YULON NISSAN MOTOR CO., LTD ANNUAL REPORT 2014

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YULON NISSAN MOTOR CO., LTD ANNUAL REPORT 2014

Printed on May 12, 2015 SEC mops.twse.com.tw Official Website www.nissan.com.tw

●Name, Title, and Contact Number of the spokesperson of the Company:

Name of Spokesman: Leman C.C. Lee T itle: Senior Vice President T elephone: (037) 875881 Ext 1117 E-m ail: [email protected] Acting Spokesman: Emma Lin T itle: Manager T elephone: (037) 875881 Ext 1130 E-m ail: [email protected] ●Headquarter and Branch:

Headquarter is located at No.39-2, Po Kung Keng, Shi Hu Tsuen, San Yi, Miao Li Hsien, Taiwan, R.O.C. T elephone: (037) 875881 W ebsite: http://www.nissan.com.tw Taipei Branch is located at 7F, No.150, Sec.2, E. Nanking Road, Taipei City 104, Taiwan, R.O.C. T elephone: (02) 25156421 W ebsite: http://www.nissan.com.tw ●Name, address, and telephone number of the Stock Title Transfer Agent:

Name: YULON MOTOR COMPANY, LTD., Equity Management Dept. Address: 7F, No.150, Sec.2, E. Nanking Road, Taipei City 104, Taiwan, R.O.C. (Hualiang Building) T elephone: (02) 25156421 W ebsite: http://www.yulon-motor.com.tw ●The names, address, and telephone number of the independent auditor:

2014 Certified Public Accountant:Chien-Hsin Hsieh and Wan-Yi Liao. Accountant Firm: Deloitte & Touche Address: 12F, Hung-Tai Plaza 156 Min Sheng East Road, Sec.3, Taipei 105, Taiwan, R.O.C. (Hong Tai Century Building) T elephone: (02) 25459988 W ebsite: http://www.deloitte.com.tw ●Listed in overseas stock exchange: Nil ●Company website ate: http://www.nissan.com.tw

Notice to readers This English version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail.

YULON NISSAN

Contents

I.

Letter to Shareholders .............................................................................................................................. 1 1. 2014 Operating Performance .................................................................................................................. 3 2. Highlights of Business Operation Plans for 2015 ................................................................................... 3 3. Future Development Strategy of The Company ..................................................................................... 4 4. Impact of External Environment (including competitors, regulations, macroeconomics and other factors) .................................................................................................................................................... 4

II.

Company Brief Introduction 1. Established Date ..................................................................................................................................... 5 2. Highlights of Development..................................................................................................................... 5 3. 2014 Operation Results........................................................................................................................... 6 4. Others...................................................................................................................................................... 6

III.

Company Management Report 1. Organizational System ............................................................................................................................ 7 (1) Organization Chart ............................................................................................................................ 7 (2) Organizational Functions .................................................................................................................. 8 2. Information of Directors, Supervisors, President, Senior Vice President, Vice President, General Manager .................................................................................................................................................. 9 (1) Directors and Supervisors' Information............................................................................................. 9 (2) Information of President, Senior Vice President, Vice President and General Manager................. 21 (3) Payment of Remuneration to Directors, Supervisors, President and Senior Vice President ........... 25 (4) Analysis and description of the net profits macro or individual financial report after payment of remuneration made out to directors, supervisors, president, and vice president in the last 2 years. ........................................................................................................ 30 3. Operation of Corporate Governance ..................................................................................................... 31 (1) Operational Status of the Board of Directors .................................................................................. 31 (2) Operational Status of the Audit Committee .................................................................................... 31 (3) The Attendance of Directors and Supervisors and Operational Status of the Board of Directors... 32 (4) The Difference in Contrast to the Operation of Corporate Governance and the Listed / OTC Company's Corporate Governance Codes of Practice and Reasons ................................................ 32 (5) Remuneration Committee .............................................................................................................. 37 (1) Data of Remuneration Committee Members ............................................................................. 37 (2) Operational Status of Remuneration Committee ....................................................................... 37 (6) Implementing Corporate Social Responsibility............................................................................... 38 (7) Status of Honest Operation Implemented by the Company and the Adopted Measures:................ 41

Contents

(8) Inquiry Method of Governance Codes, Important Information for enhancing realization of Operation of Corporate Goverance and Relevant Regulations Established by the Company. ........ 45 (9) Execution Status of Internal Control System................................................................................... 46 1. Statement of Internal Control System .......................................................................................... 46 2. Project Examination Report of CPAs’ Internal Control System .................................................. 46 (10) Company or Employees, who have been penalized by Laws, or Employees received penalties From Company for Violating the Internal Control Regulations, Major Shortcomings and Status of Improvements in Fiscal Year 2014 and prior to the Publication Date of the Annual Report ... 47 (11) Major Resolutions made by the Shareholders Meeting and Board of Directors Meeting in Fiscal year 2014 and prior to the Publication Date of Annual Report............................................. 47 (12) Major Issues on Record or Written Statements Made by any Director or Supervisor which Specified his/her Dissent to Important Resolutions Passed by the Board of Directors Meeting in Fiscal year 2014 and Prior to the Publication Date of the Annual Report................................... 48 (13) The discharge and resignation of Chairman, President, Accounting Chief, Financial Affairs Chief, Internal Audit Chief, and R&D supervisors for 2014 and Prior to the Publication Date of the Annual Report........................................................................................................................ 48 4. Information on CPA Audit Fees ............................................................................................................ 48 (1) Information on CPA Audit Fees ...................................................................................................... 48 (2) Amount of Audit and Non-Audit Fees and Contents of Non-Audit Services.................................. 49 (3) The Change of CPA Firms and the Audit Fees after change is Lower than that before change, the Reduced Amount, Proportion and Reason ................................................................................ 49 (4) The Audit Fees after Change is More than 15% lower than that before Change, the Reduced Fee Amount, Proportion and Reason .............................................................................................. 49 5. Information on Change of CPAs ........................................................................................................... 49 (1) Information of the Previous CPAs................................................................................................... 49 (2) Information of the Successive CPAs ............................................................................................... 50 (3) Previous CPAs' Reply of Article 10-5-1 and 10-5-2-3 of Guidelines Governing the Preparation of Financial Reports by Securities Issuers....................................................................................... 50 6. Upon the Company's Chairman, General Manager or Financial / Accounting Manager Employed by the Verifying CPA Firm within one year, the Name, the Position, and Time Period in the CPA firm or its Affiliates should be Disclosed ................................................................ 50 7. Changes of Share and Share Collateralizing for Directors, Supervisors, Managers and Shareholders with over 10% of Shares Held During the 2014 Fiscal year and Prior to the Publication Date of the Annual Report ....................................................................................................................................... 50 (1) Changes of Share for Directors, Supervisors, Managers and Major Shareholders .......................... 51 (2) Information of Share Changes ......................................................................................................... 53 (3) Information of Share Collateralizing ............................................................................................... 53 8. Information on the top-10 shareholders who are affiliates or related as spouse or second cousins....... 54 9. The Number of Shares held by the Company, the Company's Directors, Supervisors, Managers and its Directly or Indirectly Controlled Business Toward the same Investment Businesses, as well as

YULON NISSAN

the Combined Calculated Shareholding Percentage.............................................................................. 55 IV. Capital Raising Status 1. Capital and Shares ................................................................................................................................. 56 (1) Source of Share Capital ................................................................................................................... 56 (2) Structure of Shareholders ................................................................................................................ 56 (3) Status of Ownership Dispersion ...................................................................................................... 57 (4) List of Major Shareholders .............................................................................................................. 57 (5) Information about Market Price per share, Net Value, Earnings, Dividends and Related Information in Recent 2 Years......................................................................................................... 58 (6) Dividend Policy and Execution Status ............................................................................................ 58 (7) The Effect of the Distribution of Stock Dividend as Proposed by this Shareholders Meeting on Operation Performance and Earning per Share .......................................................................... 59 (8) Employee Bonus and Remuneration to the Directors and Supervisors. .......................................... 59 (9) Status of Company’s Repurchased Treasury Shares ....................................................................... 59 2. Corporate Bonds issued ......................................................................................................................... 59 3. Preferred Stock issued ........................................................................................................................... 59 4. GDR (Global Depositary Receipt) Issued ............................................................................................. 59 5. Employee Stock Options Issued ............................................................................................................ 59 6. Restricted Stock Dividends of Employee Issued ................................................................................... 60 7. New Shares Issued for Merger or Acquisition....................................................................................... 60 8. Recorded up to the Previous one quarter of the Date of the Report is in Printing, Previously Issued or Privately Raised Marketable Securities that are still not Completed or the Completed and Planned Benefits but not shown over the Recent 3 years................................................................ 60 V. Highlights of Operations 1. Business Content ................................................................................................................................... 61 (1) Business Scope................................................................................................................................. 61 (2) Industry Summary ............................................................................................................................ 62 (3) Technology, Research and Development (R&D)............................................................................. 63 (4) Long, Short term Business Development Plan ................................................................................. 64 2. Market, Production & Sales Review...................................................................................................... 67 (1) Market Analysis ............................................................................................................................... 67 (2) The major usage and production processes of main products .......................................................... 69 (3) Supplies of main raw materials ........................................................................................................ 69 (4) List of Major Suppliers and Clients Over the Recent 2 Fiscal Years ............................................... 69 (5) Production Volume over the recent 2 years...................................................................................... 70 (6) Sales Volume of Recent 2 Fiscal Years............................................................................................ 70 3. Employee Data for the Recent Two Years and as of the Publication Date of Annual Report .............. 70 4. Expenditures on Environmental Protection ........................................................................................... 70

Contents

(1) Losses and Disposal caused by environmental pollution over the recent years. .............................. 70 (2) Probable environmental expenditures .............................................................................................. 70 5. Labor-Capital Relationship.................................................................................................................... 70 (1) Current Prominent Labor-Capital Agreements, Employee Benefits and Their Implementation ...... 70 (2) Labor Dispute................................................................................................................................... 71 6. Prominent Contracts .............................................................................................................................. 72 VI.

FINANCIAL INFORMATION 1. Condensed Financial Statements for the recent 5 fiscal year ............................................................... 73 (1) Condensed Balance Sheet and Comprehensive Income Statement– IFRS....................................... 73 (2) Condensed Balance Sheet and Income Statement – the R.O.C. Financial Accounting Standards ... 77 (3) CPAs’ Name and Auditor opinions.................................................................................................. 80 2. Financial Analysis in Recent 5 years..................................................................................................... 81 (1) Financial Ratio Analysis complying with IFRS ............................................................................ 81 (2) Financial Analysis –ROC GAAP .................................................................................................... 85 3. Supervisor Audit Report........................................................................................................................ 89 4. Recent Annual Financial Statements ................................................................................................... 90 5. The Audited Consolidated Financial Statements of the Parent Company and Subsidiaries in Recent Year ......................................................................................................................................... 144 6. The company and its Affiliates have not encountered any Financial Difficulties over the Last years and as of the Publication Date of the Annual Report ................................................................. 203

VII. Review and Analysis of Financial Conditions and Operation Performance and Risk Management 1. Financial Conditions............................................................................................................................ 204 2.Financial Performance .......................................................................................................................... 205 (1) Comparison and Analysis of Financial Performance ..................................................................... 205 (2) Gross Profit Analysis...................................................................................................................... 205 3. Cash Flow Analysis ............................................................................................................................. 206 (1) Cash Flow Analysis for the Recent 2 Years ................................................................................... 206 (2) Cash Flow Analysis for the Next Year........................................................................................... 206 4. Influence on Financial Condition caused by Prominent Capital Expenditures in Fiscal year 2014 .... 206 (1) The Use and Capital Source of Prominent Capital Expenditure..................................................... 206 (2) Anticipated Benefits ....................................................................................................................... 207 5. Investment Policy in Fiscal Year 2014, Major Reasons for Profit and Loss, Its Improvement Plan and Next Year's Investment Plan................................................................................................. 207 6. Risk Management and Evaluation ....................................................................................................... 208 (1) Influence of the Interest Rate, Foreign Exchange Rate and Rate of Inflation on Company's Profit / Loss and Plans to Encounter these Risks in the Future...................................................... 208 (2) Policy on High Risk, High Leverage Investment, Capital Loans to Others, Endorsement and

YULON NISSAN

Trade on Derivatives, Major Reason for Profit/Loss and plans to encounter these risks in the future............................................................................................................................................... 208 (3) Future Research/Development Plans and Estimated Investing R&D Expenditure ........................ 208 (4) Important Changes of Local and Foreign Government Policies and Regulations and Their Influence Over Company's Financial Condition and Plans to Encounter these Risks in the Future .............................................................................................................................................. 208 (5) Changes on Technology and Industrial Change Influence toward the company's Finance Business and Coping Strategies ..................................................................................................... 208 (6) Changes on Corporate Image that Influence Company's Risk Management and Contingency Plans............................................................................................................................................... 208 (7) Benefit Anticipated and Possible Risks of Merge and Acquisition................................................ 208 (8) Benefit Anticipated and Possible Risks of Plant Site Expansion ................................................... 209 (9) Risks of having Purchase or Sales Centralization .......................................................................... 209 (10) The Impact and the Risk of having a big Volume of Transferring or Changes of Shareholders Equity of the Directors, Supervisors or Shareholders who Hold more than 10% Shares, Except for the Releasing of

Shares ......................................................................................................... 209

(11) The Impact and Risk of Changing Operating Rights of the Company........................................... 209 (12) Litigation/Non-Litigation Events ................................................................................................... 209 (13) Other Important Risks and Actions to be Taken ............................................................................ 209 7. Other Important Items ......................................................................................................................... 209 VIII. Special Noted Items 1. Affiliates Information .......................................................................................................................... 210 (1) Affiliates Consolidated Operation Statement ................................................................................. 210 (2) Affiliates Consolidated Financial Report ....................................................................................... 212 (3) Consolidated Report of Public Companies and their Affiliates...................................................... 212 2. Fiscal Year 2014 and Prior to the Publication Date of the Annual Report, The Status of Issuing Private Placement Securities................................................................................................................ 212 3. Fiscal Year 2014 and Prior to the Publication Date of the Annual Report, Acquisitionor Disposal of Yulon Shares by Subsidiaries.......................................................................................................... 212 4. Other Necessary Supplementary Notes ............................................................................................... 212 5. Any Events that had Significant Impacts on Shareholders' Right or Securities Prices as Stated in Section 2 Paragraph 2 in Article 36 of the Securities Transaction Law for Fiscal year 2014 and Prior to the Publication date of the Annual Report.............................................................................. 212

Letter to Shareholders

I. Letter to Shareholders Dear Shareholders,

In view of the optimistic economic prosperity in Taiwan in 2014, most automobile brands have taken active means to launch brand-new models and driven the the trends to change new cars, the overall purchasing market was boosted while the total car sales volume reached 414,000 units, up 12% compared with that in 2013. Driven by the successful launch of new models, NISSAN ALL NEW LIVINA, SENTRA aero, INFINITI Q50, and QX60 Hybrid, and the trends to change new cars, the new car sales of Yulon Nissan reached 47,740 units in 2014 with an annual growth of 8.5% and market share of 11.5%, comfortably perched in second place. The total 2014 car sales in China market were 23,492,000 units, up 6.9% compared with that in 2013. Dong Feng Nissan passenger cars were sold in 954,000 units in 2014, up 3% compared with that of 2013. The export revenue for Yulon Nissan automobile components was NTD368 million, exporting to Thailand, Malaysia, Philippine, China, Korea, Japan, Egypt, Indonesia, and Vietnam. In favor of new car launch and profits from investment in China, the consolidated revenue for Yulon Nissan in 2014 reached NTD331.8, up 5.4% per year with earnings before tax for 2014 in the amount of NTD80.27 million and the EPS of NTD21.75. Yulon Nissan continues innovating and improving “products” and “services in response to the intensely competitive automobile market in Taiwan. With regards to new product introduction, the new NISSAN X-TRAIL was launched in 2015. Equipped with the 3 active protection systems in ARC/ AEB/ATC, Vehicle Dynamic Control (VDC) and Hill Start Assist (HSA), the car series are designed to build a “comprehensive protection.” The 3D ultra-relief leather chair incorporated with a maximum wide-opening rear door angle plus the mulita-link sliding back seats with tilting adjustment fully exhibits the “premium comfort.” The new X-TRAIL shakes up the domestic market as the perfect SUV. With regards to service innovation, Yulon Nissan was awarded with the “No. One Domestic Car Brands” in both sales service index (SSI) and customer service index (CSI) conducted by J. D. Power in 2014. Yulon Nissan will continue to improve sales and service quality in 2015 by improving hardware/software equipment with the use of innovative information technology and quick fixes to effectively improve customer satisfaction. INFINITI follows the “IREDI (INFINITI Retail Environment Design Initiative)” for constant upgrade of distribution office by creating spacious, bright and galley-like showroom while applying P.C.E (Premium Customer

2014 Annual Report 1

YULON NISSAN

Experience) of five-star prestigious services, providing customers with beautiful experience of hospitality. With regards to automobile market in China, Deng Feng Nissan will launch multiple models of passenger cars in 2015 and it is estimated that the sales volume will exceed 1 million units, up 5% compared with that in 2014. In terms of export, Yulon Nissan will continue to expand items in component exports for 2015 to create greater momentum of growth for company revenue. Looking into the future and under the support from all shareholders and efforts from all employees, Yulon Nissan will continue to increase revenue and profits through new products, new services and brand value. Yulon Nissan is confident in creating maximum benefits from the intensely competitive market. All of our employees will continue to take the challenge and meet the expectation of all supporting shareholders. Finally we would like to express our gratitude for the support from all shareholders on behalf of all employees at Yulon Nissan Motor Co., Ltd. We wish your health and success. Thank you.

Chairman

2014 Annual Report 2

Kenneth K. T. Yen

Letter to Shareholders

1.

2014 Operating Performance: (1) Operating Performance Unit:NTD Thousand Fiscal Year Item Operating Revenue Profit Before Tax Net Profit For The Year Earnings Per Share

Fiscal year 2013

Fiscal year 2014

31,486,050 8,806,890 7,299,997 24.33

33,176,837 8,026,677 6,523,759 21.75

(2) Profitability Analysis perating Performance Fiscal Year Item Profit Margin On Sales Income after Tax(%) Return on assets(%) Return on equity(%)

Fiscal year 2013

Fiscal year 2014

5.82% 23.18% 23.35% 31.98%

2.37% 19.66% 18.26% 25.11%

(3) Comparison of Sales Performance in Major Competitors Fiscal Year Brands NISSAN TOYOTA MITSUBISHI HONDA FORD OTHER TOTAL

2.

Fiscal year 2013 units 44,010 129,298 42,084 25,589 24,098 104,821 369,900

share 11.9% 35.0% 11.4% 6.9% 6.5% 28.3% 100.0%

Fiscal year 2014 units 47,740 142,173 43,180 24,607 24,705 131,893 414,298

share 11.5% 34.3% 10.4% 5.9% 6.0% 31.9% 100.0%

Highlights of Business Operation Plans for 2015: (1)Management Guidelines Yulon Nissan integrates the abundant management resources from Nissan Motor Company Global and Yulon Group to develop the following company management guidelines: 1. Build strategy-oriented organizations to form sustained competitive advantage. 2. Lead the market trends and style through innovative products and services. 3. Use macro environmental resources to create synergies for business operation. 4. Implement profit growth model to maximize values for customers. (2) Expected Business Objectives To strengthen the permeability of brand commutation and brand publication, the company emphasizes the development on “clear brand identification” “brand image communication,” and promoting

2014 Annual Report 3

YULON NISSAN

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

3.

Future Development Strategy Of The Company: (1) Implement reforms in management system Establish strategy oriented learning organization with improvement to emphasize on innovative corporate culture as key development, which not only encourages employees to constantly learn and grow but also enhance the efficiency of organization operation. (2) Taking initiative in following up the progress in ECFA and expanding the planning of operational development By following the progress in ECFA, the company re-reviews the cross-strait production planning and expanding the complementary architecture of strategies with the partners to integrate cross-strait market, using more active and flexible cooperation and division of labor to create higher operational performance. (3) Coping with Global Eco-Friendly Trend to Develop Clean Electric Vehicle The company constantly focuses on the introduction of eco-friendly clean vehicles to build the image of green brand, in addition to expanding the planning of sales development for electric vehicles in attempt to complete the vision of green traffic with zero-emission and zero-pollution. Such vision fulfills the concept of co-existence between people, vehicles and nature.

4.

Impact of External Environment (including competitors, regulations, macroeconomics and other factors) : The drastic drop in oil price, surging demand to change new cars and driven by different car makers releasing new models, the growing momentum of automobile market gradually improves. Nonetheless the 2015 economic environment is still subject to the impact of uncertainty factors such as the U.S. quantitative easing withdrawal, EU activation of QE easing policy, drastic fall and rise of currencies in different economic and trade regions of the world, and fluctuations in raw material price. To sustain the demand for corporate growth, the company has taken initiative in the planning and development of long and short-term strategy actions in different stages to assure corporate sustainability and long-term profiting performance.

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Company Brief Introduction

II. Company Brief Introduction 1.

Established Date: October 22, 2003.

2.

Highlights of Development: Oct. 2003:

May 2004: Jun. 2004: Sep. 2004: Nov. 2004: Dec. 2004: Mar 2005: Jun 2005: Jul 2005: Jul 2005: Sep 2005: Dec 2005: Mar. 2006: Mar. 2006: May 2006: Jun. 2006: Jul. 2006: Aug. 2006: Oct. 2006: Dec. 2006: Dec. 2006: May 2007: Jun. 2007: Oct. 2007: Nov. 2008: Dec. 2008: Dec. 2008: Jan. 2009: Apr. 2009: Jul. 2009: Sep. 2009: Nov. 2009: Dec. 2009:

To ehance competiveness, participate in international division of labor and carry out the professional management, Yulon Motor spun off R&D, sales and other businesses to set up this company in accordance with corporation merge and accquisition regulations. The capital was NT 3bn. Yulon Motor owned 100% of the shares of this company at the time of its establishment and has transferred 40% of the shares to Nissan Motor on Oct. 30 2003. Established Philippines subsidiary - Yi-Sheng Co., Ltd. The company’s stock processed a public issuance. A new selection of an upgraded large sedan, the NISSAN TEANA was superbly launched. NISSAN has been certified with ISO 9001 and ISO 14001. Yulon Nissan Motor Co., Ltd., went IPO officially. The largest innovation contest “2005 Innovation Award of Yulon Nissan Motor” began. Gorgeous INFINITI M35/G35 Coupe was launched. Yulon Motor and Yulon Nissan Motor donated NTD 1 million to the Environment Protection Bureau for purchasing Group Accident Insurance for the entire part-time workers. INFINITI flagshop opened in AUTOMALL Shindian. Yulon Nissan Motor was awarded the most satisfied automaker of non-luxury cars in Taiwan by J.D.POWER. The stylish and innovative NISSAN MURANO took the field in Taipei car fair. The INFINITI T.O.E. service system was formally launched. Infinite possibility of power and sexiness – the charming INFINITI FX45/35 was available in the market. Yulon Nissan Motor was honored to receive the Model Award for CSR Award from GV magazine. The whole new NISSAN TIIDA featuring “Magical Big Space” made its stage debut. “Stay Rooted in Taiwan and Take a Broad View Internationally” – the construction of the new Yulon Nissan Design Center started. Yulon Nissan Motor was honored to receive the award as the automobile manufacturer with the highest proportion of export to Japan. Yulon Nissan Motor received the “National Standardization Award” from the Ministry of Economic Affairs, R.O.C. Satisfaction with NISSAN increased once again. The 3 year/100,000 km extended warranty was available in coming January. The brand new NISSAN BLUEBIRD was available in the market. Yulon Nissan Motor received “the Third Anniversary of Great Vision Magazine Society Responsibility Award 2007” Yulon Nissan Motor received “Certification of NISSAN secure burglarproof code” from Ministry of the Interior. Yulon Nissan Motor launched X-level SUV of NISSAN LIVINA 1.6L and 1.8L. Launch of GT-R press conference Launch of Rogue press conference Yulon Nissan Green Program to sponsor pandas Tuantuan and Yuanyuan NISSAN was awarded the No. 1 Ideal Domestic Car Brand Launch of NISSAN ALL NEW TEANA of car craft revitalization Kick-off of the “NISSAN Green Power Camp” Some ten thousand drivers gathered in “an Adventurous NISSAN Day in Resort” for an energy-saving, carbon-reducing and earth-loving ride NISSAN ROUGE won Car of the Year Award of CarNews as the best imported Crossover of the year ALL-New INFINITI M unveiled in Taipei Auto Show with the 2.5L model announced

2014 Annual Report 5

YULON NISSAN

May 2010: Aug. 2010: Jan. 2011: May. 2011:

Sep. 2011: Jul. 2012: Dec. 2012: Feb. 2013: May 2013: May 2013: Oct. 2013:

3.

2014 Operation Results: Jan. 2014: Feb. 2014: Feb. 2014: Mar. 2015: Mar. 2015: May. 2014: May. 2014: Jun. 2014: Jun. 2014: Jul. 2014:

Jul. 2014: Aug. 2014: Sep. 2014: Sep. 2014: Nov. 2014: Nov. 2014: Nov. 2014: Dec. 2014:

4.

simultaneously NISSAN TIIDA has been awarded by the Environmental Protection Department the “Annual Green Car” for three consecutive years. “NISSAN Green Program-Travel and Play with the Nature”, jointly with the Forestry Bureau invited people in the north, middle and south of Taiwan in response to the green concept INFINITI sponsored Cirque du Soleil’s performance in Taiwan, and initiated “Little Sun – Dreams Come True Program.” Yulon-Nissan took the lead in cooperating with Taichung City Government in jointly implementing the Smart Electric Car Pilot Program initiated by the Ministry of Economic Affairs. NISSAN was awarded the ninth “Excellent Service Award” by Global Views Magazine. The brand new 7-seat INFINITI JX series were launched. NISSAN BIG TIIDA hatchbacks and turbocharged cars was launched. Grand opening of INFINITI IREDI showroom in Xindian, New Taipei City, Taiwan. NISSAN BIG TIIDA Turbo hailed as the green car of the year 2013. INFINITI sponsoring Cirque du Soleil shows in Taiwan to increase visibility among top-level customers. Introduction of all new NISSAN SUPER SENTRA.

Fist issue of INFINITI Automobile Magazine was released. 2014 INFINITI QX60 Upgraded model launched (CVT /third-row electric folding seatback.). 2014 INFINITI FX Q60/Q70 launched. NISSAN ALL NEW LIVINA was launched. SUPER SENTRA was awarded with the “2014 Best Domestic Midsize Car” from Car of the Year Awards Taiwan. NISSAN NEW MARCH was awarded with the 2014 Eco-Friendly Car from EPA, Executive Yuan. NISSAN JUKE Star-Wars was launched. First production of INFINITI Q50S Hybrid VIP was available for presell. INFINITI was the first company of the industry to offer the longest warranty for hybrid system. Yulon Nissan and Yulo Motor continued the care by donating one million of accident insurance premiums to benefit the civil temporary works at Department of Environmental Protection, Taipei City. INFINITI QX60 Hybrid was first launched. Nissan offers victims from the Kaohsiung Gas Explosion with free tolling and maintenance/repair offers for damaged vehicles. “2014 NISSAN Travel in Nature” responds to the International Leave No Trace” movement. INFINITI Q50 was launched. New advanced and upgraded 2015 NISSAN JUKE. INFINITI QX70S wintertime warrior was launched. 2015 INFINITI Q50 style launched and served as the only designated car for Taipei Golden Horse Film Festival. “External wildness and inner beauty.” SENTRA aero 1.8L was first release to worldwide.

Others 1. Mergers & Acquisitions, invested companies and reconstructions in fiscal year 2014 and until the Annual Report published date: Nil 2. Large Transfer volume or Changes made by the Board Members, Supervisors or Big Shareholders holding more than 10% shares in fiscal year 2014 and until the Annual Report published date: Nil 3. Change of Business Operation Rights and other important matters that are enough to influence the shareholders equity in the fiscal year 2014 and until the Annual Report published dated: Nil

2014 Annual Report 6

2014 Annual Report 7

Offshore Business Office

Total Customer Satisfaction Department

Public Relations Department

Parts and Service Department

INFINITI Business Department

Marketing Department

Senior Vice President

Product Planning Department

MIS Centre

Administration Department

Business Planning & Finance Department

Vice President

Purchasing Department

Technology Center

Production Technology Office

Company Management Report

III. Company Management Report

1. Organizational System: (1) Organization chart:

Board of Directors Auditing Office

Chairman Special Assistant to the Chairman

President

Senior Vice President

Vice President

YULON NISSAN

(2) Organization Functions Department Title Auditing Office

Occupational Activities Establish a Strong, Reasonable and Effective Internal Control System 1. Planning and guiding a product that conforms to the market needs and with competitive strength 2. Plans IT product and strategy, enhance the product’s added value Product Planning 3. Conduct market survey and information gathering; get hold of consumer’s Department requirements and evaluation on the product 4. Perform long term pricing management, institute accurate pricing strategy so as to ensure product competitive strength 1. Brand Marketing Planning and Management Marketing 2. Strengthen the difference strategy buildup the brand value Department 3. Management and motivation of Dealers as well as management of car production, sales and distribution 1. Plans Brand Operation Strategy, and building up brand’s value 2. Distribution channel development, planning and implementing operation management INFINITI Business criteria Department 3. Actively utilize market information, to predict and guide the marketing direction 4. Regulation and implementation of service policy and management standards 5. Planning and implementation of educational training for Distributors 1. Regulation and implementation of service policy and standard management 2. Planning and deployment of educational training for the Dealers Parts and service 3. Establish and deployment of customer satisfaction enhancement standard and Department management 4. Parts distribution and management 5. Parts procurement and inventory volume control Total Customer 1. Planning and promotion of the QA strategies and the QA system Satisfaction 2. Quality supervision business Department 3. Product quality information feedback and improvement 1. Car model and parts development 2. Subcontracted parts component quality verification and engineering specification test Technology Center confirmation 3. Vehicle’s Regulation related verification/application and supervisory confirmation 1. Purchasing business planning and management, and parts subcontractors management Purchasing Department 2. Car parts purchasing 1. Planning of new model 2. Deployment, production and sorting of the manufacturing plans 3. Equipment Investment Planning, applying, and management Production 4. Technology Information Authorization Technology Office 5. Planning and Deployment of Factory Annual Plans 6. As a window between the NML, responsible for technology guidance and assigning, maintenance research 1. Operation Planning, monitoring and management of achieving goals Business Planning 2. Management of fund utilization and Avoid foreign currency risk & Finance 3. Law, Stock Affair, Shareholders Meeting relevant business Department 4. Provide analysis data of Corporate Financial Meeting, Taxation relevant business and operation 1. Human Resources Management and Labor-Capital Relation Development and Benefits Administration Planning 2. General miscellaneous affairs management Department 3. Law affairs and negotiations MIS centre System Maintenance and management Public Relations Planning and implementation of public relation image activities Department 1. Stipulating the Offshore Business Strategy Plans and Target control Offshore Business 2. Management of Offshore Business Office 3. Investment Evaluation of Offshore Business

2014 Annual Report 8

Company Management Report

2 Information of Directors, Supervisors, President, Senior Vice President, Vice President, General Manager : (1) Directors and Supervisors' Information:

Title

Nationa lity or Place of Registra tion

Name

Elected Term (Sworn-in) Date

First Elected Date

Shareholdings when Elected

Shares

Current Shareholdings

Share Holding

Shares

Share Holding

Yulon Motor Co., Ltd. Chairman R.O.C Representative: 2012.7.1 Kenneth K. T. Yen

3

2003.10.01 180,000,000 * 0

60.00 *0.00

143,500,000 * 0

47.83 *0.00

Yulon Motor Co., Ltd. Director R.O.C Representative: 2012.7.1 Kuo-Rong Chen

3

2003.10.01 180,000,000 * 0

60.00 *0.00

143,500,00 * 5,000

47.83 *0.00

2014 Annual Report 9

YULON NISSAN

May 12, 2015 Current shareholding of Shareholdings in Main spouse and minor the names of others children Experience (Education)

Positions concurrently held in this company and other company Shares

Share Shares Share Shares Holding Holding

0

0

0.00

0.00

0

0

Other competent Officer, Director or Supervisor who is the Spouse or the second-degree relative Title Name Relatio nship

0.00

Honorary Doctor of Commerce, University of Saint John, USA Honorary Doctor of Management , National Chiao Tung University

Chairman, Yulon Motor Co., Ltd. Chairman , China Motor Corporation. Chairman, Taiwan Acceptance Corporation Chairman, Tai-Yuen Textile Co., Ltd. Chairman, Hwa-chuan Auto Technology Center Co., Ltd. Chairman, Hui-Fong Motor Co., Ltd. Chairman, Hualing Motor Co., Ltd. Chairman, LUXGEN Motor Co., Ltd. Director, Southeast (Fujian) Motor Co., Ltd. Nil Chairman, Yen Tjing-Ling Industrial Development Foundation Director, Yen Tjing Ling Medical Foundation Chairman, Vivian Wu Journalism Award Foundation Chairman, Vivian Wu Industry and Commerce ECCC Foundation Please refer to the “Information on Affiliated Companies” for details.

Nil

Nil

0.00

Vice Chairman, Yulon Motor Co., Ltd. Special Assistant to the Chairman, Yulon Nissan Motor Co., Ltd. Director, China Motor Corporation Director, Taiwan Acceptance Corporation Director, Tai-Yuen Textile Co., Ltd. Director, Hwa-chuan Auto Technology Center Co., Master of Ltd. High Level Vice Chairman, Luxgen Motor Co., Ltd. Management Director, Dongfeng Yulon Motor Co., Ltd. Vice Chairman, Guangzhou Aeolus Automobile Nil , National Chiao Tung Motor Co., Ltd. University Vice Chairman, Aeolus Automobile Motor Co., Ltd. Director, Yen Tjing-Ling Industrial Development Foundation Director, Yen Tjing Ling Medical Foundation. Director, Vivian Wu Journalism Award Foundation Director, Vivian Wu Industry and Commerce ECCC Foundation Please refer to the “Information on Affiliated Companies” for details.

Nil

Nil

2014 Annual Report 10

Company Management Report

Title

National ity or Place of Registra tion

Name

Elected Term (Sworn-in) Date

3

Yulon Motor Co., Ltd. Director R.O.C Representative: 2013.4.1 Zhen –Xiang Yao

2.25

Director

3

Current Shareholdings

Share Holding

Shares

Share Holding

2011.3.21 143,500,000 0 *

47.83 *0.00

143,500,000 * 0

47.83 *0.00

2013.4.1

143,500,000 * 0

47.83 *0.00

143,500,000 * 0

47.83 *0.00

2011.3.21 120,000,000 * 0

40.00 *0.00

120,000,000 * 0

40.00 *0.00

Shares

Yulon Motor Co., Ltd. Director R.O.C Representative: 2012.7.1 Wen -Rong Tsay

Nissan Motor Co., Ltd. Japan Representative: 2012.7. 1 Takashi Nishibayashi

Shareholdings when Elected

First Elected Date

2014 Annual Report 11

YULON NISSAN

May 12, 2015 Current shareholding of Shareholdings in the names of Main spouse and others Experience minor children (Education) Shares Share Shares Share Holding Holding

0

0

0

0.00

0.00

0.00

Positions concurrently held in this company and other company

Other competent Officer, Director or Supervisor who is the Spouse or the second-degree relative Title Name Relati onship

0

President , Yulon Nissan Motor Co., Ltd. Director, Taiwan Acceptance Corporation Director, Tokio Marine Newa Insurance Co., Ltd Director, CARPLUS Auto Leasing Co., Ltd. Director, Yu Shin Motor Co., Ltd. Director, Chen Long Co., Ltd. Director, Chi Ho Corporation. Master of Chairman, Yue Sheng Industrial Co., Ltd. High Level Director, Huamao International Investment Co., Ltd. Management, Director, CL Skylite Trading Co., Ltd. 0.00 National Director, Fengye Car Rental Co., Ltd. Chiao Tung Director, Jet Ford, Inc. University Director, Guangzhou Aeolus Automobile Co., Ltd. Director, Aeolus Automobile Co., Ltd. Director, Aeolus Xiangyang Automobile Co., Ltd. Chairman, Shenzhen Lan You Technology Co., Ltd. Director, Dong Feng Yulon Used Cars Co., Ltd. Director, Yen Tjing-Ling Industrial Development Foundation

Nil

Nil

Nil

0

Department of Mechanical Engineering, National Taiwan University of Director and President, Yulon Motor Co., Ltd. Science and Director, Lexgen Motors Co., Ltd. 0.00 Technology Director, China Engine Corporation Master of International Business Management, Curtin University of Technology

Nil

Nil

Nil

Nil

Nil

Nil

0

0.00

Waseda University, Commercial Science

Director and General Manager of the China Department, Nissan Motor Co., Ltd. President, Nissan (China) Investment Co., Ltd. Director , Dongfeng Motor Co., Ltd.

2014 Annual Report 12

Company Management Report

Title

Nationality or Place of Registratio n

Name

Elected (Sworn-in) Term Date

First Elected Date

Shareholdings when Elected

Shares

Current Shareholdings

Share Holding

Shares

Share Holding

Japan

Nissan Motor Co., Ltd. 2012.7. 1 Representative: Atsushi Kubo

3

2012.7.1 120,000,000 * 0

40.00 *0.00

120,000,000 * 0

40.00 *0.00

Japan

Nissan Motor Co., Ltd. 2014.4. 1 Representative: Junichi Ohori

1.17

2014.04.1 120,000,000 * 0

40.00 *0.00

120,000,000 * 0

40.00 *0.00

Director

Japan

Nissan Motor Co., Ltd. Moritami Matsumoto

2014.4. 1

1.17

2014.4.1 120,000,000 * 0

40.00 *0.00

120,000,000 * 0

40.00 *0.00

Indepen dent Director

R.O.C

Tsong-Jen Huang

2012.7. 1

3

2003.10.0 1

0.00

Indepen dent Director

R.O.C

Robert Mao

2012.7.1

3

2003.10.0 1

Director

Director

2014 Annual Report 13

0

0

0.00

0

0

0.00

0.00

YULON NISSAN

May 12, 2015 Current Shareholdings shareholding of in the names of spouse and minor others children Shares

0.00

0

0.00

0

0.00

0

0.00

0

0.00

0

0.00

0

Positions concurrently held in this company and other company

Share Share Shares Holding Holding

0

0

Main Experience (Education)

0.00

0.00

0

0

Other competent Officer, Director or Supervisor who is the Spouse or the second-degree relative Title Name

Waseda University, FACULTY OF GM, Nissan Motor Co., Ltd Political Science and Economics Musashi Institute of Technology, SVP, Yulon-Nissan Motor Co., Ltd Master, Faculty of Engineering

Relation ship

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

0.00

Chairman, SYSTEX Corporation Independent Director, China Motor Corporation President, Hopax Co., Ltd. Doctor of President, Yung Wei Finance Consultant Co., Computer Ltd. Science, (Legal Representative) Nil University of Chairman, ChinPu Investment Co., Ltd. Wisconsin, (Legal Representative) U.S.A Director, Kimo.com (BVI) Corp. (Legal Representative) Director, Systex Capital Group Inc. (BVI) (Legal Representative) Director, Systex Solutions (HK) Ltd.

Nil

Nil

0.00

Master of Management, Massachusetts Institute of Technology, Chairman, Hewlett-Packard Company in China U.S.A Independent Director, China Motor Corporation Master of Engineering, Cornell University, U.S.A

Nil

Nil

Tokai University

VP, Yulon-Nissan Motor Co., Ltd.

2014 Annual Report 14

Nil

Company Management Report

National ity or Title Place of Registra tion

Name

Wei Wen Investment Co., Super R.O.C Ltd visor Representative: Kwan-Tao Li

Wei Wen Investment Co., Super Ltd R.O.C visor Representative: Tai-Ming Chen

Super Japan Yosuke Sato visor

Elected (Sworn-in) Date

Term

First Elected Date

2012.7.1

Shareholdings when Elected

Current Shareholdings

Shares

Share Holding

Shares

Share Holding

1,880,000 * 0

0.63 *0.00

1,878,000 * 0

0.63 *0.00

2012.7.1

3

2013.6.14

2.04

2013.6.14 1,878,000 * 0

0.63 *0.00

1,878,000 * 0

0.63 *0.00

2013.6.14

2.04

2013.6.14

0.00

0

0.00

* which are personal owned

2014 Annual Report 15

0

YULON NISSAN

May 12, 2015 Current Shareholdings in shareholding of the names of spouse and minor others children Shares

0

Main Experience (Education)

Positions concurrently held in this company and other company

Share Share Shares Holding Holding

0.00

0

Other competent Officer, Director or Supervisor who is the Spouse or the second-degree relative Title

Name

Relations hip

0.00

Chief Counselor, Lee & Li Member of New Attorneys-at-Law York Bar Chairman, Lee & Li Foundation MBA, J.L. Director, Yen Tjing Ling Medical Kellogg Graduate Foundation School of Director, Far Eastern Medical Management, Foundation Northwestern Director, Far Eastern Y.Z. Hsu University/Hong Science & Technology Kong University Memorial Foundation of Science & Director, Far Eastern Memorial Technology Foundation LLM, New York Director, Tai-Yuen Textile Co., University Law Ltd. Graduate School, Director , Diamond Hosiery & U.S.A. Thread Co., Ltd. LLB, National Director, Far Eastern New Century Taiwan Corporation University Law Supervisor, Asia Cement Department Corporation

Nil

Nil

Nil

Member of New York Bar Partner, Jones Day Adjunct Assistant Independent Supervisor, China Professor, Motor Corporation National Director, Taiwan Acceptance Chengchi Corporation University Independent Director, Simplo LL. B., National Technology Co., Ltd. Taiwan Supervisor, Carnival Industrial University Corp LL. M., Boston University

Nil

Nil

Nil

Nil

Nil

Nil

0

0.00

0

0.00

0

0.00

0

0.00

Ritsumeikan University

General Manager, Nissan Motor Co., Ltd

2014 Annual Report 16

Company Management Report

The Major Stockholders of Corporation Shareholders  

Names of Major Stockholders

May 12, 2015

The Major Stockholders of Corporation Shareholders

Yulon Motor Company Ltd.

1. Tai Yuen Textile Co., Ltd., (18.11%) 2. China Motor Co., Ltd., (15.06%) 3. Kenneth K. T. Yen (10.18%) 4. Nanshian Life Insurance Co., Ltd. (4.50%) 5. Hua Li Investment Co., Ltd. (1.61%) 6.Management of Board Public Service Pension Fund (1.46%) 7. Fan De 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%)

Nissan Motor Co., Ltd.

1.Renault (43.7%) 2.The Chase Manhattan Bank, N.A. London. Special Account No.1(3.21%) 3. Japan Trustee Services Bank Ltd.(Trust) (2.18%) 4. The Master Trust Bank of Japan Ltd. (Trust)(2.15%) 5. GIC PRIVATE LIMITED(1.46%) 6. Nippon Life Insurance Company (1.46%) 7.JP Morgan Chase Bank 385632(1.23%) 8. Moxley and Co LLC(0.92%) 9. The Bank of New York 133522 (0.84%) 10.JP Morgan Chase Bank 380055(0.82%)

Wei Wen Investment Co., Ltd.

1.Kenneth K. T. Yen (99.4%) 2.Wei Tai Investment Co., Ltd.(0.1%) 3.Le Wen Investment Co., Ltd. (0.1%) 4.Fan De Investment Co., Ltd. (0.1%) 5.Jing Yu Investment Co., Ltd. (0.1%) 6. Yu Xin Investment Co., Ltd. (0.1%)) 7. Lilian Chen (0.1%)

If the Legal Persons are the Major Shareholders, their major Stockholders May 12, 2015 Legal Person’s Name

1.Tai-Yuen Textile Co., Ltd.

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

2014 Annual Report 17

YULON NISSAN

2.China Motor Co., Ltd.

3. Nanshian Life Insurance Co., Ltd 4.Hua Li Investment Co., Ltd.

1. Tai-Yuen Textile Co., Ltd. (25.18%) 2. Mitsubishi Motors Co., Ltd. (14.00%) 3. Yulon Motor Company Ltd. (8.05%) 4. Diamond Hosiery & Thread Co., Ltd. (6.76%) 5. Mitsubishi Corp. (4.79%) 6. Cathay Life Insurance Co., Ltd. (3.81%) 7. Nanshian Life Insurance Co., Ltd. (1.72%) 8. Kenneth K. T. Yen ( 1.20% ) 9.Vanguard Emerging Markets Stock Index Fund, A Series of Vanguard International Equity Index FundS.(0.94%) 10. New Labor Pension Fund (0.84%) 1. First Bank by the Runcheng an investment holding company trust account (83.11%) 2.Runcheng the Investment Holding Co., Ltd.(7.52%) China Motor Co., Ltd. (100%)

5. Management of Board Public Service Non-juristic person, not applicable Pension Fund

6.Fan De Xin Investment Co., Ltd.

1. Wei Wen Investment Co., Ltd. (33.30%) 2. Wei Tai Investment Co., Ltd. (33.36%) 3. Le Wen Investment Co., Ltd. (33.30%) 4. Jerry Chu (0.02%) 5. Wei-Kung Chi (0.02%)

7. Labor Insurance Fund

Non-juristic person, not applicable

8. Yen Tjing-Ling Industrial Development Foundation

Non-juristic person, not applicable

9. Shin Kong Life Insurance Co., Ltd..

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

10.Renault

1.French State(15.01%) 2.Nissan Finance Co., Ltd.(15%) 3.Daimler AG(3.10) 4.Other Shareholders: Subject to local restrictions, not available

11.The Chase Manhattan Bank, N.A. Subject to local restrictions, not available London. Special Account No.1 12.Japan Trustee Services Bank Ltd. Subject to local restrictions, not available (Trust) 13.The Master Trust Bank of Japan, Ltd. (Trust)

1.Mitsubishi UFJ Trust and Banking Co.,Ltd.(46.5%) 2.Nippon Life Insurance Co.,Ltd.(33.5%) 3.Meiji Yasuda Life Insurance Co.,Ltd.(10%) 4.The Norinchukin Trust & Banking Co.,Ltd.(10%)

14. GIC PRIVATE LIMITED

Subject to local restrictions, not available

2014 Annual Report 18

Company Management Report

15. Nippon Life Insurance Company

Subject to local restrictions, not available

16. JP Morgan Chase Bank 385632

Subject to local restrictions, not available

17. Moxley and Co LLC

Subject to local restrictions, not available

18. The Bank of New York 133522

Subject to local restrictions, not available

19. JP Morgan Chase Bank 380055

Subject to local restrictions, not available

20. Wei Tai Investment Co., Ltd.

1. Kenneth K. T. Yen (99.88%) 2. Wei Wen Investment Co., Ltd. (0.02%) 3. Fan De Investment Co., Ltd. (0.04%) 4. Lilian Chen (0.02%) 5. Jerry Chu (0.02%) 6. Wei-Kung Chi (0.02%)

21. Le Wen Investment Co., Ltd.

1. Kenneth K. T. Yen (99.88%) 2. Wei Wen Investment Co., Ltd. (0.04%) 3. Fan De Investment Co., Ltd. (0.04%) 4. Lilian Chen (0.02%) 5. Wei-Kung Chi (0.02%)

22. Jing Yu Investment Co., Ltd...

1. Evans Co., Ltd. (99.96%) 2. Wei Tai Investment Co., Ltd. (0.007%) 3. Fan De Investment Co., Ltd. (0.007%) 4. Wei-Kung Chi (0.007%) 5. Jack Huang (0.007%) 6. Henry Wang(0.006%) 7. Shu-Jun Chen (0.006%)

23. Yu Xin Investment Co., Ltd.

1. Evans Co., Ltd. (99.96%) 2. Wei Tai Investment Co., Ltd. (0.007%) 3. Fan De Investment Co., Ltd. (0.007%) 4. Wei-Kung Chi (0.007%) 5. Jack Huang (0.007%) 6. Henry Wang(0.006%) 7. Shu-Jun Chen (0.006%)

2014 Annual Report 19

YULON NISSAN

Professionalism and Independence of Directors and Supervisors Conditions

Name Yulon Motor Co., Ltd. Representative: Kenneth K. T. Yen Yulon Motor Co., Ltd. Representative: Kuo-Rong Chen Yulon Motor Co., Ltd. Representative:: Wen -Rong Tsay Yulon Motor Co., Ltd. Representative:: Zhen –Xiang Ya Nissan Motor Co., Ltd. Representative: Takashi Nishibayashi Nissan Motor Co., Ltd. Representative: Atsushi Kuboi Nissan Motor Co., Ltd. Representative: Junichi Ohori Nissan Motor Co., td. Representative: Moritami Matsumoto

With over 5 years of work experience and the following professional qualifications Lecturer (or above) of public/private colleges/universities for relevant subjects required for business, law, finance, accounting or company businesses

Specialized and technical personnel with national exam qualified ertificates required for judges, public procurators, lawyers, ccountants or other company businesses

Conformed to the requirements of Independence(Note 1)

Work experience required for business, law, finance, 1 accounting or company businesses

2

5

6

7

8

Number of director posts held concurrentl y for other 9 10 publicly listed companies

3

4

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

Tsong-Jen Huang

v

v

v

v

v

v

v

v

v

v

v

1

Robert Mao Wei Wen Investment Co., Ltd. Representative: Kwan-Tao Li Wei Wen Investment Co., Ltd. Representative: Tai-Ming Chen

v

v

v

v

v

v

v

v

v

v

v

1

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

v

Yosuke Sato

v

v

v

v

v

1 v

Note: Directors and supervisors who meet the following conditions 2 years prior to the election and during the post, are marked “v” in each qualification columns. (1) Not an employee of the company or its affiliates (2) Not a director or a supervisor of the company or its affiliates (excluding the independent directors of the company’s or the mother company’s subsidiaries that directly or indirectly hold over 50% shares of the voting right) (3) Not a natural person shareholder who or whose spouse, minor child, or who on behalf of other people, holds over 1% of the company’s total issued shares or is one of the first 10 shareholders (4) Not a spouse, or within a second-degree relative or a fifth-degree direct relative of the above 3 parties (5) Not a director, supervisor or an employee who is a legal person shareholder directly holding 5% of the company’s total issued shares, or a director, supervisor or an employee who is one of the first five legal person shareholders (6) Not a director, supervisor, manager or a shareholder with over 5% shares who are from specific companies or organizations that have that have financial or business transactions with the company (7) Not an enterprise owner, a partner, director, supervisor, manager or their spouse who is a professional or from an independent venture, a partner, a company or an organization providing business, legal, financial, accounting services or consultation for the company or its affiliates (8) Neither a spouse nor within a second-degree relative of other directors (9) Without any of the circumstances mentioned in the provisions of Article 30 of the Company Law (10)Not a government, legal person or representative elected according to Article 27 of the Company Law

2014 Annual Report 20

Company Management Report

(2) Information of President, Senior Vice President, Vice President and General Manager

Title

Nation ality

Name

Shares

Elected (Sworn-in) Date

Shareholding of spouse and minor children

Shareholdings in the names of others

Shares

Share Holding

Shares

Share Holding

Shares

Share Holding

President R.O.C

Wen -Rong Tsay

2010.09.01

0

0.00









Special Assistant R.O.C to the Chairman

Kuo-Rong Chen

2003.11.1

5,000

0.00









2014 Annual Report 21

YULON NISSAN

May 12, 2015

Main Experience (Education)

Concurrent positions at other companies

Any manager who is the spouse or blood relative within the second order to the principal Title Name Relation ship

Director, Taiwan Acceptance Corporation Director, Tokio Marine Newa Insurance Co., Ltd Director, CARPLUS Auto Leasing Co., Ltd. Director, Yu Shin Motor Co., Ltd. Director, Chen Long Co., Ltd. Director, Chi Ho Corporation. Chairman, Yue Sheng Industrial Co., Ltd. Director, Huamao International Investment Co., Ltd. Master of High Level Director, CL Skylite Trading Co., Ltd. Management, Chiao Director, Fengye Car Rental Co., Ltd. Tung University Director, Jet Ford, Inc. Director, Guangzhou Aeolus Automobile Co., Ltd. Director, Aeolus Automobile Co., Ltd. Director, Aeolus Xiangyang Automobile Co., Ltd. Chairman, Shenzhen Lan You Technology Co., Ltd. Director, Dong Feng Yulon Used Cars Co., Ltd. Director, Yen Tjing-Ling Industrial Development Foundation

Vice Chairman, Yulon Motor Co., Ltd. Director, China Motor Corporation Director, Taiwan Acceptance Corporation Director, Tai-Yuen Textile Co., Ltd. Director, Hwa-chuan Auto Technology Center Co., Ltd. Vice Chairman, Luxgen Motor Co., Ltd. Master of High Level Director, Dongfeng Yulon Motor Co., Ltd. Management, Chiao Vice Chairman, Guangzhou Aeolus Automobile Co., Ltd. Tung University Vice Chairman, Aeolus Automobile Co., Ltd. Director, Yen Tjing-Ling Industrial Development Foundation Director, Yen Tjing Ling Medical Foundation. Director, Vivian Wu Journalism Award Foundation Director, Vivian Wu Industry and Commerce ECCC Foundation Please refer to the “Information on Affiliated Companies” for details.

2014 Annual Report 22













Company Management Report

Title

Natio nality

Name

Shares

Elected (Sworn-in) Date

Shareholding of Shareholdings in spouse and minor the name of others children

Shares

Share Holding

Shares

Senior Vice Japan Junichi Ohori President

2014.4.1













Senior Vice R.O.C Leman President C.C. Lee

2015.1.1













Vice President Vice President Senior General Manager General Manager

Japan

2014.4.1













Japan

Moritami Matsumoto Kenji Shimoyama

2014.4.1













Japan

Yoshihiro Takahama

2014.7.1













R.O.C Jiang-Shan Lee

2003.10.1













General Manager

R.O.C Shun-Chi Tsai

2007.1.1













General Manager

R.O.C Dennis Chang

2012.10.1













General Manager

R.O.C Tsan-Huang Lin

2009.02.15













General Manager

R.O.C Yu-Chou Hsieh

2009.7.1

1,000











General Manager

R.O.C Wen-Chi Mao

2010.12.1













General Manager

R.O.C Wen-Chuan Chung

2010.12.1













General Manager

Wen-Chiang Shu

2011.05.18













General Manager

Chiung-Ming, Chou

2013.05.17













General Manager

Chao-Yen Liang

2015.1.1













Accounting Manager

Chen-Hua, Chi

2015.05.11













2014 Annual Report 23

YULON NISSAN

May 12, 2015

Main Experience (Education)

Concurrent positions at other companies

Any manager who is the spouse or blood relative within the second order to the principal Title Name Relationship

Musashi Institute of Technology, Master, Faculty of Engineering

Department of Mechanical Engineering, National Taiwan University

─ Supervisor, Taiwan Acceptance Corporation Director, Yu Shin Motor Co., Ltd. Director, YuShin Motor Co., Ltd Director, YuChang Motor Co., Ltd Director, Yuan Long Motor Co. Ltd. Director, Empower Motor Co. Ltd. Director, Yuan Tang Motor Co. Ltd Director, Chen Long Motor Co. Ltd Director , Kaihsin Insurance Agent Co.Ltd. Director, Sinjang Co. Ltd Director, Tianwang Co. Ltd Director, Qun Min Corporation Director, Hui-Lian Motor Co., Ltd













Tokai University









Faculty of Engineering, Department of Mechanical Engineering, Kogakuin University









Department of Law,Faculty of Law, SOPHIA University



























































































Master of Civil Engineering, University of Maryland Industrial Engineering, Chung Yuan Christian University. Master of International Business Management, Curtin University of Technology Department of Business Administration , Tunghai University Department of Aerospace Engineering, Tamkang University Chung Cheng Institute of Technology National Defense University Department of Vehicle Engineering Master of Business Administration , National Cheng Kung University. Bachelor, Industrial Design, National Cheng Kung University, Taiwan. Master, Industrial Management, National Taiwan University of Science and Technology, Taiwan. Master, International Business Management, Curtin University of Technology, Australia Department of Navigation , National Taiwan Ocean University Department of Mechanical Engineering, National United University Department of Mechanical Engineering, National Chung Hsing University Master of High Level Management, Chiao Tung University University of Idaho (USA) Master of Accountancy

Director, Empower Motor Co. Ltd. Director, Yuan Long Motor Co. Ltd Director, Qun Min Corporation Director, Singan Co. Ltd Director, Yuan Long Motor Co., Ltd. Director, Yuan Tang Motor Co. Ltd Director, Yu Shin Motor Co., Ltd. Director, YuChang Motor Co., Ltd

Director of Kaihsin Insurance Agent Co. President, Hui-Lian Motor Co., Ltd President.Jin-Lian Co., Ltd.

2014 Annual Report 24

2014 Annual Report 25

Expense (D)

Payment(C)

Compensation of Surplus Distribution(F) (Note 3)

0

00

0

0

0

0.18% 0.18%

Rent Rent 648 648 Car Car Rental Rental 1,114 1,114 Driver Driver 2,022 2,022

22,429 22,429

2,010

2,010

454

0

Granted Employee Restricted Stock (I)

454

0

0

0

0

0

0.59% 0.59%

Nil

% of Total Amount Whether of A, B, C, D ,E,F and G against Net Reinvestme nt Business Profit after Tax Compensati on is Received All the from companies Companies The included in other than Company this Subsidiaries consolidated statement

Dec. 31, 2014 Unit: NTD Thousand

All the All the All the companies companies companies included in this The included in The included in consolidated Company this Company this statement consolidated consolidate Cash Stock statement d statement Bonus Bonus

Bonus (G)

Surplus Divided Employee

Number of Stocks Allowed to be Subscribed for Employee Stock Options (H)

Compensation Received by Employees with Concurrent Posts

Note 1: The driver payment is disclosed for reference only but not regarded as part of the compensation. Note 2: (1)Actual pensions account: 0 NTD Thousand (2)recognized pensions account:0 NTD Thousand Note 3: (1)Actual pensions account: 0 NTD Thousand (2)recognized pensions account:2,010 NTD Thousand Note 4: Junichi Ohori and Moritami Matsumo succeeded Keiji Hatanaka and Isao Morimoto as Nissan Motor Co., Ltd. Representative since April 1 2014.

Director

Business Execution

Surplus Divided

% of Total Amount of A, B,C and D Salary, Reward and against Net Profit Special Allowance (E) after Tax (Note 1)

All the All the All the All the All the All the All the companies companies companies companies companies companies companies The Company The included in The included in The included in The included in The included in The included in The included in Company this Company this Company this Company this Company this Company this Company this consolidated consolidated consolidated consolidated consolidated consolidated consolidated statement statement statement statement statement statement statement Cash Stock Bonus Bonus

Kenneth K.T. Yen Kuo-Rong Chen Wen -Rong Tsay Zhen –Xiang Ya Takashi Nishibayashi Atsushi Kuboi Keiji Hatanaka 12,000 12,000 (Note4)

Name

Junichi Ohori (Note4) Isao Director Morimoto (Note4) Moritami Director Matsumoto (Note4) Independent Tsong-Jen director Huang Independent Robert Mao director

Director

Director

Director

Director

Director

Director

Chairman

Title

Compensation (A)

Director Compensation

Compensation of Surplus Distribution (B) (Note 2)

1.Director’s Compensation

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

219Company Management Report

2014 Annual Report 26

Total

More than NT100,000,000

NT50,000,000~NT100,000,000

NT30,000,000~NT50,000,000

NT15,000,000~NT30,000,000

NT10,000,000~NT15,000,000

NT5,000,000~NT10,000,000

NT2,000,000~NT5,000,000

Less than NT 2,000,000

Directors of the Company

The Compensation Range for

Kuo-Rong Chen、Wen -Rong Nishibayashi 、Atsushi Kubo 、 Isao Morimoto 、Moritami

Robert Mao

12

Robert Mao

12

Matsumoto 、Tsong-Jen Huang、 Matsumoto 、Tsong-Jen Huang、

Isao Morimoto 、Moritami

Keiji Hatanaka 、Junichi Ohori 、 Keiji Hatanaka、Junichi Ohori 、

Nishibayashi 、Atsushi Kubo 、

Tsay 、Zhen –Xiang Ya、 Takashi Tsay 、Zhen –Xiang Ya、 Takashi

Kenneth K.T. Yen、

The Company

Kuo-Rong Chen、Wen -Rong

The Company

Total Compensation Amount of A+B+C+D The Company

Wen -Rong Tsay

Wen -Rong Tsay

12

Kenneth K.T. Yen、

Kenneth K.T. Yen、

12

Matsumoto

Matsumoto

Robert Mao

Robert Mao

Junichi Ohori 、Moritami

Morimoto、Tsong-Jen Huang、

Morimoto、Tsong-Jen Huang、

Junichi Ohori 、Moritami

Kubo 、Keiji Hatanaka、Isao

Kubo 、Keiji Hatanaka、Isao

Ya、Takashi Nishibayashi 、Atsushi Ya、Takashi Nishibayashi 、Atsushi

Kuo-Rong Chen、Zhen –Xiang

The Company

Total Compensation Amount of A+B+C+D+E+F+G

Kuo-Rong Chen、Zhen –Xiang

Number of Directors

Kenneth K.T. Yen、

Compensation Range Table

YULON NISSAN

Name

2014 Annual Report 27

Total

More than NT100,000,000

NT50,000,000~NT100,000,000

NT30,000,000~NT50,000,000

NT15,000,000~NT30,000,000

NT10,000,000~NT15,000,000

NT5,000,000~NT10,000,000

NT2,000,000~NT5,000,000

Less than NT2,000,000

3,600

The Company

0

3

0

Number of Supervisors

0

Business Execution Expense (C)

0.06%

0.06%

Nil

3

Kwan-Tao Li、Tai-Ming Chen、Yosuke Sato

All the companies included in this consolidated statement D

Total Compensation Amount of A+B+C

0

Kwan-Tao Li、Tai-Ming Chen、Yosuke Sato

3,600

Supervisor Compensation Surplus Divided Remuneration (B)

Dec. 31, 2014 Unit:NTD Thousand

% of Total Amount of A, Whether B and C against Net Profit Reinvestment Remuneration (A) after Tax Business Compensation All the All the All the All the is Received companies companies companies companies from The The The The included in this included in this included in this included in this Companies Company Company Company Company consolidated consolidated consolidated consolidated other than statement statement statement statement Subsidiaries

The Compensation Range for Supervisors of the Company

Compensation Range Table

Supervisor Yosuke Sato

Wei Wen Investment Co., Ltd Representive: Supervisor Kwan-Tao Li Tai-Ming Chen

Title

2.Compensation of supervisors

219Company Management Report

Wen-Rong Tsai

Name (Note 1)

6,075

6,075

2014 Annual Report 28

Note (1)Actual pensions account: 0 NTD Thousand (2)recognized pensions account:734 NTD Thousand Note 2: The driver payment is disclosed for reference only but not regarded as part of the compensation.

Total

More than NT100,000,000

NT50,000,000~NT100,000,000

NT30,000,000~NT50,000,000

NT15,000,000~NT30,000,000

4

Wen-Rong Tsai

NT10,000,000~NT15,000,000

454

0

0.21%

0.21%

0

0

The Company

0

0

4

Wen-Rong Tsai

Junichi Ohori

Kuo-Rong Chen 、Keiji Hatanaka

Number of President and Senior Vice President

0

The Company

454

Kuo-Rong Chen 、Keiji Hatanaka

Driver 1,401

Car Rental 829

NT5,000,000~NT10,000,000

Driver 1,401

Car Rental 829

Junichi Ohori

734

Rent 324

5,383

NT2,000,000~NT5,000,000

Less than NT2,000,000

General Managers of the Company

The Compensation Range for General Managers and Vice

734

Rent 324

5,383

Dec. 31, 2014 Unit: NT Thousand

Nil

% of Total Amount of Number of Employee % of Total Amount of Whether A, B, C, D ,E,F and G Surplus Divided Employee Bonus (C) A, B,C and D against Stock Options against Net Profit Reinvestment Net Profit after Tax Acquired after Tax Business All the companies Compensation All the All the All the included in this All the is Received companies companies companies The Company companies consolidated from included in The included in The included in The included in statement this Company Companies this this this Company Company consolidated other than consolidated Cash consolidated consolidate Stock Cash Stock statement Subsidiaries statement statement d statement Bonus Bonus Bonus Bonus

Reward and Special Allowance (B)

All the All the companies companies The included in The included in The this this Company Company Company consolidated consolidate statement d statement

Salary (A)

Compensation Range Table

Special Assistant Kuo-Rong Chen to the Chairman t Senior Vice Keiji Hatanaka President Senior Vice Junichi Ohori President

President

Title

3: Compensation of the President and Senior Vice President

YULON NISSAN

219Company Management Report

4.Manager’s Name of the allocated employee bonus and allocation situation Dec. 31, 2014 Unit: NT Thousand Stock Bonus Title

Name Shares

President

Total

% of Total Amount against Net Profit After Tax

2,613 (Note)

0.04% (Note)

Cash Bonus

Market Amount Price

Amount

Wen -Rong Tsay

Special Assistant to the Kuo-Rong Chen Chairman Senior Vice Hatanaka Keiji(Note1) President Senior Vice Junichi Ohori(Note2) President Vice President Isao Morimoto(Note1) Vice President Leman C.C. Lee Moritami Matsumoto(Note2) Vice President Takeshi Fujiwara(Note1) manager

Vice President

Vice President Kenji Shimoyama(Note2) Manager Jiang-Shan Lee Senior General Takahama Manager Yoshihiro(Note3) Manager

Chiung-Ming, Chou

Manager

Shun-Chi Tsai

Manager

Bruce Cheng

Manager

Tsan-Huang Lin

Manager

Yu-Chou Hsieh

Manager

Wen-Chuan Chung

Manager

Wen-Chi Mao

Manager

Wen-Chiang Shu

Financial Supervisor Accounting Manager

-

-

-

2,613 (Note)

Chao-Yen Liang Chen-Hua Chi

Note :The individual name and title should be disclosed; however, the distribution may be disclosed in summary. Note 1:Resigned on Apr 1, 2014. Note 2:Appointed on Apr 1, 2014. Note 3:Appointed on Jul 1, 2014.

2014 Annual Report 29

YULON NISSAN

(4)Analysis and description of the net profits macro or individual financial report after payment of remuneration made out to directors, supervisors, president, and vice president in the last 2 years. The percentages of the total remuneration amount paid to the company’s directors, supervisors, general managers and vice general managers against the net profit after tax are respectively compared and analyzed, and the relationship among the policies, standards and combinations of compensation payment, the procedures of the compensation establishment and the operational performance is also described. Unit: NTD Thousand 2014 year Total Title

Compensation (Note)

Director Supervisor

2013year % of Total

Net Profit After Remuneration Tax

against Net

Total Compensation

Profit after Tax

(Note)

% of Total Net Profit After Remuneration Tax

against Net Profit after Tax

12,000

6,523,759

0.18%

12,000

7,299,997

0.16%

3,600

6,523,759

0.06%

3,200

7,299,997

0.04%

13,799

6,523,759

0.21%

12,697

7,299,997

0.17%

29,399

6,523,759

0.45%

27,897

7,299,997

0.38%

President and Senior Vice President Total

Note:Compensation includes the company and all consolidated companies The company’s directors and supervisors should receive a total of NTD 100,000 (including transportation allowances) per month. The chairman’s remuneration should be paid according to the negotiation of the authorized Board of Directors in terms of his participation frequency in the company’s operation and the contributions without exceeding the standard of the highest salary level established by the company. The company’s overall compensation combinations mainly include three parts: basic salaries, rewards and welfare. For the payment standards, basic salaries are appraised based on the employees’ market quotations of their served posts; rewards are granted for the employees’ and the departments’ achievement of goals or the company’s operation performance; as for the setting of welfare, welfare measures the employees can share are designed to conform to regulations as well as cater for the employees’ needs.

2014 Annual Report 30

219Company Management Report

3. Operation of Corporate Governance (1) Operational Status of the Board of Directors There have been 5 annual meetings held for the Board of Directors recently. The attendance of directors and supervisors is as follows: Title

Name

Corporation Director

Yulon Motor Co., Ltd.

Corporation Director Representative and Chairman Corporation Director Representative Corporation Director Representative Corporation Director Representative Corporation Director Corporation Director Representative Corporation Director Representative Corporation Director Representative Corporation Director Representative Corporation Director Representative Corporation Director Representative Independent Director Independent Director Corporation Supervisor Corporation Supervisor Representive Corporation Supervisor Representive Supervisor

Number of Number of Times % of Actual Times for Actual for Authorized Attendance Attendance Attendance

Kenneth K.T. Yen

4

1

80%

Kuo-Rong Chen

5

0

100%

Wen-Rong Tsay

5

0

100%

Zhen –Xiang Ya

5

0

100%

Nissan Motor Co., Ltd. Takashi Nishibayashi

1

4

20%

Atsushi Kubo

2

3

40%

Keiji Hatanaka

1

0

100%

Isao Morimoto

1

0

100%

Junichi Ohori

4

0

100%

Moritami Matsumoto Tsong-Jen Huang

4

0

100%

5

0

100%

Robert Mao Wei Wen Investment Co., Ltd.

4

1

80%

Kwan-Tao Li

4

0

80%

Tai-Ming Chen

5

0

100%

Yosuke Sato

2

0

40%

Note

Resigned on April 1, 2014 Resigned on April 1, 2014 Appointed on April 1, 2014 Appointed on April 1, 2014

Other Notes: 1.The content listed in Article 14-3 of the Stock Exchange Law and other recorded or written resolutions of the meetings of the Board of Directors, which are objected or retained by independent directors, should specify the dates, terms, motion content, all of the independent directors’ comments and the company’s handling of these comments: Nil. 2.The directors’ execution status of interest relationship motion avoidance should specify the directors’ names, the motion content, the reasons of interest avoidance and the status of resolution participation: Nil. 3.The goals for strengthening the functions of the Board of Directors in the fiscal year and the recent fiscal year (e.g., establish an audit committee, increase information transparency, etc.) and the evaluation of the operation status: Nil.

(2) Operational Status of the Audit Committee: Nil 2014 Annual Report 31

YULON NISSAN

(3) The attendance of directors and supervisors and Operational Status of the Board of Directors There have been 5 annual meetings held for the Board of Directors recently. The attendance is as follows: Title

Number of Times for Actual Attendance

% of Actual Attendance

Kwan-Tao Li

4

80%

Name

Corporation Person Supervisor Natural Person Supervisor Representive Natural Person Supervisor Representive

Wei Wen Investment Co., Ltd.

Tai-Ming Chen

5

100%

Supervisor

Yosuke Sato

2

40%

Note

Other items that should be stated: 1. Composition and Duties of Supervisors: (1) Communication between the Supervisor(s) and the Company’s employee(s) and/or shareholder(s) (e.g. communication channel and the way of communication): NIL (2) Communication between the Supervisor(s) and Superintendent of Internal Audit and Certified Public Accountant (e.g., communication items, method and results in respect to the Company’s financial and business status): NIL 2.If a Supervisor attends the Board meeting and express his/her opinion, it is required to record the date and term of the Board meeting, content of the proposal discussed and resolution thereof and the action taken by the Company to reflect such Supervisor’s opinion: NIL

(4)The difference in contrast to the operation of corporate governance and the listed / OTC company’s corporate governance codes of practice and reasons Operations (Note 1) Evaluation Items

Yes No

1. Does the company develops and V discloses corporate governance practice principles in accordance with “Governance Best Practice Principles for TWSE/GTSM Listed Companies.”

2. Corporate shareholding structure and shareholders’ equity (1) Does the company develop V internal operation procedures to for shareholders’ suggestions, doubts, disputes, and complaints with implementation according to the procedures?

Summary and Description

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

1.The practice was developed on August 4th, 2014 and first revised on March 23th, 2015. 2. The practice is disclosed in the Market Observation Post System and the company website (http://www.nissan.com.tw/tc/explore/invest or.aspx).

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

It is stipulated in Clause 13 of the company’s Corporate Governance Practice Principles that “the company offers specialists who will properly handle shareholders’ suggestion, doubts and disputes. The company reserves the right to develop internal operation procedures to properly process the aforementioned two matters with retention of written records for review and incorporation of internal control system,” which will be completed by 2015.

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

2014 Annual Report 32

219Company Management Report

Operations (Note 1) Evaluation Items

Yes No

Summary and Description

(2) Does the company actually V control the main shareholders and the final control list of major shareholders of the company?

The company controls the major shareholders and the final control list of the company in addition to disclosing such information on the annual report on “Directors, Supervisors, Managers, and Major Shareholders’ Equity Change.”

(3) Does the company establish V and execute the risk control and firewall mechanism with the affiliated enterprise?

The company’s corporate governance practice principles specifies the risk assessment with affiliated companies and the importance of necessary control mechanism in addition to developing the “Acquisition or Disposition of Information Asset Procedure,” “Endorsement and Guarantee Operation Procedure,” “Fund Loaning to Others Operation Procedure,” “Internal Major Information Processing Procedure,” “Prevention of Insider Trading Management Operation Procedure.” The company also establishes spokesperson, investor’s contact window, established good internal major information processing and disclosure mechanism to avoid improper information leakage as well as assuring the consistency and accuracy of information published.

(4) Does the company develop V internal specification to prohibit insiders from using undisclosed information from the market to buy or sell securities?

To prevent company insiders from buying and selling securities using information unpublished, the company has specified the “Internal Major Information Processing Operation Process” and “Prevention of Insider Trading Management Operation Procedure” through the announcement of the company website and routine promotion to directors, supervisors, manager, and employee (email, company internal network).

3. Composition and function of Board of Directors (1) Does the Board of Directors develop diversified guidelines and implement execution in terms of member composition?

V

The company has set up the multiple capacities required for the overall Board of Directors in the corporate governance practice principles in accordance with the Corporate Governance Best Practice Principles for TWSE/GTSM Listed. The incumbent directors and supervisors not only should possess multiple professional capacity such as operational judgment, business management, industry knowledge, crisis handling, financial and accounting, legal, information technology, and leadership and decision making, but also include foreign directors and supervisors to provide multi-dimensional suggestions for different nationality, viewpoints, and cultural background. 2014 Annual Report 33

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

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

YULON NISSAN

Operations (Note 1) Evaluation Items

Yes No

Summary and Description

(2) Does the company also V voluntarily establish other functional committee apart from the salary remuneration committee and audit committee?

To improve the corporate governance, the company has established the salary remuneration committee to supervise and suggest salary for directors, supervisors and managers in addition to establishing the audit committee on the election of 7th Board of Directors.

(3) Does the company develop V Board of Directors Performance Assessment Guidelines and Evaluation Method in addition to conduct annual performance assessment?

The company has developed the constructs of performance evaluation for the Board of Directors at the corporate governance practice principles. The company is also scheduled to submit the discussion on performance assessment guidelines and procedures to the Board of Directors in 2015, which will be announced on the company website after approval.

(4) Does the company routinely assess the independence of attesting CPA?

The company refers to the Bulletin of Norm of Professional Ethics for Certified Public Accountant of the Republic of China No.10 “Integrity, Objectivity and Independence” to develop the CPA independence evaluation form. The Board of Directors will use the aforementioned evaluation form to review the independence and competence of the attesting ACP based on the financial interests matters, financing and guarantee, commercial relation with the company, and the enterprise of the attesting CPA and their family. The stakeholders can communicate via business transaction or spokesperson while the company also establishes an investor section on the company website (http://www.nissan.com.tw/tc/explore/inves tor.aspx) to disclose the contact/complaint window and contact methods for investors and stakeholders, in order to provide immediate response of issues concerned by all stakeholders with response.

V

4. Does the company establish V communication channel with the stakeholders, establish stakeholder section on the company website, and properly respond to the key corporate social responsibility issues concerned by the stakeholders?

5. Does the company commission V professional registrar for handling of shareholder meeting affairs?

6. Public information (1) Does the company establish V website to disclose information on the financial operations and corporate governance?

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

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

In consideration with the operations between the company and Yulon Group, currently the registrar section of Yulon Motor Co., Ltd. is in charge of the shareholder meeting affairs of the company.

In consideration of the business operations, the internal registrar department of the group shall be in charge of the affairs

The company has established a corporate website (http://www.nissan.com.tw/tc/explore/inves tor.aspx) to disclose product information, management, finance, and key corporate regulations and articles regarding corporate governance.

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

2014 Annual Report 34

219Company Management Report

Operations (Note 1) Evaluation Items

Yes No

Summary and Description

(2) Does the company adopt V other information disclosure methods (i.e. establishing English website, assigning specialist to collect and disclose the corporate information, implement spokesperson system and displaying corporate website at investor meeting?

To treat domestic and foreign shareholders and stakeholders with equity, the company establishes a company website in English (http://www.nissan.com.tw/en/) to disclose the company introduction, management and finance, and social welfare as well as other corporate governance information in English. The investor meeting information is also available in Chinese and English versions which are disclosed at the company website in Chinese and English versions. In case the company holds the investor meeting independently, the company will upload video file for investors to review (currently investors are on invitation basis).

7. Does the company also hold V important information that will help understand the corporate governance operation (including but not limited to employee rights, care for employees, investor relation, supplier relation, stakeholders’ rights, advanced study by the directors and supervisors, risk management policy and execution of risk evaluations standards, and the company purchasing liability insurance for directors and supervisors).

Employee rights and care for employees: Please refer to V. Operation Overview, 5. Labor-Employee Relation of this annual report. Apart from building the Yulon Community in Sanyi, Miaoli County, the company started cooperation with Hsinchu City Lifeline Association in 2015 to provide “EAP Employee Assistance Program” through professional and confidential consulting channel. Relation with investors and stakeholders: The company offers spokesperson and professional registrar institute as well as announcing significant information on the bulletin of Public Observation Post System in Chinese and English concurrently, and the company website in Chinese and English with equal treatment for domestic and foreign investors/stakeholders. Relation with supplier: As a member of community, the company continues to pay attention to environmental protection, health and safety, and human rights for labor, emphasizes on establishing sustainable development relation with vendors, and bring the impact into full play to urge the vendor on the supply chain to follow up. The company also develops vendor sustainable development activities including management guidelines, conduct principles, evaluation, counseling, and performance management, to announce to the company website.。There are additional vendor management guidelines and routine associate assembly for use as the diversified channel for education training and bilateral communication. Directors and supervisors: The company set up 13 supervisors and directors, including 2 independent directors and 3 supervisors to supervise the corporate operation for the investors. The directors and supervisors pursues advanced study each year according to the “Guidelines for 2014 Annual Report 35

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

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

YULON NISSAN

Operations (Note 1) Evaluation Items

Yes No

Summary and Description

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

Promoting Pursuit of Advanced Study for Directors and Supervisors of TWSE/STSM Listed Companies.” Such information on the attending Board of Directors and advanced study shall be disclosed at the Public Observation Post System. The Board of Director Performance Evaluation Guidelines and Procedures will undergo evaluation upon development to assure the equity of investors and stakeholders. Additionally, Nissan Motor Co., Ltd. has insured for the directors and supervisors with liability insurance in the coverage of USD75 million, including the directors, supervisors and key staff of the company. Consumer or client protection policy: The company sets up 24-hour 0800 toll-free phone consulting service hotline to provide distribution operation and service office query, new car information announcement, towing assistance, client requirement assistance, suggestions and compliant case processing, providing consumers with comprehensive equity consulting channel and demand services. Execution of risk management policy and risk measurement standards: Please refer to VII. 6. Risk Management and Evaluation of the annual report. 8. Does the company offer V corporate governance self-evaluation report or commission other professional institutes with corporate governance assessment report? (If so, please describe the opinions from the Board of Directors, self-evaluation or commissioned assessment results, major flaws or suggestions and improvement) (Note 2).

The company shall conduct corporate governance self-evaluation in 2015 and will disclose on the company website and Public Observation Post System for availability to investors and stakeholders.

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

Note 1: Provide description on the summary and description column regardless of checking on “yes” or “no” for the operations. Note 2: The so-called corporate governance self-evaluation refers to the self-evaluation and description provided by the company in accordance with the corporate self-governance items on the report about the current corporate operations and executions.

2014 Annual Report 36

219Company Management Report

(5) Remuneration Committee: (1) Data of Remuneration Committee Members Meet the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience An Instructor or A Judge, Public Have Work Higher Prosecutor, Attorney, Experience in Position in a Certified Public the Area of Department Accountant, or Other Commerce, of Commerce, Law, Professional or Technical Law, Finance, Name Title/Criteria Finance, Accounting, Specialists Who Has or or Other Academic Passed a National Accounting, or 1 Department Related to Examination and Been Otherwise the Business Needs of Awarded a Certificate in Necessary for the Company in a a Profession Necessary the Public for the Business of the Business of the or Private Junior Company Company College,

Criteria (Note)

2

3

4

5

6

7

Number of Other Taiwanese Public Companies Concurrentl y Serving as a 8 Compensati on Committee Member in Taiwan

College or University Tsong-Jen Huang Independent Director Robert Mao Independent Director Yun-Hua Yang Other

V

V

V

V

V

V

V

V

V

V

1

V

V

V

V

V

V

V

V

V

1

V

V

V

V

V

V

V

V

3

V

Note: Compensation Committee Members, during the two years before being elected or during the term of office, meet any of the following situations, please tick the appropriate corresponding boxes: 1. Not an employee of the company or any of its affiliates; 2. Not a director or supervisor of the company or any of 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 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 company 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 company 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 company; 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 company or to 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.

(2) Operational Status of Remuneration Committee:

Title Chair

1.There are 3 members in the Remuneration Committee. 2.Current Commission term: From Jul 1, 2012 to Jun 30, 2015. The Compensation Committee convened three (A) regular meetings in 2014. The Committee members’ attendance status is as follows: Name Attendance in Person By Proxy Attendance Rate in Notes (B) Person (%)(B/A) Tsong-Jen 2 1 67% Huang Robert Mao 1 1 33% Yun-Hua Yang 3 0 100%

Member Member Annotation: 1. There was no recommendation of the Compensation Committee which was not adopted or was modified by the Board of Directors in 2014. 2. There were no written or otherwise recorded resolutions on which a member of the Compensation Committee had a dissenting opinion or qualified opinion.

2014 Annual Report 37

YULON NISSAN

(6) Implementing Corporate Social Responsibility: Operations

Evaluation Items

1. Implementation of corporate governance (1) Does the company develop corporate social responsibility policy or system and review the effectiveness of implementation?

(2) Does the company routinely organize social responsibility education training? (3) Does the company establish and promote full-time(part-time) corporate social responsibility department, where the Board of Directors authorize senior management to process and report to the Board of Directors of the processing?

(4) Does the company develop reasonable salary and remuneration policy in addition to combining employee performance appraisal system and corporate social responsibility, as well as establishing explicit and effective rewards and punishment system?

2. Development of sustainable environment (1) Does the company devote in the improvement on the utilization efficiency of various resources and use recycled materials with low environmental impact?

Yes

V

V

V

V

V

Summary and Description

No

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

The company has developed corporate social responsibility policy at the Board of Directors on May 11, 2015 and established project committee to promote the different activities with routine reporting of the corporate performance in corporate social responsibility to the Board of Directors. The promotion effectiveness of 2014 CSR will be disclosed on the CSR report to be published by the end of 2015. Organizing different corporate social responsibility education training from time to time. The company has established CSR Project Committee in March 2015, where the President serves as the coordinator, the Vice President as the vice coordinator, and the responsible human HR department shall be responsible for promoting relevant activities with routine reporting to the Board of Directors. 1. The company has established the Remuneration Committee in 2011 and routinely calls for meetings to develop reasonable salary system. 2. Corporate social responsibility is part of the work and has been managed and required by improved performance and reward/punishment system.

In compliance with the philosophy of Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies.

1. Establishing environmental safety official organization in charge of promotion and advocacy of various energy-saving policies to upgrade the resource utilization efficiency. 2. New cars released to the market starting in 2009 shall comply with the “Voluntary Automobile Resource Recycling and Reuse Specification” for R&D/design of products, to promote the voluntary automobile resources

In compliance with the philosophy of Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies.

2014 Annual Report 38

219Company Management Report

Operations

Evaluation Items

Yes

(2) Does the company establish proper environmental management system in accordance with its characteristics of industry?

V

(3) Does the company pay attention on the impact of climate change on operational activating and execute strategies on greenhouse gas inventory, develop corporate energy-conservation and carbon emission reduction, and greenhouse gas reduction?

V

3. Maintenance of social welfare (1) Does the company develop relevant management policy and procedures in accordance with relevant laws and regulations and International Bill of Human Rights?

(2) Does the company establish employee complaint mechanism and channel with proper handling?

Summary and Description

No

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

recycling and reuse specification. 1) The vehicle recovery rate has far exceeded the standard (80%) and reached 92.7%~95.1%. 2) Vehicle recovering and reuse rate has far exceeded the standard (85%) and reached 96.2%~98.1%. 3) Restriction on the use of four environmentally hazardous heavy metals, including lead, mercury, cadmium, and hexavalent chromium. Established environmental management system in April 2015 to promote relevant environmental management policies. 1. The company started conducting greenhouse gas inventory in 2013 and the result of 2014 inventory is 1439.32 metric tons of CO2e/year. 2. Continuous promotion of energy-saving and carbon reduction measures and introducing multiple Grade-1 oil consumption energy-saving models with recognition by the environmental and energy-saving marks from the government. 3. Continuing to introduce low oil-consumption car models, zero-emission electric vehicles and other green products to achieve the objectives in energy conservation and carbon reduction.

V

The company has developed management policy and procedure in accordance with relevant laws and regulation and International Bill of Human Rights

V

1. Establishes diverse employee communication channel and handles employee problems immediately. 2. The employee complaint practice will be completed by 2015.

2014 Annual Report 39

In compliance with the philosophy of Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies.

YULON NISSAN

Operations

Evaluation Items

Yes

Summary and Description

No

(3) Does the company routinely provide safe and healthy work environment for employees in addition to implementing safety and health education?

V

1. Complying with safety health regulations and provide safe and healthy work environment with routine implementation of education and training to assure the safety of employees at work. 2. Provide proper protection equipment for employees engaging in special operations. 3. Routinely inspect on all equipment and implement equipment operation training for employees.

(4) Does the company establish routine communication mechanism with employees and notify the employees of the operational change that could possibly cause major impact through reasonable means?

V

Monthly publication of “YNM Operation Report” that allows employees to fully grasp the current corporate operations and major events.

(5) Does the company establish effective career competence development training program for employees?

V

Diverse career competency development training system is available and employees are encouraged to develop multi-task and shift rotation.

(6) Does the company develop relevant rights/interest policy and complaint procedures to protect consumers in accordance with the R&D, purchase, production, operation, and service process?

V

Establishing 0800 toll-free 24-hour customer service hotline with routine organization of associate supplier assembly to facilitate the communication channel.

(7) Does the company comply with all relevant laws and regulations and international standards for the marketing and labeling of products and services?

V

The marketing and labeling of products and services are in compliance with the relevant laws and regulations as well as NISSAN specification to assure the rights and interests of consumers.

(8) Does the company evaluate the past records of vendors with impact on the environment and society prior to the business?

V

1. Comply with ISO H00-B-A003 V Supplier Environment Impact Management Procedures. New vendors must be evaluated for their impact on the environment in accordance New Vendor Environment Impact Assessment Form. 2.The outsourcing of new cars after X-Trail will increase the environmental investigation items on the Vendor Quotation Form.

2014 Annual Report 40

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

219Company Management Report

Operations

Evaluation Items

(9) Does the contract signed between the company and the major vendors include policy on vendor involving the violation of corporate social responsibility with significant impact on the environment and society and clauses that could terminate or cancel the contract at any time?

4. Strengthen information disclosure (1) Does the company disclose relevant corporate social responsibility with relevance and reliability on the company website and Market Observation Post System?

Yes

Summary and Description

No

V

The contract with vendor, “Vehicle Components Sales Contract,” specifies the follows: (1) Environmental Protection Clause (Clause 56). (2)Electroplating Process Warranty Clause (Clause 57). (3) Integrity Management Clause (Clause 58) (4) Compliance with Laws and Regulations (Clause 59)

V

The relevant information is disclosed on the company website http://www.nissan.com.tw and the Market Observation Post System on a regular basis.

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

In compliance with the philosophy of Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies.

5. If the Company has enacted its code of corporate social responsibility in accordance with the Code of Practice for Corporate Social Responsibility by Listed and OTC Companies, please describe its operation and the difference from the Code of Practice: In compliance with the policies promoted by the “Corporate Social Responsibility Practice Principles” of the company. 6. Other critical information that helps understand the operation of corporate social responsibility: N/A. 7. Provide description if the corporate social responsibility report has been met the certification standard of relevant certification institute: N/A. Note 1: Provide description on the summary and description column regardless of checking on “yes” or “no” for the operations. Note 2: For companies having prepared the Social Corporate Responsibility Report, provide remarks on the summary and description to check through the Corporate Social Responsibility Report or index page.

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

2014 Annual Report 41

YULON NISSAN

Operations (Note 1) Evaluation Items Yes 1. Develop ethical management policy and program (1) Does the company specify the policy and approach regarding ethical management on articles and outbound documents as well as the commitment from Board of Directors and management to implement management policy?

V

(2) Does the company develop prevention on non-integral conducts program to specify the operation procedures, conduct guide, punishment and complain system for violation with implementation in all programs?

V

(3) Does the company adopt prevention measures according to Article 7, Paragraph 2 of “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies” or other operational activities of other business scope without higher unethical behavior risk?

V

2. Implementation ethical management (1) Does the company evaluate the ethical records of transacting targets and specify the ethical behavior clauses in the contract signed with the transacting targets.

V

No

Summary and Description

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

To declare the company’s determination in active implementation of ethical management, the company has developed ethical management practice with disclosure through the Public Observation Post System and the company website. In addition to specifying the company policy on ethical management and prevention programs through the aforementioned practice, the company also develops work conducts according to the organizational structure, department and sections, requiring all company employees including the directors and management to implement ethical management. The company develops “work conduct,” “internal significant information processing operation procedures,” “management and review operation process,” and “sexual harassment complaint process” to regulate employee behavior in scandals, embezzlement of public funds and gender equality in workplace. In case of discovery and verification of investigation, the company shall make claims from the employees and the guarantors. The company establishes one complete management system to explicitly specify the rights and obligations between the labor and employers with reference on relevant laws and regulation on work conducts as the guidelines for company operation and employees in the execution of operations. In case the company personnel encounter unethical behaviors from others with involvement of legal violations, the company shall report the relevant facts to the judicial or prosecuting agency. In the event public service agency or public service officials are involved, the company shall also report the anti-corruption agency of the government to process.

Compliance with Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and implementation of the matters mentioned on the left.

The contracts between transacting parties shall undergo review by professional and legal personnel with specification of ethical management clauses to specify the offering or acceptance of bribery and other unethical conducts with claims for indemnification.

Compliance with Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and implementation of the matters mentioned on the left.

2014 Annual Report 42

219Company Management Report

Operations (Note 1) Evaluation Items Yes (2) Does the company establish a full-time (part-time) organization promoting corporate ethical management under the Board of Directors in addition to routinely report to the Board of the Directors for execution?

V

(3) Does the company develop conflict of interest policy, provide proper petition channel and implement the execution?

V

(4) Has the company established valid accounting system and internal control system to implement ethical management with the internal audit department routinely audit or the CPA executes inspection?

V

(5) Does the company routinely hold domestic and external educational training for ethical management?

V

No

Summary and Description The company’s ethical management practice has been approved for the first time on August 4th, 2014 and underwent first revision on March 23rd, 2014. The Board of Directors serves as the business planning and financial department competent authority to promote ethical management related matters, in addition to coordinating with relevant department for the development of prevention program. The preventions will be included as reporting matters to Board of Directors with routine reporting to the Board of Directors for execution. The company develops “Regulations Governing the Board of Director Meeting” with specification that in case the matters of that Board of Director meeting is in conflict of interest with the stakeholders or the corporation represented, the directors shall explain the significant content of stakeholder relation at the Board of Directors. In case the content in in concern for jeopardizing the company interest, the directors may not join the discussion and voting while avoiding during discussion and voting. The directors may not act on other directors to exercise their voting right. Apart from developing relevant ethical management practice and regulations, the audit office conducts audit on stakeholder transactions and inside trading each year according to the “Regulations Governing Establishment of Internal Control Systems by Public Companies.” In the event of receiving any reporting on violations, the Board of Directors and relevant competent authorizes will be reported for handling. Additionally the company will hold internal control systems self-evaluation operations to assure the validity of internal control and audit. The company implements education training for ethical behavior for all new employees. The company also develops ethical behavior related content in work conducts in addition to promoting “internal significant information process operation procedures” through internal website and “prevention of inside trading management operation process” to prevent unethical conducts and to advocate the importance of ethical management in routine education and training.

2014 Annual Report 43

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

YULON NISSAN

Operations (Note 1) Evaluation Items Yes 3. Operations of company reporting system (1) Does the company develop specific reporting and incentive system and establishing convenient reporting channel in addition to assigning proper handling specialist for the target reported?

V

(2) Does the company develop investigation standard operation process and relevant confidential mechanism for accepting reported matters?

V

(3) Does the company adopt measures that protect the informer without facing improper treatment due to reporting?

V

4. Strengthen information disclosure (1) Does the company disclose the content of ethical management practice developed and promote the effectiveness on the company website and Public Observation Post System?

V

No

Summary and Description

Discretions with Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies and the Reasons

In case the company personnel is discovered with violation of ethical management, follow the work conducts and employee complaint processing system to claim and report to the company supervisor, audit office, business planning and financial department, and management department. In case the investigation is verified, the personnel shall be punished according to the internal regulation and laws. In case the company personnel are discovered with unethical behavior, port to the aforementioned diversified windows and the company will immediately investigate the case. The company will take actions according to the laws and regulations once the verified by the investigation. Upon receiving reporting, confidential measures will be immediately activated to assure non-disclosure of the name and labor number of the informer or other personal information that could be used to identify the employees.

Compliance with Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and implementation of the matters mentioned on the left.

The company discloses the complete content of ethical management practice of the company on the company website and Public Observation Post System in addition to incorporate the matters to be reported to the Board of Directors, routinely submit the execution and promotion effectiveness to the Board of Directors.

Compliance with Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and implementation of the matters mentioned on the left.

5.For companies having developed independent ethical management practice in accordance with “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies,” please describe the discretion between the operation and practice developed: The company has developed shareholder’s meeting regulations, Board of Directors meeting standards, internal major information processing operation procedures, prevention of insider transaction management operation procedures, classified document management guidelines, and public announcement and promotion to the company personnel (directors, supervisors, employees, and appointed personnel). Additionally the company has followed “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies” to develop the ethical management practice of the company that has been reviewed without discretion between the actual operations and the aforementioned practice. 6.Other critical information that helps understand the operations of the ethical corporate management: (ethical management practice that has been revised and developed under corporate review). The company has referred to the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies” for the development of the ethical management practice of the company. The practice has been approved by the Board of Directors on August 4th, 2014 and was revised on March 23, 2015 for the first time. Note 1: Provide description on the summary and description column regardless of checking on “yes” or “no” for the operations.

2014 Annual Report 44

219Company Management Report

(8)Inquiry Method of Governance Codes, Important Information for enhancing realization of Operation of Corporate Goverance and Relevant Regulations Established by the Company The “Investor Information” on the company website has disclosed relevant corporate governance, integrity management practice and other regulations, and will be updated from time to time.

2014 Annual Report 45

YULON NISSAN

(9) Execution Status of Internal Control System 1. Statement of Internal Control System Yulon Nissan Motor Co., Ltd. Statement of Internal Control System Date: March 23, 2015 Yulon Nissan Motor Company (Yulon Nissan) has conducted a self-check of internal control for the period of January 1, 2014 to December 31, 2014. The results are as follows: 1. Yulon Nissan acknowledges that the Board of Directors and management personnel are responsible for establishing, performing, and maintaining an Internal Control System. The said system has already been duly established at Yulon Nissan. The purposes of the Internal Control System is to provide a reasonable assurance for the Company’s efficient and effective operations (including profit, performance and safeguard of assets, and etc.), the reliability of financial reports, and the compliance with applicable laws and regulations. 2. Yulon Nissan also acknowledges that the Internal Control System possesses inherent constraints irrespective of the intended impeccability of the system design and therefore could only provide a reasonable assurance of the three aforementioned goal. Due to the changes in environment and circumstances, the effectiveness of the internal control system may vary accordingly. Nevertheless, the Internal Control System is equipped with self-monitoring mechanisms. Should any flaws be recogniezed, the Company would enforce corrective measures immediately. 3. The company evaluates the effectiveness of the design and implementation of its Internal Control System in accordance with the Guidelines for the Establishment of Internal Control System by Public Companies (the “Guidelines”). The said Guidelines divide internal control into five components: (1) Control Environment. (2) Risk Assessments, (3) Control Operations, (4) Information and Communication, and (5) Monitoring. Each component comprises certain factors. More information regarding the said factors is available in the aforesaid Guidelines. 4. Yulon Nissan has assessed and evaluated the design and effectiveness in the design and performance of the aforementioned system. 5. Based upon the evaluation of the aforementioned system, Yulon Nissan considered the Internal Control System during the opening period (including supervision and management of subordinates), which included the Design and performance of the known operation effectiveness and the degree of reaching the efficiency goals, reliability of financial reporting and obeying the related internal control system of the relevant laws, are all effective, and it can ensure that the aforementioned goals can reasonably reached. 6. The Statement of Internal Control System will be a prominent feature of Yulon Nissan annual report and prospectus, and will be released to the public. Should any statement herein involve forgery, concealment or any other illegality, Articles 20, 32, 171 and 174 of the Security Exchange Law shall apply. 7. This Statement of Internal Control System has been approved by Yulon Nissan Board of Directors at the meeting of March 23, 2015 with 10 directors present at the meeting and none disagreeing with this Statement of Internal Control System. Yulon Nissan Motor Co., Ltd. Chairman: Kenneth K. T. Yen President: Wen-Rong Tsai 2. Project Examination Report of CPAs’ Internal Control System:Nil

2014 Annual Report 46

219Company Management Report

(10) Company or employees, who have been penalized by laws, or employees received penalties From company for violating the internal control regulations, major Shortcomings and Status of improvements in Fiscal Year 2014 and prior to the publication date of the Annual Report:Nil (11) Major resolutions made by the Shareholders Meeting and Board of Directors Meeting in fiscal year 2014 and prior to the publication date of annual report Title of Meeting

Date of Meeting

Important Resolutions

Board of Mar 24, Directors 2014

1. Passed 2013 Operating Report and Financial Statements. 2. Passed to convene the Company’s Shareholders General Meeting 2014. 3. Passed modification of “ Operating Procedures for Assets Acquisition and Disposal”. 4. Passed YNM’s “2013 Declaration Statement of Internal Control”. 5. Passed of the managerial personnel’s discharge and assignment.

Board of May 9, Directors 2014

1. Passed the Company's surplus distribution for fiscal year 2013 ; each stock is issued with a total of NTD 19.47 as a cash dividend. 2. Passed 2014 operational target and budget plan. 3. Passed “Internal Control System” and “Internal Audit Implementation Rules” under “Operating Procedures for Assets Acquisition and Disposal”. 4. Passed shareholder’s proposal for 2014 Shareholders’ Meeting.

June 23 2014

1. Passed to acknowledge the Company’s final statement of fiscal year 2012 2.Adoption of the Company’s surplus distribution proposal for fiscal year 2013 each stock is issued with a total of NTD 19.47. 3. Passed amendment to “ Operating Procedures for Assets Acquisition and Disposal”.

Shareholders

Meeting

Board of August 4, Directors 2014

1. Passed amendment to “Articles of Incorporation”. 2. Passed amendment to “Rules of Procedure for Shareholders’ Meeting”. 3. Passed to change the CPA and evaluate the independence. 4. Passed amendment to “Stocks Affair Internal Control System” and “Stocks Affair Internal Audit Implementation Rules”. 5. Passed establishment of “Principles of Corporate Governance”. 6. Passed establishment of “Principles of Ethical Corporate Management”. 7. Passed establishment of “Principles of Corporate Social Responsibility”.

Board of Nov 10, Directors 2014

1.Passed Company's Internal Control Statement of 2015. 2.Passed supplementation to “Internal Control System” and “Internal Audit Implementation Rules”. 3.Passed the Lift on The Prohibition on Managerial Personnel from “Concurrently Act as A Managerial Personnel of Another Company”.

Board of Dec 22, Directors 2014

1.Passed the supplementation to the system of “Personal Information Protection”. 2.Passed the supplementation to the system of "Intellectual Property Acquisition, Protection and Implementation" 3.Passed 2015 Remuneration Committee Calendar. 4.Passed the managerial personnel’s assignment.

Board of Mar 23, Directors 2015

1. Passed 2013 Business Report and Financial Statements. 2. Passed proposal of an Election of Directors and Supervisors. 3. Passed to convene the Company’s Shareholders General Meeting 2015. 4. Passed approval of an Internal Audit Officer Appointment. 5. Passed YNM’s “2014 Declaration Statement of Internal Control”. 6. Passed amendment to “Principles of Corporate Governance”. 7. Passed amendment to “Principles of Ethical Corporate Management”.

2014 Annual Report 47

YULON NISSAN

Title of Meeting

Date of Meeting

Board of May 11, Directors 2015

Important Resolutions 1. Passed proposal of an accounting officer appointment. 2. Passed 2015 operational target and budget plan. 3. Passed amendment to "Internal Control System" and "Internal Audit Implementation Rules". 4. Passed the Company’s surplus distribution proposal for fiscal year 2014 each stock is issued with a total of NTD30. 5. Passed nomination of the Candidate list of Independent Directors for 2015 Shareholders' Meeting. 6. Passed release the prohibition on directors from participation in competitive business. 7. Passed amendment to "Principles of Corporate Social Responsibility". 8. Passed formulation of "Principles of Corporate Social Responsibility".

(12)Major Issues on record or written statements made by any director or supervisor which specified his/her dissent to important resolutions passed by the Board of Directors Meeting in fiscal year 2014 and prior to the publication date of the annual report: Nil (13)The discharge and resignation of chairman, president, accounting chief, financial affairs chief, internal audit chief, and R&D supervisors for 2014 and prior to the Publication Date of the Annual Report:

Title Internal Audit Chief Accounting Manager

Name

Date of Office

Date of Resignation and Discharge

Reason of Resignation and Discharge

Yuan-Bin Niu

92.10.22

104.02.01

Retirement

Yan-Jung Kuan

100.02.09

104.05.08

Retirement

4. Information on CPA Audit fees (1) Information on CPA Audit Fees: CPA firms

CPA’s Name

Audit Period

Deloitte & Touche CPA Firm

Chien-Hs in Hsieh

En-Ming Wu

2014.01.01-2014.03.31

Deloitte & Touche CPA Firm

Chien-Hs in Hsieh

Wan-Yi Liao

2014.04.01-2014.12.31

2014 Annual Report 48

Note Due to the CPA Firm’s internal arrangement

219Company Management Report

Unit: NTD Thousand Fee Item Compensation Range 1 Less than NT2,000,000 2

NT2,000,000~NT4,000,000

3

NT4,000,000~NT6,000,000

4

NT6,000,000~NT8,000,000

5

NT8,000,000~NT10,000,000

6

More than NT10,000,000

Audit Fee

Non-Audit Fee

Total Amount

v

(2) Amount of audit and non-audit fees and contents of non-audit services: N/A. (3) The change of CPA firms and the audit fees after change is lower than that before change, the reduced amount, proportion and reason: N/A. (4) The audit fees after change is more than 15% lower than that before change, the reduced fee amount, proportion and reason: N/A.

5. Information on Change of CPAs (1) Information of the Previous CPAs: Change Date Change Reason Explanation

August 4, 2014 The Company appointed CPAs Chien-Hsin Hsieh and En-Ming Wu of Deloitte and CPA Firm as the CPAs of auditing 2013 financial statements. Due to the CPA Firm’s internal arrangement, the successive CPAs will be Chien-Hsin Hsieh and Wan-Yi Liao instead for 2014 financial statement audit. Counterparty CPA Appointor Situation

Termination Explanation from Appointor or CPA

Initiative Termination

Not Applicable

Not Applicable

Reject Acceptance/ Continuance

Not Applicable

Not Applicable

Audit opinion other than unqualified opinion within two years and its reason

None Accounting principle or practice Yes

Audit scope or procedure

Different opinions between CPA and issuer

Other disclosures (based on article 10-5-1-4 of Compilation Guidelines for Public Company Annual Reports)

Disclosure of financial report

Other No



Not e:

Not Applicable

None

2014 Annual Report 49

YULON NISSAN

(2) Information of the Successive CPAs: Firm Name

Deloitte & Touche CPA Firm

CPA Name

CPAs Chien-Hsin Hsieh and Wan-Yi Liao Resolved by the Board of Director on August 4,

Appointment Date

2014

Accounting practices or principles for certain transactions and possible audit opinions and results Not applicable of financial statements before appointment Different opinions between succeeding and preceding CPAs in writing

Not applicable

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

6.Upon the Company’s chairman, general manager or financial/ accounting manager employed by the Verifying CPA firm within one year, the name, the position, and time period in the CPA firm or its affiliates should be disclosed: N/A. 7.Changes of Share and Share Collateralizing for Directors, Supervisors, Managers and Shareholders with over 10% of shares held during the 2014 fiscal year and prior to the publication date of the annual report

2014 Annual Report 50

219Company Management Report

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

Title

Unit:Thousand Share Current Fiscal Year and Fiscal year 2014 before May 12, 2015 Number of Increased Number of Increased holding (Decreased) holding (Decreased) Shares Number of Shares Number of Increased Shares Increased Shares (Decreased) Collateralized (Decreased) Collateralized

Name

Corporation Chairman

Yulon Motor Co., Ltd.

-

-

-

-

Chairman

Yulon Motor Co., Ltd. Representative: Kenneth K.T. Yen

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Director Director Director Corporation Director Director Director Director

Director

Director

Director Corporation Supervisor Supervisor Supervisor Independent Director

Yulon Motor Co., Ltd. Representative:Kuo-Rong Chen Yulon Motor Co., Ltd. Representative: Wen-Rong Tsai Yulon Motor Co., Ltd. Representative: Zhen –Xiang Ya Nissan Motor Co., Ltd. Nissan Motor Co., Ltd. Representative: Takashi Nishibayashi Nissan Motor Co., Ltd. Representative: Atsushi Kubo Nissan Motor Co., Ltd. Representative: Keiji Hatanaka (Note 1) Nissan Motor Co., Ltd. Representative: Junichi Ohori (Note 2) Nissan Motor Co., Ltd. Representative: Isao Morimoto (Note 1) Nissan Motor Co., Ltd. Representative: Moritami Matsumoto (Note 2) Wei Wen Investment Co., Ltd Wei Wen Investment Co., Ltd Representative: Kwan-Tao Li Wei Wen Investment Co., Ltd Representative: Tai-Ming Chen (Note 4) Tsong-Jen Huang

2014 Annual Report 51

YULON NISSAN

Current Fiscal Year and before May 12, 2015 Number of Increased Number of Increased holding (Decreased) holding (Decreased) Shares Number of Shares Number of Increased Shares Increased Shares (Decreased) Collateralized (Decreased) Collateralized Fiscal year 2014

Title

Name

Independent Director

Robert Mao

-

-

-

-

Supervisor

Yosuke Sato

-

-

-

-

President

Wen-Rong Tsai

-

-

-

-

Kuo-Rong Chen

-

-

-

-

Keiji Hatanaka (Note1)

-

-

-

-

Junichi Ohori(Note2)

-

-

-

-

Leman C.C. Lee(Note3)

-

-

-

-

Vice President

Isao Morimoto (Note1)

-

-

-

-

Vice President

Moritami Matsumoto(Note2)

-

-

-

-

Vice President

Takeshi Fujiwara(Note1)

-

-

-

-

Vice President

Kenju Shimoyama (Note2)

-

-

-

-

Senior General Manager

Yoshihiro Takahama(Note4)

Manager

Jiang-Shan Lee

-

-

-

-

Manager

Chiung-Ming, Chou

-

-

-

-

Manager

Shun-Chi Tsai

-

-

-

-

Manager

Dennis Chang

-

-

-

-

Manager

Tsan-Huang Lin

-

-

-

-

Manager

Yu-Chou Hsieh

-

-

-

-

Manager

Wen-Chuan Chung

-

-

-

-

Manager

Wen-Chi Mao

-

-

-

-

Manager

Wen-Chiang Shu

-

-

-

-

Manager

Chao-Yen Liang (Note3)

-

-

-

-

Accounting Manager

Chen-Hua, Chi(Note5)

-

-

-

-

Special Assistant to the Chairman Senior Vice President Senior Vice President Senior Vice President

Note 1:Resigned on Apr 1, 2014.

2014 Annual Report 52

219Company Management Report

Note 2:Appointed on Apr 1, 2014. Note 3:Appointed on Jan 1, 2015. Note 4:Appointed on Jul 1, 2014 Note 5:Appointed on May 11, 2015

(2)Information of Share Changes:Nil (3)Information of Share Collateralizing:Nil

2014 Annual Report 53

YULON NISSAN

8.Information on the top-10 shareholders who are affiliates or related as spouse or second cousins: The Information of Shareholders with Shareholding Percentage as the Top 10, who are Mutually Related

Name

Yulon Motor Co., Ltd. Kenneth K.T.Yen Kuo-Rong Chen

Title, name, and relationship of Shareholding of the top-10 shareholders who Shareholdings in the Shareholding of the Person Spouse and Underage are Names of Others Children affiliates or related as spouse or second cousins Number of Share Number of Share Number Share Name Relationship Shares holding Rate Shares holding Rate of Shares holding Rate Yu Ching Subsidiary Business Co., Ltd. Subsidiary 143,500,000 47.83 Sin Chi Co., Ltd. 5,000

-

-

-

-

-

-

-

Wen-Rong Tsai

-

-

-

-

-

-

-

-

Zhen –Xiang Yao

-

-

-

-

-

-

-

-

40.00

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Atsushi Kubo

-

-

-

-

-

-

-

-

Junichi Ohori

-

-

-

-

-

-

-

-

Moritami Matsumoto

-

-

-

-

-

-

Nissan Motor Corporation Takashi Nishibayashi

Yu Ching Business Co., Ltd.

120,000,000

3,500,000

1.17

-

-

-

-

Sin Chi Co., Ltd.

3,050,000

1.02

-

-

-

-

Cathay Life Insurance Co., Ltd

2,389,000

0.80

-

-

-

-

Wei Wen Investment Co., Ltd.

1,878,000

0.63

-

-

-

-

Kwan-Tao Li

-

-

-

-

-

-

Tai-Ming Chen

-

-

-

-

-

-

-

-

-

-

Wei Tai Investment Co., Ltd.

1,776,000

0.59

Lo-Wen Enterprises Co., Ltd

1,500,000

0.50

Bureau of Labor Insurance – New Plan

1,067,000

0.36

-

-

-

-

952,000

0.32

-

-

-

-

Taiwan Life Insurance Co. Ltd

2014 Annual Report 54

Yulon Motor Co., td. Sin Chi Co., Ltd. Yulon Motor Co., td. Yu Ching Business Co., Ltd. -

Note

Director

Representative OF Directo

Director

Representative OF Directo

Mother Company Representative: Subsidiary of Kenneth K.T.Yen Yulon Motors Co., Ltd. Mother Company Representative: Yulon Motors Co., Kuo-Rong Chen Ltd.

-

Representative: Hong-tu Tsai

The chairman is Yulon Motor the large shareholder who supervisors Co., td. has ability to control company. Representative OF supervisors Representative OF supervisors The chairman is Representative: Yulon Motor the large shareholder who JIan Lin Zhu Co., td. has ability to control company. The chairman is Representative: Yulon Motor the large shareholder who Wei Gong Chi Co., td has ability to control company. Non-juristic person, not applicable -

-

Representative: Shu-Bo Su

219Company Management Report

9.The number of shares held by the company, the company’s directors, supervisors, managers and its directly or indirectly controlled business toward the same investment businesses, as well as the combined calculated shareholding percentage Unit:number of shares:% Invested from directors, supervisors and managers, Invested from Yulon Nissan or companies that are Motor Co., Ltd. directly or indirectly Reinvested Companies controlled by Yulon Nissan

Yi-Jan Overseas Investment Co., Ltd.

Total investment

Shares

Percentage

Shares

Percentage

Shares

Percentage

84,986,756

100%

-

-

84,986,756

100%

2014 Annual Report 55

YULON NISSAN

IV、Capital Raising Status 1. Capital and Shares (1)Source of Share Capital 1.Source of Share Capital Unit:Thousand Shares:NTD:Thousand Dollars Authorized Capital Year

Par

Month

Value

Shares

Paid-up Capital Stock

Amount

Shares

Remark Invested with

Source of

Amount

Other

Assets Other

Share Capital

than Cash

Separately 2003/10

10

600,000

6,000,000

300,000

3,000,000

-

Established

Note

3,000,000 Note :Approved in the letter No. Shang-Zi-Di 09201296600, dated October 22,2003

2.Class of Shares Unit:Thousand Shares Class of Shares Common Stock

Authorized Capital

Remark

Issued

Unissued Capital

Total

300,000(Listed)

300,000

600,000

-

3.Securities under the sum-up reporting method:N/A

(2)Structure of Shareholders May 12, 2015 Structure of Governme Foreign Financial Other Shareholders ntal Natural Person Institutional and Institution Institution Quantity(Qty) Institution Natural Person Number Shares Percentage

1

12

78

1,067,000 4,534,208 159,587,583 0.35

1.51

53.20

2014 Annual Report 56

Total

4,191

75

4,357

10,817,918

123,993,291

300,000,000

3.61

41.33

100.00

Capital Raising Status

(3)Status of Ownership Dispersion Par value per share: NTD 10.00 Shareholding class

No. of shareholders

May 12, 2015

Shares

Percentage

1~

999

540

44,565

0.01%

1,000~

5,000

3,341

5,548,067

1.85%

5,001~

10,000

243

1,928,920

0.64%

10,001~

15,000

71

906,000

0.30%

15,001~

20,000

39

726,000

0.24%

20,001~

30,000

30

774,920

0.26%

30,001~

40,000

19

684,523

0.23%

40,001~

50,000

11

526,293

0.17%

50,001~

100,000

21

1,428,000

0.48%

100,001~

200,000

18

2,337,639

0.78%

200,001~

400,000

8

2,103,000

0.70%

400,001~

600,000

4

1,851,073

0.62%

600,001~

800,000

2

1,529,000

0.51%

800,001~ 1,000,000

1

952,000

0.32%

9

278,660,000

92.89%

4,357

300,000,000

100.00%

Make a self classification based on the actual situation when above 1,000,001 Total

(4) List of Major Shareholders No. of shares Names of

Shares

Percentage %

Major shareholders Yulon Motor Co., Ltd.

143,500,000

47.83

Nissan Motor Co., Ltd.

120,000,000

40.00

Yu Ching Business Co., Ltd.

3, 500,000

1.17

Sin-Chi Co., Ltd

3,050,000

1.02

Cathay Life Insurance Co., Ltd

2,389,000

0.80

Wei Wen Investment Co., Ltd.

1,878,000

0.63

Wei Tai Investment Co., Ltd.

1,776,000

0.59

Lo-Wen Enterprises Co., Ltd.

1,500,000

0.50

1,067,000

0.36

952,000

0.32

Bureau of Labor Insurance – New Plan Taiwan Life Insurance Co. Ltd

2014 Annual Report 57

YULON NISSAN

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

Dividend

2014 year

and before May 12,

Highest

449

440

345.5

Lowest

228.5

271.5

279

Average

308.58

354.53

329.18

83.47

89.77

92.07

64.00

-

-

300,000,000

300,000,000

300,000,000

EPS(Earning Per Share)

24.33

21.75

3.42

Cash Dividend

19.47

-

-

After distribution

EPS(Earning Weighted average number of shares Per Share)

2013 year

2015

Nest Assets Before distribution Per share

Current Fiscal Year

Stock

-

-

-

-

Dividend

-

-

-

-

-

-

-

Analysis on Price-Earnings(P/E) Ratio

12.68

16.30

-

ROI(Return Price-Dividend Ratio on Dividend Yield Investment)

15.78

-

-

6%

-

-

Per share

Cumulative un-paid dividend

(6)Dividend Policy and Execution Status 1. Dividend Policy governed by this Company By-Laws For the Company’s net income at the end of each fiscal year, in addition to the income tax withheld by law, the loss appropriation for prior years must be processed first, then, appropriating 10% legal surplus from the balance amount and other earnings surplus and/or reserve in accordance with the component authorities. If any surplus still remains, it shall be distributed as follows: (1) 0.1% ~ 5% as Employee Bonus. (2) The Board of Directors shall draft a distribution proposal of the remaining balance together with the accumulated undistributed earnings from the last fiscal year and present it to the Shareholders Meeting final resolution. This company is in a mature and stable industry. While mapping out our dividend distribution program, we would take the profitability, capital requirement for future operation, possible change in the industry environment, shareholder equity and balance of dividend as well as long-term financial planning into consideration. Dividend would be distributed in cash and stock. Dividend in cash would be declared on profit made for specific fiscal period and shall not be less than 20% of the total dividend declared for the year. 2. The proposal to this Shareholders Meeting for dividend distribution as follows The proposal to the Shareholders General Meeting for 2015 for the dividend distribution is cash dividend at NT$30 per share.

2014 Annual Report 58

Capital Raising Status

(7) The effect of the distribution of stock dividend as proposed by this Shareholders Meeting on operation performance and earning per share:Nil (8) Employee Bonus and Remuneration to the Directors and Supervisors 1.The percentage or limit for employee bonus and remuneration to the directors and supervisors set forth in the Articles of Incorporation are If there should have an earnings derived from the company’s final reporting of each fiscal year, when distributing the earnings after tax payment, and covering the previous fiscal years losses, it should first allocate a 10% as legal reserved, and if there is remaining, it shall be distributed according to the following: (1) 0.1% ~ 5% as Employee Bonus. (2) The Board of Directors shall draft a distribution proposal of the remaining balance together with the accumulated undistributed earnings from the last fiscal year and present it to the Shareholders Meeting final resolution. Directors and supervisors of the Company may be paid NTD 100,000 (including the transportation allowances) monthly. 2.The estimates of the employee bonus and directors and supervisors remuneration are NT$32,722,800 and 0, this fiscal year. 3.The employee’s bonus and directors/supervisors’ remuneration paid from last fiscal year’s earnings are: (1) The proposal to distribute employee bonus of NTD32,722,800, Stock bonus of NTD 0 and directors/Supervisors of NTD0. There’s no deviation from the estimated 2014 annual budget. (2) Employees’ dividends that had been determined through 2014 board of directors’ proposals were paid in cash. (3) Employees’ dividends and rewards for directors and supervisors this time were deemed as the expenditure of 2014. The basic earnings per share of this year was calculated as NT$ 21.75. 4. The employee’s bonus and directors/supervisors’ remuneration paid from last fiscal year’s earnings is: Approved from the 10th meeting of 5rd Board of Director held on May 9, 2014, the earnings in fiscal year 2013 allocated as employee bonus were NTD 31,500,000, and the remuneration to the directors/supervisors was zero, a These amounts are consistent with the actual amounts distribution resolved in the Shareholders’ Meeting.

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

2. Corporate Bonds issued:Nil 3. Preferred Stock issued:Nil 4. GDR(Global Depositary Receipt) issued:Nil 5. Employee Stock Options issued:Nil

2014 Annual Report 59

YULON NISSAN

6. Restricted Stock Dividends of Employee Issued:Nil 7. New shares issued for merger or acquistion:Nil 8. Recorded up to the previous one quarter of the Date of the Report is in Printing, previously issued or privately raised marketable securities that are still not completed or the completed and planned benefits but not shown over the recent 3 years:Nil

2014 Annual Report 60

Hightlights Of Operations

V、Hightlights Of Operations 1.Business Content (1) Business Scope 1. Business Scope (1) Business Content: The company’s main operating items include the design, research, development, sales and spare parts of cars products: A. Passenger Vehicles: Sedan, RV and its components B. Commercial Vehicles: Diesel Truck, Diesel Chassis and its components (2) Operating weight Unit:NTD Thousand Business Content Finished cars

Fiscal year 2013 Amount

Fiscal year 2014

Percentage(%)

Amount

Percentage(%)

28,051,149

89.09

29,690,734

89.49

Parts

3,361,299

10.68

3,435,623

10.36

Other

73,602

0.23

50,480

0.15

Total

31,486,050

100.00

33,176,837

100.00

(3) Current main products A. NISSAN brand: Mew March series: 1.5L 4-speed automatic 5-door sedan ALL NEW LIVINA series: 1.6L: featuring continuously variable transmission, 5-door RV TIIDA series: 1.6/: 4-speed automatic transmission.

BIG TIIDA series: 1.6 L continuous variable speed hatchback SUPER SENTRA series: 1.8L all-speed automatic transmission, 4-door sedan TEANA series: 2.0/2.5L all-spee automatic transmission, 4-door sedan 370Z series: 3.7L imported 6-speed automatic/manual transmission sports car MURANO series: 3.5L imported all-speed gear-change 4WD Sport Utility Vehicle X-TRAIL model: 2.0/2.5L CVT Continuously Variable Transmission 4WD SUV. JUKE series: Imported SUV featuring continuously variable transmission (CVT) GTR series: 3.8L imported six-speed powershift sports car B. INFINITI: Q50: L4 2.0L turbo Manual/Automatic 7-speed, 4-door mid-sized luxury compact sport car Q50: V6 3.5L Hybrid Manual/Automatic 7-speed, 4-door luxury compact sport car. Q60: V6 3.7L Manual/Automatic 7-speed, 2-door luxury sport. Q70: V6 2.5L Manual/Automatic 7-speed, 4-door luxury compact sport car. Q70: V6 3.7L Manual/Automatic 7-speed, 4-door luxury crossover SUV QX50: V6 3.7L Manual/Automatic 7-speed, 5-door mid-sized luxury crossover SUV. QX60:V6 3.5L CVT Continuously Variable Transmission, 5-Door seven-passenger luxury SUV. QX60:V6 2.5L Hybrid CVT Continuously Variable Transmission, 5-Door seven-passenger luxury SUV QX70:V6 3.7L Manual/Automatic 7-Speed, 5-Door luxury SUV QX50 series: V6 3.7L 5-door, 7-speed automatic transmissio sports car

2014 Annual Report 61

YULON NISSAN

(2) Industry Summary 1. Industry Environment Analysis (1) Global Economic Environment The American QE(Quantitative easing) and direction of interest policy continue to affect the international economic development and the recovery pace of global economy. The United States considers interest rise due to the stable recovering of economy while other major countries still expect to provide growing momentum through continuous easing monetary policies. Under the dark cloud of deflation and Greek problems in areas circulated with EUROS, the European Central Bank has initiated QE in March 2015. Japan will continue to maintain easing monetary policy due to plaque of weak growth momentum. China has started reducing interest rate in March 2015 in order to provide an easing monetary environment. South Korea also followed and reduced interest rate in March 2015. The different paces of monetary policies form different countries have led to the high uncertainty in global financial market and economic development. All research institutes offer the 2015 global economic growth forecasts as shown in the following table: 2015 Global Economic Growth Rate Forecast Research Institute

Latest Forecast

Date of Announcement

IMF International Monetary Fund

3.5%↓(3.8%)

January 2015

World Bank

3.0%↓(3.4%)

January 2015

Global Insight

2.9%↓(3.0%)

March 2015

※The numbers inside ( ) refer to the previous forecast value (2) China Economic Environment The 2014 economic growth rate for Chinese economy was only 7.4% due to the slow investment growth and excess productivity as well as other pressure, hitting a new record low since 1990 (24 years). Today China faces with more complex economic environment, including impact from excess productivity, local government debts, rising financial risks, continuous decline of housing price, and inflation increase, resulting in increased pressure for economic downslide. The Premier of the People's Republic of China announced on the National People's Congress held in March 2015 that the 2015 economic growth rate will be 7%. The research institutes offer the following 2015 China economic growth forecasts as shown in the following table: 2015 China Economic Growth Rate Forecast Research Institute

Latest Forecast

China Government IMF International Monetary Fund World Bank

7.0%

Global Insight Asian Development Bank

Date of Announcement March 2015

6.8%↓(7.1%)

January 2015

7.1%↓(7.2%)

January 2015

6.5%(6.5%)

March 2015

7.2%(7.2%)

March 2015

※The numbers inside ( ) refer to the previous forecast values (3) Domestic Economic Environment In favor of the gradually improving global economy, declining international oil price and improvement on domestic economic situations, major domestic and international economic institutes mostly hold prudent and optimistic view on the trends of economic development for Taiwan in 2015. The market confidence is also positive while the research institutes offer the following 2015 domestic economic growth forecasts as shown in the following table:

2014 Annual Report 62

Hightlights Of Operations

2015 Taiwan Economic Growth Rate Forecast Date of Announcemt Research Institute Latest Forecast DirectorateGeneral of Budget, 3.78%↑(3.50%) February 2015 Accounting and Statistics, Executive Yuan Taiwan Institute of Economic 3.67%↑(3.48%) January 2015 Research Chung-Hwa Institute for Economic 3.50%↓(3.53%) December 2014 Research Asian 3.7%↑(3.6%) March 2015 Development Bank IMF International Monetary Fund 3.8%↓(3.9%) October 2014 ※The numbers inside ( ) refer to the previous forecast values 2. Industry Overview and Development Encouraged by the trend of changing new cars and decline in oil price in 2014, the automobile market has reached 414,298 units (about 414,000 units) in total annual sales, with a surprising 12% growth rate compared to that of 2013. During this period, Yulon Nissan continues to launch new models and change the models, leading the overall market trends and driving the annual car market to a record high in nearly 9 years. The number of domestic old cars aged over 10 years has reached 4 million units, accounting for 54.5% of all 7.34 million units in Taiwan. The rate has hit a record high and it is expected that this wave of business opportunity for consumers to change new cars will likely to continue to surge this year and become the main power in supporting the growth of car markets in Taiwan. Yulon Nissan also launches new SUV models this year to strengthen its overall competitiveness and to take the upcoming challenges. 3. Relationships of the industry’s upper, middle and down streams. Upper streams: partners of manufacturing car parts and components. Middle streams: center of manufacturing, R&D, and marketing. Down streams: dealers directly dealing with customers and being responsible for car sales and after-sale services. 4. Development trend and competition by each product line (1) Small family car(1600cc below): In 2014, 53,608 domestic small saloon cars under 1600cc were sold, indicating a increase rate of 12% compared to 2013, accounting for 31.2% of the domestic passenger car market. (2) 2.0L or below car models(1600~2000cc): In 2014. The medium sedan market sales reached 105,301 cars, accounting for 61.3% of domestic passenger vehicle market with an increase of 13% from 2013. (3) Decline of 2.0L or above car models The sales volume in the large-sized car market in 2014 amounts to 12,860, the sales volume fell by 23% from 2013. A 7.5% market share in the domestic vehicles market. (4) RV The sales volume in the RV car market is 133,680 vehicles, the sales volume with an increase of 13% from 2013.

(3) Technology, Research and Development (R&D) 1. As of the most recent years and Printing of the Annual Report, the total R&D expenditure invested

2014 Annual Report 63

YULON NISSAN

Unit:NTD Thousand Fiscal Year Item

Fiscal year 2013

R&D expenditure Net Sales

Fiscal year 2014

Current Fiscal Year and before May 12,2015(Note)

617,309

586,905

253,593

31,486,050

33,176,837

12,425,505

2.0%

1.8%

2.0%

Percentage of R&D expenditure over Net Sales Note:The figures are self-totaled number

2. The technology and product successfully developed (1) June 2006: Completed the development of new TIIDA model. (2) December 2006: Completed the development of SYLPHY new model. (3) September 2007: Completed the development of LIVINA new model. (4) November 2007: Completed the development of CABSTAR new model. (5) February 2009: Completed the development of new TEANA 08 model. (6) October 2011: Completed the development of new NEW MARCH model. (7) October 2012: Completed the development of new BIG TIIDA model. (8) October 2013: Completed the development of SUPER SENTRA model. (9) December 2012: Completed the Taiwan emission phase 5 development.of TEANA / MARCH / TIIDA 4-door. (10) Jan. 2014 completed the development for ALL NEW LIVINA. (11) Oct. 2014 completed the development for modified model of SENTRA AERO. (12) Mar. 2015 completed the development of new-generation X-Trail model. 3.R&D Plan (1) Products to Be Developed & Time Product Name

Time

BIG TIIDA Minor model modification SUPER SENTRA Minor model modification LIVINA ALL New Model

2015~2017 2015~2017 2015~2018

(2) Expected Development Costs 2015

2016

2017

385,000

346,500

346,500

(4) Long, short term business development plan In recent years the substantial decline in oil price, surging demand for change of new cars, and driven by car manufacturers releasing new models, the growing momentum of automobile market gradually improves. Nonetheless looking into the 2015 economic environment, the market is still subject to the impact of uncertain factors such as the U.S. withdrawal from QE mechanism, EU initiating QE policy, sharp fall and rise of currencies in other economic and

2014 Annual Report 64

Hightlights Of Operations

trade zone, and the fluctuations in raw material prices. Hence the company continues to take active planning and develop long and short-term strategic actions for different stages to cope with sustained corporate growth demand and to assure the sustainable management and long-term profit performance of the company. 1. Short -term business development plan (1) Product strategy Design the optimal combination of car models and boost market share via a complementary strategy with domestic made car and imported car models incorporated. Meanwhile, we also plan product lines close to the market trends , strive to produce the most attracting and needs-based products with an emphasized vehicle core value on better appearance, more durable usability, advanced technology and higher performance. (2) Marketing strategy A.Nissan: (A).To strengthen the brand core value of “passionate driving, sensible design, and innovation with a human-touch”. (B).To advocate activities of “promoting brand image,” “enhanced internal consensus,” “promotion activities for all car models/CRM” and “promotion activities for car types” to increase the brand penetration for our goal as an established auto giant. (C). In order to enhance Car Advisor competitiveness, improve successful transaction rate, and provide more convenient purchasing experience, “interactive experience platform ” , “ test drive at your home ” , and ICT ( Information and Communication Technology) tools such as "Nissan PAD" are introduced. B.Infiniti: (A).To stress the brand core value of “Inspired performance with unlimited glamour”. (B).To stress activities of “product experience marketing development,” “well-defined brand orientation” and “increased promotion effectiveness” to raise brand awareness. (C). To strengthen its distribution, NISSAN will continue to build offices meeting the “IREDI INFINITI Retail Environment Design Initiative,” expand digital assisting tool application and P.C.E (Premium Customer Experience, five-star prestigious services with continuous improvement on SSL and CSI. (3) Customer satisfaction strategies The series of customer value promotion activates developed over the years can gradually be used to build an example of benchmark enterprise in customer satisfaction with effective boosting of car sales. (4) Profit increasing strategies To achieve the best profit efficacy by enhancing car model combination management, and to effectively increase car model sales and profits by continuous implementation of car model profit and cost management. 2. Long-term business development plan (1) Implement changes in management system: A. Promote next-generation HR system The company will continue to develop strategy forming oriented learning organization and apply organizational process restructuring, V-up Japanese auto system analysis and problem-solving approach, and cost reduction to improve the efficiency of organizational operation. Meanwhile the company continues to expand the scope and application of knowledge management platform to create opportunities for employees to continuously learn and grow while building the learning environment and culture of organizations. (A)Excellent marketing team program: Improve the capacity of marketing team. (B)Outstanding supervisor program: Strengthen the management capacity of

2014 Annual Report 65

YULON NISSAN

management level. (C)Supervisor successor program: Pre-reserving successors for entry-level and middle supervisors (D)Key talent retention: Effectively retain the key core talents of the company through reasonable and transparent assessment system. (E)Dual-track system: Establish the long-term development direction for professional technical position and management position so the personnel will have explicit development course. (F)(F)Key process documentation: Record and retain the knowledge of corporate core values into documents through systematic approach for management and utilization. B. Introduce next-generation information system The construction of corporate smart decision-making supporting system is developed towards immediacy and quick response while integrating with the existing system to effectively simplify the operation process and bring management synergies into full play. Hence, the Smart DSS structure offers excellent operation environment and complete intelligence collection platform for all personnel at different levels of the company to decide and develop supporting reference. Moreover, the company also continues to develop and improve Smart DMS to strengthen the competitiveness in distributors, upgrade the sales power in distributors, customer satisfaction and operational benefits, and thereby improve the overall operational performance of the company. C. Continue to refine “innovative” corporate culture The future core competitive advantage will continue to develop from “innovation” with introduction of innovative products and services to effectively utilize the core intelligence capital of the company and comprehensively build customer values. In terms of product innovation, the company will collect and manage customer opinions with introduction or mainstream models into process management, thereby to discover the potential demand for consumers, develop and introduce products meeting customer expectation, and create maximum values for customers and shareholders. Continue to strengthen “quick service” in terms of service innovation: Effectively improve customer satisfaction through professional and trustworthy after-sales service and quick solution of customer problems. (2) Actively control ECFA progress, expand the planning of business development and achieve mutually reciprocal economic benefits The company is committed in developing high-quality and differentiated products through the continuous strengthening of R&D potential, thereby actively develop export opportunities for regional car recovery and components. Following the increasingly intense Cross-Strait economic trade, the company will re-review the cross-strait division of labor architecture through ECFA signing by proposing the optimal division of labor production model in order to expand the Chinese market with more active and flexible division of labor, which forms strategic supplement with partners, expands business scale and create higher operational performance. (3) Cooperate with global eco-friendly, energy-saving and carbon-reduction trends in the development of clean electric automobiles To build the green brand image and continue focusing on the introduction of eco-friendly and clean vehicles, the company initially combines with government departments to jointly respond and promote electric pilot demonstration operation plan to verify the vehicle quality and performance with excellent effectiveness and successfully establishment of reputation. In the future, the company will more actively expand the development of electric vehicles to achieve the green traffic vision of zero emission and zero pollution, in addition to attain co-existence among people, car and nature.

2014 Annual Report 66

Hightlights Of Operations

2. Market, Production & Sales Review (1) Market Analysis 1. Sales Area of company’s Main Products This company’s products are designing, R&D, Sales of Sedan, RV vehicles and commercial vehicles, and sales of other components. Taiwan area is our main sales area, in 2014, the local sales weight is 99%, and Indonesia and Egypt are the main export sales areas, the sales weight is 1%. 2. Market Share In 2014, we sold 42,707 general cars with a market share of 15.4% and 5,033 import ones, with a market share of 3.7%. The total sales volume is 47,740 units and the market share is 11.5%. The total sales volume in 2014 is increase 8.5% than 2013. 3. Analysis and Description of 2014 Market Sales Status and Growth 2014 was a year of major breakthrough in car sales under the impact of factors such as the gradual recovering of domestic economy, boosting Index of Consumer Sentiment (ICS) and international oil price drop. The new car sales of the whole year performed far better than expectation and hit a new record high of 414,000 units in 9 years. 4. Market Sales Forecast for This Year (2014) The year 2015 extended the hot sales of car market from the end of 2014 since the beginning. With the talk on new model release and driven by the promotional programs from all car manufacturers, the domestic car market has been considerably more active in the beginning of this year. Hence the total market sales between January and April this year was 138,465 units, contributing to a 5.8% growth compared with the same period last year. Looking the trend of changing new cars in the 2015 automobile market and driven by the continual fall in oil price and big car companies launching modified new models to the market, this year the number of car sales is likely to break the record of 414,000 units in 2014. Apart from launching the existing three mainstream car models in ALL NEW LIVINA, BIG TIIDA, SUPER SENTRA/SENTRA AERO, the Company will continue to improve innovation, and the brand image and brand preference of passionate driving, the Company also launched the new-generation perfect SUV X-TRAIL in May. X-TRAIL does not only provide comprehensive protection premium comfort equipment to satisfy SUV consumers in safety and comfort but also carried with the first 3A protective system of NISSAN to substantially boost the manipulation and safety of driving, which fully overthrows the existing impression of consumers on SUV. Moreover, ALL NEW LIVINA, BIG TIIDA, SUPER SENTRA/SENTRA AERO, and X-TRAIL are equipped with the new-generation CVT Continuously Variable Transmission with optimal saving in oil consumption and smoothness in shift conversion, accomplishing the superior performance of Grade-1 oil consumption, demonstrating NISSAN’s concrete actions in energy saving and carbon reduction. In 2015, the Company will focus on mainstream models including ALL NEW LIVINA, BIG TIIDA, SUPER SENTRA/SENTRA AERO, and X-TRAIL, incorporated with annual marketing campaigns, to take challenge of taking annual market share by 12.5% and ultimately targeting at the mid to long-term goal in 15%. 5. Competitive Niche (1) Advantageous Operation and Management Ability A. Expand combined operational effects across the strait and of the group.

2014 Annual Report 67

YULON NISSAN

B. Leverage Nissan’s global resources to reduce part costs. C. Strengthen our financial management ability and investment performance. (2) A Superior and Complete Product Line A. Introduce products that meet market and customer needs to create customers’ value. B. Innovate IT to strengthen product variation and competitive advantages. C. Increase brand name celebrity of our imported cars to continuously grow our sales volume. D. To develop a green brand image and increase product value and brand awareness (3) Chinese Style of Design Ability A. Play an important role in Nissan’s global R&D centers and dominate the design of some of our car models. B. Create profits through our technical output. C. Cater to the tastes of the Chinese market and design/develop products that can better meet customers’ needs. (4) A Comprehensive Service System A. Provide real-time and comprehensive value-added services through our e-platform. B. Increase our dealers’ overall operating and management ability. C. To promote “Service Express” to effectively increase customer satisfaction (5) A Learning Organization A. Increase our employees’ core, management and professional competency. B. Mold a knowledge sharing culture and create a new operating pattern. C. Increase the use of Nissan’s V-UP (DECIDE, V-FAST) system problem solving approach and gradually accumulate our acquired successful experience to form an innovative learning organization and establish long-term competitive advantages. 6. Advantageous and Disadvantageous Factors of Perspective Development and Strategies to Address (1) Advantageous Factors Our company will continue to use “innovation” as the core of our entire development, and center on our consumers’ value to increase our “product power” and “service quality” to create a higher competitive edge. For our “product power”, we will successively introduce Nissan’s quality car designs (NISSAN and INFINITI brands) and combine the personalized IT interface with our products to provide our consumers with a more convenient and mobile life. A.In respect to NISSAN service, For our “service quality”, we will continue to provide our consumers with “genial”, “speedy”, “professional”, and “reliable” service with our thoughtful service ideal. B.In terms of service, INFINITI will continue to build offices meeting the specification of IREDI (INFINITI Retail Environment Design Initiative)” in addition to offering P.C.E (Premium Customer Experience), 5-start prestigious services for car owners to experience premium service quality. Meanwhile INFINIT will introduce digital assisting tools to provide more superior service experience, creating higher added-value and customer satisfaction for consumers. (2) Disadvantageous Factors A.The expansion of introducing entry-level models of luxury brands while the EU initiating easy monetary policy will substantially increase the competitiveness for the price of European import cars. B.In cooperation with government eco-friendly policy, the increase of convenience and availability of mass traffic transport network will affect consumers’ use of car and intention to purchase cars. C. The pressure for New Taiwan Dollars deflation continues to increase following the withdrawal of U.S. QE policy, which affects the import cost of raw materials.

2014 Annual Report 68

Hightlights Of Operations

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

(2) The major usage and production processes of main products: The company’s main business is design, research, develop, sale and components sales of car products, and there are no production processes, therefore it’s not applicable. (3) Supplies of main raw materials: The company is not a production manufacturing industry; therefore it’s not applicable. (4) List of Major Suppliers and Clients Over the Recent 2 Fiscal Years 1. Data of suppliers accounting for more than 10% of total purchases over the recent 2 fiscal years Unit:NTD Thousand Fiscal year 2013 Rank Supplier’s Name

1

Yulon Motor Co., Ltd.

2

Others Net Purchase amoust

Amount

Relationship % to Net Supplier’s with YulonPurchase Name Motor

24,923,064

99

140,473

1

25,063,537

Fiscal year 2014

Relative Party

Yulon Motor Co., Ltd. Others Net Purchase amoust

100

Amount

Relationship Relationship % to Net Supplier’s % to Net with Yulonwith Amount Purchase Name Purchase Motor Yulon-Motor

27,438,045

99

404,834

1

27,842,879

First season in 2015

Relative Party

Yulon Motor Co., Ltd. Others Net Purchase amoust

100

7,374,371

95

414,847

5

7,789,218

Related Party

100

2. Data of clients accounting for more than 10% of total sales over the recent 2 fiscal years Unit:NTD Thousand Rank

Supplier’s Name

Fiscal year 2013 Amount

Fiscal year 2014

Relationship % to Net with Purchase Yulon-Motor

% to Net Purchase

Relationship with Yulon-Motor

29,532,957

89

Relative Party

Amount

First season in 2015 % to Net Purchase

Relationship with Yulon-Motor

8,040,721

89

Related Party

Amount

1

Taiwan Acceptance 27,903,555 Corporation

89

2

Others

3,582,495

11

3,643,880

11

988,332

11

31,486,050

100

33,176,837

100

9,029,053

100

Net Purchase amoust

Relative Party

2014 Annual Report 69

YULON NISSAN

(5) Production Volume over the recent 2 years: This company is not a production manufacturer industry; therefore it’s not applicable. (6) Sales Volume of Recent 2 Fiscal Years Unit:Taiwan \ NTD Thousand Fiscal Year Sales Volume

Fiscal year 2013 Local Sales

Fiscal year 2014

Export Sales

Local Sales

Volume

Value

Volume

Vehicle

44,627

28,051,149

-

-

Parts

-

2,991,312

-

Other

-

73,602

Total

-

31,116,063

Main Produces (or by Department)

Value

Export Sales

Volume

Value

Volume

Value

46,190

29,690,734

-

-

369,987

-

3,067,762

-

367,861

-

-

-

50,480

-

-

-

369,987

-

32,808,976

-

367,861

3. Employee Data for the Recent Two Years and as of the Publication Date of Annual Report Fiscal Year Marketing Management No. of Reserch & Employee Development Total Average age Average seniority Doctor Master Academy College Ratio Senior High School Below Senior High School

Fiscal year 2013

Fiscal year 2014

Current Fiscal Year and before May 12,2015 195 80

202 78

200 80

140

148

147

420 39.5 11.62 0 216 174 28

428 40.13 12.11 0 219 179 28

422 40.4 12.33 0 215 177 28

2

2

2

4. Expenditures on Environment Protection (1) Losses and Disposal caused by environmental pollution over the recent 2 years: Nil (2) Probable environmental expenditures: The Company has passed the ISO 14001 certification in Nov. 2004 and will continue to support the environment protection in the future. No major probable environmental expenditures are expected in the future.

5. Labor-Capital Relationship (1) Current Prominent Labor-Capital Agreements, Employee Benefits and Their Implementation

2014 Annual Report 70

Hightlights Of Operations

1. Status of Labor-Capital Agreements (1) This company holds a monthly meeting with the labor representatives for proper communication of problems and improvements between the proprietor and the laborers. (2) Understand and pay more attention the needs and voice of the employee to promote the Labor-Capital harmony. (3) Ask for the opinions from the officials of the labor authorities, scholars or lawyers on relevant issues and hold seminars of relevant topics regularly. (4) Continue to strengthen our effort in educating the employees to enhance convergence. 2. Employee Benefits (1) Provide commuter’s transportation and scheduled home-returning transportation free of charge. (2) Provides safe, convenient, quiet dormitory environment. (3) Establish employee welfares zone, which includes tennis court, indoor and outdoor basketball court, golf drivingrange, leisure garden, KTV, warm water swimming pool, sauna facilities, video/audio center, western-style food restaurant, gymnasium, etc. (4) Organize annual celebration event company-wide, year-end lucky draw and banquet. (5) Set up Worker’s Complaint Handling System to assist colleagues to solve working problems and to maintain their rights and privileges. (6) Institutionalize regulations on the prevention of sexual harassment to provide a harassment-free environment for the employees and employee-to-be. Necessary actions would be taken to prevent, correct, punish and handle acts of harassment, and to ensure the protection of the privacy of the victims as well as the rights of all employees. 3. Retirement System (1) This company complies with the requirements set forth in the Labor Standards Law and institutionalized relevant regulations on retirement and pecuniary aid in case of death. (2) For enhancing the quality of human resources and proper mechanism for replacing the old with the young employees, we have institutionalized a flexible retirement and resignation program. (3) The employee retirement regulations developed in accordance with “Labor Pension Act” belongs to the regulation governing pension appropriation. The Company has appropriated 6% from the monthly salary of employees to the individual pension fund accounts at the Bureau of Labor Insurance since July 1st, 2005. The 2014 and 2013, the Company has recognized the amount of appropriation according to the ration stipulated in the appropriation program to the Statement of Comprehensive Income in the amount of NT12,935 thousand and NT12,548 thousand, respectively. (4) The Company adopted the defined benefit plan under the Labor Standards Law, under which pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name.

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

2014 Annual Report 71

YULON NISSAN

6. Prominent Contracts Contract

Counter party Contract Period Highlights of Provisions Nissan Motor Co., Ltd.

2003.11.1~ 2008.10.31 Note(1)

Dealing Nissan Motor agreement on Co., Ltd. import cars

2003.11.1~ 2008.10.31 Note(1)

Technical cooperation agreement

OEM, Substitute Materials Contract

Yulon Motor Co., Ltd.

2015.5.1~ 2010.4.30 Note(2)

Sales Contract

Taiwan Acceptance Corporation

Note(3)

Distribution agreement

Yu Chang Motor Co., Ltd.

2014.3.1~ 2019.2.28

Distribution Yu Hsin Motor agreement Co., Ltd. Yu Tang Distribution Motor Co., agreement Ltd. and other 2 companies Yu Sing Motor Distribution Co., Ltd. and agreement other 2 companies Yuan Long Distribution Motor Co., agreement Ltd. and other 3 companies Chen Long Distribution Motor Co., agreement Ltd. and other 2 companies

2015.3.1~ 2019.2.28 2012.3.1~ 2017.2.28 2013.3.1~ 2018.2.28 t 2013.3.1~ 2017.2.28 2013.3.1~ 2016.2.29

Restrictive Terms 1. Restriction on sub-licensing to a Technical cooperation to third party develop and manufacture a 2. Restriction on sales beyond variety of vehicles licensed territories 1. Restriction on sales beyond Dealing matters with licensed territories import cars 2. Confidential responsibility on third party business 1. Restriction on sub-licensing to a Aseembly for variety of third party vehicles and auto parts 2. Restriction on sales beyond licensed territories 1. Restriction on sub-licensing to a Provide Car Financing to third party Dealers 2. Confidential responsibility on third party business 1. Restriction on sub-licensing to a Sales of Nissan a variety of third party vehicles and auto parts 2. Confidential responsibility on third party business 1. Restriction on sub-licensing to a Sales of Nissan a variety of third party vehicles and auto parts 2. Confidential responsibility on third party business 1. Restriction on sub-licensing to a Sales of Nissan a variety of third party vehicles and auto parts 2. Confidential responsibility on third party business 1. Restriction on sub-licensing to a Sales of Nissan a variety of third party vehicles and auto parts 2. Confidential responsibility on third party business 1. Restriction on sub-licensing to a Sales of Nissan a variety of third party vehicles and auto parts 2. Confidential responsibility on third party business 1. Restriction on sub-licensing to a Sales of Nissan a variety of third party vehicles and auto parts 2. Confidential responsibility on third party business

Note(1): If no action is taken to renew or non renew the contract at least 6 months prior to its expiration, the contract will automatically be renewed for 1 years. Note(2): If no action is taken to renew or non renew the contract at least 3 months prior to its expiration, the contract will automatically be renewed for 1 years. Note(2): Yulon Nissan Motor Co., Ltd., and Taiwan Acceptance Corporation are affiliates, and Dealers collections are made through Taiwan Acceptance Corp.; therefore contract duration was not specifically instituted.

2014 Annual Report 72

Hightlights Of Operations

VI、Financial Information 1. Condensed Financial Statements for the recent 5 fiscal year (1) Condensed Balance Sheet and Comprehensive Income Statement Individual Condensed Balance Sheets-IFRS

Unit:In NTD Thousand

Fiscal Year

Item

The financial data as of March 31, 2015 of that fiscal year

Financial Data in recent 5 years 2012

2013

2014

Current Assets

1,442,669

4,939,631

10,174,765

11,085,022

Property, plant and equipment

1,677,365

1,748,604

1,758,753

1,995,811

11,369

7,887

12,346

11,666

Other assets

24,198,766

28,622,496

24,538,542

25,063,411

Total Assets

27,330,169

35,318,618

36,484,406

38,155,910

3,149,879

5,172,176

6,369,203

7,200,705

7,139,879

11,013,176

3,564,997

5,105,965

3,184,691

3,335,281

6,714,876

10,278,141

9,553,894

10,535,986

10,704,876

16,119,141

(NOTE2)

-

20,615,293

25,040,479

26,930,512

27,619,924

Share Capital

3,000,000

3,000,000

3,000,000

3,000,000

Capital Reserves

6,129,405

6,129,405

6,129,405

6,129,405

12,389,954

15,700,634

16,384,208

17,409,374

8,399,954

9,859,634

Intangible assets

Current Liabilities

Before distribution After distribution

Non-current liabilities Before distribution Total Liabilities After distribution Equity attributable to owners of the company

Retained Earnings

Before distribution After distribution

Other equity Treasury stock Noncontrolling interest (NCI) Before distribution Total equity After distribution

( 904,066)

(NOTE2)

(NOTE2)

-

-

210,438

1,416,899

1,081,145

-

-

-

-

-

-

-

-

20,615,293

25,040,477

26,930,512

38,155,910

16,625,293

19,199,477

(NOTE2)

Note 1: Quarterly Statement of the First Quarter of 2015 has not been reviewed by CPAs. Note 2: Earnings distribution proposal will be confirmed by 2015 general meeting of shareholders.

2014 Annual Report 73

-

YULON NISSAN

Consolidated Condensed Balance Sheets-IFRS Unit:In NTD Thousand The financial data as of March 31, 2015 of that fiscal year(NOTE1)

Financial Data in recent 5 years Fiscal Year

Item

2012

2013

2014

Current Assets

14,954,714

18,135,802

16,262,960

17,123,053

Property, plant and equipment

1,677,365

1,748,604

1,758,753

1,995,811

11,369

7,887

12,346

11,666

Other assets

10,686,931

15,426,672

18,472,488

19,046,605

Total Assets

27,330,379

35,318,965

36,506,547

38,177,135

3,150,089

5,172,523

6,369,203

7,200,820

7,140,089

11,013,523

3,564,997

5,105,965

3,206,832

3,356,391

6,715,086

10,278,488

9,576,035

10,557,211

10,705,086

16,119,488

(NOTE2)

-

20,615,293

25,040,477

26,930,512

27,619,924

Share Capital

3,000,000

3,000,000

3,000,000

3,000,000

Capital Reserves

6,129,405

6,129,405

6,129,405

6,129,405

12,389,954

15,700,634

16,384,208

17,409,374

8,399,954

9,859,634

(NOTE2)

-

( 904,066)

210,438

1,416,899

1,081,145

Intangible assets

Current Liabilities

Before distribution After distribution

Non-current liabilities Before distribution Total Liabilities After distribution Equity attributable to owners of the company

Retained Earnings

Before distribution After distribution

Other equity Treasury stock Noncontrolling interest (NCI) Before distribution Total equity After distribution

(NOTE2)

-

-

-

-

-

-

-

-

-

20,615,293

25,040,477

26,930,512

27,619,924

16,625,293

19,199,477

(NOTE2)

Note 1: Financial data of Q1 are reviewed by the CPA with the adoption of IFRS. Note 2: Earnings distribution proposal will be confirmed by 2015 general meeting of shareholders.

2014 Annual Report 74

-

Hightlights Of Operations

Individual Condensed Income Statement-IFRS Fiscal Year

Unit:NTD Thousand The financial data (Note ) as of March 31 2015of 2014 that fiscal year

Financial Data in recent 5 years 2012

2013

29,134,530

31,486,050

33,170,141

9,042,254

3,670,937

5,448,850

4,314,965

1,174,669

542,072

1,856,646

801,184

335,,346

5,559,055

6,950,244

7,225,493

903,157

Profit before tax

6,101,127

8,806,890

8,026,677

1,238,503

Net income (loss)

4,939,070

7,299,997

6,523,759

1,025,315

( 912,581)

1,115,187

1,207,276

(335,903)

4,026,489

8,415,184

7,731,035

689,412

4,939,270

7,299,997

6,523,759

1,023,315

-

-

7,731,035

689,412

-

-

21.75

3.42

Item Operating Revenue Gross Profit Operating profit or loss Non-operating and Expenses

Income

Other comprehensive profit and loss (net) Total current comprehensive profit and loss Net income attributable to parent company’s shareholders Net income attributable to unrestrictive equity Total comprehensive profit and loss attributable to parent company’s shareholders Total comprehensive profit and loss attributable to unrestrictive equity EPS (Earning Per Share)

-

4,026,489

-

16.46

-

8,415,184

-

24.33

Note : Quarterly Statement of the First Quarter of 2015 has not been reviewed by CPAs.

2014 Annual Report 75

YULON NISSAN

Consolidated Condensed Income Statement-IFRSs Fiscal Year

Financial Data in recent 5 years 2012

Item Operating Revenue

Unit:NTD Thousand The financial data (Note ) as of March 31 2015of 2014 that fiscal year

2013

29,134,530

31,486,050

33,176,837

9,042,254

3,670,937

5,448,850

4,321,661

1,174,669

512,388

1,832,179

786,229

329,541

5,588,746

6,974,711

7,240,448

908,962

Profit before tax

6,101,134

8,806,890

8,026,677

1,238,503

Net income (loss)

4,939,070

7,299,997

6,523,759

1,025,315

( 912,581)

1,115,187

1,207,276

(335,903)

4,026,489

8,415,184

7,731,035

689,412

4,939,070

7,299,997

6,523,759

1,025,315

-

-

-

-

4,026,489

8,415,184

7,731,035

689,412

-

-

-

-

16.46

24.33

21.75

3.42

Gross Profit Operating profit or loss Non-operating and Expenses

Income

Other comprehensive profit and loss (net) Total current comprehensive profit and loss Net income attributable to parent company’s shareholders Net income attributable to unrestrictive equity Total comprehensive profit and loss attributable to parent company’s shareholders Total comprehensive profit and loss attributable to unrestrictive equity EPS (Earning Per Share)

Note : Quarterly Statement of the First Quarter of 2015 has been reviewed by CPAs.

2014 Annual Report 76

Hightlights Of Operations

(2)Condensed Balance Sheet and Income Statement – the R.O.C. Financial Accounting Standards Individual Condensed Balance Sheet – the R.O.C. Financial Accounting Standards Unit:In NTD Thousand Fiscal Year

Item

Financial Data in recent 5 years 2010

2011

2012

Current Assets

3,855,526

4,089,045

1,476,958

Fund and Investment

15,402,999

19,069,822

23,891,801

40,840

37,166

45,236

Fixed assets Intangible assets

-

-

-

Other assets

1,443,347

1,459,623

1,729,328

Total Assets

20,742,712

24,655,656

27,143,323

1,790,241

2,698,572

3,147,752

3,470,241

5,758,572

7,137,750

Current Liabilities

Before distribution After distribution

Long term liabilities Other liabilities

-

-

-

1,787,127

2,393,600

3,325,239

3,577,368

5,092,172

6,472,991

5,257,368

8,152,172

10,462,991

Share Capital

3,000,000

3,000,000

3,000,000

Capital Reserves

5,988,968

5,988,968

6,129,405

7,958,797

10,110,362

11,980,839

6,278,797

7,050,362

7,990,839

Total Liabilities

Before distribution After distribution

Before distribution Retained Earnings After distribution Unrealized gains/losses On financial products Cumulative Translation Adjustment Net loss not recognized as pension cost Before Total distribution shareholder After equity distribution

-

217,579 -

-

464,154 -

-

(439,912) -

17,165,344

19,563,484

20,670,332

15,485,344

16,503,484

16,680,332

2014 Annual Report 77

YULON NISSAN

Consolidated Condensed Balance Sheet – the R.O.C. Financial Accounting Standards Unit:In NTD Thousand Fiscal Year

Item

Financial Data in recent 5 years 2010

2011

2012

Current Assets

4,382,762

13,848,011

14,989,003

Fund and Investment

14,876,477

9,310,797

10,379,966

40,840

37,166

45,236

-

-

Other assets

1,443,401

1,459,680

1,729,328

Total Assets

20,743,480

24,655,654

27,143,533

1,791,009

2,698,570

3,147,962

3,471,009

5,758,570

7,137,962

-

-

1,787,127

2,393,600

3,325,239

3,578,136

5,092,170

6,473,201

5,258,136

8,152,170

10,463,201

Share Capital

3,000,000

3,000,000

3,000,000

Capital Reserves

5,988,968

5,988,968

6,129,405

7,958,797

10,110,362

11,980,839

6,278,797

7,050,362

7,990,839

-

-

217,579

464,154

-

-

17,165,344

19,563,484

20,670,332

15,485,344

16,503,484

16,680,332

Fixed assets Intangible assets

Current Liabilities

Before distribution After distribution

Long term liabilities Other liabilities Total Liabilities

Before distribution After distribution

Before distribution After distribution Unrealized gains/losses On financial products Cumulative Translation Adjustment Net loss not recognized as pension cost Before Total distribution shareholder After equity distribution Retained Earnings

2014 Annual Report 78

-

-

-

(439,912) -

Hightlights Of Operations

Individual Condensed income statement – the R.O.C. Financial Accounting Standards Unit:NTD Thousand Fiscal Year

Financial Data in recent 5 years 2010

2011

2012

27,455,696

32,115,351

29,134,530

3,784,639

4,735,148

4,028,900

505,309

1,049,039

889,502

2,935,557

3,644,374

5,608,459

Non-Operating Expenses and losses

96,662

95,506

407,187

Gain (loss) before tax from continuing operation

3,344,204

4,597,907

6,090,774

Gain (loss) from continuing operation

2,883,898

3,831,565

4,930,477

Item Operating Revenue Gross Profit Operating Income Non-Operating Revenue and Gain

Gain (loss) from discontinued operating

-

-

-

Nonrecurring gain or loss

-

-

-

Cumulative effect of changes in accounting principles

-

-

-

Net Income (Loss)

2,883,898

3,831,565

4,930,477

9.61

12.77

16.43

EPS (Earning Per Share)

2014 Annual Report 79

YULON NISSAN

Consolidated Condensed income statement – the R.O.C. Financial Accounting Standards Unit:NTD Thousand Fiscal Year

Financial Data in recent 5 years 2010

2011

2012

Item Operating Revenue

27,455,696

32,115,351

29,134,530

3,784,639

4,735,148

4,028,900

504,554

1,048,713

859,818

2,923,153

3,606,612

5,633,431

Non-Operating Expenses and losses

83,460

57,418

402,468

Gain (loss) before tax from continuing operation

3,344,247

4,597,907

6,090,781

Gain (loss) from continuing operation

2,883,898

3,831,565

4,930,477

Gross Profit Operating Income Non-Operating Revenue and Gain

Gain (loss) from discontinued operating

-

-

-

Nonrecurring gain or loss

-

-

-

Cumulative effect of changes in accounting principles

-

-

-

Net Income (Loss)

2,883,898

3,831,565

4,930,477

9.61

12.77

16.43

EPS (Earning Per Share)

(3) CPAs’ Name and Auditor opinions Fiscal Year

2010

2011

2012

2013

2014

CPA En-Min Wu En-Min Wu Chien-Hsin Hsieh Chien-Hsin Hsieh Chien-Hsin Hsieh (Certified public Chien-Hsin Hsieh Chien-Hsin Hsieh En-Min Wu En-in Wu Wan-Yi Liao accountant) Auditors’ opinions

Modified unqualified comment

No retained comment

No retained comment

2014 Annual Report 80

No retained comment

No retained comment

Hightlights Of Operations

2. Financial analysis in recent 5 years (1)Financial Ratio Analysis complying with IFRS - individual Fiscal Year

Financial analysis in recent 5 years

Profitability

Operating Performance

Liquidity Finance % Structure%

Analysis items

years

2013 years

2014 years

25

29

26

27

1,442

1,724

1,712

1,551

46

96

160

154

Quick Ratio Interest coverage ratio Receivables turnover(times) Average number days receivables outstanding Inventory turnover(times)

46

95

160

150

3,139

519

189

137

49

66

105

91

7

5

3

4

15,248

14,489

12,058

344

13

16

31

29

Payable turnover(times) Average inventory turnover days Property, plant and equipment turnover(times) Total asset turnover(times)

-

-

-

1

19

18

19

19

1

1

1

1

Return on assets(%)

19

23

18

11

Return on equity(%)

25

32

25

15

Pre-tax Income to Paid-in Capital Ratio (%)

203

294

268

165

Profit margin(%)

17

23

20

11

16.46

24.33

21.75

3.42

Cash flow from operations ratio(%)

120

27

3

(Note 2)

Cash flow adequacy ratio(%)

91

64

46

39

Cash Flow Re-investment Ratio(%)

3

Operating leverage

2

1

2

1

Financial leverage

1

1

1

1

Earning Per Share(NT dollar) Leverage Cash Flow

2012 years

years

Debt to assets ratio Long term funds to Property, plant and equipment ratio Current Ratio

The financial data(Note 1) as of March 31 2015 of that fiscal year

(Note 4) (Note 3)

(Note 2)

Explanation of the changes in each financial ratio in recent two years: 1.The increase in current ratio and quick ratio was the result of the subsidiary company receiving more cash dividends. 2.The reduction of interest coverage ratio was the result of longer borrowing period and increased interest expense. 3.The increase in receivables turnover ratio was the result of increased sales. 4.The increase in payable turnover ratio was the result of change in certain payment conditions that led to reduction in accounts payable. 5.The reduction in return on assets, return on equity, profit before tax to capital stock, and cash flow was a results of reduced gross profits. 6.The reduction in cash flow adequacy ratio was a result of more distribution of dividends.

2014 Annual Report 81

YULON NISSAN

Note1 : Quarterly Statement of the First Quarter of 2015 has not been reviewed by CPAs. Note2 : The first quarter of 2015 was a net cash outflow from operating activities, therefore it is not counted. Note3 : 2014 cash flow from operating activities subtracting cash dividends becomes negative value and is hence not calculated. Note4 : 2013 cash flow from operating activities subtracting cash dividends becomes negative value and is hence not calculated. Note5: The formula is as follows: 1.Finance structure (1)Debt to assets ratio = total liabilities/total assets. (2)Long term funds to property, plant and equipment ratio = (net shareholders’ equity + Long term liabilities)/net fixed assets. 2.Liquidity (1)Current ratio = current assets/current liabilities. (2)Quick ratio = (current assets - inventory - prepaid expenses)/current liabilities. (3)Interest coverage ratio = before income tax expenses and interest expense/current interest expense. 3.Operating Performance (1)Receivables (including Account Receivable and Note Receivable from operating) turnover = cost of goods sold/average accounts Receivable (including Account Receivable and Note Receivable from operating). (2)Average number days receivables outstanding = 365 days/average receivable turnover. (3)Inventory turnover (times) = cost of goods sold/average inventory. (4)Payable (including Account Payable and Note Payable from operating) turnover = cost of goods sold/average accounts payable (including Account Payable and Note Payable from operating). (5)Average inventory turnover days = 365 days/average inventory turnover. (6)Property, plant and equipment turnover (times) = net sales/net fixed assets. (7)Total asset turnover = net sales/total assets. 4.Profitability (1)Return on assets = [net income after tax + interest expense x (1-tax ratio)]/average total assets. (2)Return on equity = shareholders’ equity/net income after tax. (3)Profit margin = net income after tax/net sales. (4)Earning Per Share = (net income after tax - preferred dividend)/weighted average number of shares. 5.Cash flow (1)Cash flow from operations ratio = cash flow from operations/current liabilities. (2)Net Cash flow adequacy ratio = cash flow from operations of recent five fiscal years/recent five fiscal years’ (capital expenditure + increase in inventory + cash dividend). (3)Cash flow re-investment ratio= (cash flow from operations - cash dividend)/(gross fixed assets + long-term investment + other asset + operation capital). 6.Leverage: (1)Operating leverage = (net operating revenue - variable operating cost and expense)/operating net income. (2)Financial leverage = operating revenue/(operating revenue - interest expense).

2014 Annual Report 82

Hightlights Of Operations

Financial Ratio Analysis complying with IFRS - Consolidated Fiscal Year

Financial analysis in recent 5 years

Profitability

Operating Performance

Liquidity Finance % Structure%

Analysis items

years

2013 years

2014 years

29

26

1,441

1,724

1,714

1,552

474

350

255

238

452

334

247

227

3,139

519

189

137

50

66

106

73

7

5

3

5

15,247

14,489

12,058

344

14

16

31

24

years

Debt to assets ratio

24

Long term funds to Property, plant and equipment ratio Current Ratio Quick Ratio Interest coverage ratio Receivables turnover(times) Average number days receivables outstanding Inventory turnover(times) Payable turnover(times)

28

Average inventory turnover days Property, plant and equipment turnover(times) Total asset turnover(times)

-

-

-

1

19

18

19

19

1

1

1

1

Return on assets(%)

19

23

18

11

Return on equity(%)

25

32

25

15

Pre-tax Income to Paid-in Capital Ratio (%)

203

294

268

165

Profit margin(%)

17

23

20

11

16.46

24.33

21.75

3.42

Cash flow from operations ratio(%)

120

27

(Note 3)

(Note 2)

Cash flow adequacy ratio(%)

163

108

69

44

Earning Per Share(NT dollar) Leverage Cash Flow

2012 years

The financial data(Note 1) as of March 31 2014 of that fiscal year

Cash Flow Re-investment Ratio(%)

3

Operating leverage

1

1

2

3

Financial leverage

1

1

1

1

(Note5) (Note 4)

(Note 2)

Explanation of the changes in each financial ratio in recent two years: 1.The reduction in current ratio and quick ratio was the result of increased short-term borrowing.。 2.The reduction of interest coverage ratio was the result of longer borrowing period and increased interest expense. 3.The increase in receivables turnover ratio was the result of increased sales. 4.The increase in payable turnover ratio was the result of change in certain payment conditions that led to reduction in accounts payable. 5.The reduction in return on assets, return on equity, profit before tax to capital stock, and cash flow was a results of reduced gross profits. 6. The reduction in Cash flow adequacy ratio was a result of more distribution of dividends.

2014 Annual Report 83

YULON NISSAN

Note1 : Quarterly Statement of the First Quarter of 2015 has been reviewed by CPAs. Note2 : 2015 Q1 operating cash flow from operating activities subtracting cash dividends becomes negative value and is hence not calculated. Note3 : The 2014 operational activities were net cash outflow and therefore not included in the calculation. Note4 : 2014 cash flow from operating activities subtracting cash dividends becomes negative value and is hence not calculated. Note5 : 2013 cash flow from operating activities subtracting cash dividends becomes negative value and is hence not calculated. Note6: The formula is as follows: 1.Finance structure (1)Debt to assets ratio = total liabilities/total assets. (2)Long term funds to property, plant and equipment ratio = (net shareholders’ equity + Long term liabilities)/net fixed assets. 2.Liquidity (1)Current ratio = current assets/current liabilities. (2)Quick ratio = (current assets - inventory - prepaid expenses)/current liabilities. (3)Interest coverage ratio = before income tax expenses and interest expense/current interest expense. 3.Operating Performance (1)Receivables (including Account Receivable and Note Receivable from operating) turnover = cost of goods sold/average accounts Receivable (including Account Receivable and Note Receivable from operating). (2)Average number days receivables outstanding = 365 days/average receivable turnover. (3)Inventory turnover (times) = cost of goods sold/average inventory. (4)Payable (including Account Payable and Note Payable from operating) turnover = cost of goods sold/average accounts payable (including Account Payable and Note Payable from operating). (5)Average inventory turnover days = 365 days/average inventory turnover. (6)Property, plant and equipment turnover (times) = net sales/net fixed assets. (7)Total asset turnover = net sales/total assets. 4.Profitability (1)Return on assets = [net income after tax + interest expense x (1-tax ratio)]/average total assets. (2)Return on equity = shareholders’ equity/net income after tax. (3)Profit margin = net income after tax/net sales. (4)Earning Per Share = (net income after tax - preferred dividend)/weighted average number of shares. 5.Cash flow (1)Cash flow from operations ratio = cash flow from operations/current liabilities. (2)Net Cash flow adequacy ratio = cash flow from operations of recent five fiscal years/recent five fiscal years’ (capital expenditure + increase in inventory + cash dividend). (3)Cash flow re-investment ratio= (cash flow from operations - cash dividend)/(gross fixed assets + long-term investment + other asset + operation capital). 6.Leverage: (1)Operating leverage = (net operating revenue - variable operating cost and expense)/operating net income. (2)Financial leverage = operating revenue/(operating revenue - interest expense).

2014 Annual Report 84

Hightlights Of Operations

(2) Financial analysis -ROC GAPP- Individual Fiscal Year

Financial analysis in recent 5 years 2010

2011

2012

17

21

24

42,031

52,638

45,694

Current Ratio

215

152

47

Quick Ratio

215

149

45

2,651

3,871

3,134

71

71

49

5

5

7

24,786

19,494

15,033

24

27

13

-

-

-

Fixed asset turnover(times)

672

864

644

Total asset turnover(times)

1

1

1

Return on assets(%)

15

17

19

Return on equity(%)

18

21

25

Percentage to Operation income paid-in Income before Tax capital%

17

35

30

111

153

203

Profit margin(%)

11

12

17

9.61

12.77

16.43

Cash flow from operations ratio(%)

13

83

120

Cash flow adequacy ratio(%)

54

105

127

Cash Flow Re-investment Ratio(%)

1

3

3

Operating leverage

6

1

2

Financial leverage

1

1

1

Profitability

Operating Performance

Liquidity Finance % Structure%

Analysis items Debt to assets ratio Long term funds to fixed assets ratio

Interest coverage ratio Receivables turnover(times) Average number days receivables outstanding Inventory turnover(times) Payable turnover(times) Average inventory turnover days

Leverage Cash Flow

Earning Per Share(NT dollar)

Explanation of the changes in each financial ratio in 2011 and 2012: 1. The decreasing of current ratio and quick ratio is mainly caused by redemption fund in 2012 2.The decreasing of receivables turnover, inventory turnover, fixed asset turnover, operation income on paid-in capital ratio is mainly caused by the decrease in sales. 3.The increasing of return on assets, return on equity, income before tax on paid-in capital ratio, profit margin and EPS is mainly caused by the increasing of mainland investment profit. 4.The increasing of cash flow from operations ratio and cash flow adequacy ratio is mainly caused by redemption fund in 2012 and then current cash debt coverage ratio increased.

2014 Annual Report 85

YULON NISSAN

Note: The formula is as follows: 1. Finance structure (1) Debt to assets ratio = total liabilities/total assets. (2) Long term funds to fixed assets ratio = (net shareholders’ equity + Long term liabilities)/net fixed assets. 2. Liquidity (1) Current ratio = current assets/current liabilities. (2) Quick ratio = (current assets - inventory - prepaid expenses)/current liabilities. (3) Interest coverage ratio = before income tax expenses and interest expense/current interest expense. 3. Operating Performance (1) Receivables (including Account Receivable and Note Receivable from operating) turnover = cost of goods sold/average accounts Receivable (including Account Receivable and Note Receivable from operating). (2) Average number days receivables outstanding = 365 days/average receivable turnover. (3) Inventory turnover (times) = cost of goods sold/average inventory. (4) Payable (including Account Payable and Note Payable from operating) turnover = cost of goods sold/average accounts payable (including Account Payable and Note Payable from operating). (5) Average inventory turnover days = 365 days/average inventory turnover. (6) Fixed asset turnover (times) = net sales/net fixed assets. (7) Total asset turnover = net sales/total assets. 4. Profitability (1) Return on assets = [net income after tax + interest expense x (1-tax ratio)]/average total assets. (2) Return on equity = shareholders’ equity/net income after tax. (3) Profit margin = net income after tax/net sales. (4) Earning Per Share = (net income after tax - preferred dividend)/weighted average number of shares. 5. Cash flow (1) Cash flow from operations ratio = cash flow from operations/current liabilities. (2) Net Cash flow adequacy ratio = cash flow from operations of recent five fiscal years/recent five fiscal years’ (capital expenditure + increase in inventory + cash dividend). (3) Cash flow re-investment ratio= (cash flow from operations - cash dividend)/(gross fixed assets + long-term investment + other asset + operation capital). 6. Leverage: (1) Operating leverage = (net operating revenue - variable operating cost and expense)/operating net income. (2) Financial leverage = operating revenue/(operating revenue - interest expense).

2014 Annual Report 86

Hightlights Of Operations

Financial analysis -ROC GAPP- Consolidated Fiscal Year

2010

2011

2012

17

21

24

42,031

52,638

45,694

Current Ratio

245

513

476

Quick Ratio

239

497

452

2,651

3,871

3,134

Receivables turnover(times)

71

72

51

Average number days receivables outstanding

5

5

7

24,786

19,495

15,033

37

26

16

-

-

-

Fixed asset turnover(times)

672

864

644

Total asset turnover(times)

1

1

1

Return on assets(%)

15

17

19

Return on equity(%)

18

21

25

Percentage to Operation income paid-in capital% Income before Tax

17

35

29

111

153

203

Profit margin(%)

11

12

17

9.61

12.77

16.43

Cash Flow

Cash flow from operations ratio(%)

43

259

270

Cash flow adequacy ratio(%)

28

131

203

Cash Flow Re-investment Ratio(%)

4

24

23

Leverage

Financial analysis in recent 5 years

Operating leverage

2

1

2

Financial leverage

1

1

1

Profitability

Operating Performance

Liquidity %

Finance Structure%

Analysis items Debt to assets ratio Long term funds to fixed assets ratio

Interest coverage ratio

Inventory turnover(times) Payable turnover(times) Average inventory turnover days

Earning Per Share(NT dollar)

Explanation of the changes in each financial ratio in 2011 and 2012: 1.The decreasing of receivables turnover, inventory turnover, fixed asset turnover, operation income on paid-in capital ratio is mainly caused by the decrease in sales. 2.The increasing of return on assets, return on equity, income before tax on paid-in capital ratio, profit margin and EPS is mainly caused by the increasing of mainland investment profit. 3.The increasing of cash flow from operations ratio and cash flow adequacy ratio is mainly caused by redemption fund in 2012 and then current cash debt coverage ratio increased.

2014 Annual Report 87

YULON NISSAN

Note

: The formula is as follows: 1. Finance structure (1) Debt to assets ratio = total liabilities/total assets. (2) Long term funds to fixed assets ratio = (net shareholders’ equity + Long term liabilities)/net fixed assets. 2. Liquidity (1) Current ratio = current assets/current liabilities. (2) Quick ratio = (current assets - inventory - prepaid expenses)/current liabilities. (3) Interest coverage ratio = before income tax expenses and interest expense/current interest expense. 3. Operating Performance (1) Receivables (including Account Receivable and Note Receivable from operating) turnover = cost of goods sold/average accounts Receivable (including Account Receivable and Note Receivable from operating). (2) Average number days receivables outstanding = 365 days/average receivable turnover. (3) Inventory turnover (times) = cost of goods sold/average inventory. (4) Payable (including Account Payable and Note Payable from operating) turnover = cost of goods sold/average accounts payable (including Account Payable and Note Payable from operating). (5) Average inventory turnover days = 365 days/average inventory turnover. (6) Fixed asset turnover (times) = net sales/net fixed assets. (7) Total asset turnover = net sales/total assets. 4. Profitability (1) Return on assets = [net income after tax + interest expense x (1-tax ratio)]/average total assets. (2) Return on equity = shareholders’ equity/net income after tax. (3) Profit margin = net income after tax/net sales. (4) Earning Per Share = (net income after tax - preferred dividend)/weighted average number of shares. 5. Cash flow (1) Cash flow from operations ratio = cash flow from operations/current liabilities. (2) Net Cash flow adequacy ratio = cash flow from operations of recent five fiscal years/recent five fiscal years’ (capital expenditure + increase in inventory + cash dividend). (3) Cash flow re-investment ratio= (cash flow from operations - cash dividend)/(gross fixed assets + long-term investment + other asset + operation capital). 6. Leverage: (1) Operating leverage = (net operating revenue - variable operating cost and expense)/operating net income. (2) Financial leverage = operating revenue/(operating revenue - interest expense).

2014 Annual Report 88

Hightlights Of Operations

3. Supervisor Audit Report Yulon Nissan Motor Co., Ltd. Supervisors Audit Written Report

The Board of Directors has prepared and submitted to us the Company’s operations report, financial statements and earnings distribution proposal of fiscal year 2014 together with auditors’ report prepared and certified by 2 authorized CPAs: Mr. Chien-Hsin Hsieh and Ms. Wan-Yi Liao from Deloitte Touche Tohmatsu. The documents mentioned above have been further audited as being correct and accurate by the undersigned, the supervisors of Yulon Nissan Motor Company Limited. According to Article 219 of Company Law, we hereby submit this report.

Yours truly

2015 Shareholders’ Meeting

Supervisors:

Wei Wen Investment Co., Ltd.

Representative: Kwan-Tao Li Representative: Tai-Ming Chen

Supervisors: Yosuke Sato

May 12, 2015

2014 Annual Report 89

YULON NISSAN

4. Recent Annual Financial Statements Independent Auditors’ Report The Board of Directors and Stockholders Yulon Nissan Motor Company, Ltd. We have audited the accompanying balance sheets of Yulon Nissan Motor Company, Ltd. as of December 31, 2014 and 2013, and the related statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2014 and 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit 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 provide a reasonable basis for our opinion. In our opinion, the financial statements referred in the first paragraph present fairly, in all material respects, the financial position of Yulon Nissan Motor Company, Ltd. as of December 31, 2014 and 2013, and its financial performance and its cash flows for the years ended December 31, 2014 and 2013, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

March 23, 2015 Notice to Readers The accompanying financial statements are intended only to present the financial position, results of operations 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 accepted and applied in the Republic of China. For the convenience of readers, the 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 auditors’ report and financial statements shall prevail.

2014 Annual Report 90

Hightlights Of Operations

YULON NISSAN MOTOR COMPANY, LTD. BALANCE SHEETS DECEMBER 31, 2014 AND 2013

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss (Notes 4 and 7) Notes receivable (Notes 4 and 8) Notes receivable - related parties (Notes 4 and 28) Trade receivables (Notes 4 and 8) Trade receivables - related parties (Notes 4 and 28) Other receivables (Notes 4 and 8) Inventories (Notes 4 and 9) Prepayments Other financial assets (Note 10) Total current assets NON-CURRENT ASSETS Investments accounted for using equity method (Notes 4 and 11) Property, plant and equipment (Notes 4, 12 and 28) Computer software (Notes 4, 13 and 28) Deferred tax assets (Notes 4 and 22) Other non-current assets (Notes 14 and 28) Total non-current assets

TOTAL

2014 Amount

%

2013 Amount

$ 9,493,958 331,032 2,000 905 70,137 224,495 39,606 2,739 9,893 -

26 1 1 -

$3,141,904 434,741 27 2,312 41,502 292,229 22,658 2,047 11,057 991,154

9 1 1 3

10,174,765

28

4,939,631

14

23,800,390 1,758,753 12,346 164,709 573,443

65 5 2

28,185,091 1,748,604 7,887 188,363 249,042

80 5 1

26,309,641

72

30,378,987

86

$36,484,406

2014 Annual Report 91

%

100 $35,318,618 100

YULON NISSAN

(In Thousands of New Taiwan Dollars, Except Par Value) 2014 Amount

LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 15) Notes payable - related parties (Note 28) Trade payables Trade payables - related parties (Note 28) Other payables (Note 16) Current tax liabilities (Notes 4 and 22) Provisions (Notes 4 and 18) Deferred revenue (Note 17) Other current liabilities

$ 3,630,000 122,244 565,471 882,601 977,135 172,054 19,698

Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Note 15) Provisions (Notes 4 and 18) Accrued pension liabilities (Notes 4 and 19) Deferred tax liabilities (Notes 4 and 22) Total non-current liabilities

2013 Amount

%

10 $2,630,000 1,536 127,494 2 1,073,092 2 657,680 3 490,530 169,129 1,643 21,072

8 3 2 1 1 -

%

6,369,203

17

5,172,176

15

86,282 546,327 2,552,082

2 7

1,000,000 74,808 555,089 3,476,068

3 1 10

3,184,691

9

5,105,965

14

9,553,894

26

10,278,141

29

3,000,000 6,129,405

8 17

3,000,000 6,129,405

9 17

2,987,887 788,877 12,607,444 16,384,208 1,416,899

8 2 35 45 4

2,257,887 1,228,789 12,213,958 15,700,634 210,438

6 3 35 44 1

26,930,512

74

25,040,477

71

Total liabilities EQUITY Capital stock - $10 par value; authorized - 600,000 thousand shares; issued and outstanding - 300,000 thousand shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity TOTAL

$36,484,406

100 $35,318,618 100

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

2014 Annual Report 92

Hightlights Of Operations

YULON NISSAN MOTOR COMPANY, LTD. STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2014 Amount OPERATING REVENUE (Note 28) Sales (Note 4) Service revenue (Note 4) Other operating revenue

$

%

%

31,412,448 16,872 56,730

100 -

33,126,357 1,382 42,402

100 -

33,170,141

100

31,486,050

100

28,855,176

87

26,037,200

83

GROSS PROFIT

4,314,965

13

5,448,850

17

OPERATING EXPENSES (Notes 19, 21 and 28) Selling and marketing expenses General and administrative expenses Research and development expenses

2,564,472 363,535 586,905

8 1 2

2,611,485 363,395 617,309

8 1 2

3,514,912

11

3,592,189

11

1,131

-

801,184

2

1,856,646

6

6,677,910 410,960 175,495 14,032 5,964 5,078 (42,689 ) (18,712 ) (2,545 )

20 1 1 -

6,902,444 51,675 33,106 1,741 3,745 2,482 (16,994) (26,132) (1,823)

22 -

7,225,493

22

6,950,244

22

PROFIT BEFORE TAX

8,026,677

24

8,806,890

28

INCOME TAX EXPENSES (Notes 4 and 22)

1,502,918

4

1,506,893

5

NET PROFIT FOR THE YEAR

6,523,759

20

7,299,997

23

Total operating revenue OPERATING COSTS Cost of goods sold (Notes 9, 21 and 28)

Total operating expenses OTHER INCOME AND EXPENSES (Notes 21 and 28) PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Shares of profit of subsidiary Foreign currency exchange gain, net (Note 21) Interest income (Note 4) Gain from valuation of financial assets, net Gain on disposal of investment, net (Note 21) Other revenue (Note 28) Interest expenses (Note 28) Overseas business expenses (Note 28) Other losses (Note 28) Total non-operating income and expenses

$

2013 Amount

(15)

-

(Continued)

2014 Annual Report 93

YULON NISSAN

YULON NISSAN MOTOR COMPANY, LTD. STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2014 Amount OTHER COMPREHENSIVE INCOME Exchange differences on translating foreign operations Actuarial gain arising from defined benefit plans (Note 19) Income tax relating to components of other comprehensive income (Notes 4 and 22)

$

Other comprehensive income for the year, net of income tax TOTAL COMPREHENSIVE INCOME

$

2013 Amount

%

1,206,461

3

982 (167)

1,114,504

4

-

823

-

-

(140)

-

1,207,276

3

7,731,035

23

EARNINGS PER SHARE (Note 23) Basic Diluted

$21.75 $21.74

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

2014 Annual Report 94

$

%

$

1,115,187

4

8,415,184

27

$24.33 $24.32

(Concluded)

Hightlights Of Operations

YULON NISSAN MOTOR COMPANY, LTD. STATEMENTS OF CHANGES IN EQUITY YEARS ENDED DECEMBER 31, 2014 AND 2013

BALANCE, JANUARY 1, 2013

Capital Stock (Note 20)

Capital Surplus (Note 20)

$

$

Appropriation of 2012 earnings Legal reserve Special reserve Cash dividend distributed by the Company - $13.3 per share

3,000,000

6,129,405

-

-

-

-

Net profit for the year ended December 31, 2013

-

-

Other comprehensive income for the year ended December 31, 2013, net of income tax

-

-

Total comprehensive income for the year ended December 31, 2013

-

-

3,000,000

6,129,405

-

-

-

-

Net profit for the year ended December 31, 2014

-

-

Other comprehensive income for the year ended December 31, 2014, net of income tax

-

-

Total comprehensive income for the year ended December 31, 2014

-

-

BALANCE, DECEMBER 31, 2013 Appropriation of 2013 earnings Legal reserve Special reserve Cash dividend distributed by the Company - $19.47 per share

BALANCE, DECEMBER 31, 2014

$

2014 Annual Report 95

3,000,000

$

6,129,405

YULON NISSAN

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

Retained Earnings (Note 20) Unappropriated Legal Reserve Special Reserve Earnings $

$

1,764,839

$

788,877

$

9,836,238

Other Equity Exchange Differences on Translating Foreign Operations $

(904,066)

Total Equity $

20,615,293

493,048 -

439,912 -

(493,048) (439,912) (3,990,000)

-

(3,990,000)

493,048

439,912

(4,922,960)

-

(3,990,000)

-

-

7,299,997

-

7,299,997

-

-

683

1,114,504

1,115,187

-

-

7,300,680

1,114,504

8,415,184

2,257,887

1,228,789

12,213,958

210,438

25,040,477

730,000 -

(439,912) -

(730,000) 439,912 (5,841,000)

-

(5,841,000)

730,000

(439,912)

(6,131,088)

-

(5,841,000)

-

-

6,523,759

-

6,523,759

-

-

815

1,206,461

1,207,276

-

-

6,524,574

1,206,461

7,731,035

2,987,887

$

788,877

$

12,607,444

$

1,416,899

$

26,930,512

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

2014 Annual Report 96

Hightlights Of Operations

YULON NISSAN MOTOR COMPANY, LTD. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars) 2014 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Gain on fair value changes of financial assets designated as at fair value through profit or loss Interest expense Interest income Share of profit of subsidiary Loss (gain) on disposal of property, plant and equipment Net gain on disposal of investment Net gain on foreign currency exchange Net changes in operating assets and liabilities Financial assets at fair value through profit or loss Notes receivable Notes receivable - related parties Trade receivables Trade receivables - related parties Other receivables Inventories Prepayments Notes payable - related parties Trade payables Trade payables - related parties Other payables Other current liabilities Deferred revenue Provisions Accrued pension liabilities Cash generated from operations Interest paid Income tax paid Net cash generated from operating activities

$

8,026,677 446,629 5,454

2013 $

8,806,890 462,132 6,713

(14,032 ) 42,689 (175,495 ) (6,677,910 ) (1,131 ) (5,964 ) (350,658 )

(1,741 ) 16,994 (33,106 ) (6,902,444 ) 15 (3,745 ) (45,263 )

123,705 (1,973 ) 1,407 (28,635 ) 67,734 2,764 (692 ) 1,164 (1,536 ) (5,250 ) (461,174 ) 225,026 (1,374 ) (1,643 ) 14,399 (7,780 ) 1,222,401 (42,794 ) (985,114 )

(429,255 ) (27 ) (698 ) (5,192 ) 291,332 14,003 (500 ) (4,181 ) 1,536 (9,825 ) (268,139 ) 107,388 (4,930 ) (11,225 ) 13,671 (1,253 ) 1,999,150 (15,553 ) (227,419 )

194,493

1,756,178

CASH FLOWS FROM INVESTING ACTIVITIES Dividends received Interest received Payment for property, plant and equipment (Note 24) Proceeds from disposal of property, plant, and equipment Payments for computer software Decrease (increase) in other financial assets Increase in other non-current assets

11,399,888 155,783 (486,380 ) 4,638 (9,913 ) 991,154 (344,753 )

3,351,292 27,579 (1,084,114 ) 26 (3,231 ) (977,222 ) (181,563 )

Net cash generated from investing activities

11,710,417

1,132,767 (Continued)

2014 Annual Report 97

YULON NISSAN

YULON NISSAN MOTOR COMPANY, LTD. STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars) 2014 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Proceeds from long-term borrowings Repayment of long-term borrowings Payments of dividends

$

Net cash used in financing activities

1,000,000 (1,000,000) (5,841,000)

2013 $

(560,000 )

(5,841,000)

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

2,430,000 1,000,000 (3,990,000 )

288,144

31,331

NET INCREASE IN CASH AND CASH EQUIVALENTS

6,352,054

2,360,276

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

3,141,904

781,628

CASH AND CASH EQUIVALENTS, END OF YEAR

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

2014 Annual Report 98

$

9,493,958

$

3,141,904

(Concluded)

Hightlights Of Operations

YULON NISSAN MOTOR COMPANY, LTD. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION Yulon Nissan Motor Company, Ltd. (the “Company”) is a business on research and development of vehicles and sales of vehicles. The Company started its operations in October 2003, after Yulon Motor Co., Ltd. (“Yulon”) transferred its sales, research and development businesses to the Company in October 2003 through a spin-off. The Company’s spin-off from Yulon intended to increase Yulon’s competitive advantage and participation in the global automobile network and to enhance its professional management. The spin-off date was October 1, 2003. Yulon initially held 100% equity interest in the Company but then transferred its 40% equity to Nissan Motor Co., Ltd. (“Nissan”), a Japanese motor company, on October 30, 2003. The Company became listed on December 21, 2004 after the initial public offering application of the Company was accepted by the Taiwan Stock Exchange Corporation on October 6, 2004.

2. APPROVAL OF FINANCIAL STATEMENTS The accompanying financial statements were approved by the board of directors on March 23, 2015.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS 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 on April 3, 2014, stipulated that the Company 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 Standards and Interpretations (the “New IFRSs”) Improvements to IFRSs (2009) - amendment to IAS 39 Amendment to IAS 39 “Embedded Derivatives”

2014 Annual Report 99

Effective Date Announced by IASB (Note) January 1, 2009 and January 1, 2010, as appropriate Effective for annual periods ended on or after June 30, 2009 (Continued)

YULON NISSAN

New, Amended and Revised Standards and Interpretations (the “New IFRSs”) Improvements to IFRSs (2010) Annual Improvements to IFRSs 2009-2011 Cycle Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters” Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters” Amendment to IFRS 1 “Government Loans” Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and Financial Liabilities” Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” IFRS 10 “Consolidated Financial Statements” IFRS 11 “Joint Arrangements” IFRS 12 “Disclosure of Interests in Other Entities” Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance” Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment Entities” IFRS 13 “Fair Value Measurement” Amendment to IAS 1 “Presentation of Other Comprehensive Income” Amendment to IAS 12 “Deferred Tax: Recovery of Underlying Assets” IAS 19 (Revised 2011) “Employee Benefits” IAS 27 (Revised 2011) “Separate Financial Statements” IAS 28 (Revised 2011) “Investments in Associates and Joint Ventures” Amendment to IAS 32 “Offsetting Financial Assets and Financial Liabilities” IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine”

Effective Date Announced by IASB (Note) July 1, 2010 and January 1, 2011, as appropriate January 1, 2013 July 1, 2010 July 1, 2011 January 1, 2013 January 1, 2013 July 1, 2011 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2014 January 1, 2013 July 1, 2012 January 1, 2012 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2014 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.

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 Company’s accounting policies. New IFRSs in Issue but Not Yet Endorsed by FSC The Company has not applied the following New IFRSs issued by the IASB but not yet endorsed by the FSC. As of the date the financial statements were authorized for issue, the FSC has not announced their effective dates.

2014 Annual Report 100

Hightlights Of Operations

New IFRSs

Effective Date Announced by IASB (Note 1)

Annual Improvements to IFRSs 2010-2012 Cycle Annual Improvements to IFRSs 2011-2013 Cycle Annual Improvements to IFRSs 2012-2014 Cycle IFRS 9 “Financial Instruments” Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and Transition Disclosures” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” Amendment to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations” IFRS 14 “Regulatory Deferral Accounts” IFRS 15 “Revenue from Contracts with Customers” Amendment to IAS 1 “Disclosure Initiative”

July 1, 2014 (Note 2) July 1, 2014 January 1, 2016 (Note 4) January 1, 2018 January 1, 2018

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

January 1, 2016

Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” Amendment to IAS 19 “Defined Benefit Plans: Employee Contributions” Amendment to IAS 27 “Equity Method in Separate Financial Statements” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting” IFRIC 21 “Levies”

January 1, 2016

January 1, 2016 (Note 3) January 1, 2016 January 1, 2016 January 1, 2017 January 1, 2016

July 1, 2014 January 1, 2016 January 1, 2014 January 1, 2014 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 Company’s accounting policies.

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YULON NISSAN

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of Compliance The accompanying financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (the “Regulations”). Basis of Preparation The financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets. When preparing its financial statements, the Company used equity method to account for its investment in subsidiaries. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the financial statements to be the same with the amounts attributable to the owner of the Company in its consolidated financial statements, adjustments arising from the differences in accounting treatment between basis and consolidated basis were made to investments accounted for by equity method, share of profit or loss of subsidiaries, share of other comprehensive income of subsidiaries, as appropriate, in the financial statements. Classification of Current and Non-current Assets and Liabilities Current assets include cash, cash equivalents, assets held for trading purposes and assets that are expected to be converted into cash or consumed within one year from the balance sheet date; assets other than current assets are non-current assets. Current liabilities include liabilities due to be settled within one year from the balance sheet date; liabilities other than current liabilities are non-current liabilities. Foreign Currencies The functional currency of Company and presentation currency of the financial statements are both New Taiwan dollars (NT$). Functional currency is the currency of the primary economic environment in which the Company operates. In preparing the financial statements, transactions in currencies other than the New Taiwan dollars are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Such exchange differences are recognized in profit or loss in the year in which they arise. Non-monetary items that are measured in terms of historical cost in foreign currencies are not retranslated. The financial statements of foreign subsidiaries prepared in foreign currencies are translated into New Taiwan dollars at the following exchange rates: Assets and liabilities - year-end rates; profit and loss - average rates during the year; stockholders’ equity - historical rates. The resulting differences are recorded as other comprehensive income.

2014 Annual Report 102

Hightlights Of Operations

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

Subsidiary is the entities

Under the equity method, the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the Company's share of the profit or loss and other comprehensive income of the subsidiary after the date of acquisition. Besides, the Company also recognizes the Company’s share of the change in other equity of the subsidiary. Investments accounted for by the equity method are assessed for indicators of impairment at the end of each reporting period. When there is objective evidence that the investments accounted for by the equity method has been impaired, the impairment losses are recognized in profit or loss. Property, Plant and Equipment Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss. The Company depreciates molds and dies on the basis of estimated production volume. Other property, plant and equipment are depreciated by using straight-line method. The estimated production volume, useful lives, residual values and depreciation method are reviewed at the end of each year, 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. Computer Software Computer software is stated at cost, less subsequent accumulated amortization and subsequent accumulated impairment loss. The Company amortization is recognized on a straight-line basis over 3 years. Estimated useful lives, residual values and amortization method are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of computer software shall be assumed to be zero unless the Company expects to dispose of the asset before the end of its economic life. Impairment of Assets When the carrying amount of property, plant and equipment and computer software exceeds its recoverable amount, the excess is recognized as an impairment loss. If an impairment loss subsequently reverses, the carrying amount of the asset is increased accordingly, but the increased carrying amount may not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years.

2014 Annual Report 103

YULON NISSAN

Financial Instruments Financial assets and liabilities shall be recognized when the Company becomes a party to the contractual provisions of the instruments. Financial assets and liabilities are initially recognized at fair values. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. a. Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. 1) Measurement category a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividend or interest (included dividend or interest received in the investment year) earned on the financial asset. Method to determine the fair value please refer to Note 27. b) Loans and receivables Loans and receivables are non-derivative financial assets, with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial. 2) Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. For financial assets carried at amortized cost, such as trade receivables and other receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

2014 Annual Report 104

Hightlights Of Operations

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable and other receivables are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables and other receivables that are written off against the allowance account. 3) Derecognition of financial assets The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. b. Financial liabilities 1) Subsequent measurement All the financial liabilities are measured at amortized costs using the effective interest method. 2) Derecognition of financial liabilities The Company derecognizes a financial liability only when the obligation specified in the contract is discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss. Provision a. Inventory purchase commitment Where the Company has a commitment under which the unavoidable costs of meeting the obligations under the commitment exceed the economic benefits expected to be received from the commitment, the present obligations arising under such commitment (e.g. inventory purchase commitment) are recognized and measured as provisions. b. Warranties Provisions for the expected cost of warranty obligations are recognized at the date of sale of the relevant products, at the best estimate of the expenditure required to settle the Company’s obligation by the management of the Company.

2014 Annual Report 105

YULON NISSAN

Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable. a. Sale of goods Revenue from the sale of goods is recognized when the goods are delivered and titles have passed. b. Rendering of services Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. c. Dividend and interest income Dividend income from investments is recognized when the shareholder’s right to receive payment has been established. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Retirement Benefit Costs Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling 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, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. The accrued pension liabilities recognized in the balance sheets represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of plan assets. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. a. Current tax Current taxable payable depends on current tax income. Taxable income is different from the net income before tax on the statement of comprehensive income for the reason that partial revenue and expenses are taxable or deductible items in other period, or not the taxable or deductible items according to related Income Tax Law. The Company’s current tax liabilities are calculated by the legislated tax rate on balance sheet date. According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings as the status of appropriations of earnings is uncertain.

2014 Annual Report 106

Hightlights Of Operations

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision. b. Deferred tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized. c. 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, in which case, the current and deferred tax are also recognized in other comprehensive income.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Company's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The following are the key assumptions and other key sources of estimation uncertainty at the end of the reporting period.

2014 Annual Report 107

YULON NISSAN

a. Estimated impairment of trade receivables When there is objective evidence of impairment loss, the Company takes into consideration the estimation of future cash flows. The amount of impairment loss is measured as the difference between the assets’ 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. As of December 31, 2014 and 2013, the carrying amount of trade receivables was $337,143 thousand and $358,728 thousand, respectively. b. Property, plant and equipment - molds and dies The Company depreciates molds and dies using unit-of-output method. The Company examines the estimated production units of each model according to the market every 6 months and calculates the amount allocated for each mold and die, which is also the basis of depreciation of molds and dies. c. Provisions for the expected cost of warranty The Company calculates the provisions for the expected cost of warranty quarterly based on the numbers of units sold and the weighted average of actual warranty expense in the past. As of December 31, 2014 and 2013, the carrying amount of provisions for warranty was $146,358 thousand and $134,125 thousand, respectively. d. Provisions for loss on inventory purchase commitment The Company assesses provisions for loss on inventory purchase commitment of parts and vehicles to Yulon regularly. As of December 31, 2014 and 2013, the carrying amount of provisions for loss on inventory purchase commitment was $111,978 thousand and $109,812 thousand, respectively. e. Recognition and measurement of defined benefit plans The Company uses judgments and estimations in determining the actuarial assumptions for calculation of the present value of defined benefit obligation at the end of each reporting period. Actuarial assumptions comprise the discount rate and the expected return rate on plan assets. Changes in the assumptions may have a material impact on the amount of the expense and the liability.

6. CASH AND CASH EQUIVALENTS December 31 2014 2013 Cash on hand Checking accounts and demand deposits Foreign currency demand deposits Cash equivalents Foreign currency time deposits Time deposits

2014 Annual Report 108

$

20 1,184,495 310,534

$

20 754,979 46,992

7,992,009 6,900

2,333,013 6,900

$ 9,493,958

$ 3,141,904

Hightlights Of Operations

Cash equivalent includes time deposits that have a maturity of three months or less from the date of acquisition, are readily convertible to a known amount of cash, and are subject to an insignificant risk of change in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. The market interest rates intervals of cash in bank and time deposits at the end of the reporting period were as follows: December 31 2014 2013 Demand deposits and time deposits

0.01%-3.40%

0.01%-3.25%

7. FINANCIAL INSTRUMENT AT FAIR VALUE THROUGH PROFIT OR LOSS December 31 2014 2013 Financial assets held for trading Non-derivative financial assets Mutual funds

$ 331,032

$ 434,741

8. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES December 31 2014 2013 2,000

$

27

Notes receivable

$

Trade receivables

$ 70,137

$ 41,502

Other receivables Interest receivables Disposal of investment receivables Others

$ 25,242 14,364

$

$ 39,606

$ 22,658

5,530 5,297 11,831

a. Notes receivable For the notes receivable, there were no past due balances at the end of the reporting period and the Company did not recognize an allowance for impairment loss. b. Trade receivables For the trade receivables balances that were past due at the end of the reporting period, the Company did not recognize an allowance for impairment loss, because there was not a

2014 Annual Report 109

YULON NISSAN

significant change in credit quality and the amounts were still considered recoverable. The Company did not hold any collateral or other credit enhancements for these balances. The aging of receivables that were past due but not impaired was as follows: December 31 2014 2013 Less than 180 days

$ 22,720

$ 13,833

9. INVENTORIES December 31 2014 2013 Parts Vehicles

$

1,664 1,075

$

2,047 -

$

2,739

$

2,047

The cost of inventories recognized as cost of goods sold for the year ended December 31, 2014 was $28,855,176 thousand, which included warranty cost of $70,933 thousand and loss on inventory purchase commitment of $2,166 thousand. The cost of inventories recognized as cost of goods sold for the year ended December 31, 2013 was $26,037,200 thousand, which included warranty cost of $38,088 thousand and loss on inventory purchase commitment of $28,431 thousand.

10. OTHER FINANCIAL ASSETS Other financial assets are RMB time deposits with original maturity of more than three months. The ranges of the market interest rates of these time deposits were as follows: December 31 2014 2013 Time deposit with original maturity of more than three months

-

3.35%

11. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD December 31 2014 2013 Investment in subsidiary Yi-Jan Overseas Investment Co., Ltd.

$ 23,800,390

$ 28,185,091

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

2014 Annual Report 110

Hightlights Of Operations

December 31 2014 2013 Yi-Jan Overseas Investment Co., Ltd.

100%

100%

Through Yi-Jan Overseas Investment Co., Ltd. and Jetford Inc. (subsidiary of Yi-Jan Overseas Investment Co., Ltd.), the Company’s indirect proportion of voting rights in associates were as follows: December 31 2014 2013 Guangzhou Aeolus Automobile Co., Ltd. Aeolus Automobile Co., Ltd. Aeolus Xiangyang Automobile Co., Ltd. Shenzhen Lan You Technology Co., Ltd. Dong Feng Yulon Used Cars Co., Ltd.

40.00% 33.12% 16.55% 45.00% 49.00%

40.00% 33.12% 16.55% 45.00% 49.00%

The amounts recognized as share of the profit or loss of subsidiary on 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.

12. PROPERTY, PLANT, AND EQUIPMENT

Molds

Dies

Computer Equipment

Other Equipment

Transportati on Equipment

Machinery and Equipment

Leasehold Improvement

Tools

Total

Cost Balance at January 1, 2013 Additions Disposals

$ 4,860,514 426,764 (1,668,369)

$

964,863 88,297 (330,008 )

$

85,064 5,750 (8,921 )

$

82,255 4,354 (11,076 )

$

4,290 4,305 -

$

19,053 (524)

$

3,441 3,942 (1,118)

$

5,694 -

$ 6,025,174 533,412 (2,020,016)

Balance at December 31, 2013

$ 3,618,909

$

723,152

$

81,893

$

75,533

$

8,595

$

18,529

$

6,265

$

5,694

$ 4,538,570

$ (3,591,304)

$ (593,890 )

$

(69,031 )

$

(66,618)

$

(4,100)

$

(15,952)

$

(1,979)

$

(4,935)

$ (4,347,809)

(361,039) 1,668,369

(85,563 ) 330,008

(348) -

(462,132) 2,019,975

Balance at December 31, 2013

$ (2,283,974)

$ (349,445 )

$

(66,883 )

$

(61,780)

$

(4,780)

$

(16,082)

$

(1,739)

$

(5,283)

$ (2,789,966)

Carrying value, net, December 31, 2013

$ 1,334,935

$

373,707

$

15,010

$

13,753

$

3,815

$

2,447

$

4,526

$

411

Balance at January 1, 2014 Additions Disposals

$ 3,618,909 334,961 -

$

723,152 104,972 -

$

81,893 2,231 (8,450 )

$

75,533 10,002 (238)

$

8,595 8,119 (5,852)

$

18,529 (145)

$

6,265 (1,755)

$

5,694 -

$ 4,538,570 460,285 (16,440)

Balance at December 31, 2014

$ 3,953,870

$

828,124

$

75,674

$

85,297

$

10,862

$

18,384

$

4,510

$

5,694

$ 4,982,415

Accumulated depreciation and impairment Balance at January 1, 2013 Depreciation expense Disposals

(6,773 ) 8,921

(6,202) 11,040

(680) -

(649) 519

(878) 1,118

$ 1,748,604

Cost

2014 Annual Report 111

(Continued)

YULON NISSAN

Computer Equipment

Other Equipment

Transportati on Equipment

Machinery and Equipment

$

$

$

$

Leasehold Improvement

Molds

Dies

Tools

$ (2,283,974)

$ (349,445 )

(338,562) -

(93,647 ) -

Balance at December 31, 2014

$ (2,622,536)

$ (443,092 )

$

(64,712 )

$

(66,978)

$

(3,427)

$

(16,369)

$

(1,135)

$

Carrying value, net, December 31, 2014

$ 1,331,334

$

$

10,962

$

18,319

$

7,435

$

2,015

$

3,375

$

Total

Accumulated depreciation and impairment Balance at January 1, 2014 Depreciation expense Disposals

385,032

(66,883 ) (6,243 ) 8,414

(61,780) (5,433) 235

(4,780) (1,031) 2,384

(16,082)

$

(432) 145

(1,739)

$

(1,151) 1,755

(5,283)

$ (2,789,966)

(130) -

(446,629) 12,933

(5,413)

$ (3,223,662)

281

$ 1,758,753

There were no signs of impairment losses of assets for the years ended December 31, 2014 and 2013; therefore, the Company did not assess for impairment. Except molds and dies are depreciated on an estimated production volume basis, other property, plant and equipment are depreciated on a straight-line basis over the assets’ estimated useful life. The estimated useful lives are as follows: Computer equipment Other equipment Powered equipment Experimental equipment Office and communication equipment Other equipment Transportation equipment Machinery and equipment Leasehold improvement Tools

2 to 5 years 15 years 3 to 8 years 3 years 1 to 10 years 4 to 5 years 3 to 10 years 3 to 5 years 2 to 5 years

13. COMPUTER SOFTWARE Computer Software Cost Balance, January 1, 2013 Additions Disposals

$ 20,210 3,231 (990)

Balance, December 31, 2013

$ 22,451

Accumulated amortization Balance, January 1, 2013 Amortization expense

$ (8,841) (6,713) (Continued)

2014 Annual Report 112

Hightlights Of Operations

Computer Software Disposals

990

Balance, December 31, 2013

$ (14,564)

Carrying amounts at December 31, 2013

$

7,887

Cost Balance, January 1, 2014 Additions Disposals

$ 22,451 9,913 (13,640)

Balance, December 31, 2014

$ 18,724

Accumulated amortization Balance, January 1, 2014 Amortization expense Disposals

$ (14,564) (5,454) 13,640

Balance, December 31, 2014

$ (6,378)

Carrying amounts at December 31, 2014

$ 12,346

14. OTHER NON-CURRENT ASSETS December 31 2014 2013 Refundable deposits Prepayment for equipment

$ 538,131 35,312

$ 234,653 14,389

$ 573,443

$ 249,042

Refundable deposits are mainly for materials to Yulon. 15. BORROWINGS a. Short-term borrowings December 31 2014 2013 Unsecured bank loans Ranges of weighted average effective interest rate

2014 Annual Report 113

$ 3,630,000

$ 2,630,000

0.96%-1.10%

0.96%-1.05%

YULON NISSAN

b. Long-term borrowings December 31 2014 2013 Unsecured bank loans

$

-

Interest rate

$ 1,000,000

-

1.35%

The interest payments of the long-term borrowing are made monthly. The principal of the long-term borrowing is repayable upon maturity. The Company made early repayment in October 2014.

16. OTHER PAYABLES December 31 2014 2013 Salaries and bonus Tax Advertising and promotion fees Others

$ 296,081 230,936 156,097 199,487

$ 357,082 113,701 186,897

$ 882,601

$ 657,680

17. DEFERRED REVENUE December 31 2014 2013 Arising from government grants

$

-

$

1,643

The deferred revenue arose in respect of government grant for electric vehicles.

18. PROVISIONS December 31 2014 2013 Current Inventory purchase commitment Warranties

Non-current Warranties

2014 Annual Report 114

$ 111,978 60,076

$ 109,812 59,317

$ 172,054

$ 169,129

$

$

86,282

74,808

Hightlights Of Operations

Inventory Purchase Commitment Balance at January 1, 2013 Additional provisions recognized Paid

$

Balance at December 31, 2013

81,381 28,431 -

Warranties

Total

$ 148,885 38,088 (52,848)

$ 230,266 66,519 (52,848)

$ 109,812

$ 134,125

$ 243,937

Balance at January 1, 2014 Additional provisions recognized Paid

$ 109,812 2,166 -

$ 134,125 70,933 (58,700)

$ 243,937 73,099 (58,700)

Balance at December 31, 2014

$ 111,978

$ 146,358

$ 258,336

The provision for loss on inventory purchase commitment represents the present obligations of which the unavoidable costs meeting the obligations under the commitment exceed the economic benefits expected to be received from the commitment. The provision for warranty claims represents the present value of management’s best estimate of the future outflow of economic benefits that will be required under the Company’s obligations for warranty under local sale of goods legislation. The estimate had been made on the basis of historical warranty trends.

19. RETIREMENT BENEFIT PLANS a. Defined contribution plan The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. The total expense recognized in profit or loss for the years ended December 31, 2014 and 2013 was $12,935 thousand and $12,548 thousand, respectively, represents contributions payable to these plans by the Company at rates specified in the rules of the plans. Employee benefit expenses in respect of defined contribution plan were included in the following line items: For the Year Ended December 31 2014 2013 Selling and marketing expenses General and administrative expenses Research and development expenses b. Defined benefit plan

2014 Annual Report 115

$ $ $

4,136 4,175 4,624

$ $ $

4,018 4,005 4,525

YULON NISSAN

The Company adopted the defined benefit plan under the Labor Standards Law, under which pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. 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 valuation were as follows: December 31 2014 2013 Discount rate Expected return on plan assets Expected rate of salary increase

1.750% 2.000% 2.500%

1.750% 2.000% 2.500%

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 were as follows: For the Year Ended December 31 2014 2013 Current service cost Interest cost Expected return on plan assets Past service cost

$

An analysis by functions Selling and marketing expenses General and administrative expenses Research and development expenses

5,641 10,038 (138) 2,504

$

6,112 9,476 (219) 2,504

$ 18,045

$ 17,873

$

$

4,312 8,493 5,240

$ 18,045

4,666 8,145 5,062

$ 17,873

Actuarial gains recognized in other comprehensive income for the years ended December 31, 2014 and 2013 was $982 thousand and $823 thousand, respectively. The cumulative amount of actuarial losses recognized in other comprehensive income as of December 31, 2014 and 2013 was $8,454 thousand and $9,436 thousand, respectively.

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Hightlights Of Operations

The amounts included in the balance sheet arising from the Company’s obligation in respect of its defined benefit plan were as follows: December 31 2014 2013 Defined benefit obligation Fair value of plan assets Deficit Past service cost not yet recognized

$ 568,683 (9,957) 558,726 (12,399)

$ 573,593 (3,601) 569,992 (14,903)

Net liability arising from defined benefit obligation

$ 546,327

$ 555,089

Movements in the present value of the defined benefit obligation were as follows: For the Year Ended December 31 2014 2013 Opening defined benefit obligation Current service cost Interest cost Actuarial gains Benefits paid - from plan assets Benefits paid - from book-reserve

$ 573,593 5,641 10,038 (973) (19,616)

$ 583,133 6,112 9,476 (967) (11,169) (12,992)

Closing defined benefit obligation

$ 568,683

$ 573,593

Movements in the fair value of the plan assets were as follows: For the Year Ended December 31 2014 2013 Opening fair value of plan assets Expected return on plan assets Actuarial gains/(losses) Contributions from the employer Benefits paid

$

3,601 138 9 6,209 -

$

8,561 219 (144) 6,134 (11,169)

Closing fair value of plan assets

$

9,957

$

3,601

For the years ended December 31, 2014 and 2013, the actual return on plan assets were $147 thousand and $75 thousand, respectively. The major categories of plan assets at the end of the reporting period for each category were disclosed based on the information announced by Bureau of Labor Funds, Ministry of Labor:

2014 Annual Report 117

YULON NISSAN

December 31 2014 2013 Equity instruments Cash and cash equivalents Fixed income instruments Debt instruments Others

49.69 19.12 14.46 11.92 4.81

44.77 22.86 18.11 9.37 4.89

100.00

100.00

The Company 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, 2014 Present value of defined benefit obligation Fair value of the plan assets Deficit Experience adjustments on plan liabilities Experience adjustments on plan assets

December 31, 2013

December 31, 2012

January 1, 2012

$ (568,683) $ 9,957 $ (558,726)

$ (573,593) $ 3,601 $ (569,992)

$ (583,133) $ 8,561 $ (574,572)

$ (559,935) $ 5,458 $ (554,477)

$

11,615

$ (13,778)

$ (10,147)

$

-

$

9

$

$

$

-

(144)

(111)

The Company expects to make a contribution of $6,674 thousand to the defined benefit plans during the annual period beginning after 2014.

20. EQUITY a. Capital surplus December 31 2014 2013 Excess from spin-off Generated from long-term investment

$ 5,986,507 142,898

$ 5,986,507 142,898

$ 6,129,405

$ 6,129,405

The capital surplus arising from shares issued in excess of par (including excess from spin-off) may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus). The capital surplus from long-term investment may not be used for any purpose.

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Hightlights Of Operations

b. Retained earnings and dividend policy Under the Company’s Articles of Incorporation, the legal reserve should be set aside at 10% of annual net income, less any accumulated deficit, and appropriate special reserve. The remainder of the income should be appropriated as follows: 1) 0.1% to 5% as bonus to employees. 2) The remainder and the undistributed retained earnings as dividends. proposed by the board of directors and approved by the stockholders.

The distribution is

The Company operates in a mature and stable industry. In determining the ratio of cash dividends to stock dividends, the Company considers factors such as the impact of dividends on reported profitability, cash required for future operations, any potential changes in the industry, interest of the stockholders and the effect on the of Company’s financial ratios. Thus, cash dividends should be at least 20% of total dividends to be distributed to the stockholders. The appropriations of earnings for 2013 and 2012 had been approved in the shareholders’ meetings on June 23, 2014 and June 14, 2013, respectively. The appropriations and dividends per share were as follows: Appropriation of Earnings For the Year Ended December 31 2013 2012 Legal reserve Special reserve Cash dividend

$

730,000 (439,912 ) 5,841,000

$

493,048 439,912 3,990,000

Dividends Per Share (NT$) For the Year Ended December 31 2013 2012

$ 19.47

$ 13.3

Bonus to employees for 2013 and 2012 approved in the shareholders’ meetings on June 23, 2014 and June 14, 2013, respectively, were as follows: For the Year Ended December 31 2013 2012 Cash Dividend Cash Dividend Bonus to employees

$ 31,500

$ 30,251

There was no difference between the amounts of the bonus to employees in the shareholders’ meetings in 2014 and 2013 and the amounts recognized in the financial statements for the years ended December 31, 2013 and 2012. The appropriations of earnings for 2012 were proposed according to the Company’s financial statements for the year ended December 31, 2012, which were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the Generally Accepted Accounting Standard in the Republic of China (“ROC GAAP”). The estimated amount of accrued employee bonus for the year ended December 31, 2014 was

2014 Annual Report 119

YULON NISSAN

$32,723 thousand. The bonuses to the Company’s employees for the year ended December 31, 2014 were calculated at 0.56% of net income net of the 10% deduction for legal reserve. The estimated amount of accrued employee bonus for the year ended December 31, 2013 was $31,500 thousand. The bonuses to the Company’s employees for the year ended December 31, 2013 were calculated at 0.43% of net income net of the 10% deduction for legal reserve. After the end of the year, if the actual amounts subsequently resolved by the board of directors have significant difference from the proposed amounts, the adjustments to expenses are recorded in the year of recognition. At the date of stockholders’ resolution, if the amount differs from the amount resolved by the board of directors, 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 closing price (after considering the effect of cash and stock dividends) of the shares of the day immediately preceding the shareholders’ meeting. Under Rule No. 1010012865 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, the Company should appropriate or reverse to a special reserve. Any special reserve appropriated may be reversed to the extent that the net debit balance reverses and thereafter distributed. Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Company. As of March 23, 2015, the date of the accompanying independent auditors’ report, the appropriations and distribution of the 2014 earnings of the Company had not been approved by the board of directors and stockholders. Information on the bonus to employees, directors and supervisors proposed by the Company’s board of directors is available on the Market Observation Post System website of the Taiwan Stock Exchange. Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s capital surplus. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s capital surplus, the excess may be transferred to capital or distributed in cash.

21. NET PROFIT a. Depreciation and amortization For the Year Ended December 31 2014 2013 An analysis of depreciation by function Operating cost Operating expenses

An analysis of amortization by function Operating expenses

2014 Annual Report 120

$ 432,209 14,420

$ 446,602 15,530

$ 446,629

$ 462,132

$

$

5,454

6,713

Hightlights Of Operations

b. Technical cooperation agreement For the Year Ended December 31 2014 2013 Operating cost

$ 507,681

$ 460,376

The Company has a technical cooperation agreement (the “TCA”) with Nissan. The TCA requires the Company to pay Nissan technical service fees mostly based on purchase costs less commodity tax. c. Employee benefit expenses For the Year Ended December 31 2014 2013 Post-employment benefit (Note 19) Defined contribution plans Defined benefit plans

$

Termination benefit Labor and health insurance Other employee benefit Total employee benefit expenses

12,935 18,045 30,980 3,900 36,868 547,850 588,618

$ 619,598

An analysis of employee benefits expense by function Operating cost Operating expenses Non-operating expenses The number of employees for the years ended December 422, respectively.

$ 645 $ 617,829 $ 1,124 31, 2014 and 2013

$

12,548 17,873 30,421 3,900 34,648 596,424 634,972

$ 665,393 $ 881 $ 663,487 $ 1,025 were 428 and

d. Non-operating income and expenses For the Year Ended December 31 2014 2013 Net gain/(loss) on disposal of property, plant and equipment

$

1,131

$

(15)

e. Gain or loss on foreign currency exchange For the Year Ended December 31 2014 2013 Foreign currency exchange gain Foreign currency exchange loss

$ 495,700 (84,740)

$

55,580 (3,905)

Net gain

$ 410,960

$

51,675

2014 Annual Report 121

YULON NISSAN

f. Gain or loss on sale of investment For the Year Ended December 31 2014 2013 Gain on sale of investment Loss on sale of investment

$

9,705 (3,741)

$

5,211 (1,466)

Net gain

$

5,964

$

3,745

22. INCOME TAX 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 Adjustments for prior years Deferred tax In respect of the current year

$ 2,402,152 1,265 (900,499)

Income tax expense recognized in profit or loss

$ 1,502,918

$

921,450 4,257 581,186

$ 1,506,893

A reconciliation of accounting profit and income tax expenses is as follows: For the Year Ended December 31 2014 2013 Profit before tax

$ 8,026,677

$ 8,806,890

Income tax expense calculated at the statutory rate (17%) Nondeductible expenses in determining taxable income Tax-exempt income Additional income tax on unappropriated earnings Adjustments for prior years’ tax

$ 1,364,535 23,854 (3,695) 116,959 1,265

$ 1,497,171 5,646 (933) 752 4,257

Income tax expense recognized in profit or loss

$ 1,502,918

$ 1,506,893

As the status of 2014 appropriations of earnings is uncertain, the potential income tax consequences of 2014 unappropriated earnings are not reliably determinable.

2014 Annual Report 122

Hightlights Of Operations

b. Income tax recognized in other comprehensive income For the Year Ended December 31 2014 2013

Deferred tax Recognized in other comprehensive income Actuarial gains and losses on defined benefit plan

$

$

(167)

(140)

c. Current tax liabilities 2014

December 31 2013

Current tax liabilities Income tax payable

$ 490,530

$ 977,135

d. Deferred tax assets and liabilities The movements of deferred tax assets and deferred tax liabilities were as follow: For the year ended December 31, 2013

Opening Balance

Recognized in Profit or Loss

Recognized in Other Comprehensiv e Income

Closing Balance

Deferred tax assets Temporarily difference Defined benefit obligation Impairment losses Provisions for warranty Provisions for loss on inventory purchase commitment Unrealized exchange loss, net Deferred revenue

$

$

94,999 78,193 25,310

$

(212) (25,946) (2,509)

$

(140) -

$

94,647 52,247 22,801

13,835

4,833

-

18,668

4,985 3,813

(4,985) (3,813)

-

-

221,135

$

(32,632)

$

$ 2,927,514

$

543,104

$

(140)

$

188,363

Deferred tax liabilities Temporarily difference Shares of profit of subsidiary Unrealized exchange gain, net

$ 2,927,514

5,450 $

548,554

2014 Annual Report 123

$

-

$ 3,470,618

-

5,450

-

$ 3,476,068

YULON NISSAN

For the year ended December 31, 2014

Opening Balance

Recognized in Profit or Loss

Recognized in Other Comprehensiv e Income

Closing Balance

Deferred tax assets Temporarily difference Defined benefit obligation Impairment losses Provisions for warranty Provisions for loss on inventory purchase commitment

$

94,647 52,247 22,801

$

(1,323) (24,612) 2,080

18,668 $

188,363

$

(167) -

368 $

$

-

(23,487)

$

$ (964,024)

$

93,157 27,635 24,881 19,036

(167)

$

164,709

Deferred tax liabilities Temporarily difference Shares of profit of subsidiary Unrealized exchange gain, net

$ 3,470,618 5,450 $ 3,476,068

40,038 $ (923,986)

$

-

$ 2,506,594

-

45,488

-

$ 2,552,082

e. Integrated income tax December 31 2014

2013

Unappropriated earnings Unappropriated earnings generated on and after January 1, 1998

$ 12,607,444

$ 12,213,958

Imputation credit account (“ICA”)

$

$

881,287

813,731

For the Year Ended December 31 2014 2013 (Expected) (Actual) Creditable ratio for distribution

14.74%

6.67%

Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputation credits allocated to ROC resident shareholders of the Company was calculated based on the creditable ratio as of the date of dividend distribution. The actual imputation credits allocated to shareholders of the Company 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 shareholders. f. Income tax assessment

The tax returns through 2012 have been assessed by the tax authorities.

2014 Annual Report 124

Hightlights Of Operations

23. EARNINGS PER SHARE The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share from continuing operations were as follows: Net Profit for the Year For the Year Ended December 31 2014 2013 Earnings used in the computation of basic and diluted earnings per share

$ 6,523,759

$ 7,299,997

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 Effect of potential dilutive ordinary shares: Bonus issue to employees Weighted average number of ordinary shares used in the computation of diluted earnings per share

300,000

300,000

141

126

300,141

300,126

The Company may settle bonuses paid to employees in cash or shares; thus, the Company 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 is 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.

24. NON-CASH TRANSACTIONS For the years ended December 31, 2014 and 2013, the Company entered into the following non-cash investing activities: For the Year Ended December 31 2014 2013 Investing activities affecting both cash and non-cash transactions Increase in property, plant and equipment Decrease in trade payables

$

439,933 46,447

$

Cash paid for acquisition of property, plant and equipment

$

486,380

$ 1,084,114

2014 Annual Report 125

515,061 569,053

YULON NISSAN

25. OPERATING LEASE AGREEMENTS The future minimum lease payments of non-cancellable operating lease commitments were as follows: December 31 2014 2013 No later than 1 year Later than 1 year and not later than 5 years

$

2,508 3,971

$

2,508 6,479

$

6,479

$

8,987

26. CAPITAL MANAGEMENT The Company manages its capital to ensure that entities in the Company, will be able to continue as going concerns, while maximizing the return to stockholders through optimization of the debt and equity balance.

27. FINANCIAL INSTRUMENTS a. Fair value of financial instruments 1) Fair value of financial instruments not carried at fair value The management believes the carrying value of the financial assets and financial liabilities not carried at fair value is approximately equal to the fair value. 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).

2014 Annual Report 126

Hightlights Of Operations

December 31, 2014 Level 1

Level 2

Level 3

Total

Financial assets at FVTPL Non-derivative financial assets held for trading

$ 331,032

$

-

$

-

$ 331,032

December 31, 2013 Level 1

Level 2

Level 3

Total

Financial assets at FVTPL Non-derivative financial assets held for trading

$ 434,741

$

-

$

-

$ 434,741

There were no transfers between Levels 1 and 2 in the current and prior periods. 3) Valuation techniques and assumption applied for the purpose of measuring fair value The fair value of fund beneficiary certificate traded on active market is the net asset value on balance sheet date. If there is no market price, the fair value is determined by the redemption value. The estimates and assumptions used by the Company were consistent with those that market participants would use in setting a price for the financial instrument. b. Categories of financial instruments December 31 2014 2013 Financial assets Fair value through profit or loss Held for trading Loans and receivables (Note 1)

$

331,032 9,831,101

$

434,741 4,491,786

Financial liabilities Amortized cost (Note 2)

4,876,724

5,106,211

Note 1: The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables, other receivables and other financial assets.

2014 Annual Report 127

YULON NISSAN

Note 2: The balances included financial liabilities measured at amortized cost, which comprise short-term loans, notes payable, trade payables, part of other payables, and long-term loans. c. Financial risk management objectives and policies The Company’s major financial instruments include trade receivable, trade payables, and borrowings. The Company’s Corporate Treasury function coordinates access to domestic and international financial markets, manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk. 1) Market risk The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. There had been no change to the Company’s exposure to market risks or the manner in which these risks were managed and measured. Sensitivity analysis evaluates the impact of a reasonably possible change in interest or foreign currency rates over a year. Details of sensitivity analysis for foreign currency risk and for interest rate risk are set out in (a) and (b) below. a) Foreign currency risk The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 30. Sensitivity analysis The Company is mainly exposed to the RMB, U.S. dollars and Japanese yen. The following table details the Company’s sensitivity to a 5% increase and decrease in the functional currency against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items, and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. A positive number below indicates an increase in pre-tax profit associated with the functional currency strengthen 5% against the relevant currency. For a 5% weakening of the functional currency against the relevant currency, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative. RMB Impact For the Year Ended December 31 2014 2013 Gain (loss)

$ (409,199)

$ (165,708)

U.S. Dollar Impact For the Year Ended December 31 2014 2013 $

2014 Annual Report 128

(5,979)

$

(3,450)

Japan Yen Impact For the Year Ended December 31 2014 2013 $

(1,434)

$

(749)

Hightlights Of Operations

This was mainly attributable to the exposure outstanding on RMB, U.S. dollars, and Japanese Yen cash in bank, receivables and payables, which were not hedged at the end of the reporting period. b) Interest rate risk The carrying amount of the Company’s financial assets and financial liabilities with exposure to interest rate at the end of the reporting period were as follows: December 31 2014 2013 Fair value interest rate risk Financial assets Financial liabilities Cash flows interest rate risk Financial assets Financial liabilities

$ 8,030,577 500,000

$ 3,336,817 3,630,000

1,463,381 3,130,000

796,221 -

Sensitivity analysis The sensitivity analyses below were determined based on the Company’s exposure to interest rates for non-derivative instruments at the end of the reporting period. A 25 basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Company’s pre-tax profit for the year ended December 31, 2014 would decrease/increase by $4,167 thousand, which was mainly attributable to the Company’s exposure to interest rates on its demand deposits. If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Company’s pre-tax profit for the year ended December 31, 2013 would decrease/increase by $1,991 thousand, which was mainly attributable to the Company’s exposure to interest rates on its demand deposits. 2) Credit risk The Company’s concentration of credit risk of 46% and 49% in total trade receivables as of December 31, 2014 and 2013, respectively, was related to the Company’s largest customer within the vehicle department and the five largest customers within the parts department. 3) Liquidity risk The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

2014 Annual Report 129

YULON NISSAN

The Company relies on bank borrowings as a significant source of liquidity. As of December 31, 2014 and 2013, the available unutilized short-term borrowings facilities were $2,070,000 thousand and $370,000 thousand, respectively. The following table details the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Company can be required to pay.

December 31, 2014 Weightedaverage Effective Interest Rate (%)

Within One Month

-

$ 1,018,924

1 to 3 Months

3 Months to 1 Year

1-2 Years

67,421

$ 159,019

$

Non-derivative financial liabilities Non-interest bearing Floating interest rate instrument Fixed interest rate instrument

$

-

0.96

1,133,555

2,000,925

-

-

1.10

500,135

-

-

-

$ 2,652,614

$ 2,068,346

$ 159,019

$

Weightedaverage Effective Interest Rate (%)

Within One Month

1 to 3 Months

3 Months to 1 Year

1-2 Years

-

$ 970,731

$ 292,470

$ 211,544

$

631,466

2,006,287

10,125

1,008,544

$ 1,602,197

$ 2,298,757

$ 221,669

$ 1,008,544

-

December 31, 2013

Non-derivative financial liabilities Non-interest bearing Fixed interest rate instrument

1.08

-

28. TRANSACTIONS WITH RELATED PARTIES In addition to those disclosed in other notes, the Company had business transactions with the following related parties: a. Related parties

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Hightlights Of Operations

Related Party Investors that have significant influence over the Company Nissan Motor Corporation (“Nissan”) Yulon Motor Co., Ltd. (“Yulon”) Subsidiaries Yi-Jan Overseas Investment Co., Ltd. Jetford, Inc. Other parties Nissan Trading Co., Ltd. Nissan Motor Egypt S.A.E. PT. Nissan Motor Indonesia (“NMI”) Nissan Motor India Private Limited Nissan Mexicana, S.A. De C. V. Nissan Motor (Thailand) Co., Ltd. PT Nissan Motor Distributor Indonesia Nissan North America, Inc. Nissan Vietnam Co., Ltd. Nissan Motors Co., Ltd Honmoku Plant Nissan Philippines Inc. Dongfeng Nissan Passenger Vehicle Co. Allied Engineering Co., Ltd. Chien Tai Industry Co., Ltd. Taiwan Calsonic Co., Ltd. Taiwan Acceptance Corporation Yueki Industrial Co., Ltd. Yu Pong Business Co., Ltd. Yushin Motor Co., Ltd. Yu Chang Motor Co., Ltd. Ka-Plus Automobile Leasing Co., Ltd. Yu Sing Motor Co., Ltd. Empower Motor Co., Ltd. Uni Auto Parts Co., Ltd. Chan Yun Technology Co., Ltd. Y-teks, Co. Singan Co., Ltd. Sinjang Co., Ltd. Luxgen Motor Co., Ltd. Yue Sheng Industrial Co., Ltd. Univatin Motor Philippines, Inc. (Nissan Motor Philippines, Inc.) Uni Calsonic Corporation China Ogihara Corporation Yuan Lon Motor Co., Ltd. Chen Long Co., Ltd. Yulon Management Co., Ltd. ROC Spicer Co., Ltd. Yu Tang Motor Co., Ltd. Tokio Marine Newa Insurance Co., Ltd. Hua-Chuang Automobile Information Technical Center Co., Ltd.

Relationship with the Company

Equity-method investor of the Company Same as above Subsidiary Subsidiary of Yi-Jan Overseas Investment Co., Ltd. Subsidiary of Nissan Same as above Same as above Subsidiary of Nissan Same as above Same as above Same as above Same as above Substantial related party of Nissan Same as above Same as above Same as above Same as above Same as above Same as above Subsidiary of Yulon Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Substantial related party of Yulon Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above (Continued)

2014 Annual Report 131

YULON NISSAN

Related Party Chi Ho Corporation Taiway, Ltd. Kian Shen Corporation Hui-Lian Motor Co. Le-Wen Co., Ltd Visionary International Consulting Co., Ltd. Sin Etke Technology Co., Ltd. Singgual Technology Co., Ltd. Hsiang Shou Enterprise Co., Ltd. Hong Shou Culture Enterprise Co., Ltd. Yu Pool Co., Ltd. Yu-Jan Co., Ltd. Tang Li Enterprise Co., Ltd. Ding Long Motor Co., Ltd. Lian Cheng Motor Co., Ltd. CL Skylite Trading Co., Ltd. Yuan Jyh Motor Co., Ltd. Tsung Ho Enterprise Co., Ltd. Diamond Leasing Service Co., Ltd. Hsieh Kuan Manpower Service Co., Ltd. Tan Wang Co., Ltd.

Relationship with the Company Same as above Same as above Same as above Same as above Same as above Same as above Subsidiary of Hua-Chuang Automobile Information Technical Center Co., Ltd. Subsidiary of Singan Co., Ltd. Same as above Same as above Subsidiary of Yushin Motor Co., Ltd. Subsidiary of Yu Sing Motor Co., Ltd. Subsidiary of Yu Tang Motor Co., Ltd. Subsidiary of Chen Long Co., Ltd. Same as above Subsidiary of Chen Long Co., Ltd. Subsidiary of Yuan Lon Motor Co., Ltd. Subsidiary of Chi Ho Corporation Subsidiary of Ka-Plus Automobile Leasing Co., Ltd. Subsidiary of Diamond Leasing Service Co., Ltd. Subsidiary of Yu Chang Motor Co., Ltd.

b. Transactions between the Company and related parties are based on agreements. transactions between the Company and related parties were disclosed below:

Details of

1) Trading transactions For the Year Ended December 31 2014 2013 Sales Investors that have significant influence Others

$

11,212 32,546,046

$

10,309 30,844,618

$ 32,557,258

$ 30,854,927

$

1,382

$

16,872

$

16,547 21,209

$

21,286 18,413

$

37,756

$

39,699

Service revenue Investors that have significant influence Other operating revenue Investors that have significant influence Others

2014 Annual Report 132

Hightlights Of Operations

The Company designs and performs R&D of cars for Nissan. recognized according to the related contracts.

Service revenue is

Other operating revenue of the Company arose from selling steel plates, steel and aluminum parts, and engaging in vehicles identification and testing. For the Year Ended December 31 2014 2013 Operating cost - purchase Investors that have significant influence Others

$ 27,463,115 108,182

$ 24,825,735 40,724

$ 27,571,297

$ 24,866,459

$

507,681

$

460,376

$

13,626 13,296

$

12,323 16,713

$

26,922

$

29,036

Operating cost - TCA Investors that have significant influence Operating cost - rental Investors that have significant influence Others

The Company’s TCA is the payment to investors with significant influence, with whom the Company has technical cooperation agreements. The Company’s rental expenses paid monthly are primarily comprised of customer service system, building property, car testing expenses, cars and driving service for its executives. For the Year Ended December 31 2014 2013 Selling and marketing expenses Investors that have significant influence Others

$

32,908 1,468,999

$

42,433 1,750,092

$ 1,501,907

$ 1,792,525

$

12,211 183,379

$

20,486 186,468

$

195,590

$

206,954

$

100,291 27,922

$

89,939 26,324

$

128,213

$

116,263

General and administrative expenses Investors that have significant influence Others

Research and development expenses Investors that have significant influence Others

2014 Annual Report 133

YULON NISSAN

Selling and marketing expenses are payment to other parties for advertisement and promotion. General and administrative expenses are payment to other parties for consulting, labor dispatch and IT services. Research and development expenses are payment to investors with significant influence for sample products, trial fee, and TOBE System. The Company bought molds from related parties (molds purchased were recorded under property, plant and equipment) as follows: For the Year Ended December 31 2014 2013 Investors that have significant influence Others

$

16,624 130,942

$ 147,566

$

167,103

$ 167,103

2) Non-operating transactions For the Year Ended December 31 2014 2013 Other revenue Investors that have significant influence Others

$

168 -

$

581 399

$

168

$

980

$

13,344

$

15,486

$

31

$

32

Overseas business expenses Others Other losses Investors that have significant influence 3) Receivables from related parties December 31 2014

2013

Notes receivable Others

$

905

$

2,312

$

6,329 14,890 203,276

$

10,100 40,837 241,292

Trade receivables Subsidiary Investors that have significant influence Others

$ 224,495

2014 Annual Report 134

$ 292,229

Hightlights Of Operations

4) Payables to related parties December 31 2014

2013

Notes payable Investors that have significant influence

$

-

$

1,536

Trade payables Investors that have significant influence Others

$ 253,986 311,485

$ 659,922 413,170

$ 565,471

$1,073,092

5) Refundable deposits December 31 Investors that have significant influence Others

2014

2013

$ 488,561 47,977

$ 174,432 59,284

$ 536,538

$ 233,716

c. 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 benefits Post-employment benefits

$ 44,464 1,986

$ 42,279 1,585

$ 43,864 $ 46,450 The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends. d. Other transactions with related-parties 1) The Company sold to Taiwan Acceptance Corporation trade receivable which amounted to $2,061,218 thousand and $2,017,040 thousand for the years ended December 31, 2014 and 2013, respectively. Based on the related contract, the amount of receivable sold is limited to the amount of pledges from the original debtor to Taiwan Acceptance Corporation. The Company’s interest expenses recognized on the trade receivable sold to Taiwan Acceptance Corporation were $1,149 thousand and $1,185 thousand for the years ended December 31, 2014 and 2013, respectively. 2) The Company bought other equipment for $247 thousand and $769 thousand from Singgual Technology Co., Ltd. for the years ended December 31, 2014 and 2013. All of them were recorded under property, plant and equipment.

2014 Annual Report 135

YULON NISSAN

3) The Company had sold property, plant and equipment to related-party; the related party and amounts for the year ended December 31, 2014 are summarized as follows: Amount Hua-Chuang Automobile Information Technical Center Co., Ltd.

$

4,629

Carrying Value $

Gain on Disposal

3,468

$

1,161

4) The Company bought computer software for $148 thousand from Singgual Technology Co., Ltd. for the year ended December 31, 2014. All of them were recorded under computer software. 5) The Company signed molds contracts with Diamond Leasing Service Co., Ltd. The molds contracts are valid from the date of the contract to the end of production of the car model. The contract amount is $790,155 thousand (excluding of tax) and the installment payments will be disbursed according to the progress under the contract schedule. The types of car parts have not been produced until the end of December 2014. The Company had already paid $681,226 thousand (recognized as property, plant, and equipment). Besides, within the contract period, the Company should pay to Diamond Leasing Service Co., Ltd. before the end of January every year with the amount of $2.6 for every ten thousand of the accumulated amounts paid for molds in prior year.

29. SIGNIFICANT CONTINGENCIES AND UNRECOGNIZED COMMITMENTS In addition to those disclosed in other notes, significant commitments and contingencies of the Company as of December 31, 2014 were as follows: a. The Company is under a manufacturing contract with Yulon, effective November 1, 2003. This contract, for which the first expiry date was on October 31, 2008, is automatically extended annually unless either party issues a termination notice at least three months before expiry. The contract states that the Company authorizes Yulon to manufacture Nissan automobiles and parts, and the Company is responsible for the subsequent development of new automobile parts. The manufacturing volume of Yulon under the contract should correspond to the Company’s sales projection for the year. In addition, the Company has authorized Yulon as the original equipment manufacturer (“OEM”) of automobile parts and after-sales service. As of December 31, 2014, both parties did not receive a termination notice, so the contract automatically extended. The Company is responsible for developing new car models, refining designs, and providing the sales projection to Yulon. Yulon is responsible for transforming the sales projections into manufacturing plans, making the related materials orders and purchases, providing product quality assurance, delivering cars, and shouldering warranty expenses due to any defects in products made by Yulon. b. The Company has a contract with Taiwan Acceptance Corporation for sale and purchase of vehicles. Besides, Taiwan Acceptance Corporation separately signed with dealers contracts for display of vehicles. If any dealer violates the display contract, resulting in the need for Taiwan Acceptance Corporation to recover the display vehicles, the Company must assist in the settlement or buy-back the vehicles at the original price. From the date of signing the sale and purchase contract to December 31, 2014, no buy-back of vehicles has occurred.

2014 Annual Report 136

Hightlights Of Operations

c. Unrecognized commitments December 31 2014 2013 Acquisition of property, plant, and equipment Acquisition of computer software

$ 234,249 296

$ 289,990 1,331

$ 234,545

$ 291,321

30. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES The significant financial assets and liabilities denominated in foreign currencies were as follows: (In Thousands of New Taiwan Dollars and Foreign Currency) December 31, 2014 Foreign Currencies

Exchange Rate

Carrying Amount

$ 1,607,224 3,778 108,653

5.0920(RMB:NTD) 31.65(USD:NTD) 0.2646 (JPY:NTD)

$ 8,183,984 119,586 28,749

278

0.2646 (JPY:NTD)

74

Financial assets Monetary items RMB USD JPY Financial liabilities Monetary item JPY December 31, 2013 Foreign Currencies

Exchange Rate

Carrying Amount

675,808 2,315 53,715

4.9040(RMB:NTD) 29.805(USD:NTD) 0.2839 (JPY:NTD)

$ 3,314,162 68,999 15,250

919

0.2839 (JPY:NTD)

261

Financial assets Monetary items RMB USD JPY

$

Financial liabilities Monetary items JPY

2014 Annual Report 137

YULON NISSAN

31. SEPARATELY DISCLOSED ITEMS a. Information about significant transactions and investees: 1) Financing provided to others:

None

2) Endorsements guarantees provided:

None

3) Market securities held (excluding investment in subsidiaries and associates): (attached)

Table 1

4) Marketable securities acquired and disposed at costs or prices of at least NT$300 million or 20% of the paid-in capital: None 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None 6) Disposal of real individual estate at prices of at least NT$300 million or 20% of the paid-in capital: None 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 2 (attached) 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 3 (attached) 9) Trading in derivative instruments: 10) Information on investees:

None

Table 4 (attached)

b. Information on investments in mainland China 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, investment income or loss, carrying amount of the investment at the end of the period, repatriated investment income, and limit on the amount of investment in the mainland China area: Table 5 (attached) 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses: None a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period. b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period. c) The amount of property transactions and the amount of the resultant gains or losses. d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes. e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds. f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

2014 Annual Report 138

2014 Annual Report 139

Note:

-

Nomura Investment Grade USD Credit Acc Capital US Opportunity -

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss

Financial Statement Account

667

1,117

1,781

1,770

1,081

2,928

7,964

9,821

Shares (Thousands)

$

11,293

13,121

20,036

21,363

38,994

40,218

80,738

105,269

Carrying Value

-

-

-

-

-

-

-

-

$

11,293

13,121

20,036

21,363

38,994

40,218

80,738

105,269

Market Value Note Percentage of or Net Asset Ownership % Value (Note)

December 31, 2014

TABLE 1

The fair value of the financial asset at fair value through profit or loss is calculated based on the asset’s net value and the redemption price as of December 31, 2014.

Nomura Global Biotech & Health Care

-

Yuanta Global REITs Fund

-

-

-

-

-

Allianz Glbl Inv Glbl Biotech

Yulon Beneficiary certificates Nissan Motor Company, Yuanta De-Bao Money Ltd. Market Fund Franklin Templeton Sinoam Money Market Fuh Hwa Global Bond

Investor

Relationship with Securities Type and Name the Investor

MARKETABLE SECURITIES HELD DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars and U.S. Dollars, Unless Stated Otherwise)

YULON NISSAN MOTOR COMPANY, LTD. Financial Information

Related Party

2014 Annual Report 140

Note 1: Note 2: Note 3:

Sale

Subsidiary of Yulon

Payment Terms

1 15 days after sales for parts Immediate payment for vehicles - Same as above

1 15 days after sales for parts Immediate payment for vehicles 1 15 days after sales for parts

1 Same as above

1 15 days after sales for parts

1 15 days after sales for parts Immediate payment for vehicles

1 Same as above

98 5 days after sales for parts 3 days after sales for vehicles 89 4 days after sales for parts 3 days after sales for vehicles 1 15 days after sales for parts

% to Total

Transaction terms are based on agreements. Balances shown here are notes and trade receivable from sales and notes and trade payable for purchases. Balances shown here are based on the carrying amount of the Company.

127,529

Sale

Chi Ho Corporation

Substantial related party of Yulon

225,047

254,783

Sale

Sale

265,793

Sale

242,075

278,913

Sale

Sale

Substantial related party of Yulon Substantial related party of Yulon Subsidiary of Yulon

350,365

Sale 315,776

366,743

29,532,957

$ 27,438,045

Amount

Sale

Sale

Purchase

Purchase/ Sale

Substantial related party of Yulon Subsidiary of Yulon

Equity-method investor of the Company Subsidiary of Yulon

Nature of Relationship

Substantial related party of Yulon Yushin Motor Co., Ltd. Subsidiary of Yulon

Chen Long Co., Ltd.

Hui-Lian Motor Co., Ltd. Yu Tang Motor Co., Ltd. Empower Motor Co., Ltd.

Yulon Nissan Motor Yulon Company, Ltd. Taiwan Acceptance Corporation Yuan Lon Motor Co., Ltd. Yu Chang Motor Co., Ltd. Yu Sing Motor Co., Ltd.

Company Name

Transaction Details

$

-

-

-

-

-

-

-

-

-

-

-

Unit Price

-

-

-

-

-

-

-

-

-

-

-

Payment Terms

$

-

-

2,728

2,373

-

-

-

3,154

6,088

90,416

(132,058)

Ending Balance

-

-

1

1

-

-

-

1

2

30

(19)

-

-

-

-

-

-

-

-

-

-

-

% to Note Total (Note 3)

Abnormal Transaction Note/Accounts Payable (Note 1) or Receivable (Note 2)

TABLE 2

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

YULON NISSAN MOTOR COMPANY, LTD.

YULON NISSAN

Related Party

Nature of Relationship

2014 Annual Report 141

Note:

Corporation

90,416

$

21,940

Other receivables

$

Trade receivables

Ending Balance

The turnover rate was based on the carrying amount of the Company.

Company, Ltd.

Yulon Nissan Motor Taiwan Acceptance Subsidiary of Yulon

Company Name

232.57

$

-

-

$

21,940

90,416

Period

Subsequent

Action Taken

(Note) Amount

Received in

Amounts

Turnover Rate

Overdue

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, Unless Stated Otherwise)

YULON NISSAN MOTOR COMPANY, LTD.

$

-

Bad Debts

for

Allowance

TABLE 3

Financial Information

2014 Annual Report 142

Note 1: Note 2: Note 3:

Dong Feng Yulon Used Guangdong (Mainland China) Cars Co., Ltd.

Shenzhen Lan You Guangdong (Mainland China) Technology Co., Ltd.

Guangzhou Aeolus Guangdong (Mainland China) Automobile Co., Ltd.

Aeolus Automobile Co., Guangdong (Mainland China) Ltd.

Aeolus Xiangyang Hubei (Mainland China) Automobile Co., Ltd.

British Virgin Islands

Developing and manufacturing of parts and vehicles and related services Developing and selling of parts and vehicles and related services Developing and manufacturing of parts and vehicles and related services Developing, manufacturing and selling of computer software and hardware and computer technology consulting Valuation, purchase, renovation, rent and selling of used cars

Investment

Investment

Main Businesses and Products

US$

US$

US$

US$

US$

US$

593

1,125

16,941

18,710

21,700

57,171

US$

593

US$ 1,125

US$16,941

US$18,710

US$21,700

US$57,171

Note 2

-

-

-

-

-

Note 2

Note 2

49.00 US$

Note 2

(700) US$ (3,749) US$ (1,837 ) Notes 2 and 3

45.00 US$ 17,765 US$ 5,756 US$ 2,590

40.00 US$399,697 US$513,803 US$205,521 Note 2

33.12 US$ 57,024 US$ 3,245 US$ 1,075

16.55 US$ 85,840 US$ 64,463 US$ 10,222

71,772 100.00 US$751,775 US$220,357 US$220,357 Note 2

84,987 100.00 $23,800,390 $ 6,677,910 $ 6,677,910

%

Net Income Share of (Loss) of Profit (Loss) Note Carrying (Note 1) Amount the Investee

As of December 31, 2014

December Shares 31, 2013 (Thousands)

$ 1,847,983 $1,847,983 (US$ 57,371 ) (US$57,371)

December 31, 2014

Original Investment Amount

TABLE 4

Shares of profit include the amortization of investment premium or discount. The carrying amount and related shares of profit of the equity investment were calculated based on the audited financial statements and percentage of ownership. The Company’s share of loss exceeds its interest in Dong Feng Yulon Used Cars Co., Ltd. The Company recognized additional loss on constructive future obligations to settle Dong Feng Yulon Used Cars Co., Ltd.

Jet Ford, Inc.

Location

Yi-Jan Overseas Cayman Islands Investment Co., Ltd.

Investee Company

Yi-Jan Overseas JetFord, Inc. Investment Co., Ltd.

Yulon Nissan Motor Company, Ltd.

Investor Company

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars and U.S. Dollars, Unless Stated Otherwise)

YULON NISSAN MOTOR COMPANY, LTD.

YULON NISSAN

38,300 10,000 )

Dong Feng Yulon Used Cars Co., Ltd. (Note 4)

2014 Annual Report 143

Note 4:

Note 1: Note 2: Note 3:

(US$

(US$

(US$

(US$

$ (US$

18,804 593 )

35,674 1,125 )

537,199 16,941 )

533,109 16,812 )

716,856 21,700 )

$

-

-

-

-

-

$

Inflow

-

-

-

-

-

$1,917,100 (US$59,660)

Commission, MOEA

Investment Amounts Authorized by Investment

Note 1

Note 1

Note 1

Note 1

Note 1

Outflow

Investment Flows

(US$

(US$

(US$

(US$

$ (US$

49.00

45.00

40.00

33.12

16.55

Investment Gain (Loss) (Note 2)

Carrying Amount as of December 31, 2014

98,336 32,569 1,804,815 3,245 ) (US$ 1,075 ) (US$ 57,024 ) (US$

4,597,012 148,224 )

(US$

(US$

(113,605 ) (55,667 ) (22,141 ) -3,749 ) (US$ -1,837 ) (US$ -700 )

174,436 78,496 562,276 5,756 ) (US$ 2,590 ) (US$ 17,765 )

$16,158,307

(Note 3)

Investment Commission, MOEA

-

-

15,571,122 6,228,449 12,650,417 10,914,750 (US$ 513,803 ) (US$205,521 ) (US$ 399,697 ) (US$ 355,880 )

(US$

876,623 28,078 )

Accumulated Repatriation of Investment Income as of December 31, 2014

$ 1,953,598 $ 309,794 $ 2,716,828 $ (US$ 64,463 ) (US$ 10,222 ) (US$ 85,840 ) (US$

Net Income (Loss) of the Investee

Upper Limit on the Amount of Investment Stipulated by

18,804 593 )

35,674 1,125 )

537,199 16,941 )

533,109 16,812 )

716,856 21,700 )

Accumulated Outward Remittance % Ownership of for Investment from Direct or Indirect Investment Taiwan as of December 31, 2014

TABLE 5

The Company indirectly owns these investees through Jet Ford, Inc., an investment company registered in a third region. The carrying amount and related investment income of the equity investment were calculated based on the audited financial statements and percentage of ownership. The upper limit was calculated in accordance with the “Regulation Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission under the Ministry of Economic Affairs on August 22, 2008. The Company’s share of loss exceeds its interest in Dong Feng Yulon Used Car s Co., Ltd. The Company recognized additional loss on const ructive future obligations to settle D ong Feng Yulon Used Cars Co., Ltd.

$1,841,642 (US$57,171)

December 31, 2014

Mainland China as of

Accumulated Outward Remittance for Investment in

Valuation, purchase, renovation, rent and selling of used cars. (RMB

57,450 15,000 )

Shenzhen Lan You Developing, manufacturing and Technology Co., Ltd. selling of computer software and (RMB hardware and computer technology consulting

Guangzhou Aeolus Developing and manufacturing of Automobile Co., Ltd. parts and vehicles and related services

8,969,950 (RMB2,200,000 )

761,964 (RMB 194,400 )

Aeolus Automobile Co., Ltd.

Developing and selling of parts and vehicles and related services

$ 3,581,037 (RMB 826,000 )

Main Businesses and Products

Aeolus Xiangyang Developing and manufacturing of Automobile Co., Ltd. parts and vehicles and related services

Investee Company

Accumulated Method of Outward Remittance Investment Paid-in Capital for Investment from (e.g., Direct or Taiwan as of Indirect) January 1, 2014

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars, U.S. Dollars and RMB, Unless Stated Otherwise)

YULON NISSAN MOTOR COMPANY, LTD.

Financial Information

YULON NISSAN

5. The Audited Consolidated Financial Statements of the Parent Company and Subsidiaries in Recent Year Independent Auditors’ Report The Board of Directors and Stockholders Yulon Nissan Motor Company, Ltd. We have audited the accompanying consolidated balance sheets of Yulon Nissan Motor Company, Ltd. (the “Company”) and its subsidiaries (collectively referred to as 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 ended December 31, 2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the Rules Governing the Audit 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 provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred in the first paragraph present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2014 and 2013 and their consolidated financial performance and their consolidated cash flows for the years ended December 31, 2014 and 2013, in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed by the Financial Supervisory Commission of the Republic of China. We have also audited the financial statements of Yulon Nissan Motor Company, Ltd. as of and for the years ended December 31, 2014 and 2013 on which we have issued an unqualified report.

March 23, 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.

2014 Annual Report 144

Financial Information

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2014 AND 2013 2014 Amount

ASSETS CURRENT ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss (Notes 4 and 7) Notes receivable (Notes 4 and 8) Notes receivable - related parties (Notes 4 and 28) Trade receivables (Notes 4 and 8) Trade receivables - related parties (Notes 4 and 28) Other receivables (Notes 4 and 8) Inventories (Notes 4 and 9) Prepayments Other financial assets (Note 10)

%

35 1 1 2 6

$8,567,899 434,741 27 2,312 41,706 286,196 351,164 2,047 877,335 7,572,375

24 1 1 1 3 21

16,262,960

45

18,135,802

51

17,734,336 1,758,753 12,346 164,709 573,443

49 5 1

14,989,267 1,748,604 7,887 188,363 249,042

42 5 1 1

20,243,587

55

17,183,163

49

100 $ 35,318,965

100

NON-CURRENT ASSETS Investments accounted for using equity method (Notes 4 and 11) Property, plant and equipment (Notes 4, 12 and 28) Computer software (Notes 4, 13 and 28) Deferred tax assets (Notes 4 and 22) Other non-current assets (Notes 14 and 28) Total non-current assets

$

2014 Annual Report 145

2013 Amount

$ 12,831,865 331,032 2,000 905 70,218 220,133 96,152 2,739 509,050 2,198,866

Total current assets

TOTAL

%

36,506,

YULON NISSAN

(In Thousands of New Taiwan Dollars, Except Par Value) 2014 Amount

LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Note 15) Notes payable - related parties (Note 28) Trade payables Trade payables - related parties (Note 28) Other payables (Note 16) Current tax liabilities (Notes 4 and 22) Provisions (Notes 4 and 18) Deferred revenue (Note 17) Other current liabilities

$ 3,630,000 122,244 565,471 882,601 977,135 172,054 19,698

2013 Amount

%

10 $ 2,630,000 1,536 127,494 2 1,073,092 2 657,680 3 490,530 169,129 1,643 21,419

% 8 3 2 1 1 -

6,369,203

17

5,172,523

15

86,282

-

1,000,000 74,808

3 -

22,141 546,327 2,552,082

2 7

555,089 3,476,068

1 10

Total non-current liabilities

3,206,832

9

5,105,965

14

Total liabilities

9,576,035

26

10,278,488

29

3,000,000 6,129,405

8 17

3,000,000 6,129,405

9 17

2,987,887 788,877 12,607,444 16,384,208 1,416,899

8 2 35 45 4

2,257,887 1,228,789 12,213,958 15,700,634 210,438

6 3 35 44 1

26,930,512

74

25,040,477

71

100 $ 35,318,965

100

Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Note 15) Provisions (Notes 4 and 18) Credit balance of investments accounted for using equity method (Notes 4 and 11) Accrued pension liabilities (Notes 4 and 19) Deferred tax liabilities (Notes 4 and 22)

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY Capital stock - NT$10 par value; authorized - 600,000 thousand shares; issued and outstanding - 300,000 thousand shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity

$ 36,506,547

TOTAL

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

2014 Annual Report 146

Financial Information

YULON NISSAN MOTOR COMPANY, LTD. 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 Amount OPERATING REVENUE (Note 28) Sales (Note 4) Service revenue (Note 4) Other operating revenue

2013 Amount

%

%

$ 33,126,357 8,078 42,402

100 -

$ 31,412,448 16,872 56,730

100 -

33,176,837

100

31,486,050

100

28,855,176

87

26,037,200

83

GROSS PROFIT

4,321,661

13

5,448,850

17

OPERATING EXPENSES (Notes 19, 21 and 28) Selling and marketing expenses General and administrative expenses Research and development expenses

2,564,472 385,186 586,905

8 1 2

2,611,485 387,862 617,309

8 1 2

3,536,563

11

3,616,656

11

1,131

-

786,229

2

1,832,179

6

6,593,641 398,147 287,674 14,032 5,964 5,078 (42,689) (18,712) (2,687)

20 1 1 -

6,269,191 348,901 391,529 1,741 3,745 4,553 (16,994) (26,132) (1,823)

20 1 1 -

7,240,448

22

6,974,711

22

PROFIT BEFORE TAX

8,026,677

24

8,806,890

28

INCOME TAX EXPENSES (Notes 4 and 22)

1,502,918

4

1,506,893

5

NET PROFIT FOR THE YEAR

6,523,759

20

7,299,997

23

Total operating revenue OPERATING COSTS Cost of goods sold (Notes 9, 21 and 28)

Total operating expenses OTHER INCOME AND EXPENSES (Notes 21 and 28) PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Shares of profit of associates Interest income (Note 4) Foreign currency exchange gain, net (Note 21) Gain on valuation of financial assets, net Gain on disposal of investment, net (Note 21) Other revenue (Note 28) Interest expenses (Note 28) Overseas business expenses (Note 28) Other losses (Note 28) Total non-operating income and expenses

(15)

-

(Continued)

2014 Annual Report 147

YULON NISSAN

YULON NISSAN MOTOR COMPANY, LTD. 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 Amount OTHER COMPREHENSIVE INCOME Exchange differences on translating foreign operations Actuarial gain arising from defined benefit plans (Note 19) Income tax relating to components of other comprehensive income (Notes 4 and 22)

$

Other comprehensive income for the year, net of income tax

2013 Amount

%

1,206,461

3

982 (167 )

1,114,504

4

-

823

-

-

(140 )

-

1,207,276

3

$

%

1,115,187

4

TOTAL COMPREHENSIVE INCOME

$

7,731,035

23

$

8,415,184

27

NET INCOME ATTRIBUTED TO Stockholders of the company

$

6,523,759

20

$

7,299,997

23

TOTAL COMPREHENSIVE INCOME ATTRIBUTED TO Stockholders of the company

$

7,731,035

23

$

8,415,184

27

EARNINGS PER SHARE (Note 23) Basic Diluted

$21.75 $21.74

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

2014 Annual Report 148

$24.33 $24.32

(Concluded)

Financial Information

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

BALANCE, JANUARY 1, 2013

Capital Stock (Note 20)

Capital Surplus (Note 20)

$

$

Appropriation of 2012 earnings Legal reserve Special reserve Cash dividend distributed by the Company - $13.3 per share

3,000,000

6,129,405

-

-

-

-

Net profit for the year ended December 31, 2013

-

-

Other comprehensive income for the year ended December 31, 2013, net of income tax

-

-

Total comprehensive income for the year ended December 31, 2013

-

-

3,000,000

6,129,405

-

-

-

-

Net profit for the year ended December 31, 2014

-

-

Other comprehensive income for the year ended December 31, 2014, net of income tax

-

-

Total comprehensive income for the year ended December 31, 2014

-

-

BALANCE, DECEMBER 31, 2013 Appropriation of 2013 earnings Legal reserve Special reserve Cash dividend distributed by the Company - $19.47 per share

BALANCE, DECEMBER 31, 2014

$

2014 Annual Report 149

3,000,000

$

6,129,405

YULON NISSAN

(In Thousands of New Taiwan Dollars)

Retained Earnings (Note 20) Unappropriated Legal Reserve Special Reserve Earnings $

$

1,764,839

$

788,877

$

9,836,238

Other Equity Exchange Differences on Translating Foreign Operations $

(904,066)

Total Stockholders’ Equity $

20,615,293

493,048 -

439,912 -

(493,048) (439,912) (3,990,000)

-

(3,990,000)

493,048

439,912

(4,922,960)

-

(3,990,000)

-

-

7,299,997

-

7,299,997

-

-

683

1,114,504

1,115,187

-

-

7,300,680

1,114,504

8,415,184

2,257,887

1,228,789

12,213,958

210,438

25,040,477

730,000 -

(439,912) -

(730,000) 439,912 (5,841,000)

-

(5,841,000)

730,000

(439,912)

(6,131,088)

-

(5,841,000)

-

-

6,523,759

-

6,523,759

-

-

815

1,206,461

1,207,276

-

-

6,524,574

1,206,461

7,731,035

2,987,887

$

788,877

$

12,607,444

$

1,416,899

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

2014 Annual Report 150

$

26,930,512

Financial Information

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars) 2014 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Net gain on fair value changes of financial assets designated as at fair value through profit or loss Interest expense Interest income Share of profit of associates Net loss (gain) on disposal of property, plant and equipment Net gain on disposal of investment Net gain on foreign currency exchange Net changes in operating assets and liabilities Financial assets at fair value through profit or loss Notes receivable Notes receivable - related parties Trade receivables Trade receivables - related parties Other receivables Inventories Prepayments Notes payable - related parties Trade payables Trade payables - related parties Other payables Other current liabilities Deferred revenue Provisions Accrued pension liabilities Cash generated from operations Interest paid Income tax paid Net cash generated from (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in other financial assets Payment for property, plant and equipment (Note 24) Proceeds from disposal of property, plant and equipment Payments for computer software Increase in other non-current assets Interest received Dividends received Net cash generated from investing activities

2014 Annual Report 151

$ 8,026,677 446,629 5,454

2013 $

8,806,890 462,132 6,713

(14,032 ) 42,689 (398,147 ) (6,593,641 ) (1,131 ) (5,964 ) (460,335 )

(1,741) 16,994 (348,901) (6,269,191) 15 (3,745) (414,495)

123,705 (1,973 ) 1,407 (28,512 ) 66,063 2,765 (692 ) (1,743 ) (1,536 ) (5,250 ) (461,174 ) 225,026 (1,721 ) (1,643 ) 14,399 (7,780 ) 969,540 (42,794 ) (1,484,271 )

(429,255) (27) (698) (5,152) 293,142 227,960 (500) 321,826 1,536 (9,825) (268,139) 107,388 (4,793) (11,225) 13,671 (1,253) 2,489,327 (15,553) (1,093,697)

(557,525 )

1,380,077

5,433,877 (486,380 ) 4,638 (9,913 ) (344,753 ) 650,394 5,057,835

(1,918,135) (1,084,114) 26 (3,231) (181,563) 217,424 5,194,339

10,305,698

2,224,746 (Concluded)

YULON NISSAN

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013 (In Thousands of New Taiwan Dollars) 2014 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings Proceeds from long-term borrowings Repayment of long-term borrowings Payments of dividends

$ 1,000,000 (1,000,000 ) (5,841,000 )

2013 $

(5,841,000 )

Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES

2,430,000 1,000,000 (3,990,000) (560,000)

356,793

694,621

NET INCREASE IN CASH AND CASH EQUIVALENTS

4,263,966

3,739,444

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

8,567,899

4,828,455

CASH AND CASH EQUIVALENTS, END OF YEAR

$ 12,831,865

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

2014 Annual Report 152

$

8,567,899

(Concluded)

Financial Information

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2014 ND 2013 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION Yulon Nissan Motor Company, Ltd. (the “Company,” the Company and its subsidiaries are collectively referred to as the “Group”) is a business on research and development of vehicles and sales of vehicles. The Company started its operations in October 2003, after Yulon Motor Co., Ltd. (“Yulon”) transferred its sales, research and development businesses to the Company in October 2003 through a spin-off. The Company’s spin-off from Yulon intended to increase Yulon’s competitive advantage and participation in the global automobile network and to enhance its professional management. The spin-off date was October 1, 2003. Yulon initially held 100% equity interest in the Company but then transferred its 40% equity to Nissan Motor Co., Ltd. (“Nissan”), a Japanese motor company, on October 30, 2003. The Company became listed on December 21, 2004 after the initial public offering application of the Company was accepted by the Taiwan Stock Exchange Corporation on October 6, 2004.

2. APPROVAL OF FINANCIAL STATEMENTS The accompanying consolidated financial statements were approved by the board of directors on March 23, 2015.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS 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 on April 3, 2014, stipulated that 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 Regulation Governing the Preparation of Financial Reports by Securities Issuers starting January 1, 2015. New, Amended and Revised Standards and Interpretations (the “New IFRSs”) Improvements to IFRSs (2009) - amendment to IAS 39 Amendment to IAS 39 “Embedded Derivatives” Improvements to IFRSs (2010)

2014 Annual Report 153

Effective Date Announced by IASB (Note) January 1, 2009 and January 1, 2010, as appropriate Effective for annual periods ended on or after June 30, 2009 July 1, 2010 and January 1, 2011, as appropriate (Continued)

YULON NISSAN

New, Amended and Revised Standards and Interpretations (the “New IFRSs”) Annual Improvements to IFRSs 2009-2011 Cycle Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters” Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters” Amendment to IFRS 1 “Government Loans” Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and Financial Liabilities” Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” IFRS 10 “Consolidated Financial Statements” IFRS 11 “Joint Arrangements” IFRS 12 “Disclosure of Interests in Other Entities” Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance” Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment Entities” IFRS 13 “Fair Value Measurement” Amendment to IAS 1 “Presentation of Other Comprehensive Income” Amendment to IAS 12 “Deferred Tax: Recovery of Underlying Assets” IAS 19 (Revised 2011) “Employee Benefits” IAS 27 (Revised 2011) “Separate Financial Statements” IAS 28 (Revised 2011) “Investments in Associates and Joint Ventures” Amendment to IAS 32 “Offsetting Financial Assets and Financial Liabilities” IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine”

Effective Date Announced by IASB (Note) January 1, 2013 July 1, 2010 July 1, 2011 January 1, 2013 January 1, 2013 July 1, 2011 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2014 January 1, 2013 July 1, 2012 January 1, 2012 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2014 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.

The initial application of the above 2013 IFRSs version and the related amendments to the Regulation Governing the Preparation of Financial Reports by Securities Issuers would not have any material impact on the Group’s accounting policies. New IFRSs in Issue but Not Yet Endorsed by 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.

2014 Annual Report 154

Financial Information

New IFRSs Annual Improvements to IFRSs 2010-2012 Cycle Annual Improvements to IFRSs 2011-2013 Cycle Annual Improvements to IFRSs 2012-2014 Cycle IFRS 9 “Financial Instruments” Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and Transition Disclosures” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” Amendment to IFRS 11 “Accounting for Acquisitions of Interests in Joint Operations” IFRS 14 “Regulatory Deferral Accounts” IFRS 15 “Revenue from Contracts with Customers” Amendment to IAS 1 “Disclosure Initiative” Amendments to IAS 16 and IAS 38 “Clarification of Acceptable Methods of Depreciation and Amortization” Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” Amendment to IAS 19 “Defined Benefit Plans: Employee Contributions” Amendment to IAS 27 “Equity Method in Separate Financial Statements” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of Hedge Accounting” IFRIC 21 “Levies”

Effective Date Announced by IASB (Note 1) July 1, 2014 (Note 2) July 1, 2014 January 1, 2016 (Note 4) January 1, 2018 January 1, 2018 January 1, 2016 (Note 3) January 1, 2016 January 1, 2016 January 1, 2017 January 1, 2016 January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2016 January 1, 2014 January 1, 2014 January 1, 2014

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.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

2014 Annual Report 155

YULON NISSAN

Statement of Compliance The accompanying consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed by the FSC. Basis of Preparation The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets. Classification of Current and Non-current Assets and Liabilities Current assets include cash, cash equivalents, assets held for trading purposes and assets that are expected to be converted into cash or consumed within one year from the balance sheet date; assets other than current assets are non-current assets. Current liabilities include liabilities dued to be settled within one year from the balance sheet date; liabilities other than current liabilities are non-current liabilities. Basis of Consolidation a. Principles for preparing consolidated financial statements The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries). When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. b. Subsidiary included in consolidated financial statements

Investor Yulon Nissan Motor Company, Ltd Yi-Jan Overseas Investment Co., Ltd.

Investee

Main Business

Yi-Jan Overseas Investment Co., Ltd. Investment Jetford Inc. Investment

% of Ownership December 31 2014 2013 100.00 100.00

100.00 100.00

Foreign Currencies The financial statements of each individual group entity are presented in its functional currency, which is the currency of the primary economic environment in which the entity operates. The consolidated financial statements are presented in the Company’s functional currency, New Taiwan dollars (NT$). Upon preparing the consolidated financial statements, the operations and financial positions of each individual entity are translated into New Taiwan dollars. In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of

2014 Annual Report 156

Financial Information

exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Such exchange differences are recognized in profit or loss in the year in which they arise. Non-monetary items that are measured in terms of historical cost in foreign currencies are not retranslated. The financial statements of the foreign associates accounted for using the equity method prepared in foreign currencies translated into New Taiwan dollars at the following exchange rates: Assets and liabilities - year-end rates; profit and loss - average rates during the year; stockholders’ equity - historical rate. The resulting differences are recorded as other comprehensive income. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations subsidiaries are translated into New Taiwan dollars at year-end rates; profit and loss are translated at the average rates during the year; stockholders’ equity - historical rate. The resulting differences are recoded as other comprehensive income. Inventories Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date. Investment in Associates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss and other comprehensive income of the associate after the date of acquisition. Besides, the Group also recognizes the Group’s share of the change in other equity of associates. When the Group subscribes for additional new shares of the associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings. When the Group’s share of losses of an associate equals its interest in that associate (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

2014 Annual Report 157

YULON NISSAN

Investments accounted for using the equity method are assessed for indicators of impairment at the end of each reporting period. When there is objective evidence that the investments accounted for by the equity method has been impaired, the impairment losses are recognized in profit or loss. Property, Plant and Equipment Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss. The Group depreciates molds and dies on the basis of estimated production volume. Other property, plant and equipment are depreciated by using straight-line method. The estimated production volume, useful lives, residual values and depreciation method of an asset are reviewed at the end of each year, 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. Computer Software Computer software is stated at cost, less subsequent accumulated amortization and subsequent accumulated impairment loss. The Group amortization is recognized on a straight-line basis over 3 years. Estimated useful lives, residual values and amortization method are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis. The residual value of computer software shall be assumed to be zero unless the Group expects to dispose of the asset before the end of its economic life. Impairment of Assets When the carrying amount of property, plant and equipment and computer software exceeds its recoverable amount, the excess is recognized as an impairment loss. If an impairment loss subsequently reverses, the carrying amount of the asset is increased accordingly, but the increased carrying amount may not exceed the carrying amount that would have been determined had no impairment loss been recognized on the asset in prior years. Financial Instruments Financial assets and financial liabilities shall be recognized when the Group becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially recognized at fair values. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. a. Financial assets

2014 Annual Report 158

Financial Information

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. 1) Measurement category a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss does not incorporate any dividend or interest (included dividend or interest received in the investment year) earned on the financial asset. Method to determine the fair value please refer to Note 27. b) Loans and receivables Loans and receivables are non-derivative financial assets, with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial. 2) Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. For financial assets carried at amortized cost, such as trade receivables and other receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables and other receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable and other receivables are considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables and other receivables that are written off against the allowance account.

2014 Annual Report 159

YULON NISSAN

3) Derecognition of financial assets The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. b. Financial liabilities 1) Subsequent measurement All the financial liabilities are measured at amortized costs using the effective interest method. 2) Derecognition of financial liabilities The Group derecognizes a financial liability only when the obligation specified in the contract is discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss. Provisions a. Inventory purchase commitment Where the Group has a commitment under which the unavoidable costs of meeting the obligations under the commitment exceed the economic benefits expected to be received from the commitment, the present obligations arising under such commitment (e.g. inventory purchase commitment) are recognized and measured as provisions. b. Warranties Provisions for the expected cost of warranty obligations are recognized at the date of sale of the relevant products, at the best estimate of the expenditure required to settle the Group’s obligation by the management of the Group. Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable. a. Sale of goods Revenue from the sale of goods is recognized when the goods are delivered and titles have passed. b. Rendering of services Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract. c. Dividend and interest income Dividend income from investments is recognized when the shareholder’s right to receive payment has been established.

2014 Annual Report 160

Financial Information

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Retirement Benefit Costs Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling 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, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested. The accrued pension liabilities recognized in the consolidated balance sheets represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of plan assets. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. a. Current tax Current taxable payable depends on current tax income. Taxable income is different from the net income before tax on the consolidated statement of comprehensive income for the reason that partial revenue and expenses are taxable or deductible items in other period, or not the taxable or deductible items according to related Income Tax Law. The Group’s current tax liabilities are calculated by the legislated tax rate on balance sheet date. According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings as the status of appropriations of earnings is uncertain. Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision. b. Deferred tax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Deferred tax liabilities are recognized for taxable temporary differences associated with investments in associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

2014 Annual Report 161

YULON NISSAN

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 assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized. c. 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, in which case, the current and deferred tax are also recognized in other comprehensive income.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Group's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The following are the key assumptions and other key sources of estimation uncertainty at the end of the reporting period. a. Estimated impairment of trade receivables When there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows. The amount of impairment loss is measured as the difference between the assets’ 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. As of December 31, 2014 and 2013, the carrying values of trade receivables were $389,408 thousand and $681,405 thousand, respectively. b. Property, plant and equipment - molds and dies The Group depreciates molds and dies using unit-of-output method. The Group examines the estimated production units of each model according to the market every 6 months and calculates the amount allocated for each mold and die, which is also the basis of depreciation of molds and dies. c. Provisions for the expected cost of warranty

2014 Annual Report 162

Financial Information

The Group calculates the provisions for the expected cost of warranty quarterly based on the numbers of units sold and the weighted average of actual warranty expense in the past. As of December 31, 2014 and 2013, the carrying amount of provisions for warranty was $146,358 thousand and $134,125 thousand, respectively. d. Provisions for loss on inventory purchase commitment The Group assesses provisions for loss on inventory purchase commitment of purchasing parts and vehicles to Yulon regularly. As of December 31, 2014 and 2013, the carrying amount of provisions for loss on inventory purchase commitment was $111,978 thousand and $109,812 thousand, respectively. e. Recognition and measurement of defined benefit plans The Group uses judgments and estimations in determining the actuarial assumptions for calculation of the present value of defined benefit obligation at the end of each reporting period. Actuarial assumptions comprise the discount rate and the expected return rate on plan assets. Changes in the assumptions may have a material impact on the amount of the expense and the liability.

6. CASH AND CASH EQUIVALENTS December 31 2014 Cash on hand Checking accounts and demand deposits Foreign currency demand deposits Cash equivalents Foreign currency time deposits Time deposits

$

20 1,184,495 1,081,033 10,559,417 6,900

2013 $

20 754,979 2,648,035 5,157,965 6,900

$ 12,831,865 $ 8,567,899 Cash equivalents include time deposits that have a maturity of three months or less from the date of acquisition, are readily convertible to a known amount of cash, and are subject to an insignificant risk of change in value. These cash equivalents are held for the purpose of meeting short-term cash commitments. The market interest rates intervals of cash in bank and time deposits at the end of the reporting period were as follows: December 31 2014 2013 Demand deposits and time deposits

0.01%-3.40%

0.01%-3.25%

7. FINANCIAL INSTRUMENT AT FAIR VALUE THROUGH PROFIT OR LOSS

2014 Annual Report 163

YULON NISSAN

December 31 2014 2013 Financial assets held for trading Non-derivative financial assets Mutual funds

$ 331,032

$ 434,741

8. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES December 31 2014 2013 Notes receivable

$

2,000

$

27

Trade receivables

$

70,218

$

41,706

$

81,788 14,364

$ 334,035 5,297 11,832

$

96,152

$ 351,164

Other receivables Interest receivables Disposal of investment receivables Others

a. Notes receivable For the notes receivable, there were no past due balances at the end of the reporting period and the Group did not recognize an allowance for impairment loss b. Trade receivables For the trade receivables balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss, because there was not a significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements for these balances. The aging of receivables that were past due but not impaired was as follows: December 31 2014 2013 Less than 180 days

$ 22,720

$ 13,833

9. INVENTORIES December 31 2014 2013 Parts Vehicle

2014 Annual Report 164

$

1,664 1,075

$

2,047 -

$

2,739

$

2,047

Financial Information

The cost of inventories recognized as cost of goods sold for the year ended December 31, 2014 was $28,855,176 thousand, which included warranty cost of $70,933 thousand and loss on inventory purchase commitment of $2,166 thousand. The cost of inventories recognized as cost of goods sold for the year ended December 31, 2013 was $26,037,200 thousand, which included warranty cost of $38,088 thousand and loss on inventory purchase commitment of $28,431 thousand.

10. OTHER FINANCIAL ASSETS Other financial assets are RMB time deposits with original maturities more than three months. The ranges of the market interest rates of these time deposits were as follows: December 31 2014 2013 Time deposit with original maturity more than three months

3.25%-3.75%

2.35%-5.00%

11. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD December 31 2014 2013 Investment in associates Guangzhou Aeolus Automobile Co., Ltd. Aeolus Xiangyang Automobile Co., Ltd Aeolus Automobile Co., Ltd. Shenzhen Lan You Technology Co., Ltd. Dong Feng Yulon Used Cars Co., Ltd. Add: Credit balance of investments accounted for using equity method

$ 12,650,417 2,716,828 1,804,815 562,276 (22,141) 17,712,195

$

8,669,017 2,261,228 3,571,067 453,724 34,231 14,989,267

22,141

-

$ 17,734,336

$ 14,989,267

As the end of the reporting periods, the proportion of ownership and voting rights in associates held by the Group were as follows: December 31 2014 2013

Name of Associate Guangzhou Aeolus Automobile Co., Ltd. Aeolus Xiangyang Automobile Co., Ltd. Aeolus Automobile Co., Ltd. Shenzhen Lan You Technology Co., Ltd. Dong Feng Yulon Used Cars Co., Ltd.

40.00% 16.55% 33.12% 45.00% 49.00%

40.00% 16.55% 33.12% 45.00% 49.00%

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

2014 Annual Report 165

YULON NISSAN

December 31 2014 2013 Total assets Total liabilities

$ 73,126,807 $ 26,221,061

$ 74,643,842 $ 20,169,080

For the Year Ended December 31 2014 2013 Revenue for the year Profit for the year

$ 37,319,860 $ 17,683,887

$ 60,026,176 $ 19,308,831

The amounts recognized as share of profit of associates on 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.

12. PROPERTY, PLANT AND EQUIPMENT Molds

Dies

Computer Equipment

Other Equipment

Transportati on Equipment

Machinery and Equipment

Leasehold Improvement

Tools

Total

Cost Balance at January 1, 2013 Additions Disposals

$ 4,860,514 426,764 (1,668,369)

$

964,863 88,297 (330,008 )

$

85,064 5,750 (8,921 )

$

82,255 4,354 (11,076 )

$

4,290 4,305 -

$

19,053 (524)

$

3,441 3,942 (1,118)

$

5,694 -

$ 6,025,174 533,412 (2,020,016 )

Balance at December 31, 2013

$ 3,618,909

$

723,152

$

81,893

$

75,533

$

8,595

$

18,529

$

6,265

$

5,694

$ 4,538,570

$ (3,591,304)

$ (593,890 )

$

(69,031 )

$

(66,618 )

$

(4,100)

$

(15,952)

$

(1,979)

$

(4,935)

$(4,347,809 )

(361,039) 1,668,369

(85,563 ) 330,008

(348) -

(462,132 ) 2,019,975

Balance at December 31, 2013

$ (2,283,974)

$ (349,445 )

$

(66,883 )

$

(61,780 )

$

(4,780)

$

(16,082)

$

(1,739)

$

(5,283)

$(2,789,966 )

Carrying value, net, December 31, 2013

$ 1,334,935

$

373,707

$

15,010

$

13,753

$

3,815

$

2,447

$

4,526

$

411

Balance at January 1, 2014 Additions Disposals

$ 3,618,909 334,961 -

$

723,152 104,972 -

$

81,893 2,231 (8,450 )

$

75,533 10,002 (238 )

$

8,595 8,119 (5,852)

$

18,529 (145)

$

6,265 (1,755)

$

5,694 -

$ 4,538,570 460,285 (16,440 )

Balance at December 31, 2014

$ 3,953,870

$

828,124

$

75,674

$

85,297

$

10,862

$

18,384

$

4,510

$

5,694

$ 4,982,415

$ (2,283,974 )

$ (349,445)

$

(66,883)

$

(61,780 )

$

(4,780)

$

(16,082)

$

(1,739)

$

(5,283 )

$ (2,789,966)

(338,562 ) -

(93,647) -

(130 ) -

(446,629) 12,933

Balance at December 31, 2014

$ (2,622,536 )

$ (443,092)

$

(64,712)

$

(66,978 )

$

(3,427)

$

(16,369)

$

(1,135)

$

(5,413 )

$ (3,223,662)

Carrying value, net, December 31, 2014

$ 1,331,334

$

$

10,962

$

18,319

$

7,435

$

2,015

$

3,375

$

281

$ 1,758,753

Accumulated depreciation and impairment Balance at January 1, 2013 Depreciation expense Disposals

(6,773 ) 8,921

(6,202 ) 11,040

(680) -

(649) 519

(878) 1,118

$ 1,748,604

Cost

Accumulated depreciation and impairment Balance at January 1, 2014 Depreciation expense Disposals

385,032

(6,243) 8,414

(5,433 ) 235

(1,031) 2,384

2014 Annual Report 166

(432) 145

(1,151) 1,755

Financial Information

There were no signs of impairment losses of assets for the years ended December 31, 2014 and 2013; therefore, the Group did not assess for impairment. Except molds and dies are depreciated on an estimated production volume basis, other property, plant and equipment are depreciated on a straight-line method over the assets’ estimated useful life of the assets. The estimated useful lives are as follows: Computer equipment Other equipment Powered equipment Experimental equipment Office and communication equipment Other equipment Transportation equipment Machinery and equipment Leasehold improvement Tools

2 to 5 years 15 years 3 to 8 years 3 years 1 to 10 years 4 to 5 years 3 to 10 years 3 to 5 years 2 to 5 years

13. OTHER INTANGIBLE ASSETS Computer Software Cost Balance, January 1, 2013 Additions Disposals

$ 20,210 3,231 (990)

Balance, December 31, 2013

$ 22,451

Accumulated amortization

(Continued) Computer Software $ (8,841) (6,713) 990

Balance, January 1, 2013 Amortization expense Disposals Balance, December 31, 2013

$ (14,564)

Carrying amounts at December 31, 2013

$

7,887

Cost Balance, January 1, 2014 Additions Disposals

$ 22,451 9,913 (13,640)

2014 Annual Report 167

YULON NISSAN

Balance, December 31, 2014

$ 18,724

Accumulated amortization Balance, January 1, 2014 Amortization expense Disposals

$ (14,564) (5,454) 13,640

Balance, December 31, 2014

$ (6,378)

Carrying amounts at December 31, 2014

$ 12,346

(Concluded) 14. OTHER NON CURRENT ASSETS For the Year Ended December 31 2014 2013 Refundable deposits Prepayment for equipment

$ 538,131 35,312

$ 234,653 14,389

$ 573,443

$ 249,042

Refundable deposits are mainly for materials the Company paid to Yulon.

15. BORROWINGS a. Short-term borrowings December 31 2014 2013 Unsecured bank loans Ranges of weighted average effective interest rate

$ 3,630,000 0.96%-1.10%

$ 2,630,000 0.96%-1.05%

b. Long-term borrowings December 31 2014 2013 Unsecured bank loans Interest rate

$

-

$ 1,000,000 1.35%

The interest payments of the long-term borrowing are made monthly. The principal of the long-term borrowing is repayable upon maturity. The Company made early repayment in October 2014.

2014 Annual Report 168

Financial Information

16. OTHER PAYABLES For the Year Ended December 31 2014 2013 Salaries and bonus Taxes Advertising and promotion fees Others

$ 296,081 230,936 156,097 199,487

$ 357,082 113,701 186,897

$ 882,601

$ 657,680

17. DEFERRED REVENUE For the Year Ended December 31 2014 2013 Arising from government grants

$

-

$

1,643

The deferred revenue arose in respect of government grant for electric vehicles.

18. PROVISIONS December 31 2014 2013

Current Inventory purchase commitment Warranties

Non-current Warranties Inventory Purchase Commitment Balance at January 1, 2013 Additional provisions recognized Paid

$

Balance at December 31, 2013

81,381 28,431 -

$ 111,978 60,076

$ 109,812 59,317

$ 172,054

$ 169,129

$

$

86,282

Warranties

74,808

Total

$ 148,885 38,088 (52,848)

$ 230,266 66,519 (52,848)

$ 109,812

$ 134,125

$ 243,937

Balance at January 1, 2014 Additional provisions recognized Paid

$ 109,812 2,166 -

$ 134,125 70,933 (58,700)

$ 243,937 73,099 (58,700)

Balance at December 31, 2014

$ 111,978

$ 146,358

$ 258,336

2014 Annual Report 169

YULON NISSAN

The provision for loss on inventory purchase commitment represents the present obligations of which the unavoidable costs meeting the obligations under the commitment exceed the economic benefits expected to be received from the commitment. The provision for warranty claims represents the present value of management’s best estimate of the future outflow of economic benefits that will be required under the Group’s obligations for warranty under local sale of goods legislation. The estimate had been made on the basis of historical warranty trends.

19. RETIREMENT BENEFIT PLANS a. Defined contribution plan The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. The total expense recognized in profit or loss for the years ended December 31, 2014 and 2013 was $12,935 thousand and $12,548 thousand, respectively, represents contributions payable to these plans by the Company at rates specified in the rules of the plans. Employee benefit expenses in respect of defined contribution plan were included in the following line items: 2014 2013 Selling and marketing expenses General and administrative expenses Research and development expenses

$ $ $

4,136 4,175 4,624

$ $ $

4,018 4,005 4,525

There were no regular employees for Yi-Jan Overseas Investment Co., Ltd. and Jet Ford, Inc. as of December 31, 2014; therefore, the subsidiaries had no pension plan for employees. b. Defined benefit plan The Company adopted the defined benefit plan under the Labor Standards Law, under which pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. 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 valuation were as follows:

2014 Annual Report 170

Financial Information

December 31 2014 2013 Discount rate Expected return on plan assets Expected rate of salary increase

1.750% 2.000% 2.500%

1.750% 2.000% 2.500%

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 were as follows: For the Year Ended December 31 2014 2013 Current service cost Interest cost Expected return on plan assets Past service cost

$

5,641 10,038 (138) 2,504

$

$

18,045

$

6,112 9,476 (219) 2,504 17,873

For the Year Ended December 31 2014 2013 An analysis by functions Selling and marketing expenses General and administrative expenses Research and development expenses

$

4,312 8,493 5,240

$

4,666 8,145 5,062

$

18,045

$

17,873

Actuarial gains recognized in other comprehensive income for the years ended December 31, 2014 and 2013 was $982 thousand and $823 thousand, respectively. The cumulative amount of actuarial losses recognized in other comprehensive income as of December 31, 2014 and 2013 was $8,454 thousand and $9,436 thousand, respectively. The amounts included in the consolidated balance sheet arising from the Company’s obligation in respect of its defined benefit plan were as follows: December 31 2014

2013

Defined benefit obligation Fair value of plan assets Deficit Past service cost not yet recognized

$ 568,683 (9,957) 558,726 (12,399)

$ 573,593 (3,601) 569,992 (14,903)

Net liability arising from defined benefit obligation

$ 546,327

$ 555,089

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

2014 Annual Report 171

YULON NISSAN

For the Year Ended December 31 2014 2013 Opening defined benefit obligation Current service cost Interest cost Actuarial gains Benefits paid - from plan assets Benefits paid - from book-reserve

$

573,593 5,641 10,038 (973 ) (19,616 )

$

583,133 6,112 9,476 (967 ) (11,169 ) (12,992 )

Closing defined benefit obligation

$

568,683

$

573,593

Movements in the fair value of the plan assets were as follows: For the Year Ended December 31 2014 2013 Opening fair value of plan assets Expected return on plan assets Actuarial gains/(losses) Contributions from the employer Benefits paid

$

3,601 138 9 6,209 -

$

8,561 219 (144 ) 6,134 (11,169 )

$ 3,601 Closing fair value of plan assets $ 9,957 For the years ended December 31, 2014 and 2013, the actual return on plan assets were $147 thousand and $75 thousand, respectively. The major categories of plan assets at the end of the reporting period for each category were disclosed based on the information announced by Labor Pension Fund Supervisory Committee:

2014 Equity instruments Cash and cash equivalents Fixed income instruments Debt instruments Others

December 31 2013

49.69 19.12 14.46 11.92 4.81

44.77 22.86 18.11 9.37 4.89

100.00

100.00

The Company 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, 2014 2013 2012 Present value of defined benefit obligation Fair value of the plan assets

$ (568,683) $ 9,957

$ (573,593) $ 3,601

2014 Annual Report 172

$ (583,133) $ 8,561

January 1, 2013 $ (559,935) $ 5,458

Financial Information

Deficit Experience adjustments on plan liabilities Experience adjustments on plan assets

$ (558,726)

$ (569,992)

$ (574,572)

$ (554,477)

$

11,615

$

(13,778)

$

(10,147)

$

-

$

9

$

(144)

$

(111)

$

-

The Company expects to make a contribution of $6,674 thousand, to the defined benefit plans during the annual period beginning after 2014.

20. EQUITY a. Capital surplus December 31 2014 2013 Excess from spin-off Generated from long-term investment

$ 5,986,507 142,898

$ 5,986,507 142,898

$ 6,129,405

$ 6,129,405

The capital surplus arising from shares issued in excess of par (including excess from spin-off) may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus). The capital surplus from long-term investment may not be used for any purpose. b. Retained earnings and dividend policy Under the Company’s Articles of Incorporation, the legal reserve should be set aside at 10% of annual net income, less any accumulated deficit, and appropriate special reserve. The remainder of the income should be appropriated as follows: 1) 0.1% to 5% as bonus to employees. 2) The remainder and the undistributed retained earnings as dividends. proposed by the board of directors and approved by the stockholders.

The distribution is

The Company operates in a mature and stable industry. In determining the ratio of cash dividends to stock dividends, the Company considers factors such as the impact of dividends on reported profitability, cash required for future operations, any potential changes in the industry, interest of the stockholders and the effect on the of Company’s financial ratios. Thus, cash dividends should be at least 20% of total dividends to be distributed to the stockholders. The appropriations of earnings for 2013 and 2012 had been approved in the shareholders’ meetings on June 23, 2014 and June 14, 2013, respectively. The appropriations and dividends per share were as follows:

2014 Annual Report 173

YULON NISSAN

Appropriation of Earnings For the Year Ended December 31 2013 2012 Legal reserve Special reserve Cash dividend

$

730,000 (439,912) 5,841,000

$

493,048 439,912 3,990,000

Dividends Per Share (NT$) For the Year Ended December 31 2013 2012

$19.47

$13.30

Bonus to employees for 2013 and 2012 approved in the shareholders’ meetings on June 23, 2014 and June 14, 2013, respectively, were as follows: For the Year Ended December 31 2013 2012 Cash Dividend Cash Dividend Bonus to employees

$ 31,500

$ 30,251

There was no difference between the amounts of the bonus to employees in the shareholders’ meetings in 2014 and 2013 and the amounts recognized in the consolidated financial statements for the years ended December 31, 2013 and 2012. The appropriations of earnings for 2012 were proposed according to the Company’s financial statements for the year ended December 31, 2012, which were prepared in accordance with the Guideline Governing the Preparation of Financial Reports by Securities Issuers and the Generally Accepted Accounting Standard in the Republic of China (“ROC GAAP”). The estimated amount of accrued employee bonus for the year ended December 31, 2014 was $32,723 thousand. The bonuses to the Company’s employees for the year ended December 31, 2014 were calculated at 0.56 % of net income net of the 10% deduction for legal reserve. The estimated amount of accrued employee bonus for the year ended December 31, 2013 was $31,500 thousand. The bonuses to the Company’s employees for the year ended December 31, 2013 were calculated at 0.43% of net income net of the 10% deduction for legal reserve. After the end of the year, if the actual amounts subsequently resolved by the board of directors have significant difference from the proposed amounts, the adjustments to expenses are recorded in the year of recognition. At the date of stockholders’ resolution, if the amount differs from the amount resolved by the board of directors, 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 closing price (after considering the effect of cash and stock dividends) of the shares of the day immediately preceding the shareholders’ meeting. Under Rule No. 1010012865 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, the Company should appropriate or reverse to a special reserve. Any special reserve appropriated may be reversed to the extent that the net debit balance reverses and thereafter distributed. Except for non-ROC resident shareholders, all shareholders receiving the dividends are

2014 Annual Report 174

Financial Information

allowed a tax credit equal to their proportionate share of the income tax paid by the Company. As of March 23, 2015, the date of the accompanying independent auditors’ report, the appropriations and distribution of the 2014 earnings of the Company had not been approved by the board of directors and stockholders. Information on the bonus to employees, directors and supervisors proposed by the Company’s board of directors is available on the Market Observation Post System website of the Taiwan Stock Exchange. Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s capital surplus. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s capital surplus, the excess may be transferred to capital or distributed in cash.

21. NET PROFIT a. Depreciation and amortization For the Year Ended December 31 2014 2013 An analysis of depreciation by function Operating cost Operating expenses

An analysis of depreciation by function Operating expenses

$

432,209 14,420

$

446,602 15,530

$

446,629

$

462,132

$

5,454

$

6,713

b. Technical cooperation agreement For the Year Ended December 31 2014 2013 $

Operating cost

507,681

$

460,376

The Company has a technical cooperation agreement (the “TCA”) with Nissan. The TCA requires the Company to pay Nissan technical service fees mostly based on purchase costs less commodity tax. c. Employee benefit expenses For the Year Ended December 31 2014 2013 Post-employment benefit (Note 19) Defined contribution plans Defined benefit plans Termination benefit

2014 Annual Report 175

$

12,935 18,045 30,980 3,900

$

12,548 17,873 30,421 3,900

YULON NISSAN

Labor and health insurance Other employee benefit

36,868 547,850 588,618

34,648 596,424 634,972

Total employee benefit expenses

$

619,598

$

665,393

An analysis of employee benefits expense by function Operating cost Operating expenses Non-operating expenses

$ $ $

645 617,829 1,124

$ $ $

881 663,487 1,025

The number of employees for the years ended December 31, 2014 and 2013 were 428 and 422, respectively. d. Non-operating income and expenses For the Year Ended December 31 2014 2013 Net gain or (loss) on disposal of property, plant and equipment

$

1,131

$

(15)

e. Gain or loss on foreign currency exchange For the Year Ended December 31 2014 2013 Foreign currency exchange gain Foreign currency exchange loss

$

816,413 (528,739)

$

409,972 (18,443 )

Net gain

$

287,674

$

391,529

f. Gain or loss on sale of investment For the Year Ended December 31 2014 2013 Gain on sale of investment Loss on sale of investment

$

9,705 (3,741)

$

5,211 (1,466)

Net gain

$

5,964

$

3,745

2014 Annual Report 176

Financial Information

22. INCOME TAX 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 Adjustments for prior years Deferred tax In respect of the current year

$ 2,402,152 1,265

$

(900,499)

Income tax expense recognized in profit or loss

$ 1,502,918

921,450 4,257 581,186

$ 1,506,893

A reconciliation of accounting profit and income tax expenses is as follows:

For the Year Ended December 31 2014 2013 Profit before tax

$ 8,026,677

$ 8,806,890

Income tax expense calculated at the statutory rate Nondeductible expenses in determining taxable income Tax-exempt income Additional income tax on unappropriated earnings Adjustments for prior years’ tax

$ 1,364,535 23,854 (3,695) 116,959 1,265

$ 1,497,171 5,646 (933) 752 4,257

Income tax expense recognized in profit or loss

$ 1,502,918

$ 1,506,893

The applicable tax rate used above is the corporate tax rate of 17% payable by the Company in ROC. Under the laws of the Cayman Islands and the British Virgin Islands, Yi-Jan Overseas Investment Co., Ltd. and Jetford Inc., respectively, are tax-exempt. As the status of 2014 appropriations of earnings is uncertain, the potential income tax consequences of 2014 unappropriated earnings are not reliably determinable. b. Income tax recognized in other comprehensive income For the Year Ended December 31 2014 2013 Deferred tax Recognized in other comprehensive income Actuarial gains and losses on defined benefit plan

2014 Annual Report 177

$

(167)

$

(140)

YULON NISSAN

c. Current tax liabilities December 31 2014

2013

Current tax liabilities Income tax payable

$

977,135

$

490,530

d. Deferred tax assets and liabilities The movements of deferred tax assets and deferred tax liabilities were as follow: For the year ended December 31, 2013 Recognized in Profit or Loss

Opening Balance

Recognized in Other Comprehensi ve Income

Closing Balance

Deferred tax assets Temporarily difference Defined benefit obligation Impairment losses Provisions for warranty Provisions for loss on inventory purchase commitment Unrealized exchange loss, net Deferred revenue

$

$

94,999 78,193 25,310

$

(212 ) (25,946 ) (2,509 )

$

(140 ) -

$

94,647 52,247 22,801

13,835

4,833

-

18,668

4,985 3,813

(4,985 ) (3,813 )

-

-

221,135

$

(32,632 )

$

(140 )

$

188,363

Deferred tax liabilities Temporarily difference Shares of profit of associates Unrealized exchange gain, net

$ 2,927,514

$ 543,104

-

5,450

$ 2,927,514

$ 548,554

2014 Annual Report 178

$

$

-

$ 3,470,618

-

5,450

-

$ 3,476,068

Financial Information

For the year ended December 31, 2014

Opening Balance

Recognized in Profit or Loss

Recognized in Other Comprehensi ve Income

Closing Balance

Deferred tax assets Temporarily difference Defined benefit obligation Impairment losses Provisions for warranty Provisions for loss on inventory purchase commitment

$

94,647 52,247 22,801

$

(1,323) (24,612) 2,080

18,668 $

188,363

$

(167 ) -

368 $

(23,487)

$

93,157 27,635 24,881

$

19,036

(167 )

$

164,709

(Concluded) Opening Balance

Recognized in Profit or Loss

$ 3,470,618

$ (964,024 )

Recognized in Other Comprehensi ve Income

Closing Balance

Deferred tax liabilities Temporarily difference Shares of profit of associates Unrealized exchange gain, net

5,450 $ 3,476,068

$

40,038 $ (923,986 )

$

-

$ 2,506,594

-

45,488

-

$ 2,552,082

e. Integrated income tax December 31 2014

2013

Unappropriated earnings Unappropriated earnings generated on and after January 1, 1998

$ 12,607,444

$ 12,213,958

Imputation credit account (“ICA”)

$

$

881,287

813,731

For the Year Ended December 31 2014 2013 (Expected) (Actual) Creditable ratio for distribution

14.74%

2014 Annual Report 179

6.67%

YULON NISSAN

Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputation credits allocated to ROC resident shareholders of the Company was calculated based on the creditable ratio as of the date of dividend distribution. The actual imputation credits allocated to shareholders of the Company 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 shareholders. f. Income tax assessment

The tax returns through 2012 have been assessed by the tax authorities. 23. EARNINGS PER SHARE The earnings and weighted-average number of common stock outstanding in the computation of earnings per share were as follows: Net Profit for the Year For the Year Ended December 31 2014 2013 Earnings used in the computation of basic and diluted earnings per share

$ 6,523,759

$ 7,299,997

Weighted-average number of common stock outstanding (in thousand shares): For the Year Ended December 31 2014 2013 Weighted average number of common stock in computation of basic earnings per share Effect of potential dilutive common stock: Bonus issue to employees Weighted average number of common stock used in the computation of diluted earnings per share

300,000

300,000

141

126

300,141

300,126

The Group may settle bonuses paid to employees in cash or shares; thus, the Group assumes the entire amount of the bonus would be settled in shares and the resulting potential shares are 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 is 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.

2014 Annual Report 180

Financial Information

24. NON-CASH TRANSACTIONS For the years ended December 31, 2014 and 2013, the Company entered into the following non-cash investing activities: For the Year Ended December 31 2014 2013 Investing activities affecting both cash and non-cash transactions Increase in property, plant and equipment Decrease in trade payable

$

439,933 46,447

$

515,061 569,053

Cash paid for acquisition of property, plant and equipment

$

486,380

$ 1,084,114

25. OPERATING LEASE AGREEMENTS The future minimum lease payments of non-cancellable operating lease commitments were as follows: December 31 2014 2013 No later than 1 year Later than 1 year and not later than 5 years

$

2,508 3,971

$

2,508 6,479

$

6,479

$

8,987

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

27. FINANCIAL INSTRUMENTS a. Fair value of financial instruments 1) Fair value of financial instruments not carried at fair value The management believes the carrying value of the financial assets and financial liabilities not carried at fair value is approximately equal to the fair value. 2) Fair value measurements recognized in the consolidated 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:

2014 Annual Report 181

YULON NISSAN

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 Non-derivative financial assets held for trading

$ 331,032

$

-

$

-

$ 331,032

December 31, 2013 Level 1

Level 2

Level 3

Total

Financial assets at FVTPL Non-derivative financial assets held for trading

$ 434,741

$

-

$

-

$ 434,741

There were no transfers between Levels 1 and 2 in the current and prior periods. 3) Valuation techniques and assumption applied for the purpose of measuring fair value The fair value of fund beneficiary certificate traded on active market is the net asset value on balance sheet date. If there is no market price, the fair value is determined by the redemption value. The estimates and assumptions used by the Group were consistent with those that market participants would use in setting a price for the financial instrument. b. Categories of financial instruments December 31 2014 2013 Financial assets Fair value through profit or loss Held for trading Loans and receivables (Note 1)

$

331,032 15,420,139

$

434,741 16,821,679

Financial liabilities Amortized cost (Note 2)

4,876,724

2014 Annual Report 182

5,106,211

Financial Information

Note 1: The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, trade receivables, other receivables and other financial assets. Note 2: The balances included financial liabilities measured at amortized cost, which comprise short-term, notes payable, trade payables, part of other payables, and long-term loans. c. Financial risk management objectives and policies The Group’s major financial instruments include trade receivable, trade payables, and borrowings. The Group’s Corporate Treasury function coordinates access to domestic and international financial markets, manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk and interest rate risk), credit risk and liquidity risk. 1) Market risk The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. There had been no change to the Group’s exposure to market risks or the manner in which these risks were managed and measured. Sensitivity analysis evaluates the impact of a reasonably possible change in interest or foreign currency rates over a year. Details of sensitivity analysis for foreign currency risk and for interest rate risk are set out in (a) and (b) below. a) Foreign currency risk The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 30. Sensitivity analysis The Group is mainly exposed to the RMB, U.S. dollars and Japanese yen. The following table details the Group’s sensitivity to a 5% increase and decrease in the functional currency against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items, and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. A positive number below indicates an increase in pre-tax profit associated with the functional currency strengthen 5% against the relevant currency. For a 5% weakening of the functional currency against the relevant currency, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative.

2014 Annual Report 183

YULON NISSAN

RMB Impact For the Year Ended December 31 2014 2013 Gain (loss)

$(678,748)

$ (758,298)

U.S. Dollar Impact For the Year Ended December 31 2014 2013 $ (15,884 )

Japan Yen Impact For the Year Ended December 31 2014 2013

$ (27,582 )

$ (1,434 )

$

(749 )

This was mainly attributable to the exposure outstanding on RMB, U.S. dollars and Japanese Yen cash in bank, receivables and payables, which were not hedged at the end of the reporting period. b) Interest rate risk The carrying amount of the Group’s financial assets and financial liabilities with exposure to interest rate at the end of the reporting period were as follows: December 31 Fair value interest rate risk Financial assets Financial liabilities Cash flows interest rate risk Financial assets Financial liabilities

2014

2013

$ 12,796,831 500,000

$ 12,742,990 3,630,000

2,233,880 3,130,000

3,397,264 -

Sensitivity analysis The sensitivity analyses below were determined based on the Group’s exposure to interest rates for non-derivative instruments at the end of the reporting period. A 25 basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the year ended December 31, 2014 would decrease/increase by $2,240 thousand, which was mainly attributable to the Group’s exposure to interest rates on its demand deposits. If interest rates had been 25 basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the year ended December 31, 2013 would decrease/increase by $8,493 thousand, which was mainly attributable to the Group’s exposure to interest rates on its demand deposits. 2) Credit risk The Group’s concentration of credit risk of 46% and 50% in total trade receivables as of December 31, 2014 and 2013, respectively, was related to the Group’s largest customer within the vehicle department and the five largest customers within the parts department. 3) Liquidity risk The Group manages liquidity risk by monitoring and maintaining a level of cash and cash

2014 Annual Report 184

Financial Information

equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants. The Group relies on bank borrowings as a significant source of liquidity. As of December 31, 2014 and 2013, the available unutilized short-term borrowing facilities were $2,070,000 and $370,000 thousand, respectively. The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. December 31, 2014 Weightedaverage Effective Interest Rate (%)

Within One Month

-

$ 1,018,924

0.96 1.10

3 Months to 1 Year

1-2 Years

67,421

$ 150,019

$

1,133,555

2,000,925

-

-

500,135

-

-

-

$ 2,652,614

$ 2,068,346

$ 159,019

$

Weightedaverage Effective Interest Rate (%)

Within One Month

1 to 3 Months

3 Months to 1 Year

1-2 Years

-

$ 970,731

292,470

$ 211,544

$

631,466

2,006,287

10,125

1,008,544

$ 1,602,197

$ 2,298,757

$ 221,669

$ 1,008,544

1 to 3 Months

Non-derivative financial liabilities Non-interest bearing Floating interest rate instrument Fixed interest rate instrument

$

-

-

December 31, 2013

Non-derivative financial liabilities Non-interest bearing Fixed interest rate instrument

1.08

$

-

28. TRANSACTIONS WITH RELATED PARTIES In addition to those disclosed in other notes, the Group had business transactions with the following related parties: a. Related parties

2014 Annual Report 185

YULON NISSAN

Related Party Investors that have significant influence over the Group Nissan Motor Corporation (“Nissan”) Yulon Motor Co., Ltd. (“Yulon”) Other parties Nissan Trading Co., Ltd. Nissan Motor Egypt S.A.E. PT. Nissan Motor Indonesia (“NMI”) Nissan Motor India Private Limited Nissan Mexicana, S.A. De C. V. Nissan Motor (Thailand) Co., Ltd. PT Nissan Motor Distribution Indonesia Nissan North America, Inc. Nissan Vietnam Co., Ltd. Nissan Motors Co., Ltd Honmoku Plant Nissan Philippines Inc. Dongfeng Nissan Passenger Vehicle Co. Zhenzhou Nissan Automobile Co., Ltd. Allied Engineering Co., Ltd. Chien Tai Industry Co., Ltd. Taiwan Calsonic Co., Ltd. Taiwan Acceptance Corporation Yueki Industrial Co., Ltd. Yu Pong Business Co., Ltd. Yushin Motor Co., Ltd. Yu Chang Motor Co., Ltd. Ka-Plus Automobile Leasing Co., Ltd. Yu Sing Motor Co., Ltd. Empower Motor Co., Ltd. Uni Auto Parts Co., Ltd. Chan Yun Technology Co., Ltd. Y-teks, Co. Singan Co., Ltd. Sinjang Co., Ltd. Luxgen Motor Co., Ltd. Yue Sheng Industrial Co., Ltd. Univatin Motor Philippines, Inc. (Nissan Motor Philippines, Inc.) Uni Calsonic Corporation China Ogihara Corporation Yuan Lon Motor Co., Ltd. Chen Long Co., Ltd. Yulon Management Co., Ltd. ROC Spicer Co., Ltd. Chi Ho Corporation Yu Tang Motor Co., Ltd. Tokio Marine Newa Insurance Co., Ltd. Hua-Chuang Automobile Information Technical Center Co., Ltd.

Relationship with the Group

Equity-method investor of the Company Same as above Subsidiary of Nissan Same as above Same as above Same as above Same as above Same as above Same as above Same as above Substantial related party of Nissan Substantial related party of Nissan Same as above Same as above Same as above Same as above Same as above Same as above Subsidiary of Yulon Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Substantial related party of Yulon Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above Same as above (Continued)

2014 Annual Report 186

Financial Information

Related Party Taiway, Ltd. Kian Shen Corporation Hui-Lian Motor Co. Le-Wen Co., Ltd Visionary International Consulting Co., Ltd. Sin Etke Technology Co., Ltd. Singgual Technology Co., Ltd. Hsiang Shou Enterprise Co., Ltd. Hong Shou Culture Enterprise Co., Ltd. Yu Pool Co., Ltd. Yu-Jan Co., Ltd. Tang Li Enterprise Co., Ltd. Ding Long Motor Co., Ltd. Lian Cheng Motor Co., Ltd. CL Skylite Trading Co., Ltd. Yuan Jyh Motor Co., Ltd. Tsung Ho Enterprise Co., Ltd. Diamond Leasing Service Co., Ltd. Hsieh Kuan Manpower Service Co., Ltd. Tan Wang Co., Ltd.

Relationship with the Group Same as above Same as above Same as above Same as above Same as above Subsidiary of Hua-Chuang Automobile Information Technical Center Co., Ltd. Subsidiary of Singan Co., Ltd. Same as above Same as above Subsidiary of Yushin Motor Co., Ltd. Subsidiary of Yu Sing Motor Co., Ltd. Subsidiary of Yu Tang Motor Co., Ltd. Subsidiary of Chen Long Co., Ltd. Same as above Subsidiary of Chen Long Co., Ltd. Subsidiary of Yuan Lon Motor Co., Ltd. Subsidiary of Chi Ho Corporation Subsidiary of Ka-Plus Automobile Leasing Co., Ltd. Subsidiary of Diamond Leasing Service Co., Ltd. Subsidiary of Yu Chang Motor Co., Ltd.

b. Balances and transactions between the Company and its subsidiaries, which were related parties of the Company, had been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and parties were disclosed below: 1) Trading transactions For the Year Ended December 31 2014 2013 Sales Investors that have significant influence over the Group Others

$

11,212 32,546,046

$

10,309 30,844,618

$ 32,557,258

$ 30,854,927 (Continued) For the Year Ended December 31 2014 2013 Service revenue Investors that have significant influence over the Group

2014 Annual Report 187

$

1,382

$

16,872

YULON NISSAN

Others

6,696

-

$

8,078

$

16,872

$

16,547 21,209

$

21,286 18,413

$

37,756

$

39,699

Other operating revenue Investors that have significant influence over the Group Others

The Company designs and performs R&D of cars for Nissan. Service revenue is recognized according to the related contracts. Service revenue also arose from technical support provided by Jetford to other parties. Other operating revenue of the Company arose from selling steel plates, steel and aluminum parts, and engaging in vehicles identification and testing. For the Year Ended December 31 2014 2013 Operating cost - purchase Investors that have significant influence over the Group Others

$ 27,463,115 108,182

$ 24,825,735 40,724

$ 27,571,297

$ 24,866,459

$

507,681

$

460,376

$

13,626 13,296

$

12,323 16,713

$

26,922

$

29,036

Operating cost - TCA Investors that have significant influence over the Group Operating cost - rental Investors that have significant influence over the Group Others

The Company’s TCA is the payment to investors with significant influence over the Group, with whom the Company has technical cooperation agreements. The Company’s rental expenses paid monthly are primarily comprised of customer service system, building property, car testing expenses, cars and driving service for its executives.

2014 Annual Report 188

Financial Information

For the Year Ended December 31 2014 2013 Selling and marketing expenses Investors that have significant influence over the Group Others

$

32,908 1,468,999

$

42,433 1,750,092

$

1,501,907

$

1,792,525

$

12,211 183,379

$

20,486 186,468

$

195,590

$

206,954

$

100,291 27,922

$

89,939 26,324

$

128,213

$

116,263

General and administrative expenses Investors that have significant influence over the Group Others

Research and development expenses Investors that have significant influence over the Group Others

Selling and marketing expenses are payment to other parties for advertisement and promotion. General and administrative expenses are payment to other parties for consulting, labor dispatch and IT services. Research and development expenses are payment to investors with significant influence over the Group for sample products, trial fee and TOBE System. The Company bought molds from related parties (molds purchased were recorded under property, plant and equipment) as follows: For the Year Ended December 31 2014 2013 Investors that have significant influence over the Group Others

2014 Annual Report 189

$

16,624 130,942

$

167,103

$

147,566

$

167,103

YULON NISSAN

2) Non-operating transactions For the Year Ended December 31 2014 2013 Other revenue Investors that have significant influence over the Group Others

$

168 -

$

581 399

$

168

$

980

$

13,344

$

15,486

$

31

$

32

Overseas business expense Others Other losses Investors that have significant influence over the Group 3) Receivables from related parties December 31 2014

2013

Notes receivable Others

$

905

$

2,312

$

14,890 205,243

$

40,837 245,359

$

220,133

$

286,196

Trade receivables Investors that have significant influence over the Group Others

4) Payables to related parties December 31 2014

2013

Notes payable Investors that have significant influence over the Group

$

-

$

1,536

$

253,986 311,485

$

659,922 413,170

$

565,471

$

1,073,092

Trade payables Investors that have significant influence over the Group Others

2014 Annual Report 190

Financial Information

5) Refundable deposits December 31 2014 Investors that have significant influence over the Group Others

2013

$

488,561 47,977

$

174,432 59,284

$

536,538

$

233,716

c. 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 Post-employment benefit

$

44,464 1,986

$

42,279 1,585

$

46,450

$

43,864

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends. d. Other transactions with related-parties 1) The Company sold to Taiwan Acceptance Corporation trade receivable which amounted to $2,061,218 thousand and $2,017,040 thousand for the years ended December 31, 2014 and 2013, respectively. Based on the related contract, the amount of receivable sold is limited to the amount of pledges from the original debtor to Taiwan Acceptance Corporation. The Company’s interest expenses recognized on the trade receivable sold to Taiwan Acceptance Corporation were $1,149 thousand and $1,185 thousand for the years ended December 31, 2014 and 2013, respectively. 2) The Company bought other equipment for $247 thousand and $769 thousand from Singgual Technology Co., Ltd. for the years ended December 31, 2014 and 2013. All of them were recorded under property, plant and equipment. 3) The Company had sold property, plant and equipment to related-party; the related-party and amounts for the year ended December 31, 2014 are summarized as follows:

Amount Hua-Chuang Automobile Information Technical Center Co., Ltd.

$

4,629

2014 Annual Report 191

Carrying Value $

3,468

Gain on Disposal $

1,161

YULON NISSAN

4) The Company bought computer software for $148 thousand from Singgual Technology Co., Ltd. for the year ended December 31, 2014. All of them were recorded under computer software. 5) The Company signed molds contracts with Diamond Leasing Service Co., Ltd. The molds contracts are valid from the date of the contract to the end of production of the car model. The contract amount is $790,155 thousand (excluding of tax) and the installment payments will be disbursed according to the progress under the contract schedule. The types of car parts have not been produced until the end of December 2014. The Company had already paid $681,226 thousand (recognized as property, plant, and equipment). Besides, within the contract period, the Company should pay to Diamond Leasing Service Co., Ltd. before the end of January every year with the amount of $2.6 for every ten thousand of the accumulated amounts paid for molds in prior year.

29. SIGNIFICANT CONTINGENCIES AND UNRECOGNIZED COMMITMENTS In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of December 31, 2014 were as follows: a. The Company is under a manufacturing contract with Yulon, effective November 1, 2003. This contract, for which the first expiry date was on October 31, 2008, is automatically extended annually unless either party issues a termination notice at least three months before expiry. The contract states that the Company authorizes Yulon to manufacture Nissan automobiles and parts, and the Company is responsible for the subsequent development of new automobile parts. The manufacturing volume of Yulon under the contract should correspond to the Company’s sales projection for the year. In addition, the Company has authorized Yulon as the original equipment manufacturer (“OEM”) of automobile parts and after-sales service. As of December 31, 2014, both parties did not receive a termination notice, so the contract automatically extended. The Company is responsible for developing new car models, refining designs, and providing the sales projection to Yulon. Yulon is responsible for transforming the sales projections into manufacturing plans, making the related materials orders and purchases, providing product quality assurance, delivering cars, and shouldering warranty expenses due to any defects in products made by Yulon. b. The Company has a contract with Taiwan Acceptance Corporation for sale and purchase of vehicles. Besides, Taiwan Acceptance Corporation separately signed with dealers contracts for display of vehicles. If any dealer violates the display contract, resulting in the need for Taiwan Acceptance Corporation to recover the display vehicles, the Company must assist in the settlement or buy-back the vehicles at the original price. From the date of signing the sale and purchase contract to December 31, 2014, no buy-back of vehicles has occurred. c. Unrecognized commitments December 31 2014 2013 Acquisition of property, plant and equipment Acquisition of other computer software

2014 Annual Report 192

$ 234,249 296

$ 289,990 1,331

$ 234,545

$ 291,321

Financial Information

30. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES The significant financial assets and liabilities denominated in foreign currencies were as follows: (In Thousands of New Taiwan Dollars and Foreign Currency) December 31, 2014 Foreign Currencies

Exchange Rate

Carrying Amount

Financial assets Monetary items RMB RMB USD JPY

$ 1,042,417 1,607,224 10,037 108,653

0.1634 (RMB:USD) 5.0920 (RMB:NTD) 31.65 (USD:NTD) 0.2646 (JPY:NTD)

$ 5,390,974 8,183,984 317,672 28,749

278

0.2646 (JPY:NTD)

74

Financial liabilities Monetary item JPY December 31, 2013 Foreign Currencies

Exchange Rate

Carrying Amount

Financial assets Monetary items RMB RMB USD JPY

$

2,424,662 0.1640 (RMB:USD) 675,808 4.9040 (RMB:NTD) 18,508 29.805 (USD:NTD) 53,715 0.2839 (JPY:NTD)

$ 11,851,796 3,314,163 551,636 15,250

Financial liabilities Monetary items JPY

919

0.2839 (JPY:NTD)

261

31. SEPARATELY DISCLOSED ITEMS a. Information about significant transactions and investees: 1) Financing provided to others: None 2) Endorsements/guarantees provided: None 3) Marketable securities held (excluding investment in subsidiaries and associates): (attached)

2014 Annual Report 193

Table 1

YULON NISSAN

4) Marketable securities acquired and disposed at cost or prices at least NT$300 million or 20% of the paid-in capital: None 5) Acquisition of individual real estate at cost of at least NT$300 million or 20% of the paid-in capital: None 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None 7) Total purchases from sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 2 (attached) 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 3 (attached) 9) Trading in derivative instruments: None 10) Information on investees: Table 4 (attached) 1) Intercompany relationships and significant intercompany transactions: Table 5 (attached) b. Information on investments in mainland China 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, investment income or loss, carrying amount of the investment at the end of the period, repatriated investment income, and limit on the amount of investment in the mainland China area: Table 6 (attached) 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third area, and their prices, payment terms, and unrealized gains or losses: None a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period. b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period. c) The amount of property transactions and the amount of the resultant gains or losses. d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes. e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds. f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

32. SEGMENTS INFORMATION Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group's reportable segments were as follows: Vehicle segment: Vehicle sales Part segment: Parts sales Investment segment: Overseas business activities Other segment: Other operating activities other than the above segments a. Segment revenues and results

2014 Annual Report 194

Financial Information

The following was an analysis of the Group’s revenue and results from operations by reportable segment Revenue For the Year Ended December 31 2014 2013 Vehicle segment Part segment Investment segment Other segment

$ 29,690,734 3,435,622 50,481 $ 33,176,837

Profit Before Tax For the Year Ended December 31 2014 2013

$ 28,051,149 3,361,299 73,602 $ 31,486,050

Gain (loss) on disposal of property, plant and equipment Interest income Net foreign currency exchange gain Net gain on valuation of financial assets Net gain on disposal of investment Interest expense Central administration cost and directors’ compensation

$

813,125 461,811 6,574,929 (471,847) 7,378,018

$ 1,625,085 585,791 6,243,059 (360,752 ) 8,093,183

1,131 398,147

(15 ) 348,901

287,674

391,529

14,032

1,741

5,964 (42,689)

3,745 (16,994 )

(15,600)

(15,200 ) $ 8,806,890

$ 8,026,677

Profit before tax

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales for the years ended December 31, 2014 and 2013. Segment profit represents the profit earned by each segment, excluding the allocation of gain (loss) on disposal of property, plant and equipment, interest income, net foreign currency exchange gain, net gain from valuation of financial assets, net gain on disposal of investment, interest expense, central administration cost and directors’ compensation, and income tax expense. The amount is provided to the chief operating decision maker for allocating resources and assessing the performance. b. Segment total assets December 31 2014 $

Vehicle segment Part segment Investment segment Other segment Unallocated assets

1,717,969 3,174 17,734,336 37,610 19,493,089 17,013,458

$ 36,506,547

Consolidated total assets

2014 Annual Report 195

2013 $

1,710,369 2,532 14,989,267 35,703 16,737,871 18,581,094

$ 35,318,965

YULON NISSAN

c. Revenue from major products and services The following is an analysis of the Group’s revenue from its major products and services. For the Year Ended December 31 2014 2013 Vehicles Parts Others

$ 29,690,734 3,435,623 50,480

$ 28,051,149 3,361,299 73,602

$ 33,176,837

$ 31,486,050

d. Geographical information The Group’s revenues from external customers by location of operations are detailed below. For the Year Ended December 31 2014 2013 Domestic Overseas

$ 32,910,048 266,789

$ 31,099,191 386,859

$ 33,176,837

$ 31,486,050

The Group’s non-current assets by location of assets are detailed below. December 31 Domestic Overseas

2014

2013

$ 2,344,542 -

$ 2,005,533 -

$ 2,344,542

$ 2,005,533

e. Information about major customers The Group’s revenue from major customers is detailed below. For the Year Ended December 31 2014 2013 Certain customer from the vehicle segment

$ 29,532,957

$ 27,903,555

No other single customers contributed 10% or more to the Group’s revenue for both 2014 and 2013.

2014 Annual Report 196

Securities Type and Name

2014 Annual Report 197

Note:

-

-

-

-

-

-

-

-

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss

Financial Statement Account

40,218 38,994 21,363 20,036 13,121 11,293

2,928 1,081 1,770 1,781 1,117 667

105,269 80,738

$

7,964

9,821

-

-

-

-

-

-

-

-

Percentage of Shares Carrying Value Ownership (Thousands)

December 31, 2014

$

11,293

13,121

20,036

21,363

38,994

40,218

80,738

105,269

Market Value Note or Net Asset Value (Note)

TABLE 1

The fair value of the financial asset at fair value through profit or loss is calculated based on the asset’s net value and the redemption price as of December 31, 2014

Nomura Global Biotech & Health Care

Nomura Investment Grade USD Credit Acc Capital US Opportunity

Allianz Glbl Inv Glbl Biotech Yuanta Global REITs Fund

Yulon Nissan Beneficiary certificates Motor Company, Ltd. Yuanta De-Bao Money Market Fund Franklin Templeton Sinoam Money Market Fuh Hwa Global Bond

Investor

Relationship with the Investor

MARKETABLE SECURITIES HELD DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars and U.S. Dollars, Unless Stated Otherwise)

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES Financial Information

Related Party

Nature of Relationship

2014 Annual Report 198

Note 1: Note 2: Note 3:

242,075

Chen Long Co., Ltd.

Substantial related party of Sale Yulon

127,529

225,047

Transaction terms are based on agreements. Balances shown here are notes and trade receivable from sales and notes and trade payable for purchases. Balances shown here are based on the carrying amount of the Company.

Chi Ho Corporation

Yushin Motor Co., Ltd.

1 15 days after sales for parts Immediate payment for vehicles - Same as above

1 15 days after sales for parts Immediate payment for vehicles 1 15 days after sales for parts

254,783

Substantial related party of Sale Yulon Subsidiary of Yulon Sale

1 Same as above

265,793

278,913

Substantial related party of Sale Yulon Yu Tang Motor Co., Ltd. Substantial related party of Sale Yulon Empower Motor Co., Ltd. Subsidiary of Yulon Sale

Hui-Lian Motor Co., Ltd.

1 Same as above 1 15 days after sales for parts Immediate payment for vehicles 1 15 days after sales for parts

350,365 315,776

Sale Sale

98 5 days after sales for parts 3 days after sales for vehicles 89 4 days after sales for parts 3 days after sales for vehicles 1 15 days after sales for parts

Payment Terms

366,743

27,438,045

% to Total

Sale

$

Amount

29,532,957

Purchase

Purchase/ Sale

Transaction Details

Sale

Yulon Nissan Motor Yulon Equity-method investor of Company, Ltd. the Company Taiwan Acceptance Subsidiary of Yulon Corporation Yuan Lon Motor Co., Ltd. Substantial related party of Yulon Yu Chang Motor Co., Ltd. Subsidiary of Yulon Yu Sing Motor Co., Ltd. Subsidiary of Yulon

Company Name

$

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Abnormal Transaction (Note 1) Payment Unit Price Terms

-

-

2,728

2,373

-

-

3,154 -

6,088

90,416

$ (132,058)

-

-

1

1

-

-

1 -

2

30

(19)

-

-

-

-

-

-

-

-

-

-

Note/Accounts Payable or Receivable (Note 2) Note Ending % to Total Balance (Note 3)

TABLE 2

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

YULON NISSAN

Related Party

Nature of Relationship

Trade receivables Other receivables

$

Ending Balance

Note: The turnover rate was based on the carrying amount of the Company.

Yulon Nissan Motor Taiwan Acceptance Subsidiary of Yulon Company, Ltd. Corporation

Company Name

90,416 21,940

232.57

Turnover Rate (Note)

$

Amount

-

-

Action Taken

Overdue

$

90,416 21,940

Amounts Received in Subsequent Period

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, Unless Stated Otherwise)

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

$

-

Allowance for Bad Debts

TABLE 3

Financial Information

2014 Annual Report 199

2014 Annual Report 200

Investment

Hubei (Mainland Developing and manufacturing China) of parts and vehicles and related services Aeolus Automobile Co., Ltd. Guangdong Developing and selling of parts (Mainland and vehicles and related China) services Guangzhou Aeolus Automobile Guangdong Developing and manufacturing Co., Ltd. (Mainland of parts and vehicles and China) related services Shenzhen Lan You Technology Guangdong Developing, manufacturing Co., Ltd. (Mainland and selling of computer China) software and hardware and computer technology consulting Dong Feng Yulon Used Cars Guangdong Valuation, purchase, Co., Ltd. (Mainland renovation, rent and selling China) of used cars

Aeolus Xiangyang Automobile Co., Ltd.

British Virgin Islands

Investment

Main Businesses and Products

US$ 16,941

US$ 1,125

US$ 16,941

1,125

593

US$

US$

593

US$ 18,710

US$ 18,710

US$

US$ 21,700

US$ 57,171

US$ 21,700

US$ 57,171

$ 1,847,983 $ 1,847,983 (US$ 57,371) (US$ 57,371 )

Original Investment Amount December 31, December 2014 31, 2013

-

-

-

-

-

71,772

84,987

Shares (Thousands)

Carrying Amount

49.00 US$

US$ 5,756

US$513,803

US$ 3,245

US$ 64,463

US$220,357

$ 6,677,910

Note

US$ 2,590 Note 2

US$205,521 Note 2

US$ 1,075 Note 2

US$ 10,222 Note 2

US$220,357 Notes 2 and 3

$ 6,677,910 Notes 2 and 3

Net Income Share of (Loss) of the Profit (Loss) Investee (Note 1)

(700 ) US$ (3,749) US$ (1,837) Notes 2 and 4

45.00 US$ 17,765

40.00 US$399,697

33.12 US$ 57,024

16.55 US$ 85,840

100.00 US$751,775

100.00 $23,800,390

%

As of December 31, 2014

TABLE 4

Note 1: Shares of Profit include the amortization of investment premium or discount. Note 2: The carrying amount and related shares of profit of the equity investment were calculated based on the audited financial statements and percentage of ownership. Note 3: Eliminated. Note 4: The Company’s share of losses exceeds its interest in Dong Feng Yulon Used Cars Co., Ltd. The Company recognized additional loss on constructive future obligations to settle Dong Feng Yulon Used Cars Co., Ltd.

Jet Ford, Inc.

Location

Yi-Jan Overseas Investment Co., Cayman Islands Ltd.

Investee Company

Yi-Jan Overseas Jetford, Inc. Investment Co., Ltd.

Yulon Nissan Motor Company, Ltd.

Investor Company

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars and U.S. Dollars, Unless Stated Otherwise)

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

YULON NISSAN

2014 Annual Report 201

Note 3: Note 4: Note 5:

Note 2:

Note 1:

0

Yulon Nissan Motor Company, Ltd.

Company Name

Jet Ford Inc.

Related Party

a

Relationship (Note 2)

Notes and trade receivables – related parties

Financial Statement Account

$

6,329

Amount (Note 3)

Transaction Details

-

Payment Terms (Note 4)

-

% to Total Sales or Assets (Note 5)

TABLE 5

Intercompany relationships are numbered as follows: a. The Company is numbered as 0. b. Subsidiaries are numbered from number 1. Nature of relationships is numbered as follows: a. The Company to subsidiaries is numbered as 1. b. Subsidiaries to the Company is numbered as 2. c. Subsidiaries to subsidiaries is numbered as 3. Eliminated. The prices and payment terms for related-party transactions were based on agreements. If the transaction amounts are related to the balance sheet accounts, the percentages are those of the year-end balances to the consolidated total assets. If the transaction amounts are related to the income statement accounts, the percentages are the total amounts of the year to the consolidated total sales.

Number (Note 1)

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES Financial Information

$ 3,581,037 (RMB 826,000 )

761,964 (RMB 194,400 )

Aeolus Xiangyang Developing and manufacturing of Automobile Co., Ltd. parts and vehicles and related services

Aeolus Automobile Co., Ltd.

2014 Annual Report 202 Note 1 (US$

18,804 593)

$

Note 4:

Note 1: Note 2: Note 3:

-

-

-

-

-

$

-

-

-

-

-

(US$

(US$

(US$

(US$

$ (US$

18,804 593)

35,674 1,125)

537,199 16,941)

533,109 16,812)

716,856 21,700)

49.00

45.00

40.00

33.12

16.55

$16,158,307

Investment Gain (Loss) (Note 2)

(US$

(US$

(US$

(US$

32,569 1,075)

78,496 2,590)

(113,605 ) (55,667) -3,749 ) (US$ -1,837)

174,436 5,756 ) (US$

15,571,122 6,228,449 513,803 ) (US$ 205,521)

98,336 3,245 ) (US$

$ 1,953,598 $ 309,794 (US$ 64,463 ) (US$ 10,222)

Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA(Note 3)

Inflow

Accumulated % Ownership Outward Remittance of Direct or Net Income (Loss) for Investment from Indirect of the Investee Taiwan as of Investment December 31, 2014

1,804,815 57,024)

(US$

(US$

(22,141) -700)

562,276 17,765)

12,650,417 (US$ 399,697)

(US$

$ 2,716,828 (US$ 85,840)

Carrying Amount as of December 31, 2014

(US$

(US$

$ (US$

-

-

10,914,750 355,880)

4,597,012 148,224)

876,623 28,078)

Accumulated Repatriation of Investment Income as of December 31, 2014

TABLE 6

The Company indirectly owns these investees through Jet Ford, Inc., an investment company registered in a third region. The carrying amount and related investment income of the equity investment were calculated based on the audited financial statements and percentage of ownership. The upper limit was calculated in accordance with the “Regulation Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission under the Ministry of Economic Affairs on August 22, 2008. The Company’s share of losses exceeds its interest in Dong Feng Yulon Used Cars Co., Ltd. The Company recognized additional loss on constructive future obligations to settle Dong Feng Yulon Used Cars Co., Ltd.

$1,917,100 (US$59,660)

38,300 10,000 )

35,674 1,125)

537,199 16,941)

533,109 16,812)

716,856 21,700)

$1,841,642 (US$57,171)

(RMB

(US$

(US$

(US$

$ (US$

Outflow

Investment Flows

Investment Amounts Authorized by Investment Commission, MOEA

Valuation, purchase, renovation, rent and selling of used cars.

Note 1

Note 1

Note 1

Note 1

Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2014

Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2014

Dong Feng Yulon Used Cars Co., Ltd. (Note 4)

57,450 15,000 )

Shenzhen Lan You Developing, manufacturing and Technology Co., Ltd. selling of computer software and hardware and computer technology consulting (RMB

8,969,950 (RMB2,200,000)

Guangzhou Aeolus Developing and manufacturing of Automobile Co., Ltd. parts and vehicles and related services

Developing and selling of parts and vehicles and related services

Paid-in Capital

Main Businesses and Products

Investee Company

Method of Investment (e.g., Direct or Indirect)

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2014 (In Thousands of New Taiwan Dollars, U.S. Dollars and RMB, Unless Stated Otherwise)

YULON NISSAN MOTOR COMPANY, LTD. AND SUBSIDIARIES

YULON NISSAN

Financial Information

6. The company and its affiliates have not encountered any financial difficulties over the last years and as of the the publication date of the annual report: No applicable. This company and its affiliates have not encountered any financial difficulties.

2014 Annual Report 203

YULON NISSAN

VII、Review and Analysis of Financial Conditions and Operation Performance and Rist Management 1. Financial Conditions Unit:In NTD thousand Fiscal Year Item Current Assets

Fiscal year 2014

Fiscal year 2013

Difference Amount



$ 16,262,60

$ 18,135,802

-$ 1,872,842

-10

17,734,336

14,989,267

2,745,069

18

Fixed Assets

1,758,753

1,748,604

10,149

1

Other Assets

750,498

445,292

305,206

69

Total Assets

36,506,547

35,318,965

1,187,582

3

Current Liabilities

6,369,203

5,172,523

1,196,680

23

Other Liabilities

3,206,832

5,105,965

-1,899,133

-37

Total Liabilities

9,576,035

10,278,488

-702,453

-7

Share Capital

3,000,000

3,000,000

0

0

Capital Reserves

6,129,405

6,129,405

0

0

16,384,208

15,700,634

683,574

4

1,416,899

210,438

1,206,461

573

26,930,512

25,040,477

1,890,035

8

Long-Term Equity Investments

Retained Earnings other

adjustment

items

shareholders’ equity Total share holder equity

Variance Analysis (For those with percentage of difference up to more than 20%, and with the amount up to NTD 10 million in the recent two fiscal years) (1) Other increase in assets was a result of the increased amount of refundable deposits due to operation requirement in 2014. (2) The increase of current liabilities was the result of short-term fund borrowing in 2014. (3) The reduction of total non-current liabilities was the result of repayment of long-term borrowing in 2014 and the receipt of reduction in deferred income tax from the investment proceeds of invested companies distributing dividends adopting Equity Method. (4)The increase in other adjustment items under shareholders’ equity is mainly caused by the increased accumulative translation adjustments. (The US dollar rose against the Taiwan dollars. On December 31, 2013 the exchange rate was29.805, while it was 31.650 on the same day the following year.)

2014 Annual Report 204

Review and Analysis of Financial Conditions and Operation Performance and Rist Management

2. Financial Performance (1) Comparison and Analysis of Financial Performance Unit:In NTD thousand Fiscal Year Fiscal year 2014

Fiscal year 2013

$

$

Item Gross Revenue Less:Sales Returns Sales Allowances Net Operating Revenue Operating Cost Operating margin Operating Expenses Operating Profit Non-Operating Revenue and Gain Non-Operating Expense and Loss Income Before Income Tax Income Tax Expense Net Income

$

33,199,661

Increase (Decrease) Amount

Changes(%)

31,500,781

1,698,880

5

22,824

14,731

8,093

55

33,176,837 28,855,176 4,321,661 3,535,432 786,229 7,304,536 64,088 8,026,677 1,502,918 6,523,759

31,486,050 26,037,200 5,448,850 3,616,671 1,832,179 7,019,660 44,949 8,806,890 1,506,893 7,299,997

1,690,787 2,817,976 -1,127,189 -81,239 -1,045,950 284,876 19,139 -780,213 -3,975 -776,238

5 11 -21 -2 -57 4 43 -9 0 -11

$

Variance Analysis (For those with percentage of difference up to more than 20%, and with the amount up to NTD 10 million in the recent two fiscal years) (1) The reduction in gross profit and operating revenue was the result of better sales in models with lower gross profits and hence the reduction in gross profits. (2) The increase of non-operating expenditure was the result of longer duration of borrowing in this period and higher interest expense.

(2) Gross profit analysis: Unit:In NTD thousand Item

Variance between two periods

Gross Profit

-1,127,189

Content

Selling Price Difference 5,219

Difference sources Cost Price Combined Sales Volume difference Difference Difference -12,342 -1,265,499 129,140

1. Favorable price-variance was the result of price increase for components in 2014. 2. Unfavorable variance was the result of increase in price for finished car import in 2014. 3. Unfavorable sales portfolio variance was the result of increased sales in finished products with low margin in 2014. 4. Favorable volume difference occurred mainly because of increase in sales volume of cars in 2014. 5. Service revenue decreased NT$ 8,749,000 in 2014 due to the decrease of revenue of outsourcing and R&D from Nissan and Zhengzhou Nissan. 6. Revenue from sale of steel flats, certificating and testing decreased NT$14,328,000 in 2014.

2014 Annual Report 205

YULON NISSAN

3. Cash Flow Analysis (1) Cash Flow Analysis for the Recent 2 years Fiscal Year Fiscal year 2014

Fiscal year 2013

Increase (Decrease) Ratio (%)

Item Cash Flow Ratio (%)

-9

27

-133

Cash Flow Adequacy Ratio (%)

69

108

-36

-19

-8

-137

Cash Reinvestment Ratio (%)

Difference Analysis and Description of Changes in Increase and Decrease Ratio: The decrease of Cash flow is mainly caused by a net cash outflow from operating activities and the increase of loan in 2014. The decrease of Cash flow adequacy ratio is mainly caused by more dividends paid in 2014.

(2) Cash Flow Analysis for the Next Year Expected Cash balance at annual net cash the beginning flow from of the year operating activities 12,831,865

-45,687

Unit: In NTD thousand Expected annual Expected contingency plan for net cash flow from Expected cash insufficient cash investment and balance Investment accommodation Financial plan plan activities -3,286,315

9,499,863

-

-

4. Influence on Financial Condition caused by Prominent Capital Expenditures in fiscal year 2014 (1) The Use and Capital Source of Prominent Capital Expenditure Unit:In NTD thousand Program items

Actual and estimated source of capital

Actual or estimated date of completion

Actual or estimated use of capital Total fund needed Fiscal year Fiscal year Fiscal year Fiscal year Fiscal Fiscal year 2012 2013 2014 2015 year 2016 2017

Model Self-owned Clamp 2017.12.31 2,895,614 1,064,885 fund Lifting Tool

515,061

439,933

630,717 149,120

95,898

Other equipment

Self-owned 2017.12.31 fund

162,744

0

24,685

20,352

95,121

17,296

5,290

MIS equipment

Self-owned 2017.12.31 fund

38,190

5,346

3,231

9,913

19,700

0

0

2014 Annual Report 206

Review and Analysis of Financial Conditions and Operation Performance and Rist Management

(2) Anticipated benefits 1. Invested in new model mold, increase production line to raise market shares. 2. The investment in information system related hardware and software, updating management information system will increase the managerial efficiency and strengthen market competition capabilities. 3. Increase the degree of automation, reduce the labor costs.

5. Investment Policy in Fiscal Year 2014, Major Reasons for Profit and Loss, Its Improvement Plan and Next Year’s Investment Plan Investor Company

Investee Company

Yulon Nissan Yi-Jan Overseas Motor Company, Investment Ltd. Co., Ltd. Yi-Jan Overseas Investment Jet Ford, Inc. Co., Ltd. Aeolus Xiangyang Jet Ford, Inc. Automobile Co., Ltd. Guangzhou Aeolus Automobile Co., Ltd. Aeolus Automobile Co., Ltd. Shenzhen Lan You Technology Co., Ltd. Dong Feng Yulon Used Cars Co., Ltd.

Percentage of Investment Ownership on Gain (Loss) December 31,2011

Cause of Gain(Loss)

Improvement Investment plan in plan the currently year

100

$ 6,679,910 Growing Status of China Car Market

Nil

Nil

100

USD220,357

Growing Status of China Car Market

Nil

Nil

16.55

USD 10 ,222

Growing Status of China Car Market

Nil

Nil

40

USD205,521

Growing Status of China Car Market

Nil

Nil

33.12

USD 1,075 Growing Status of China Car Market

Nil

Nil

45

USD 2,590 Growing Status of China Car Market

Nil

Nil

49

-USD1,837

Nil

Nil

2014 Annual Report 207

Change and reduction in operation.

YULON NISSAN

6. Risk Management and Evaluation (1) Influence of the interest rate, foreign exchange rate and rate of inflation on company’s profit/loss and plans to encounter these risks in the future: 1. Influence of interest rate fluctuation on the company’s profit/loss and future coping strategies: The market interest rate is quite low in recent years, so the affect of fluctuation on the company’s profit/loss is limited. 2. Influence of foreign exchange rate fluctuation on the company’s profit/loss and future coping strategies To avoid potential risks, the company has not specially manipulated the foreign exchange rate; the exchange rate difference is utilizing the sharing method agreed with Nissan. 3. Influence of inflation on the company’s profit/loss and future coping strategies: Nil.

(2) Policy on High Risk, High Leverage Investment, Capital Loans to Others, Endorsement and Trade on Derivatives, Major Reason for Profit/Loss and plans to encounter these risks in the future: 1. This company has not involved in High Risk, High Leverage Investment. 2. As to the Capital Loans to Others, Endorsement and Trade on Derivatives, these activities are governed by company’s ‘Procedure of Capital Loans to Others’, ‘Procedure of Endorsement’ and ‘Procedure of Trade on Derivatives’. There was no related activity in 2014.

(3) Future research/development plans and estimated investing R&D expenditure: Please refer to :V、Hightlights of Operations-1.Business Scope -(3)Technology, Research and Development (R&D)

(4) Important Changes of Local and Foreign Government Policies and Regulations and Their Influence Over Company’s Financial Condition and Plans to Encounter these Risks in the Future: After entering the WTO, the company has not enjoyed the favorable tax exemption/deduction of goods since the fiscal year 2005, but the company has reduced the purchasing cost and expenses, therefore the influence on the company’s profit/loss is limited.

(5) Changes on technology and industrial change influence toward the company’s finance business and coping strategies: The company has the best car research/development team and personnel in the country, to quickly handle the technology changes and industrial change.

(6) Changes on Corporate Image that Influence Company’s Risk Management and Contingency Plans: The company has a good corporate reputation, and there has been no negative report in connection with the corporation.

(7) Benefit anticipated and possible risks of merge and acquisition: It’s not applicable, because the company was not involved in any merge and acquisition.

2014 Annual Report 208

Review and Analysis of Financial Conditions and Operation Performance and Rist Management

(8) Benefit anticipated and possible risks of plant site expansion: N/A. (9) Risks of having purchase or sales centralization 1. Purchase: The company incoming shipment is Yulon Motor Company, Ltd., it’s a listed company that has an outstanding credibility, excellent production technology and strong finance, so the company has no need of worrying about the interruption of incoming shipment. 2. Sales: Local market is the main selling of the company, selling cars and parts to the consumers through each location dealer. The company has an exclusive department responsible for supervising the sales development of each dealer, after a long period, the dealers’ sales are pretty stable, so there is no risk of having sales centralization

(10)The impact and the risk of having a big Volume of transferring or changes of Shareholders equity of the Directors, Supervisors or holding more than10% shares shareholders, Except for the releasing of shares : Nil. (11)The impact and risk of changing operating rights of the company: Nil. (12)Litigation/Non-Litigation Events: 1. The company: Nil. 2. The proportion of shares that the owned by big shareholders like the Company’s Board Members, Supervisors, General Manager, Real Owner that exceeds 10% and the belonging company: Nil.

(13)Other Important Risks and actions to be taken: Nil.

7. Other Important Items: Nil

2014 Annual Report 209

YULON NISSAN

VIII、Special Noted Items 1. Affiliates information (1) Affiliates Consolidated Operation Statement 1. Organization Chart of Yulon Motor’s Affiliated Companies

Yulon Nissan Motor Co., Ltd.

Yi-Jan Overseas Investment Co., Ltd. 100%

Jet Ford, Inc. 100%

2. Basic information of affiliates Dec. 31, 2014 Unit:Thousand Dollars Foreign Currency Name

Establishing Date

Address

Actually accrued capital amount

Main Business Items

USD 84,987

Investments

USD 71,772

Investments

2F,Cayside,Harbour Drive P.O.Box Yi-Jan Overseas Investment Co., Ltd.

1999.11.17

30592 S.M.B. George Town Grand Cayman Island B.W.I. P.O.Box 3151 Road Town,

Jet Ford, Inc.

1994.01.12

Tortola British Virgin Islands

3. Shareholders representing both holding companies and subordinates: Nil

2014 Annual Report 210

Special Noted Items

4. Information of the directors, supervisors, and general managers of the affiliates

Dec. 31, 2014 Name

Title

Yulon Nissan Motor Co., Ltd.

Yi-Jan Overseas Director Investment Co., Ltd.

Representative: Kenneth K. T. Yen

Shares

Percentage

84,986,756

100%

71,771,793

100%

Yi-Jan Overseas Investment Co., Ltd.

Director Jet Ford, Inc.

Shares

Name or representative

Representative:Kenneth K. T. Yen

Director

Kuo-Rong Chen

Director

Wen-Rong Tsay

5. Affiliates’ Operating Results Dec. 31, 2014 Unit:In NTD thousand Affiliate Code Number

Name

Yi-Jan Overseas 22270001 Investment Co., Ltd.

Capital

Net Earning Total Operating Operating Income / Per Share Net Value Liabilities Revenue net income Loss (NT dollar) (after-tax) (after-tax)

Total Assets

2,740,770 23,800,390

0 23,800,390 6,678,047 6,677,909 6,677,910

78.57

22270002 Jet Ford, Inc. 2,347,251 23,822,132

28,453 23,793,679 6,593,641 6,571,987 6,678,051

93.04

2014 Annual Report 211

YULON NISSAN

(2) Affiliates Consolidated Financial Report: Statement The company and its subordinates in fiscal year 2014 (from Jan 1 2014 to December 31 2014) should, in accordance with the “Regulations of Preparing the Affiliates Combined Operation Report Combined Financial Report and Relevant Reports”, include and prepare the Affiliates Combined Financial Report of the company, and according to regulations of Communique’ No.7 of the financial Accounting Criteria, which is “Combined Financial Report”, include and prepare the mother/subordinates combined financial report of the company are the same, and the Affiliates Combined Financial Report relevant information that was exposed In the above said mother/subordinates combined financial report were already exposed, and shall not make another affiliates combined financial report. Very truly yours

Company Name: Yulon Nissan Motor Co., Ltd. Responsible person: Kenneth K. T. Yen

March 23, 2015

(3) Consolidated report of public companies and their affiliates: Nil

2. Fiscal Year 2014 and prior to the publication date of the annual report, The Status of Issuing Private Placement Securities: Nil 3. Fiscal Year 2014 and prior to the publication date of the annual report, Acquisition or Disposal of Yulon Shares by Subsidiaries: Nil 4. Other necessary supplementary notes: Nil 5. Any events that had significant impacts on shareholders’ right or securities prices as stated in Section 2 Paragraph 2 in Article 36 of the Securities Transaction Law for fiscal year 2014 and prior to the publication date of the annual report: Nil

2014 Annual Report 212

Special Noted Items

Yulon Nissan Motor Co., Ltd.

Chairman

Kenneth K. T. Yen

Product Information

INFINITI QX50 3.7

QX60 2.5 Hybrid / 3.5

QX70 3.7

Q50 Sedan 3.5 Hybrid / 2.0 Turbo

Q60 Coupe 3.7

Q70 Sedan 3.7 / 2.5

370Z 3.7

GT-R 3.8

MURANO 3.5

JUKE 1.6

TEANA 2.5/2.0

X-TRAIL 2.5/2.0

SUPER SENTRA 1.8

BIG TIIDA 1.6

SENTRA aero 1.8

TIIDA 1.6

LIVINA 1.6

MARCH 1.5

Corporate Vision Becoming the Benchmark Company of "Product Innovation" and "Service Innovation" in the Cross Strait Auto Industry

2014

YULON NISSAN MOTOR CO., LTD 39-2Po Kung Keng, Shi Hu Tsuen, San Yi, Miao Li Hsien, Taiwan, R.O.C 24Hour Service hot-line 0800-088-888 http://www.nissan.com.tw

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YULON NISSAN MOTOR CO., LTD ANNUAL REPORT 2014

YULON NISSAN MOTOR CO., LTD ANNUAL REPORT 2014 Printed on May 12, 2015 SEC mops.twse.com.tw Official Website www.nissan.com.tw ●Name, Title, and Co...

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