total Compensation to Granted “new Earnings Distribution as Compensation Exercisable Compensation Pensions President and restricted Employee Profit Sharing (A+B+C+D) as a “Employee Stock （ ） Executive Vice employee (A) B (D) % of Net Income Options” Compen President (C) shares” (%) -sation from Title Name From All From From From the From Noncon From From From All Consolidated From From All From From All From All All the Corporation All -solidated the the Consolida Entities the Consolida the Consolida the Consoli Consoli Corpora Consoli Affiliates Corpora Corpo -ted Corpora -ted Corpora -ted Corpo -dated -dated -tion -dated -tion -ration Entities -tion Entities -tion Entities -ration Entities Entities Cash Stock Cash Stock Entities

Vice Chairman Hsin-Tai Liu (Note1) Chao-Wen President(Note1) Chen Chairperson’s Special Assistant Ching-Kuo (Executive Vice Sung President) 15,114 18,305 - - 37,776 46,012 175 - 204 - 2.07 2.52 - - - - 1,870 Executive Vice Chung-Chou President Huang (Note 2) Executive Vice Chi-Se Tso President Executive Vice Te-Jun Lo President Executive Vice Ching-Ya President Chen Note1: The Board of Direstors has appointed Mr. Hsin-Tai Liu as Vice Chairman of CMC and Mr. Chao-Wen Chen as President on the meeting of May 11, 2015. The effective date will start from June 1, 2015. Mote2: The above-mentioned figures include depreciation expense for official business cars NT$472 thousand, gasoline NT$556 thousand, and other expenses NT$338 thousand. Besides, compensation paid to the drivers is NT$2,767 thousand.

Name of President and Executive Vice President Remuneration From All Consolidated Entities and The Corporation Non-consolidated Affiliates (Note) Under NT$2,000,000 Chi-Se Tso - NT$2,000,000 ～ NT$ 5,000,000 Te-Jun Lo -

Chao-Wen Chen Chao-Wen Chen Chung-Chou Huang NT$5,000,000 ～ NT$10,000,000 Chung-Chou Huang Chi-Se Tso Ching-Ya Chen Te-Jun Lo Ching-Ya Chen

NT$10,000,000～ NT$15,000,000 Ching-Kuo Sung Ching-Kuo Sung NT$15,000,000～ NT$30,000,000 Hsin-Tai Liu Hsin-Tai Liu NT$30,000,000～ NT$50,000,000 - - NT$50,000,000～ NT$100,000,000 - - Over NT$100,000,000 - - Total 7 7 Note: The remuneration paid to President and Executive Vice Presidents from non-consolidated affiliates shall be included in this column.

46 Corporate Governance

4. The Ratio of the Remuneration Paid to Board of Directors, Supervisors, Presidents, and Executive Vice Presidents to Net Income in 2013 and 2014

(1) Paid from the Corporation

The ration of Remuneration to Net Income (%) Increase (Decrease) Paid to 2014 2013 Rate (%) Director 1.91 1.37 0.54 Supervisor 0.08 0.06 0.02 President and 2.07 1.81 0.26 Executive Vice President (2) Paid from the Corporation

The ration of Remuneration to Net Income (%) Increase (Decrease) Paid to 2014 2013 Rate (%) Director 1.92 1.37 0.55 Supervisor 0.09 0.06 0.03 President and 2.52 2.10 0.42 Executive Vice President (3) Analysis 1. The ratio of remuneration paid to Directors, Supervisors, Presidents, and Executive Vice Presidents to net income is more than that in 2013 because the net income increased in 2014. 2. The connection between the remuneration's policy, standards and combinations, the process to sets up the remuneration, operation outcomes and future risks: There is Compensation Committee in the Corporation. Compensation paid to Directors, Supervisors, and General Managers are proposed by Compensation Committee and resolved by Board meetings.

47 Corporate Governance

(V) Employment Profit Sharing Granted to Management Team April 30, 2015 Unit: NT$ thousands Ratio of the Total Title Name Stock Cash Total to Net Income （％） Vice Chairman(Note) Hsin-Tai Liu President(Note) Chao-Wen Chen Chairperson Special Assistant (Executive Vice Ching-Kuo Sung President) Executive Vice President Chung-Chou Huang Executive Vice President Chi-Se Tso Executive Vice President Te-Jun Lo Executive Vice President Ching-Ya Chen Special Assistant Ming-Lin Chang Vice President Shih-Ho Chang Vice President Kuo-Chi Wang Vice President Chih-Hsiung Wu Vice President Hsin-Cheng Tseng Vice President Ya-Cheng Hsiao Vice President Allan Yang Vice President Te-Chao Huang Vice President Ching-Wu Chien Managers General Manager, Product Engineering Division Shing JuChen General Manager, Procurement Division Chiung-chih Tseng - 632 632 0.02 Plant General Manager, Hsin Chu Plant Chun-Hung Hu General Manager, Cheng-Chang Huang Management Information System Division General Manager, Service Division Li-Wei Wang General Manager, Parts Development Division Hung-Ching Yang Plant General Manager, Yang Mei Plant Fu-Ping Kuo General Manager, Tsung-Yih Tsai Electrical and Electronic Engineering Division General Manager, Mei-Chu Tai Financial and Accounting Division General Manager, Production Control Division Ching-Chi Chen General Manager, Corporate Planning Division Ling-Chun Lin General Manager, Sales Division Kuo-Hsiung Peng General Manager, Production Engineering Division Tung-Tai Hsiung General Manager, Overseas Business Division Hsuan-Kuo Wang General Manager, Product Program Division Ching-Yun Liao General Manager, Quality Control Division Yueh-Feng Wu General Manager, General Administration Division Yu-Chun Su General Manager, Audit Division Fu-Tang Hou

Note: The Board of Direstors has appointed Mr. Hsin-Tai Liu as Vice Chairman of CMC and Mr. Chao-Wen Chen as President on the meeting of May 11, 2015. The effective date will start from June 1, 2015.

48 Corporate Governance

III. Implementation of Corporate Governance

(I) Board of Directors Meeting Status There were 6 Board of Directors meetings in 2014. The directors’ attendance status is as follows: Attendance Name of Corporate Attendance Tiitle Representative Rate in Notes Shareholder in Person By Proxy Person (%) Yulon Motor Co., Chairperson Kenneth K.T. Yen 5 1 83 Ltd. Mitsubishi Motors Director Katsuro Asaoka 6 0 100 Corporation Tai-Yuen Textile Director Hsin I Lin 6 0 100 Co., Ltd. Yulon Motor Co., Director Li-Lien Chen 6 0 100 Ltd. Tai-Yuen Textile Director Kuo-Rong Chen 6 0 100 Co., Ltd. The Board of Direstors has appointed Mr. Hsin-Tai Liu as Vice Tai-Yuen Textile Director Hsin-Tai Liu 6 0 100 Chairman of CMC on the Co. meeting of May 11, 2015. The effective date will start from June 1, 2015. Mitsubishi Corporation assigns Mr. Ishikawa Mitsubishi Zenta in replacement of Director Hiroshi Miyazeki 6 0 100 Corporation. Mr. Hiroshi Miyazeki as its representative from May 1, 2015. Independent - Tsung-Jen Huang 4 1 67 Director Mr. Mao attended BOD Meetings by vedio conference for 3 times in Independent 2014. Attending BOD - Robert Y.L., Mao 5 0 83 Director Meetings by vedio conference is considered as attend in-person by law. Annotation: 1. There were no event as set forth in article 14-3 of Securities Exchange Act or written or otherwise recorded resolutions on which independent directors had a dissenting opinion or qualified opinion in 2014. 2. Recusals of Directors due to conflicts of interests in 2014: The directors of the Corporation are highly disciplined and recused themselves from the voting for proposal involved with their interest. There was no proposl with interest involved and therefore it was unnecessary for them to recuse. 3. Measures taken to strengthen the functionality of the Board (e.g. establish Autid Committee, enhance information transparency): The Corporation will establish the Audit Committee in 2016.

49 Corporate Governance

(II) Attendance of Supervisors for Board Meetings There were 6 Board of Directors meetings in 2014. The supervisors’ attendance status is as follows: Name of Corporate Attendance in Attendance Rate in Tiitle Representative Notes Shareholder Person Person (%) Wei Kung Chi 6 100 Supervisor Le Wen Enterprise Co., Ltd. Tai-Ming Chen 6 100 Annotations: 1. The composition and responsibilities of supervisors: (1) Descriptions of the communication between the supervisors and the employees and shareholders: in addition to the periodical report of related employees to supervisors, supervisors may contact related employees directly if there is any question. The supervisors may communicate with employees and shareholders via the board of directors and shareholders’ meetings. (2) Descriptions of the communication between the supervisors, internal auditors and the auditors: the supervisors may investigate the business and financial conditions of the Corporation anytime and may request board of directors or managers for report. 2. Where there are opinions of the supervisors attending the BOD meeting, the date of BOD meeting, term, content of motion and resolutions shall be specified. The resolutions of BOD meetings and the handling of the Corporation to opinions expressed by the supervisors: None.

(III) Audit Committee Meeting Status: None

50 Corporate Governance

(IV) Corporate Governance Execution Status and Deviations from “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies” Status of Implementation Non-compliance with the Corporate Assessment Item Yes No. Performance Summary Governance BPP and reasons 1. Does the Corporation  The Corporation has established the Code of Corporate The Corporation has established and establish and disclose own Governance Practice and disclosed it on the Market disclosed own “Code of Corporate corporate practice principles Observation Post System and own corporate website. Governance Practice” with reference with reference to the to the “Corporate Governance BPP” “Corporate Governance and has established own internal BPP”? control system. Therefore, this Corporation is operated with reference to the spirit of the Corporate Governance BPP and has implemented relevant regulations. 2. Shareholding structure & shareholders’ rights: (1) Does the Corporation  (1) Apart from establishing the spokesperson system (1) Comply with the “Corporate establish and implement to handle the shareholder suggestions, concerns, Governance BPP”. the internal operation disputes and litigation matters, shareholders can procedures to handle express their comments on the corporate website at shareholders’ http://www.china-motor.com.tw. The Corporation suggestions, concerns, will assign relevant departments to appropriately disputes and litigation respond to their comments. Under the Financial matters? Department, we have established a share registration unit to handle and respond to relevant affairs. (2) Does the Corporation  (2) The Corporation maintains a list of major (2) Comply with the “Corporate maintain a list of major shareholders who controlling the Corporation and Governance BPP”. shareholders who their beneficial owners and reports their shares and controlling the stock mortgage/relief status by the Rules Corporation and their Governing Information Filing for TWSE-Listed beneficial owners? Companies. (3) Has the Corporation  (3) The Corporation has established the “Interested (3) Comply with the “Corporate established and Party Trading Management Regulations” as the Governance BPP”. implemented a risk risk management system and firewall between the management system and Corporation and affiliates. “firewall” between the Corporation and its affiliates? (4) Has the Corporation  (4) The Corporation has established the “Insider (4) Comply with the “Corporate established internal rules Trading Prevention SOP” to prohibit insiders from Governance BPP”. prohibiting insider trading securities with undisclosed information. trading securities on undisclosed information? 3. Formation and responsibility of the board of directors: (1) Does the Corporation  (1) The Corporation has established and implemented (1) Comply with the “Corporate establish and implement diversified policies with reference to board Governance BPP”. diversified policies with formation according to the Code of Corporate reference to board Governance Practice. formation? (2) Besides establishing the  (2) The Corporation has established the (2) Comply with the “Corporate Compensation Compensation Committee. In 2016, the Governance BPP”. Committee and Audit Corporation will establish the Audit Committee. Committee by the law, (Continued) 51 Corporate Governance

Status of Implementation Non-compliance with the Corporate Assessment Item Yes No. Performance Summary Governance BPP and reasons does the Corporation voluntarily establish other functional committees? (3) Does the Corporation  (3) Every year the Corporation assesses the (3) Comply with the “Corporate establish board achievement of the performance indicators set by Governance BPP”. performance evaluation the board. regulations and methods to evaluate board performance every year? (4) Does the Corporation  (4) The Corporation assesses the independency of (4) Comply with the “Corporate assess the independency CPAs on a regular basis (once a year). The Governance BPP”. of its CPAs? assessment includes the interests between CPAs and the Corporation, dual status of CPAs, familiarity with employees of the Corporation, threat from the Corporation, and service period. 4. Does the Corporation  The Corporation has provided detailed contact Comply with the “Corporate establish mechanisms for information on the corporate website for stakeholders Governance BPP”. communicating with (customers, the public, and suppliers) to express their stakeholders and a stakeholder comments, so that the Corporation can make site on the corporate website appropriate response. The Corporation will establish to appropriately respond to a stakeholder site on the corporate website by the end material CSR topics they of 2015 according to the law. concern about? 5. Does the Corporation assign  The Corporation has an own share register department. Comply with the “Corporate professional share registers to Governance BPP”. handle shareholder meeting affairs? 6. Information disclosure (1) Does the Corporation  (1) The Corporation discloses relevant operation, (1) Comply with the “Corporate establish a website to financial and corporate governance information Governance BPP”. disclose own operation, over the corporate website. financial and corporate governance information? (2) Does the Corporation  (2) The Corporation has established an English (2) Comply with the “Corporate disclose such information website, assigned special staff to gather and Governance BPP”. with other methods (e.g., disclose corporate information, implemented the English website, spokesperson system, and posted conference call assigning staff to gather on the corporate website. and disclose relevant information, implementing the spokesperson system, and posting the conference call on the corporate website)? 7. Does the Corporation disclose  See Note. Comply with the “Corporate other information for investors Governance BPP”. to better understand its corporate governance practices (including but not limited to employee rights and benefits, employee care, investor relations, supplier

(Continued)52 Corporate Governance

Status of Implementation Non-compliance with the Corporate Assessment Item Yes No. Performance Summary Governance BPP and reasons relations, stakeholder rights and benefits, training for directors and supervisors, implementation of risk management policies and risk assessment standards, implementation of customer relations policies, and Directors and Officers Liability Insurance)? 8. Does the Corporation  The Corporation does not have a self-evaluation report Comply with the “Corporate implement self-evaluation of or third-party evaluation report of corporate Governance BPP”. its corporate governance governance practices. practices or appoint a third party to do so and maintain a report? (If yes, please specify the board opinion, self-evaluation or third-party evaluation results, major defects or recommendations and improvement.) Note: Material information for better understanding of corporate governance: (1) Employee rights and benefits: The Corporation protects the rights and benefits of employees with reference to the Labor Standards Act and has specified employee rights and benefits in the Employee Handbook. The Corporation also publishes information regarding employee rights and benefits on the intranet and bulletin board. (2) Employee care: The Corporation provides employees with comprehensive care, including the employee canteen, employee dormitory, employee gymnasium, swimming pool, employee library, and infirmary. The Corporation also organizes employee fair (Family Day) and subsidizes employee tours from time to time and arranges heath examinations for employees regularly. (3) Investor relations: The Corporation publishes on the corporate website information regarding the future development and financial condition of the Corporation and holds conference call at least 2 times a year. The Corporation also assigns special staff to answer questions of investors and explains to them the Corporation’s future development through teleconferences or presentations from time to time. (4) Supplier relations: The Corporation has a procurement department to handle product supply of suppliers and handle the quality improvement of suppliers from time to time. The Corporation also holds the contractor conference every year to explain to suppliers the annual plan and future development of the Corporation. (5) Stakeholder rights and benefits: The Corporation maintains the rights and benefits of stakeholders with reference to the law and assigns relevant units to respond to stakeholders. (6) Training for directors and supervisors: The Corporation regularly provides training information for directors and supervisors and encourages them to receive training. In addition, the Corporation arranges training on new laws and accounting systems for directors and supervisors. Relevant training information is disclosed over the MOPS. (7) Implementation of risk management policy and risk assessment standards: The Corporation has established the Audit Division to audit potential risks on a routine basis and report results to the internal business meeting at planned intervals. (8) Implementation of customer service policy (respect for consumer demand): The Corporation has established a helpline (toll-free 0800) and suggestion box on the corporate website for consumers to express their demand and comments. The Corporation also requests dealers to make timely response to customers. (9) Directors and Officers Liability Insurance: As the share structure is relatively simple at present, and most directors and supervisors are appointed by the group’s holding company, the Corporation has not arranged insurance of any kind for them. In order to strengthen corporate goverence of the Corporation, the BOD Meeting this May passes to buy D&O Liability Insurance starts from July 1, 2015.

53 Corporate Governance

(V) Composition, Responsibilities and Operations of Compensation Committee:

1. Information of compensation committee members Meet the following professional qualification Criteria requirments, together with at least five years work Criteria（Note 2） experience An instructoror A judge, public Have work higher position prosecutor, experience Numer of in a department attorney, certified in the area other of commerce, public accountant, of Taiwanese law, finance, or other commerce, public N accounting or professional or law, companies Identity other academic technical finance or O concurrently (Note 1) department specialists who accounting T serving as a related to the has passed a or 1 2 3 4 5 6 7 8 E business needs national otherwise compensatio of the company examination and necessary n committee in a public or been awarded a for the member in private junior certificate in a business of Taiwan college, college profession the or university necessary for the company Name business of the company Independent Tsung-Jen - -          1 Director Huang Independent Robert Y.L., - -          1 Director Mao Yun-Hua Other  - -         3 Yang Note1: Serve as a director, independent director or otherwise Note 2: Status of independence compliance (1) Not an employee of the company or its affiliates (2) Note a director, supervisor of the company or its affiliates. The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary in which the company holds, directly or indirectly, more than 50 percent of voting shares. (3) Not a natural-person shareholder who holds the share, altogether with those shares held by the person＇s spouse, minor children or held by the person under others＇ names, in an aggregate amount of one percent or more or the total number of issued shares of the company or rank as one of its top 10 shareholders. (4) Not a spouse, relative with in second degree of kinship or lineral relative within the third degree of kinship, or any of the above person in the preceding three subparagraphs (5) Not a director, supervisor or employee of a corporate/institutional shareholder that directly holds 5% or more of the total number of issued shares of the company or rank as one of its top 5 shareholders (6) Not a director, supervisor, officer or shareholder holding 5% or more of the shares of a specified company or institution that has a financial or business relationship with the company. (7) Not a professional individual who, or an owner, partner, director, supervisor, officer of a sole proprietorship, company or institution that, provides commercial, legal, accounting services or consultation to the company or any affiliate of the company, or a spouse thereof. (8) Not been a person of any conditions defined in article 30 of the Company Law

54 Corporate Governance

2. Compensation committee meeting status (1) The Corporation’s compensation committee consists of 3 members. (2) Tenure of office: the tenure of second session of committee is from July 1, 2013 to June 30, 2016. The qualification and attendance of the committee members are as follows: Meeting Attendance Attendance rate in Title Name Times in 2014 By person (%) Notes in person (B) (A) proxy (Ｂ/Ａ) Tsung-Jen Convener 2 0 100% Huang Robert Y.L., Member 2 1 0 50% Mao Yun-Hua Member 2 0 100% Yang Annotations: 1. There was no recommendation of the compensation committee which was not adopted or was modified by the Board. 2. There were no written or otherwise recorded resolutions on which a member of the compensation committee had a dissenting opinion or qualified opinion.

55 Corporate Governance

(VI) Social Responsibility: Implementation Non-compliance with the Assessment Item Corporate Social Responsibility Yes No Performance Summary BPP for TWSE/GTSM Listed Companies and Reasons 1. Corporate governance promotion (1) Does the Corporation  (1) The Corporation has established a Code of CSR (1) Comply with the establish a CSR policy or Practice and implemented the Code by exercising CSR BPP. system and review the corporate governance, fostering a sustainable effectiveness of environment, preserving philanthropy, and implementation? reinforcing disclosure of CSR information. The Corporation has also established the CSR Management Committee to promote CSR, which includes CSR training, introducing and upgrading ISO relatived certifications, CSR promotion of dealers and suppliers, energy-saving promotion, and appealing procedure for stakeholders. The CSR Management Committee reports the effectiveness of implementation to the board regularly. (2) Does the Corporation arrange  (2) The Administration Department arranges (2) Comply with the CSR training on a regular corporate ethics-related training regularly, CSR BPP. basis? including pre-service training for new employees. (3) Does the Corporation  (3) In 2014, the Corporation established the CSR (3) Comply with the establish a dedicated Management Committee chaired by the VP of CSR BPP. (concurrent) unit to promote Planning and Administration. Under the CSR with authorization from committee, there are the “corporate governance”, top management and to report “employee care”, “sustainable environment”, the effectiveness of “customer and partner relations”, and implementation to the board? “philanthropy” teams. The Corporate Planning Division, General Administration Division, Health & Safety Office, and Service Division lead respective teams. Other members of these teams include the Finance and Accounting Division, Audit Division, Sales Division, Parts Development Division, Electrical & Electronic Engineering Division, Product Engineering Division, Yangmei Plant, Hsinchu Plant, and Procurement Division. The CSR Management Committee is responsible for promoting CSR, preparing the CSR report, and reporting the effectiveness of implementation to the board at planned intervals regularly. The outcomes of 2014 includes CSR traing courses(includes Personal Information Protection, and Health & Safety), energy-saving cost reduction up to 10 million, counselling energy-saving project to supplier, CSR report compiliation and announcement, applying Energy Label for new released car, etc. (4) Does the Corporation  (4) The Corporation has strictly followed the (4) Comply with the establish a fair compensation labor-and-human-rights regulations established by CSR BPP. policy combing with the the government, and has established an employee performance appropriate compensation system and relevant evaluation system and CSR disciplinary items to reward or punish employees policy and an effective and with reference to their performance and conduct. well-defined reward and punishment system? (Continued56 ) Corporate Governance

Implementation Non-compliance with the Assessment Item Corporate Social Responsibility Yes No Performance Summary BPP for TWSE/GTSM Listed Companies and Reasons 2. Development of a sustainable environment:  (1) The Corporation holds committee meetings to (1) Comply with the (1) Does the Corporation make review resource recycling and energy CSR BPP. efforts to enhance resource conservation topics and rewards units making efficiency and use recycled special proposals for related activities: recycling materials with lower of production water at the Yangmei Plant, clutter environmental impact? reuse at the Hsinchu Plant, and the use of independent switches for lights on each floor for employees to switch lights off after leaving the office. (2) Does the Corporation  (2) The Corporation has established an EMS with (2) Comply with the establish an appropriate reference to relevant environmental regulations CSR BPP. environmental management and other requirements, effective resource system (EMS) according to utilization, pollution prevention and continual the characteristics of its improvement, and organizational operation. The industry? Corporation has also passed ISO14001 EMS certification. (3) Has the Corporation noticed  (3) In 2009 the Corporation began voluntary GHG (3) Comply with the the effect of climate change disclosure at the Taiwan National Greenhouse Gas CSR BPP. on its business activities and (GHG) Registry every year. The Corporation does it implement GHG establishes the Energy Conservation Team with inventory and establish an members from each department to promote energy energy conservation and GHG audit, establishes and implements energy reduction strategy? conservation targets and programs, analyzes energy consumption and efficiency, holds review meetings at planned intervals, and proposes improvement plans, so as to reduce GHG emissions. In addition, by implementing the ISO14001 EMS, the Corporation includes energy conservation measures in the annual improvement program for each plant to implement. At the monthly energy conservation review meeting, each unit proposes energy conservation measures and practices. 3. Implementation of philanthropy (1) Does the Corporation  (1) The Corporation observes relevant labor laws and (1) Comply with the establish relevant regulations, and respects internationally CSR BPP. management policies and recognized basic labor and human rights. After procedures with reference to regularly gathering reviews labor laws and relevant international regulations, the General Administration Division regulations and international reviews relevant the compliance of relevant SOPs human rights treaties? and regulations and amend them where necessary. The Corporation also ensures no discrimination in employment policies. (2) Does the Corporation  (2) The Corporation sets up a suggestion box to (2) Comply with the establish mechanisms and gather opinion and comments from employees and CSR BPP. channels for and properly ensure unhindered communication with handle employee grievances? employees. The Corporation also sets up a hotline, fax line, and e-mail for sexual harassment reporting. (Continued)

57 Corporate Governance

Implementation Non-compliance with the Assessment Item Corporate Social Responsibility Yes No Performance Summary BPP for TWSE/GTSM Listed Companies and Reasons (3) Does the Corporation provide  (3) The Corporation has established the Safety and (3) Comply with the employees with a safe and Health Office and a Health Center (infirmary) to CSR BPP. healthy work environment audit occupational safety in the work environment and regularly arrange safety and arrange periodic health examination. The and health training/education Corporation also hires resident physicians to for employees? ensure employee health. (4) Does the Corporation  (4) Every year the Corporation holds Company (4) Comply with the establish mechanisms for business meetings to explain to employees the CSR BPP. periodic employee significant change affecting future corporate communication and development in the future and related operational reasonably notice employees changes. of significant operational changes that could substantially affect them? (5) Does the Corporation  (5) The Corporation implements training/ education (5) Comply with the establish effective training programs regularly, including pre-service training CSR BPP. plans for employees to and in-service training. The Corporation also develop employability? assigns suitable employees to attend knowledge and skill training courses to develop competencies required by work. (6) Does the Corporation  (6) The Corporation prioritizes maintenance of (6) Comply with the establish policies and consumer rights and benefits and establishes the CSR BPP. procedures to protect following standards to handle product liability and consumer rights and benefits accidents: “Toll-free Helpline Answering Service in R&D, procurement, Quality Management SOP”, “Toll-free Helpline production, operation, and and Consumer Complaint Handling SOP”, and service processes? “Toll-free Helpline Complaint Closure Aftercare SOP”. In addition, all product assurance standards and SOPs are reviewed and revised periodically to ensure a flawless product assurance system. (7) Does the Corporation follow  (7) In advertising products, apart from complying (7) Comply with the relevant regulations and with the verity and good faith principle of CSR BPP. international standards to automobiles, all appeals and methods comply with market and label products relevant legal requirements. In legal compliance, and services? product related data is indicated in respective locations to clearly inform consumers. Details are also given in the owner’s manual to ensure consumers fully and easily understand the specifications, performance, operation, and precautions of product. (8) Does the Corporation assess  (8) Apart from setting green procurement as an (8) Comply with the if suppliers have records important corporate policy, the Corporation has CSR BPP. regarding causing impacts on aggressively encouraged suppliers to pass the environment and society? ISO14001 certification and assesses suppliers prior to any transactions. (Continued)

58 Corporate Governance

Implementation Non-compliance with the Assessment Item Corporate Social Responsibility Yes No Performance Summary BPP for TWSE/GTSM Listed Companies and Reasons (9) When signing contracts with  (9) To optimize supplier management, the (9) Comply with the major suppliers, does the Corporation signs the “Basic Contract” with CSR BPP. Corporation include the suppliers to specify the rights and obligations of following terms in the both parties. The “Basic Contract” specifies that contract: when suppliers the supplier should comply with the Corporation’s violate the Corporation’s environmental policy, laws and regulations. The CSR policy and have Corporation can terminate the contract and ask for significant impact on the compensation when the supplier violates the environment and society, the “Basic Contract”. In addition, the Corporation has Corporation may terminate or established and implemented the Supplier rescind the contract at any Management Regulations to request and supervise time? suppliers to continually raise quality, delivery time, cost, R&D, and safety standards. Through routine managements, guidance, and reward, we push suppliers to make continual improvement, so as to pursue sustainable operation. 4. Reinforcement of disclosure of CSR information. (1) Does the Corporation  (1) The Corporation has set up a corporate website and (1) Comply with the disclose relevant and reliable discloses regularly information related to CSR BPP. CSR information on the consumers and investors on the corporate website corporate website and and the MOPS. In addition, the Corporation MOPS? publishs CSR-related information in the annual report. 5. If the Corporation has established own code of CSR practice with reference to the “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies,” specify its operation and non-compliance with the best practice principles. In 2014 the Corporation established own Code of CSR Practice with reference to the “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies.” At present, the Corporation has completed our own internal control system. Therefore, the Corporation has operated and implemented relevant regulations with reference to the spirit of the “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies.” 6. Other material information enabling a better understanding of CSR implementation: At the end of 2014, the Corporation published and disclosed the CSR Report 2013 on the corporate website and the MOPS. 7. If the organizational CSR report has passed the verification standards of relevant certification authorities, please specify: None.

59 Corporate Governance

(VII) Taiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory Commission: Implementation Non-compliance with Ethical Corporate Assessment Item Management BPP for Yes No Performance Summary TWSE/GTSM Listed Companies and Reasons 1. Policies and plans for fair and ethical business operations (1) Does the Corporation specify its policies  (1) The Corporation sets “harmony, innovation, (1) Comply with the and practices to maintain fair and ethical excellence” as management philosophy and Ethical Corporate business operations in relevant “integrity, care, and responsibility” as the Management BPP. regulations and external documents? Do employee’s code of conduct, apart from the board and managers actively ensuring “philosophy” is implemented in implement the commitments made in management, it is specified in the employee relevant policies? handbook (2) Does the Corporation draw up and  (2) In the organizational “Work Rules”, the (2) Comply with the pratice programs to prevent unethical Corporation specifies that no employee shall Ethical Corporate conduct and set out in each program and accept bribes or other improper benefits for Management BPP. implement SOPs, conduct guidelines, an official act and punishes employees based penalties for violation, and a grievance on the severity of indecent act. system? (3) Does the Corporation take precautionary  (3) In the “Service Ethics” and “Punishment, (3) Comply with the action to prevent business activities Reward, Promotion, Transfer, and Ethical Corporate specified in paragraph 2 of Article 7 of Performance Evaluation” sections of the Management BPP. the “Ethical Corporate Management Best “Work Rules”, the Corporation specifies what Practice Principles for TWSE/GTSM employee behaviors are acceptable and how Listed Companies” and other business to respond to the indecent act of others. The activities within its scope of business “Work Rules” are explained to employees with higher behavioral risk? upon hiring. 2. Implementation of fair and ethical business operations (1) Does the Corporation assess if trading  (1) Aside from setting “integrity, care, and (1) Comply with the counterparts involved in any unfair and responsibility” as the employee’s code of Ethical Corporate unethical business operations and include conduct and specifying relevant service Management BPP. the fair and ethical business operations ethics in the “Work Rules”, the Corporation clause in the transaction agreement values the integrity of trading counterparties signed with them? and thus specifies in contracts the need to comply with relevant regulations and fair and ethical business operations. (2) Has the Corporation established a  (2) The Corporation has established the (2) Comply with the dedicated (concurrent) unit directly AuditDivision to regularly audit if each Ethical Corporate under the board to promote fair and internal cycle violates fair and ethical Management BPP. ethical business operations and report the business operations and participate in board effectiveness of implementation directly meetings. to the board?

(3) Does the Corporation establish and  (3) In the “Work Rules” the Corporation (3) Comply with the implement policies to prevent conflicts specifies that employees may be dismissed Ethical Corporate of interest and provide appropriate and face relevant legal action if they engage Management BPP. channels for reporting such conflicts? in work of a similar nature externally with conflicts of interest with the Corporation that causes serious damage to the Corporation without prior permission from the Corporation. Also, the annual work target of employees is set with reference to the (Continued) 60 Corporate Governance

Implementation Non-compliance with Ethical Corporate Assessment Item Management BPP for Yes No Performance Summary TWSE/GTSM Listed Companies and Reasons organizational or departmental annual work policies, and the goal of employees and the organization should be consistent and conflicts of interest should be prevented through thorough communication. (4) Has the Corporation established effective  (4) The Audit Division audits internal systems (4) Comply with the accounting and internal control systems and external activities regularly and report Ethical Corporate to implement fair and ethical business the results to the board. Management BPP. operations? Does the Corporation have these system audited regularly by the internal audit unit or a CPA? (5) Does the Corporation arrange regular  (5) Apart from arranging training on fair and (5) Comply with the internal/external training/ education for ethical operations for new employees, the Ethical Corporate fair and ethical business operations? Corporation has established the “Work Management BPP. Rules” and “NC-0403 Reward and Punishment Regulations” and posted them on the intranet for the reference of all employees to ensure employees understand the importance of fair and ethical operations and relevant reward and punishment regulations. In addition, the Corporation reviews relevant regulations at planned intervals and publishes them after each time of revision for employees to understand. 3. Operation of the whistleblower system  (1) Does the Corporation establish a practical whistleblower and reward system and channels to facilitate (1) ~ (3) Employees can directly report to the reporting of unfair and unethical General Administration Division or to the business operations and assign supervisors through the “Employee Grievance appropriate personnel to handle a Box” any violation of fair and ethnical operations (1) ~ (3) Comply with the reported case? and no part of investigations will be disclosed. In Ethical Corporate (2) Does the Corporation establish a SOP  addition, employees can make anonymous reports Management BPP. and a non-disclosure mechanism of and the case responsible unit will not disclose any relevant investigations? information of informers (whistleblowers) to (3) Does the Corporation establish and  ensure absolute protection. implement an informer protection policy to ensure no informer will receive indecent treatment? 4. Reinforcement of information disclosure (1) Does the Corporation disclose the  (1) The Corporation discloses the content of own (1) Comply with the content and effectiveness of Code of Business Ethics on the corporate Ethical Corporate implementation of the Code of Business website and MOPS and the status of Management BPP. Ethics on the corporate website and operation on the corporate website at planned MOPS? intervals, including the status of fair and ethnical operations where necessary.

(Continued) 61 Corporate Governance

Implementation Non-compliance with Ethical Corporate Assessment Item Management BPP for Yes No Performance Summary TWSE/GTSM Listed Companies and Reasons 5. If The Corporation has established own code of business ethics with reference to the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies,” specify its operation and non-compliance with the best practice principles. In 2014, the Corporation established own Code of Business Ethics with reference to the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies.” At present, the Corporation also has a completly internal control system. Therefore, the Corporation has operated and implemented relevant regulations with reference to the spirit of the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies.” 6. Other material information enabling a better understanding of fair and ethical business operations (such as review and revise the code of business ethics): None.

(VIII) Corporate Governance Guidelines and Regulations: Please refer the “Corporate Governance” of Market Observation Post System and the corporate website (http://www.china-motor.com.tw).

(IX) Other Important Information Regarding Corporate Governance: Please refer the “Corporate Governance” of Market Observation Post System and the corporate website (http://www.china-motor.com.tw).

62 Corporate Governance

(X) Internal Control System Execution Status 1. Statement of Internl Control System China Motor Corporation Statement of Internl Control System Date: March 23, 2015 Based on the findings of a self-assessment, the Corporation states the following with regard to its internal control system during the year of 2014: 1. The Corporation’s Board of Directors and Management are responsible for establishing, implementing,and maintaining an adequate internal control system. Our internal control is a process designed to provide reasonable assurance over the effectiveness and efficiency of our operation (including profitability, performance, and safeguarding of assets), reliabilitiy of our financial reporting, and compliance with applicable laws and regulations. 2. An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can provide only reasonable assurance of accomplishing its stated objectives. Moreover, the effectiveness of an internal control system may be subject to changes due to extenuating circumstances beyond our control. Nevertheless, ourt internal control system contains self-monitoring mechanism, and the Corporation takes immediate actions in response to any identified deficicies. 3. The Corporation evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control System by Public Companies (herein below, the “Regulations”). The criteria adopted by the Regulations identify five key components of managerial internal control: (1) control environment, (2) risk assessment, (3) control activities, (4) information and communication, and (5) monitoring. Each component further covers certain items. Please refer to “Regulations” for preceding items. 4. The Corporation has evaluated the design and operating effectiveness of its internal control system according to the aforesaid Regulations. 5. Based on the findings of such evaluation, the Corporation believes that, on December 31, 2014, we have maintained, in all material respects, an effective internal control system (that includes the supervision and management of our subsidiaries), to provide reasonable assurance over our operational effectiveness and efficiency, reliability of financial reporting, and compliance with applicable laws and regulations. 6. This statement will be an integral part of the Corporation’s Annual Report for the year 2013 and Prospectus, and will be made public. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Article 20, 32, 171, and 174 of the Securities and Exchange Law. 7. This statement has been passed by the Board of Directors in their meeting held on March 23, 2014, with none of 9 attending directors expressing dissenting opinions, and the remainder all affirming the content of this statement.

China Motor Corporation Chairperson: Kenneth K.T. YEN President：Hsin-Tai Liu

63 Corporate Governance

2. The independent auditor’s report shall be disclosed if the the auditor is designated to review internal control system: None (XI) Punishment and Improvement Status of Violation Internal Control System during the 2014 Calendar Year and up to April 30, 2015: None (XII) Major Resolutions at Shareholders Meetings and Board of Directors Meetings during the 2014 Calendar Year and up to April 30, 2015 (Note) Meeting Date Major Resolutions Implementation 1. Passed the Corporation’s 2013 Annual Report. Published on the 2. Passed the Corporation’s 2013 Earning Distribution. MOPS and 3. Passed the date and place of the annual meeting of shareholders implemented with 2014. reference to relevant 4. Passed the relief of non-competition restrictions for administrators. regulations and 5. Passed the partial revision of the “Articles of Incorporation”. reported items 1, 2, 5, Board 2014/3/24, 6. Passed part of the Corporation’s “Procedure for Board of Directors and 7 to the 2014 Meeting Meetings”. annual meeting of 7. Passed the partial revision of the Corporation’s “Procedures of shareholders for Acquisition or Disposal of Assets” and “Procedures of Engaging in acknowledgement Derivatives Trading”. and resolution. 8. Passed the issue of the “Internal Control System Statement” for 2013. 1. Reported the consolidated financial statement of Q1 2014. Published on the 2. Proposed a capital increase project under €13.47 million to Fujian MOPS and Board Benz Automotive Co., Ltd. implemented with 2014/5/12 Meeting 3. Passed the partial revision of the Corporation’s “Procedures for reference to relevant Acquisition or Disposal of Assets” and “Procedures for Derivatives regulations. Trading”. 1. Passed the Corporation’s 2013 Annual Report. Implemented 2. Passed the Corporation’s 2013 Earning Distribution. according to the 3. Passed the partial revision of the “Articles of Incorporation”. resolutions. Shareholders’ 2014/6/24 4. Passed the partial revision of the “Procedures of Acquisition or Meeting Disposal of Assets”. 5. Passed the partial revision of the “Procedures of Engaging in Derivatives Trading”. 1. Implemented the CPA independence assessment of 2014. Published on the 2. Established the Corporation’s “Code of CSR Practice”. MOPS and Board 2014/7/7 3. Established the Corporation’s “Code of Business Ethics”. implemented with Meeting 4. Established the Corporation’s “Code of Corporate Governance reference to relevant Practice”. regulations. 1. Reported the consolidated financial statement of Q2 2014. Published on the 2. Changed the CPA of financial statements. MOPS and Board 2014/8/4 3. Revised the Corporation’s “Share Registration Unit Internal Control implemented with Meeting System” and “Internal Audit Implementation Rules for Share reference to relevant Registration Unit Internal Audit System”. regulations. Published on the Board MOPS with reference 2014/11/10 Reported the consolidated financial statement of Q3 2014. Meeting to relevant regulations. 1. Established the annual goal for 2015. Published on the 2. Established the annual audit program for 2015. MOPS and 3. Revised the Corporation’s “Personal Information Protection Rules” implemented with and “Personal Information Protection Implementation Rules”. reference to relevant Board 2014/12/22 4. Revised the Corporation’s “The Operational Procedures for regulations. Meeting Supervision of Subsidiaries”. 5. Revised the “Internal Audit Implementation Rules” and “Internal Audit Self-Assessment Process”.

64 Corporate Governance

Meeting Date Major Resolutions Implementation 6. Official rearrangement of general managers and higher-level officers. 7. Passed the relief of non-competition restrictions for administrators. 1. Passed the Corporation’s 2014 Annual Report. Published on the 2. Passed the Corporation’s 2014 Earning Distribution. MOPS and 3. Partial revision of the “Articles of Incorporation” and “Regulations implemented with Governing Election of Directs and Supervisors”. reference to relevant 4. Date and place of the annual meeting of shareholders 2015. regulations and

Board 5. Official rearrangement of general managers and higher-level reported items 1, 2, 2015/3/23

Meeting officers. and 3 to the 2015 6. Issue of the “Internal Control System Statement” for 2014. annual meeting of 7. Partial revision of the Corporation’s “Code of Corporate Governance shareholders for Practice”. acknowledgement 8. Partial revision of the Corporation’s “Code of CSR Practice”. and resolution. 9. Partial revision of the Corporation’s “Code of Business Ethics”. Note: complementary for BOD Meeting May 11, 2015

Meeting Date Major Resolutions Implementation 1. Resolve the record date for common share dividend of 2015. Published on the 2. Plan to buy the Directors and Officers Liability Insurance. MOPS and Board 2015/5/11 3. President rearrangement. implemented with Meeting 4. Vice Chairman election. reference to relevant regulations.

(XIII) Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors during the 2014 Calendar Year and up to April 30, 2015: None

(XIV) Resignation or Dismissal of Chairperson, President, and General Manager of Accounting, Finance, Internal Audit and R&D during the 2014 Calendar Year and up to April 30, 2015: None (Note) Note: The Board of Direstors has appointed Mr. Hsin-Tai Liu as Vice Chairman of CMC and Mr. Chao-Wen Chen as President on the meeting of May 11, 2015. The effective date will start from June 1, 2015. Title Name Inaugural Date Conge Date Reason for Change In order to establish the tradition and President Hsin-Tai Liu Jan 1, 2012 Jun 1, 2015 management system of the Corporation.

65 Corporate Governance

IV. Information Regarding Audit Fees Audit Fees Accounting Firm Name of CPA Audit Period Note Denny Kuo 2014.1.1~2014.6.30 Lilac Shue Deloitte & Touche Internal Rotation Eddie Shao 2014.7.1~2014.12.31 Lilac Shue

Item Audit Fee Non-Audit Fee Total Range of the Amount 1 Belwo 2,000 thousands  2,000 thousands（included）～ 2 4,000 thousands 4,000 thousands（included）～ 3 6,000 thousands 6,000 thousands（included）～ 4   8,000 thousands 8,000 thousands（included）～ 5 10,000 thousands 10,000 thousands（included） 6 and above

1. When the non-audit fees paid to CPA, the firm of CPA and its affiliates are more than one fourth of the audit fee, disclose the amounts of audit and non-audit fee and the content of non-audit services: Unit：Thousand Non-Audit Fee Accounting Audit Name of CPA System Company Human Other Audit Period Note Firm Fee Subtoatl Design Registration Resource （note） Denny Kuo 2014.1.1~ Lilac Shue 2014.6.30 Deloitte & TP Touche 7,050 - 74 - 250 324 Eddie Shao 2014.7.1~ Audit Fee Lilac Shue 2014.12.31

Note: If the “other” of non-audit fee reaches 25% of non-audit fee, specify its service content in the note. 2. Replace the accounting firm and the audit fee paid in the year of replacement is less than the audit fee in previous year, disclose the amount of audit fee before and after the replacement and its reasons: N.A. 3. For the audit fee is reduced more than 15 percent as comparing to previous year, disclose the amount reduced, percentage and reason: N.A.

66 Corporate Governance

V. Information Regarding Replacement or Rotation of Accountants (I) Regarding the former CPA Date of Replacement July 2014 Due to relevant regulatory requirements on rotation, Deloitte & Reason and Description of Replacment Touche has rotated audit partners in 2014, the CPA Eddie Shao succeeded the duty of orignal CPA Denny Kuo in July 2014. Related Party CPA Appointer Status Reason for termination or rejection of Voluntary termination of (NA) (NA) appointment appointment Reject the (continued) (NA) (NA) appointment Opinion and reason for any report Partial long-term investment under equity method is otherthan unqualified opinion in last recognized based on the audit report of other CPA and two years therefore the modified unqualified opinions are issued. Accounting principle or - practice Disclosure of financial Yes - statement Any disagreement with the issuer - Scope or steps of audit - Other No  Note - Other disclosure (items to be disclosed in accordance with article 10.5.(1)(iv) of Regulations Governing None Information to be Published in Annual Reports of Public Companies) (II) Regarding the successive CPA Account Firm Deloitte & Touche Name of CPA CPA Eddie Shao Date of Appointment July 2014 The items and results of possible opinion on the financial report aiming at accounting methods or NA accounting principles applied to specific transactions as enquiried before the appointment The written opinions of successive CPA which are None different from the former CPA (III) The former CPA written response to the matters referred to in article 10.5.(1) and article 10. 5.(2) (ii) of Regulations Governing Information to be Published in Annual Reports of Public Companies: N.A.

VI. Chairperson, Prisident and General Manager of Financial Affairs or Accounting Working in CMC’s Independent Audit Firm or its affiliates during 2014: None

67 Corporate Governance

VII. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders (I) Share transfer and change in pledged shares of directors, supervisors, managers and shareholders holding more than 10% of shares Unit: share 2014 As of April 30, 2015 Title Name Change in Increase (decrease) Change in Increase (decrease) Shareholding on pledged shares Shareholding on pledged shares Director (Note1) Tai-Yuen Textile Co., Ltd. - - - - Director Yulon Motor Co., Ltd. - - - - Director (Note1) Mitsubishi Motors Corporation - - - - Director Mitsubishi Corporation - - - - Supervisor Le Wen Enterprise Co., Ltd. - - - - Chairperson Kenneth K. T. Yen - - - - Vice Chairman (Note2) Hsin-Tai Liu - - - - Director Katsuro Asaoka - - - - Director Hsin-I Lini - - - - Director Li-Lien Chen - - - - Director Kuo-Rong Chen - - - - Director Hiroshi Miyazeki - - - - Independent Director Tsung-Jen Huang - - - - Independent Director Robert Y.L., Mao - - - - Supervisor Wei-Kung Chi - - - - Supervisor Tai-Ming Chen - - - - Prsident (Note2) Chao-Wen Chen -- - - Spcial Assistant of Chairperson Ching-Kuo Sung -- - - (Executive Vice President Executive Vice Prsident Chung-Chou Huang - - - - Executive Vice Prsident Chi-Se Tso -- - - Executive Vice Prsident Te-Jun Lo -- - - Executive Vice Prsident Ching-Ya Chen - - - - Special Assistant Ming-Lin Chang -- - - Vice President Shih-Ho Chang -- - - Vice President Kuo-Chi Wang - - - - Vice President Chih-Hsiung Wu -- - - Vice President Hsin-Cheng Tseng -- - - Vice President Ya-Cheng Hsiao - - - - Note1: shareholders holding over 10% of issued shares. Note2: The Board of Direstors has appointed Mr. Hsin-Tai Liu as Vice Chairman of CMC and Mr. Chao-Wen Chen as President on the meeting of May 11, 2015. The effective date will start from June 1, 2015. (Continued on the next page)

68 Corporate Governance

(Continued from the previous page) 2014 As of April 30, 2015 Title Name Change in Increase (decrease) Change in Increase (decrease) Shareholding on pledged shares Shareholding on pledged shares Vice President Allan Yang -- - - Vice President Te-Chao Huang - - - - Vice President Ching-Wu Chien - - - - GM of Product Shing JuChen - - - - Engineering Division GM of Procurement Chiung-chih Tseng - - - - Division Plant GM of Hsin Chu Chun-Hung Hu - - - - Plant GM of Management Information System Cheng-Chang Huang - - - - Division GM of Service Division Li-Wei Wang -- - - GM of Parts Hung-Ching Yang - - - - Development Division Plant GM of Yang Mei Fu-Ping Kuo - - - - Plant GM of Electrical and Tsung-Yih Tsai - - - - Electronic Division GM of Finance & Mei-Chu Tai - - - - Accounting Division GM of Production Ching-Chi Chen - - - - Control Division GM of Corporate Ling-Chun Lin - - - - Planning Division GM of Sales Division Kuo-Hsiung Peng -- - - GM of Production Tung-Tai Hsiung -- - - Engineering Division GM of Oversea Business Hsuan-Kuo Wang -- - - Division GM of Product Program Ching-Yun Liao -- - - Division GM of Quality Control Yueh-Feng Wu -- - - Division GM of General Yu-Chun Su -- - - Administration Division GM of Audit Division Fu-Tang Hou - - - - (2) When the opponent party of shares transfer or pledge is a related party, disclose the name of the opponent party, the relation with the Corporation, directors, supervisors and shareholders holding over 10% of shares and the shares acquired or pledged: None.

69 Corporate Governance

VIII. Information Disclosing the Relationship between any of the Top Ten Shareholders Spouse & Minor Shares Held Names and Relationship of Any of the Top Shareholding Children Through Other Ten Shareholders being A Related Party or Name Shareholding Parties spouse or relatives within 2nd degree kinship Note Number of Number of Number of % % % Titel (or Name) Relation Shares Shares Shares Yulon Motor Co., Ltd. Same chairperson - Tai-Yuen Textile Co., Diamond Hosiery & 348,589,538 25.19 - - - - Same chairperson - Ltd. Thread Co., Ltd. Kenneth K. T. Yen Chairperson - Representative： ------Hsin-I Lin Representative： ------Kuo-Rong Chen Representative： 14,560 ------Hsin-Tai Liu Mitsubishi Motors Investee under 193,768,273 14.00 - - - - Mitsubishi Corporation - Corporation equity method Representative： ------Katsuro Asaoka Tai-Yuen Textile Co., Ltd Same chairperson - Diamond Hosiery & Yulon Motor Co., Ltd. 111,480,444 8.05 - - - - Same chairperson - Thread Co., Ltd. Kenneth K. T. Yen Chairperson - Representative： 16,621,212 1.20 - - - - Li-Lien Chen Spouse - Kenneth K. T. Yen Representative： - - 16,621,2121.20 - - Kenneth K. T. Yen Spouse - Li-Lien Chen Tai-Yuen Textile Co., Same chairperson - Diamond Hosiery & Ltd. 93,596,630 6.76 - - - - Thread Co., Ltd. Yulon Motor Co., Ltd. Same chairperson - Kenneth K. T. Yen Chairperson - Mitsubishi Motors Invester under Mitsubishi Corporation 66,404,796 4.80 - - - - - Corporation equity method Representative： ------Hiroshi Miyazeki Cathay Life Insurance 52,783,000 3.81 ------Co., Ltd. Nan Shan Life Insurance Company, 23,866,000 1.72 ------Ltd. Tai-Yuen Textile Co., Chairperson of - Ltd. said company Chairperson of Kenneth K. T. Yen 16,621,212 1.20 - - - - Yulon Motor Co., Ltd. - said company Diamond Hosiery & Chairperson of - Thread Co., Ltd. said company Vanguard Emerging Markets Stock Index 13,122,000 0.95 ------Fund New Labor Pension 11,632,000 0.84 ------Fund

70 Corporate Governance

IX. Long-Term Investment Ownership April 30, 2015 Investments of Directors, Supervisors, Managers and Investment of the Businesses with Shares Syndicated Invetments Corporation Investee Directly or Indirectly Held by the Corporation Shareholding Shareholding Shareholding Shares Shares Shares % % % Yulon Motor Co., Ltd. 236,900,689 15.06 478,796,215 30.44 715,696,904 45.50 Kian Shen Corporation 30,378,649 43.87 66,977 0.10 30,445,626 43.97 Hwa Wei Holdings Co., Ltd. 40,000 40.00 60,000 60.00 100,000 100.00 China Motor Investment Co., 40,000 100.00 - - 40,000 100.00 Tld. Fortune Motors Co., Ltd 132,095,729 41.92 31,063,658 9.86 163,159,387 51.78 Sino Diamond Motor 325,786,161 100.00 - - 325,786,161 100.00 Corporation Alliance Investment & 183,000,000 100.00 - - 183,000,000 100.00 Management Co., Ltd. China Motor Corporation 133,503,200 100.00 - - 133,503,200 100.00 Investment Co., Ltd. ROC Spicer Ltd. 1,422,360 29.00 1,004,584 20.48 2,426,944 49.48 Tokio Marine Newa Insurance 61,510,524 20.57 52,009,524 17.39 113,520,048 37.96 Co., Ltd. Daimler Hong Kong Ltd. 40,887,000 32.45 - - 40,887,000 32.45 Shung Ye Motor Enterprise 25,189,500 39.98 10,500 0.02 25,200,000 40.00 Gatetech Technology Inc. 24,725,155 56.53 7,151,539 16.35 31,876,694 72.88 COC Tooling & Stamping Co., 28,147,543 49.76 28,422,836 50.23 56,570,379 99.99 Ltd. Tai Yuen Venture Capital 52,470,000 49.50 53,487,600 50.46 105,957,600 99.96 Investment Corp. China Engine Corporation 32,000,000 18.95 88,000,000 52.10 120,000,000 71.05 Hua-Chuang Automobile Information Technical Center 47,200,000 9.44 341,600,000 68.32 388,800,000 77.76 Co., Ltd. Uni Auto Parts Manufacture 11,847,397 15.00 19,754,105 25.00 31,601,502 40.00 Co., Ltd. Fu Yu Venture Investment Co., 2,222,223 14.81 - - 2,222,223 14.81 Ltd. Sinjang Co., Ltd 8,567,750 20.01 8,567,950 20.01 17,135,700 40.02 Huang Chung Motor Co., Ltd. 8,790,000 100.00 - - 8,790,000 100.00 Shin Gan Co., Ltd. 7,074,057 24.67 11,636,355 40.59 18,710,412 65.26 Yulon IT Solutions Inc. 8,331,999 43.85 10,668,001 56.15 19,000,000 100.00 Hua Han Corporation 521,161 48.99 542,429 51.00 1,063,590 99.99 Note: The investees are investment of the Corporation under equity method.

71 Capital Overview

I. Capital and Shares (I) Sources of Capital Unit: thousand shares; NTD thousand Authorized Capital Paid-in Capital Remark Issue Capital Month/Year Price Source of Increase by Shares Amount Shares Amount Other (NTD) capital assets Other than Cash Capital 2007/09/14 Jing 09/2007 10 1,800,000 18,000,000 1,391,301 13,913,008 increment - Shou Shang No. by earning 9601227310

Cancellation 2011/01/17 Jing 01/2011 10 1,800,000 18,000,000 1,384,051 13,840,508 of treasury - Shou Shang No. stocks 10001001380

(II) Type of stock April 30, 2015 Authorized Capital Type of Stock Issued Shares (share, note) Unissued Shares (share) Total

Inscribed common stock 1,384,050,854 415,949,146 1,800,000,000

Note: TWSE listed stock.

(III) Status of Shareholders April 30, 2015 Type of Shareholders Domestic Foreign Government Financial Other Judicial Natural Instituions & Total Agencies Institutions Person Qty Persons Natural Persons Number of 4 36 149 44,186 353 44,728 Shareholders Shareholding 34,452,000 94,121,077 607,117,491 192,566,082 455,794,204 1,384,050,854 (share) Shareholding 2.49 6.80 43.87 13.91 32.93 100.00 (％)

72 Capital Overview

(IV) Shareholding Distribution Status April 30, 2015 Number of Shareholder Ownership (share) Onwership (share) Ownership (%) Shareholders (person) 1～ 999 18,607 3,303,606 0.24 1,000～ 5,000 18,907 40,333,324 2.91 5,001～ 10,000 3,681 27,488,924 1.99 10,001～ 15,000 1,217 14,613,949 1.06 15,001～ 20,000 646 11,818,896 0.85 20,001～ 30,000 585 14,464,280 1.05 30,001～ 40,000 238 8,268,517 0.60 40,001～ 50,000 189 8,728,885 0.63 50,001～ 100,000 279 19,809,848 1.43 100,001～ 200,000 157 21,761,958 1.57 200,001～ 400,000 78 21,380,772 1.55 400,001～ 600,000 37 18,052,502 1.30 600,001～ 800,000 16 10,999,839 0.79 800,001～ 1,000,000 18 15,800,337 1.14 Over 1,000,000 73 1,147,225,217 82.89 Total 44,728 1,384,050,854 100.00

(V) List of Major Shareholders April 30, 2015 Share Total Shares Owned Ownership (%) Shareholders (share) 1. Tai-Yuen Textile Co., Ltd. 348,589,538 25.19 2. Mitsubishi Motors Corporation 193,768,273 14.00 3. Yulon Motor Co., Ltd. 111,480,444 8.05 4. Diamond Hosiery & Thread Co., Ltd 93,596,630 6.76 5. Mitsubishi Corporation 66,404,796 4.80 6. Cathay Life Insurance Co., Ltd. 52,783,000 3.81 7. Nan Shan Life Insurance Company., Ltd. 23,866,000 1.72 8. Kenneth K. T. Yen 16,621,212 1.20 9. Vanguard Emerging Markets Stock Index Fund 13,122,000 0.95 10. New Labor Pension Fund 11,632,000 0.84

73 Capital Overview

(VI) Market Price, Net Worth, Earnings, and Dividends per Share Year 2013 2014 As of April 30, 2015 Item Highest 30.00 31.35 27.90 Market Price Per Lowest 23.80 26.00 25.40 Share (NTD) Average 26.99 28.07 26.86 Net Worth Per Before distribution 33.76 35.00 35.63(Note 3) Share (NTD) After distribution 32.66 35.00(Note 1) - Weighted average shares 1,384,051 1,384,051 1,384,051 Earning Per (thousand shares) Share (NTD) Earning per share 1.86 1.88 0.73(Note 3) Cash dividend (note 3) 0.90 1.10 - Stock Earning - - - Dividend Per dividend Capital Surplus - - - Share (NTD) Accumulated undistributed - - - dividend Price/earning ratio 14.51 14.93 - Return on Price/dividend ratio 29.99 25.52 - Investment Cash dividend yield rate 3.33% 3.92% - Note: 1. The 2015 shareholders’ meeting has not yet been convened, and the earning distribution is not yet confirmed. Therefore, the EPS amounts before and after distribution are the same. 2. The earning distribution in previous year. 3. Net worth per share and earning per share of 2015 Q1 have been reviewed by CPA.

(VII) Corporate Dividend Policy and Implementation Status 1. Dividend policy  The dividend policy in the current version of the Articles of Incorporation is as follows:

If there is a profit after the annual closing of books, the Corporation shall, after having provided for taxes and covered the losses of previous years by law, appropriate ten percent (10%) of the net profit after tax to the legal reserve. If there is still a balance, the Corporation shall appropriate special reserve with reference to the regulations of competent authorities and allocate it as follows: (1) 0.5% as remunerations for directors and supervisors, except for independent directors who are not allowed to receive the said remuneration. (2) 0.1-5% as profit sharing for employees, either in cash or in stock, profit sharing for employees in stock should also be distributed to employees of subsidiaries complying with certain requirements established by the board.

74 Capital Overview

(3) Balances should be combined with the accumulative unallocated profits in previous years and the board shall submit an allocation plan to the shareholders’ meeting for approval. The Corporation is operated in a mature and stable industry. Dividends are distributed with reference to the organizational profitability, capital demand for future business plans, and industry environment change. In addition, the dividend distribution plan is made with reference to shareholder benefit and long-term organizational financial planning. Dividends are distributed in cash or stock. The amount of cash distributed each year shall not be less than 20% of the total amount of dividends issued.  Future dividend policy

Over the past three years, the amount of cash dividend per share shared over 50% of the EPS. In the future, the Corporation will maintain at this dividend policy and prioritize cash dividends.

2. Proposed dividend allocation plan at the present Shareholders Meeting:

The profit allocation plan of 2014 was established by the board: cash dividend at NT$1.15 per share. The profit for allocation was appropriated from the unallocated profit of 2014. If the Corporation decided to re-purchase company shares or assign treasury stock to employees and such decision affects the number of shares circulating on the market on the dividend distribution base date, the shareholders’ meeting will be requested to authorize the board to adjust the dividend ratio.

(VIII) The Impact of Stock Dividend Issuance on Business Performance and EPS: N.A.

(IX) Employee Bonus and Directors' and Supervisors' Remuneration 1. The percentage or scope of employee profit shareing and compensations to directors and supervisors specified in articles of incorporation

75 Capital Overview

Please refer to (VII) Corporate Dividend Policy and Implementation Status. 2. The accounting for the discrepancy between actual amount distributed and the estimated amount arised from differences of the basis of estimate of employee profit sharing and compensations to directors and supervisors and the basis of calculating shares of stock dividend The Corporation has made as most appropriate estimate and recognized the expenses pursuant to the percentage of employee profit shareing and compensations to directors and supervisors as set forth in the articles of incorporation. If there is significant change of the distribution amount resolved by the Board afterward, the change shall be recognized as expenses in current year (the year of recognizing expenses of employee profit sharehing). If the actual amount of distribution changes upon the resolution of shareholders’ meeting in next year, then the change will be carried to the profit and loss of next year in principle of change in accounting estimate. 3. Employee profit sharing information approved by BOD (1) The cash and stock bonus to employees and compensations to directors and supervisors. Where there is discrepancy between the expenses recorded and the estimate, disclose the amount, reason and handling of difference The 2014 proposal concerning the earning distribution had been approved by the11th meeting of 18th term of BOD on March 23, 2015. It is proposed to distribute cash bonus $12,876 thousands to employees and $11,512 thousands as compensation to directors and supervisors, which are identical to the estimate in the year of recording expenses. In case the actual distribution amount is changed upon the resolution of shareholders’ meeting, it will be deemed as change of accounting estimate and will be adjusted in the year of resolution made by shareholders’s meeting. (2) The percentage of proposed stock bonus to employees over the net income after tax and the total employee profit sharing There was no stock bonus distributed to employees in 2014 and therefore this is not applicable

76 Capital Overview

(3) The earning per share after taking the employee bonus and compensation to directors and supervisors into consideration The computed earning per share after taking the employee profit shareing and compensation to directors and supervisors into consideration is NTD 1.88. 4. The actual distribution of employee profit shareing and compensation to directors and supervisors (including the number of shares, amount and share price), the amount, reason and handling of difference from the recognized employee profit sharing and compensations to directors and supervisors. The 2013 employee profit sharing and compensation to directors and supervisors had been approved by 5th meeting of 18th term of BOD on March 24, 2014. The proposed cash bonus to employees was 16,680 thousands and 11,393 as compensation to directors and supervisors, which were identical to the actual amount distributed after the shareholders’ meeting.

(X) Buyback of Treasury Stock: None

II. Issurance of Corporate Bonds: None

III. Issuance of Preferred Stock: None

IV. Issuance of Depository Receipts: None

V. Status of Employee Stock Option Plan and Employee Restricted Stock: None

VI. Status of New Share Issuance in Connection with Mergers and Acquisitions: None

VII. Financing Plans and Implementation: N.A.

77 Operational Highlights

I. Business Activities (I) Business Scope 1. The Main Content of the Corporation’s Business: (1) CA01090 Aluminum Casting Manufacturing (2) CB01010 Machinery and Equipment Manufacturing (3) CC01010 Electric Power Supply, Electric Transmission and Power Distribution Machinery Manufacturing (4) CD01030 Automobiles and Parts Manufacturing (5) CD01040 Motor Vehicles and Parts Manufacturing (6) CD01050 Bicycles and Parts Manufacturing (7) CC01090 Batteries Manufacturing (8) CD01990 Other Transport Equipment and Parts Manufacturing (9) CQ01010 Die Manufacturing (10) E603050 Cybernation Equipments Construction (11) E603100 Electric Welding Construction (12) E604010 Mechanical Installation Construction (13) E605010 Computing Equipments Installation Construction (14) F106030 Wholesale of Mold (15) F112040 Wholesale of Petrochemical Fuel Products (16) F113010 Wholesale of Machinery (17) F113110 Wholesale of Batteries (18) F113020 Wholesale of Household Appliance (19) F113070 Wholesale of Telecom Instruments (20) F114010 Wholesale of Automobiles (21) F114020 Wholesale of Motorcycles (22) F114030 Wholesale of Motor Vehicle Parts and Supplies (23) F114040 Wholesale of Bicycle Parts and Supplies (24) F114050 Wholesale of Tire and Tubes (25) F119010 Wholesale of Electronic Materials (26) F206030 Retail Sale of Die (27) F212050 Retail Sale of Petroleum Products

78 Operational Highlights

(28) F213010 Retail Sale of Household Appliance (29) F213060 Retail Sale of Telecom Instruments (30) F213110 Retail Sale of Batteries (31) F214010 Retail Sale of Automobiles (32) F214020 Retail Sale of Motorcycles (33) F214030 Retail Sale of Motor Vehicle Parts and Supplies (34) F214040 Retail Sale of Bicycles and Parts (35) F214050 Retail Sale of Tires and Tubes (36) F219010 Retail Sale of Electronic Materials (37) F401010 International Trade (38) F401021 Restrained Telecom Radio Frequency Equipments and Materials Import (39) F501990 Other Eating and Drinking Places Not Elsewhere Classified (40) H703100 Real Estate Rental and Leasing (41) I102010 Investment Consultancy (42) I103060 Management Consulting Services (43) I301010 Software Design Services (44) I401010 General Advertising Services (45) I501010 Product Designing (46) IE01010 Telecommunications Number Agencies (47) IZ01010 Copying Services (48) IZ02010 Typewriting Services (49) IZ04010 Translation Services (50) IZ12010 Manpower Services (51) J901020 Hotels and Motels (52) J903020 Mountain Climbing Guiding Services (53) JA01010 Automotive Repair and Maintenance (54) JA01990 Other Automobile Services (55) JA02010 Electric Appliance and Audiovisual Electric Products Repair Shops (56) JA02020 Motorcycle Repair Shops (57) JA02030 Bicycle Repair Shops (58) JB01010 Exhibition Services

79 Operational Highlights

(59) JE01010 Rental and Leasing Business (60) J202010 Industry Innovation and Incubation Services (61) F106010 Wholesale of Ironware (62) CC01020 Electric Wires and Cables Manufacturing (63) CC01030 Electric Appliance and Audiovisual Electric Products Manufacturing (64) CC01080 Electronic Parts and Components Manufacturing (65) IZ99990 Other Industry and Commerce Services Not Elsewhere Classified (66) ZZ99999 Other than licensed businesses, to manage and operate businesses not prohibited or restricted by law 2. Revenue distribution Manufacture and sales of vehicles and related components accounted for 97% of revenue 3. Current Products of Company  Commercial vehicles: FUSO 3.49 ~ 17T series LEADCA 3.49T DELICA 2.4L series VERYCA 1.2L/1.3L series  Sedans: LANCER FORTIS 1.8L, LANCER iO 1.8/2.0L series COLT PLUS 1.5L series  Recreational/Business vehicles: OUTLANDER 2.4L car series ZINGER 2.4L car series

 Electric vehicles: Electric scooter series: e-moving, e-moving plus, e-moving young and e-moving Super Electric bike: e-moving Bobe

4. New products to be developed in the future The future target markets of the Corporation include Taiwan (domestic) and Asia-Pacific

80 Operational Highlights

(export). Based on this strategy, products are divided into three groups: (1) value-added innovative models (create product added value through partial modification) for the Taiwan market; (2) models from Asia-Pacific international division of labor (international division of RD labor: achieving cost-effectiveness with the complementary effect of worldwide parts); and (3) “independently developed models for China and Taiwan markets. In terms of EV, aside from the e-moving Series that has received critical acclaim, the Corporation successfully launched last October (2014) the registration-free, replaceable battery, and drawable-recharge e-bike: the e-moving Bobe lithium version. Currently, we have a complete e-bike range in the e-moving Series to fulfill the demand of different customer groups. Since the Series was launched, it has been the bestseller for five consecutive years. Besides continuously developing lighter and smaller batteries and expanding basic customers to benefit subsequent sales, the Corporation will focus on mechatronics R&D to effectively improve product quality and expand the scope of product application.

(II) Industry Overview 1. Current status and development of the industry In recent years, about 300 thousand -400 thousand cars were sold a year in Taiwan. Thanks to the economic recovery, massive JPY depreciation, and new model launch of different automakers, over 400 thousand cars were sold in Taiwan last year (2014), and 423.8 thousand cars, up by 12% from 378.5 thousand cars in 2013. According to the monitoring indicators National Development Council (NDC) announced last year, it was green light in 10 out of 12 months, suggesting a steady economic recovery. Looking to 2015, the global economy will tend to recover under the lead of the USA. As Taiwan’s export momentum increases, unemployment reduces, and industrial output increases, it is expected that domestic economic conditions in 2015 will be better off than in last year (2014). The estimated economic growth rate for 2015 by different research institutions is: DGBAS 3.78%, TIER 3.67%, and CIER 3.50%. Although the economy is expected to grow continuously this year (2015), as there are still uncertainties at domestic and abroad, the estimated sales of small cars in 2015 will be 420 thousand cars (429 thousand including heavy vehicles), which are little growth to that of

81 Operational Highlights

414.3 thousand cars (423.8 thousand including heavy vehicles) in 2014.

2. Interrelations among up-, mid-, and down-stream industries The auto industry is a technology- and capital-intensive industry covering a wide range of industries, including parts and components at upstream, the whole car manufacture at midstream, and sales and after service at downstream, and each part are closely interrelated with one another. In terms of the interrelation between parts and components and whole car manufacture, as car manufacture and assembly involves complex processes and require over ten thousand parts, part and component suppliers and the auto-making plants form a satellite-center system with long-term, steady cooperation. As the internal interrelation of the auto industry is close, each auto-making plant will launch vertical integration with upstream and downstream suppliers at different levels.

3. Developmental trends of product The auto market in Taiwan is highly competitive, and different automakers launch different models to create different, new market segmentations. In addition, to cope with the global environmental protection trend and the advent of high oil price era, automakers will emphasize diesel cars, hybrid cars, and even pure electric cars. The Corporation will also assess the implementation or relevant R&D technologies and models.

4. Product competition After long-term competitions, domestic cars have shared nearly 67% of the market, suggesting that the effort in market cultivation of domestic automakers has won market recognition. In the future, the Corporation will continue to engage in R&D and production to enhance product competitiveness and thereby fulfill the constantly changing demand of consumers and market environment.

(III) Technology and R&D overview 1. R&D Expenses In 2014 and by 30 April 2015 the R&D expenses were NT$1,788,639 thousand and

82 Operational Highlights

NT$482,750 thousand respectively. In 2014 the consolidated R&D expenses were NT$2,131,257 thousand. 2. Successfully developed technology and products in 2014 and by 30 April 2015

(1) May 2014: Completed the development and began mass production and sales of the LANCER FORTIS M/C. (2) July 2014: Completed the development and began mass production and sales of the COLT PLUS service vision. (3) September 2014: Completed the development and began mass production and sales of the COLT PLUS Special edition. (4) September 2014: Completed the development and began mass production and sales of the competitive upgrade e-moving Super. (5) October 2014: Completed the development and began mass production and sales of the e-moving Bobe lithium model. (6) November 2014: Completed the development and began mass production and sales of the VERYCA complying with relevant safety standards. (7) November 2014: Completed the development and began mass production and sales of the brand new OUTLANDER. (8) December 2014: Completed the development and began mass production and sales of the DELICA complying with relevant safety standards. (9) December 2014: Completed the development and began mass production and sales of the ZINGER complying with relevant safety standards. (10) December 2014: Completed the development and began mass production and sales of the new COLT PLUS X-SPORTS. (11) December 2014: Completed the development and began mass production and sales of the LANCER FORTIS 15MY model for the Middle East.

(IV) Long- and short-term business development plan In the short-term development plan, we will continue to launch models under Mitsubishi or SEM’s brand to the Taiwan and China markets and expand the scale of export sales. For long-term development, although the oil price continuously dropped last year, it is expected to rise in the long run. To capture the new opportunities from the green energy industry,

83 Operational Highlights

therefore, the Corporation will aggressively engage in developing electrical 2-wheels production and relative power kits. Therefore, the Corporation will continue out three-fold long-term development strategy: “cultivation of the Taiwan market”, “expansion of the China market and export sales”, and “entry to the green energy business”, so as to maintain profit, sustain business growth, and pursue sustainable operations.

II. Market, production, and sales overview (I) Market analysis 1. Market condition of auto sales Our product lineup includes commercial cars, sedans, RVs and vans. Currently, Taiwan is the principal market, and expansion of export sales is under way. With the assistance of Mitsubishi Motors in recent years, we exported LANCER FORTIS to the Middle East. In 2014, a total of 43,194 sedans and commercial vehicles (3.5 t and under, including imported models), commanding 10.4% of the market. This figure included 10,932 sedans, reaching 4.7% of the market; 8,436 RVs, gaining 5.6% of the RV market; and 23,826 commercial vehicles (3.5t and under), achieving 73.7% of the commercial vehicle market. In addition, a total of 2,017 heavy vehicles over 3.5t were sold, taking 21.2% of the heavy vehicle market (these figures referred to registered vehicles). 2. Future supply and demand and growth of the auto market Under the influence of the macro environment, domestic auto sales began to drop significantly from a peak of 510 thousand cars in 2005 to only a half at 229 thousand cars in 2008. As the economy gradually recovered and with the favorable factors came from the government in recent years, auto sales rose back to over 400 thousand cars a year. In the future, it is estimated that sales (includes heavy vehicles) will maintain at 350 thousand to 420 thousand carsa year for the short run. New or revised models from different brands in 2015: MITSUBISHI ZINGER, RAV4, FORD FOCUS, HYUNDAI iX35, NISSAN TIDDA & X-TRAIL, and HONDA CR-V, etc. 3. Competition strategy in the auto market As the auto market in Taiwan is exceptionally challenging, the Corporation will aggressively cultivate the Taiwan market, expand the China market, increase international sales, and

84 Operational Highlights

develop self-owned technology as described below: Favorable factors

(1) After years of diligent cultivation, the Corporation has established an excellent brand image with great word of mouth that has won consumer identification and recognition. Moreover, we have successfully established the No. 1 brand image of RV and commercial vehicle in consumers. (2) After independently developing technology for decades, the Corporation has established solid technology R&D foundation and capability and partner recognition. Today, the Corporation is part of the international division of labor system of Mitsubishi Motors and has exported whole cars and parts to Southeast Asia, the Middle East, and Latin America. (3) The Corporation has established a well-connected sales and service network and complete horizontally integrated business system with service scope covering auto sales, property insurance, car-owner service, car rental, pre-owned car trade, and magazine to comprehensively and effectively enhance organizational competitiveness. (4) Solid sales system support: At present, Fortune Motors Co., Ltd. and Shung Ye Motor are the two distributors of our sedans, RVs, and commercial vehicles, and Yu Ye Motor is the distributor of our heavy commercial vehicles (including the 3.5t Canter). All of them are leading vehicle distributors in Taiwan.

Unfavorable factors

(1) Other automakers launch competitive (low fuel consumption and low price) new sedans, commercial vehicles, and RVs. (2) Technical source parent company Mitsubishi Motors has changed to niche models, which will influence overall technical support for our products.

Countermeasures

(1) Cultivating the Taiwan market: Mitsubishi and own brand dual-line product development, product competitiveness enhancement, shortening product R&D time. As Taiwan is the fundamental market of CMC, the Corporation will continue to cultivate the Taiwan market. Apart from aggressively striving for new model development with Mitsubishi Motors, the Corporation will develop other products and launch competitive

85 Operational Highlights

new models, so as to meet the needs for the Taiwan market and shorten product launch time. (2) Expanding China market: Integrating with international resources and strengthening competitiveness in the China market with SEM as the core. A. After importing resources from Mitsubishi Motors, SEM, a CMC re-invested business with controlling power in China, has launched a dual-brand strategy featuring Mitsubishi and own-brand SEM. In 2014 a total of 68 thousand cars were sold. In 2015, new RV models will be launched and estimated sales are over 100 thousand cars. In the future, the Corporation will maintain close connection with SEM and establish a strategic relationship with SEM to cultivate cross-strait markets. B. In addition, Fujian Benz Automotive Co., Ltd., a established among CMC, Daimler AG, and Fujian Motor, was officially established in June 2007 and began mass product in May 2010. With the resources of SEM OEM plant in Qingkou, Fujian Benz manufactures and distributes high-grade Mercedes sedans to occupy the special niche market, thus enabling CMC to accomplish its product lineups in the China market and become two major pillars of our business in China along with SEM. (3) Aggressive participation in the international division of labor system and expanding export scale Cooperating with the global market development strategy of Mitsubishi Motors, the Corporation will continuously enhance product cost competitiveness to strive for OEM and export contracts of Mitsubishi models. In 2012, the Corporation successfully exported Lancer Fortis to the Middle East, and a total of 2,995 cars were sold cumulatively until the end of 2014. In the future, the Corporation will continue to strive for more export opportunities and more export models from Mitsubishi Motors. (4) Strengthening technical R&D capability After establishing the China-motor Car Asia Research & Technology Center, the Corporation has developed and revised a number of models (e.g., VERYCA/VARICA, FREECA, GRUNDER, ZINGER, COLT PLUS, and LEADCA) based on the demand of Taiwan and China markets. In the future, the Corporation will continue improve independent R&D capability and develop the OEM capability of key parts and components to ensure the market competitiveness of independently developed models and thereby

86 Operational Highlights

improve self-owned design and R&D capabilities.

4. Electric bikes (1) Domestic market A. In 2014, a total of 3,688 e-moving scooters were registered. After the government began to promote TES (Taiwan E-scooter Standard), a total of 22,283 e-moving scooters were sold cumulatively, with a market share at 66.6%. B. In 2014, the total e-scooters market volume was only 5,077, suggesting that there is much room for improvement in promoting e-scooters to the public, both in product acceptance and applicability. The Corporation will continue to keep close cooperation with the Industrial Development Bureau of the Ministry of Economic Affairs and other relevant units to provide more incentives for citizens and improve their confidence in e-scooters and strive for more benefits from the government for consumers to buy e-scooters with lesser financial burdens. C. The Corporation will continue to cooperate with the green energy vehicle policy of the government by launching new products, producing key parts and components domestically, and reinforcing product promotion. In addition, the Corporation will aggressively promote the e-scooters to courier services, parking fee collection agencies, and delivery services to encourage the public to use e-scooters, so as to accelerate the maturity of the industry, contribute to energy conservation and emission reduction, and create more benefits for the Corporation. (2) Overseas market After exposing products at exhibitions held at home and abroad and contacting overseas channels, the Corporation began exporting e-scooters to the Netherlands and France in 2011. In 2014, the Corporation began exporting e-scooters to Malaysia, Macau, and Marshall Islands. In 2015, the Corporation will further cultivate markets in Malaysia, Japan, Macau, and the Netherlands and aggressively cultivate the Iran market to seek promising development.

87 Operational Highlights

(II) Main Uses and Production Processes of Major Products The Corporation mainly produces various types of commercial vehicles, sedans, and RV/business vehicles whose main uses are to carry cargo, passengers and offer leisure. The production processes are shown below:

Style design Client

Design Dealer

R & D Test Vehicle manufacturing Readiness

Development Completed and various vehicle types of testing compliance

Completed Stamping and Mechanical vehicles door assembly processing inspection

Engine Body welding Assembly

Accessories Body painting Assembly

88 Operational Highlights

(III) Supply Status of Main Materials The raw materials purchased by the Corporation are mainly parts needed for operations such as car manufacturing, sales and maintenance. International supplier is Mitsubishi Corporation of Japan. Domestic parts supplies are supplied by auto parts third-parties. With long term contracts signed and long term cooperation, supply status of raw materials is very stable.

Major Materials Major Suppliers Items Procurement Strategy Contract signed, delivery Automotive Parts Mitsubishi Corporation Parts such as CKD in installments 120 auto parts suppliers such as Kian Shen Auto parts that are Contract signed, delivery Automotive Parts Corporation, etc domestically produced in installments Contract signed, delivery Raw materials CPC Corporation, Taiwan Various oil products in installments Baking varnish, spray Contract signed, delivery Raw materials Taiwan Kansai Paint Co. Ltd., etc paint, solvent, etc in installments Nippon Steel and Sumitomo Metal and Contract signed, delivery Raw materials Steel Plates Chun Yuan Steel Industry Co., Ltd. in installments

(IV) Major Suppliers and Clients Taking over 10% of the Amount of Incoming (Sales) over the Last Two Years 1. Major Suppliers Unit: NT$ thousands

2013 2014 First Quarter, 2015 As % of As % of As % of Procurement Relation Procurement Relation Procurement Relation Supplier Total Net Supplier Total Net Supplier Total Net Amount to CMC Amount to CMC Amount to CMC Procurement Procurement Procurement

CMC’s Mitsubishi 2,471,106 11 Corporate Corporation Director CMC’s CMC’s Mitsubishi Mitsubishi 2,992,245 13 Corporate 889,979 17 Corporate Investee Corporation Corporation Director Director accounted South East 2,412,885 11 for using Motor equity method Net Net Net 22,232,903 100 - 23,426,133 100 - 5,344,811 100 - Procurement Procurement Procurement Note: The table above is base on consolidated information.

89 Operational Highlights

2. Main Customers Unit: NT$ thousands 2013 2014 First Quarter, 2015 As % of As % of As % of Relation Relation Relation Customer Net Sales Total Net Customer Net Sales Total Net Customer Net Sales Total Net to CMC to CMC to CMC Sales Sales Sales Investee Investee Investee Fortune accounted Fortune accounted Fortune accounted Motors Co., 15,405,613 43 for using Motors 16,104,468 45 for using Motors 5,064,945 47 for using LTD equity Co., LTD equity Co., LTD equity method method method

Investee Investee Shung Ye accounted Shung Ye accounted Yu Ye Motor for using - Motor for using 5,320,250 15 Motor 6,201,277 17 1,905,389 18 Enterprise equity Enterprise equity method method

Investee Shung Ye accounted Yu Ye Yu Ye - Motor for using - Motor 4,737,251 13 5,080,255 14 Motor 1,698,223 16 Enterprise equity method

Net Sales 35,539,825 100 - Net Sales 35,951,427 100 - Net Sales 10,881,082 100 -

Note: The table above is base on consolidated information.

90 Operational Highlights

(V) Production over the Last 2 Years Unit: Quantity –Vehicles

Unit: NT$ thousands

Year Capacity/ 2013 2014 Vo lu me Value Production Production Production Production Production Production Main Products Capacity Vo lu me Value Capacity Vo lu me Value 4-wheeled vehicles 56,880 42,875 20,317,273 56,880 45,224 20,506,581

2-wheeled vehicles 14,640 4,751 162,823 14,640 4,536 177,684 Note: The production volume and value in the table above is mainly based on production of car built-up. Production capacity refers the volume manufactured using existing production equipment operating under normal single shift given considerations to factors such as holidays or days when production ceases.

(VI) Sales over the Last 2 Years Unit: Quantity –Vehicles (Set)

Unit: NT$ thousands

Year 2013 2014 Sales Vo lu me Domestic Sales Exports Domestic Sales Exports Value Vo lu me Valu e Vo lu me Valu e Volu me Valu e Vo lu me Valu e Main Products 4-wheeled 42,156 21,306,125 3,224 1,052,517 43,163 22,588,077 1,733 516,385 vehicles 2-wheeled 4,454 200,616 - - 4,813 233,694 - - vehicles Sets of parts - - 12,840 608,196 - - 9,900 573,415 Note: The sales volume and value in the table above is mainly based on sale of car built-up.

III. Human Resources Year 2013 2014 April 30, 2015 Number of employees 4,839 4,568 4,587

Average Age (years) 37.86 38.51 38.57 Average Years of Service (years) 10.16 11.01 10.73 Ph.D. 8 8 8 Master’s 494 548 536 Bachelor’s or Other higher Education 1,587 1,538 1,522 education High School 1,734 1,676 1,649 Junior High School or Less 1,016 798 872 Note: The table above is base on consolidated information.

91 Operational Highlights

IV. Environmental Cost (I) Losses and Fines Caused by Environmental Pollution during the 2014 Calendar Year and up to April 30, 2015: None

(II) Forecast of Environmental Protection Expenses for Next Three Years Unit: NT$ thousands Year 2015 2016 2017 Environmental Amount Environmental Amount Environmental Amount Protection Protection Protection Expenses Item Expenses Expenses Proposed (1) Waste water and 43,327 (1) Waste water and 50,062 (1) Waste water and 49,142 Purchase of Pollution polluted air polluted air polluted air Prevention running costs running costs running costs Equipment or (2) Pollution 7,800 (2) Pollution 6,100 (2) Pollution 6,100 Content of Expenses inspection fees inspection fees inspection fees Expected Comply with the (1) Air Pollution Control Act, (2) Water Pollution Control Act, (3) Waste Disposal Improvement Act.

V. Labor and Management Relationship (I) Employee's Benefits, Training, Retirement Measures and Implementation 1. Employee Benefits Programs (1) Providing uniforms, shuttle buses and transport vehicles to return home during consecutive holidays. (2) Providing full equipped dormitories, activity centers, training centers, restaurants and nurseries. (3) Holding activities such as domestic and foreign travel, year-end dinner and raffles drawing. (4) Sponsoring worker social group activities. (5) Providing free group term insurance, accident insurance, and regular general health checks. (6) Providing hospitalization condolences, sympathy and mutual aid pro mourning, and dependents entitled to hospitalization benefits. (7) Providing gifts for the three major Chinese holidays, birthdays, wedding and child birth (8) Providing scholarships for employees and their children, emergency loans and aids. (9) Signing agreements with excellent domestic stores to become “Special Arrangement Stores” to provide employees with diversified information for purchasing and selection. (10) Providing discounts to purchase the Corporation’s vehicles.

92 Operational Highlights

2. People Development (1) The Corporation’s human resources development integrates the double objectives of "Corporate Development" and “Employee Satisfaction.” These objectives are for nurturing professionals, developing personal potential and building a learning organization so that the growth of the Corporation and colleagues are combined with each other. (2) To implement the people development vision, the Corporation’s human resource development system is divided into "In-house Training", "External Education and Training," "Overseas Training", "On the Job Training" and "Validation Personnel Training." These provide a series of core skill, management skill and professional skill courses and convenient real-time online learning system. These allow the tight integration of employee personal development and work assignments. A. In-house Training consists of five categories: a. Core work skill training b. Management skill training c. Professional skill training d. New staff training e. Project training B. External Education and Training: To carry out the Corporation’s educational training, each unit can apply to send employees based on needs to attend educational training courses held outside the Corporation in addition to attending regularly scheduled in-house training. In addition, the application to attend external educational training shall be reviewed and approved by educational and training unit for recommendation on whether to attend or not. C. Overseas Training: Each department can send its staff members to attend oversea training programs held by external institutions based on actual work needs or develop its oversea training plan to send the appropriate staff member. After approval, staff members are then sent abroad for overseas training while providing managerial staff from the mainland China’s joint ventures to receive project training in Taiwan. D. On the Job Training (OJT): Using methods such as delegated work, work instructions, project implementation, and so forth, managers at all levels shall develop abilities of the team members based on the individual ability and work nature of the team member.

93 Operational Highlights

E. Validation Personnel Training: Implement the training of inspection, testing, monitoring, and so forth of processes or product designs, manufacture, installation, services and environmental management of each unit shall be done. The training and qualification certification of internal auditors, environmental management, and occupational safety staff members are held.

3. Retirement (1) The retirement of workers shall be conducted according to the following stipulations: A. The Corporation has a retirement plan for formally hired employees. Retirement pensions are set aside into the retirement reserve fund and managed by the Corporation’s Labor Pension Fund Supervisory Committee and deposited into Bank of Taiwan on behalf of the committee. B. Pension can be claimed only for those conforming to the requirements of Labor Standards Act upon retirement for those who select to retire according to the regulations of the Labor Standards Act. C. For those who select the Labor Pension Act, the Corporation shall set aside funds monthly based on the employees’ wages. In addition, the working years prior to selecting the Labor Pension Act shall be retained until the time conforming to the stipulations of retirement according to the Labor Pension Act. Only upon retirement shall the pension be claimed. D. The Labor Pension Act is applicable to all employees (including those re-employed after leaving the Corporation) that reported to duty after July 1, 2005. (2) The standard for retirement is based on the following stipulations: A. For employees satisfying any of the conditions listed below, they can apply for voluntary retirement. a. For those who have worked in the Corporation for fifteen years and aged fifty-five or above. b. For those who have worked in the Corporation for twenty-five years. c. For those who have worked in the Corporation for ten years and aged sixty or above. B. The Corporation shall not implement compulsory retirement unless one of the following conditions applies: a. For those aged sixty-five or above. b. For those unable to fulfill their duties at work due to insanity or physical disability.

94 Operational Highlights

(3) The calculation for the amount of pension given is based on the following criteria for those where Labor Standards Act apply: A. Based on years worked, each full year worked shall receive two basis points. However, for those with years work exceeding fifteen years, each full year worked shall receive one basis point with the highest total of forty-five points as the upper limit. For those who have worked less than half a year, the basis used is one-half year. Those who have worked half a year or more shall be calculated based on one full year. B. For employees who become insane or physically disabled while performing work duties, an additional twenty percent or five basis points (which ever one is more) shall be added in addition to those stipulated by the previous article. C. The standard of pension basis point refers to the monthly average age at the time of retirement.

4. Labor and Management Agreement (1) The Corporation philosophy is based on coexistence and common prosperity through the spirit of working together cooperatively and harmoniously to seek the maximum well-being for all. (2) The establishing of year-end bonuses and profit-sharing system match the interests of employees in conjunction with the Corporation's interests and create outstanding employee performance in the process. (3) Regular labor and management meetings are held to ensure smooth communication channels and promote labor and management harmony.

5. Implementation of Measures Protecting Employee Rights (1) Promoting employee assistance programs, maintaining health of employees in terms of physical and social functions, providing psychological and legal consultations and counseling, and establishing comprehensive, holistic care counseling system. (2) Conducting management skill training and implementing counseling skills in day to day management. (3) Promoting mutely-channel communication concepts, encouraging participating in management, developing team consensus. (4) Being open and public about management and operating conditions, increasing solidarity and sense of crisis among employees. 95 Operational Highlights

(5) Emphasizing worker issues, establishing sound labor unions and ensuring employee rights. (6) Holding labor and management meetings regularly to coordinate labor and management relations.

6. Protective Measures for Work Environment and Employee Safety (1) Work Environment: The Corporation provides a good work environment to employees in the following specific ways: A. Planting large amount of plants in the factory’s empty spaces to beautify the environment. In addition, themes are planned according to the four seasons for the flower section and seasonal flowers. B. Setting up rest areas as QCC garden, coffee shops, and so forth. C. Banning cigarette smoking in all workplace and restaurants, so that cigarette smoking can only be in designated areas. D. Setting up dedicated walkways for dining and commuting, ensuring proper separation of people and vehicle lanes. E. Establishing widely turbine exhausts and local exhausts in the factory area to ensure the air quality. F. Setting up air conditioner in the painting field operation area to raise comfort level. G. Measuring the operating environment focusing on the monitoring and improvement of operational areas for the plant dust, noise, organic solvents and so forth semiannually. (2) Protecting of Employee Safety A. Introducing occupational safety and health management system and improving health and safety management performance. B. Formulating labor safety and health management programs to implement and ensure the safety and health of the employees. C. Environmental health and safety meetings are held regularly. In addition, tracking safety and health performance indicators are to done to reach state to strengthen the implementation of safety and health policy. D. Implanting concepts of predetermined danger and risk management into the minds of employees and families. To continue promoting residential safety and fire escape, to implement fire escape training in offices, factories and dormitories, to promote the prevention of carbon monoxide poisoning and traffic safety, on site safety observations, cases of other factory occupational hazards, and so forth. E. Implementing regular health checks for employees. For those with abnormalities,

96 Operational Highlights

requesting periodic follow-up and tracking or treatment is done in addition to health education to ensure the physical health of employees.

7. Code of Ethics and Business Conduct (1) Code of Conduct: The Corporation employees’ code of conduct is "Honesty, Caring, and Responsibility." (2) Code of Ethics: The Corporation work rules have a chapter dedicated to “Service Ethics.” The chapter includes explicit specifications regarding working attitude, strict keeping of confidentiality, requirements regarding using public properties, no bribery or improper benefits allowed, and so forth. (3) Learning Code of Conduct and Code of Ethics are the keypoints of new employee training.

(II) Dispute between Labor and Management during the 2014 Calendar Year and up to April 30, 2015 The Corporation has had no labor disputes in 2014 and as of April 30, 2015. In the future, this philosophy will be used to promote labor and management harmony. Therefore, the prediction is that there will not be any labor disputes or losses from it.

97 Operational Highlights

VI. Major Contracts Contract Interested Contract Term Content Restrictions Nature Party The Corporation is licensed to manufacture and sell parts, The Corporation components, and vehicles designed should not assign or by Mitsubishi Motors based on the re-license the rights Licensing Mitsubishi design, drawings, and technical and licenses granted and July 1, 2005 to July Motors specifications provided by Mitsubishi by Mitsubishi technology 2023. Corporation Motors. Mitsubishi Motors should Motors to a third cooperation send staff to provide necessary party without prior technical assistance in manufacture permission of for the Corporation at any time at the Mitsubishi Motors. request of the Corporation.  May 23, 2005 until The Corporation is licensed to contract termination manufacture and sell the parts, The Corporation for CANTER model. components, and trucks designed by should not assign or  January 9, 2006 until Licensing Mitsubishi Mitsubishi FUSO based on the re-license the rights contract termination and FUSO design, drawings, and technical and licenses granted for FUSO model. technology Truck and specifications provided by Mitsubishi by Mitsubishi FUSO  May 7, 2013 for a cooperation Bus FUSO. Mitsubishi FUSO should send to a third party term of 8 years for TF contracts Corporation staff to provide necessary technical without prior model. assistance in manufacture for the permission of  May 29, 2013 for a Corporation at any time at the request Mitsubishi FUSO. term of 8 years for of the Corporation. Euro 5 TA model. Territory: Taiwan Fortune Distribution August 1, 2014 to July Distribution of sedans, RVs, vans, and and Fujian areas Motors Co., contract 31, 2017 trucks under 3.5t (exclusive). under the ROC Ltd. jurisdiction. Territory: Taiwan Distribution Shung Ye December 30, 2014 to Distribution of sedans, RVs, and vans and Fujian areas contract Motor December 29, 2017 under 3.5t (exclusive). under the ROC jurisdiction. Territory: Taiwan Distribution Yu Ye August 1, 2013 to July Distribution of trucks and truck and Fujian areas contract Motors 31, 2016 chassis of 3.5t and up. under the ROC jurisdiction. Except for models licensed by Mitsubishi Motors or Daimler AG or independently Established and managed Fujian developed models, Daimler Automotive Co., Ltd. (now the Corporation Fujian Benz Automotive Co., Ltd.), a Shareholders Since November 4, should not develop, Daimler AG joint venture established among Agreement 2004. manufacture, and CMC, Daimler AG, and Fujian Motor, distribute models to manufacture medium and light competitive with sedans at 2-6t. models manufactured and distributed by Fujian Benz Automotive Co., Ltd. in China.

98 Financial Highlights

I. Condensed Balance Sheet and Statement of Comprehensive Income over the Last Five Years （I）Condensed Balance Sheet and Statement of Comprehensive Income 1. Condensed Balance Sheet (1) Consolidated Financial Report Unit: NT$ thousands Year Financial Data Last Five Years Financial Data to March 31, 2015 2014 2013 2012 - - Financial Data Item (Note 1) (Note 2) Current assets 22,939,000 23,879,163 22,358,136 22,791,286 Long-term Investments 29,743,458 27,698,817 26,770,354 29,798,657 Property, Plant, & Equipment 6,490,732 5,952,588 5,486,371 6,554,666 Intangible Assets 245,859 188,472 93,666 236,408 Other Assets 2,104,369 2,341,370 2,337,760 2,059,129 Total Assets 61,523,418 60,060,410 57,046,287 61,440,146 Before 7,843,305 8,393,456 8,651,966 6,928,810 Current Distribution Please refer to Liabilities After (II)1. Condensed Distribution 7,843,305 9,915,912 9,897,612 Balance Sheet – 6,928,810 Non-current Liabilities 2,279,533 2,228,053 2,289,245 ROC GAAP for 2,208,376 the condensed Before Distribution 10,122,838 10,621,509 10,941,211balance sheet for 9,137,186 Total 2008 ~ 2012 Liabilities After 10,122,838 12,143,965 12,186,857since IFRSs was 9,137,186 Distribution implemented for the first time in Equity Attributable to owners of the Corporation 48,441,960 46,725,127 43,599,7252013. 49,314,549

Capital Stock 13,840,508 13,840,508 13,840,508 13,840,508 Capital Surplus 6,392,369 6,376,868 6,373,509 6,396,623 Before 26,422,721 25,516,688 24,130,457 27,405,914 Retained Distribution Earnings After Distribution 26,422,721 23,994,232 22,884,811 27,405,914 Other Equity 1,786,362 991,063 (744,749) 1,671,504 Treasury stock --- - Non-controlling Interests 2,958,620 2,713,774 2,505,351 2,988,411 Before 51,400,580 49,438,901 46,105,076 52,302,960 Total Distribution Equity After Distribution 51,400,580 47,916,445 44,859,430 52,302,960 Note 1: Because the 2015 shareholders’ meeting is not held yet, the earnings distribution is not yet finalized. Therefore, the earnings before and after distribution are the same. Note 2: Financial report disclosures are in accordance with the Auditors’ review report.

99 Financial Highlights

(2) Unconsolidated Financial Report Unit: NT$ thousands Year Financial Data Last Five Years

2014 2013 2012 - - Item (Note)

Current assets 16,872,698 16,865,341 15,344,312

Long-term Investments 33,400,116 32,055,302 31,493,938

Property, Plant, & Equipment 3,370,510 2,920,646 2,449,934

Intangible Assets 218,187 160,800 65,993

Other Assets 1,314,492 1,362,665 1,412,078

Total Assets 55,176,003 53,364,754 50,766,255 Before 4,971,795 4,891,727 5,312,757 Please refer to (II) 1. Current Distribution Condensed Balance Liabilities After Sheet – ROC GAAP 4,971,795 6,414,183 6,558,403 Distribution for the condensed balance sheet for Non-current Liabilities 1,762,248 1,747,900 1,853,773 2008 ~ 2012 since IFRSs was Before 6,734,043 6,639,627 7,166,530implemented for the Total Distribution first time in 2013. Liabilities After 6,734,043 8,162,083 8,412,176 Distribution Capital Stock 13,840,508 13,840,508 13,840,508

Capital Surplus 6,392,369 6,376,868 6,373,509 Before 26,422,721 25,516,688 24,130,457 Distribution Retained Earnings After 26,422,721 23,994,232 22,884,811 Distribution

Other Equity 1,786,362 991,063 ( 744,749)

Treasury stock -- - Before 48,441,960 46,725,127 43,599,725 Distribution Total Equity After 48,441,960 45,202,671 42,354,079 Distribution Note: Because the 2015 shareholders’ meeting is not held yet, the earnings distribution is not yet finalized. Therefore, the earnings before and after distribution are the same.

100 Financial Highlights

2. Statement of Comprehensive Income (1) Consolidated Financial Reports Unit: NT$ thousands (except EPS, NT$) Year Financial Data for Last Five Years Financial Data to Item March 31, 2015 2014 2013 2012 - - (Note) Operating Revenue 35,951,427 35,539,825 41,786,130 10,881,082

Realized Gross Profit 6,062,064 5,182,483 5,573,613 2,124,291

Profit from Operations 1,970,164 1,380,509 1,295,750 909,444 Non-operating income 1,269,735 1,685,439 1,231,375 306,955 and expenses Profit Before Income 3,239,899 3,065,948 2,527,125 1,216,399 Tax Please refer to (II) Net Profit from 2. Condensed continuing operations 2,821,712 2,751,022 2,322,084 Income 1,064,028 after income taxes Statement – ROC Net Profit from - - - GAAP for the - discontinued operations condensed balance Net Profit (losses) 2,821,712 2,751,022 2,322,084 sheet for 2008 – 1,064,028 2012 since IFRSs Other Comprehensive was implemented income (Loss) 732,318 1,916,382 (1,092,941) ( 138,917) for the first time in (after-tax) 2013. Total Comprehensive 3,554,030 4,667,404 1,229,143 925,111 income Net profit attributable to owners of the 2,558,290 2,531,878 2,139,436 988,640 Corporation Net profit attributable to non-controlling 263,422 219,144 182,648 75,388 interests Total Comprehensive income attributable to 3,223,882 4,368,486 1,102,399 869,037 owners of the Corporation Total Comprehensive income attributable to 330,148 298,918 126,744 56,074 non-controlling interests Earnings per share 1.88 1.86 1.57 0.73 (NT$) Note: Financial report disclosures are in accordance with the Auditors’ review report.

101 Financial Highlights

(2) Unconsolidated Financial Report Unit: NT$ thousands (except EPS, NT$) Year Financial Data for Last Five Years

2014 2013 2012 - - Item Operating Revenue 28,272,683 27,562,088 33,836,593

Gross Profit 4,550,959 3,807,173 4,111,778

Profit from Operations 1,971,290 1,705,072 1,709,453 Non-operating income 926,000 1,045,806 565,563 and expenses Please refer to (II) Profit Before Income 2,897,290 2,750,878 2,275,016 2. Condensed Tax Income Net Profit from Statement – ROC continuing operations 2,558,290 2,531,878 2,139,436 GAAP for the After Income Taxes condensed balance Net Profit from sheet for 2008 – --- discontinued operations 2012 since IFRSs Net Pfofit (losses) 2,558,290 2,531,878 2,139,436 was implemented for the first time in Other Comprehensive 665,592 1,836,608 ( 1,037,037) 2013. income(after-tax) Total Comprehensive 3,223,882 4,368,486 1,102,399 income Earnings per share 1.88 1.86 1.57 (NT$)

102 Financial Highlights

(II) Condensed Balance Sheet and Statement of Income - ROC GAAP 1. Condensed Balanced Sheet – R.O.C. GAAP Unit: NT$ thousands Year Financial Data for Last Five Years Item 2012 2011 2010 2009 2008 Current assets 15,568,284 16,731,597 14,763,451 14,282,819 9,855,613 Funds and Investments 31,039,936 30,928,684 30,063,228 29,422,869 29,705,189 Fixed assets 3,231,078 3,172,693 4,019,289 4,811,678 5,648,411 Intangible Assets 65,993 128,238 206,367 287,001 313,526 Other assets 352,644 317,338 316,179 595,315 874,786 Total assets 50,257,935 51,278,550 49,368,514 49,399,682 46,397,525 Before 5,246,612 6,221,971 5,021,749 6,218,155 5,273,289 Current distribution liabilities After 6,492,258 7,882,832 6,405,800 6,633,370 5,273,289 distribution Long-term liabilities 6,026 17,244 829,537 1,430,008 838,450

Other liabilities 1,691,042 1,699,475 1,850,007 1,938,573 2,151,500

Before 6,943,680 7,938,690 7,701,293 9,586,736 8,263,239 Total distribution liabilities After 8,189,326 9,599,551 9,085,344 10,001,951 8,263,239 distribution Capital stock 13,840,508 13,840,508 13,840,508 13,913,008 13,913,008 Capital surplus 8,183,718 8,224,130 8,130,587 8,145,402 8,140,986 Before 21,606,035 21,110,457 19,449,337 17,089,599 16,232,054 Retained distribution Earnings After 20,360,389 19,449,596 18,065,286 16,674,384 16,232,054 distribution Unrealized Gain/Loss on ( 778,802) ( 788,677) 11,675 ( 262,815) ( 1,188,279) financial instruments Cumulative translation ( 100,450) 364,319 ( 376,967) 488,296 727,284 adjustments Net loss not recognized as ( 129,459) ( 103,732) ( 81,218) ( 67,696) ( 197,977) pension cost Before 43,314,255 43,339,860 41,667,221 39,812,946 38,134,286 Total distribution Equity After 42,068,609 41,678,999 40,283,170 39,397,731 38,134,286 distribution

103 Financial Highlights

2. Condensed Income Statement – R.O.C. GAAP Unit: NT$ thousands (except EPS, NT$) Year Financial Data for Last Five Years Item 2012 2011 2010 2009 2008 Operating Revenue 33,836,593 35,913,458 31,904,055 28,394,014 23,296,214

Gross Profit 4,111,778 4,067,486 3,630,959 2,198,260 1,483,315

Operating Income 1,708,658 1,935,417 1,782,366 510,237 ( 892,827) Non-operating income 911,799 1,424,109 1,664,675 1,077,396 1,119,394 and gains Non-operating expenses 328,050 95,315 181,104 400,845 6,763,224 and losses Income from continuing operations before 2,292,407 3,264,211 3,265,937 1,186,788 (6,536,657) income taxes Net Income from 2,156,407 3,045,211 2,885,937 859,788 (5,465,657) continuing operations Net Income from ---- - discontinued operations Extraordinary gain or ---- - loss Cumulative effect of change in accounting ---- - principle Net income 2,156,407 3,045,211 2,885,937 859,788 (5,465,657) Earnings per share 1.56 2.2 2.09 0.62 ( 3.95) (NT$)

(III) Auditors’ Opinions for the Last Five Years Year 2014 2013 2012 2011 2010 Eddie Shao(Note) Denny Kuo Denny Kuo (Note) Eddie Shao Eddie Shao CPA Lilac Shue Lilac Shue Lilac Shue Lilac Shue Lilac Shue (Note) A Modified A Modified A Modified A Modified A Modified Auditors’ Unqualified Unqualified Unqualified Unqualified Unqualified Opinion Opinion Opinion Opinion Opinion Opinion Note: Because of internal retation within the CPA firm, the auditing CPA changed from Denny Kuo to Eddie Shao in 2014. In addition, the auditing CPA changed from Eddie Shao to Denny Kuo in 2012 and from Pearl Lin to Lilac Shue in 2010.

104 Financial Highlights

II. Financial Analysis over the Last Five Years (I) Financial Analysis 1. Consolidated Financial Report Year Financial Analysis for the Last Five Years Financial Data to March 31, 2014 2013 2012 - - Item of Analysis 2015 (Note) Capital Debt Ratio 16.45 17.68 19.18 14.87 Structure Long-term Fund to Property, Analysis 827.03 867.97 882.08 831.64 (%) Plant, and Equipment Ratio Current Ratio 292.47 284.50 258.42 328.94 Liquidity Analysis Quick Ratio 207.99 199.40 161.79 255.65 % Times Interest Earned (Times) 153.02 110.40 67.04 214.40 Average Collection Turnover 11.93 11.34 12.54Please refer to 13.80 (II) Financial Days Sales Outstanding (Days) 30.60 32.19 29.11Analysis – 26.45 Average Inventory Turnover 5.08 4.47 5.17ROC GAAP 7.11 Operating for the Performanc Average Payment Turnover 8.16 8.31 9.74financial 11.04 e Analysis Average Inventory Turnover analysis for 71.85 81.66 70.60 51.34 (Times) Days (Days) 2008 ~ 2012 Property, Plant, and Equipment since IFRSs 5.59 5.98 7.31 6.67 Turnover was implemented Total Assets Turnover 0.57 0.58 0.70 0.71 for the first Return on Total Assets 4.67 4.74 4.04time in 2013. 6.95 Return on Equity 5.60 5.76 5.01 8.21 Profitability Analysis Pre-tax Income to Paid in capital 23.41 22.15 18.26 35.15 (%) Net Margin 8.12 8.04 5.73 9.78 Earnings per Share (NT$) 1.88 1.86 1.57 0.73 Cash Flow Ratio 47.78 33.69 12.50 12.82 Cash Flow Cash Flow Adequacy Ratio N/A N/A N/A N/A (%) Cash Flow Reinvestment Ratio 2.75 2.00 ( 0.77) 1.08 Operating Leverage 2.76 3.69 3.84 2.54 Leverage Financial Leverage 1.01 1.02 1.03 1.01 1. “Times Interest Earned” increased in 2014 mainly because the Interest Expenses has decreased. 2. “Cash Flow Ratio” and “Cash Flow Reinvestment Ratio” increased in 2014 mainly because the “Cash Provided by Operating Activities” has increased. 3. “Operating Leverage” decreased in 2014 mainly because the “Profit from Operations” has increased. Note: Financial report disclosures are in accordance with the the Auditors’ review report.

105 Financial Highlights

2. Unconsolidated Financial Report Year Financial Analysis for the Last Five Years

2014 2013 2012 - - Item of Analysis Capital Debt Ratio 12.20 12.44 14.12 Structure Analysis Long-term Fund to Property, 1489.51 1659.67 1855.29 (%) Plant, and Equipment Ratio

Liquidity Current Ratio 339.37 344.77 288.82 Analysis Quick Ratio 248.08 252.19 174.86 % Times Interest Earned (Times) 32924.75 15994.48 1682.46 Average Collection Turnover 17.56 16.94 18.03 Days Sales Outstanding 20.79 21.55 20.24 Please refer to (II) (Days) Financial Operating Average Inventory Turnover 5.77 4.92 5.85 Analysis – ROC GAAP for the PerformanceAverage Payment Turnover 8.81 8.77 10.11 financial analysis Analysis Average Payment Turnover for 2008 ~ 2012 63.26 74.19 62.39 since IFRSs was (Times) Days (Days) implemented for Property, Plant, and the first time in 8.85 10.09 13.77 2013. Equipment Turnover Total Assets Turnover 0.51 0.52 0.65 Return on Total Assets 4.71 4.86 4.16 Return on Equity 5.38 5.61 4.88 Profitabilit Pre-tax Income As Ratio of y Analysis 20.93 19.88 16.44 Paid in capital (%) Net Margin 9.19 9.34 6.42 Earnings per Share (NT$) 1.88 1.86 1.57 Cash Flow Ratio 48.57 62.09 13.50 Cash Flow Cash Flow Adequacy Ratio N/A N/A N/A (%) Cash Flow Reinvestment 1.22 2.50 ( 1.38) Ratio Operating Leverage 2.56 3.55 1.79 Leverage Financial Leverage 1.00 1.00 1.00 1. “Times Interest Earned” increased in 2014 mainly because the Interest Expenses has decreased. 2. “Cash Flow Ratio” and “Cash Flow Reinvestment Ratio” decreased in 2014 mainly because the “Cash Provided by Operating Activities” has decreased. 3. “Operating Leverage” decreased in 2014 mainly because the “Profit from Operations” has increased.

106 Financial Highlights

1. Capital Structure Analysis (1) Debt Ratio = Total Liabilities / Total Assets (2) Long-term Fund to Fixed Assets Ratio = (Equity + Non-current Liabilities) / Net Property, Plant, & Equipment

2. Liquidity Analysis (1) Current Ratio = Current Assets / Current Liabilities (2) Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities (3) Times Interest Earned = Earnings before Interest and Taxes / Interest Expenses

3. Operating Performance Analysis (1) Average Collection Turnover = Net Sales / Average Trade Receivables (2) Days Sales Outstanding = 365 / Average Collection Turnover (3) Average Inventory Turnover = Cost of Sales / Average Inventory (4) Average Payment Turnover = Cost of Sales / Average Trade Payables (5) Average Inventory Turnover Days = 365 / Average Inventory Turnover (6) Property, Plant, & Equipment Turnover = Net Sales / Net Property, Plant, & Equipment (7) Total Assets Turnover = Net Sales / Total Assets

4. Profitability Analysis (1) Return on Total Assets = (Net Profit + Interest Expenses * (1 - Effective tax rate))/ Average Total Assets (2) Return on Equity = Net Profit / Average Equity (3) Net Margin = Net Profit / Net Sales (4) Earnings per Share = (Net Profit - Preferred Stock Dividend) / Weighted Average Number of Shares Outstanding

5. Cash Flow (1) Cash Flow Ratio = Net Cash Generated from Operating Activities / Current Liabilities (2) Cash Flow Adequacy Ratio = Five-year sum of cash from operations / Five-year sum f capital expenditures, inventory additions, and cash dividend (3) Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends)/ (Gross Property, Plant, & Equipment + Long-term Investments + Other Non-current Assets + Working Capital)

6. Leverage (1) Operating Leverage = (Net Sales - Variable Cost of goods sold) / Profit from Operations (2) Financial Leverage = Profit from Operations / (Profit from Operations - Interest Expenses)

107 Financial Highlights

(II) Financial Analysis – R.O.C. GAAP

Year Financial Analysis for the Last Five Years

Item of Analysis 2012 2011 2010 2009 2008 Capital Debt Ratio 13.82 15.48 15.60 19.41 17.81 Structure Long-term Fund to Fixed Analysis 1340.74 1366.57 1057.32 857.14 689.98 (%) Assets Ratio Current Ratio 296.73 268.91 293.99 229.70 186.90 Liquidity Quick Ratio 181.29 192.53 233.11 180.11 101.10 Analysis % Times Interest Earned 1695.31 196.95 96.12 23.83 ( 86.88) (Times) Average Collection 18.32 17.80 12.46 12.31 9.23 Turnover Days Sales Outstanding 19.92 20.51 29.29 29.65 39.54 (Days) Operating Average Inventory Turnover 5.86 8.80 10.04 7.38 4.83 Performance Analysis Average Payment Turnover 10.13 10.20 8.90 10.28 8.68 (Times) Average Inventory 62.28 41.48 36.35 49.46 75.56 Turnover Days (Days) Fixed Assets Turnover 10.47 11.32 7.94 5.90 4.12 Total Assets Turnover 0.67 0.70 0.65 0.57 0.50 Return on Total Assets 4.25 6.08 5.90 1.88 ( 10.50) Return on Equity 4.98 7.16 7.08 2.21 ( 13.05) Profitability Ratio to Operating Income 12.35 13.98 12.88 3.67 ( 3.76) Analysis Pain-in (%) Capital Income before tax 16.56 23.58 23.60 8.53 ( 46.98) Net Margin 6.37 8.48 9.05 3.03 ( 23.46) Earnings per Share (NT$) 1.56 2.20 2.09 0.62 ( 3.95) Cash Flow Ratio 26.55 36.18 95.89 71.62 24.80

Cash Flow Cash Flow Adequacy Ratio 113.96 126.41 119.07 93.49 53.22 (%) Cash Flow Reinvestment (0.39) 1.28 6.63 6.91 1.22 Ratio Operating Leverage 2.11 2.49 2.74 9.57 ( 6.99) Leverage Financial Leverage 1.00 1.01 1.02 1.11 0.88

108 Financial Highlights

1. Capital Structure Analysis (1) Debt Ratio = Total Liabilities / Total Assets (2) Long-term Fund to Fixed Assets Ratio = (Shareholders' Equity + Long-term Liabilities) / Net Fixed Assets

2. Liquidity Analysis (1) Current Ratio = Current Assets / Current Liabilities (2) Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities (3) Times Interest Earned = Earnings before Interest and Taxes / Interest Expenses

3. Operating Performance Analysis (1) Average Collection Turnover = Net Sales / Average Trade Receivables (2) Days Sales Outstanding = 365 / Average Collection Turnover (3) Average Inventory Turnover = Cost of Sales / Average Inventory (4) Average Payment Turnover = Cost of Sales / Average Trade Payables (5) Average Inventory Turnover Days = 365 / Average Inventory Turnover (6) Fixed Assets Turnover = Net Sales / Net Fixed Assets (7) Total Assets Turnover = Net Sales / Total Assets

4. Profitability Analysis (1) Return on Total Assets = (Net Income + Interest Expenses * (1 - Effective tax rate))/ Average Total Assets (2) Return on Equity = Net Income / Average Shareholders' Equity (3) Net Margin = Net Income / Net Sales (4) Earnings per Share = (Net Income - Preferred Stock Dividend) / Weighted Average Number of Shares Outstanding

5. Cash Flow (1) Cash Flow Ratio = Net Cash Provided by Operating Activities / Current Liabilities (2) Cash Flow Adequacy Ratio = Five-year sum of cash from operations / Five-year sum f capital expenditures, inventory additions, and cash dividend (3) Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends)/ (Gross Fixed Assets + Investments + Other Assets + Working Capital)

6. Leverage (1) Operating Leverage = (Net Sales - Variable Cost) / Income from Operations (2) Financial Leverage = Income from Operations / (Income from Operations - Interest Expenses)

109 Financial Highlights

III. Supervisors' Review Report

The Corporation’s financial report and consolidated financial reports for fiscal year 2014 prepared by the Board of Directors have been audited and reviewed by Eddie Shao, CPA and Lilac Shue, CPA of Deloitte & Touche LLP. Together with the business report and earnings distribution report, these have been sent to the supervisors for review and been determined to be correct. According to the regulation of Company Act Article 219, our report is therefore presented.

Respectfully

Authorized and Sealed

Presented above

The Corporation’s 2015 Shareholders’ Meeting

Supervisor: Le Wen Enterprise Co.

Representative: Wei-Kung Chi

Representative: Tai-Ming Chen

March 24, 2015

110 Financial Highlights

IV. Consolidated Financial Statements and Appendix

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders China Motor Corporation

We have audited the accompanying consolidated balance sheets of China Motor Corporation (the “Corporation”) and its subsidiaries (collectively, the “Group”) as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. However, we did not audit the financial statements as of and for the years ended December 31, 2014 and 2013 of Daimler Vans Hong Kong Ltd., Guangzhou NTN-Yulon Drivertrain Co., Ltd., Shung Ye Motors Corporation, Uni Auto Parts Manufacture Co., Ltd. and Soueast-motor Co., Ltd., and the financial statements as of and for the year ended December 31, 2013 of Fu Yu Venture Capital Investment Corporation and Zhejiang Kangda Motor Industry and Trading Co., Ltd., in which the Corporation had equity-method investments, as shown in the accompanying financial statements. These investments were 8.1% (NT$5,003,779 thousand) and 8.1% (NT$4,849,829 thousand) of the Corporation’s total assets as of December 31, 2014 and 2013, respectively. The Corporation’s equity in their comprehensive income was 2.4% (NT$85,600 thousand) and 10.5% (NT$492,040 thousand) of the Corporation’s total comprehensive income in 2014 and 2013, respectively. These investees’ financial statements were audited by other auditors, whose reports have been furnished to us and our opinion, insofar as it relates to the amounts included for these investees, is based solely on the reports of the other auditors.

We conducted our audits in accordance with the Regulations Governing the Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2014 and 2013, and the consolidated financial performance and the consolidated cash flows for the years then ended, in conformity 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 Internationals (SIC) endorsed by the Financial Supervisory Commission (FSC) of the Republic of China.

111 Financial Highlights

We have also audited the financial statements of the parent company, China Motor Corporation, as of and for the years ended December 31, 2014 and 2013, on which we have issued a modified unqualified report.

March 24, 2015

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.

112 Financial Highlights

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars)

2014 2013 ASSETS Amount % Amount %

CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) $ 11,211,609 18 $ 10,947,278 18 Financial assets at fair value through profit or loss (Notes 4 and 7) 631,143 1 1,063,536 2 Available-for-sale financial assets (Notes 4 and 8) 1,556,952 3 1,243,367 2 Notes receivable, net (Note 4) 248,494 - 213,675 - Accounts receivable, net (Note 4) 934,816 2 1,023,343 2 Receivables from related parties, net (Notes 4 and 22) 1,560,828 3 1,846,555 3 Other receivables (Note 4) 169,118 - 398,825 1 Inventories (Notes 4 and 9) 5,704,551 9 5,752,022 10 Other current assets (Notes 4, 18, 22 and 23) 921,489 1 1,390,562 2

Total current assets 22,939,000 37 23,879,163 40

NON-CURRENT ASSETS Available-for-sale financial assets (Notes 4 and 8) 863,278 2 691,526 1 Financial assets measured at cost (Notes 4 and 10) 468,225 1 669,732 1 Debt investments with no active market (Note 4) 1,316,118 2 597,793 1 Investments accounted for using the equity method (Notes 4 and 11) 27,095,837 44 25,739,766 43 Property, plant and equipment (Notes 4, 12 and 23) 6,490,732 11 5,952,588 10 Investment properties (Notes 4, 13 and 23) 1,441,857 2 1,456,495 3 Intangible assets under development (Note 4) 218,187 - 160,800 - Goodwill (Note 4) 27,672 - 27,672 - Deferred tax assets (Notes 4 and 18) 488,930 1 636,617 1 Other non-current assets 173,582 - 248,258 -

Total non-current assets 38,584,418 63 36,181,247 60

TOTAL $ 61,523,418 100 $ 60,060,410 100

LIABILITIES AND EQUITY

CURRENT LIABILITIES Short-term borrowings (Note 14) $ 649,737 1 $ 968,034 2 Short-term bills payable 119,870 - 339,488 1 Notes and accounts payable 2,545,342 4 2,959,688 5 Payables to related parties (Note 22) 825,486 1 809,155 1 Other payables 2,756,797 5 2,398,726 4 Current tax liabilities (Notes 4 and 18) 293,807 1 269,733 - Current portion of long-term borrowings -- 6,026 - Other current liabilities (Note 22) 652,266 1 642,606 1

Total current liabilities 7,843,305 13 8,393,456 14

NON-CURRENT LIABILITIES Long-term borrowings 50,000 - - - Deferred tax liabilities (Notes 4 and 18) 132,981 - 165,083 - Accrued pension liabilities (Notes 4 and 15) 2,084,161 3 2,051,255 4 Other non-current liabilities 12,391 - 11,715 -

Total non-current liabilities 2,279,533 3 2,228,053 4

Total liabilities 10,122,838 16 10,621,509 18

EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Notes 4, 15 and 16) Ordinary shares 13,840,508 23 13,840,508 23 Capital surplus 6,392,369 10 6,376,868 11 Retained earnings Legal reserve 7,595,944 12 7,342,756 12 Special reserve 1,057,002 2 1,373,008 2 Unappropriated earnings 17,769,775 29 16,800,924 28 Total retained earnings 26,422,721 43 25,516,688 42 Other equity Exchange differences on translating foreign operations 750,561 1 192,209 - Unrealized gain on available-for-sale financial assets 1,035,801 2 798,854 2 Total other equity 1,786,362 3 991,063 2

Total equity attributable to owners of the Corporation 48,441,960 79 46,725,127 78

NON-CONTROLLING INTERESTS 2,958,620 5 2,713,774 4

Total equity 51,400,580 84 49,438,901 82

TOTAL $ 61,523,418 100 $ 60,060,410 100

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

(With Deloitte & Touche audit report dated March 24, 2015)

113 Financial Highlights

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2014 2013 Amount % Amount %

OPERATING REVENUE (Notes 4 and 22) Net sales $ 34,767,347 97 $ 34,200,990 96 Other operating revenue 1,184,080 3 1,338,835 4

Total operating revenue 35,951,427 100 35,539,825 100

OPERATING COSTS (Notes 9, 15, 17 and 22) Cost of goods sold 29,115,654 81 29,447,799 83 Other operating cost 782,315 2 937,470 2

Total operating costs 29,897,969 83 30,385,269 85

GROSS PROFIT 6,053,458 17 5,154,556 15

REALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES 8,606 - 27,927 -

REALIZED GROSS PROFIT 6,062,064 17 5,182,483 15

OPERATING EXPENSES (Notes 15, 17 and 22) Selling and marketing expenses 760,460 2 596,377 2 General and administrative expenses 1,200,183 4 1,375,383 4 Research and development expenses 2,131,257 6 1,830,214 5

Total operating expenses 4,091,900 12 3,801,974 11

PROFIT FROM OPERATIONS 1,970,164 5 1,380,509 4

NON-OPERATING INCOME AND EXPENSES Interest income 154,425 - 126,559 - Other income 157,658 1 180,568 1 Gain on disposal of investments (Notes 4 and 11) 76,151 - 69,088 - Other expense (19,190) - (36,909) - Foreign exchange gain, net 107,254 - 154,866 - Impairment loss (Notes 4, 10, 12 and 13) (129,130) - (139,490) - Net loss on financial instruments at fair value through profit or loss (Note 4) (34,535) - (1,787) - Interest expense (21,313) - (28,024) - Share of profit of associates and joint ventures (Note 4) 978,415 3 1,360,568 4

Total non-operating income and expenses 1,269,735 4 1,685,439 5 (Continued)

114 Financial Highlights

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2014 2013 Amount % Amount %

PROFIT BEFORE INCOME TAX $ 3,239,899 9 $ 3,065,948 9

INCOME TAX EXPENSE (Notes 4 and 18) 418,187 1 314,926 1

NET PROFIT FOR THE YEAR 2,821,712 8 2,751,022 8

OTHER COMPREHENSIVE INCOME (Note 4) Exchange differences on translating foreign operations (Note 16) 66,064 - 88,358 - Unrealized gain on available-for-sale financial assets (Note 16) 248,114 1 1,023,953 3 Cash flow hedges (Note 16) - - 48,706 - Actuarial gain (loss) arising from defined benefit plans (Note 15) (24,801) - 140,228 - Share of other comprehensive income of associates and joint ventures (Note 16) 438,725 1 638,976 2 Income tax relating to components of other comprehensive income (loss) (Notes 15 and 18) 4,216 - (23,839) -

Other comprehensive income for the year 732,318 2 1,916,382 5

TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 3,554,030 10 $ 4,667,404 13

NET PROFIT ATTRIBUTABLE TO: Owners of the Corporation $ 2,558,290 7 $ 2,531,878 7 Non-controlling interests 263,422 1 219,144 1

$ 2,821,712 8 $ 2,751,022 8

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Corporation $ 3,223,882 9 $ 4,368,486 12 Non-controlling interests 330,148 1 298,918 1

$ 3,554,030 10 $ 4,667,404 13

EARNINGS PER SHARE (Notes 4 and 19) Basic $1.88 $ 1.86 Diluted $1.88 $ 1.86

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

(With Deloitte & Touche audit report dated March 24, 2015) (Concluded)

115 Financial Highlights

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Except Dividends Per Share)

Equity Attributable to Owners of the Company Other Equity Exchange Unrealized Gain Differences on (Loss) on Retained Earnings Translating Available-for- Unappropriated Foreign sale Financial Non-controlling Ordinary Shares Capital Surplus Legal Reserve Special Reserve Earnings Operations Assets Cash Flow Hedge Total Interests Total Equity

BALANCE AT JANUARY 1, 2013 $ 13,840,508 $ 6,373,509 $ 7,127,112 $ - $ 17,003,345 $ (368,073) $ (327,970) $ (48,706) $ 43,599,725 $ 2,505,351 $ 46,105,076

Special reserve under Rule No. 1010012865 issued by the FSC - - - 1,057,024 (1,057,024) ------

Appropriation of the 2012 earnings Legal reserve - - 215,644 - (215,644) ------Special reserve - - - 316,006 (316,006) ------Cash dividends - $0.9 per share - - - - (1,245,646) - - - (1,245,646) - (1,245,646)

Special reserve reversal - - - (22) 22 ------

Cash dividends distributed by subsidiaries ------(66,253) (66,253)

Actual acquisition of interest in subsidiaries - - - - (797) - - - (797) (24,242) (25,039)

Change in capital surplus from investments in associates and joint ventures accounted for using the equity method - 3,359 ------3,359 - 3,359

Net profit for the year ended December 31, 2013 - - - - 2,531,878 - - - 2,531,878 219,144 2,751,022

Other comprehensive income for the year ended December 31, 2013, net of income tax - - - - 100,796 560,282 1,126,824 48,706 1,836,608 79,774 1,916,382

Total comprehensive income for the year ended December 31, 2013 - - - - 2,632,674 560,282 1,126,824 48,706 4,368,486 298,918 4,667,404

BALANCE AT DECEMBER 31, 2013 13,840,508 6,376,868 7,342,756 1,373,008 16,800,924 192,209 798,854 - 46,725,127 2,713,774 49,438,901

Appropriation of the 2013 earnings Legal reserve - - 253,188 - (253,188) ------Cash dividends - $1.1 per share - - - - (1,522,456) - - - (1,522,456) - (1,522,456)

Special reserve reversal - - - (316,006) 316,006 ------

Cash dividends distributed by subsidiaries ------(85,108) (85,108)

Actual acquisition of interest in subsidiaries - - - - (94) - - - (94) (194) (288)

Change in capital surplus from investments in associates and joint ventures accounted for using the equity method - 15,501 ------15,501 - 15,501

Net profit for the year ended December 31, 2014 - - - - 2,558,290 - - - 2,558,290 263,422 2,821,712

Other comprehensive income for the year ended December 31, 2014, net of income tax - - - - (129,707) 558,352 236,947 - 665,592 66,726 732,318

Total comprehensive income for the year ended December 31, 2014 - - - - 2,428,583 558,352 236,947 - 3,223,882 330,148 3,554,030

BALANCE AT DECEMBER 31, 2014 $ 13,840,508 $ 6,392,369 $ 7,595,944 $ 1,057,002 $ 17,769,775 $ 750,561 $ 1,035,801 $ - $ 48,441,960 $ 2,958,620 $ 51,400,580

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

(With Deloitte & Touche audit report dated March 24, 2015)

116 Financial Highlights

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars)

2014 2013

CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax $ 3,239,899 $ 3,065,948 Adjustments for: Depreciation expenses 727,754 628,439 Amortization expenses 88,082 104,194 Net loss on fair value change of financial instruments at fair value through profit or loss 34,535 1,787 Interest expense 21,313 28,024 Interest income (154,425) (126,559) Dividend income (47,546) (43,526) Net loss on disposal of property, plant and equipment 11,354 16,913 (Gain) loss on disposal of investments (4,862) 39,225 Loss on disposal of associates and joint ventures 16,279 - Share of profit of associates and joint ventures (978,415) (1,360,568) Impairment loss 129,130 139,490 Realized gain on transactions with associates (8,606) (27,927) Unrealized net gain on foreign currency exchange (42,757) (28,172) Gain on disposal of investments in subsidiaries (4,603) - Changes in operating assets and liabilities Financial assets held for trading 295,858 (64,511) Notes receivable (34,819) 114,654 Accounts receivable 90,504 140,628 Receivables from related parties 71,695 (389,920) Other receivables 54,127 (76,816) Inventories 47,588 1,675,654 Other current assets 469,056 (459,140) Financial liabilities held for trading - (262,476) Notes and accounts payable (416,547) 345,390 Payables to related parties 15,764 104,601 Other payables 383,375 (397,230) Other current liabilities 9,660 (49,376) Accrued pension liabilities 8,105 29,116 Cash generated from operations 4,021,498 3,147,842 Income tax paid (274,307) (246,905)

Net cash generated from operating activities 3,747,191 2,900,937

CASH FLOWS FROM INVESTING ACTIVITIES Decrease in financial assets designated as at fair value through profit or loss upon initial recognition 102,000 215,452 (Increase) decrease in available-for-sale financial assets (189,286) 2,341,257 Acquisition of debt investments with no active market (980,584) (363,794) Proceeds from the repayments of principal of debt investments with no active market 291,748 - Acquisition of financial assets measured at cost (24,769) (11,128) (Continued)

117 Financial Highlights

CHINA MOTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars)

2014 2013

Proceeds from the disposal of financial assets measured at cost $ 53,361 $ 11,128 Acquisition of investments accounted for using the equity method (729,750) - Proceeds from the disposal of investments accounted for using the equity method 80,948 - Proceeds from the disposal of a subsidiary 984 - Proceeds from capital reduction by investees 103,371 219,375 Acquisition of property, plant and equipment (1,275,175) (1,132,653) Proceeds from the disposal of property, plant and equipment 34,317 35,411 Acquisition of intangible assets (92,650) (129,199) Acquisition of investment properties (686) - Decrease (increase) in other non-current assets 22,923 (118,861) Interest received 143,867 125,332 Dividends received 1,061,068 1,067,751

Net cash generated from (used in) investing activities (1,398,313) 2,260,071

CASH FLOWS FROM FINANCING ACTIVITIES Partial acquisition of interest in subsidiaries (288) (25,039) Cash dividends paid (1,522,456) (1,245,646) Decrease in short-term borrowings (331,393) (15,280) Decrease in short-term bills payable (219,618) (89,754) Proceeds of long-term borrowings 43,974 - Repayments of long-term borrowings - (11,218) Increase in other non-current liabilities 676 1,246 Interest paid (22,102) (30,651) Changes in non-controlling interests (85,108) (66,253)

Net cash used in financing activities (2,136,315) (1,482,595)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES 51,768 97,542

NET INCREASE IN CASH AND CASH EQUIVALENTS 264,331 3,775,955

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 10,947,278 7,171,323

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 11,211,609 $ 10,947,278

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

(With Deloitte & Touche audit report dated March 24, 2015) (Concluded)

118 Financial Highlights

CHINA MOTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

China Motor Corporation (the “Corporation”) manufactures and sells cars and related parts. Its stock is listed on the Taiwan Stock Exchange.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the board of directors and authorized for issue on March 23, 2015.

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

a. The amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC not yet effective.

Rule No. 1030029342 and Rule No. 1030010325 issued by the FSC, stipulated that the Corporation and its subsidiaries (collectively, the “Group”) should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers starting January 1, 2015.

New, Amended and Revised Effective Date Standards and Interpretations (the “New IFRSs”) Announced by IASB (Note)

Improvements to IFRSs (2009) - amendment to IAS 39 January 1, 2009 and January 1, 2010, as appropriate Amendment to IAS 39 “Embedded Derivatives” Effective for annual periods ended on or after June 30, 2009 Improvements to IFRSs (2010) July 1, 2010 and January 1, 2011, as appropriate Annual Improvements to IFRSs 2009-2011 Cycle January 1, 2013 Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7 July 1, 2010 Disclosures for First-time Adopters” Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed July 1, 2011 Dates for First-time Adopters” Amendment to IFRS 1 “Government Loans” January 1, 2013 Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and January 1, 2013 Financial Liabilities” Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” July 1, 2011 IFRS 10 “Consolidated Financial Statements” January 1, 2013 IFRS 11 “Joint Arrangements” January 1, 2013 IFRS 12 “Disclosure of Interests in Other Entities” January 1, 2013 (Continued)

119 Financial Highlights

New, Amended and Revised Effective Date Standards and Interpretations (the “New IFRSs”) Announced by IASB (Note)

Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated January 1, 2013 Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance” Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment January 1, 2014 Entities” IFRS 13 “Fair Value Measurement” January 1, 2013 Amendment to IAS 1 “Presentation of Other Comprehensive Income” July 1, 2012 Amendment to IAS 12 “Deferred Tax: Recovery of Underlying January 1, 2012 Assets” IAS 19 (Revised 2011) “Employee Benefits” January 1, 2013 IAS 28 (Revised 2011) “Investments in Associates and Joint January 1, 2013 Ventures” Amendment to IAS 32 “Offsetting Financial Assets and Financial January 1, 2014 Liabilities” IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine” January 1, 2013 (Concluded)

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

Except for the following, whenever applied, the initial application of the above 2013 IFRSs version and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers would not have any material impact on the Group’s accounting policies:

1) IFRS 12 “Disclosure of Interests in Other Entities”

IFRS 12 is a new disclosure standard and is applicable to entities that have interests in joint arrangements and associates. In general, the disclosure requirements in IFRS 12 are more extensive than in the current standards.

2) Revision to IAS 28 “Investments in Associates and Joint Ventures”

Revised IAS 28 requires when a portion of an investment in an associate meets the criteria to be classified as held for sale, that portion is classified as held for sale. Any retained portion that has not been classified as held for sale is accounted for using the equity method. Under current IAS 28, when a portion of an investment in associates meets the criteria to be classified as held for sale, the entire investment is classified as held for sale and ceases to apply the equity method.

Under revised IAS 28, when an investment in a joint venture becomes an investment in an associate, the Group continues to apply the equity method and does not remeasure the retained interest. Under current IAS 28, on the loss of joint control, the Group measures at fair value any investment the Group retains in the former jointly controlled entity. The Group recognizes in profit or loss any difference between the aggregate amounts of fair value of retained investment and proceeds from disposing of the part interest in the jointly controlled entity, and the carrying amount of the investment at the date when joint control is lost.

120 Financial Highlights

3) IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope.

The fair value measurements under IFRS 13 will be applied prospectively from January 1, 2015.

4) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 requires items of other comprehensive income to be grouped into those items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on related items of other comprehensive income are grouped on the same basis. Under current IAS 1, there were no such requirements.

The Group will retrospectively apply the above amendments starting from 2015. Items not expected to be reclassified to profit or loss are remeasurements of the defined benefit plans and the share of the remeasurements of the defined benefit plans of associates accounted for using the equity method. Items expected to be reclassified to profit or loss are the exchange differences on translating foreign operations, unrealized gains (loss) on available-for-sale financial assets, cash flow hedges, and share of the other comprehensive income (except the share of the remeasurements of the defined benefit plans) of associates and joint ventures accounted for using the equity method. However, the application of the above amendments will not result in any impact on the net profit for the year, other comprehensive income for the year (net of income tax), and total comprehensive income for the year.

5) Revision to IAS 19 “Employee Benefits”

Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminates the “corridor approach” permitted under current IAS 19 and accelerate the recognition of past service costs. The revision requires all remeasurements of the defined benefit plans to be recognized immediately through other comprehensive income in order for the net pension asset or liability to reflect the full value of the plan deficit or surplus.

Furthermore, the interest cost and expected return on plan assets used in current IAS 19 are replaced with a “net interest” amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. In addition, the revised IAS 19 introduces certain changes in the presentation of the defined benefit cost, and also includes more extensive disclosures.

On initial application of the revised IAS 19 in 2015, the Group would elect not to present 2014 comparative information about the sensitivity of the defined benefit obligation. Adjustments arising from initial application are not significant.

6) Amendments to IFRS 7 “Disclosure - Offsetting Financial Assets and Financial Liabilities”

The amendments to IFRS 7 require disclosure of information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under enforceable master netting arrangements and similar arrangements.

121 Financial Highlights

7) Amendments to IAS 32 “Offsetting Financial Assets and Financial Liabilities”

The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realization and settlement”.

8) Annual Improvements to IFRSs: 2009-2011 Cycle

Several standards including IAS 1 “Presentation of Financial Statements”, IAS 16 “Property, Plant and Equipment”, IAS 32 “Financial Instruments: Presentation” and IAS 34 “Interim Financial Reporting” were amended in this annual improvement.

The amendments to IAS 1 clarify that an entity is required to present a balance sheet as at the beginning of the preceding period when a) it applies an accounting policy retrospectively, or makes a retrospective restatement or reclassifies items in its financial statements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the balance sheet at the beginning of the preceding period. The amendments also clarify that related notes are not required to accompany the balance sheet at the beginning of the preceding period.

The amendments to IAS 16 clarify that spare parts, stand-by equipment and servicing equipment should be recognized in accordance with IAS 16 when they meet the definition of property, plant and equipment and otherwise as inventory.

The amendments to IAS 32 clarify that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12 “Income Taxes”.

The amendments to IAS 34 clarify that a measure of total liabilities for a reportable segment would be disclosed in interim financial reporting when such amounts are regularly provided to the chief operating decision maker of the Group and there has been a material change from the amounts disclosed in the last annual financial statements for that reportable segment.

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

The Group has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced their effective dates.

Effective Date New IFRSs Announced by IASB (Note 1)

Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 (Note 4) IFRS 9 “Financial Instruments” January 1, 2018 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets January 1, 2016 (Note 3) between an Investor and its Associate or Joint Venture” Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities: January 1, 2016 Applying the Consolidation Exception” Amendment to IFRS 11 “Accounting for Acquisitions of Interests in January 1, 2016 Joint Operations” (Continued)

122 Financial Highlights

Effective Date New IFRSs Announced by IASB (Note 1)

IFRS 14 “Regulatory Deferral Accounts” January 1, 2016 IFRS 15 “Revenue from Contracts with Customers” January 1, 2017 Amendment to IAS 1 “Disclosure Initiative” January 1, 2016 Amendments to IAS 16 and IAS 38 “Clarification of Acceptable January 1, 2016 Methods of Depreciation and Amortization” Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” January 1, 2016 Amendment to IAS 19 “Defined Benefit Plans: Employee July 1, 2014 Contributions” Amendment to IAS 27 “Equity Method in Separate Financial January 1, 2016 Statements” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount January 1, 2014 Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of January 1, 2014 Hedge Accounting” IFRIC 21 “Levies” January 1, 2014 (Concluded)

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

Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.

Note 3: Prospectively applicable to transactions occurring in annual periods beginning on or after January 1, 2016.

Note 4: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Group’s accounting policies, except for the following:

1) IFRS 9 “Financial Instruments”

Recognition and measurement 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;

123 Financial Highlights

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 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.

The impairment of financial assets

IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily 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.

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.

2) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that such disclosure of recoverable amounts is required only when an impairment loss has been recognized or reversed during the period. Furthermore, the Group is required to disclose the discount rate used in measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique.

3) Annual Improvements to IFRSs: 2010-2012 Cycle

Several standards including IFRS 8 “Operating Segments”, IFRS 13 “Fair Value Measurement”, and IAS 24 “Related Party Disclosures” were amended in this annual improvement.

The amended IFRS 8 requires an entity to disclose the judgments made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have “similar economic characteristics”. The amendment also clarifies that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segments’ assets are regularly provided to the chief operating decision-maker.

124 Financial Highlights

IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of not discounting is immaterial.

IAS 24 was amended to clarify that a management entity providing key management personnel services to the Group is a related party of the Group. Consequently, the Group is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.

4) Annual Improvements to IFRSs: 2011-2013 Cycle

The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32.

5) Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization”

The entity should use appropriate depreciation and amortization method to reflect the pattern in which the future economic benefits of the property, plant and equipment and intangible asset are expected to be consumed by the entity.

The amended IAS 16 “Property, Plant and Equipment” requires that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate. The amended standard does not provide any exception from this requirement.

The amended IAS 38 “Intangible Assets” requires that there is a rebuttable presumption that an amortization method that is based on revenue that is generated by an activity that includes the use of an intangible asset is not appropriate. This presumption can be overcome only in the following limited circumstances:

a) In which the intangible asset is expressed as a measure of revenue (for example, the contract that specifies the entity’s use of the intangible asset will expire upon achievement of a revenue threshold); or

b) When it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated.

An entity should apply the aforementioned amendments prospectively for annual periods beginning on or after the effective date.

6) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

The amendments stipulated that, when an entity sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when an entity loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full.

125 Financial Highlights

Conversely, when an entity sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate or joint venture, i.e. the entity’s share of the gain or loss is eliminated. Also, when an entity loses control of a subsidiary that does not contain a business but retains significant influence or joint control in an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate or joint venture, i.e. the entity’s share of the gain or loss is eliminated.

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs as endorsed by the FSC.

b. 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. Historical cost is based on the fair value of the consideration given in exchange for assets.

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

Current assets include:

1) Assets held primarily for the purpose of trading;

2) Assets expected to be realized within 12 months from the balance sheet date; and

3) Cash and cash equivalents.

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;

2) Liabilities due to be settled within 12 months after the reporting period; and

3) Liabilities which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

All other assets and liabilities are classified as non-current.

d. Basis of consolidation

1) Principles for preparing consolidated financial statements

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

126 Financial Highlights

Income and expenses of subsidiaries acquired or disposed 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, as appropriate.

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

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

Total comprehensive income of subsidiaries is attributed to the owners of the Corporation 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 Corporation.

2) Entities included in the consolidated financial statements

% of Ownership December 31 Investor Investee Main Business 2014 2013

China-Motor Corporation Kian Shen Corporation The production of frame of heavy duty car and 43.87 43.87 mold China Motor Corporation Investment Investment of production and service industries 100.00 99.99 Hwa Wei Holdings Investment of production and service industries 100.00 100.00 China Engine Manufacture of automobile engine and parts 52.11 52.11 Sino Diamond Motors Sales and providing after sales service of 100.00 100.00 vehicle Hwa Hann Sales of automobile parts 99.99 99.99 Alliance Investment & Management Investment 100.00 100.00 Gatetech Technology Aluminum-magnesium alloy casting industry 72.81 72.81 China Motor Investment Investment 100.00 100.00 Hwa Chung Motors Sales of vehicle and parts 100.00 100.00 COC Tooling & Stamping Production of mold, fixture and gauge of 49.76 49.76 vehicle. Kian Shen Kian Shen Investment Overseas investment of production and service 43.87 43.87 industries China Engine Advance Power Machinery Co., Ltd. Manufacture of automobile engine and parts 52.11 52.11 Advance Power Investment Co., Ltd. Investment and sales 52.11 52.11 Sino Diamond Motors Hwa Yu Co., Ltd. Overseas investment of production and service 100.00 100.00 industries Brilliant Insight International Consulting and services 100.00 - Consultancy Service Co., Ltd. Gatetech Technology Gatetech Holding Co., Ltd. (GH) Investment 72.81 72.81 Alliance Investment & Greentrans Investment Co., Ltd. Investment 100.00 100.00 Management Hwa Chung Motors Greentrans Co., Ltd. Sales of motorcycle and parts 100.00 100.00 Linwei Motor Co., Ltd. Sales of second-hand vehicle 100.00 100.00 COC Tooling & Y. M. Hi-Tech Industry Ltd. Steel cutting 29.86 29.86 Stamping Shye Shinn Corporation Investment 49.76 49.76 Kian Shen Investment Kian Shen Investment Hong Kong Co., Investment 43.87 43.87 Limited (KSIHK) Hwa Yu Co., Ltd. Hwa Lin Investments Ltd. Overseas investment of production and service 100.00 100.00 industries Beijing Jun Hua Information Consulting and services 100.00 100.00 Fujian Rui Hua Consulting Co., Ltd. Consulting and services 100.00 100.00 GH Gatetech International Co., Ltd. (GI) Investment 72.81 72.81 Greentrans Investment Jiangsu Greentrans Automotive Parts Production and sales of parts of electronic 100.00 100.00 Co., Ltd. Co., Ltd. motorcycle Shye Shinn Corporation Zhengzhou Tooling & Stamping Co., Production of mold, fixture and gauge of 29.86 29.86 Ltd. vehicle. GI Gatetech Technology Suchow Aluminum-magnesium alloy casting industry 72.81 72.81 Sino Diamond Investment Dongguan Huayi Motor Maintenance Maintenance and supplementary services of 100.00 100.00 Co., Ltd. vehicle Tianjin Hwarui Maintenance Co., Ltd. Maintenance and supplementary services of 100.00 100.00 vehicle (Continued)

127 Financial Highlights

% of Ownership December 31 Investor Investee Main Business 2014 2013

Sichuan Huafeng Hanwei Cars Service Maintenance and supplementary services of 100.00 100.00 And Maintenance Co., Ltd. vehicle Guangzhou Huayou Motor Maintenance Maintenance and supplementary services of 100.00 100.00 Co., Ltd. vehicle Dongguan Huayi Motor Yangjiang Huaching Motor Co., Ltd. Sales and providing after sales service of - - Maintenance Co., Ltd. vehicle Dongguan Huashun Motor Sale Co., Ltd. Sales and providing after sales service of 100.00 100.00 vehicle Tianjin Hwarui Tianjin Hwahong Sale Co., Ltd. Sales and providing after sales service of 100.00 100.00 Maintenance Co., Ltd. vehicle Sichuan Huafeng Hanwei Sichuan Houwei Cars Service and Sales and providing after sales service of 100.00 100.00 Cars Service and Maintenance Co., Ltd. vehicle Maintenance Co., Ltd. Sichuan Ling wei Cars Service and Sales and providing after sales service of 100.00 100.00 Maintenance Co., Ltd. vehicle Guangzhou Huayou Guangzhou Huayou Motor Sale Co., Ltd. Sales and providing after sales service of 100.00 100.00 Motor Maintenance vehicle Co., Ltd. (Concluded)

The Group does not hold more than 50% interest in Kian Shen Corporation, CoC Tooling & Stamping and their subsidiaries, but it has control and takes the risk. Thus, their financial statements were included in the consolidated financial statements.

The Group invested Yangjiang Huaching through a third party, but it has control and takes the risk. Thus, Yangjiang Huaching’s financial statements were included in the consolidated financial statements.

The Group disposed of Yangjiang Huaching in June 2014. The consolidated financial statements for the year ended December 31, 2014 was included this subsidiary’s revenue and expense before disposal.

Brilliant Insight International was invested in and established in January 2014, so it was not included in the consolidated financial statements of 2013.

The board of Hwa Hann had decided to dissolve the corporation in April 2009. The liquidation was not completed as of the year ended December 31, 2014.

For the relationship between the Corporation and its controlled entities as of December 31, 2014, please refer to Attachment 10.

e. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are recognized in profit or loss as incurred.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree in excess of the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Conversely, after re-assessment, if the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree, the excess is recognized immediately in profit or loss as a bargain purchase gain.

Non-controlling interests are initially measured at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets.

128 Financial Highlights f. 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 period in which they arise.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are 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, joint ventures or branches operations in other countries or currencies used different with the Corporation) 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 period. Exchange differences arising are recognized in other comprehensive income.

On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Corporation are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Corporation losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss. g. Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date. h. Investments accounted for using the equity method

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. Joint venture arrangements that involve the establishment of a separate entity in which ventures have joint control over the economic activity of the entity are referred to as jointly controlled entities.

The results and assets and liabilities of associates and jointly controlled entities are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, investments in an associate and jointly controlled entity 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 and jointly controlled entity. The Group also recognizes the changes in the Group’s share of equity of associates and jointly controlled entities attributable to the Group. The Group’s

129 Financial Highlights

equity in the investees’ net income or net loss is calculated using the treasury stock method when investees also have investments in the Group (reciprocal holding).

When the Group subscribes for additional new shares of the associate and jointly controlled entity at a percentage different from its current ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate and jointly controlled entity. The Group records this difference as an adjustment to investments, with the corresponding amount charged or credited to capital surplus. If the Group’s ownership interest is reduced due to the additional subscription for the new shares of an associate and jointly controlled entity, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate and jointly controlled entity is reclassified to profit or loss on the same basis as would have been required had the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient for this debiting, the shortage is debited to retained earnings.

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

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 and jointly controlled entity recognized 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 forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which it ceases to have significant influence over the associate and jointly controlled entity. Any retained investment is measured at fair value at that date. The difference between the previous carrying amount of the associate and the jointly controlled entity attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and the jointly controlled entity. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate and the jointly controlled entity on the same basis as would be required if that associate and jointly controlled entity had directly disposed of the related assets or liabilities.

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

i. Property, plant and equipment

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

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such properties are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.

130 Financial Highlights

Depreciation expenses, except those for molds (included as machinery) which are amortized using the production unit method, are computed using the straight-line method over service lives. Each significant part is depreciated separately. 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.

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. j. Investment properties

Investment properties are properties held for earning rentals or for capital appreciation.

Investment properties are measured initially at cost. After initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation expense is computed using the straight-line method over the service lives.

Any gain or loss arising on the derecognition of the property is calculated as the difference between the net disposal proceeds and the carrying amount of the asset and is included in profit or loss in the period in which the property is derecognized. k. Intangible assets

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally intangible asset arising from the development phase of an internal project is recognized if, and only if all of the following have been demonstrated:

1) The technical feasibility of completing the intangible asset so that it will be available for use or sale;

2) The intention to complete the intangible asset and use or sell it;

3) The ability to use or sell the intangible asset;

4) How the intangible asset will generate probable future economic benefits;

5) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

6) The ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally generated intangible assets is the sum of the expenditures incurred from the date when the intangible asset first meets the recognition criteria listed above. After initial recognition, the intangible asset is measured at cost less accumulated amortization and accumulated impairment loss. l. 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 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.

131 Financial Highlights

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication of asset impairment.

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

When an impairment reverses, 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 that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

m. Financial instruments

Financial assets and financial liabilities are recognized when a group entity 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 fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1) Financial assets

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

a) Measurement category

Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, available-for-sale financial assets, and loans and receivables.

i. Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

A financial asset may be designated as at fair value through profit or loss upon initial recognition if:

i) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

ii) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Corporation’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

iii) The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.

132 Financial Highlights

ii. 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.

Available-for-sale financial assets are measured at fair value. Dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

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

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

iii. Loans and receivables

Loans and receivables (including cash and cash equivalent, trade receivables, other financial assets, refundable deposits, 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. b) Impairment of financial assets

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

For financial assets carried at amortized cost, such as trade receivables and other receivables assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables, and other situation.

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

133 Financial Highlights

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

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

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for that financial asset because of financial difficulties.

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

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

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

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

c) Derecognition of financial assets

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

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

2) Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts and convertible bonds.

134 Financial Highlights

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 unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at fair value through profit or loss. n. Hedge accounting

The Group designates certain hedging instruments for 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 relating to the ineffective portion is recognized immediately in profit or loss.

The associated gains or losses that were recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in the same period when the hedged item affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the associated gains and losses that were recognized in other comprehensive income are removed from equity and are included in the initial cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued prospectively when the Group revokes the designated hedging relationship, or when the hedging instrument expires or is sold, terminated, or exercised, or when it 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. o. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales returns are recognized at the time of sale provided the seller can reliably estimate future returns and recognizes a liability for returns based on previous experience and other relevant factors.

1) Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

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

b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

c) The amount of revenue can be measured reliably;

135 Financial Highlights

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

e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

2) Rendering of services

Service income including that from operating service provided under service concession arrangements is recognized when services are provided.

3) Royalties

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Royalties determined on a time basis are recognized on a straight-line basis over the period of the agreement. Royalty arrangements that are based on production, sales and other measures are recognized by reference to the underlying arrangement.

4) Dividend and interest income

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

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

p. Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching 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 purchase, 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.

q. Retirement benefit costs

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

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method. All actuarial gains and losses on the defined benefit obligation are recognized immediately in other comprehensive income. Past service cost is recognized immediately to the extent that the benefits are already vested, or is amortized on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognized in the consolidated balance sheets represents the present value of the defined benefit obligation, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the unrecognized past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

136 Financial Highlights r. Taxation

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

1) Current tax

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

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

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carry forward and unused tax credits for purchases of machinery and equipment to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, 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 amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the 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 that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred tax for the year

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.

137 Financial Highlights

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.

a. Estimated impairment of loans and receivables

When there is objective evidence of impairment loss, the Group 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 (excluding future credit losses that have not been incurred) 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.

b. Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

c. Income taxes

The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal takes place.

d. Recognition and measurement of defined benefit plans

Accrued pension liabilities and the resulting pension expense under defined benefit pension plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and long-term average future salary increase. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

e. Write-down of inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value was based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

f. Useful lives of property, plant and equipment

The Group reviews the estimated useful lives, the depreciation method and the residual value of property, plant and equipment. Significant changes in depreciation methods influence the recognition of related depreciation expenses.

138 Financial Highlights

g. Impairment of financial assets measured at cost and investment in the associate

The Group immediately recognizes impairment loss on its net investment in the associate when there is any indication that the investment may be impaired and the carrying amount may not be recoverable. The Group’s management evaluates the impairment based on the estimated future cash flow expected to be generated by the associate, including growth rate of sale and capacity of production facilities estimated by the associate’s management. The Group also takes into consideration the market conditions and industry development to evaluate the appropriateness of assumptions.

h. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Corporation estimates the recoverable amount of the cash-generating unit to which the asset belongs. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

6. CASH AND CASH EQUIVALENTS

December 31 2014 2013

Cash Cash on hand $ 9,597 $ 12,588 Checking accounts and demand deposits 1,073,575 917,563 1,083,172 930,151 Cash equivalents Time deposits 7,370,496 6,853,894 Repurchase agreements collateralized by bonds 2,757,941 3,163,233 10,128,437 10,017,127

$ 11,211,609 $ 10,947,278

Cash equivalents, for the purpose of meeting short-term cash commitments, consist of highly liquid time deposits and repurchase agreements collateralized by bonds that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

The interest rate intervals of cash on bank and Repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

December 31 2014 2013

Checking accounts and demand deposits 0.01%-0.66% 0.01%-0.35% Time deposits 0.65%-4% 0.65%-3.4% Repurchase agreements collateralized by bonds 0.58% 0.62%-3.1%

139 Financial Highlights

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31 2014 2013

Financial assets at FVTPL - current

Financial assets designated as at FVTPL Convertible bonds $ 59,700 $ 90,187 Asset swaps - 38,331 Others - 34,220 59,700 162,738 Financial assets held for trading Non-derivative financial assets Domestic listed shares 290,952 372,214 Mutual funds 280,435 528,584 571,387 900,798 Derivative financial assets Preferred stock options 56 -

$ 631,143 $1,063,536

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31 2014 2013

Current

Domestic investments Mutual funds $ 1,446,286 $ 1,228,178 Listed shares 110,666 15,189

$ 1,556,952 $1,243,367

Non-current

Domestic investments Unlisted shares $ 812,718 $ 584,206 Listed shares 50,560 78,655 863,278 662,861 Foreign investments Listed shares - 28,665

$ 863,278 $ 691,526

9. INVENTORIES

December 31 2014 2013

Merchandise $ 557,274 $ 847,831 Finished goods 2,264,998 2,169,834 (Continued)

140 Financial Highlights

December 31 2014 2013

Work in progress $ 471,123 $ 471,785 Raw materials 1,875,421 1,750,169 Material in transit 535,735 512,403

$ 5,704,551 $5,752,022 (Concluded)

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2014 and 2013 were $29,115,654 thousand and $29,447,799 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2014 and 2013 included the reversal of inventory write-ups of $25,925 thousand and inventory write-downs $15,060 thousand, respectively. Previous write-downs were reversed as a result of disposal of obsolete inventories.

10. FINANCIAL ASSETS MEASURED AT COST

December 31 2014 2013

Non-current

Domestic unlisted common shares $ 341,028 $ 457,965 Overseas unlisted common shares 125,916 176,411 Overseas unlisted preference shares 1,281 35,356

$ 468,225 $669,732

Classified according to financial asset measurement categories Available-for-sale financial assets $ 468,225 $669,732

Management believed that the above unlisted equity investments held by the Group, whose fair value cannot be reliably measured due to the range of reasonable fair value estimates was so significant; therefore they were measured at cost less impairment at the end of reporting period.

The Group disposed of certain financial assets measured at cost with carrying amounts of $48,499 thousand and $50,353 thousand during 2014 and 2013, respectively, recognizing disposal gain of $4,862 thousand and disposal loss of $39,225 thousand respectively.

The Group evaluated the invested corporations by future cash flows and market rate of return and recognized impairment loss $114,717 thousand and $111,221 thousand during 2014 and 2013, respectively.

11. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

December 31 2014 2013

Investments in associates $ 21,002,114 $ 20,458,129 Investments in jointly controlled entities 6,093,723 5,281,637

$ 27,095,837 $ 25,739,766

141 Financial Highlights

a. Investments in associates

December 31 Name of Associate 2014 2013

Listed companies Yulon $ 11,341,031 $ 10,836,574 Unlisted companies Fortune Motors 3,720,297 3,622,593 Hua-Chuang Automobile Information Technical Center 1,945,696 1,971,104 Tokio Marine Newa Insurance 1,397,974 1,313,152 ROC-Spicer 1,266,698 1,206,286 Tai Yuen Venture Capital Investment 395,782 435,862 Uni Auto Parts Manufacture 352,470 313,263 Shung Ye Motors 340,294 347,418 Sin Gan 105,025 278,041 Sin Jiang Enterprises 95,291 92,651 Yulon IT Solutions 22,414 22,043 Fu Yu Venture Capital Investment 19,142 19,142 9,661,083 9,621,555

$ 21,002,114 $ 20,458,129

Ownership % December 31 Name of Associate 2014 2013

Listed companies Yulon 16.67 16.67 Unlisted companies Fortune Motors 41.93 41.92 Hua-Chuang Automobile Information Technical Center 37.76 37.76 Tokio Marine Newa Insurance 20.57 20.57 ROC-Spicer 29.00 29.00 Tai Yuen Venture Capital Investment 49.50 49.50 Uni Auto Parts Manufacture 15.00 15.00 Shung Ye Motors 40.00 40.00 Sin Gan 24.67 44.45 Sin Jiang Enterprises 20.01 20.01 Yulon IT Solutions 43.85 43.85 Fu Yu Venture Capital Investment 14.81 14.81

The investments in Yulon, Uni Auto Parts Manufacture and Fu Yu Venture Capital Investment were accounted for by the equity method although the Group’s equity interest in each of those companies was less than 20% of their outstanding common stocks since the Group exercises significant influence on their financial and operating decisions.

In April 2013, the board of Fu Yu Venture Capital Investment decided to dissolve this company. The liquidation was still ongoing at the end of 2014.

Income and other comprehensive income of investments accounted for using equity method of 2014 and 2013, respectively, are referred to the associates’ audited financial statements for the same period.

142 Financial Highlights

The Group sold its entire holding of Sin Gan’s shares-representing a 19.78% equity interest-to a subsidiary of Yulon in December 2014 and recognized a realized loss of $16,279 thousand on this sale. (The loss of $16,279 thousand consisted of the proceeds of $80,948 thousand on this sale less the book value of the disposal of investments $100,512 thousand and the deferred unrecognized loss of $3,285 thousand on this disposal.)

Fair value of investments in associates for which there are published price quotation was summarized as follow, based on the closing prices of those investments at the balance sheet date:

December 31 Name of Associate 2014 2013

Yulon $ 12,193,610 $ 14,160,321

The summarized financial information in respect of the Group’s associates is set out below:

December 31 2014 2013

Total assets $ 281,487,671 $ 254,412,472 Total liabilities $ 171,167,911 $ 147,599,615

2014 2014

Revenue for the year ended December 31 $ 181,136,514 $ 149,475,637 Profit for the year ended December 31 $ 4,642,235 $ 4,370,614 Group’s share of profit and other comprehensive income (loss) of associates for the year ended December 31 $ 1,681,382 $ 1,579,590 b. Investment in joint controlled entities

December 31 Name of Jointly Controlled Entity 2014 2013

Unlisted companies Soueast-motor Co., Ltd. $ 1,861,949 $ 2,155,047 Daimler Vans Hong Kong Ltd. 1,238,121 844,923 Guangzhou NTN-YULON Drivertrain Co., Ltd. 1,210,945 991,695 Fuzhou Fushiang Motor Industrial Co., Ltd. 637,547 605,285 Xiangyang NTN-YULON Drivertrain 413,926 - Xiamen King-Long Kian-Shen Frame Co., Ltd. 302,107 260,518 China Engine (Fujian) Corporation Ltd. 208,060 197,052 Zhejiang Kangda Motor Industry And Trading Co., Ltd. 199,119 178,341 Suzhou Fulgent Automobile Service Co., Ltd. 21,949 41,960 Jiang Su Hui Feng Vehicle Service Co., Ltd. - 6,816

$ 6,093,723 $ 5,281,637

143 Financial Highlights

Ownership % December 31 Name of Jointly Controlled Entity 2014 2013

Unlisted companies Soueast-motor Co., Ltd. 25.00 25.00 Daimler Vans Hong Kong Ltd. 32.45 32.45 Guangzhou NTN-YULON Drivertrain Co., Ltd. 40.00 40.00 Fuzhou Fushiang Motor Industrial Co., Ltd. 35.00 35.00 Xiangyang NTN-YULONG Drivertrain 40.00 - Xiamen King-Long Kian-Shen Frame Co., Ltd. 50.00 50.00 China Engine (Fujian) Corporation Ltd. 38.03 38.03 Zhejiang Kangda Motor Industry And Trading Co., Ltd. 24.50 24.50 Suzhou Fulgent Automobile Service Co., Ltd. 35.00 35.00 Jiang Su Hui Feng Vehicle Service Co., Ltd. 35.00 35.00

The Group participated in the capital increase by cash of Daimler Vans Hong Kong Ltd. in July 2014 and invested $317,533 thousand (EUR 7,788 thousand) in this entity.

The investments accounted for by the equity method and the share of profit or loss and other comprehensive income of those investments for the years ended December 31, 2014 and 2013 was based on the associates’ financial statements audited by the auditors for the same years.

The summarized financial information in respect of the Group’s jointly controlled entities is set out below:

December 31 2014 2013

Current assets $ 5,581,806 $ 6,861,224 Non-current assets $ 4,775,297 $ 3,993,348 Current liabilities $ 3,989,281 $ 5,268,150 Non-current liabilities $ 308,555 $ 334,425

2014 2013

Profit (loss) for the year ended December 31 $ (63,865) $ 424,256 Other comprehensive gain (loss) for the year ended December 31 $ 127,362 $ (13,121)

12. PROPERTY, PLANT AND EQUIPMENT

Land Other Property in Land Improvement Buildings Machinery Equipment Construction Total

Cost

Balance at January 1, 2013 $ 2,144,980 $ 101,310 $ 4,587,609 $ 23,724,457 $ 1,691,647 $ 397,673 $ 32,647,676 Additions - 152 22,361 66,913 112,166 931,061 1,132,653 Disposals (6,368 ) - (5,125 ) (368,405 ) (117,723 ) (528 ) (498,149 ) Reclassification (13,833 ) 2,668 13,388 628,383 19,573 (664,012 ) (13,833 ) Effect of foreign currency exchange differences - - (2,164 ) (13,553 ) (26,223 ) 382 (41,558 )

Balance at December 31, 2013 $ 2,124,779 $ 104,130 $ 4,616,069 $ 24,037,795 $ 1,679,440 $ 664,576 $ 33,226,789 (Continued)

144 Financial Highlights

Land Other Property in Land Improvement Buildings Machinery Equipment Construction Total

Accumulated depreciation and impairment

Balance at January 1, 2013 $ 89,779 $ 3,204,479 $ 22,498,824 $ 1,368,223 $ - $ 27,161,305 Disposals - (1,372 ) (366,114 ) (78,339 ) - (445,825 ) Depreciation expense and impairment losses 2,399 124,238 395,019 91,089 - 612,745 Effect of foreign currency exchange differences - 2,869 (77,162 ) 20,269 - (54,024 )

Balance at December 31, 2013 $ 92,178 $ 3,330,214 $ 22,450,567 $ 1,401,242 $ - $ 27,274,201

Carrying amounts at December 31, 2013 $ 2,124,779 $ 11,952 $ 1,285,855 $ 1,587,228 $ 278,198 $ 664,576 $ 5,952,588

Cost

Balance at January 1, 2014 $ 2,124,779 $ 104,130 $ 4,616,069 $ 24,037,795 $ 1,679,440 $ 664,576 $ 33,226,789 Additions - 222 21,378 51,935 102,943 1,098,697 1,275,175 Disposals - - (229 ) (688,797 ) (94,563 ) (1,956 ) (785,545 ) Reclassification 350 805 124,686 853,781 34,460 (1,016,375 ) (2,293 ) Effect of foreign currency exchange differences - - 37,799 (7,190 ) 64,239 4,301 99,149

Balance at December 31, 2014 $ 2,125,129 $ 105,157 $ 4,799,703 $ 24,247,524 $ 1,786,519 $ 749,243 $ 33,813,275

Accumulated depreciation and impairment

Balance at January 1, 2014 $ 92,178 $ 3,330,214 $ 22,450,567 $ 1,401,242 $ - $ 27,274,201 Disposals - (182 ) (675,119 ) (64,172 ) - (739,473 ) Depreciation expense and impairment losses 2,704 120,951 512,078 88,517 - 724,250 Effect of foreign currency exchange differences - 10,688 48,674 4,203 - 63,565

Balance at December 31, 2014 $ 94,882 $ 3,461,671 $ 22,336,200 $ 1,429,790 $ - $ 27,322,543

Carrying amounts at December 31, 2014 $ 2,125,129 $ 10,275 $ 1,338,032 $ 1,911,324 $ 356,729 $ 749,243 $ 6,490,732 (Concluded)

The estimated future cash flows expected to arise from the related machinery was decreased, since several types of vehicle went out of production. Thus, the Group recognized impairment loss of $11,820 thousand in 2014.

The above items of property, plant and equipment were depreciated on a straight-line basis over the estimated useful life of the asset:

Category Year

Land improvement 3-20 years Buildings 2-60 years Machinery 2-24 years Other equipment 2-17 years

The amount set for fixed assets pledged as collateral is shown in Note 23.

145 Financial Highlights

13. INVESTMENT PROPERTIES

Cost

Balance at January 1, 2013 $ 1,802,028 Transferred from property, plant and equipment 13,833

Balance at December 31, 2013 $ 1,815,861

Accumulated depreciation and impairment

Balance at January 1, 2013 $ (318,672) Depreciation expense (15,694) Impairment losses (25,000)

Balance at December 31, 2013 $ (359,366)

Carrying amounts at December 31, 2013 $ 1,456,495

Cost

Balance at January 1, 2014 $ 1,815,861 Additions 686

Balance at December 31, 2014 $ 1,816,547

Accumulated depreciation and impairment

Balance at January 1, 2014 $ (359,366) Depreciation expense (15,324)

Balance at December 31, 2014 $ (374,690)

Carrying amounts at December 31, 2014 $ 1,441,857

The investment properties held by the Group were depreciated over their estimated 10-60 years useful life, using the straight-line method.

The fair value of investment properties of the Group were $2,407,586 thousand and $2,354,850 thousand as of December 31, 2014 and 2013, respectively. Except for a part of investment properties appraised by the independent valuer, Po Hung Chen, as of December 31, 2014, others as of December 31, 2014 and 2013 were appraised by the management using evaluation model which the market participants frequently used. The valuer’s valuation was reference to similar properties’ marker transaction and the valuer used weighted analysis of cost and revenue method (assuming discount rate is 3.22% and capitalization rate is 2.24%). According to the valuation result, the Group recognized $25,000 thousand of impairment losses in 2013.

The amount set for fixed assets pledged as collateral is shown in Note 23.

146 Financial Highlights

14. SHORT-TERM BORROWINGS

December 31 2014 2013

Secured borrowings

Bank loans $ 510,000 $ 556,000

Unsecured borrowings

Fiduciary loans 139,737 412,034

$ 649,737 $968,034

a. The range of interest rate on bank loans was 1.14%-1.86% and 1.15%-2% per annum as of December 31, 2014 and 2013, respectively.

b. The range of interest rate on line of credit borrowings was 1.2%-2.27% and 1.4%-7.2% per annum as of December 31, 2014 and 2013, respectively.

15. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Corporation and Kian Shen, China Engine, Advance Power Machinery Co., Ltd., CMC Investment, Sino Diamond Motors, COC Tooling & Stamping, Y. M. Hi-Tech Industry Ltd., Gatetech Technology and Ling Wei Motors of 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.

Subsidiaries in Mainland China contribute a percentage of salaries as pensions which is following the rule of local government

b. Defined benefit plans

The Corporation and Kian Shen, China Engine, Sino Diamond Motors, COC Tooling & Stamping, Y. M. Hi-Tech Industry Ltd. and Gatetech Technology of the Group adopted the defined benefit plan under the Labor Standards Law, under which pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The 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.

The plan assets are invested in domestic (foreign) equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of Bureau of Labor Funds, Ministry of Labor or under the mandated management. However, in accordance with Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund the return generated by employees' pension contribution should not be below the interest rate for a 2-year time deposit with local banks.

147 Financial Highlights

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

December 31 2014 2013

Discount rates 1.75%-2% 1.5%-1.875% Expected return on plan assets 1.75%-2% 1.2%-2% Expected return on reimbursement rights 1%-2.5% 1%-2.5%

The assessment of the overall expected rate of return was based on historical return trends and analysts’ predictions of the market for the asset over the life of the related obligation, by reference to the aforementioned use of the plan assets and the impact of the related minimum return.

Amounts recognized in profit or loss in respect of these defined benefit plans are as follows:

For the Year Ended December 31 2014 2013

Service cost $ 50,901 $56,248 Interest cost 40,909 36,983 Expected return on plan assets (2,974) (2,619) Past service cost 206 -

$ 89,042 $90,612

Defined benefit expenses of $1,503 thousand in 2014 and $2,001 thousand in 2013 referred to associates and were accounted for as the Corporation’s payment made on behalf of others.

An analysis of the defined benefit plans by function is as follows:

For the Year Ended December 31 2014 2013

An analysis by function Operating cost $ 50,991 $52,160 Selling and marketing expenses 3,103 3,676 General and administrative expenses 8,782 8,202 Research and development expenses 24,663 24,573

$ 87,539 $88,611

Actuarial gains and losses recognized in other comprehensive income (net of income tax) for the years ended December 31, 2014 and 2013 was $20,585 thousand in loss and $116,389 thousand in gain, respectively. The cumulative amount of actuarial losses recognized in other comprehensive income as of December 31, 2014 and 2013 was $127,071 thousand and $106,486 thousand, respectively.

148 Financial Highlights

The amount included in the consolidated balance sheet arising from the Group’s obligation in respect of its defined benefit plans was as follows:

December 31 2014 2013

Present value of funded defined benefit obligation $ 2,231,517 $ 2,193,263 Fair value of plan assets (147,356) (142,008)

Accrued pension liabilities $ 2,084,161 $2,051,255

Movements in the present value of the defined benefit obligations were as follows:

2014 2013

Opening defined benefit obligation $ 2,193,263 $ 2,295,237 Service cost 50,901 56,248 Interest cost 40,909 36,983 Actuarial losses (gains) 25,038 (141,150) Liabilities extinguished on settlements - (2,238) Past service cost 206 - Benefits paid (78,800) (51,817)

Closing defined benefit obligation $ 2,231,517 $ 2,193,263

Movements in the fair value of the plan assets were as follows:

2014 2013

Opening fair value of plan assets $ 142,008 $ 132,870 Expected return on plan assets 2,974 2,619 Actuarial gains (losses) 237 (922) Contributions from the employer 34,382 30,525 Benefits paid (32,245) (23,010) Assets distributed on settlements - (74)

Closing fair value of plan assets $ 147,356 $ 142,008

Actual returns on plan assets for the years ended December 31, 2014 and 2013 were $3,211 thousand and $1,697 thousand, respectively.

The percentage of plan assets at the end of the reporting period for each category was disclosed based on the information announced by Bureau of Labor Funds, Ministry of Labor:

December 31 2014 2013

Equity instruments 49.69% 44.77% Cash 19.12% 22.86% Fix-income investment 14.46% 18.11% Debt instruments 11.92% 9.37% Others 4.81% 4.89%

100.00% 100.00%

149 Financial Highlights

The Group chose to disclose the history of experience adjustments as the amounts determined for each accounting period prospectively from the date of transition to IFRSs (January 1, 2012):

December 31, December 31, December 31, January 1, 2014 2013 2012 2012

Present value of defined benefit obligation $ 2,231,517 $ 2,193,263 $ 2,295,237 $ 2,004,049 Fair value of plan assets $ 147,356 $ 142,008 $ 132,870 $ 131,315 Deficit $ 2,084,161 $ 2,051,255 $ 2,162,367 $ 1,872,734 Experience adjustments on plan liabilities $ 25,419 $ (140,040) $ 266,971 $ - Experience adjustments on plan assets $ 237 $ (922) $ (1,553) $ -

The Group expects to make a contribution of $24,184 thousand and $27,388 thousand, respectively to the defined benefit plans during the annual period beginning after 2014 and 2013.

16. EQUITY

a. Ordinary shares

December 31 2014 2013

Numbers of shares authorized (in thousands) 1,800,000 1,800,000 Amount of shares authorized $ 18,000,000 $ 18,000,000 Number of shares issued and fully paid (in thousands) 1,384,051 1,384,051 Shares issued $ 13,840,508 $ 13,840,508

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

b. Capital surplus

December 31 2014 2013

Share premium from issuance $ 6,368,843 $6,368,843 Change in capital surplus from investments in associates and joint ventures accounted for using equity method 18,860 3,359 Other 4,666 4,666

$ 6,392,369 $6,376,868

The capital surplus arising from shares issued in excess of par (including share premium from issuance of common shares) may be used to offset a deficit; in addition, when the Corporation has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Corporation’s capital every year).

The capital surplus from long-term investments may not be used for any purpose.

150 Financial Highlights c. Retained earnings and dividend policy

The Corporation’s Articles of Incorporation provide that legal reserve should be appropriated at 10% of annual net income less any accumulated deficit. The remaining net income should be appropriated as follows:

1) 0.5% as remuneration of directors and supervisors;

2) 0.1% to 5% as employees’ bonus in the form of cash or stock. The Corporation may issue stock bonuses to the employees of an affiliated company under conditions set by the board of directors;

3) The remainder plus undistributed earnings from prior years, to be distributed as dividends as recommended by the board of directors and approved by the stockholders in their meeting.

The operating of the Corporation is considered as a mature and steady industry. In determining dividend amounts, the Corporation takes its future capital expenditures and related factors into account and also seeks to uphold the stockholders’ interests and realize the Corporation’s long-term financial plan. Dividends are in the form of cash or stock. The Corporation’s policy is that cash dividends should be at least 20% of total dividends.

For 2014 and 2013, the bonuses to employees were estimated at $12,876 thousand and $16,680 thousand, respectively, and the remunerations to directors and supervisors were estimated at $11,512 thousand and $11,393 thousand, respectively, which represented 0.1% to 5.0% and 0.5%, respectively, of net income (net of the bonus and remuneration). Material differences between these estimates and the amounts proposed by the Board of Directors in the following year are adjusted for in the year of the proposal. If the actual amounts subsequently resolved by the stockholders differ from the proposed amounts, the differences are recorded in the year of stockholders’ resolution as a change in accounting estimate. If a share bonus is resolved to be distributed to employees, the number of shares is determined by dividing the amount of the share bonus by the fair value of the shares. Fair value of the shares refers to the closing price after considering the effect of cash and stock dividends of the shares on the day immediately preceding the shareholders’ meeting.

The Corporation appropriates or reverses a special reserve in accordance with Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive entitled “Questions and Answers on Special Reserves Appropriated Following the Adoption of IFRSs”. Distributions can be made out of any subsequent reversal of the debit to other equity items. the Corporation also appropriates and reverses a special reserve in accordance with Rule No. 1030006415 issued by the FSC.

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

Except for non-ROC resident stockholders, all stockholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Corporation when appropriating the earnings after 1998.

The reversal and recognition of a special reserve of $316,006 thousand were approved in the shareholders' meetings in June 2014 and June 2013, respectively.

151 Financial Highlights

The appropriations from the 2013 and 2012 earnings and the bonus to employees and the remuneration to directors and supervisors for 2013 and 2012 were approved in the stockholders’ meetings in June 2014 and June 2013, respectively. The appropriations and dividends per share, the bonus to employees and the remuneration to directors and supervisors were as follows:

Dividends Per Share Appropriation of Earnings (NT$) For For For For Year 2013 Year 2012 Year 2013 Year 2012

Legal reserve $ 253,188 $ 215,644 $ - $ - Cash dividends 1,522,456 1,245,646 1.1 0.9

2013 2012

Bonus to employees $ 16,680 $1,941 Remuneration to directors and supervisors 11,393 9,704

The appropriations of earnings for 2012 were proposed according to the Corporation’s financial statements for the year ended December 31, 2012, which were prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and the Generally Accepted Accounting Standard in the Republic of China (“ROC GAAP”),, and by reference to the balance sheet for the year ended December 31, 2012, which was prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (revised) and International Financial Reporting Standards.

The bonus to employees and remuneration to the directors and supervisors approved by the stockholders were the same as the accrued amounts shown in the financial statements.

The appropriation of the earnings was proposed by the board of directors on March 23, 2015. The appropriations and dividends per share were as follows:

Appropriation Dividends Per of Earnings Share (NT$)

Legal reserve $ 255,829 $- Cash dividends 1,591,658 1.15

The appropriations of 2014 earnings, the bonus to employees and the remuneration to directors and supervisors for 2014 are subject to the resolution of the stockholders meeting to be held in June 2015.

Information on the bonus to employees and the remuneration to directors and supervisors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

d. Special reserve appropriated under Rule No. 1010012865 issued by the FSC

December 31 2014 2013

Special reserve $ 1,057,002 $ 1,057,002

152 Financial Highlights

Information on the special reserve appropriated or reversal of the above mentioned special reserve resulted from elimination of the original appropriation circumstances was as follows:

2013

Balance at January1 $ 1,057,024 Reversed on elimination of the original need to appropriate a special reserve: Disposal of property, plant and equipment (22)

Balance at December 31 $ 1,057,002 e. Others equity items

1) Exchange differences on translating foreign operations

2014 2013

Balance at January 1 $ 192,209 $ (368,073) Exchange difference arising on translating the foreign operation (2,975) 2,500 Share of exchange differences on translating foreign operations of associates and joint ventures accounted for using the equity method 561,327 557,782

Balance at December 31 $ 750,561 $ 192,209

2) Unrealized gain (loss) on available-for-sale financial assets

2014 2013

Balance at January 1 $ 798,854 $ (327,970) Unrealized gain arising on revaluation of available-for-sale financial assets 248,114 1,023,953 Share of unrealized gain (loss) on revaluation of available-for-sale financial assets of associates and joint ventures accounted for using the equity method (11,167) 102,871

Balance at December 31 $ 1,035,801 $ 798,854

3) Cash flow hedge

2014 2013

Balance at January 1 $ - $ (48,706) Transferred to initial carrying amount of hedged items Forward foreign exchange contracts - 48,706

Balance at December 31 $ - $ -

153 Financial Highlights

f. Non-controlling interests

For the Year Ended December 31 2014 2013

Balance at January 1 $ 2,713,774 $ 2,505,351 Attributable to non-controlling interests: Share of profit for the year 263,422 219,144 Exchange difference arising on translation of foreign entities 69,039 85,858 Unrealized loss on available-for-sale financial assets - (1) Actuarial loss on defined benefit plans (2,787) (7,329) Income tax related to actuarial gains and losses 474 1,246 Acquisition of non-controlling interests in subsidiaries (194) (24,242) Cash dividends to subsidiaries’ shareholder (85,108) (66,253)

Balance at December 31 $ 2,958,620 $ 2,713,774

17. NET PROFIT

Net profit concludes as follow:

a. Depreciation and amortization

For the Year Ended December 31 2014 2013

An analysis of depreciation by function Operating cost $ 589,225 $ 480,095 Operating expenses 138,529 148,344

$ 727,754 $ 628,439

An analysis of amortization by function Operating cost $ 1,554 $ 2,204 Selling and marketing expenses 9,433 12,005 General and administrative expenses 16,482 33,309 Research and development expenses 60,613 56,676

$ 88,082 $ 104,194

b. Employee benefit expense

For the Year Ended December 31 2014 2013

Post-employment benefits Defined contribution plans $ 83,934 $ 82,480 Defined benefit plans 87,539 88,611 171,473 171,091 Short-term benefits 3,859,794 3,503,189

$ 4,031,267 $ 3,674,280 (Continued)

154 Financial Highlights

For the Year Ended December 31 2014 2013

An analysis of employee benefit expenses by function Operating costs $ 2,222,836 $ 2,015,493 Operating expenses 1,808,431 1,658,787

$ 4,031,267 $ 3,674,280 (Concluded)

18. 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 2014 2013

Current tax In respect of the current year $ 296,104 $ 269,153 In respect of prior periods 2,282 (9,636) 298,386 259,517 Deferred tax In respect of the current year 119,666 57,098 In respect of prior periods 135 (1,689) 119,801 55,409

Income tax expense recognized in profit or loss $ 418,187 $ 314,926

b. A reconciliation of accounting profit and income tax expenses was as follows:

For the Year Ended December 31 2014 2013

Profit before tax $ 3,239,899 $ 3,065,948

Income tax expense calculated at the tax rate (17%) $ 550,783 $ 521,211 Tax-exempt income (231,526) (217,723) Additional income tax on unappropriated earnings 137,518 86,148 Unrecognized investment credits (882) (138,001) Unrecognized deductible temporary differences (15,530) 28,530 Investment credits (83,159) - Unrecognized loss carryforward 1,038 15,550 Effect of different tax rate of group entities operating in other jurisdictions 65,174 32,935 Adjustments for prior years’ tax 2,309 (11,325) Others (7,538) (2,399)

Income tax expense recognized in profit or loss $ 418,187 $ 314,926

The Group applied 17% tax rate by the ROC tax law. Subsidiaries in China applied 25% tax rate by China tax law and other entities applied tax rates by tax laws of local jurisdictions.

155 Financial Highlights

The potential effect of additional income tax on unappropriated earnings in 2014 could not be reliably assured by the uncertainty of earnings distribution in meeting.

c. Current tax assets and liabilities

December 31 2014 2013

Current tax assets (included in other current assets)

Tax refund receivable $ 11,662 $ 30,919 Prepayment tax 143 465

$ 11,805 $ 31,384

Current tax liabilities

Income tax payable $ 293,807 $ 269,733

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2014

Recognized in Other Com- Opening Recognized in prehensive Closing Balance Profit or Loss Income Balance

Deferred tax assets

Temporary difference Defined benefit plan $ 347,850 $ (24,483) $ 4,216 $ 327,583 Other payable 29,973 6,056 - 36,029 Property, plant and equipment 24,157 (10,019) - 14,138 Inventory 25,950 (3,498) - 22,452 Other 36,724 1,609 - 38,333 464,654 (30,335) 4,216 438,535 Loss carryforwards 171,963 (121,568)- 50,395

$ 636,617 $ (151,903) $ 4,216 $488,930

Deferred tax liabilities

Temporary difference Other $ 165,083 $ (32,102)$ - $ 132,981

156 Financial Highlights

For the year ended December 31, 2013

Recognized in Other Com- Opening Recognized in prehensive Closing Balance Profit or Loss Income Balance

Deferred tax assets

Temporary difference Defined benefit plan $ 341,238 $ 6,008 $ 604 $ 347,850 Other payable 28,642 1,331 - 29,973 Property, plant and equipment 40,144 (15,987) - 24,157 Inventory 21,783 4,167 - 25,950 Other 57,395 (20,671) - 36,724 489,202 (25,152) 604 464,654 Loss carryforwards 171,963 - - 171,963

$ 661,165 $ (25,152) $ 604 $ 636,617

Deferred tax liabilities

Temporary difference Other $ 110,383 $ 30,257 $ 24,443 $ 165,083 e. Deductible temporary differences, unused loss carryforwards and unused investment credits for which no deferred tax assets have been recognized in the consolidated balance sheets

December 31 2014 2013

Loss carryforwards Expiry in 2017 $ 125,129 $ 170,540 Expiry in 2018 255,854 271,132 Expiry in 2019 121,375 135,278 Expiry in 2020 326,942 326,942 Expiry in 2021 460,748 497,449 Expiry in 2022 173,152 178,398 Expiry in 2023 106,374 92,947 Expiry in 2024 56,756 -

$ 1,626,330 $ 1,672,686

Investment credits Purchase of machinery and equipment $ - $ 920

Deductible temporary differences $ 3,135,897 $ 3,139,857

157 Financial Highlights

f. Information about unused loss carryforwards

Loss carryforwards as of December 31, 2014 comprised:

Unused Amount Expiry Year

$ 125,129 2017 552,295 2018 121,375 2019 326,942 2020 460,748 2021 173,152 2022 106,374 2023 56,756 2024

$ 1,922,771

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

As of December 31, 2014 and 2013, the taxable temporary differences associated with investment in subsidiaries for which no deferred tax liabilities have been recognized were $366,543 thousand and $285,740 thousand, respectively.

h. Integrated income tax

December 31 2014 2013 Unappropriated earnings Unappropriated earnings generated on and before December 31, 1997 $ 4,357,331 $ 4,357,331 Unappropriated earnings generated on and after January 1, 1998 13,412,444 12,443,593

$ 17,769,775 $ 16,800,924

Imputation credit account (“ICA”) $ 1,709,095 $ 1,605,949

The creditable ratios for the distribution of earnings of 2014 and 2013 were 14.27% (expected ratio) and 15.13% (actual ratio), respectively. The creditable ratio for individual shareholders residing in the ROC will be half of the original creditable ratio that is based on the revised Article 66-6 of the Income Tax Law and will take effect on January 1, 2015.

Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputation credits allocated to ROC resident stockholders of the Corporation was calculated based on the creditable ratio as of the date of dividend distribution. The actual imputation credits allocated to stockholders of the Corporation was based on the balance of ICA as of the date of dividends distribution. Therefore, the expected creditable ratio for the 2014 earnings may differ from the actual creditable ratio to be used in allocating imputation credits to the stockholders.

i. Income tax assessment

The tax returns of the Corporation through 2011 have been assessed by the tax authorities.

158 Financial Highlights

19. EARNINGS PER SHARE

Unit: NT$ Per Share

For the Year Ended December 31 2014 2013

Basic earnings per share $1.88 $1.86 Diluted earnings per share $1.88 $1.86

The net profit and weighted average number of ordinary shares outstanding that were used in the computation of earnings per share were as follows

Net Profit for the Year

For the Year Ended December 31 2014 2013

Profit for the period attributable to owners of the Corporation $ 2,558,290 $2,531,878

Weighted average number of ordinary shares outstanding (in thousand shares):

For the Year Ended December 31 2014 2013

Weighted average number of ordinary shares in computation of basic earnings per share 1,384,051 1,384,051 Weighted average number of ordinary shares adjustment of associates’ shares (20,439) (20,439) 1,363,612 1,363,612 Effect of potentially dilutive ordinary shares: Bonus issue to employees 748 613

Weighted average number of ordinary shares used in the computation of diluted earnings per share 1,364,360 1,364,225

When calculating EPS, the Corporation considers the shares which associates hold as the treasury stock to reduce the outstanding shares.

If the Group offered to settle bonuses paid to employees in cash or shares, the Group assumed the entire amount of the bonus would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

20. CAPITAL MANAGEMENT

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

159 Financial Highlights

21. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments

1) Fair value of financial instruments not carried at fair value

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

2) Fair value measurements recognized in the consolidated balance sheets

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

b) Level 2 fair value measurements are those derived from 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 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

December 31, 2014

Level 1 Level 2 Level 3 Total Financial assets at FVTPL Derivative financial assets $ 59,700 $ - $ 56 $ 59,756 Nonderivative financial assets held for trading 571,387 - - 571,387

$ 631,087 $-$56 $ 631,143

Available-for-sale financial assets Securities listed - ROC $ 161,226 $ - $ - $ 161,226 Unlisted securities - ROC 145,693 - 667,025 812,718 Mutual funds 1,446,286 - - 1,446,286

$ 1,753,205 $-$ 667,025 $2,420,230

December 31, 2013

Level 1 Level 2 Level 3 Total Financial assets at FVTPL Derivative financial assets $ 90,187 $ 72,551 $ - $ 162,738 Nonderivative financial assets held for trading 900,798 - - 900,798

$ 990,985 $ 72,551 $- $1,063,536 (Continued)

160 Financial Highlights

Level 1 Level 2 Level 3 Total

Available-for-sale financial assets $ 93,844 $ - $ - $ 93,844 Securities listed - ROC 28,665 - - 28,665 Securities - other countries - - 584,206 584,206 Unlisted securities - ROC 1,228,178 - - 1,228,178 Mutual funds $ 1,350,687 $-$ 584,206 $1,934,893 (Concluded)

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

3) Reconciliation of Lever 3 fair value measurements of financial instruments

Financial instruments at FVTPL

2014 2013

Financial assets (liabilities)

Balance at January 1 $ - $ (112,337) Purchase 126 - Recognized in profit or loss (70) 112,337

Balance at December 31 $ 56 $ -

Available-for-sale financial assets

2014 2013

Financial assets

Balance at January 1 $ 584,206 $ 582,787 Recognized in other comprehensive income 82,819 1,419

Balance at December 31 $ 667,025 $ 584,206

Derivative financial instruments for hedging

2014 2013

Financial liabilities for hedging

Balance at January 1 $ - $ (48,706) Recognized in other comprehensive income - 48,706

Balance at December 31 $ - $ -

161 Financial Highlights

4) Valuation techniques and assumption applied for the purpose of measuring fair value

The fair values of financial assets and financial liabilities were determined as follows:

a) The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market prices. For those instruments with no quoted market prices, the fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants.

b) The fair values of derivative instruments were not available; thus, a discounted cash flow analysis was performed using the yield curve applicable to the reporting period. The fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants.

c) The fair values of other financial assets and financial liabilities (excluding those described above) were determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

b. Categories of financial instruments

December 31 2014 2013

Financial assets

Fair value through profit or loss (FVTPL) Held for trading $ 571,443 $ 900,798 Designated as at FVTPL 59,700 162,738 Loans and receivables (Note 1) 15,581,281 15,190,707 Available-for-sale financial assets (Note 2) 2,888,455 2,604,625

Financial liabilities

Amortized cost (Note 3) 6,958,679 7,492,420

Note 1: The balances included cash and cash equivalents, notes receivable, accounts receivable (related parties included), other receivables, other financial assets (included in other current assets), debt investments with no active market, and guarantee deposits (included in other non-current assets).

Note 2: The balances included the carrying amounts of available-for-sale financial assets and financial assets measured at cost.

Note 3: The balances included short-term borrowings, short-term bills payable, notes payable, accounts payable (related parties included), other payables, long-term loans (including the current portion) and deposits received (included in other current liabilities).

c. Financial risk management objectives and policies

The main financial instruments of the Group include equity and debt investments, accounts receivables, accounts payables and borrowings. Financial risks include market risk, credit risk, and liquidity risk.

162 Financial Highlights

1) Market risk

The Group’s activities exposed it primarily to the financial risks due to changes in exchange rates, interest rate and other market-related factors.

a) Exchange rate risk

Holding foreign currency-denominated assets and liabilities exposes the Group to adverse fluctuations of cash flows and the reduction of foreign currency assets due to the exchange rate changes. The Group avoids cash flow risk resulting from the adverse exchange rate changes by using derivative contracts.

Sensitivity analysis

The Group is mainly exposed to the U.S. dollar (USD), Japanese yen (JPY) and Renminbi (RMB).

The following table shows the Group’s sensitivity to a 1% increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. The sensitivity rate of 1% 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 outstanding foreign currency-denominated monetary items, and their translation at the end of the reporting period is adjusted for a 1% change in exchange rates. A positive number below indicates an increase in pre-tax profit due to a 1% strengthening of the New Taiwan dollar against the relevant currency. For a 1% weakening of the New Taiwan dollar against the relevant currency, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative.

USD to NTD For the Year Ended December 31 2014 2013

Loss $ (6,876) $ (7,484)

USD to RMB For the Year Ended December 31 2014 2013

Gain $ 829 $ 1,322

JPY to NTD For the Year Ended December 31 2014 2013

Gain $ 3,063 $ 3,652

RMB to NTD For the Year Ended December 31 2014 2013

Loss $ (14,263) $ (14,979)

163 Financial Highlights

b) Interest rate risk

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

December 31 2014 2013

Fair value interest rate risk Financial assets $ 1,375,818 $ 726,311 Cash flow interest rate risk Financial assets 11,328,119 11,061,725 Financial liabilities 819,607 1,313,548

Sensitivity analysis

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

Had interest rates been 1% higher and had all other variables been held constant, the Group’s pre-tax profit would have increased by $105,085 thousand in 2014 and $97,482 thousand in 2013.

The increase in the Group’s sensitivity to interest rates during the current period was mainly due to the increase in floating rate asset instruments.

c) Other price risk

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

Sensitivity analysis

The Group assesses equity price risk using sensitivity analysis.

The following sensitivity analysis was based on the exposure to equity price risk at the end of the reporting period. Had equity prices been 5% lower, the fair values of available-for-sale investments and held-for-trading investments would have decreased by $116,230 thousand and $114,211 thousand as of December 31, 2014 and 2013, respectively.

2) Credit risk

Credit risk represents the potential loss that would be incurred by the Group if the counter-parties or third parties breach financial instrument contracts. Management believes its exposure to default by these parties is low.

3) Liquidity risk

The Group has sufficient operating capital to meet cash requirements for settling derivative transactions. Thus, liquidity risk is low.

164 Financial Highlights

22. TRANSACTIONS WITH RELATED PARTIES

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

a. Revenue

For the Year Ended December 31 Related Parties Types 2014 2013

Associates $ 23,007,461 $ 22,835,513 Investors that have significant influence over the Corporation 750,616 1,067,737

$ 23,758,077 $ 23,903,250

b. Purchases of goods

For the Year Ended December 31 Related Parties Types 2014 2013

Associates $ 3,163,473 $ 4,286,106 Investors that have significant influence over the Corporation 3,034,599 2,509,491

$ 6,198,072 $ 6,795,597

c. Technical service expense (included in cost of goods sold and marketing expenses)

For the Year Ended December 31 Related Parties Types 2014 2013

Investors that have significant influence over the Corporation $ 176,080 $ 181,236

d. Development expense (included in research and development expenses)

For the Year Ended December 31 Related Parties Types 2014 2013

Investors that have significant influence over the Corporation $ 58,852 $ 41,448

e. Other expense (included in general and administrative expenses)

For the Year Ended December 31 Related Parties Types 2014 2013

Associates $ 63,235 $ 69,357 Investors that have significant influence over the Corporation - 326,478

$ 63,235 $ 395,835

165 Financial Highlights

f. Receivables from related parties

December 31 Related Parties Types 2014 2013

Associates $ 1,501,928 $ 1,747,726 Investors that have significant influence over the Corporation 58,900 98,829

$ 1,560,828 $ 1,846,555

g. Prepayments (included in other current assets)

December 31 Related Parties Types 2014 2013

Associates $ 104,805 $ 158,245 Investors that have significant influence over the Corporation 36,164 11,556

$ 140,969 $ 169,801

h. Payables to related parties

December 31 Related Parties Types 2014 2013

Associates $ 643,778 $ 690,766 Investors that have significant influence over the Corporation 181,708 118,389

$ 825,486 $ 809,155

i. Deposit in advance (included in other current liabilities)

December 31 Related Parties Types 2014 2013

Associates $ 102,194 $ 25,589

The outstanding payables to related parties had no guarantees but would be paid in cash. The Group received guarantees on the receivables from some of the related parties. In addition, the Group did not recognize allowance for doubtful accounts for 2014 and 2013.

Except for the royalty received from Soueast-motor Co., Ltd. in accordance with the authorities of Mainland China, other transactions with related parties have the same terms for pricing, receipts and payments as of those for the third parties. Lease contracts with related parties are based on market conditions, and the terms of receipts or payments were the same as those for the third parties.

The Group signed contract with Mitsubishi Motor Corp. (MMC). Please refer to Note 24.

166 Financial Highlights

j. Compensation of key management personnel

The remuneration of directors and key management personnel were as follow:

For the Year Ended December 31 2014 2013

Short-term employee benefits $ 153,536 $ 127,333 Post-employment benefits 2,891 2,806

$ 156,427 $ 130,139

The remuneration of directors and key executives was determined by the remuneration committee on the basis of individual performance and market trends.

23. ASSETS PLEDGED AS COLLATERAL

The following assets were provided as collateral for bank borrowings, the tariff of importing vehicle parts and materials and the deposit of government project:

December 31 2014 2013

Property, plant and equipment $ 802,434 $ 806,375 Other current assets 116,510 114,449 Investment properties 54,591 54,591

$ 973,535 $975,415

24. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Significant commitments and contingencies of the Group as of December 31, 2014 were as follows:

a. Guarantee notes amounting to $4,877,200 thousand, which had been issued to financial institutions as collaterals for loans; unused letters of credit amounted to $21,945 thousand.

b. Certain fees received by MMC for providing the Group with technical assistance in the manufacture of automobiles and in minor revisions of certain car models, as stated in several agreements with the latest expiry in November 2021.

c. The status of endorsements/guarantees was listed in Table 2.

167 Financial Highlights

25. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN

The significant financial assets and liabilities denominated in foreign currencies were as follows:

December 31, 2014

Foreign Carrying Currencies Exchange Rate (Note) Amount Financial assets

Monetary items USD $ 23,567 31.6500 $ 745,907 4,311 6.2156 (USD:RMB) 136,435 JPY 88,246 0.2646 23,350 RMB 295,682 5.0920 1,505,610

$ 2,411,302

Financial liabilities

Monetary items USD 1,843 31.6500 $ 58,324 6,931 6.2156 (USD:RMB) 219,359 JPY 1,245,664 0.2646 329,603 RMB 15,578 5.0920 79,325

$ 686,611

December 31, 2013

Foreign Carrying Currencies Exchange Rate (Note) Amount Financial assets

Monetary items USD $ 27,196 29.8050 $ 810,569 2,241 6.0969 (USD:RMB) 66,793 JPY 135,238 0.2839 38,394 RMB 317,040 4.8886 1,549,866

$ 2,465,622

Financial liabilities

Monetary items USD 2,087 29.8050 $ 62,202 6,675 6.0969 (USD:RMB) 198,948 JPY 1,421,766 0.2839 403,639 RMB 10,639 4.8886 52,007

$ 716,796

Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged, unless stated otherwise.

168 Financial Highlights

26. SEPARATELY DISCLOSED ITEMS

Excluded in Note 7 and Tables 1 to 10, there was no other separately disclosed items.

27. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group’s reportable segments were vehicle manufacturing, channel and others.

Segment Revenues Segment Income or Loss 2014 2013 2014 2013

Vehicle manufacturing $ 32,005,676 $ 31,294,987 $ 3,199,806 $ 3,084,312 Channel 4,188,945 4,598,776 (46,795) (75,951) Others 32,357 3,614 55,534 (45,733) Adjustment and eliminations (275,551) (357,552) - - $ 35,951,427 $ 35,539,825 3,208,545 2,962,628 Administration cost and remunerations to directors and supervisors (259,966) (221,551) Other non-operating income and expenses, net 291,320 324,871

Profit before income tax $ 3,239,899 $ 3,065,948

Intersegment transactions were accounted for according to market prices.

Segment profit represented the profit before tax earned by each segment without allocation of central administration costs and remunerations to directors and supervisors, interest income, other income, gain on disposal of investments, net foreign exchange gain, interest expense, other expense, net loss on financial instruments at fair value through profit or loss, impairment loss and income tax expense. This was the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

169 Financial Highlights

TABLE 1

CHINA MOTOR CORPORATION AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Actual Collateral Financial Highest Balance Business Reasons for Allowance for Financing Limit Aggregate Related Ending Balance Borrowing Interest Nature of No. Lender Borrower Statement for the Period Transaction Short-term Impairment for Each Financing Parties (Note 1) Amount Rate Financing Item Value Account (Note 1) Amounts Financing Loss Borrower Limits (Notes 1 and 5)

0 China Motor Sino Diamond Motors Other receivable Yes $ 500,000 $ 500,000 $ - - Short-term $ - Working capital $ - - $ - $ 1,453,259 $ 9,688,392 Corporation financing (Note 2) (Note 3)

1 Sino Diamond Motors Hwa Wei Holdings Other receivable Yes 53,805 - - 2.00 Short-term - Working capital - - - 1,210,142 1,210,142 (US$ 1,700 financing (Note 4) (Note 4) thousand)

2 Hwa-Lin Sichuan Huafeng Other receivable Yes 37,980 37,980 37,980 2.00 Short-term - Working capital - - - 1,453,259 9,688,392 Hanwei (US$ 1,200 (US$ 1,200 (US$ 1,200 financing (Note 2) (Note 3) thousand) thousand) thousand) Guangzhou Huayou Other receivable Yes 62,034 62,034 62,034 2.00 Short-term - Working capital - - - 〃 〃 Motor Maintenance (US$ 1,960 (US$ 1,960 (US$ 1,960 financing thousand) thousand) thousand) Dongguan Huayi Other receivable Yes 147,107 147,107 143,126 2-3 Short-term - Working capital - - - 〃 〃 (US$ 3,570 (US$ 3,570 (US$ 3,515 financing thousand) thousand) thousand) and and and (RMB 6,700 (RMB 6,700 (RMB 6,260 thousand) thousand) thousand) Tianjin Hwarui Other receivable Yes 15,825 - - 2.00 Short-term - Working capital - - - 〃 〃 (US$ 500 financing thousand) Guangzhou Huayou Other receivable Yes 29,024 29,024 - 5.679 Short-term - Working capital - - - 〃 〃 Motor Sales (RMB 5,700 (RMB 5,700 financing thousand) thousand)

3 Guangzhou Huayou Guangzhou Huayou Other receivable Yes 509,200 509,200 358,986 5.40 Short-term - Working capital - - - 〃 〃 Motor Maintenance Motor Sales (RMB 100,000 (RMB 100,000 (RMB 70,500 financing thousand) thousand) thousand) Tianjin Hwahong Other receivable Yes 50,920 50,920 - - Short-term - Working capital - - - 〃 〃 (RMB 10,000 (RMB 10,000 financing thousand) thousand) Sichuan Huafeng Other receivable Yes 50,920 50,920 - - Short-term - Working capital - - - 〃 〃 Hanwei (RMB 10,000 (RMB 10,000 financing thousand) thousand) Dongguan Huashun Other receivable Yes 50,920 50,920 10,184 2.90 Short-term - Working capital - - - 〃 〃 (RMB 10,000 (RMB 10,000 (RMB 2,000 financing thousand) thousand) thousand) Dongguan Huayi Other receivable Yes 50,920 50,920 - - Short-term - Working capital - - - 〃 〃 (RMB 10,000 (RMB 10,000 financing thousand) thousand)

4 Sichuan Huafeng Sichuan Lingwei Other receivable Yes 50,920 50,920 9,486 5.40 Short-term - Working capital - - - 〃 〃 Hanwei (RMB 10,000 (RMB 10,000 (RMB 1,863 financing thousand) thousand) thousand) Sichuan Hauwei Other receivable Yes 50,920 50,920 922 5.40 Short-term - Working capital - - - 〃 〃 (RMB 10,000 (RMB 10,000 (RMB 181 financing thousand) thousand) thousand)

(Continued)

170 Financial Highlights

Actual Collateral Financial Highest Balance Business Reasons for Allowance for Financing Limit Aggregate Related Ending Balance Borrowing Interest Nature of No. Lender Borrower Statement for the Period Transaction Short-term Impairment for Each Financing Parties (Note 1) Amount Rate Financing Item Value Account (Note 1) Amounts Financing Loss Borrower Limits (Notes 1 and 5)

Tianjin Hwahong Other receivable Yes $ 50,920 $ 50,920 $ - - Short-term $ - Working capital $ - - $ - $ 1,453,259 $ 9,688,392 (RMB 10,000 (RMB 10,000 financing (Note 2) (Note 3) thousand) thousand) Guangzhou Huayou Other receivable Yes 50,920 50,920 - - Short-term - Working capital - - - 〃 〃 Motor Maintenance (RMB 10,000 (RMB 10,000 financing thousand) thousand) Dongguan Huashun Other receivable Yes 152,760 152,760 40,736 2.90 Short-term - Working capital - - - 〃 〃 (RMB 30,000 (RMB 30,000 (RMB 8,000 financing thousand) thousand) thousand) Dongguan Huayi Other receivable Yes 152,760 152,760 - - Short-term - Working capital - - - 〃 〃 (RMB 30,000 (RMB 30,000 financing thousand) thousand)

5 Tianjin Hwarui Tianjin Hwahong Other receivable Yes 254,600 50,920 - - Short-term - Working capital - - - 〃 〃 (RMB 50,000 (RMB 10,000 financing thousand) thousand) Guangzhou Huayou Other receivable Yes 50,920 50,920 - - Short-term - Working capital - - - 〃 〃 Motor Maintenance (RMB 10,000 (RMB 10,000 financing thousand) thousand) Dongguan Huashun Other receivable Yes 152,760 152,760 - - Short-term - Working capital - - - 〃 〃 (RMB 30,000 (RMB 30,000 financing thousand) thousand) Dongguan Huayi Other receivable Yes 152,760 152,760 - - Short-term - Working capital - - - 〃 〃 (RMB 30,000 (RMB 30,000 financing thousand) thousand)

6 Tianjin Hwahong Tianjin Hwarui Other receivable Yes 254,600 254,600 107,553 5.40 Short-term - Working capital - - - 〃 〃 (RMB 50,000 (RMB 50,000 (RMB 21,122 financing thousand) thousand) thousand) Sichuan Huafeng Other receivable Yes 50,920 50,920 - - Short-term - Working capital - - - 〃 〃 Hanwei (RMB 10,000 (RMB 10,000 financing thousand) thousand) Dongguan Huashun Other receivable Yes 76,380 76,380 63,650 2.90 Short-term - Working capital - - - 〃 〃 (RMB 15,000 (RMB 15,000 (RMB 12,500 financing thousand) thousand) thousand) Dongguan Huayi Other receivable Yes 76,380 76,380 - 3.10 Short-term - Working capital - - - 〃 〃 (RMB 15,000 (RMB 15,000 financing thousand) thousand) Guangzhou Huayou Other receivable Yes 50,920 50,920 - 6.44 Short-term - Working capital - - - 〃 〃 Motor Maintenance (RMB 10,000 (RMB 10,000 financing thousand) thousand)

7 Dongguan Huayi Dongguan Huashun Other receivable Yes 254,600 254,600 18,667 5.04 Short-term - Working capital - - - 〃 〃 (RMB 50,000 (RMB 50,000 (RMB 3,666 financing thousand) thousand) thousand)

8 Dongguan Huashun Yangjiang Huaching Other receivable Yes 50,920 - - 5.04 Short-term - Working capital - - - 〃 〃 (RMB 10,000 financing thousand) Dongguan Huayi Other receivable Yes 50,920 50,920 - 5.04 Short-term - Working capital - - - 〃 〃 (RMB 10,000 (RMB 10,000 financing thousand) thousand) Sichuan Huafeng Other receivable Yes 50,920 50,920 - - Short-term - Working capital - - - 〃 〃 Hanwei (RMB 10,000 (RMB 10,000 financing thousand) thousand) Tianjin Hwahong Other receivable Yes 50,920 50,920 - - Short-term - Working capital - - - 〃 〃 (RMB 10,000 (RMB 10,000 financing thousand) thousand)

(Continued)

171 Financial Highlights

Actual Collateral Financial Highest Balance Business Reasons for Allowance for Financing Limit Aggregate Related Ending Balance Borrowing Interest Nature of No. Lender Borrower Statement for the Period Transaction Short-term Impairment for Each Financing Parties (Note 1) Amount Rate Financing Item Value Account (Note 1) Amounts Financing Loss Borrower Limits (Notes 1 and 5)

Guangzhou Huayou Other receivable Yes $ 50,920 $ 50,920 $ - - Short-term $ - Working capital $ - - $ - $ 1,453,259 $ 9,688,392 Motor Maintenance (RMB 10,000 (RMB 10,000 financing (Note 2) (Note 3) thousand) thousand)

9 CMI Hwa Wei Holdings Other receivable Yes 1,200,000 1,200,000 1,200,000 2.00 Short-term - Working capital - - - 〃 〃 financing

10 GH Gatech (Suzhou) Other receivable Yes 47,475 47,475 - 5.00 Short-term - Working capital - - - 〃 〃 Technology (US$ 1,500 (US$ 1,500 financing thousand) thousand)

Note 1: At exchange rate on December 31, 2014, US$1＝$31.65, RMB1＝$5.092.

Note 2: The amount is 3% of the total stockholder’s equity of the latest financial statement of China Motor Corporation.

Note 3: The amount is 20% of the total stockholder’s equity of the latest financial statement of China Motor Corporation.

Note 4: The amount is 40% of the total stockholders’ equity of the latest financial statement of Sino Diamond Motors.

Note 5: Eliminated.

(Concluded)

172 Financial Highlights

TABLE 2

CHINA MOTOR CORPORATION AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Endorsee/Guarantee Ratio of Maximum Outstanding Accumulated Endorsement/ Endorsement/ Endorsement/ Amount Endorsement/ Actual Amount Endorsement/ Guarantee Guarantee Guarantee Limits on Endorsement/ Endorsed/ Guarantee at the Borrowing Endorsed/ Guarantee to Net Aggregate Endorsement/ Given by Given by Given on Behalf No. Endorser/Guarantor Guarantee Given on Guaranteed Name Relationship End of the Amount Guaranteed by Equity in Latest Guarantee Limit Parent on Subsidiaries on of Companies Behalf of Each Party During the Period (Note) Collaterals Financial Behalf of Behalf of in Mainland Period (Note) Statements Subsidiaries Parent China (Note) (%)

1 Sino Diamond Motors Hwa-Lin Subsidiary 20% of the Corporation’s $ 253,200 $ - $ - $ - - 50% of the Corporation’s issued No No No issued capital, (US$ 8,000 capital, $6,920,254 thousand $2,768,102 thousand thousand) Guangzhou Huayou Subsidiary 1,519,200 1,519,200 - -3.14 〃 〃 Yes Motor Maintenance (US$ 48,000 (US$ 48,000 thousand) thousand) Sichuan Huafeng Hanwei Subsidiary 41,145 - - -- 〃 〃 〃 (US$ 1,300 thousand) Tianjin Hwarui Subsidiary 2,278,800 2,278,800 - - 4.70 〃 〃 〃 (US$ 72,000 (US$ 72,000 thousand) thousand)

2 Hwa-Lin Guangzhou Huayou Subsidiary 20% of the Corporation’s 84,411 - - - - 50% of the Corporation’s issued No No Yes Motor Maintenance issued capital, (US$ 2,667 capital, $6,920,254 thousand $2,768,102 thousand thousand) Sichuan Huafeng Hanwei Subsidiary 84,411 - - - - 〃 〃 〃 (US$ 2,667 thousand) Tianjin Hwarui Subsidiary 84,411 - - - - 〃 〃 〃 (US$ 2,667 thousand)

3 Dongguan Huayi Dongguan Huashun Subsidiary 20% of the Corporation’s 254,600 254,600 - - 0.53 50% of the Corporation’s issued No No Yes issued capital, (RMB 50,000 (RMB 50,000 capital, $6,920,254 thousand $2,768,102 thousand thousand) thousand)

4 Guangzhou Huayou Motor Guangzhou Huayou Subsidiary 20% of the Corporation’s 254,600 254,600 - - 0.53 50% of the Corporation’s issued No No Yes Maintenance Motor Sales issued capital, (RMB 50,000 (RMB 50,000 capital, $6,920,254 thousand $2,768,102 thousand thousand) thousand)

5 Tianjin Hwahong Dongguan Huayi Subsidiary 20% of the Corporation’s 254,600 - - - - 50% of the Corporation’s issued No No Yes issued capital, (RMB 50,000 capital, $6,920,254 thousand $2,768,102 thousand thousand)

Note: At exchange rate on December 31, 2014, US$1＝$31.65, RMB1＝$5.092.

173 Financial Highlights

TABLE 3

CHINA MOTOR CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Relationship with December 31, 2014 Type and Issuer of Holding Company Name the Holding Financial Statement Account Carrying Percentage of Note Marketable Securities Shares Fair Value Company Amount Ownership

China Motor Corporation Convertible bonds Jinli 1st Convertible Bond - Financial assets at fair value through profit or loss - current 320 $ 30,400 - $ 30,400 YEM CHIO 6th Convertible Bond - 〃 293 29,300 - 29,300

Stocks Gigabyte - Financial assets at fair value through profit or loss - current 500 18,500 - 18,500 LARGAN - 〃 6 14,370 - 14,370 MTK - 〃 30 13,860 - 13,860 MSI - 〃 400 13,640 - 13,640 Compea Mfg. - 〃 500 8,925 - 8,925 Chailease - 〃 100 7,880 - 7,880 Catcher - 〃 17 4,191 - 4,191 SESDA - 〃 100 3,960 - 3,960 Tripod - 〃 50 3,105 - 3,105 Kenda - 〃 22 1,425 - 1,425

Preferred stock options TC Bank - Financial assets at fair value through profit or loss - current - 56 - 56

Beneficial certificates Reliance Securities Investment Trust Private - Financial assets at fair value through profit or loss - current 9,699 145,963 - 145,963 Fund

Beneficial certificates Yuanta De Bao Money Market Fund - Available-for-sale financial assets - current 32,502 383,872 - 383,872 Fuh-Hwa Mmkt Fund - 〃 12,103 172,021 - 172,021 Ctbc Hua Win Money Mkt Fund - 〃 7,446 80,596 - 80,596 Sinopac Mmkt Fund - 〃 5,887 80,573 - 80,573 Fubon Chi Hsiang Mmkt Fund - 〃 3,284 50,638 - 50,638 Hua Nan Phoenix Money Market Fund - 〃 3,137 50,192 - 50,192 The RSIT Enhanced Money Market - 〃 4,258 50,089 - 50,089 China Oriemt International Fixed Income fund - 〃 15 49,433 - 49,433 - Segregated portfolio 3 Cathay Emerging China Bond Fund - 〃 4,456 47,879 - 47,879 Fubon China Money Market - 〃 743 38,232 - 38,232 Fubon China High Yield Bd - 〃 581 31,036 - 31,036 Ft Sinoam Global Bond Fof -A - 〃 2,226 30,920 - 30,920

(Continued)

174 Financial Highlights

Relationship with December 31, 2014 Type and Issuer of Holding Company Name the Holding Financial Statement Account Carrying Percentage of Note Marketable Securities Shares Fair Value Company Amount Ownership

Allianz Glbl Inv All Seasons Hvst FOBF - Available-for-sale financial assets - current 2,627 $ 30,471 - $ 30,471 UPAMC James Bond Mmkt Fund - 〃 1,850 30,385 - 30,385 HSBC Dim Sum High Yield Bond RMB Acc - 〃 2,659 29,782 - 29,782 JP Morgan Asia Hiyld Ttl Rt. Bd. - 〃 2,481 29,775 - 29,775 ING EMD & High Yield Bond Port - 〃 2,641 29,573 - 29,573 Fuh Hwa RMB Bond A - 〃 532 27,746 - 27,746 CTBC Glbl Em Mrkt Strategy Bond - 〃 2,000 20,377 - 20,377 Cathay Taiwan Money Market Funds - 〃 1,647 20,189 - 20,189 UPAMC Great China Small-Mild Cap Fund - 〃 1,830 20,055 - 20,055 Franklin Temp Sino Am China - 〃 1,502 15,743 - 15,743 Franklin Templeton Sinoam Money Market - 〃 1,006 10,194 - 10,194

Stocks TC Bank - Available-for-sale financial assets - current 154 1,629 - 1,629

Stocks Shye Shyang Machinery Industrial Corporate directors Available-for-sale financial assets - noncurrent 9,009 667,025 10.00 667,025 Orange Electronic Co., Ltd. - 〃 1,535 145,693 10.00 145,693

Stocks Uni-Calsonic Corporate directors Financial assets measured at cost 3,549 48,729 18.20 - PAC-LINK BioVentures I - 〃 7,138 39,420 10.00 - PAC-LINK Opportunity Fund The same chair man 〃 19,817 37,900 14.11 - Shin Sheng Venture Capital Investment Corp. Corporate directors 〃 2,452 10,050 9.43 - Taiwan Aerospace - 〃 811 8,107 0.60 - Com2B (Cayman) Corp. - 〃 2,000 5,702 4.44 - Yueki Industrial Co., Ltd. - 〃 16 100 0.08 - NORM Pacific Automation Corp. - 〃 90 - 0.45 -

Preferred stock TC Bank - Debt investments with no active market - 290,276 - 290,276

Corporate bond ICBC - Debt investments with no active market - 305,520 - 305,520 Value Success International - 〃 - 154,527 - 154,527 CHIFIN 2.9 03/12/16 - 〃 - 152,760 - 152,760 Gatetech Technology Subsidiaries 〃 - 150,000 - 150,000 (Note) Kunzhi Limited - 〃 - 77,067 - 77,067 Sinotrans Sailing Ltd. - 〃 - 76,518 - 76,518 China Unicom - 〃 - 51,116 - 51,116 Anstock Limited - 〃 - 50,741 - 50,741 SBSG 3.675 03/1/15 - 〃 - 35,690 - 35,690 BEIDAT 5.2 11/30/15 Corp. - 〃 - 25,638 - 25,638

(Continued)

175 Financial Highlights

Relationship with December 31, 2014 Type and Issuer of Holding Company Name the Holding Financial Statement Account Carrying Percentage of Note Marketable Securities Shares Fair Value Company Amount Ownership

RESOUR 3 3/4 11/12/15 - Debt investments with no active market - $ 25,510 - $ 25,510 BSHBOS 3 3/8 09/28/16 - 〃 - 25,391 - 25,391 UNIPR 3 ½ 06/06/16 - 〃 - 25,364 - 25,364

Kian Shen Beneficial certificates Jih Sun Money Market Fund - Financial assets at fair value through profit or loss - current 688 10,006 - 10,006 Mega Diamond Money Market Fund - 〃 406 5,001 - 5,001

Kian Shen Investment Stock Beijing NTN-SEOHAN Driveshaft Co., Ltd. - Financial assets measured at cost - RMB 3,402 9.00 - thousand

Alliance Investment & Management Stocks Hiroca holding - Financial assets at fair value through profit or loss - current 2,023 189,779 2.59 189,779

Beneficial certificates Capital Money Market Fund - Financial assets at fair value through profit or loss - current 5,948 94,280 - 94,280

Stocks China Fineblanking Technology Co., Ltd. - Available-for-sale financial assets - noncurrent 110 3,278 0.24 3,278

Stocks Mosa Industrial Corp. - Financial assets measured at cost 5,633 97,800 4.26 - Samuel (Cayman) Co., Ltd. - 〃 6,327 92,131 15.07 - CARPLUS Auto Leasing Corporation - 〃 2,590 21,531 3.45 - Acrosser Technology Co., Ltd. - 〃 2,052 13,152 8.01 - AMPAK Technology Inc. - 〃 412 11,524 0.55 - United Oriental Glass Ind. Co., Ltd. - 〃 533 11,199 1.33 - Solidlite Corporation - 〃 789 8,744 3.60 - Phalanx Biotech Group - 〃 696 7,658 3.57 - T-Car Inc. - 〃 234 6,386 0.50 - Tennrich International Corp. - 〃 523 5,588 0.86 - Gongin Precision Industrial Co., Ltd. - 〃 320 4,669 0.70 - Nitring Enterprise, Inc. - 〃 366 4,392 1.83 - Industrial Technology Investment - 〃 474 1,518 1.67 - Corporation. Jouge Technology Co., Ltd. - 〃 205 987 0.76 - Site information service - 〃 65 968 0.54 - Chao Peng Optronics Co, Ltd. - 〃 88 1 0.81 -

Preferred stock Apexigen Inc. - Financial assets measured at cost 234 1,280 - - General Rich International S.A. - 〃 60 - - -

Greentrans Beneficial certificates CTBC Hwa-win Money Market Fund - Financial assets at fair value through profit or loss - current 185 2,003 - 2,003

(Continued)

176 Financial Highlights

Relationship with December 31, 2014 Type and Issuer of Holding Company Name the Holding Financial Statement Account Carrying Percentage of Note Marketable Securities Shares Fair Value Company Amount Ownership

Sino Diamond Motors Beneficial certificates Reliance Securities Investment Trust Private - Financial assets at fair value through profit or loss - current 99 $ 1,487 - $1,487 Fund

Beneficial certificates CTBC Hwa-win Money Market Fund - Available-for-sale financial assets - current 5,543 60,000 - 60,000 Allianz Global Investors All Seasons Return - 〃 3,610 52,025 - 52,025 Fund of Bond Funds Prudential Financial Mmkt - 〃 289 4,490 - 4,490

CMC Investment Stock Asia Plastic - Financial assets at fair value through profit or loss - current 219 7,968 0.09 7,968 Carnival - 〃 190 1,528 0.05 1,528 TFC - 〃 24 1,339 - 1,339 YTEC - 〃 42 475 - 475 Uni President - 〃 - 7 - 7

Beneficiary certificates Capital Money Market Fund - Financial assets at fair value through profit or loss - current 801 12,695 - 12,695 CTBC Hwa-win Money Market Fund - 〃 831 9,000 - 9,000

Stock Myson Century, Inc. - Available-for-sale financial assets - noncurrent 4,705 47,282 7.84 47,282

Stock Momo.Com Inc. - Available-for-sale financial assets - current 325 109,037 - 109,037

Stocks PAC-LINK Bio Ventures I - Financial assets measured at cost 1,428 7,884 2.00 - Tai Yuan Textile The same chair man 〃 186 3,500 0.02 -

Gatetech Technology Debt The 2nd period of 2006 Non-cumulative - Debt investments with no active market - 20,000 - 20,000 Subordinated Financial Bond, without Maturity Date

Note: Eliminated

(Concluded)

177 Financial Highlights

TABLE 4

CHINA MOTOR 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, 2014 (In Thousands of New Taiwan Dollars)

Type and Name of Financial Beginning Balance Acquisition Disposal Other Ending Balance Company Name Marketable Statement Counterparty Relationship Carrying Gain (Loss) on Adjustment Shares Amount Shares Amount Shares Amount Shares Amount Securities Account Amount Disposal (Note 1)

China Motor Corporation Stocks DiamlerVans Hong Investments - Equity-method 33,099 $ 844,923 7,788 $ 317,533 - $ - $ - $ - $ 75,665 40,887 $ 1,238,121 Kong Ltd. accounted for investee using the equity method

Kian Shen Investment Stocks Hong Kong Co., Xiangyang Investments (Note 2) Equity-method - - - 412,217 - - - - 1,709 - 413,926 Limited NTN-YOLON accounted for investee Privertrain using the equity method

Note 1: Including recognizing equity in gains or losses of investees and their equity adjustments.

Note 2: Invested by Kian Shen Investment Hong Kong Co., Limited

178 Financial Highlights

TABLE 5

CHINA MOTOR CORPORATION AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars)

Notes/Accounts Transaction Details Abnormal Transaction Receivable (Payable) Buyer Related Party Relationship % to % to Note Purchase/ Amount Total Payment Terms Unit Price Payment Terms Ending Balance Total Sale (Note 2) (Note 2)

China Motor Corporation Fortune Motors Equity-method investees Sale $ (15,346,199) (55) Collect after 16-60 days of delivery $ - - $ 689,319 42 Shung Ye Motors Equity-method investees Sale (4,005,574) (14) Collect after 16-60 days of delivery - - 215,527 13 Mitsubishi Corp. Director Sale (745,082) (3) Collect after 20-80 days of delivery - - 58,893 4 Y. M. Hi-Tech (Note 1) Subsidiaries Sale (105,660) - Collect after 16-45 days of delivery - - 29,895 2 Mitsubishi Corp. Director Purchase 2,500,427 13 Pay after 7 days of cargo ship out - - (66,910) (3) Uni Auto Parts Manufacture Equity-method investees Purchase 622,720 3 Pay after 45 days of the month of - - (135,151) (5) delivery Kian Shen (Note 1) Subsidiaries Purchase 550,409 3 Pay after 45 days of the month of - - (101,891) (4) delivery COC (Note 1) Subsidiaries Purchase 350,772 2 Pay after 45 days of the month of - - (65,632) (3) delivery Shye Shyang Machinery Industrial Directors Purchase 357,497 2 Pay after 45 days of the month of - - (65,896) (3) delivery ROC-Spicer Equity-method investees Purchase 355,773 2 Pay after 45 days of the month of - - (69,135) (3) delivery China Enging (Note 1) Subsidiaries Purchase 183,939 1 Pay after 45 days of the month of - - (8,293) - delivery Uni-Calsonic Directors Purchase 128,957 1 Pay after 45 days of the month of - - (26,678) (1) delivery

Y. M. Hi-Tech Yulon Equity-method investees Sale (153,134) (49) Collect after 45 days of the month - - 26,088 52 of delivery COC (Note 1) Parent company Sale (102,565) (33) Collect after 45 days of the month - - 16,965 34 of delivery Yulon Equity-method investees Purchase 150,904 52 Pay after 45 days of the month of - - (81,767) (62) delivery China Motor Corporation (Note 1) Parent company Purchase 105,660 37 Pay after 16-45 days of delivery - - (29,895) (23)

Sino Diamond Motors Shung Ye Motors Equity-method investees Sale (1,045,351) (50) Collect after 7-45 days of delivery - - 5,433 9 Fortune Motors Equity-method investees Sale (757,835) (37) Collect after 16-45 days of delivery - - 24,348 41 Mitsubishi Corp. Director of parent company Purchase 491,818 50 Net 30 days from the end of the - - (109) - month of when invoice is issued

(Continued)

179 Financial Highlights

Notes/Accounts Transaction Details Abnormal Transaction Receivable (Payable) Buyer Related Party Relationship % to % to Note Purchase/ Amount Total Payment Terms Unit Price Payment Terms Ending Balance Total Sale (Note 2) (Note 2)

Kiah Shen China Motor Corporation (Note 1) Parent company Sale $ (550,409) (46) Collect after 45 days of the month $ - - $ 101,891 42 of delivery Yulon Equity-method investees Sale (125,095) (11) Collect after 45 days of the month - - 21,216 9 of delivery

COC China Motor Corporation (Note 1) Parent company Sale (350,772) (21) Collect after 45 days of the month - - 65,632 20 of delivery Yulon Equity-method investees Sale (489,278) (29) Collect after 45 days of the month - - 69,612 21 of delivery Yulon Equity-method investees Purchase 261,277 24 Pay after 45 days of the month of - - (1,837) (1) delivery Y.M. Hi-Tech (Note 1) Subsidiaries Purchase 102,565 9 Pay after 45 days of the month of - - (16,965) (6) delivery

China Engine China Motor Corporation (Note 1) Parent company Sale (183,939) (17) Collect after 45 days of the month - - 8,293 2 of delivery Hua-Chuang Automobile Information Equity-method investees Sale (453,577) (41) Collect after 45 days of the month - - 295,822 85 Technical Center of delivery Yulon Equity-method investees Sale (274,550) (25) Collect after 45 days of the month - - 38,768 11 of delivery

Donggunn Huayi Donggunn Huashun (Note 1) Subsidiaries Sale (138,724) 35 Collect after 16-30 days of delivery - - 3,473 54

Tianjin Huahong Soueast-motor Equity-method investees Purchase 248,643 91 Pay after 45 days of delivery - - - -

Guangzhou Huayou Motor Soueast-motor Equity-method investees Purchase 229,828 81 Pay after 45 days of delivery - - (17,110) (93) Sales

Sichuan Hwafeng Hanwei Soueast-motor Equity-method investees Purchase 448,085 96 Pay after 45 days of delivery - - (23,100) (97)

Donggunn Huashun Soueast-motor Equity-method investees Purchase 136,640 41 Pay after 45 days of delivery - - (33,953) (90) Donggunn Huayi (Note 1) Parent company Purchase 138,724 42 Pay after 16-30 days of delivery - - (3,473) (9)

Note 1: Eliminated.

Note 2: The proportion of Individual company total purchase (sale) or total receivable (payable).

(Concluded)

180 Financial Highlights

TABLE 6

CHINA MOTOR CORPORATION AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars)

Overdue Amounts Allowance for Received in Company Name Related Party Relationship Ending Balance Turnover Rate Impairment Amount Actions Taken Subsequent Loss Period

China Motor Corporation Fortune Motors Equity-method investee $ 689,319 23.84 $ - - $ 689,319 $ - Shung Ye Motors Equity-method investee 215,527 17.92 - - 215,527 -

China Engine Hua-Chuang Automobile Information Technical Center Equity-method investee 295,822 1.39 - - 295,822 -

Kian Shen China Motor Corporation (Note) Parent company 101,891 5.33 - - 101,891 -

Note: Eliminated

181 Financial Highlights

TABLE 7

CHINA MOTOR CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investment Amount As of December 31, 2014 Net Income (Loss) Share of Profits Investor Company Investee Company Location Main Businesses and Products Note December 31, 2014 December 31, 2013 Shares % Carrying Amount of the Investee (Loss)

China Motor Corporation Yulon (Note 6) Miaoli, Taiwan Manufacture and sale of vehicles $ 2,772,729 $ 2,772,729 236,901 15.06 $ 10,301,122 $ 2,210,346 $ 306,252 Equity-method investees Kian Shen (Note 1) Taoyuan, Taiwan The production of frame of heavy duty 344,800 344,800 30,379 43.87 1,583,029 319,589 139,746 Subsidiary car and mold Fortune Motors Taipei, Taiwan Sales and providing after sales service of 2,132,219 2,132,219 132,097 41.93 3,720,283 888,321 372,384 Equity-method vehicle investees Sino Diamond Motors (Note 1) Taipei, Taiwan Sales and providing after sales service of 3,463,724 3,463,724 325,786 100.00 2,994,854 (39,492) (39,492) Subsidiary vehicle CMC Investment (Note 1) Taipei, Taiwan Invest on production and service 130,263 409,975 133,503 100.00 1,788,115 41,890 41,896 Subsidiary industries. Alliance Investment & Taipei, Taiwan Investment 1,200,030 1,200,030 183,000 100.00 1,672,498 (22,458) (19,173) Subsidiary Management (Note 1) CMI (Note 1) Samoa Investment 1,402 1,402 40 100.00 1,422,782 41,144 41,144 Subsidiary Tokio Marine Newa Insurance Taipei, Taiwan Property insurance 955,941 955,941 61,511 20.57 1,473,429 837,245 172,227 Equity-method (Note 2) investees ROC-Spicer Taoyuan, Taiwan Manufacture and sales of automobile 803,633 803,633 1,422 29.00 1,266,698 321,168 93,028 Equity-method parts investees Daimler Vans Hong Kong Ltd. Hong Kong Investment 1,813,970 1,496,438 40,887 32.45 1,238,121 83,363 27,051 Equity-method investees Hwa Wei Holdings (Note 1) British Virgin Islands Overseas investment on production and 1,202 1,202 40 100.00 828,820 (529,210) (510,173) Subsidiary service industries COC (Note 1) Taoyuan, Taiwan The production of mold, fixture and 412,125 412,125 28,148 49.76 631,389 174,662 86,303 Subsidiary gauge of vehicle. The production of mold, fixture and gauge of vehicle. Tai Yuen Venture Capital Taipei, Taiwan Venture capital, providing plan consulting 495,000 495,000 52,470 49.50 395,782 (29,011) (14,360) Equity-method Investment and operations administration investees Uni Auto Parts Manufacture Miaoli, Taiwan The production of mold, fixture and 109,813 109,813 11,847 15.00 352,470 195,470 29,196 Equity-method gauge of vehicle. investees Hua-Chuang Automobile Taipei, Taiwan Product design 473,760 473,760 47,200 9.44 335,220 33,498 (44,521) Equity-method Information Technical Center investees (Note 4) Shung Ye Motors (Note 3) Taipei, Taiwan Sales and providing after sales service of 391,142 391,305 25,190 39.98 317,609 26,688 10,644 Equity-method vehicle investees Gatetech Technology (Note 1) Taoyuan, Taiwan Aluminum-magnesium alloy casting 474,941 474,941 24,725 56.53 203,735 (55,011) (31,100) Subsidiary industry China Engine (Note 1) Taoyuan, Taiwan Manufacture of automobile engine and 320,000 320,000 32,000 18.95 154,941 11,966 9,576 Subsidiary parts Sin Gan Taipei, Taiwan Sales and providing after sales service of 71,316 120,664 7,074 24.67 105,025 113,087 27,910 Equity-method vehicle investees Sin Jiang Enterprises Taipei, Taiwan Retail and wholesale of second-hand 85,893 85,893 8,568 20.01 95,291 23,975 4,797 Equity-method vehicle investees Hwa Chung Motors (Note 1) Taoyuan, Taiwan Manufacture of vehicles 328,900 328,900 8,790 100.00 66,018 (52) (52) Subsidiary Yulon IT Solutions Taipei, Taiwan Information software wholesale services 83,320 83,320 8,332 43.85 22,414 993 436 Equity-method investees Fu Yu Venture Capital Investment Taipei, Taiwan Venture capital, providing plan consulting 22,222 22,222 2,222 14.81 19,142 - - Equity-method and operations administration investees (under liquidation) Hwa Hann (Note 1) Philippines Buy and sell of automobile parts 3,378 3,378 521 48.99 2,485 - - Subsidiary (under liquidation)

Kian Shen Kian Shen Investment (Note 1) British Virgin Islands Production and overseas invest on service 328,888 328,888 10,296 100.00 2,760,312 409,280 - Subsidiary industries

(Continued)

182 Financial Highlights

Investment Amount As of December 31, 2014 Net Income (Loss) Share of Profits Investor Company Investee Company Location Main Businesses and Products Note December 31, 2014 December 31, 2013 Shares % Carrying Amount of the Investee (Loss)

Kian Shen Investment KSIHK (Note 1) Hong Kong Investment US$ 25,907 US$ 25,907 25,907 100.00 RMB 542,837 RMB 63,316 $ - Subsidiary thousand thousand thousand thousand

Alliance Investment & Hua-Chuang Automobile Taipei, Taiwan Product design 473,760 473,760 47,200 9.44 548,847 33,498 - Equity-method Management Information Technical Center investees Greentrans Investment (Note 1) Samoa Investment 195,237 195,237 6,600 100.00 195,739 (3,645) - Subsidiary Gatetech Technology (Note 1) Taoyuan, Taiwan Aluminum-magnesium alloy casting 145,123 145,123 3,172 7.26 26,141 (55,011) - Subsidiary industry

Sino Diamond Motors Hua-Yu (Note 1) Samoa Production and overseas invest on service 1,758,773 1,758,773 45,643 100.00 1,121,754 (57,474) - Subsidiary industries Hua-Chuang Automobile Taipei, Taiwan Product design 473,760 473,760 47,200 9.44 548,847 33,498 - Equity-method Information Technical Center investees China Engine (Note 1) Taoyuan, Taiwan Manufacture of automobile engine and 616,000 616,000 56,000 33.16 337,869 11,966 - Subsidiary parts Gatetech Technology (Note 1) Taoyuan, Taiwan Aluminum-magnesium alloy casting 149,369 149,369 3,946 9.02 32,552 (55,011) - Subsidiary industry Brillant Insight International Taoyuan, Taiwan Consulting and service 10,000 - 1,000 100.00 6,472 (3,528) - Subsidiary (Note 1) Hwa Hann (Note 1) Philippines Buy and sell of automobile parts 3,500 3,500 542 51.00 2,586 - - Subsidiary (under liquidation) Shung Ye Motors (Note 5) Taipei, Taiwan Sales and providing after sales service of 180 - 10 0.02 178 26,688 - Equity-method vehicle investees Fortune Motors Taipei, Taiwan Sales and providing after sales service of 24 24 1 - 14 888,321 - Equity-method vehicle investees

Hua-Yu Hwa-Lin (Note 1) British Virgin Islands Production and overseas invest on service US$ 45,929 US$ 45,929 42,093 100.00 1,013,970 (57,436) - Subsidiary industries thousand thousand

CMC Investment Yulon Miaoli, Taiwan Manufacture and sales of vehicles 909,086 909,086 25,327 1.61 1,036,624 2,210,346 - Equity-method investees Hua-Chuang Automobile Taipei, Taiwan Product design 473,760 473,760 47,200 9.44 548,847 33,498 - Equity-method Information Technical Center investees

Gatetech Technology GH (Note 1) Samoa Investment 647,041 647,041 20,130 100.00 567,402 (22,057) - Subsidiary

GH GI (Note 1) Samoa Investment US$ 20,268 US$ 20,268 20,268 100.00 569,372 (23,180) - Subsidiary thousand thousand

China Engine Advance Power Investment Mauritius Reinvestment and sales 59,456 59,456 3,750 100.00 104,043 1,356 - Subsidiary (Note 1) Advance Power Machinery Miaoli, Taiwan Manufacture of vehicle and parts 5,000 5,000 500 100.00 9,949 1,555 - Subsidiary (Note 1)

Hwa Chung Motors Ling Wei (Note 1) Taipei, Taiwan Sales of second-hand vehicle 31,000 31,000 3,608 100.00 29,747 (726) - Subsidiary Greentrans (Note 1) Taipei, Taiwan Sales of bicycle and motorcycle 10,000 10,000 1,000 100.00 10,601 450 - Subsidiary

COC Y. M. Hi-Tech (Note 1) Taoyuan, Taiwan Steel cutting 30,000 30,000 3,000 60.00 48,982 8,352 - Subsidiary Shye Shinn (Note 1) British Virgin Islands Investment US$ 2,200 US$ 2,200 2,200 100.00 47,353 3,002 - Subsidiary thousand thousand

Note 1: Eliminated.

Note 2: During the preparation of consolidated financial statement, the price marking $75,455 thousand of intra-group transaction had been eliminated.

Note 3: During the preparation of consolidated financial statement, the loss of $22,538 thousand of intra-group transaction had been eliminated.

Note 4: During the preparation of consolidated financial statement, the side stream transaction $36,065 thousand had been eliminated.

Note 5: During the preparation of consolidated financial statement, the gain $31 thousand of intra-group transaction had been eliminated.

Note 6: During the preparation of consolidated financial statement, the side stream transaction $3,285 thousand had been eliminated. (Concluded)

183 Financial Highlights

TABLE 8

CHINA MOTOR CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Remittance of Funds Accumulated Accumulated Accumulated Outward Outward % Ownership Carrying Repatriation of Remittance for Remittance for Net Income (Loss) of Direct or Investment Amount as of Investment Main Businesses and Paid-in Capital Investment from Investee Company Method of Investment Investment from of the Investee Indirect Gain (Loss) December 31, Income as of Products (Note 1) Outward Inward Taiwan as of Taiwan as of (Notes 2 and 3) Investment (Notes 2 and 3) 2014 December 31, December 31, January 1, 2014 (Note 1) 2014 2014 (Note 1) (Note 1) (Note 1)

Soueast-motor (Notes 4 Sales of industrial automation $ 4,367,700 The Company indirectly owns these $ 1,091,925 $ - $ - $ 1,091,925 $ (1,562,308) 25.00 $ (390,577) $ 1,881,097 $ 823,628 and 5) products (US$ 138,000 investees through investment (US$ 34,500 (US$ 34,500 (US$ 26,023 thousand) company registered in a third region thousand) thousand) thousand)

China Engine (Fujian) Sales of engine and engine 474,750 The Company indirectly owns these 237,375 - - 237,375 5,426 38.03 2,713 208,060 - parts (US$ 15,000 investees through investment (US$ 7,500 (US$ 7,500 thousand) company registered in a third region thousand) thousand)

Fujian Benz Automotive Sales of industrial automation 9,694,440 The Company indirectly owns these 1,273,319 299,604 - 1,572,923 167,692 16.23 27,190 1,237,080 - products (EUR 252,000 investees through investment (EUR 33,099 (EUR 7,788 (EUR 40,887 (EUR 4,163 (EUR 675 (EUR 32,157 thousand) company registered in a third region thousand) thousand) thousand) thousand) thousand) thousand)

Guangzhou NTN-YULON Sales and production of 395,625 The Company indirectly owns these 158,250 - - 158,250 636,770 17.55 254,708 1,210,945 - Drivertrain vehicle’s components (US$ 12,500 investees through investment (US$ 5,000 (US$ 5,000 (RMB 129,900 (RMB 51,960 (RMB 238,094 thousand) company registered in a third region thousand) thousand) thousand) thousand) thousand)

Fuzhou Fushiang Motor Sales and production of 562,737 The Company indirectly owns these 89,728 - - 89,728 123,550 15.35 43,243 637,547 - Industrial vehicle’s components (US$ 17,780 investees through investment (US$ 2,835 (US$ 2,835 (RMB 25,204 (RMB 8,821 (RMB 125,353 thousand) company registered in a third region thousand) thousand) thousand) thousand) thousand)

Xiangyang NTN-YULON Sales and production of 1,076,100 The Company indirectly owns these - - - - (25,603) 17.55 (10,241) 413,926 - Drivertrain vehicle’s components (US$ 34,000 investees through investment (RMB -5,223 (RMB -2,089 (RMB 81,385 thousand) company registered in a third region thousand) thousand) thousand)

Xiamen King-Long Sales and production of 488,832 The Company indirectly owns these 48,330 - - 48,330 59,197 21.94 29,598 302,107 - Kian-Shen Frame vehicle’s components (RMB 96,000 investees through investment (US$ 1,527 (US$ 1,527 (RMB 12,076 (RMB 6,038 (RMB 59,400 thousand) company registered in a third region thousand) thousand) thousand) thousand) thousand)

Beijing NTN-SEOHAN The assembling and extra work 189,900 The Company indirectly owns these 17,091 - - 17,091 86,035 3.95 - 17,305 - Driveshaft of transmission shaft and (US$ 6,000 investees through investment (US$ 540 (US$ 540 (RMB 17,551 (RMB 3,402 other parts thousand) company registered in a third region thousand) thousand) thousand) thousand)

Jiangsu Greentrans Production and sales of parts 208,890 The Company indirectly owns these 104,445 104,445 - 208,890 (5,652) 100.00 (5,652) 195,452 - Automotive Parts (Note 6) of electronic motorcycle (US$ 6,600 investees through investment (US$ 3,300 (US$ 3,300 (US$ 6,600 thousand) company registered in a third region thousand) thousand) thousand)

Fujian Rui Hua (Note 6) Consultation and services 107,610 The Company indirectly owns these 107,610 - - 107,610 371 100.00 371 107,735 - (US$ 3,400 investees through investment (US$ 3,400 (US$ 3,400 thousand) company registered in a third region thousand) thousand)

Beijing Jun Hua (Note 6) Consultation and services 4,748 The Company indirectly owns these 4,748 - - 4,748 (500) 100.00 (500) 14 - (US$ 150 investees through investment (US$ 150 (US$ 150 thousand) company registered in a third region thousand) thousand)

(Continued)

184 Financial Highlights

Remittance of Funds Accumulated Accumulated Accumulated Outward Outward % Ownership Carrying Repatriation of Remittance for Remittance for Net Income (Loss) of Direct or Investment Amount as of Investment Main Businesses and Paid-in Capital Investment from Investee Company Method of Investment Investment from of the Investee Indirect Gain (Loss) December 31, Income as of Products (Note 1) Outward Inward Taiwan as of Taiwan as of (Notes 2 and 3) Investment (Notes 2 and 3) 2014 December 31, December 31, January 1, 2014 (Notes 1) 2014 2014 (Note 1) (Note 1) (Note 1)

Zhejiang Kangda Motor Sales of various vehicles and $ 203,680 The Company indirectly owns these $ 38,233 $ - $ - $ 38,233 $ 34,472 24.50 $ 8,446 $ 199,119 $ - Industry And Trading their components (RMB 40,000 investees through investment (US$ 1,208 (US$ 1,208 thousand) company registered in a third region thousand) thousand)

Guangzhou Huayou Motor Maintenance and ancillary 405,437 The Company indirectly owns these 354,448 - - 354,448 (21,877) 100.00 (21,877) 140,910 - Maintenance (Note 6) services of vehicle (US$ 12,810 investees through investment (US$ 11,199 (US$ 11,199 thousand) company registered in a third region thousand) thousand)

Sichuan Huafeng Hanwei Maintenance and ancillary 421,895 The Company indirectly owns these 421,895 - - 421,895 4,829 100.00 4,829 137,985 - (Note 6) services of vehicle (US$ 13,330 investees through investment (US$ 13,330 (US$ 13,330 thousand) company registered in a third region thousand) thousand)

Tianjin Hwarui (Note 6) Maintenance and ancillary 253,833 The Company indirectly owns these 245,636 - - 245,636 (12,737) 100.00 (12,737) 165,356 - services of vehicle (US$ 8,020 investees through investment (US$ 7,761 (US$ 7,761 thousand) company registered in a third region thousand) thousand)

Dongguan Huayi (Note 6) Maintenance and ancillary 140,843 The Company indirectly owns these 133,468 - - 133,468 (26,091) 100.00 (26,091) 74,280 - services of vehicle (US$ 4,450 investees through investment (US$ 4,217 (US$ 4,217 thousand) company registered in a third region thousand) thousand)

Suzhou Fulgent Automobile Maintenance and ancillary 210,441 The Company indirectly owns these 129,607 - - 129,607 (59,865) 35.00 (20,953) 21,949 - Service services of vehicle (US$ 6,649 investees through investment (US$ 4,095 (US$ 4,095 thousand) company registered in a third region thousand) thousand)

Jiang Su Hui Feng Vehicle Maintenance and ancillary 79,980 The Company indirectly owns these 21,047 - - 21,047 (19,800) 35.00 (6,930) - - Service services of vehicle (US$ 2,527 investees through investment (US$ 665 (US$ 665 thousand) company registered in a third region thousand) thousand)

Sichuan Hauwei (Note 6) Sales of various vehicles and 15,276 The Company indirectly owns these - - - - (881) 100.00 (881) 153 - their components (RMB 3,000 investees through investment (RMB -179 (RMB -179 (RMB 30 thousand) company registered in a third region thousand) thousand) thousand)

Sichuan Lingwei (Note 6) Sales of various vehicles and 10,184 The Company indirectly owns these - - - - 2,204 100.00 2,204 2,358 - their components (RMB 2,000 investees through investment (RMB 448 (RMB 448 (RMB 463 thousand) company registered in a third region thousand) thousand) thousand)

Dongguan Huashun (Note 6) Sales of various vehicles and 76,380 The Company indirectly owns these - - - - (26,421) 100.00 (26,421) (37,589) - their components (RMB 15,000 investees through investment (RMB -5,370 (RMB -5,370 (RMB -7,382 thousand) company registered in a third region thousand) thousand) thousand)

Tianjin Hwahong (Note 6) Sales of various vehicles and 305,520 The Company indirectly owns these - - - - (11,808) 100.00 (11,808) 272,300 - their components (RMB 60,000 investees through investment (RMB -2,400 (RMB -2,400 (RMB 53,476 thousand) company registered in a third region thousand) thousand) thousand)

Guangzhou Huayou Motor Sales of various vehicles and 10,184 The Company indirectly owns these - - - - (18,741) 100.00 (18,741) (189,473) - Sales (Note 6) their components (RMB 2,000 investees through investment (RMB -3,809 (RMB -3,809 (RMB -37,210 thousand) company registered in a third region thousand) thousand) thousand)

Gatech (Suzhou) Technology Aluminum-magnesium alloy 769,095 The Company indirectly owns these 641,451 - - 641,451 (23,267) 72.81 (23,267) 567,953 - (Note 6) casting industry (US$ 24,300 investees through investment (US$ 20,267 (US$ 20,267 thousand) company registered in a third region thousand) thousand)

Zhengzhou Tooling & Design, manufacture, sales and 63,650 The Company indirectly owns these 30,637 - - 30,637 5,425 29.86 3,273 47,285 17,965 Stamping (Note 6) providing technological (RMB 12,500 investees through investment (US$ 968 (US$ 968 (US$ 179 (US$ 108 (US$ 1,494 (US$ 587 services of molds, hardwares thousand) company registered in a third region thousand) thousand) thousand) thousand) thousand) thousand) and stampings

(Continued)

185 Financial Highlights

Accumulated Outward Remittance for Investment Investment Amounts Authorized by Investment Upper Limit on the Amount of Investment in Mainland China as of December 31, 2014 Commission, MOEA Stipulated by Investment Commission, MOEA (Note 1) (Note 1)

$5,553,290 $6,809,051 $29,065,176 (US$125,762 thousand and (US$198,767 thousand and EUR40,887 thousand) EUR13,467 thousand)

Note 1: At exchange rate on December 31, 2014, US$1＝$31.65, RMB1＝$5.092, EUR1＝$38.47.

Note 2: At exchange rate of average rate of the year ended December 31, 2014, US$1＝$30.3056, RMB1＝$4.9202, EUR1＝$40.2816

Note 3: The carrying amount and related investment income of the equity investment were calculated based on the audited financial statements.

Note 4: The amount of sales of parts and mold to Soueast-motor for the year ended December 31, 2014 was $38,806 thousand. The unrealized gross profit was $6,865 thousand for the year ended December 31, 2014, and the payment terms were based on agreements.

Note 5: During the preparation of consolidated statements, the unrealized profit or loss $12,283 thousand had been eliminated.

Note 6: Eliminated.

(Concluded)

186 Financial Highlights

TABLE 9

CHINA MOTOR CORPORATION AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars)

Transaction Details No. Company Name Related Party Relationship % to Total Financial Statement Account Amount Payment Terms Sales or Assets

0 China Motor Corporation Kian Shen Subsidiary Cost of goods sold $ 550,409 The prices and payment terms for related-party transactions were based on 1.53 market price which are not significantly different from those to third parties. Kian Shen Subsidiary Account payable 101,891 The prices and payment terms were based on agreements. 0.17 COC Subsidiary Cost of goods sold 350,772 The prices and payment terms for related-party transactions were based on 0.98 market price which are not significantly different from those to third parties. China Engine Subsidiary Cost of goods sold 183,939 The prices and payment terms for related-party transactions were based on 0.51 market price which are not significantly different from those to third parties. Sino Diamond Motors Subsidiary Other operating revenue 161,306 The prices and payment terms for related-party transactions were based on 0.45 market price which are not significantly different from those to third parties. Gatetech Technology Subsidiary Debt investments with no 150,000 The prices and payment terms were based on agreements. 0.24 active market Y. M. Hi-Tech Industry Ltd Subsidiary Sales 105,660 The prices and payment terms for related-party transactions were based on 0.29 market price which are not significantly different from those to third parties.

1 Y. M. Hi-Tech Industry Ltd COC The same parent company Sales 102,565 The prices and payment terms for related-party transactions were based on 0.29 market price which are not significantly different from those to third parties.

2 CMI Hwa Wei Holdings The same parent company Other receivable 1,200,000 The prices and payment terms were based on agreements. 1.95

3 Hwa-Lin Dongguan Huayi Subsidiary Other receivable 143,126 The prices and payment terms were based on agreements. 0.23

4 Guangzhou Huayou Motor Guangzhou Huayou Motor Subsidiary Other receivable 358,986 The prices and payment terms were based on agreements. 0.58 Maintenance Sales

5 Tianjin Hwahong Tianjin Hwarui The same parent company Other receivable 107,553 The prices and payment terms were based on agreements. 0.17

6 Dongguan Huayi Dongguan Huashun The same parent company Sales 138,724 The prices and payment terms for related-party transactions were based on 0.39 market price which are not significantly different from those to third parties.

Note 1: Eliminated.

Note 2: This table includes transactions for amounts over one hundred million.

187 Financial Highlights

TABLE 10

CHINA MOTOR CORPORATION AND SUBSIDIARIES

INTERCOMPANY INVESTMENT RELATIONSHIPS AND RATE OF SHARE HELD FRAMEWORK DECEMBER 31, 2014

China Motor Corporation (parent company)

43.87% 100.00% 100.00% 18.95% 100.00% 48.99% 100.00% 56.53% 100.00% 100.00% 49.76%

Hwa Wei Holdings Hwa Hann Alliance Gatetech CMI Kian Shen CMC China Engine Sino Diamond Hwa Chung COC (British Virgin (Philippines) (Samoa) Investment Motors Investment & Technology Motors Islands) Management 33.16% 51.00% 7.26% 100.00% 100.00% 60.00% 9.02% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Advance Power Advance Power Hua-Yu Brilliant Insight Greentrans GH Greentrans Ling Wei Y.M. Kian Shen Investment Machinery Investment (Samoa) International Investment (Samoa) Hi-Tech (British Virgin (Mauritius) Consultancy (Samoa) Islands) Service Co., 100.00% Ltd. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Hwa-Lin GI Shye Shinn KSIHK Fujian Rui Jiangsu Beijing Jun (British Virgin (Samoa) (British Virgin (Hong Kong) Hua Hua Greentrans Islands) Islands) (Mauritius) 100.00% 60.00% 100.00% 99.75% 100.00% 100.00% Gatech Zhengzhou Tooling & 0.25% (Suzhou) Stamping Dongguan Huayi Tianjin Hwarui Sichuan Huafeng Guangzhou Technology Hanwei Huayou Motor Maintenance

100.00% 100.00% 100.00% 100.00% 100.00%

Dongguan Tianjin Sichuan Sichuan Guangzhou Huashun Hwahong Hauwei Lingwei Huayou Motor Sales

188

Financial Highlights

V. Financial Statements and Appendix of the Corporation INDEPENDENT AUDITORS’ REPORT

The Board of Directors and the Stockholders China Motor Corporation

We have audited the accompanying balance sheets of China Motor Corporation (the “Corporation”) as of December 31, 2014 and 2013, and the related statements of comprehensive income, changes in equity and cash flows for the years then ended. These financial statements are the responsibility of China Motor Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits. However, we did not audit the financial statements as of and for the years ended December 31, 2014 and 2013 of Daimler Vans Hong Kong Ltd., Shung Ye Motors Corporation and Uni Auto Parts Manufacture Co., Ltd. and the financial statements as of and for the year ended December 31, 2013 of Fu Yu Venture Capital Investment Corporation, in which the Corporation had equity-method investments, as shown in the accompanying financial statements. These investments were 3.5% (NT$1,908,200 thousand) and 2.8% (NT$1,502,208 thousand) of the Corporation’s total assets as of December 31, 2014 and 2013, respectively. The Corporation’s equity in their comprehensive income was 3.9% (NT$124,761 thousand) and 2.9% (NT$127,492 thousand) of the Corporation’s total comprehensive income in 2014 and 2013, respectively. These investees’ financial statements were audited by other auditors, whose reports have been furnished to us and our opinion, insofar as it relates to the amounts included for these investees, is based solely on the reports of the other auditors.

We conducted our audits in accordance with the Regulations Governing the Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of the Corporation as of December 31, 2014 and 2013, and its financial performance and its cash flows for the years then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

189 Financial Highlights

The accompanying schedules of the major accounting items of China Motor Corporation as of and for the year ended December 31, 2014 are presented for the purpose of additional analysis. These schedules have been subjected to the auditing procedures described in the second paragraph. In our opinion, these schedules are consistent, in all material respects, with the financial statements referred to in the first paragraph.

March 24, 2015

Notice to Readers

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

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

190 Financial Highlights

CHINA MOTOR CORPORATION

BALANCE SHEETS DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars)

2014 2013 ASSETS Amount % Amount %

CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) $ 9,022,297 16 $ 9,159,170 17 Financial assets at fair value through profit or loss (Notes 4 and 7) 295,575 1 436,606 1 Available-for-sale financial assets (Notes 4 and 8) 1,331,400 2 1,174,014 2 Notes receivable, net (Note 4) 108,044 - 124,234 - Accounts receivable, net (Note 4) 453,433 1 301,368 1 Receivables from related parties, net (Notes 4 and 22) 1,096,417 2 1,086,051 2 Other receivables (Note 4) 26,809 - 55,085 - Inventories (Notes 4 and 9) 4,235,717 8 3,953,936 8 Other current assets (Notes 4, 18, 22 and 23) 303,006 1 574,877 1

Total current assets 16,872,698 31 16,865,341 32

NON-CURRENT ASSETS Available-for-sale financial assets (Notes 4 and 8) 812,718 1 584,206 1 Financial assets measured at cost (Notes 4 and 10) 150,008 - 188,150 - Debt investments with no active market (Note 4) 1,446,118 3 727,793 1 Investments accounted for using the equity method (Notes 4 and 11) 30,991,272 56 30,555,153 57 Property, plant and equipment (Notes 4 and 12) 3,370,510 6 2,920,646 6 Investment properties (Notes 4 and 13) 846,927 2 747,833 2 Intangible assets under development (Note 4) 218,187 - 160,800 - Deferred tax assets (Notes 4 and 18) 420,591 1 570,391 1 Other non-current assets 46,974 - 44,441 -

Total non-current assets 38,303,305 69 36,499,413 68

TOTAL $ 55,176,003 100 $ 53,364,754 100

LIABILITIES AND EQUITY

CURRENT LIABILITIES Accounts payable $ 1,793,405 3 $ 2,037,346 4 Payables to related parties (Note 22) 779,211 2 751,466 2 Other payables 2,015,462 4 1,764,445 3 Current tax liabilities (Notes 4 and 18) 204,799 - 196,145 - Current portion of long-term borrowings (Note 14) - - 6,026 - Other current liabilities (Note 22) 178,918 - 136,299 -

Total current liabilities 4,971,795 9 4,891,727 9

NON-CURRENT LIABILITIES Deferred tax liabilities (Notes 4 and 18) 15,657 - 35,141 - Accrued pension liabilities (Notes 4 and 15) 1,739,530 3 1,706,305 3 Other non-current liabilities 7,061 - 6,454 -

Total non-current liabilities 1,762,248 3 1,747,900 3

Total liabilities 6,734,043 12 6,639,627 12

EQUITY (Notes 4, 15 and 16) Ordinary shares 13,840,508 25 13,840,508 26 Capital surplus 6,392,369 12 6,376,868 12 Retained earnings Legal reserve 7,595,944 14 7,342,756 14 Special reserve 1,057,002 2 1,373,008 3 Unappropriated earnings 17,769,775 32 16,800,924 31 Total retained earnings 26,422,721 48 25,516,688 48 Other equity Exchange differences on translating foreign operations 750,561 1 192,209 - Unrealized gain on available-for-sale financial assets 1,035,801 2 798,854 2 Total other equity 1,786,362 3 991,063 2

Total equity 48,441,960 88 46,725,127 88

TOTAL $ 55,176,003 100 $ 53,364,754 100

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

(With Deloitte & Touche audit report dated March 24, 2015)

191 Financial Highlights

CHINA MOTOR CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2014 2013 Amount % Amount %

OPERATING REVENUE (Notes 4 and 22) Net sales $ 27,833,418 98 $ 27,094,148 98 Other operating revenue 439,265 2 467,940 2

Total operating revenue 28,272,683 100 27,562,088 100

OPERATING COSTS (Notes 9, 15, 17 and 22) Cost of goods sold 23,623,518 84 23,714,761 86 Other operating cost 99,836 - 61,429 -

Total operating costs 23,723,354 84 23,776,190 86

GROSS PROFIT 4,549,329 16 3,785,898 14

REALIZED GAIN ON TRANSACTIONS WITH ASSOCIATES 1,630 - 21,275 -

REALIZED GROSS PROFIT 4,550,959 16 3,807,173 14

OPERATING EXPENSES (Notes 15, 17 and 22) Selling and marketing expenses 255,801 1 283,599 1 General and administrative expenses 535,229 2 518,662 2 Research and development expenses 1,788,639 6 1,299,840 5

Total operating expenses 2,579,669 9 2,102,101 8

PROFIT FROM OPERATIONS 1,971,290 7 1,705,072 6

NON-OPERATING INCOME AND EXPENSES Interest income (Note 4) 121,564 - 105,182 1 Other income 52,277 - 43,286 - Gain on disposal of investments 35,538 - 15,350 - Foreign exchange gain, net 62,718 - 78,090 - Other expense (5,789) - (11,474) - Impairment loss (Notes 10, 12 and 13) (34,904) - (37,534) - Net loss on financial instruments at fair value through profit or loss (Note 4) (9,035) - (74,184) - Interest expense (88) - (172) - Share of profit of subsidiaries, associates and joint ventures (Note 4) 703,719 3 927,262 3

Total non-operating income and expenses 926,000 3 1,045,806 4 (Continued)

192 Financial Highlights

CHINA MOTOR CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2014 2013 Amount % Amount %

PROFIT BEFORE INCOME TAX $ 2,897,290 10 $ 2,750,878 10

INCOME TAX EXPENSE (Notes 4 and 18) 339,000 1 219,000 1

NET PROFIT FOR THE YEAR 2,558,290 9 2,531,878 9

OTHER COMPREHENSIVE INCOME (Note 4) Unrealized gain on available-for-sale financial assets (Note 16) 210,601 1 4,160 - Cash flow hedges (Note 16) - - 48,706 - Actuarial gain (loss) arising from defined benefit plans (Note 15) (18,200) - 153,694 1 Share of other comprehensive income (loss) of subsidiaries, associates and joint ventures (Note 16) 470,097 1 1,656,176 6 Income tax relating to components of other comprehensive income (loss) (Notes 15 and 18) 3,094 - (26,128) -

Other comprehensive income for the year 665,592 2 1,836,608 7

TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 3,223,882 11 $ 4,368,486 16

EARNINGS PER SHARE (Notes 4 and 19) Basic $1.88 $ 1.86 Diluted $1.88 $ 1.86

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

(With Deloitte & Touche audit report dated March 24, 2015) (Concluded)

193 Financial Highlights

CHINA MOTOR CORPORATION

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Except Dividends Per Share)

Other Equity Exchange Unrealized Gain Retained Earnings Differences on (Loss) on Unappropriated Translating Available-for-sale Ordinary Shares Capital Surplus Legal Reserve Special Reserve Earnings Foreign Operations Financial Assets Cash Flow Hedge Total Equity

BALANCE AT JANUARY 1, 2013 $ 13,840,508 $ 6,373,509 $ 7,127,112 $ - $ 17,003,345 $ (368,073) $ (327,970) $ (48,706) $ 43,599,725

Special reserve under Rule No. 1010012865 issued by the FSC - - - 1,057,024 (1,057,024) - - - -

Appropriation of the 2012 earnings Legal reserve - - 215,644 - (215,644) - - - - Special reserve - - - 316,006 (316,006) - - - - Cash dividends - $0.9 per share - - - - (1,245,646) - - - (1,245,646)

Special reserve reversal - - - (22) 22 - - - -

Actual acquisition of interest in subsidiaries - - - - (797) - - - (797)

Change in capital surplus from investments in associates and joint ventures accounted for using the equity method - 3,359 ------3,359

Net profit for the year ended December 31, 2013 - - - - 2,531,878 - - - 2,531,878

Other comprehensive income for the year ended December 31, 2013, net of income tax - - - - 100,796 560,282 1,126,824 48,706 1,836,608

Total comprehensive income for the year ended December 31, 2013 - - - - 2,632,674 560,282 1,126,824 48,706 4,368,486

BALANCE AT DECEMBER 31, 2013 13,840,508 6,376,868 7,342,756 1,373,008 16,800,924 192,209 798,854 - 46,725,127

Appropriation of the 2013 earnings Legal reserve - - 253,188 - (253,188) - - - - Cash dividends - $1.1 per share - - - - (1,522,456) - - - (1,522,456)

Special reserve reversal - - - (316,006) 316,006 - - - -

Actual acquisition of interest in subsidiaries - - - - (94) - - - (94)

Change in capital surplus from investments in associates and joint ventures accounted for using the equity method - 15,501 ------15,501

Net profit for the year ended December 31, 2014 - - - - 2,558,290 - - - 2,558,290

Other comprehensive income for the year ended December 31, 2014, net of income tax - - - - (129,707) 558,352 236,947 - 665,592

Total comprehensive income for the year ended December 31, 2014 - - - - 2,428,583 558,352 236,947 - 3,223,882

BALANCE AT DECEMBER 31, 2014 $ 13,840,508 $ 6,392,369 $ 7,595,944 $ 1,057,002 $ 17,769,775 $ 750,561 $ 1,035,801 $ - $ 48,441,960

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

(With Deloitte & Touche auditors’ report dated March 24, 2015)

194 Financial Highlights

CHINA MOTOR CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars)

2014 2013

CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax $ 2,897,290 $ 2,750,878 Adjustments for: Depreciation expenses 461,395 371,892 Amortization expenses 53,821 34,393 Net loss on fair value change of financial instruments at fair value through profit or loss 9,035 74,184 Interest expense 88 172 Interest income (121,564) (105,182) Dividend income (23,516) (16,925) Share of profit of subsidiaries, associates and joint ventures (703,719) (927,262) Gain on disposal of property, plant and equipment (4,297) (2,526) Impairment loss 34,904 37,534 Realized gain on transactions with associates (1,630) (21,275) Unrealized net gain on foreign currency exchange (42,757) (28,172) Changes in operating assets and liabilities Financial assets held for trading 64,216 (149,241) Notes receivable 16,190 87,940 Accounts receivable (150,073) 139,407 Receivables from related parties (9,592) (49,568) Other receivables 38,622 (36,004) Inventories (281,781) 1,738,974 Other current assets 258,442 (185,355) Financial liabilities held for trading - (262,476) Accounts payable (246,142) 278,115 Payables to related parties 27,178 (109,176) Other payables 264,357 (360,819) Other current liabilities 42,619 (67,167) Accrued pension liabilities 15,025 28,148 Cash generated from operations 2,598,111 3,220,489 Income tax paid (183,507) (197,995)

Net cash generated from operating activities 2,414,604 3,022,494

CASH FLOWS FROM INVESTING ACTIVITIES Decrease in financial assets designated as at fair value through profit or loss upon initial recognition 67,780 194,330 (Increase) decrease in available-for-sale financial assets (169,266) 158,623 Acquisition of debt investments with no active market (980,584) (363,794) Proceeds from the repayments of principal of debt investments with no active market 291,748 - Acquisition of investments accounted for using the equity method (317,821) (392,225) Proceeds from the disposal of investments accounted for using the equity method 180 - Proceeds of capital reduction by investees 340,969 2,037,404 (Continued)

195 Financial Highlights

CHINA MOTOR CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars)

2014 2013

Acquisition of property, plant and equipment $ (1,046,566) $ (856,051) Proceeds from the disposal of property, plant and equipment 28,690 24,284 Acquisition of intangible assets (92,650) (129,200) Increase in other non-current assets (23,684) (7,243) Interest received 111,148 100,811 Dividends received 766,542 789,472

Net cash generated from (used in) investing activities (1,023,514) 1,556,411

CASH FLOWS FROM FINANCING ACTIVITIES Repayments of long-term borrowings (6,026) (11,218) Increase in other non-current liabilities 607 340 Cash dividends paid (1,522,456) (1,245,646) Interest paid (88) (172)

Net cash used in financing activities (1,527,963) (1,256,696)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (136,873) 3,322,209

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 9,159,170 5,836,961

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 9,022,297 $ 9,159,170

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

(With Deloitte & Touche audit report dated March 24, 2015) (Concluded)

196 Financial Highlights

CHINA MOTOR CORPORATION

NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

China Motor Corporation (the “Corporation”) manufactures and sells cars and related parts. Its stock is listed on the Taiwan Stock Exchange.

2. APPROVAL OF FINANCIAL STATEMENTS

The accompany financial statements were approved by the board of directors and authorized for issue on March 23, 2015.

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

a. The amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC not yet effective.

Rule No. 1030029342 and Rule No. 1030010325 issued by the FSC, stipulated that the Corporation should apply the 2013 version of IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) endorsed by the FSC and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers starting January 1, 2015.

New, Amended and Revised Effective Date Standards and Interpretations (the “New IFRSs”) Announced by IASB (Note)

Improvements to IFRSs (2009) - amendment to IAS 39 January 1, 2009 and January 1, 2010, as appropriate Amendment to IAS 39 “Embedded Derivatives” Effective for annual periods ended on or after June 30, 2009 Improvements to IFRSs (2010) July 1, 2010 and January 1, 2011, as appropriate Annual Improvements to IFRSs 2009-2011 Cycle January 1, 2013 Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7 July 1, 2010 Disclosures for First-time Adopters” Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed July 1, 2011 Dates for First-time Adopters” Amendment to IFRS 1 “Government Loans” January 1, 2013 Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and January 1, 2013 Financial Liabilities” Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” July 1, 2011 IFRS 11 “Joint Arrangements” January 1, 2013 IFRS 12 “Disclosure of Interests in Other Entities” January 1, 2013 (Continued)

197 Financial Highlights

New, Amended and Revised Effective Date Standards and Interpretations (the “New IFRSs”) Announced by IASB (Note)

Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated January 1, 2013 Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance” Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment January 1, 2014 Entities” IFRS 13 “Fair Value Measurement” January 1, 2013 Amendment to IAS 1 “Presentation of Other Comprehensive Income” July 1, 2012 Amendment to IAS 12 “Deferred Tax: Recovery of Underlying January 1, 2012 Assets” IAS 19 (Revised 2011) “Employee Benefits” January 1, 2013 IAS 27 (Revised 2011) “Separate Financial Statements” January 1, 2013 IAS 28 (Revised 2011) “Investments in Associates and Joint January 1, 2013 Ventures” Amendment to IAS 32 “Offsetting Financial Assets and Financial January 1, 2014 Liabilities” IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine” January 1, 2013 (Concluded)

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

Except for the following, whenever applied, the initial application of the above 2013 IFRSs version and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers would not have any material impact on the Corporation’s accounting policies:

1) IFRS 12 “Disclosure of Interests in Other Entities”

IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements and associates. In general, the disclosure requirements in IFRS 12 are more extensive than in the current standards.

2) Revision to IAS 28 “Investments in Associates and Joint Ventures”

Revised IAS 28 requires when a portion of an investment in an associate meets the criteria to be classified as held for sale, that portion is classified as held for sale. Any retained portion that has not been classified as held for sale is accounted for using the equity method. Under current IAS 28, when a portion of an investment in associates meets the criteria to be classified as held for sale, the entire investment is classified as held for sale and ceases to apply the equity method.

Under revised IAS 28, when an investment in a joint venture becomes an investment in an associate, the Corporation continues to apply the equity method and does not remeasure the retained interest. Under current IAS 28, on the loss of joint control, the Corporation measures at fair value any investment the Corporation retains in the former jointly controlled entity. The Corporation recognizes in profit or loss any difference between the aggregate amounts of fair value of retained investment and proceeds from disposing of the part interest in the jointly controlled entity, and the carrying amount of the investment at the date when joint control is lost.

198 Financial Highlights

3) IFRS 13 “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope.

The fair value measurements under IFRS 13 will be applied prospectively from January 1, 2015.

4) Amendments to IAS 1 “Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 requires items of other comprehensive income to be grouped into those items that (1) will not be reclassified subsequently to profit or loss; and (2) may be reclassified subsequently to profit or loss. Income taxes on related items of other comprehensive income are grouped on the same basis. Under current IAS 1, there were no such requirements.

The Corporation will retrospectively apply the above amendments starting from 2015. Items not expected to be reclassified to profit or loss are remeasurements of the defined benefit plans and the share of the remeasurements of the defined benefit plans of associates accounted for using the equity method. Items expected to be reclassified to profit or loss are the exchange differences on translating foreign operations, unrealized gains (loss) on available-for-sale financial assets, cash flow hedges, and share of the other comprehensive income (except the share of the remeasurements of the defined benefit plans) of subsidiaries, associates and joint ventures accounted for using the equity method. However, the application of the above amendments will not result in any impact on the net profit for the year, other comprehensive income for the year (net of income tax), and total comprehensive income for the year.

5) Revision to IAS 19 “Employee Benefits”

Revised IAS 19 requires the recognition of changes in defined benefit obligations and in the fair value of plan assets when they occur, and hence eliminates the “corridor approach” permitted under current IAS 19 and accelerate the recognition of past service costs. The revision requires all remeasurements of the defined benefit plans to be recognized immediately through other comprehensive income in order for the net pension asset or liability to reflect the full value of the plan deficit or surplus.

Furthermore, the interest cost and expected return on plan assets used in current IAS 19 are replaced with a “net interest” amount, which is calculated by applying the discount rate to the net defined benefit liability or asset. In addition, the revised IAS 19 introduces certain changes in the presentation of the defined benefit cost, and also includes more extensive disclosures.

On initial application of the revised IAS 19 in 2015, the Corporation would elect not to present 2014 comparative information about the sensitivity of the defined benefit obligation. Adjustments arising from initial application are not significant.

6) Amendments to IFRS 7 “Disclosure - Offsetting Financial Assets and Financial Liabilities”

The amendments to IFRS 7 require disclosure of information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under enforceable master netting arrangements and similar arrangements.

199 Financial Highlights

7) Amendments to IAS 32 “Offsetting Financial Assets and Financial Liabilities”

The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realization and settlement”.

8) Annual Improvements to IFRSs: 2009-2011 Cycle

Several standards including IAS 1 “Presentation of Financial Statements”, IAS 16 “Property, Plant and Equipment” and IAS 32 “Financial Instruments: Presentation” were amended in this annual improvement.

The amendments to IAS 1 clarify that an entity is required to present a balance sheet as at the beginning of the preceding period when a) it applies an accounting policy retrospectively, or makes a retrospective restatement or reclassifies items in its financial statements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the balance sheet at the beginning of the preceding period. The amendments also clarify that related notes are not required to accompany the balance sheet at the beginning of the preceding period.

The amendments to IAS 16 clarify that spare parts, stand-by equipment and servicing equipment should be recognized in accordance with IAS 16 when they meet the definition of property, plant and equipment and otherwise as inventory.

The amendments to IAS 32 clarify that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12 “Income Taxes”.

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

The Corporation has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC. As of the date the Corporation financial statements were authorized for issue, the FSC has not announced their effective dates.

Effective Date New IFRSs Announced by IASB (Note 1)

Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 (Note 4) IFRS 9 “Financial Instruments” January 1, 2018 Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of January 1, 2018 IFRS 9 and Transition Disclosures” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets January 1, 2016 (Note 3) between an Investor and its Associate or Joint Venture” Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities: January 1, 2016 Applying the Consolidation Exception” Amendment to IFRS 11 “Accounting for Acquisitions of Interests in January 1, 2016 Joint Operations” IFRS 14 “Regulatory Deferral Accounts” January 1, 2016 IFRS 15 “Revenue from Contracts with Customers” January 1, 2017 Amendment to IAS 1 “Disclosure Initiative” January 1, 2016 Amendments to IAS 16 and IAS 38 “Clarification of Acceptable January 1, 2016 Methods of Depreciation and Amortization” Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” January 1, 2016 (Continued)

200 Financial Highlights

Effective Date New IFRSs Announced by IASB (Note 1)

Amendment to IAS 19 “Defined Benefit Plans: Employee July 1, 2014 Contributions” Amendment to IAS 27 “Equity Method in Separate Financial January 1, 2016 Statements” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount January 1, 2014 Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of January 1, 2014 Hedge Accounting” IFRIC 21 “Levies” January 1, 2014 (Concluded)

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

Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.

Note 3: Prospectively applicable to transactions occurring in annual periods beginning on or after January 1, 2016.

Note 4: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Corporation’s accounting policies, except for the following:

1) IFRS 9 “Financial Instruments”

Recognition and measurement 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 Corporation’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,

201 Financial Highlights

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

The impairment of financial assets

IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, 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.

For purchased or originated credit-impaired financial assets, the Corporation 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.

2) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

In issuing IFRS 13 “Fair Value Measurement”, the IASB made consequential amendment to the disclosure requirements in IAS 36 “Impairment of Assets”, introducing a requirement to disclose in every reporting period the recoverable amount of an asset or each cash-generating unit. The amendment clarifies that such disclosure of recoverable amounts is required only when an impairment loss has been recognized or reversed during the period. Furthermore, the Corporation is required to disclose the discount rate used in measurements of the recoverable amount based on fair value less costs of disposal measured using a present value technique.

3) Annual Improvements to IFRSs: 2010-2012 Cycle

Several standards including IFRS 13 “Fair Value Measurement”, and IAS 24 “Related Party of Disclosures” were amended in this annual improvement.

IFRS 13 was amended to clarify that the issuance of IFRS 13 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of not discounting is immaterial.

IAS 24 was amended to clarify that a management entity providing key management personnel services to the Corporation is a related party of the Corporation. Consequently, the Corporation is required to disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required.

202 Financial Highlights

4) Annual Improvements to IFRSs: 2011-2013 Cycle

The scope in IFRS 13 of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis was amended to clarify that it includes all contracts that are within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within IAS 32.

5) Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization”

The entity should use appropriate depreciation and amortization method to reflect the pattern in which the future economic benefits of the property, plant and equipment and intangible asset are expected to be consumed by the entity.

The amended IAS 16 “Property, Plant and Equipment” requires that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate. The amended standard does not provide any exception from this requirement.

The amended IAS 38 “Intangible Assets” requires that there is a rebuttable presumption that an amortization method that is based on revenue that is generated by an activity that includes the use of an intangible asset is not appropriate. This presumption can be overcome only in the following limited circumstances:

a) In which the intangible asset is expressed as a measure of revenue (for example, the contract that specifies the entity’s use of the intangible asset will expire upon achievement of a revenue threshold); or

b) When it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated.

An entity should apply the aforementioned amendments prospectively for annual periods beginning on or after the effective date.

6) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

The amendments stipulated that, when an entity sells or contributes assets that constitute a business (as defined in IFRS 3) to an associate or joint venture, the gain or loss resulting from the transaction is recognized in full. Also, when an entity loses control of a subsidiary that contains a business but retains significant influence or joint control, the gain or loss resulting from the transaction is recognized in full.

Conversely, when an entity sells or contributes assets that do not constitute a business to an associate or joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate or joint venture, i.e. the entity’s share of the gain or loss is eliminated. Also, when an entity loses control of a subsidiary that does not contain a business but retains significant influence or joint control in an associate or a joint venture, the gain or loss resulting from the transaction is recognized only to the extent of the unrelated investors’ interest in the associate or joint venture, i.e. the entity’s share of the gain or loss is eliminated.

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

203 Financial Highlights

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

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

b. Basis of preparation

The financial statements have been prepared on the historical cost basis, except for financial instruments that are measured at fair value. Historical cost is based on the fair value of the consideration given in exchange for assets. When preparing its financial statements, the Corporation used equity method to account for its investment in subsidiaries, associates and jointly controlled entities. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the Corporation’s financial statements to be the same with the amounts attributable to the owner of the Corporation in its consolidated financial statements, adjustments arising from the differences in accounting treatment between basis and consolidated basis were made to investments accounted for by equity method, share of profit or loss of subsidiaries, associates and joint ventures, share of other comprehensive income of subsidiaries, associates and joint ventures and related equity items, as appropriate, in the Corporation’s financial statements.

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

Current assets include:

1) Assets held primarily for the purpose of trading;

2) Assets expected to be realized within 12 months from the balance sheet date; and

3) Cash and cash equivalents.

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;

2) Liabilities due to be settled within 12 months after the reporting period; and

3) Liabilities which the Corporation does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

All other assets and liabilities are classified as non-current.

d. Foreign currencies

In preparing the financial statements, transactions in currencies other than the entity’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions.

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

204 Financial Highlights

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period in which these differences arise, but if a gain or loss on a nonmonetary item is recognized in other comprehensive income, any foreign exchange component of this gain or loss is also recognized in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currencies are not retranslated.

For the purposes of presenting financial statements, the assets and liabilities of the Corporation’s foreign operations 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 period. Exchange differences arising are recognized in other comprehensive income.

On the disposal of a foreign operation (i.e. a disposal of the Corporation’s entire interest in a foreign operation, or a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation) all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Corporation are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Corporation losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests of the subsidiary and is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss. e. Inventories

Inventories consist of raw materials, supplies, finished goods and work-in-process and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date. f. Investments accounted for using equity method

Investments in subsidiaries, associates and jointly controlled entities are accounted for by the equity method.

1) Investment in subsidiaries

Subsidiaries are the entities controlled by the Corporation.

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

Changes in the Corporation’s ownership interests in subsidiaries that do not result in the Corporation’s loss of control over the subsidiaries are accounted for as equity transactions. Any difference between the carrying amounts of the investment and the fair value of the consideration paid or received is recognized directly in equity.

When the Corporation’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary, the Corporation continues recognizing its share of further losses.

205 Financial Highlights

The acquisition cost in excess of the acquisition-date fair value of the identifiable net assets acquired is recognized as goodwill. Goodwill is not amortized. The acquisition-date fair value of the net identifiable assets acquired in excess of the acquisition cost is recognized immediately in profit or loss.

When testing for impairment, the cash-generating unit is determined based on the financial statements as a whole by comparing its recoverable amount with its carrying amount. If the recoverable amount of the asset subsequently increases, the reversal of the impairment loss is recognized as a gain, but the increased carrying amount of an asset after a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized on the asset in prior years. An impairment loss recognized for goodwill shall not be reversed in a subsequent period.

When the Corporation ceases to have control over a subsidiary, any retained investment is measured at fair value at that date and the difference between the previous carrying amount of the subsidiary attributable to the retained interest and its fair value is included in the determination of the gain or loss. Furthermore, the Corporation accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Corporation had directly disposed of the related assets or liabilities.

Profits and losses from downstream transactions with a subsidiary are eliminated in full. Profits and losses from upstream with a subsidiary and sidestream transactions between subsidiaries are recognized in the Corporation’s financial statements only to the extent of interests in the subsidiary that are not related to the Corporation.

2) Investment in associates and jointly controlled entities

An associate is an entity over which the Corporation has significant influence and that is neither a subsidiary nor an interest in a joint venture. Joint venture arrangements that involve the establishment of a separate entity in which ventures have joint control over the economic activity of the entity are referred to as jointly controlled entities.

The results and assets and liabilities of associates and jointly controlled entities are incorporated in these financial statements using the equity method of accounting. Under the equity method, investments in an associate and jointly controlled entity are initially recognized at cost and adjusted thereafter to recognize the Corporation’s share of the profit or loss and other comprehensive income of the associate and jointly controlled entity. The Corporation also recognizes the changes in the Corporation’s share of equity of associates and jointly controlled entities attributable to the Corporation. The Corporation’s equity in the investees’ net income or net loss is calculated using the treasury stock method when investees also have investments in the Corporation (reciprocal holding).

When the Corporation subscribes for additional new shares of the associate and jointly controlled entity at a percentage different from its current ownership percentage, the resulting carrying amount of the investment differs from the amount of the Corporation’s proportionate interest in the associate and jointly controlled entity. The Corporation records this difference as an adjustment to investments, with the corresponding amount charged or credited to capital surplus. If the Corporation’s ownership interest is reduced due to the additional subscription for the new shares of an associate and jointly controlled entity, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate and jointly controlled entity is reclassified to profit or loss on the same basis as would have been required had the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient for this debiting, the shortage is debited to retained earnings.

206 Financial Highlights

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

Any excess of the cost of acquisition over the Corporation’s share of the net fair value of the identifiable assets and liabilities of an associate and jointly controlled entity recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Corporation’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, 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 forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Corporation discontinues the use of the equity method from the date on which it ceases to have significant influence over the associate and jointly controlled entity. Any retained investment is measured at fair value at that date. The difference between the previous carrying amount of the associate and the jointly controlled entity attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and the jointly controlled entity. The Corporation accounts for all amounts previously recognized in other comprehensive income in relation to that associate and the jointly controlled entity on the same basis as would be required if that associate and jointly controlled entity had directly disposed of the related assets or liabilities.

When a Corporation entity transacts with its associate and jointly controlled entity, profits and losses resulting from the transactions with the associate and jointly controlled entity are recognized in the Corporation’s financial statements only to the extent of interests in the associate and the jointly controlled entity that are not related to the Corporation. g. Property, plant and equipment

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

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such properties are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.

Depreciation expenses, except those for molds (included as machinery) which are amortized using the production unit method, are computed using the straight-line method over service lives. Each significant part is depreciated separately. 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.

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

207 Financial Highlights

h. Investment properties

Investment properties are properties held for earning rentals or for capital appreciation.

Investment properties are measured initially at cost. After initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation expense is computed using the straight-line method over the service lives.

Any gain or loss arising on the derecognition of the property is calculated as the difference between the net disposal proceeds and the carrying amount of the asset and is included in profit or loss in the period in which the property is derecognized.

i. Intangible assets

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally intangible asset arising from the development phase of an internal project is recognized if, and only if all of the following have been demonstrated:

1) The technical feasibility of completing the intangible asset so that it will be available for use or sale;

2) The intention to complete the intangible asset and use or sell it;

3) The ability to use or sell the intangible asset;

4) How the intangible asset will generate probable future economic benefits;

5) The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

6) The ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally generated intangible assets is the sum of the expenditures incurred from the date when the intangible asset first meets the recognition criteria listed above. After initial recognition, the intangible asset is measured at cost less accumulated amortization and accumulated impairment loss.

j. Impairment of tangible and intangible assets

At the end of each reporting period, the Corporation 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 to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Corporation estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication of asset impairment.

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

208 Financial Highlights

When an impairment reverses, 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 that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss. k. Financial instruments

Financial assets and financial liabilities are recognized when a group entity 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 fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1) Financial assets

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

a) Measurement category

Financial assets are classified into the following categories: Financial assets at fair value through profit or loss, available-for-sale financial assets, and loans and receivables.

i. Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

A financial asset may be designated as at fair value through profit or loss upon initial recognition if:

i) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

ii) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Corporation’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

iii) The contract contains one or more embedded derivatives so that the entire hybrid (combined) contract can be designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.

ii. 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.

209 Financial Highlights

Available-for-sale financial assets are measured at fair value. Dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

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

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

iii. Loans and receivables

Loans and receivables (including cash and cash equivalent, trade 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.

b) Impairment of financial assets

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

For financial assets carried at amortized cost, such as trade receivables and other receivables assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Corporation’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables, and other situation.

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

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

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.

210 Financial Highlights

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for that financial asset because of financial difficulties.

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

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

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

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

c) Derecognition of financial assets

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

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

2) Derivative financial instruments

The Corporation enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts and convertible bonds.

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 unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.

211 Financial Highlights

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at fair value through profit or loss.

l. Hedge accounting

The Corporation designates certain hedging instruments for 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 relating to the ineffective portion is recognized immediately in profit or loss.

The associated gains or losses that were recognized in other comprehensive income are reclassified from equity to profit or loss as a reclassification adjustment in the line item relating to the hedged item in the same period when the hedged item affects profit or loss. If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, the associated gains and losses that were recognized in other comprehensive income are removed from equity and are included in the initial cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued prospectively when the Corporation revokes the designated hedging relationship, or when the hedging instrument expires or is sold, terminated, or exercised, or when it 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.

m. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sales returns are recognized at the time of sale provided the seller can reliably estimate future returns and recognizes a liability for returns based on previous experience and other relevant factors.

1) Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

a) The Corporation has transferred to the buyer the significant risks and rewards of ownership of the goods;

b) The Corporation retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

c) The amount of revenue can be measured reliably;

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

e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

2) Rendering of services

Service income including that from operating service provided under service concession arrangements is recognized when services are provided.

212 Financial Highlights

3) Royalties

Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreement provided that it is probable that the economic benefits will flow to the Corporation and the amount of revenue can be measured reliably. Royalties determined on a time basis are recognized on a straight-line basis over the period of the agreement. Royalty arrangements that are based on production, sales and other measures are recognized by reference to the underlying arrangement.

4) Dividend and interest income

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

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

Government grants are not recognized until there is reasonable assurance that the Corporation will comply with the conditions attaching 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 Corporation recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Corporation should purchase, 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. o. Retirement benefit costs

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

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method. All actuarial gains and losses on the defined benefit obligation are recognized immediately in other comprehensive income. Past service cost is recognized immediately to the extent that the benefits are already vested, or is amortized on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognized in the balance sheets represents the present value of the defined benefit obligation, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the unrecognized past service cost, plus the present value of available refunds and reductions in future contributions to the plan. p. Taxation

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

1) Current tax

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

213 Financial Highlights

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

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carry forward and unused tax credits for purchases of machinery and equipment to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Corporation is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. 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 amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the 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 that would follow from the manner in which the Corporation expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred tax for the year

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.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

214 Financial Highlights a. Income taxes

The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such a reversal takes place. b. Recognition and measurement of defined benefit plans

Accrued pension liabilities and the resulting pension expense under defined benefit pension plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and long-term average future salary increase. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability. c. Write-down of inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value was based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value. d. Useful lives of property, plant and equipment

The Corporation reviews the estimated useful lives, the depreciation method and the residual value of property, plant and equipment. Significant changes in depreciation methods influence the recognition of related depreciation expenses. e. Financial assets measured at cost and impairment of investment in the associate

The Corporation immediately recognizes impairment loss on its net investment in the associate when there is any indication that the investment may be impaired and the carrying amount may not be recoverable. The Corporation’s management evaluates the impairment based on the estimated future cash flow expected to be generated by the associate, including growth rate of sale and capacity of production facilities estimated by the associate’s management. The Corporation also takes into consideration the market conditions and industry development to evaluate the appropriateness of assumptions. f. Estimated impairment of accounts receivables

When there is objective evidence of impairment loss, the Corporation 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. g. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Corporation reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Corporation estimates the recoverable amount of the cash-generating unit to which the asset belongs. Intangible assets with indefinite useful lives and

215 Financial Highlights

intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

6. CASH AND CASH EQUIVALENTS

December 31 2014 2013

Cash Cash on hand $ 6,815 $ 7,987 Checking accounts and demand deposits 214,838 148,031 221,653 156,018 Cash equivalents Time deposits 6,340,048 6,127,735 Repurchase agreements collateralized by bonds 2,460,596 2,875,417 8,800,644 9,003,152

$ 9,022,297 $ 9,159,170

Cash equivalents, for the purpose of meeting short-term cash commitments, consist of highly liquid time deposits and repurchase agreements collateralized by bonds that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

The interest rate intervals of cash on bank and Repurchase agreements collateralized by bonds at the end of the reporting period were as follows:

December 31 2014 2013

Checking accounts and demand deposits 0.01%-0.66% 0.01%-0.17% Time deposits 0.65%-4% 0.65%-3.4% Repurchase agreements collateralized by bonds 0.58% 0.62%-3.1%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31 2014 2013

Financial assets at FVTPL

Financial assets designated as at FVTPL Convertible bonds $ 59,700 $ 90,187 Asset swaps - 38,331 59,700 128,518 Financial assets held for trading Non-derivative financial assets Mutual funds 145,963 157,635 Domestic listed shares 89,856 150,453 235,819 308,088 Derivative financial assets Preferred stock options 56 -

$ 295,575 $ 436,606

216 Financial Highlights

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31 2014 2013

Current

Domestic investments Listed shares $ 1,629 $ 15,189 Mutual funds 1,329,771 1,158,825

$ 1,331,400 $ 1,174,014

Non-current

Domestic investments Unlisted shares $ 812,718 $ 584,206

9. INVENTORIES

December 31 2014 2013

Finished goods $ 2,056,454 $ 1,949,608 Work in progress 39,052 99,686 Raw materials 1,607,159 1,394,775 Materials in transit 533,052 509,867

$ 4,235,717 $ 3,953,936

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2014 and 2013 was $23,623,518 thousand and $23,714,761 thousand, respectively.

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2014 and 2013 included the reversal of inventories write-downs of $23,001 thousand and inventories write-downs of $21,480 thousand, respectively. Previous write-downs had been reversed as a result of selling idle inventories.

10. FINANCIAL ASSETS MEASURED AT COST

December 31 2014 2013

Domestic unlisted common shares $ 144,306 $ 182,448 Overseas unlisted common shares 5,702 5,702

$ 150,008 $ 188,150

Classified according to financial asset measurement categories Available-for-sale financial assets $ 150,008 $ 188,150

217 Financial Highlights

Management believed that the above unlisted equity investments held by the Corporation, whose fair value cannot be reliably measured due to the range of reasonable fair value estimates was so significant; therefore they were measured at cost less impairment at the end of reporting period.

The Corporation recognized impairment losses of $20,491 thousand and $12,534 thousand in 2014 and 2013, respectively, on these investments based on cash flow in the future and market return rate.

11. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

December 31 2014 2013

Investments in subsidiaries $ 11,348,666 $ 11,771,783 Investments in associates 18,404,485 17,938,447 Investments in jointly controlled entities 1,238,121 844,923

$ 30,991,272 $ 30,555,153

a. Investments in subsidiaries

December 31 Name of Subsidiaries 2014 2013

Listed companies Kian Shen $ 1,583,029 $ 1,448,555 Unlisted companies Sino Diamond Motors 2,994,854 2,991,898 CMC Investment 1,788,115 1,974,529 Alliance Investment & Management 1,672,498 1,725,358 China Motor Investment 1,422,782 1,381,638 Hwa Wei Holdings 828,820 1,256,404 COC Tooling & Stamping 631,389 563,582 Gatetech Technology 203,735 216,252 China Engine 154,941 145,002 Hwa Chung Motors 66,018 66,080 Hwa Hann 2,485 2,485 9,765,637 10,323,228

$ 11,348,666 $ 11,771,783

At the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by the Corporation were as follows:

December 31 Name of Subsidiaries 2014 2013

Listed company Kian Shen 43.87 43.87 Unlisted companies Sino Diamond Motors 100.00 100.00 CMC Investment 100.00 99.99 Alliance Investment & Management 100.00 100.00 China Motor Investment 100.00 100.00 (Continued)

218 Financial Highlights

December 31 Name of Subsidiaries 2014 2013

Hwa Wei Holdings 100.00 100.00 COC Tooling & Stamping 49.76 49.76 Gatetech Technology 56.53 56.53 China Engine 18.95 18.95 Hwa Chung Motors 100.00 100.00 Hwa Hann 48.99 48.99 (Concluded)

Although the Corporation and its subsidiaries’ equity in Kian Shen and COC Tooling & Stamping did not exceed 50% of each investee’s outstanding common shares, the Corporation has control over the investees. Thus, Kian Shen and COC Tooling & Stamping were included in the Corporation’s consolidated financial statements.

The Corporation’s investments in China Engine, although less than 20% of the investee’s outstanding common shares, was accounted for by the equity method since the combined investments of the Corporation and its subsidiaries in these companies exceeded 50% of their respective outstanding common shares. Therefore, China Engine is deemed as a subsidiary accounted for by using the equity method.

The board of Hwa Hann had decided to dissolve the corporation in April 2009. The liquidation was not completed as of the year ended December 31, 2014.

The amounts recognized as share of the profit or loss and comprehensive income or loss of subsidiaries by equity method for the years ended December 31, 2014 and 2013 were based on the financial statements for the same periods, which were audited by independent auditors. b. Investments in associates

December 31 Name of Associates 2014 2013

Listed company Yulon $ 10,301,122 $ 9,989,249 Unlisted companies Fortune Motors 3,720,283 3,622,577 Tokio Marine Newa Insurance 1,473,429 1,388,607 ROC-Spicer 1,266,698 1,206,286 Tai Yuen Venture Capital Investment 395,782 435,862 Uni Auto Parts Manufacture 352,470 313,263 Hua-Chuang Automobile Information Technical Center 335,220 378,622 Shung Ye Motors 317,609 324,880 Sin Gan 105,025 145,265 Sin Jiang Enterprises 95,291 92,651 Yulon IT Solutions 22,414 22,043 Fu Yu Venture Capital Investment 19,142 19,142 8,103,363 7,949,198

$ 18,404,485 $ 17,938,447

219 Financial Highlights

At the end of the reporting period, the proportion of ownership and voting rights in associates held by the Corporation were as follows:

December 31 Name of Associates 2014 2013

Listed company Yulon 15.06 15.06 Unlisted companies Fortune Motors 41.93 41.92 Tokio Marine Newa Insurance 20.57 20.57 ROC-Spicer 29.00 29.00 Tai Yuen Venture Capital Investment 49.50 49.50 Uni Auto Parts Manufacture 15.00 15.00 Hua-Chuang Automobile Information Technical Center 9.44 9.44 Shung Ye Motors 39.98 40.00 Sin Gan 24.67 24.67 Sin Jiang Enterprises 20.01 20.01 Yulon IT Solutions 43.85 43.85 Fu Yu Venture Capital Investment 14.81 14.81

The Corporation’s investment in Hua-Chuang Automobile Information Technical Center, although less than 20% of the investee’s outstanding common shares, was accounted for by the equity method since the combined investments of the Corporation and its subsidiaries in these companies exceeded 20% of this investee’s outstanding common shares.

The investments in Yulon, Uni Auto Parts Manufacture and Fu Yu Venture Capital Investment were accounted for by the equity method although the Corporation’s equity interest in each of those companies was less than 20% of their outstanding common stocks since the Corporation exercises significant influence on their financial and operating decisions.

In April 2013, the board of Fu Yu Venture Capital Investment decided to dissolve this company. The liquidation was still ongoing at the end of 2014.

The amounts recognized as share of the profit or loss and comprehensive income or loss of associates by the equity method for the years ended December 31, 2014 and 2013 were based on the financial statements for the same periods, which were audited by independent auditors.

Fair value of investments accounted for using the equity method which there are published price quotation was summarized as follows, based on the closing price of those investments at the balance sheet date:

December 31 2014 2013

Yulon $ 11,015,882 $ 12,792,637 Kian Shen $ 1,883,476 $ 2,828,252

The summarized financial information in respect of the Corporation’s associates was set out below:

December 31 2014 2013

Total assets $ 173,576,630 $ 170,468,807 Total liabilities $ 59,055,768 $ 58,411,266

220 Financial Highlights

2014 2013

Revenue for the year ended December 31 $ 95,336,255 $ 85,394,019 Profit for the year ended December 31 $ 4,581,904 $ 4,638,266 Corporation’s share of profit and other comprehensive income (loss) of associates for the year ended December 31 $ 1,154,704 $ (449,832) c. Investments in jointly controlled entities

December 31 2014 2013

Unlisted company Daimler Vans Hong Kong Ltd. $ 1,238,121 $ 844,923

At the end of the reporting period, the proportion of ownership and voting rights in jointly controlled entities held by the Corporation were as follows:

December 31 2014 2013

Unlisted company Daimler Vans Hong Kong Ltd. 32.45 32.45

The Corporation took part in the capital increase by cash of Daimler Vans Hong Kong Ltd., in July, 2014. Increasing its investment for $317,533 thousand (EUR7,788 thousand).

The amount recognized as share of the profit of loss and comprehensive income or loss of joint ventures by equity method for the years ended December 31, 2014 and 2013 were based on the financial statements for the same periods, which were audited by independent auditors.

The summarized financial information in respect of the Corporation’s jointly controlled entities was set out below:

December 31 2014 2013

Current assets $ 1,278 $ 1,525 Non-current assets $ 1,237,094 $ 843,665 Current liabilities $ 251 $ 267

2014 2013

Profit for the year ended December 31 $ 27,051 $ 50,435 Other comprehensive income (loss) for the year ended December 31 $ 127,362 $ (13,121)

221 Financial Highlights

12. PROPERTY, PLANT AND EQUIPMENT

Land Other Property in Land Improvement Buildings Machinery Equipment Construction Total

Cost

Balance at January 1, 2013 $ 733,296 $ 70,917 $ 3,209,471 $ 20,205,132 $ 1,004,029 $ 367,926 $ 25,590,771 Additions - - - - 54,977 801,074 856,051 Disposals - - - (338,130 ) (52,753 ) - (390,883 ) Reclassifications - 2,668 13,388 685,305 18,346 (660,140 ) 59,567

Balance at December 31, 2013 $ 733,296 $ 73,585 $ 3,222,859 $ 20,552,307 $ 1,024,599 $ 508,860 $ 26,115,506

Accumulated depreciation and impairment

Balance at January 1, 2013 $ 69,492 $ 2,548,842 $ 19,688,253 $ 834,250 $ - $ 23,140,837 Disposals - - (337,253 ) (31,872 ) - (369,125 ) Depreciation expense and impairment losses 633 74,431 248,169 40,348 - 363,581 Reclassifications - - 59,567 - - 59,567

Balance at December 31, 2013 $ 70,125 $ 2,623,273 $ 19,658,736 $ 842,726 $ - $ 23,194,860

Carrying amounts at December 31, 2013 $ 733,296 $ 3,460 $ 599,586 $ 893,571 $ 181,873 $ 508,860 $ 2,920,646

Cost

Balance at January 1, 2014 $ 733,296 $ 73,585 $ 3,222,859 $ 20,552,307 $ 1,024,599 $ 508,860 $ 26,115,506 Additions - - - 625 63,977 981,964 1,046,566 Disposals - - - (589,851 ) (51,799 ) - (641,650 ) Reclassifications (68,221 ) 806 (168,398 ) 844,856 28,499 (888,420 ) (250,878 )

Balance at December 31, 2014 $ 665,075 $ 74,391 $ 3,054,461 $ 20,807,937 $ 1,065,276 $ 602,404 $ 26,269,544

Accumulated depreciation and impairment

Balance at January 1, 2014 $ 70,125 $ 2,623,273 $ 19,658,736 $ 842,726 $ - $ 23,194,860 Disposals - - (589,466 ) (27,791 ) - (617,257 ) Depreciation expense and impairment losses 1,002 60,968 356,847 38,151 - 456,968 Reclassifications - (135,537 ) - - - (135,537 )

Balance at December 31, 2014 $ 71,127 $ 2,548,704 $ 19,426,117 $ 853,086 $ - $ 22,899,034

Carrying amounts at December 31, 2014 $ 665,075 $ 3,264 $ 505,757 $ 1,381,820 $ 212,190 $ 602,404 $ 3,370,510

The estimated future cash flows expected to arise from the related machinery was decreased, since several types of vehicle went out of production. Thus, the Corporation recognized impairment loss for $11,820 thousand in 2014.

The above items of property, plant and equipment were depreciated on a straight-line basis over the estimated useful life of the asset:

Category Land improvement 3-20 years Buildings 3-55 years Machinery 3-15 years Other equipment 3-15 years

222 Financial Highlights

13. INVESTMENT PROPERTIES

Cost

Balance at January 1, 2013 and December 31, 2013 $ 1,007,807

Accumulated depreciation and impairment

Balance at January 1, 2013 $ 226,663 Depreciation expense 8,311 Impairment losses 25,000

Balance at December 31, 2013 $ 259,974

Carrying amounts at December 31, 2013 $ 747,833

Cost

Balance at January 1, 2014 $ 1,007,807 Reclassification 250,878

Balance at December 31, 2014 $ 1,258,685

Accumulated depreciation and impairment

Balance at January 1, 2014 $ 259,974 Depreciation expense 16,247 Reclassification 135,537

Balance at December 31, 2014 $ 411,758

Carrying amounts at December 31, 2014 $ 846,927

The investment properties held by the Corporation were depreciated over their estimated 10-60 years useful lives, using the straight-line method.

The fair value of investment properties of the Corporation were $1,404,967 thousand and $1,189,269 thousand as of December 31, 2014 and 2013, respectively. Except for a part of investment properties appraised by the independent valuer, Po Hung Chen, as of December 31, 2014, others as of December 31, 2014 and 2013 were appraised by the management using evaluation model which the market participants frequently used. The valuter’s valuation was reference to similar properties’ marker transaction and the valuer used weighted analysis of cost and revenue method (assuming discount rate is 3.22% and capitalization rate is 2.24%). According to the valuation result, the Corporation recognized $25,000 thousand of impairment losses in 2013.

14. LONG TERM BORROWINGS

Current Long-term Total

December 31, 2013

Project loans $ 6,026 $ - $ 6,026

223 The Corporation obtained a project loan from the Industrial Development Bureau under the Ministry of Economic Affairs, which is repayable quarterly from 2009 to 2014. The Corporation has paid off the loan in October 2014 with the annual interest rate being 1%.

15. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Corporation 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.

b. Defined benefit plans

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

The plan assets are invested in domestic (foreign) equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of Bureau of Labor Funds, Ministry of Labor or under the mandated management. However, in accordance with Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund the return generated by employees' pension contribution should not be below the interest rate for a 2-year time deposit with local banks.

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

December 31 2014 2013

Discount rates 1.875% 1.875% Expected return rate on plan assets 2.00% 2.00% Expected rates of salary increase 1.00% 1.00%

The assessment of the overall expected rate of return was based on historical return trends and analysts’ predictions of the market for the asset over the life of the related obligation, by reference to the aforementioned use of the plan assets and the impact of the related minimum return.

Amounts recognized in profit or loss in respect of these defined benefit plans are as follows:

For the Year Ended December 31 2014 2013

Service cost $ 40,563 $ 45,634 Interest cost 33,284 30,767 Expected return on plan assets (1,574) (1,336)

$ 72,273 $ 75,065

Defined benefit expense of $1,640 thousand in 2014 and $2,001 thousand in 2013 referred to subsidiaries and associates and were accounted for as payment on behalf of others.

224 Financial Highlights

Analysis defined benefit plans by function as follow:

For the Year Ended December 31 2014 2013

An analysis by function Operating cost $ 40,192 $ 41,680 Selling and marketing expenses 2,550 2,907 General and administrative expenses 5,382 5,686 Research and development expenses 22,509 22,791

$ 70,633 $ 73,064

Actuarial gains and losses recognized in other comprehensive income (net of income tax) for the years ended December 31, 2014 and 2013 was $(15,106) thousand and $127,566 thousand, respectively. The cumulative amount of actuarial losses recognized in other comprehensive income as of December 31, 2014 and 2013 was $95,127 thousand and $80,021 thousand, respectively.

The amount included in the Corporation balance sheet arising from the Corporation’s obligation in respect of its defined benefit plans was as follows:

December 31 2014 2013

Present value of funded defined benefit obligation $ 1,807,076 $ 1,775,155 Fair value of plan assets (67,546) (68,850)

Accrued pension liabilities $ 1,739,530 $ 1,706,305

Movements in the present value of the defined benefit obligations were as follows:

2014 2013

Opening defined benefit obligation $ 1,775,155 $ 1,893,305 Service cost 40,563 45,634 Interest cost 33,284 30,767 Actuarial losses (gains) 18,100 (154,233) Benefits paid (60,026) (40,318)

Closing defined benefit obligation $ 1,807,076 $ 1,775,155

Movements in the fair value of the plan assets were as follows:

2014 2013

Opening fair value of plan assets $ 68,850 $ 61,454 Expected return on plan assets 1,574 1,336 Actuarial losses (100) (539) Contributions from the employer 19,125 19,227 Benefits paid (21,903) (12,628)

Closing fair value of plan assets $ 67,546 $ 68,850

Actual returns on plan asses are $1,474 thousand and $797 thousand in 2014 and 2013, respectively.

225 Financial Highlights

The percentage of plan assets at the end of the reporting period for each category was disclosed based on the information announced by Bureau of Labor Funds, Ministry of Labor:

December 31 2014 2013

Equity instruments 49.69% 44.77% Cash 19.12% 22.86% Fixed-income investments 14.46% 18.11% Debt instruments 11.92% 9.37% Others 4.81% 4.89%

100.00% 100.00%

The Corporation chose to disclose the history of experience adjustments as the amounts determined for each accounting period prospectively from the date of transition to IFRSs (January 1, 2012):

December 31, December 31, December 31, January 1, 2014 2013 2012 2012

Present value of defined benefit obligation $ 1,807,076 $ 1,775,155 $ 1,893,305 $ 1,638,108 Fair value of plan assets $ 67,546 $ 68,850 $ 61,454 $ 66,757 Deficit $ 1,739,530 $ 1,706,305 $ 1,831,851 $ 1,571,351 Experience adjustments on plan liabilities $ 17,205 $ (148,779) $ 249,116 $ - Experience adjustments on plan assets $ (100) $ (539) $ (989) $ -

The Corporation expects to make a contribution of $19,101 thousand and $19,709 thousand, respectively to the defined benefit plans during the annual period beginning after 2014 and 2013.

16. EQUITY

a. Ordinary shares

December 31 2014 2013

Numbers of shares authorized (in thousands) 1,800,000 1,800,000 Amount of shares authorized $ 18,000,000 $ 18,000,000 Number of shares issued and fully paid (in thousands) 1,384,051 1,384,051 Shares issued $ 13,840,508 $ 13,840,508

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

226 Financial Highlights b. Capital surplus

December 31 2014 2013

Share premium from issuance $ 6,368,843 $ 6,368,843 Change in capital surplus from investments in subsidiaries, associates and joint ventures accounted for using equity method 18,860 3,359 Other 4,666 4,666

$ 6,392,369 $ 6,376,868

The capital surplus arising from shares issued in excess of par (including share premium from issuance of common shares) and donations may be used to offset a deficit; in addition, when the Corporation has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Corporation’s capital every year).

The capital surplus from long-term investments may not be used for any purpose. c. Retained earnings and dividend policy

The Corporation’s Articles of Incorporation provide that legal reserve should be appropriated at 10% of annual net income less any accumulated deficit. The remaining net income should be appropriated as follows:

1) 0.5% as remuneration of directors and supervisors;

2) 0.1% to 5% as employees’ bonus in the form of cash or stock. The Corporation may issue stock bonuses to the employees of an affiliated company under conditions set by the board of directors;

3) The remainder plus undistributed earnings from prior years, to be distributed as dividends as recommended by the board of directors and approved by the stockholders in their meeting.

The operating of the Corporation is considered as a mature and steady industry. In determining dividend amounts, the Corporation takes its future capital expenditures and related factors into account and also seeks to uphold the stockholders’ interests and realize the Corporation’s long-term financial plan. Dividends are in the form of cash or stock. The Corporation’s policy is that cash dividends should be at least 20% of total dividends.

For 2014 and 2013, the bonuses to employees were estimated at $12,876 thousand and $16,680 thousand, respectively, and the remunerations to directors and supervisors were estimated at $11,512 thousand and $11,393 thousand, respectively, which represented 0.1% to 5.0% and 0.5%, respectively, of net income (net of the bonus and remuneration). Material differences between these estimates and the amounts proposed by the Board of Directors in the following year are adjusted for in the year of the proposal. If the actual amounts subsequently resolved by the stockholders differ from the proposed amounts, the differences are recorded in the year of stockholders’ resolution as a change in accounting estimate. If a share bonus is resolved to be distributed to employees, the number of shares is determined by dividing the amount of the share bonus by the fair value of the shares. Fair value of the shares refers to the closing price after considering the effect of cash and stock dividends of the shares on the day immediately preceding the shareholders’ meeting.

227 Financial Highlights

The Corporation appropriates or reverses a special reserve in accordance with Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive entitled “Questions and Answers on Special Reserves Appropriated Following the Adoption of IFRSs”. Distributions can be made out of any subsequent reversal of the debit to other equity items. The Corporation also appropriates and reverses a special reserve in accordance with Rule No. 1030006415 issued by the FSC.

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

Except for non-ROC resident stockholders, all stockholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by The Corporation when appropriating the earnings after 1998.

The reversal and recognition of a special reserve of $316,006 thousand were approved in the shareholders' meetings in June 2014 and June 2013, respectively.

The appropriations from the 2013 and 2012 earnings and the bonus to employees and the remuneration to directors and supervisors for 2013 and 2012 were approved in the stockholders’ meetings in June 2014 and June 2013, respectively. The appropriations and dividends per share, the bonus to employees and the remuneration to directors and supervisors were as follows:

Dividends Per Share Appropriation of Earnings (NT$) For For For For Year 2013 Year 2012 Year 2013 Year 2012

Legal reserve $ 253,188 $ 215,644 $ - $ - Cash dividends 1,522,456 1,245,646 1.1 0.9

2013 2012

Bonus to employees $ 16,680 $ 1,941 Remuneration to directors and supervisors 11,393 9,704

The appropriations of earnings for 2012 were proposed according to the Corporation’s financial statements for the years ended December 31, 2012, which were prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and the Generally Accepted Accounting Standard in the Republic of China (“ROC GAAP”),, and by reference to the balance sheet for the year ended December 31, 2012, which was prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (revised) and International Financial Reporting Standards.

The bonus to employees and remuneration to the directors and supervisors approved by the stockholders were the same as the accrued amounts shown in the financial statements.

The appropriation of the earnings was proposed by the board of directors on March 23, 2015. The appropriations and dividends per share were as follows:

Appropriation Dividends Per of Earnings Share (NT$)

Legal reserve $ 255,829 $ - Cash dividends 1,591,658 1.15

228 Financial Highlights

The appropriations of 2014 earnings, the bonus to employees and the remuneration to directors and supervisors for 2014 are subject to the resolution of the stockholders meeting to be held in June 2015.

Information on the bonus to employees and the remuneration to directors and supervisors is available on the Market Observation Post System website of the Taiwan Stock Exchange. d. Special reserve appropriated under Rule No. 1010012865 issued by the FSC

December 31 2014 2013

Special reserve $ 1,057,002 $ 1,057,002

Information on the special reserve appropriated or reversal of the above mentioned special reserve resulted from elimination of the original appropriation circumstances was as follows:

2013

Balance at January 1 $ 1,057,024 Reversed on elimination of the original need to appropriate a special reserve: Disposal of property, plant and equipment (22)

Balance at December 31 $ 1,057,002 e. Others equity items

1) Exchange differences on translating foreign operations

2014 2013

Balance at January 1 $ 192,209 $ (368,073) Share of exchange differences on translating foreign operations of subsidiaries, associates and joint ventures using the equity method 558,352 560,282

Balance at December 31 $ 750,561 $ 192,209

2) Unrealized gain (loss) on available-for-sale financial assets

2014 2013

Balance at January 1 $ 798,854 $ (327,970) Unrealized gain arising on revaluation of available-for-sale financial assets 210,601 4,160 Share of unrealized gains on available-for-sale financial assets of subsidiaries, associates and joint ventures accounted for using the equity method 26,346 1,122,664

Balance at December 31 $ 1,035,801 $ 798,854

229 Financial Highlights

3) Cash flow hedge

2014 2013

Balance at January 1 $ - $ (48,706) Transferred to initial carrying amount of hedged items Forward foreign exchange contracts - 48,706

Balance at December 31 $ - $ -

17. NET PROFIT

Net profit concludes as follow:

a. Depreciation and amortization

For the Year Ended December 31 2014 2013

An analysis of depreciation by function Operating cost $ 374,254 $ 275,800 Operating expenses 87,141 96,092

$ 461,395 $ 371,892

An analysis of amortization by function General and administrative expenses $ 591 $ - Research and development expenses 53,230 34,393

$ 53,821 $ 34,393

b. Employee benefit expense

For the Year Ended December 31 2014 2013

Salary $ 2,145,256 $ 1,962,730 Labor and health insurance 144,210 135,273 Post-employment benefits Defined contribution plans 37,951 35,106 Defined benefit plans 70,633 73,064 108,584 108,170 Other employees benefits 41,318 41,182

Total employee benefits $ 2,439,368 $ 2,247,355

An analysis of employee benefit expense by function Operating costs $ 1,232,808 $ 1,158,831 Operating expenses 1,206,560 1,088,524

$ 2,439,368 $ 2,247,355

For the years ended December 31, 2014 and 2013, the Corporation’s average number of employees was 1,976 and 1,907, respectively.

230 Financial Highlights

18. 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 2014 2013

Current tax In respect of the current year $ 205,400 $ 205,212 In respect of prior periods 190 (8,788) 205,590 196,424 Deferred tax In respect of the current year 133,302 22,576 In respect of prior periods 108 - 133,410 22,576

Income tax expense recognized in profit or loss $ 339,000 $ 219,000

b. A reconciliation of accounting profit and income tax expenses was as follows:

For the Year Ended December 31 2014 2013

Profit before tax $ 2,897,290 $ 2,750,878

Income tax expense calculated at the tax rate (17%) $ 492,539 $ 467,649 Tax-exempt income (188,814) (182,276) Additional income tax on unappropriated earnings 121,650 69,512 Investment credits (83,159) - Unrecognized investment credits (882) (137,598) Unrecognized deductible temporary differences (2,524) 10,501 Adjustments for prior years’ tax 190 (8,788)

Income tax expense recognized in profit or loss $ 339,000 $ 219,000

The Corporation applied 17% tax rate by the ROC tax law.

The potential effect of additional income tax on unappropriated earnings in 2014 could not be reliably assured by the uncertainty of earnings distribution in meeting.

c. Current tax assets and liabilities

December 31 2014 2013

Current tax assets (included in other current assets) Tax refund receivable $ 6,102 $ 19,530

Current tax liabilities Income tax payable $ 204,799 $ 196,145

231 Financial Highlights

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2014

Recognized in Other Opening Recognized in Comprehensive Balance Profit or Loss Income Closing Balance

Deferred tax assets

Temporary difference Defined benefit plan $ 295,564 $ (20,475) $ - $ 275,089 Other payable 29,158 6,051 - 35,209 Property, plant and equipment 24,157 (10,510) - 13,647 Inventory 15,930 (3,910) - 12,020 Other 33,619 612 - 34,231 398,428 (28,232) - 370,196 Loss carryforwards 171,963 (121,568) - 50,395

$ 570,391 $ (149,800) $ - $ 420,591

Deferred tax liabilities

Temporary difference Defined benefit plan $ 26,128 $ (23,034) $ (3,094) $ - Other 9,013 6,644 - 15,657

$ 35,141 $ (16,390) $ (3,094) $ 15,657

For the year ended December 31, 2013

Recognized in Other Opening Recognized in Comprehensive Balance Profit or Loss Income Closing Balance

Deferred tax assets

Temporary difference Defined benefit plan $ 290,780 $ 4,784 $ - $ 295,564 Other payable 27,454 1,704 - 29,158 Property, plant and equipment 40,144 (15,987) - 24,157 Inventory 12,279 3,651 - 15,930 Other 51,116 (17,497) - 33,619 421,773 (23,345) - 398,428 Loss carryforwards 171,963 - - 171,963

$ 593,736 $ (23,345) $ - $ 570,391

Deferred tax liabilities

Temporary difference Defined benefit plan $ - $ - $ 26,128 $ 26,128 Other 9,782 (769) - 9,013

$ 9,782 $ (769) $ 26,128 $ 35,141

232 Financial Highlights e. Deductible temporary differences and unused investment credits for which no deferred tax assets have been recognized in the balance sheets

December 31 2014 2013

Investment credits Purchase of machinery and equipment $ - $ 882

Deductible temporary differences $ 1,824,315 $ 1,839,130

Unrecognized investment credits of December 31, 2013 were expired in 2014. f. Information about unused loss carryforwards

Loss carryforwards as of December 31, 2014 comprised:

Unused Amount Expiry Year

$ 296,441 2018 g. Integrated income tax

December 31 2014 2013

Unappropriated earnings Unappropriated earnings generated on and before December 31, 1997 $ 4,357,331 $ 4,357,331 Unappropriated earnings generated on and after January 1, 1998 13,412,444 12,443,593

$ 17,769,775 $ 16,800,924

Imputation credit account (“ICA”) $ 1,709,095 $ 1,605,949

The creditable ratios for the distribution of earnings of 2014 and 2013 were 14.27% (expected ratio) and 15.13% (actual ratio), respectively. The creditable ratio for individual shareholders residing in the ROC will be half of the original creditable ratio that is based on the revised Article 66-6 of the Income Tax Law and will take effect on January 1, 2015.

Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputation credits allocated to ROC resident stockholders of the Corporation was calculated based on the creditable ratio as of the date of dividend distribution. The actual imputation credits allocated to stockholders of the Corporation was based on the balance of ICA as of the date of dividends distribution. Therefore, the expected creditable ratio for the 2014 earnings may differ from the actual creditable ratio to be used in allocating imputation credits to the stockholders. h. Income tax assessment

The tax returns of the Corporation through 2011 have been assessed by the tax authorities.

233 Financial Highlights

19. EARNINGS PER SHARE

December 31 2014 2013

Basic earnings per share $ 1.88 $ 1.86 Diluted earnings per share $ 1.88 $ 1.86

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

Net profit for the period

2014 2013

Profit for the period of the Corporation $ 2,558,290 $ 2,531,878

Weighted average number of ordinary shares outstanding (in thousand shares)

2014 2013

Weighted average number of ordinary shares in computation of basic earnings per share Weighted average number of ordinary shares 1,384,051 1,384,051 Adjustment for associates holding shares (20,439) (20,439) 1,363,612 1,363,612 Effect of dilutive potential ordinary shares Bonus issue to employee 748 613

Weighted average number of ordinary shares used in the computation of diluted earnings per share 1,364,360 1,364,225

When calculating EPS, the Corporation considers the shares which associates hold as the treasury stock to reduce the outstanding shares.

If the Corporation offered to settle bonuses paid to employees in cash or shares, the Corporation assumed the entire amount of the bonus would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

20. CAPITAL MANAGEMENT

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

234 Financial Highlights

21. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments

1) Fair value of financial instruments not carried at fair value

The management believes the carrying amounts of financial assets and financial liabilities recognized in the financial statements approximate their fair values or their fair values cannot be reliably measured.

2) Fair value measurements recognized in the balance sheet

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

b) Level 2 fair value measurements are those derived from 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 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

December 31, 2014 Level 1 Level 2 Level 3 Total

Financial assets at FVTPL Derivative financial assets $ 59,700 $ - $ 56 $ 59,756 Non-derivative financial assets held for trading 235,819 - - 235,819

$ 295,519 $ - $ 56 $ 295,575

Available-for-sale financial assets Securities listed - ROC $ 1,629 $ - $ - $ 1,629 Unlisted securities - ROC 145,693 - 667,025 812,718 Mutual funds 1,329,771 - - 1,329,771

$ 1,477,093 $ - $ 667,025 $ 2,144,118

December 31, 2013 Level 1 Level 2 Level 3 Total

Financial assets at FVTPL Derivative financial assets $ 90,187 $ 38,331 $ - $ 128,518 Non-derivative financial assets held for trading 308,088 - - 308,088

$ 398,275 $ 38,331 $ - $ 436,606 (Continued)

235 Financial Highlights

Level 1 Level 2 Level 3 Total

Available-for-sale financial assets Securities listed - ROC $ 15,189 $ - $ - $ 15,189 Unlisted securities - ROC - - 584,206 584,206 Mutual funds 1,158,825 - - 1,158,825

$ 1,174,014 $ - $ 584,206 $ 1,758,220 (Concluded)

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

3) Reconciliation of Lever 3 fair value measurements of financial instruments

Financial instruments at FVTPL

2014 2013

Financial assets (liabilities)

Balance at January 1 $ - $ (118,753) Purchase 126 - Recognized in profit or loss (70) 118,753

Balance at December 31 $ 56 $ -

Available-for-sale financial assets

2014 2013

Financial assets

Balance at January 1 $ 584,206 $ 582,787 Recognized in other comprehensive income 82,819 1,419

Balance at December 31 $ 667,025 $ 584,206

Derivative financial instruments for hedging

2014 2013 Financial liabilities

Balance at January 1 $ - $ (48,706) Recognized in other comprehensive income - 48,706

Balance at December 31 $ - $ -

236 Financial Highlights

4) Valuation techniques and assumption applied for the purpose of measuring fair value

The fair values of financial assets and financial liabilities were determined as follows:

a) The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market prices. For those instruments with no quoted market prices, the fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants.

b) The fair values of derivative instruments were not available; thus, a discounted cash flow analysis was performed using the yield curve applicable to the reporting period. The fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants.

c) The fair values of other financial assets and financial liabilities (excluding those described above) were determined in accordance with generally accepted pricing models based on discounted cash flow analysis. b. Categories of financial instruments

December 31 2014 2013

Financial assets

Fair value through profit or loss (FVTPL) Held for trading $ 235,875 $ 308,088 Designated as at FVTPL 59,700 128,518 Loans and receivables (Note 1) 12,257,535 11,574,155 Available-for-sale financial assets (Note 2) 2,294,126 1,946,370

Financial liabilities

Amortized cost (Note 3) 4,594,271 4,565,397

Note 1: The balances included cash and cash equivalents, debt investments with no active market, notes receivable, accounts receivable (related parties included), other receivables (related parties included), other financial assets (included in other current assets) and guarantee deposits (included in other non-current assets).

Note 2: The balances included the carrying amounts of available-for-sale financial assets and financial assets measured at cost.

Note 3: The balances included notes and accounts payable (related parties included), other payables, long-term loans (including the current portion) and deposits received (included in other current liabilities). c. Financial risk management objectives and policies

The main financial instruments of the Corporation include equity and debt investments, accounts receivables, accounts payables and borrowings. Financial risks include market risk, credit risk, and liquidity risk.

237 Financial Highlights

1) Market risk

The Corporation’s activities exposed it primarily to the financial risks due to changes in exchange rates, interest rate and other market-related factors.

a) Exchange rate risk

Holding foreign currency-denominated assets and liabilities exposes the Corporation to adverse fluctuations of cash flows and the reduction of foreign currency assets due to the exchange rate changes. The Corporation avoids cash flow risk resulting from the adverse exchange rate changes by using derivative contracts.

Sensitivity analysis

The Corporation is mainly exposed to the U.S. dollar (USD), Japanese yen (JPY) and Renminbi (RMB).

The following shows details the Corporation’s sensitivity to a 1% increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. The sensitivity rate of 1% 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 outstanding foreign currency-denominated monetary items, and their translation at the end of the reporting period is adjusted for a 1% change in exchange rates. A positive number below indicates an increase in pre-tax profit due to a 1% strengthening of the New Taiwan dollar against the relevant currency. For a 1% weakening of the New Taiwan dollar against the relevant currency, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative.

U.S. Dollar For the Year Ended December 31 2014 2013

Gain (loss) $ (1,993) $ (2,318)

Japan Yen For the Year Ended December 31 2014 2013

Gain (loss) $ 3,278 $ 4,032

RMB For the Year Ended December 31 2014 2013

Gain (loss) $ (10,898) $ (8,893)

238 Financial Highlights

b) Interest rate risk

The carrying amounts of the Corporation’s financial assets and financial liabilities with exposure to interest rate risk at the end of the reporting period were as follows.

December 31 2014 2013

Fair value interest rate risk Financial assets $ 1,505,818 $ 856,312 Cash flows interest rate risk Financial assets 9,106,304 9,239,419 Financial liabilities - 6,026

Sensitivity analysis

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

Had interest rates been 1% higher and had all other variables been held constant, the Corporation’s pre-tax profit would have increased by $91,063 thousand in 2014 and $92,334 thousand in 2013.

The decrease in the Corporation’s sensitivity to interest rates during the current period was mainly due to the decrease in floating rate asset instruments.

c) Other price risk

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

Sensitivity analysis

The Corporation assesses equity price risk using sensitivity analysis.

The following sensitivity analysis was based on the exposure to equity price risk at the end of the reporting period. Had equity prices been 5% lower, the fair values of available-for-sale investments and held-for-trading investments would have decreased by $85,646 thousand and $74,105 thousand as of December 31, 2014 and 2013, respectively.

2) Credit risk

Credit risk represents the potential loss that would be incurred by the Corporation if the counter-parties or third parties breach financial instrument contracts. Management believes its exposure to default by these parties is low.

3) Liquidity risk

The Corporation has sufficient operating capital to meet cash requirements for settling derivative transactions. Thus, liquidity risk is low.

239 Financial Highlights

23. TRANSACTIONS WITH RELATED PARTIES

In addition to those disclosed in other notes, the Corporation had business transactions with related parties:

a. Trading transactions

1) Revenues

For the Year Ended December 31 Related Parties Types 2014 2013

Investors that have significant influence $ 750,616 $ 1,066,507 Subsidiaries 440,473 460,225 Associates 19,444,957 19,684,425

$ 20,636,046 $ 21,211,157

2) Purchases

For the Year Ended December 31 Related Parties Types 2014 2013

Investors that have significant influence $ 2,542,781 $ 2,361,071 Subsidiaries 1,143,142 1,188,362 Associates 1,596,093 1,555,970

$ 5,282,016 $ 5,105,403

3) Technical service expense (included in cost of goods sold and marketing expenses)

For the Year Ended December 31 Related Parties Types 2014 2013

Investors that have significant influence $ 176,080 $ 181,236

4) Development expense (included in research and development expenses)

For the Year Ended December 31 Related Parties Types 2014 2013

Investors that have significant influence $ 58,852 $ 41,448

5) Acquisition of property, plant and equipment

For the Year Ended December 31 Related Parties Types 2014 2013

Subsidiaries $ 66,017 $ 47,654 Associates 17,031 23,077

$ 83,048 $ 70,731

240 Financial Highlights

6) Disposal of property, plant and equipment

Proceeds of Disposal Gain or Loss on Disposal For the Year Ended For the Year Ended December 31 December 31 Related Parties Types 2014 2014 2014 2013

Subsidiaries $ 3,356 $ 14,787 $ 433 $ 362 Associates 58 - 58 -

$ 3,414 $ 14,787 $ 491 $ 362

7) Receivables from related parties

December 31 Related Parties Types 2014 2013

Investors that have significant influence $ 58,900 $ 98,829 Subsidiaries 112,872 134,794 Associates 924,645 852,428

$ 1,096,417 $ 1,086,051

8) Prepayments (included in other current assets)

December 31 Related Parties Types 2014 2013

Investors that have significant influence $ 4,580 $ 11,556 Subsidiaries 7,711 - Associates 7,140 4,101

$ 19,431 $ 15,657

9) Payables to related parties

December 31 Related Parties Types 2014 2013

Investors that have significant influence $ 181,599 $ 118,362 Subsidiaries 188,919 222,605 Associates 408,693 410,499

$ 779,211 $ 751,466

10) Deposit in advance (included in other current liabilities)

December 31 Related Parties Types 2014 2013

Subsidiaries $ 2,576 $ 15,035 Associates 42,147 14,268

$ 44,723 $ 29,303

241 Financial Highlights

The outstanding payables to related parties had unsecured guarantees and would be paid in cash. The Corporation receives guarantees of the receivables from part of the related parties. In addition, the Corporation did not recognize allowance for doubtful accounts for 2014 and 2013.

Except for the royalty received from Hwa Wei Holdings in accordance with the authorities of Mainland China and the accounts receivable to Y.M.Hi-Tech Industry Ltd., other transactions with related parties have the same terms for pricing, receipts and payments as of those for third parties. Lease contracts with related parties are based on market conditions, and the terms of payment or receivables were the same as those for third parties.

The Corporation signed contract with Mitsubishi Motor Corp. (MMC). Please refer to Note 24.

b. Compensation of key management personnel:

The remuneration of directors and other members of key management personnel were as follows:

For the Year Ended December 31 2014 2013

Short-term employee benefit $ 124,889 $ 91,947 Post-employment benefit 728 717

$ 125,617 $ 92,664

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

23. ASSETS PLEDGED AS COLLATERAL

The following assets were provided as the tariff of importing vehicle parts and materials:

December 31 2014 2013

Time deposits (included in other current assets) $ 84,007 $ 80,249

24. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Significant commitments and contingencies of the Corporation as of December 31, 2014 were as follows:

a. Guarantee notes amounting to $4,877,200 thousand, which had been issued to financial institutions as collaterals for loans; Unused letters of credit amounted to a $8,615 thousand.

b. Certain fees received by MMC and MFTBC for providing the Corporation with technical assistance in the manufacture of automobiles and in minor revisions of certain car models, as stated in several agreements with the latest expiry in November 2021.

242 Financial Highlights

25. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The significant financial assets and liabilities denominated in foreign currencies were as follows:

December 31, 2014

Foreign Exchange Rate Carrying Currencies (Note) Amount Financial assets

Monetary items USD $ 7,440 31.6500 $ 235,467 JYP 5,621 0.2646 1,487 RMB 229,594 5.0920 1,169,090

$ 1,406,044

Financial liabilities

Monetary items USD 1,143 31.6500 $ 36,178 JYP 1,244,472 0.2646 329,287 RMB 15,578 5.0920 79,325

$ 444,790

December 31, 2013

Foreign Exchange Rate Carrying Currencies (Note) Amount Financial assets

Monetary items USD $ 9,751 29.8050 $ 290,621 JYP 1,116 0.2839 317 RMB 192,471 4.8886 940,904

$ 1,231,842

Financial liabilities

Monetary items USD 1,975 29.8050 $ 58,869 JYP 1,421,357 0.2839 403,523 RMB 10,547 4.8886 51,559

$ 513,951

Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged, unless stated otherwise.

26. SEPARATELY DISCLOSED ITEMS

Excluded in Note 7 and Tables 1 to 8, there are no other separately disclosed items.

243 Financial Highlights

VI. Financial Difficulties during the 2014 Calendar Year and up to April 30, 2015: None

244 Review of Financial Status, Operating Results, and Risk Management

I. Analysis of Financial Status

Brief Presentation on Financial Status Analysis Unit: NT$ thousands Year Variation December 31, 2014 December 31, 2013 Item Amount % Current assets 22,939,000 23,879,163 ( 940,163) ( 3.94) Long-term Investments 29,743,458 27,698,817 2,044,641 7.38 Property, plant and 6,490,732 5,952,588 538,144 9.04 equipment Intangible assets 245,859 188,472 57,387 30.45

Other assets 2,104,369 2,341,370 ( 237,001) ( 10.12)

Total assets 61,523,418 60,060,410 1,463,008 2.44

Current liabilities 7,843,305 8,393,456 ( 550,151) ( 6.55)

Non-current liabilities 2,279,533 2,228,053 51,480 2.31

Total liabilities 10,122,838 10,621,509 ( 498,671) ( 4.69)

Capital stock 13,840,508 13,840,508 - -

Capital surplus 6,392,369 6,376,868 15,501 0.24

Retained earnings 26,422,721 25,516,688 906,033 3.55

Other equity 1,786,362 991,063 795,299 80.25

Treasury stock - - - - Equity attributable to 48,441,960 46,725,127 1,716,833 3.67 owners of the Corporation Non-Controlling Interests 2,958,620 2,713,774 244,846 9.02

Total equity 51,400,580 49,438,901 1,961,679 3.97 Analysis of Variation (for variation over 20% in the latest 2 years and with an amount up to NT$10 million): 1. The increase in “Intangible assets” was mainly due to the raise in “Intangible assets under development” in 2014. 2. The increase in “Other equities” mainly due to the recognization of “Exchange differences on translating foreign operations” and “ Unrealized gain on available-for-sale financial assets”.

245 Review of Financial Status, Operating Results, and Risk Management

II. Analysis of Operating Results Brief Presentation on Operating Results Analysis Unit: NT$ thousands Year Ratio of Item 2014 2013 Increase (Decrease) Variation%

Operating Revenue 35,951,427 35,539,825 411,602 1.16

Operating costs 29,897,969 30,385,269 ( 487,300) ( 1.60)

Gross Profit 6,053,458 5,154,556 898,902 17.44

Realized Gross Profit 6,062,064 5,182,483 879,581 16.97

Operating expenses 4,091,900 3,801,974 289,926 7.63

Profit from Operations 1,970,164 1,380,509 589,655 42.71

Non-operating incom and 1,269,735 1,685,439 ( 415,704) ( 24.66) expenses

Continuously operating divisions’ profit before 3,239,899 3,065,948 173,951 5.67 income tax

Income tax expense ( 418,187) ( 314,926) ( 103,261) -

Cautiously operating 2,821,712 2,751,022 70,690 2.57 divisions’ net profit

Net profit of the year 2,821,712 2,751,022 70,690 2.57

Other comprehensive 732,318 1,916,382 ( 1,184,064) ( 61.79) income (Loss) (after-tax)

Total Comprehensive 3,554,030 4,667,404 ( 1,113,374) ( 23.85) income Analysis of Variation (for a variation over 20% in the latest 2 years with an amount up to NT$10 million): 1. The increase in “Profit from Operations” was mainly due to the raise in “Gross Profit”. 2. The decrease in “Non-operating income and expenses” were mainly due to the reduction of “Share of profit of associates and joint ventures”. 3. The decrease in “Other comprehensive income (Loss) (after-tax)” was mainly due to the changes of “Unrealized gain on available-for-sale financial assets”, “Share of other comprehensive income of associates and joint ventures” and “Actuarial gain (loss) arising from defined benefit plans”.

246 Review of Financial Status, Operating Results, and Risk Management

III. Analysis of Cash Flow (I) Liquidity analysis for the latest two years Year Ratio of Increase 2014 2013 Item (Decrease) Cash flow ratio(%) 47.78 33.69 14.09 Cash flow adequacy ratio(%) N/A N/A N/A Cash flow reinvestment ratio(%) 2.75 2.00 0.75 Analysis of the Ratio of Increase/Decrease: The increase in “Cash flow ratio” and the “Cash flow reinvestment ratio” were mainly due to the raise in “Net cash generated from operating activities”.

(II) Liquidity analysis of cash for the next year Unit: NT$ thousands Net cash generated Expected cash outflows Expected measures to be Expected Beginning expected from from Investing and taken for cash shortage remaining cash cash balance operating activities of Financing activities the Investment Financial (shortage) the whole year whole year plan plan 9,022,297 2,404,234 2,355,658 9,070,873 - - 1.Analysis of variation in cash flows for the next year: (1) Operating activities: Expected cash inflows from operating income NT$2,404,234 thousand. (2) Investing activities: Expected net cash outflows from investing activities NT$764,000 thousand. (3) Financing activities: Expected net cash outflows from financing activities NT$1,591,658 thousand. 2. Expected measures to be taken for cash shortage and liquidity analysis: Not applicable

IV. Major Capital Expenditure The important capital expenditure was NT$1,275,175 thousand in 2014. Its effects are expected as follows: (I) Introducing new products: The market share of the Corporation’s products will increase and turnover and sales will rise. (II) Introducing parts and components: Self-manufacturing rate of parts will rise and production cost will be reduced. (III) Strengthening sales: The reputation of the Corporation and its products will be developed and the quality of after-sale service will be enhanced to facilitate sales. (IX) Increasing productivity: The equipment for production lines will be upgraded and automatized and layout will be rationalized to increase productivity and enhance technology.

247 Review of Financial Status, Operating Results, and Risk Management

(X) Enhancing quality: Cooperative companies will increase their ability in quality assurance. Quality assurance systems will be operated more effectively to eliminate PONC (Price of Non Conformance) and have customers be more satisfied with the quality of products. Source management and fool-proofing measures will be conducted more effectively. (XI) Improving work environment: Computer equipment will be upgraded. Old office equipment and company vehicles will be replaced with new ones. Office planning construction and air quality will be improved. Pollution prevention equipment will be installed.

V. Re-investment policies in last year and major causes for profit/loss and improvement, and investment plans in the coming year Looking back in 2014, re-investments were mainly placed in automobile-related business. In return of investment, due to the downturn of the macro environment, only a 2.9% growth from 2013 was seen in the overall auto market (including trucks) in Taiwan. There was a slight profit growth from 2013 for both upstream and downstream suppliers of the auto industry and part of re-investments in sales and cost reduction in Taiwan, which fulfilled the expectation. But there was a downturn of own brand products in the China market, profits from re-investments in SEM reduced compared to 2013. Therefore, the recognized overall profit from re-investments in 2014 was NT$704 million, 24.1% down from NT$927 million in 2013. In re-investments in China, although an annual economic growth by 7.4% was seen in the China market in 2014, overall economic growth was slow. The total car sale in 2014 was 23.49 million cars, 6.9% up from 2013. Although SEM, a CMC re-invested enterprise, continued with the dual brand marketing strategy, due to the general recession of own brand auto sales in the China market, 68 thousand cars were sold in 2014. As for Fujian Benz Automotive, a total of 12 thousand cars were sold in 2014, 9.4% up from 2013. In the 2-wheeled business, a total of 3,688 e-scooters were registered in 2014, maintaining at top of the e- scooter market with 66.7% market share. As the green energy industry is one of our key investments in the future, after launching the first e-scooter EM50 in 2010, the Corporation continued to launch the EM80 and EM100 in 2012 and 2013. In 2013, the

248 Review of Financial Status, Operating Results, and Risk Management

Corporation launched the registration-free, driver license free, fuel-tax free, and fuel-free EM25. In the future, the Corporation will fulfil consumer demand with multifaceted products.

VI. Risk Management (I) Impact on profits/losses of Interest rate volatility, Exchange rate volatility and Inflation and

the Future Countermeasures: Interest rate volatility mainly affects the financial assets hold by the Corporation. Due to the fast-money policy of Europe and Japan, many countries have reduced interest rate in 2014. As the real estate price in Taiwan is still running high, the Central Bank of Taiwan will not reduce interest rates easily. Although the USA will raise interest rates in 2015, it is estimated that there is still little space for interest rate rise for the TWD in the year. When interest rate increases by 0.25%, the interest income will increase by NT$22,766 thousand. As key parts and components are imported from Japan, the exchange rate volatility of JPY will bring a bigger effect on the imcome of the Corporation. If the USD to NTD rate devaluates(appreciates) by NT$1, the profit (loss) before tax will increase(decrease) by NT$150,266 thousand; if the USD to JPY rate devaluates(appreciates) by JPY1, the profit (loss) before tax will decrease(increase) by NT$41,289 thousand. As global interest rate tends to run low, the chance of inflation will be low in the coming year. Due to the global economic downturn, productivity is excessive, and the shadow of deflation is already out there. As deflation affects buying intention, the central banks of countries in the world will lower interest rate or launch new policies to stimulate economic growth. Either high inflation or high deflation will reduce market efficiency and interfere on savings and investment decisions to discourage macroeconomics and microeconomics and bring adverse effect to our operating cost. Therefore, the Corporation will continue to watch closely the trend of inflation or deflation, so as to adjust our products and services in response. (II) Risks Associated with High-risk/High-leveraged Investment; Lending, Endorsement and

Guarantees; and Derivative Transactions: 1. The Corporation does not engage in high risk or high leveraged investments. 2. The funds loaned to others, endorsement guarantee and derivative product transactions

249 Review of Financial Status, Operating Results, and Risk Management

are made in accordance with the policy provided in the Procedure of Loaning of Funds to Others and Procedure of Making of Endorsements/Guarantees, and the Procedure of Engaging in Derivative Trading. (III) Future R&D Plans and Expected R&D Spending: The task of CARTEC, the Corporation’s Research and Development Center, and the product lines are developed pursuant to the guiding principle made by the Corporation. Technological research and development is executed to (1) develop vehicle-related technologies that meet the needs of the market and the requirements of the law, (2) develop the systemic integrating ability of differentiation and high value added products, (3) modify products to meet the demand by different foreign regions, (4) develop new energy and energy-saving related products, and focus on advanced power system, electric control system, the design and analysis of automobile electronic integration and verification technology, (5) develop green energy two-wheeler products with advanced characteristics. The R&D expenses of the Corporation estimates NT 2.1 billion. (IV) Effects of and Response to Changes of Government Policies and Regulatory Environment: The Corporation consistently paid attention to any change in laws, statutes and policies that might influence the business or operation of this Corporation. No change in domestic and foreign policies and laws has had significant influence on the financial business of the Corporation since 2014. (V) Effects of and Response to Changes in Technology and Industry: None

(VI) Effects of and Response to Changes in Corporate Image on Company's Crisis Management: None (VII) Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans: None (VIII) Expected Benefits from, Risks Relating to and Response to Capacity Expansion: None

(IX) Risks Associated with Sales and Purchase Concentration: The Corporation purchases from hundreds of cooperative suppliers instead of from only particular ones. Though the Corporation sells products through only three main distributors, yet it is one of the characteristics of this industry that the products are distributed by limited distributors. The Corporation has also entered into a contract with

250 Review of Financial Status, Operating Results, and Risk Management

each distributor and has stock equity of each distributor. The Corporation has worked the distributors for years. There is no risk of centralized sales. (X) Effects of, Risks Relating to and Response to Sales of Significant Numbers of Shares by Directors, and/ or Major Shareholders Who Own 10% or More of the Corporation’s Total Outstanding Share : None (XI) Effects of, Risks Relating to and Response to Changes in Control over the Corporation: None (XII) Risks Associated with Litigation or Non-litigation Matters : None (XIII) Other Risks: None

VII. Other Important Matters: None

251 Special Disclosure

I. Summary of Affiliated Companies (I) Consolidated business report of affiliated enterprises 1. Organization charts of affiliated enterprises: Please see page 188. 2. Basic information of each affiliated enterprise December 31, 2014 Unit: NT$ thousands Paid-in Capital No. Date of Major business or Name of Company Address Exchange Establishment Currency Amount production item Rate Alliance Investment & January 11, 13F, No. 2, Sec. 2, Dunhua S. General 1 NT $ 1,830,000 1.000 Management Co., Ltd. 1999 Road, Daan Dist., Taipci City investment Green Trans Offshore Chambers,P.O.Box General 2 March 14, 2012 US $ 6,600 31.65 Investment Co., Ltd. 217,Apia, Samoa investment No. 130, Yanshan W. Road, Production and Jiangsu Greentrans Chengqu Industrial Park, sale of electric 3 Electronics Technology July 10, 2012 Chenxiang Township, US $ 6,600 31.65 vehicles and Co., Ltd. Taicang City, Jiangsu relevant parts and Province, Chian accessories China Motor Investment in October 29, 11F, No. 2, Sec. 2, Dunhua S. 4 Corporation NT $ 1,335,032 1.000 production and 1992 Road, Daan Dist., Taipci City Investment Co., Ltd. service businesses 2nd deck Penthouse, Salamin November 19, Building 197 Salcedo St. Purchase and sale 5 Hwa Hann Corporation PHP $ 10,636 0.7238 2002 Legaspi Village, Makati City of car accessories 1229, Philippines Citco Building, Wickhams Overseas Hwa Wei Holdings Cay, P. O. Box 662, Road investment in 6 May 26, 1995 US $ 40 31.65 Co., Ltd. Town, Tortola, British Virgin production and Island service businesses No. 618, Xiucai Road, Hwa Chung Motor February 15, Sale of cars and 7 Yangmei City, Taoyuan NT $ 87,900 1.000 Co., Ltd. 2006 accessories County Sale of December 24, 11F, No. 2, Sec. 2, Dunhua S. 8 GreenTrans Co., Ltd. NT $ 10,000 1.000 motorcycles and 2009 Road, Daan Dist., Taipci City bicycles Ling Wei Motor Co., November 19, 11F, No. 2, Sec. 2, Dunhua S. 9 NT $ 36,084 1.000 Sale of used cars Ltd. 2007 Road, Daan Dist., Taipei City China Motor November 8, Level 2. Lotemau Centre, General 10 US $ 40 31.65 Investment Co., Ltd. 2005 Vaea Street, Apia, Samoa investment No. 3, Chiniudiao, Manufacture of China Engine Neighborhood 30, Hengfeng 11 July 24, 1995 NT $ 1,689,000 1.000 car engines and Corporation Village, Dayuan Township, accessories Taoyuan County No. 39-1, Bogongkeng, Xihu Manufacture of Advance Power 12 June 3, 2008 Village, Sanyi Township, NT $ 5,000 1.000 cars and Machinery Co., Ltd. Miaoli County accessories (To be continued)

252 Special Disclosure

(Continued) Paid-in Capital Date of Major business or No. Name of Company Address Exchange Establishment Currency Amount production item Rate 2nd Floor, Felix House, 24 Dr. Reinvestment and Advance Power 13 April 26, 2002 Joseph Riviere Street, Port US $ 3,750 31.65 general sales Investment Co., Ltd. Louis, Mauritius business No. 1-1, Datong First Road, Aluminum-magn Gatetech Technology Guanyin Industrial Zone, 14 May 20, 1988 NT $ 437,372 1.000 esium alloy Inc. Guanyin Township, Taoyuan foundry industry County TrustNet Chambers, Lotemau Gatech Holding Co. January 22, General 15 Centre,P.O.Box 1225,Apia, US $ 20,130 31.65 Ltd. 2002 investment Samoa TrustNet Chambers, Lotemau Gatech International January 22, General 16 Centre,P.O.Box 1225,Apia, US $ 20,268 31.65 Co. Ltd 2002 investment Samoa No. 6, Yanshan W. Road, Aluminum-magn Gatetech (Suzhou) Chengqu Industrial Park, 17 June 27, 2002 US $ 24,300 31.65 esium alloy Technology Inc. Chengxiang Township, Taicang foundry industry City, Jiangsu Province, Chian Molds, No. 412, Sec. 2, Renhe Road, COC Tooling & December 2, examination tools 18 Daxi Township, Taoyuan NT $ 565,716 1.000 Stamping Co., Ltd. 1982 and clamping County apparatus for cars No. 412, Sec. 2, Renhe Road, Y. M. Hi-Tech Industry October 1, 19 Daxi Township, Taoyuan NT $ 50,000 1.000 Steel cutting Ltd. 2003 County Shye Shinn January 26, General 20 Corporation(British Tortola, British Virgin Island US $ 968 31.65 1996 investment Virgin Islands) Design and No. 1405, Hanghai E. Road, Zhengzhou Tooling & December 29, manufacture of 21 Zhengzhou City, Henan CNY $ 12,500 5.092 Stamping Co., Ltd. 2006 molds,stamping Province part, hardware Manufacturing of No. 100, Xinjiang Road, 22 Kian Shen Corporation May 30, 1963 NT $ 692,454 1.000 large car racks Yangmei City, Taoyuan County and molds Trust Net Chambers, P. O. Box Investment in Kian Shen Investment March 13, 23 3444, Road Town, Tortola, US $ 10,296 31.65 production and Co., Ltd. 2002 British Virgin Island service businesses Kian Shen Investment Suite 2303 23/F Great Eagle November 15, General 24 Hong Kong Co. Centre 23 Harbour Road US $ 25,907 31.65 2007 investment Limited Wanchai HK Sale of Sino Diamond Motor 11F, No. 2, Sec. 2, Dunhua S. automobiles and 25 June 5, 1993 NT $ 3,257,862 1.000 Corporation Road, Daan Dist., Taipei City provision of after-sale service Brilliant Insight International January 16, 11F, No. 2, Sec. 2, Dunhua S. Consulting and 26 NT $ 10,000 1.000 Consultancy Service 2014 Road, Daan Dist., Taipei City service Co., Ltd. (To be continued)

253 Special Disclosure

(Continued) Paid-in Capital No. Date of Major business or Name of Company Address Exchange Establishment Currency Amount production item Rate Overseas November 12, Level 2. Lotemau Centre, Vaea investments in 27 Hwa Yu Co., Ltd. US $ 45,643 31.65 2003 Street, Apia, Samoa production and service businesses R. 1405, Hengji Center Office Beijing Jun Hua August 5, Consulting and 28 Building 1, No. 18, Jianguo US $ 150 31.65 Information Co., Ltd. 2004 service Mennei Street, Beijing General Office Building,South Fujian Rui Hua East (Jujian) Car Industrial Co., Consulting and 29 April 24, 2013 US $ 3,400 31.65 Consulting Co., Ltd. Ltd., South East Investment service Zone, Overseas Hwa Lin Investment December P.O. Box 3152, Road Town, investment in 30 US $ 42,093 31.65 Ltd. 14, 1999 Tortola, British Virgin Island production and service businesses Guangzhou Automobile Guangzhou Huayou February 19, Market,Yuangang Sec., Car repair and 31 Motor Maintenance US $ 12,810 31.65 2004 Guangshan Highway, Tianhe supporting service Co., Ltd. Dist., Guangzhou City Guangzhou Automobile Guangzhou Huayou September 9, Market, Yuangang Sec., Sale of cars and 32 CNY $ 2,000 5.092 Motor Sale Co., Ltd. 2002 Guangshan Highway, Tianhe parts Dist., Guangzhou City Sichuan Huafeng （Shipping Ave., Wuhou Dist.） Car repair and Hanwei Cars Service November 10, Shuangfeng Village, Jinhua supporting 33 US $ 13,330 31.65 And Maintenance Co., 2004 Township, Wuhou Dist., service,and the sale Ltd. Chengdu City of cars and parts Sichuan Houwei Cars December 17, No. 76, Shuxi Road, Jinniu Sale of cars and 34 Service And CNY $ 3,000 5.092 2010 Dist., Chengdu City parts Maintenance Co., Ltd. （Shipping Ave., Wuhou Dist.） Sichuan Lingwei Cars January 16, Sale of cars and 35 Service And Shuangfeng Village, Jinhua CNY $ 2,000 5.092 2003 Township, Wuhou Dist., parts Maintenance Co., Ltd. Chengdu City Block A, Car Town, Wanglan Tianjin Hwarui September 22, Car repair and 36 Manor, Weijin S. Road, Xiqing US $ 8,020 31.65 Maintenance Co., Ltd. 2003 supporting service Dist., Tianjin City Block A, Car Town, Wanglan Tianjin Hwahong Sale January 19, Sale of cars and 37 Manor, Weijin S. Road, Xiqing CNY $ 60,000 5.092 Co., Ltd. 2003 parts Dist., Tianjin City Car repair and Dongguan Huayi Baotun Sec., Guantai Road, supporting service, 38 Motor Maintenace Co., July 11, 2006 Houjie Township, Dongguan US $ 4,450 31.65 and the sale of cars Ltd. City and parts Sale of cars and Baotun Sec., Guantai Road, Dongguan Huashun October 18, parts、Car repair 39 Houjie Township, Dongguan CNY $ 15,000 5.092 Motor Sale Co., Ltd. 2002 City and supporting service

254 Special Disclosure

3. Information of the shareholders in a controlling or affiliated entity: None 4. Information of directors, supervisors and presidents of each affiliated enterprise December 31, 2014 Unit:Share；% Number of shares held(Note 1,2) Name of Company Title Name or Representative Shareholding Number of shares ratio Chairperson China Motor Corporation 183,000,000 100.00% Representative: Kenneth K. T. Yen Director China Motor Corporation 183,000,000 100.00% Representative: Hsin-Tai Liu Alliance Investment & Li-Lien Chen ManagementCo., Ltd. Kuo-Rong Chen Te-Chao Huang Supervisor China Motor Corporation 183,000,000 100.00% Representative: Mei-Chu Tai President Hsin-Tai Liu Director Alliance Investment & ManagementCo., 6,600,000 100.00% Green Trans Investment Co., Ltd. Ltd. (US$1 per share) Representative: Hsin-Tai Liu Director Green Trans Investment Co., Ltd. 6,600,000 100.00% Jiangsu Greentrans Representative: Hsin-Tai Liu (Contribution: US$) Electronics Technology Co., Supervisor Green Trans Investment Co., Ltd. 6,600,000 100.00% Ltd. Representative: Mei-Chu Tai (Contribution: US$) President Te-Jun Lo Chairperson China Motor Corporation 133,503,200 100.00% Representative: Kenneth K. T. Yen Director China Motor Corporation 133,503,200 100.00% China Motor Corporation Representative: Hsin-Tai Liu Investment Co., Ltd. Wei Kung Chi Supervisor China Motor Corporation 133,503,200 100.00% Representative: Te-Chao Huang President Hsin-Tai Liu Chairperson Sino Diamond Motor Corporation 542,429 51.00% Representative: Chung-Chou Huang Director China Motor Corporation 521,161 48.99% Representative: Pu-yang Liu Hwa Hann Corporation Director Josefina K.Beltran 1 0.00% Director Leonora C.Ventura 1 0.00% Director Lourdes G.Labao 1 0.00% (10 PESO per share) Director China Motor Corporation 40,000 100.00% Hwa Wei Holdings Co., Ltd. Representative: Kenneth K. T. Yen (US$1 per share) Hsin-Tai Liu (To be continued)

255 Special Disclosure

(Continued) Number of shares held(Note 1,2) Name of Company Title Name or Representative Shareholding Number of shares ratio Chairperson China Motor Corporation 8,790,000 100.00% Representative: Kenneth K. T. Yen Director China Motor Corporation 8,790,000 100.00% Representative: Hsin-Tai Liu Chao-Wen Chen Hwa Chung Motor Co., Ltd. Te-Jun Lo Ching-Wu Chien Supervisor China Motor Corporation 8,790,000 100.00% Representative: Mei-Chu Tai President Chao-Wen Chen Chairperson Hwa Chung Motor Co., Ltd. 1,000,000 100.00% Representative: Te-Jun Lo Director Hwa Chung Motor Co., Ltd. 1,000,000 100.00% Representative: Ching-Wu Chien GreenTrans Co., Ltd. Hsuan-Kuo Wang Supervisor Hwa Chung Motor Co., Ltd. 1,000,000 100.00% Representative: Mei-Chu Tai President Hsuan-Kuo Wang Chairperson Hwa Chung Motor Co., Ltd. 3,608,397 100.00% Representative: Ching-Wu Chien Director Hwa Chung Motor Co., Ltd. 3,608,397 100.00% Ling Wei Motor Co., Ltd. Representative: Kuo-Hsiung Peng Yong-Sheng Jhan Supervisor Hwa Chung Motor Co., Ltd. 3,608,397 100.00% Representative: Mei-Chu Tai Director China Motor Corporation 40,000 100.00% China Motor Investment Co., Ltd. Representative: Kenneth K. T. Yen (US$1 per share) Hsin-Tai Liu Chairperson China Motor Corporation 32,000,000 18.95% Representative: Jin-Chung Lee Director China Motor Corporation 32,000,000 18.95% China Engine Corporation Representative: Hsin-Tai Liu Chung-Chou Huang Ching-Ya Chen Shih-Hsien Lin (To be continued)

256 Special Disclosure

(Continued) Number of shares held(Note 1,2) Name of Company Title Name or Representative Shareholding Number of shares ratio Director Yulon Motor Co., Ltd. 32,000,000 18.95% Representative: Zhen-Xiang Yao Ching-Chi Chen Director National Development Fund, Executive 32,000,000 18.95% Yuan Representative: Wei-Hsien Lee Chin-Piao Lin China Engine Corporation Supervisor Sino Diamond Motor Corporation 56,000,000 33.16% Representative: Mei-Chu Tai Supervisor Sentec E&E Co., Ltd. 6,000,000 3.55% Representative: Chao-Hui Huang Supervisor Ministry of Economic Affairs 8,900,000 5.27% Representative: Wei-Yu Yeh President Shih-Hsien Lin Chairperson China Engine Corporation 500,000 100.00% Representative: Zhen-Xiang Yao Director China Engine Corporation 500,000 100.00% Representative: Jin-Chung Lee Advance Power Machinery Co., Ltd. Shih-Hsien Lin Supervisor China Engine Corporation 500,000 100.00% Representative: Charles Shiau President Ching-Chi Chen Director China Engine Corporation 3,750,000 100.00% Advance Power Investment Co., Ltd. Representative: Jin-Chung Lee (US$1 per share) Chairperson China Motor Corporation 24,725,155 56.53% Representative: Hsin-Tai Liu Director China Motor Corporation 24,725,155 56.53% Representative: Chung-Chou Huang Ya-Cheng Hsiao Te-Chao Huang Chun-Hung Hu Director Alliance Investment & Management Co., 3,172,392 7.25% Gatetech Technology Inc. Ltd. Representative: Yu-Cheng Huang Director Bai Chuan Investment Co., Ltd. 877,949 2.01% Representative: Bai-Chuan Cheng Chin-Cheng Yang Supervisor Sino Diamond Motor Corporation 3,945,760 9.02% Representative: Mei-Chu Tai Supervisor Sheng-Le Lin 80,023 0.18% President Ya-Cheng Hsiao (To be continued)

257 Special Disclosure

(Continued) Number of shares held(Note 1,2) Name of Company Title Name or Representative Shareholding Number of shares ratio Director Gatetech Technology Inc. 20,130,389 100.00% Gatech Holding Co. Ltd.. Representative: Hsin-Tai Liu (US$1 per share) Director Gatech Holding Co. Ltd. 20,268,460 100.00% Gatech International Co. Ltd. Representative: Hsin-Tai Liu (US$1 per share) Chairperson Gatech International Co. Ltd. 24,300,000 100.00% Gatetech (Suzhou) Technology Inc. Representative: Hsin-Tai Liu (Contribution:US$) Chairperson China Motor Corporation 28,147,543 49.76% Representative: Hsi-Yuan Chung Managing China Motor Corporation 28,147,543 49.76% Director Representative: Chung-Chou Huang

Managing Yulon Motor Co., Ltd. 21,358,945 37.76% Director Representative: Jin-Chung Lee

Director China Motor Corporation 28,147,543 49.76% Representative: Ching-Ya Chen COC Tooling & Stamping Co., Ltd. Hung-Ching Yang Chiung-chih Tseng Director Yulon Motor Co., Ltd. 21,358,945 37.76% Representative: Wei-Kung Chi Zhen-Xiang Yao Yong-Yuan Wang Supervisor Tai-Yuan Textile Co., Ltd. 7,062,626 12.48% Representative: Charles Shiau Mei-Chu Tai Chung-Chen Liu President Hsi-Yuan Chung Chairperson COC Tooling & Stamping Co., Ltd. 3,000,000 60.00% Representative: Hsi-Yuan Chung Director COC Tooling & Stamping Co., Ltd. 3,000,000 60.00% Representative: Chia-Pin Lin Shui-Hsing Luo Y. M. Hi-Tech Industry Ltd. Director Metal One (Japan) 2,000,000 40.00% Representative:Norimasa Mizugaki Yoshiyuki Hiyam Supervisor Suhiko Niwaya Supervisor Mei-Ching Wu President Hsi-Yuan Chung Director Shye Shinn Corporation 12,500,000 60.00% Zhengzhou Tooling & Stamping Co., Ltd. Representative: Hsi-Yuan Chung (Contribution: RMB) Chairperson COC Tooling & Stamping Co., Ltd. 968,000 100.00% Shye Shinn Corporation Representative: Hsi-Yuan Chung (Contribution:US$) (To be continued)

258 Special Disclosure

(Continued) Number of shares held(Note 1,2) Name of Company Title Name or Representative Shareholding Number of shares ratio Chairperson China Motor Corporation 30,378,649 43.87% Representative: Ching-Long Jan Director China Motor Corporation 30,378,649 43.87% Representative: Shih-Chuan Chen Shao-Pao Mai Chiung-chih Tseng Director Kuozui Motors, Ltd. 22,810,105 32.94% Representative: Yong-Yu Lin Kian Shen Corporation Hashimoto Hisa Chao-Sen Li Director Hong-Long Chen Director Bo-Tsun Lin Supervisor Wei Tai Investment Co., Ltd. 698,922 1.01% Representative: Yong-Yuan Wang Supervisor Ming-Chang Cai 6,531 0.01% President Shao-Pao Mai Kian Shen Investment Co., Ltd. Director Kian Shen Corporation 10,296,105 100.00% (British Virgin Islands) Representative: Shao-Pao Mai (US$1 per share) Kian Shen Investment Hong Kong Director Kian Shen Investment Co., Ltd. (British 25,907,038 100.00% Co.Limited Virgin Islands) (US$1 per share) Representative: Shao-Pao Mai Chairperson China Motor Corporation 325,786,161 100.00% Representative: Kenneth K. T. Yen Director China Motor Corporation 325,786,161 100.00% Representative: Chao-Wen Chen Te-Jun Lo Sino Diamond Motor Corporation Te-Chao Huang Ching-Wu Chien Supervisor China Motor Corporation 325,786,161 100.00% Representative: Mei-Chu Tai President Chao-Wen Chen Chairperson Sino Diamond Motor Corporation 1,000,000 100.00% Representative: Hsin-Tai Liu Director Sino Diamond Motor Corporation 1,000,000 100.00% Brilliant Insight International Representative: Shih-Ho Chang Consultancy Service Co., Ltd. Te-Chao Huang Supervisor Sino Diamond Motor Corporation 1,000,000 100.00% Representative: Mei-Chu Tai President Te-Chao Huang Director Sino Diamond Motor Corporation 45,642,942 100.00% Hwa Yu Co., Ltd. Representative: Kenneth K. T. Yen (US$1 per share) Director Hwa Yu Ltd. 150,000 100.00% Beijing Jun Hua Information Co., Ltd. Representative: Shih-Ho Chang (Contribution: US$) Executive Hwa Yu Ltd. 3,400,000 100.00% Director Representative: Hsin-Tai Liu (Contribution: US$) Fujian Rui Hua Consulting Co., Ltd. Supervisor Hwa Yu Ltd. 3,400,000 100.00% Representative: Mei-Chu Tai (Contribution: US$) President Te-Chao Huang (To be continued)

259 Special Disclosure

(Continued) Number of shares held(Note 1,2) Name of Company Title Name or Representative Shareholding Number of shares ratio Director Hwa Yu Ltd. 42,092,942 100.00% Hwa Lin Investment Ltd. Representative: Kenneth K. T. Yen (US$1 per share) Te-Jun Lo Chairperson Hwa Lin Investment Ltd. 12,810,000 100.00% Representative: Te-Jun Lo (Contribution: US$) Director Hwa Lin Investment Ltd. 12,810,000 100.00% Guangzhou Huayou Motor Representative: Te-Chao Huang (Contribution: US$) Maintenance Co., Ltd. Ying-Jhong Tseng Supervisor Hwa Lin Investment Ltd. 12,810,000 100.00% Representative: Mei-Chu Tai (Contribution: US$) President Ming-Jhang Wang Shareholder Hwa Lin Investment Ltd. 2,000,000 100.00% Guangzhou Huayou Motor Sale Co., Representative: Cheng-chih Fan (Contribution: RMB) Ltd. President Cheng-chih Fan Chairperson Hwa Lin Investment Ltd. 13,300,000 100.00% Representative: Te-Jun Lo (Contribution: US$) Director Hwa Lin Investment Ltd. 13,300,000 100.00% Sichuan Huafeng Hanwei Cars Representative: Te-Chao Huang (Contribution: US$) Service And Maintenance Co., Ltd. Ying-Jhong Tseng Supervisor Hwa Lin Investment Ltd. 13,300,000 100.00% Representative: Mei-Chu Tai (Contribution: US$) President Guang-Jing Wu Shareholder Sichuan Huafeng Hanwei Cars 3,000,000 100.00% Sichuan Houwei Cars Service And Service And Maintenance Co., Ltd. (Contribution: RMB) Maintenance Co., Ltd. Representative: Guang-Jing Wu President Guang-Jing Wu Shareholder Sichuan Huafeng Hanwei Cars 2,000,000 100.00% Sichuan Lingwei Cars Service And Service And Maintenance Co., Ltd. (Contribution: RMB) Maintenance Co., Ltd. Representative: Guang-Jing Wu President Guang-Jing Wu Chairperson Hwa Lin Investment Ltd. 8,020,000 99.75% Representative: Te-Jun Lo (Contribution: US$) Director Hwa Lin Investment Ltd. 8,020,000 99.75% Tianjin Hwarui Maintenance Co., Representative: Te-Chao Huang (Contribution: US$) Ltd. Ying-Jhong Tseng Supervisor Hwa Lin Investment Ltd. 8,020,000 99.75% Representative: Mei-Chu Tai (Contribution: US$) President Sa-He Wang Shareholder Tianjin Hwarui Maintenance Co., 60,000,000 100.00% Ltd. (Contribution: RMB) Tianjin Hwahong Sale Co., Ltd. President Representative: Sa-He Wang Sa-He Wang Chairperson Hwa Lin Investment Ltd. 4,450,000 100.00% Representative: Te-Jun Lo (Contribution: US$) Director Hwa Lin Investment Ltd. 4,450,000 100.00% Dongguan Huayi Motor Maintenace Representative: Te-Chao Huang (Contribution: US$) Co., Ltd. Ying-Jhong Tseng Supervisor Hwa Lin Investment Ltd. 4,450,000 100.00% Representative: Mei-Chu Tai (Contribution: US$) President Ming-Jhang Wang (To be continued)

260 Special Disclosure

(Continued) Number of shares held(Note 1,2) Name of Company Title Name or Representative Shareholding Number of shares ratio Shareholder Dongguan Huayi Motor Maintenace Co., 15,000,000 100.00% Dongguan Huashun Motor Sale Co., Ltd. (Contribution: RMB) Ltd. Representative: Ming-Jhang Wang President Ming-Jhang Wang Note: 1. If the invested company is a company limited by shares, number of shares and shareholding ratio will be disclosed. As for other types of companies, contribution and contribution ratio will be disclosed. 2. If the director or supervisor is a corporation, the information of its representative will also be disclosed.

261 Special Disclosure

5. Business Status of Each Related Enterprise December 31, 2014 Unit: NT$ thousands; except earnings per share in NT$ This year’s Earnings per Total Total Operating Operating Name of Company Capital Equlity profit (loss) share Assets Liabiities Income Profit (After tax) (After tax) Alliance Investment & 1,830,000 1,546,782 176 1,546,606 394,596 ( 152,011) ( 139,463) ( 0.76) ManagementCo., Ltd. Green Trans Investment Co., 195,237 195,739 - 195,739 - ( 5,683) ( 3,645) ( 0.55) Ltd. Jiangsu Greentrans Electronics Technology 208,890 204,826 9,374 195,452 14,404 ( 6,384) ( 5,652) - Co., Ltd. China Motor Corporation 1,335,032 1,924,672 901 1,923,771 352,684 25,789 25,900 0.19 Investment Co., Ltd.

Hwa Hann Corporation 7,698 5,838 585 5,253 - - - -

Hwa Wei Holdings Co., Ltd. 1,202 2,077,924 1,287,688 790,236 21,528 ( 127,364) ( 492,842) (12,321.05)

Hwa Chung Motor Co., Ltd. 87,900 66,155 100 66,055 - ( 102) ( 14) ( 0.002)

GreenTrans Co., Ltd. 10,000 19,822 9,221 10,601 18,775 293 450 0.45

Ling Wei Motor Co., Ltd. 36,084 65,954 36,169 29,785 120,805 ( 2,886) ( 688) ( 0.19)

China Motor Investment 1,402 1,422,782 - 1,422,782 - ( 2) ( 41,144) 1,028.60 Co., Ltd.

China Engine Corporation 1,689,000 1,355,218 312,709 1,042,509 1,106,367 ( 22,181) 11,734 0.07

Advance Power Machinery 5,000 46,243 32,097 14,146 139,235 1,893 1,511 3.02 Co., Ltd. Advance Power Investment 118,688 101,668 - 101,668 - - ( 2,844) ( 0.76) Co., Ltd.

Gatetech Technology Inc. 437,372 1,016,316 678,422 337,894 226,929 ( 30,968) ( 49,472) ( 1.13)

Gatech Holding Co. Ltd. 647,041 541,568 1,997 539,571 - - ( 18,506) ( 0.92)

Gatech International Co. 657,284 541,635 12 541,623 - - ( 19,545) ( 0.96) Ltd. Gatetech (Suzhou) 769,095 749,097 96,267 652,830 576,608 ( 26,898) ( 31,171) - Technology Inc. COC Tooling & Stamping 565,716 2,174,032 1,022,944 1,151,08 1,688,308 184,052 207,085 3.66 Co., Ltd.

Y. M. Hi-Tech Industry Ltd. 50,000 220,707 138,978 81,729 317,330 7,790 8,444 1.69

Shye Shinn Corporation 30,637 47,353 - 47,353 - ( 271) 3,002 - (British Virgin Islands) Zhengzhou Tooling & 63,650 97,179 19,606 77,573 189,430 11,123 5,700 - Stamping Co., Ltd. (To be continued)

262 Special Disclosure

(Continued) This year’s Earnings per Total Total Operating Operating Name of Company Capital Equlity profit (loss) share Assets Liabiities Income Profit (After tax) (After tax)

Kian Shen Corporation 692,454 3,759,508 654,188 3,105,320 1,185,714 22,909 319,590 4.62 Kian Shen Investment Co., 325,868 2,692,489 558 2,691,931 - - 242,309 23.53 Ltd. Kian Shen Investment Hong 819,957 2,782,468 124,294 2,658,174 - ( 246) 209,157 - Kong Co.Limited Sino Diamond Motor 3,257,862 3,407,008 428,883 2,978,125 2,070,298 38,037 ( 44,647) ( 0.14) Corporation Brilliant Insight International Consultancy Service Co., 10,000 13,696 7,224 6,472 23,392 ( 3,582) ( 3,528) ( 3.53) Ltd. Hwa Yu Co., Ltd. 1,450,378 1,080,734 - 1,080,734 371 ( 60,831) ( 60,829) ( 1.33) Beijing Jun Hua Information 4,748 14 - 14 - ( 500) ( 500) - Co., Ltd. Fujian Rui Hua Consulting 107,610 112,048 4,313 107,735 8,965 311 371 - Co., Ltd.

Hwa Lin Investment Ltd. 1,328,660 977,256 - 977,256 13,006 ( 80,165) ( 60,701) ( 1.44) Guangzhou Huayou Motor 405,437 409,564 63,964 345,600 55,589 ( 1,710) ( 3,135) - Maintenance Co., Ltd. Guangzhou Huayou Motor 10,184 199,790 389,263 ( 189,473) 450,932 ( 24,715) ( 18,742) - Sale Co., Ltd. Sichuan Huafeng Hanwei Cars Service And 421,895 533,574 141,348 392,226 573,561 8,017 7,938 - Maintenance Co., Ltd. Sichuan Houwei Cars Service And Maintenance 15,276 1,140 985 155 0 ( 876) ( 883) - Co., Ltd. Sichuan Lingwei Cars Service And Maintenance 10,184 7,047 11,077 ( 4,030) 62,560 ( 1,810) ( 2,205) - Co., Ltd. Tianjin Hwarui Maintenance 253,833 331,514 110,909 220,605 52,183 630 ( 953) - Co., Ltd. Tianjin Hwahong Sale Co., 305,520 282,375 8,772 273,603 178,787 ( 18,342) ( 12,107) - Ltd. Dongguan Huayi Motor 140,843 316,438 157,278 159,160 396,555 2,786 ( 1,358) - Maintenace Co., Ltd. Dongguan Huashun Motor 76,380 183,362 220,952 ( 37,590) 481,271 ( 26,010) ( 30,113) - Sale Co., Ltd. (II) Consolidated Financial Statements of Affiliated Enterprises: Same as the financial report of parent company and its subsidiaries.

263 Special Disclosure

Declaration of the Consolidated Financial Statements of Affiliates

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2014 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Accounting Standard 27 “Consolidated and Separate Financial Statements.” Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we have not prepared a separate set of consolidated financial statements of affiliates.

China Motor Corporation

Chairperson: Kenneth Kenneth K. T. Yen

March 24, 2015

(III) Affiliation Report: None

264 Special Disclosure

II. Private Placement Securities during the 2014 Calendar Year and up to April 30, 2015: None III. Status of Shares Held or,Disposed of, by Subsidiaries during the 2014 Calendar Year and up to April 30, 2015: None IV. Other Special Notes: None V. Impacts of Significant Events on Shareholders' Rights or Stock Value during the 2014 Calendar Year and up to April 30, 2015: None

China Motor Corporation

Chairperson: Kenneth K.T. YEN

265