€¦ · technological innovation, international standards” and embraces the teaching of laozi...

2 A Better Life Begins With the Environment & Sustainable Architecture

ContentI Letter to Shareholders

1. 2016 Operation Report

2. 2017 Operation Plan Outline

3. Future Development Strategies

4. Influence from External Competition, Regulations and Macro-operating Environment

5. Conclusion

II Company Profile1. Date of Establishment

2. Company History

III Corporate Governance Report

1. Organization

2. Directors, Supervisors and Management Team

3. Implementation of Corporate Governance

4. Information Regarding the Company’s Audit Fee and Independence

5. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

6. Relationship among the Top Ten Shareholders

7. Ownership of Shares in Affiliated Enterprises

IV Capital Raised1. Capital & Shares

2. Corporate bonds

3. Preferred stocks

4. Depositary Receipts

5. Employee Stock Options

6. New Shares to Employees with Restricted Rights

7. Status of New Shares Issuance in Connection with Mergers and Acquisitions

8. Financing Plans and Implementation

V Business Activities1. Business Scope

2. Market and Sales Overview

3. Employee Information

4. Expenditures on Environmental Protection (General Management Department)

5. Labor Relations

6. Important Contracts

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011

015

045

057

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VI Financial Information1. Condensed balance sheet, income statement and

auditors' opinions for the last five years

2. Financial Analysis of the Last Five Years

3. 2016 Supervisors' Report

4. 2016 Financial Statements

5. 2016 Consolidated Financial Statements of The Parent Company and Subsidiaries Certified by CPA

VII Review of Financial Conditions and Performance, Operating Results, and Risk Management

1. Financial Condition

2. Financial Performance

3. Cash Flow

4. Effect of Major Capital Expenditures in 2016 on Financial Operations

5. 2016 Investment Policy, Main Causes for Profits or Losses, Improvement Plans and the Investment Plans for the Coming Year

6. Risk Management

7. Other Important Matters

VIII Special Disclosures1. Summary of Affiliated Companies

2. Private Placement of Securities in Years 2016 to present

3. The Shares in the Company Held or Disposed by Subsidiaries in Years 2016 to present

4. Other Supplementary Matters

5. Matters that Have Significantly Affected Shareholders' Equity and Prices of Securities Pursuant to Item 2, Subparagraph 2, Article 36 of Securities Exchange Law in Years 2016 to present

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I. Letter to Shareholders

1. 2016 Operation Report

2. 2017 Operation Plan Outline

3. Future Development Strategies


5. Conclusion


　　Thanks to the concerted efforts of our employees, Taiwan Land Development Corporation (TLDC) achieved exceptional performance as a group on many fronts in 2016, including the sale of industrial park projects, the enhancing of asset value, the launch of new development projects, and the operating results of the Kinmen Wind Lion Plaza. TLDC’s consolidated operating revenue for 2016 reached NT$293 million, mainly attributable to labor-related revenue from agency development of industrial parks as well as related revenue from retail/entertainment operations. Furthermore, due to the adoption of the fair value approach for invested real estate, profit has been driven up as a result of an increase in market value. Since 2007, TLDC has been booking profits for ten consecutive years. Profits for 2016 continued to grow at a steady pace , with an after-tax net profit per share of NT$0.34. The innovation that TLDC has been able to realize in branding and cultural creativity repeatedly contributes to new diverse values in architecture. The Group is honored to be a recipient of the FIABCI-Taiwan Real Estate Excellence Awards and continues to be a leader in Taiwan’s architecture and cultural creative LOHAS industry.

　　For the past(2016) year, the Group continues to count on sales from the Taichung City Precision Machinery Innovation Technology Park and the Guanghua Lohas Creative Park as the major sources of profits in terms of the development of industrial parks, followed by the revenues and profits generated from the steady growth of the Kinmen Wind Lion Plaza. Based on the operating philosophy of “shared economy,” the Group continues to integrate “Green, Intelligent and Cultural Creation” with local living environments to develop product characteristics. Meanwhile the cultural creative, leisure sightseeing and medical aesthetics industries are introduced to drive investments, boost productivity and increase job opportunities, so as to promote local development and achieve the benefit of asset revitalization. The Group’s business units will delve deep into the development of the leisure real estate market and the deployment for related peripheral developments to echo the core philosophy of sustainable management. The TLDC Group’s tourism operation has gradually prospered, with presence in locations such as Hualien and Kinmen, etc. Meanwhile, the Group has also formed an alliance with Starwood Hotels; in addition to rolling out hotels under existing brands including the Meridian Hotel, the Sheraton Hotel, the Aloft Hotel, the Westin Hotel and the Element by Westin, the collaborating parties also plan to team up to customize brand new hotel brands that fulfill international standards. Furthermore, TLDC will continue the development of IoT, O2O and the management synergy of virtual and physical e-commerce. The Group will seek to grasp the end-to-end process from source to sales with key IoT technologies to promote product sales, while conducting business operations such as after-sales service and the O2O operation, etc.

　　Below we present our 2016 business report, including implementation results of the business plan, budget implementation, financial highlights and profitability analysis, research and development status, and an outline of our 2017 business plan, including business policies for the year, business objectives and important production and marketing policies as described below:

1. 2016 Operation Report (1) Operating results of plan implementation

A. Related revenue from the Taichung City Precision Machinery Innovation Technology Park and the Hualien Guanghua Lohas Creative Park; In particular, the Taichung City Precision Machinery Innovation Technology Park is a park laboriously co-developed by the Taichung City Government and the Company. After ten years of meticulous planning and implementation, the project has started to bear the fruit of our joint efforts. The Park is the first to integrate the three aspects of lifestyle, production and ecology within a premium international-caliber park zone. It is now the precision machinery settlement with the highest production value per unit area and the highest density in the world. In 2016, NT$107.3 billion in production value and 21,150 job opportunities were generated to propel the park to become a demonstration settlement of precision machinery development for the promotion of the 5+2 Industries and Industry 4.0 policies.

B. The Kinmen Wind Lion Plaza introduced the LAOX Wind Lion Duty Free Shop, sporting goods outlets (NIKE、

ADIDAS、NEW BALANCE、PUMA) and Japanese-style yakiniku restaurants to complement existing stores such as the Golden Palais Duty Free Shop, 86 Shop, Pu Hotpot, Studio A, Starbucks, Chii Lih Coral and the Golden Lion Cinemax to create steady growth and profits.

C. The building permits for the Meridian Hotel, hotel-style apartments, hot spring clubhouse and VILLA 3 have been obtained for the development plan of the Xinpu Ecological Park in Hsinchu. Among them, an agreement has been signed with Starwood Hotels for the Meridian Hotel for joint development and operation; Overall planning has been completed for the leisure ranch in the northern part of the Park. The fifth edition of the Xinpu Hot Spring Camellia Season was held in late-December 2016, and drew more than 130,000 visits during the Chinese New Year holidays of 2017.

D. The Huilanwan Cultural Plaza in Hualien is expected to be completed and operational in 2017. An IMAX

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I　　LETTER TO SHAREHOLDERS

movie theater and a shopping plaza complex will be introduced to the Hualien/Taitung area for the first time; Construction has started after the building permit for phase 1 of the Huilanwan Sunrise Village Housing Project was granted. Centaline Property Agency Limited has been entrusted to seek buyers from Hong Kong interested in taking residence or investment. Planning for phase 2 of the Huilanwan Sunrise Village Housing Project has been completed. An application for a building permit is expected to be submitted in Q2 of 2017; An Aloft hotel with 315 guest rooms has been planned for the development project of the Huilanwan Tokaido Clubhouse.

E. The environmental impact appraisal and the submission of the water conservation plan for the DaKeng Development Project in Taichung have been completed.

F. After resources have been committed to clean up the environment of self-owned assets, new value has been created for the land and new elements have been infused, which directly drive local development while improving asset value.

(2) Budget Implementation

　　In accordance with the Regulations Governing the Publication of Financial Forecasts of Public Companies, TDLC is not required to make a financial forecast in 2016; this part is thus omitted.

(3) Financial Status and Profitability Unit: NT$1,000; %

Item 2016 2015

Financial Status

Operating revenue 292,831 592,069

Operating profit 147,696 461,653

Operating net loss -578,011 -376,842

Net income after tax 247,810 2,039,605

Profitability

ROA (%) 1.14 7.21

ROE (%) 1.40 12.29

Issued capital ratio (%)Operating income -7.59 -5.19

Income before income tax 5.29 30.29

Net profit ratio (％ ) 84.62 344.48

EPS (NT$) - Retroactive adjustment 0.34 2.78

　　Sales revenue for the current period reached NT$292,831,000, consisting mainly of recognition of NT$85,206,000 in related revenue from agency business of industrial park development and NT$169,512,000 in related revenue from retail/entertainment operations. After deducting cost of sales in the amount of NT$145,135,000 and operating expenses in the amount of NT$725,707,000, and adding non-operating income of NT$980,708,000, TDLC reports an after-tax net income of NT$247,810,000 for the current period.

(4) Research and Development

　　In line with the trends for the future, the Group adopts the development strategies of “cultural creativity, technological innovation, international standards” and embraces the teaching of Laozi “The best of men is like water” and the teaching of Sun Tzu “Just as water retains no constant shape, there are no constant conditions in warfare” in the Art of War as corporate core values to respond swiftly and effectively in the ever changing market and fulfill its corporate social responsibility. We uphold the principles of “Green, Intelligent and Cultural Creation” to construct the three major business axes and establish the “shared economy” business model, and utilize the 4D planning concept (Design; Digital; Different; Diverse) to offer a new way of life and new products. Our green business encompasses business perimeters relating to ecological conservation, environmental protection, sustainable living, organic LOHAS, energy conservation & carbon reduction, future medical science and leisure & well-being. The intelligent business encompasses business perimeters relating to advanced technologies and digitalization such as IoT, Big Data, IDC, long-term healthcare and smart homes. The cultural creative business includes arts and cultural exhibitions and performances, arts agency, cultural exchange, arts auction, and the operation of arts villages, along with other related fields.

2. 2017 Operation Plan Outline (1) Business Policy

A. Value-oriented development strategies: The Group adds value to the land through cultural creativity and


technological innovation by integrating art as part of life and creating a sustainable healthy LOHAS park.

B. Sustainable development of IoT with future source of value in the cloud: Our next-step development will focus on transforming IoT into an industry, applying it in the learning aspect of lifestyle industries, and implementing it in all dimensions of business innovation.

C. Consolidation of the development of Kinmen as the border trade center: Kinmen’s visa-on-arrival policy, increased duty-free shopping quota for visitors traveling to Mainland China through Kinmen and the relaxation of Xiamen as a free trade zone have contributed to a steady growth in bilateral trade with China. The Kinmen Wind Lion Plaza exports large quantities of goods for sale in Xiamen and significantly increases bilateral trade with Xiamen and the Economic Zone on the west side, which helps solidify the development of Kinmen as a border trade center.

D. Core values of sustainable enterprise: Embracing “Green, Intelligent and Cultural Creativity” as core beliefs, we infuse land with new value, shape a unique brand image,create value for the shared economy, utilize the 4D planning concept flexibly, communicate and integrate our corporate philosophy, and remain committed to constructing high-quality LOHAS living spaces.

E. Implementing professional division of labor within the Group and talent recruitment: We pursue the overall rationalization of the Group and further enhancement of enterprise synergy through interaction and cooperation of all employees within the Group by diversifying our talent pool to meet human resources needs at different business locations and improving our asset management and Internet technology knowhow.

(2) Operation (Sales) Goals

A. The land of Taichung City Precision Machinery Innovation Technology Park, Kaohsiung Ganshan Benjhou Industrial Park, and Future Industry Division of the Guanghua LOHAS Creative Park is to be sold to generate more business revenue.

B. Self-owned assets will continue to be used flexibly for integrating “Green, Intelligent, and Cultural Creativity” into the local living environment and developing products for the creation of greater benefits.

C. The shopping street and mall at the Kinmen Wind Lion Plaza have commenced operations, and feature a hypermart, a cinema multiplex and duty-free shops as the plaza’s anchor stores; these businesses are expected to generate more revenue and profit for the plaza.

D. Building permits for the Meridian Hotel, hotel-style apartments, hot spring clubhouse and VILLA 3 have been obtained for the development plan of the Xinpu Ecological Park in Hsinchu. Sales of hotel-style apartments with property rights in the sale-and-leaseback format will target the clientèle of retirees and those valuing leisure and well-being as a priority. The development project of the leisure ranch in the northern part of the Park is currently under review by the Council of Agriculture, Executive Yuan. Planning and construction will be actively conducted after the expected acquisition of the permission for establishment.

E. The Huilanwan Sunrise Village Housing Project in Hualien offers around 35,000 pings in total available sales area for phase 1. Pre-sale of the project is currently under way and Centaline Property Agency Limited has been entrusted to look for buyers in the Hong Kong area. The building permit for phase 2 is expected to be acquired in Q2 of 2017. Construction of the Huilanwan Cultural Plaza is expected to be completed and the use permit is expected to be acquired in 2017, as operation is slated to begin with effect from 2018; An Aloft hotel with 315 guest rooms has been planned for the development project of the Huilanwan Tokaido Clubhouse.

F. The building permit for the the Zen Clubhouse in the Nantou Caotun Eco-Complex project has been acquired. Applications for the building permits of other blocks will be submitted progressively, as the development of hot spring wells is still ongoing.

G. The environmental impact appraisal and the submission of the water conservation plan for the DaKeng Development Project in Taichung have been completed; applications for both the development plan and a miscellaneous permit will continue.

H. The Group will continue to seek new development projects, including industrial park development and investment projects under the Act for Promotion of Private Participation in Infrastructure Projects.

(3) Important Production and Marketing Policies

A. Leveraging the strategy of land revitalization to diversify the utilization of land.

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I　　LETTER TO SHAREHOLDERS

B. Continuing to develop the three major horizontal business axes, namely Green, Intelligent and Cultural Creativity;

C. Enhancing our corporate image and creating brand recognition;

D. Creating added value for our products and enhancing our competitiveness by integrating cultural creativity, technological innovation, and international standards.

E. Embracing the core value of “The best of men is like water,” manifesting the central ideas and value consensus of “step beyond imagination, realize dreams.”

F. Fulfilling the value of various development projects through the 4D planning concept.

3. Future Development Strategies 　　Starting from the development goals of cultural creativity and technological innovation, the TLDC Group

continues to integrate the 4D planning concept in our approaches for building new lifestyle models that are based on a shared economy as our role evolves from being a builder of premium architectural spaces to being the provider and creator of a high quality lifestyle. As the value of land and building assets increase simultaneously, the Group will make the most of physical space to create virtual value and attract more members. Meanwhile, tailor-made products will be offered in order to turn virtual cloud into new valuable space through the systematic management and development of Big Data. The Group embraces the concept of green building via “construction traceability,” and drives online to offline operation and sales through IoT to greatly enhance the value of digital marketing.

　　TLDC takes upon itself an important mission for the future, which is to increase the “happiness level” of people in Taiwan. To achieve this aim, the Group plans to integrate leisure, living, creation and survival (work) while endeavoring to preserve rich cultural and humanistic elements in all of its works. The Group advocates greater emphasis on way of life than on monetary value in its works, which has been the essence and core of the leisure industry and the Group’s development focus in recent years. In the future, all TLDC businesses will incorporate the elements of interest and curiosity for we foresee that the learning of new knowledge will be a major path leading to the creation of new business opportunities. The Group also takes it upon itself to improve the living environment of mankind as its corporate social responsibility. As it continues to adhere to the corporate culture of “Happiness, Sharing and Innovation,” TLDC will be inviting people who share the same ideas and beliefs to join the cause of pursuing a more organic, minimalist, eco-friendly, and enjoyable lifestyle. We moreover believe that sustainable operations are the only approach to establishing new values and forging a viable future path for Taiwan.


(1) External Competition

A. Industrial park agency business: There is a pressing demand for industrial land in Taiwan. However, as land acquisition has to be conducted based on market value and involves complex environmental feasibility study process, land acquisition and development therefore involve difficult, arduous procedures. These circumstances have nevertheless turned the Group’s industrial land assets into valuable assets.

B. Diversification: The lifestyles of people in today’s society have evolved and a premium is now placed on leisure activities and well-being. It has therefore become necessary for the Group to transform itself and diversify its businesses to spread operational risks and capitalize on business opportunities in order to develop land value more effectively. By developing new markets through new products, the TLDC Group has shifted its focus to two primary scopes of business -- leisure real estate development and e-commerce. This change was adopted in an effort to generate more profit and to put our core corporate beliefs of “Green, Intelligent and Cultural Creativity” into practice.

(2) Regulatory Environment

　　The amendment to the Labor Standards Act promulgated on December 21, 2016 is predominately intended to ensure that laborers can take more days off and enjoy more special vacations, in addition to implementing the five-day workweek and ensuring universal national holidays. In the meantime, the goal of the five-day workweek can be further enforced via the methods of “regulating work hours through labor costs and “utilizing labor costs to manage labor capacity.” This directly impacts the operation of the Group’s subsidiary startup business units. For business units operating malls such as the Kinmen Wind Lion Plaza, a direct increase in labor cost is expected. Moving forward, the Group will address the impact from the Labor Standards Act via


diverse channels and measures such as manpower planning, adjustments in off-duty days or store opening hours.

(3) Macro-operating Environment

　　Taiwan recorded an economic growth rate of 1.50% for 2016, mainly due to the gradual recovery of the global economy, the continuous rebound of oil and raw material prices, as well as the low baseline effect. Recently, the U.S. economy has continued to turn around as economies in the eurozone gradually improve. Meanwhile, China’s economy remains stable. Therefore, the Directorate General of Budget, Accounting and Statistics of Executive Yuan predicts that Taiwan’s economy will exhibit a 1.92% growth in 2017. After the government rolled out multiple housing & land policies and measures, the volume of turnover in the housing market in Taiwan managed to rise in December 2015 due to factors such as it being the year-end peak season for home purchase and sellers’ strategy of lowering prices to drive volume. However, due to the increasing scarcity of available land, the consistently high cost of raw materials, plus the Central Bank’s recent relaxation of restrictions on real estate loans, the real estate markets in different areas will continue to fluctuate within very narrow margins in the short run. In the long term, however, room for downward adjustment in housing prices is expected to be limited. In particular, as the land prices in regions other than the metropolitan areas along the west corridor such as Hsinchu, Hualien and Kinmen have been steadily increasing with each passing year, those market trends are particularly favorable to TLDC, which holds a considerable amount of land assets and is embarking on several hotel and resort development projects in those areas. In the future, through sharing strategy, the Group will be offering the opportunity for long-term holding of real estate for investment purposes, an approach that is poised to lead to greater profits.

5. Conclusion 　　The Group’s future lies in “innovation.” The building of architectural spaces and landscapes is our character

and value as exemplified in our achievements of transforming outdated industrial zones into LOHAS parks. Our efforts in the next phase will focus on water, including both rivers and oceans. The Huilan Bay project is our defining work in the current stage. As cultural creation cannot rely on imagination alone, success largely relies on going beyond imagination. Trends for the future reside in sharing, combining the physical with the virtual, and creating cultural value through technology. TLDC will continue to observe the “law of nature” in transforming the environment and creating carefree spaces for people; we are committed to forging an environment that is in total harmony with Nature and the other creatures of our earth. The Group has turned in many concrete achievements in the past nine years. By leveraging our experiences and traceability data, we aspire to build cultural and creative spaces and capitalize on our professional advantages to offer all-round, quality living services that better meet the needs of the today’s society. To this end, we ask for continued support and encouragement from our shareholders.

Chairman: President: Accounting Manager:

Chiu, Fu-Sheng Chiu, Fu-Sheng Chen, Wen-Ling　　

II. Company Profile

1. Date of Establishment

2. Company History


1. Date of Establishment: June 30, 1964 2. Company History

1964.06 Establishment of the Company. Originally named "Taiwan Land Development Co." with authorized capital of NT$150 million specializing in land development business initially.

1972.07 Set up of Trust Department. Company was renamed as "Taiwan Development and Trust Co. (TDTC)" while stepping

1999.01 Completed privatization to become a listed company in accordance with government policies.

2005.08 TLDC dissolved its trust department in compliance with the Trust Enterprise Act and transferred its trust business to Jih Sun International Bank.

2005.12 Renamed as Taiwan Land Development Corporation

2006.03 Change of the listed category to construction and engineering stock.

2006.05 Establishment of the subsidiary, "Taiwan Innovation Co. (TIC),".

2008.07The chairman of TDLC has been appointed by the government since the Company was privatized in 1999. In the 15th-term directors and supervisors meeting, the first TLDC chairman from the private sector was elected, which marks a new era for the Company as it becomes a bona fide private company.

2008.11 Released a brand-new Corporation Identity System and announced the "Love and Green for Taiwan, claiming the mainstream of future life style through internationalization of future

2009.07Subsidiary "Taiwan Innovation Development Co. (TIDC)" passed the comprehensive review of the public tendering of the "Kinmen Commerce Recreation Center Build-Operate-Transfer (BOT) Project," which was organized by the Kinmen County government, and became the best applicant.

2009.08The Company collaborated with Professor Ken Sakamura, the father of Japanese computerized architecture TRON on "uhome" smart technology houses, and the "uhome" sensor network experience hall was established on level B2 of the Taiwan Land Development Financial Building.

2009.10Subsidiary "Taiwan Innovation Development Co. (TIDC)" established "Taiwan Commerce Development Corporation" to manage the development, property management, import trade business for Kinmen Commerce Recreation Center.

2009.11 Affiliate "Taiwan Commerce Development Corporation" officially signed the contract for the "Kinmen Commerce Recreation Center BOT" with the Kinmen County government.

2009.12The Company set up ARKI Galleria" on level B1 of the Taiwan Land Development Financial Building, providing the community of cultural creative artists and the general public with a space for exhibition, reading, talks and general art experience.

2009.12 Subsidiary "Taiwan Innovation Development Co. (TIDC)" established "Taiwan Envirotech Development Corporation, "an information technology company specializing in green environmental architecture and construction.

2010.06Subsidiary "Taiwan Innovation Development Co. (TIDC)" established "Taiwan City Development Corporation," which is in charge of the integration of urban renewal business and providing management services for construction projects of "Taiwan Envirotech Corporation."

2010.06The "Kaikai Kiki Gallery Taipei" was established on the first floor of the Taiwan Land Development Financial Building. The gallery was operated by the world renowned Japanese artist Takashi Murakami and features works of internationally renowned artists, with a view to providing a platform for Taiwanese artists' international exposure.

2010.08Subsidiary "Taiwan Innovation Development Co. (TIDC)" established "Hualien Culture Clubhouse Corporation," which is in charge of the development of boutique hotels in the style of Hakka fortified earth buildings at the Hualien Guanghua LOHAS Creative Park.

2010.09Subsidiary "Taiwan Innovation Development Co. (TIDC)" established "Hualien Ocean Forum Corporation," which is in charge of the development of the international forum and conference center at Hualien Guanghua LOHAS Creative Park. TLDC also established the first affiliated company in mainland China, the "Taikai Xiamen Trading Corporation" in Xiamen.

2010.11Affiliates "Taiwan Envirotech Corporation" and "Taiwan Envirotech Development Corporation" merged and renamed as "Taiwan Envirotech Development Corporation." The new entity specializes in managing IT and construction technology businesses.

2011.01 Groundbreaking of the duty-free shopping center under Phase 1 of the "Kinmen Commerce Recreation Center BOT" project.

2011.01 EEstablishment of the subsidiary "Hsinchu Hill Garden Corporation," responsible for developing the Hsinchu Hsinpu co-community.

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I I　　COMPANY PROFILE

2012.05Company participated in the bid for “Taichung Shengang Fengzhou Industrial Park Phase 2 Establishment, Planning, Development, Lease/Sales and Management Plan ＂ project organized by Taichung City Government and was selected the winner for the project.

2012.10 Company established a subsidiary “Taiwan Midtown Development Corporation ＂ to engage in land development business in Taiwan area.

2012.11 Subsidiary "Taiwan Innovation Development Co. (TIDC)" established “Taiwan Talent Development Corporation ＂ to offer manpower training, employment and entrepreneurship services.

2014.04 The Kinmen Golden Lion Cinemax held its grand opening.

2014.07 The Kinmen Wind Lion Plaza held its grand opening.

2014.08 Subsidiary “Taiwan LanYang Development Corporation ＂ was established to develop business in Yilan area.

2014.09 The Hualien Huilan Lohas Village project was granted construction permit.

2014.12 Hsinchu Hsinpu Eco-community project has completed the hot spring construction and opened for public use.

2014.12 TLDC brought in Starwood Hotels & Resorts and signed an agreement with the company for operations and management of Hsinchu Starwood and Kinmen Sheraton.

2014.12 TDLC's Wind Lion Plaza signed a strategic alliance agreement with Xiamen Bank, becoming the first Taiwanese merchant in Kinmen area to enter strategic alliance with Xiamen Bank.

2015.01 TDLC hosted the fourth "Hsinpu Hot Spring Camellia Festival" at the Hsinpu Eco-community Park, and offered visitors the chance to enjoy the hot springs for the first time, which was well-received.

2015.02The first Apple Flagship Store in the offshore islands of Taiwan, Studio A in Kinmen Wind Lion God Shopping Street held a grand opening. As Kinmen draws more international brands, the synergistic effect of O2O becomes more prominent.

2015.03 Internationally acclaimed architect Japanese architect Kengo Kuma designed the Kinmen Wind Lion God Museum.

2015.03 Hualien Huilan Bay Lohas Village is on exhibition at the National Building Museum in Washington D.C., the only architecture in Taiwan selected for exhibition.

2015.10 Hualien Huilan Bay Clubhouse is completed and Huilan Bay Sunrise Villa breaks ground and starts pre-sale of membership. The project also forms an alliance with Hong Kong Centaline Property to target buyers in Hong Kong.

2015.10TDLC Kinmen Wind Lion God Shopping Street wins the National Architecture Golden Quality Award in planning and design category and construction quality category. It is also the first mall in Taiwan that is granted the "Gold Intelligent Building Mark" by the Ministry of the Interior.

2015.11 "Taiwan Land Development Corporation Group has partnered with IMAX for the planning and implementation of the first IMAX movie theater in eastern Taiwan," which is slated to open in 2017.

2016.01 Taiwan Land Development Corporation Group's Xinpu Smart Ecological Park has been pre-certified with an international LEED platinum rating.

2016.01 Kinmen Wind Lion Plaza was recognized in the 2nd edition of China's City Complex "Golden Complex Award" as the winner of "Best Case Award"

2016.04TDLC and ROC Association of Ultrarunners co-organized 2016 Hualien Huilan Bay Wind Lion Cup Ultramarathon. Close to 1,000 runners joined the tournament, including well-known Japanese long-distance runner Hara Yoshkazu, also the holder of Asian ultramarathon record.

2016.06 Hualien Sunrise Villa, developed by TDLC, is bestowed the rare honor of “Best Project Design” at the FIABCI-Taiwan Real Estate Excellence Awards.

2016.07 TDLC enters into cooperation agreement with Japan’s largest comprehensive duty-free shop Laox for opening a store in Wind Lion God Shopping Street.

2016.11 TDLC relocates the Sun Moon Lake Peacock’s Park, a recreation garden with 48 years of history, to the Peacock Garden at Hsinpu Eco-community Park, creating a haven for the stately fowls.

2017.03 TDLC invites He Guo-fang to assist with orchid cultivation and conservation at Hsinpu Eco-community Park, thus greatly enhancing the Park’s purpose and value in ecological development.

III.

Corporate Governance Report

1. Organization

2. Directors, Supervisors and Management Team

3. Implementation of Corporate Governance

4. Information Regarding the Company’s Audit Fee and Independence

5. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

6. Relationship among the Top Ten Shareholders

7. Ownership of Shares in Affiliated Enterprises


1. Organization (1) Organizational Chart

Audit Committee

Remuneration Committee

Shareholders’ meeting

Board of Directors (Chairman, Vice Chairman, Directors)

Board Office

PresidentPresident’s Office

Vice PresidentVice President’s office

Audit Office

Supervisors

Planning Department

Pro-Construction

Planning Department

Construction Department

Finance Department

Accounting Section

Operation Section

Investment Section

General Administration Department

Administration Section

Procurement Section

Finance Section

Public Affairs Department

Operation Planning Meeting

Consultants

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I I I　　CORPORATE GOVERNANCE REPORT

(2) Major Corporate Functions

Department Functions

Audit Office ‧ Responsible for audit operations and provide periodic reports to the Board of Directors and supervisors.

Planning Department

‧ The Operation Section is responsible for operations ranging from administering industry activities commissioned by government agencies in industrial districts; establishing revitalization strategies for unused land in industrial parks as well as executing project operations; integration of related operations for cases contracted under the government's Act for Promotion of Private Participation and fulfillment and management of project implementation; land development commissioned by government agencies or private enterprises, urban land consolidation, joint construction, BOT cases, new rural projects and urban renewal.

‧ The Investment Section is responsible for the Company's management policies (including management vision, goals, guidelines, operational planning and business reports, etc); industrial trends, collection of information on the macro environment, product positioning, drafting development strategies of Company assets; investment worthiness of new businesses and feasibility assessment, editing and compiling investment or project briefing for subsidiary companies within the Group; feasibility study and investment development of business real estate investment plans; financial planning, relationships building with financial institutions and capital raising and management.

Pre-Construction Planning Department

‧ Responsible for regulatory review during development phase; making provisional financial calculations and investment analysis during development phase; applying for construction permit following development; capacity value creation; construction planning; landscape planning; space design; communication with and coordination of construction planning team.

Construction Department

‧ Responsible for construction project budgeting, construction schedule, progress valuation review and cost control during the construction phase; project contracting, procurement of materials, construction quality audit and control of the progress of project construction; application for building occupation permit; planning for greenhouses, green landscaping, tree banks and construction materials for buildings involving green energy and reduced carbon footprint; communication with and supervision of contractors.

Finance Department ‧ Accounting Section is responsible for establishing and controlling the Company's accounting system, budget drafting, accounts processing, settlement, and the review and audit of various expenditures.

General Administration Department

‧ The Administration Section is responsible for legal affairs; utilization and management of human resources, talent cultivating and career planning; establishment of talent pool; Company Seal/Imprimatur, documentation, document management; compiling Group administrative regulations, systems and operating procedures; editing and producing annual reports; administrative management of re-invested companies; filing, maintenance and management of Company's owned assets (excluding business operation or trial operation) as well as invisible asset; maintenance of IT software and hardware equipments and information security management; planning and developing management systems; disposal and maintenance/management of assets from loans receivable.

‧ The Procurement Section is responsible for comprehensive procurement and bidding activities within the Group; auditing of bidding costs; establishment of database for construction materials and vendors; administrative management, procurement of assets and equipment as well as maintenance, enterprise service, etc.

‧ The Finance Division is in charge of cashier operations for the Company.

Public Affairs Department ‧ Responsible for conducting public affairs activities associated with Legislative Yuan, government agencies, the media, landowners, juridical persons and domestic and foreign investors.


2. Directors, Supervisors and Management Team (1) Directors and Supervisors

April 30,2017

Title Nationality or place of registration

Name Gender Elected Date

Term (Years)

Date First

Elected

Shareholding when Elected Current Shareholding Spouse & Minor

Shareholding Shareholding by nominee arrangement

Experience (Education) Positions Held at Company or Other Companies

Executives, Directors or Supervisors who are spouses or within two

degrees of kinship

Shares (million shares)

Percentage(%)


Percentage(%) Shares Percentage

(%) Shares Percentage(%) Title Name Relation

Chairman Republic of China

Hung Sheng Investment Co., Ltd.

―

07/01/2014 3 years 07/01

/2011 5,370 0.82

6.497 0.85 - - - - - - - - -

Representative: Chiu, Fu-Sheng Male 44.414 5.84

‧Chairman, ERA Digital Media Co., Ltd. ‧Founder, ERA Group ‧Graduate, Fu Hsing Kang College

‧CEO and General Manager of the Company ‧Chairman, Taiwan Innovation Development Corporation ‧Chairman, Taiwan Envirotech Development Corporation ‧Chairman, Taiwan Commerce Development Corporation‧Chairman, Hsinchu Hill Garden Corporation ‧Chairman, Hualien Ocean Forum Corporation ‧Chairman, Hualien Culture Clubhouse Corporation ‧Chairman, Taiwan City Development Corporation ‧Chairman, Taikai Xiamen Trading Corporation ‧Chairman, Nanguo House Corporation ‧Chairman, Wind Lion Plaza Shopping Center Corporation ‧Chairman, Taiwan Mid-Town Development Corporation ‧Chairman, Taiwan Wind Lion Travel Service Corporation‧Chairman, Dufry TCDC Ltd.‧Director, Taiwan LanYang Development Corporation‧Director, Taiwan Manpower Development Corporation‧Director, Hung Sheng Investment Co., Ltd.‧Director, Kinmen Forum Corporation Corporation

- - -

Vice Chairman

Republic of China Lian, Tai-Sheng Male 07/01

/2014 3 years 07/01/2011 22.169 3.38% 26.958 3.54

‧Chairman, ERA Communications Inc. ‧Chairman, Hualien Cable TV Co., Ltd. ‧ Chairman, Cashbox Party World Co.,

Ltd. ‧Chairman, Tung Tai Cable TV Co., Ltd. ‧ P r e s i d e n t , S a t e l l i t e Te l e v i s i o n

Broadcasting Association R.O.C. ‧Graduate, ROCMA

‧Vice CEO of the Company ‧ Vice Chairman, Taiwan Innovation Development Corporation ‧Chairman, Taiwan Envirotech Development Corporation‧Director, Taiwan Commerce Development Corporation ‧Director, Hsinchu Hill Garden Corporation ‧Director, Hualien Ocean Forum Corporation ‧Director, Hualien Culture Clubhouse Corporation ‧Director, Taiwan City Development Corporation ‧Director, Nanguo House Corporation ‧Director, Wind Lion Plaza Shopping Center Corporation‧Director, Taiwan Mid-Town Development Corporation ‧Director, Dufry TCDC Ltd.‧Director, Taiwan Manpower Development Corporation ‧Chairman, ERA Communications Inc. ‧Chairman, Hualien Cable TV Co., Ltd. ‧Chairman, Cashbox Party World Co., Ltd. ‧Director, Zhong Du International Corporation ‧Chairman, ERA Global Culture Corporation ‧Supervisor, Tung Tai Cable TV Co., Ltd. ‧Supervisor, Tung Chia Development Co., Ltd. ‧Supervisor, Chia An Development Co., Ltd. ‧Chairman, Hongtu Investment Co., Ltd.‧Chairman, Yuming Investment Co., Ltd.

- - -

DirectorBritish Virgin Islands

Shih Tuo Investment Co., Ltd.

― 07/01/2014 3 years 07/01

/2011 4.568 0.70 4.972 0.65 - - - - - - - - -

Director Republic of China


―

07/01/2014 3 years 07/01

/2011 5.370 0.82

6.497 0.85 - - - - - - - - -

Representative: Kow, Fu-Lin Male 0.036 0.00

‧ Senior Engineer, Pacific Engineers & Constructors, Ltd

‧ M.S. in Civil Engineering, Ohio State University, U.S.A.

‧Director, Taiwan Envirotech Development Corporation ‧Senior Engineer, Pacific Engineers & Constructors, Ltd ‧Supervisor, ERA Cultural Creative Enterprise

- - -


Cheng, Ming-Chieh Male 07/01

/2014 3 years 07/01/2011 0 0.00 0 0.00

‧Director, iBIZ Technology Corp.‧ M.S. in Computer Science, Fordham

University, U.S.A.

‧Director, iBIZ Technology Corp. ‧Director, ERA Network Enterprise Co. ‧Director, ERA Global Culture Corporation

- - -



―

07/01/2014 3 years 07/01

/2011 5.370 0.82

6.497 0.85 - - - - - - - - -

Representative: Cheng, Chi-Li Female 0.700 0.09

‧ Assistant VP, Leasing and Sales, Wei Hsin Real Estate Consulting

‧ Accounting & Statistics, College of Management, Shih Chien University

‧ Vice President of the Company ‧ Director, Taiwan Envirotech Development Corporation ‧ Director, Hsinchu Hill Garden Corporation ‧ Director, Hualien Ocean Forum Corporation ‧ Director, Hualien Culture Clubhouse Corporation ‧ Director, Taiwan City Development Corporation ‧ Director, Taiwan Wind Lion Travel Service Corporation‧ Director, Taiwan LanYang Development Corporation

- - -

19


2. Directors, Supervisors and Management Team (1) Directors and Supervisors

April 30,2017



Term (Years)

Date First

Elected





degrees of kinship


Percentage(%)




Chairman Republic of China


―

07/01/2014 3 years 07/01

/2011 5,370 0.82

6.497 0.85 - - - - - - - - -

Representative: Chiu, Fu-Sheng Male 44.414 5.84

‧Chairman, ERA Digital Media Co., Ltd. ‧Founder, ERA Group ‧Graduate, Fu Hsing Kang College

‧CEO and General Manager of the Company ‧Chairman, Taiwan Innovation Development Corporation ‧Chairman, Taiwan Envirotech Development Corporation ‧Chairman, Taiwan Commerce Development Corporation‧Chairman, Hsinchu Hill Garden Corporation ‧Chairman, Hualien Ocean Forum Corporation ‧Chairman, Hualien Culture Clubhouse Corporation ‧Chairman, Taiwan City Development Corporation ‧Chairman, Taikai Xiamen Trading Corporation ‧Chairman, Nanguo House Corporation ‧Chairman, Wind Lion Plaza Shopping Center Corporation ‧Chairman, Taiwan Mid-Town Development Corporation ‧Chairman, Taiwan Wind Lion Travel Service Corporation‧Chairman, Dufry TCDC Ltd.‧Director, Taiwan LanYang Development Corporation‧Director, Taiwan Manpower Development Corporation‧Director, Hung Sheng Investment Co., Ltd.‧Director, Kinmen Forum Corporation Corporation

- - -

Vice Chairman

Republic of China Lian, Tai-Sheng Male 07/01

/2014 3 years 07/01/2011 22.169 3.38% 26.958 3.54

‧Chairman, ERA Communications Inc. ‧Chairman, Hualien Cable TV Co., Ltd. ‧ Chairman, Cashbox Party World Co.,

Ltd. ‧Chairman, Tung Tai Cable TV Co., Ltd. ‧ P r e s i d e n t , S a t e l l i t e Te l e v i s i o n

Broadcasting Association R.O.C. ‧Graduate, ROCMA

‧Vice CEO of the Company ‧ Vice Chairman, Taiwan Innovation Development Corporation ‧Chairman, Taiwan Envirotech Development Corporation‧Director, Taiwan Commerce Development Corporation ‧Director, Hsinchu Hill Garden Corporation ‧Director, Hualien Ocean Forum Corporation ‧Director, Hualien Culture Clubhouse Corporation ‧Director, Taiwan City Development Corporation ‧Director, Nanguo House Corporation ‧Director, Wind Lion Plaza Shopping Center Corporation‧Director, Taiwan Mid-Town Development Corporation ‧Director, Dufry TCDC Ltd.‧Director, Taiwan Manpower Development Corporation ‧Chairman, ERA Communications Inc. ‧Chairman, Hualien Cable TV Co., Ltd. ‧Chairman, Cashbox Party World Co., Ltd. ‧Director, Zhong Du International Corporation ‧Chairman, ERA Global Culture Corporation ‧Supervisor, Tung Tai Cable TV Co., Ltd. ‧Supervisor, Tung Chia Development Co., Ltd. ‧Supervisor, Chia An Development Co., Ltd. ‧Chairman, Hongtu Investment Co., Ltd.‧Chairman, Yuming Investment Co., Ltd.

- - -

DirectorBritish Virgin Islands

Shih Tuo Investment Co., Ltd.

― 07/01/2014 3 years 07/01

/2011 4.568 0.70 4.972 0.65 - - - - - - - - -



―

07/01/2014 3 years 07/01

/2011 5.370 0.82

6.497 0.85 - - - - - - - - -

Representative: Kow, Fu-Lin Male 0.036 0.00

‧ Senior Engineer, Pacific Engineers & Constructors, Ltd

‧ M.S. in Civil Engineering, Ohio State University, U.S.A.

‧Director, Taiwan Envirotech Development Corporation ‧Senior Engineer, Pacific Engineers & Constructors, Ltd ‧Supervisor, ERA Cultural Creative Enterprise

- - -


Cheng, Ming-Chieh Male 07/01

/2014 3 years 07/01/2011 0 0.00 0 0.00

‧Director, iBIZ Technology Corp.‧ M.S. in Computer Science, Fordham

University, U.S.A.

‧Director, iBIZ Technology Corp. ‧Director, ERA Network Enterprise Co. ‧Director, ERA Global Culture Corporation

- - -



―

07/01/2014 3 years 07/01

/2011 5.370 0.82

6.497 0.85 - - - - - - - - -

Representative: Cheng, Chi-Li Female 0.700 0.09

‧ Assistant VP, Leasing and Sales, Wei Hsin Real Estate Consulting

‧ Accounting & Statistics, College of Management, Shih Chien University

‧ Vice President of the Company ‧ Director, Taiwan Envirotech Development Corporation ‧ Director, Hsinchu Hill Garden Corporation ‧ Director, Hualien Ocean Forum Corporation ‧ Director, Hualien Culture Clubhouse Corporation ‧ Director, Taiwan City Development Corporation ‧ Director, Taiwan Wind Lion Travel Service Corporation‧ Director, Taiwan LanYang Development Corporation

- - -




Term (Years)

Date First

Elected





degrees of kinship


Percentage(%)




Supervisor Republic of China Lin, Hung-Min Male 07/01

/2014 3 years 07/01/2011 0 0.00 0 0.00

‧ Assistant VP, Finance Dept., Hualien Cable TV Co., Ltd.

‧ Banking & Finance, Tamkang University

‧ Assistant VP, Finance Dept., Hualien Cable TV Co., Ltd. ‧ Director, Holiday Entertainment Co., Ltd. ‧ Director, Dahe Media Co.,Ltd‧ Supervisor, Satellite Entertainment Communication Co., Ltd.‧ Supervisor, Taiwan Innovation Development Corporation ‧ Supervisor, Taiwan Envirotech Development Corporation ‧ Supervisor, Taiwan Commerce Development Corporation ‧ Supervisor, Taiwan City Development Corporation ‧ Supervisor, Taiwan Mid-Town Development Corporation ‧ Supervisor, Dufry TCDC Ltd.‧ Supervisor, Taiwan Manpower Development Corporation

- - -

Supervisor Republic of China

Nienshin Investment Co., Ltd.

―

07/01/2014 3 years 07/01

/2008 4.551 0.69

5.506 0.72 - - - - - - - - -

Representative: Hui-Ling Yeh Female 0.186 0.02 ‧ Director, Nienshin Investment Co., Ltd.

‧ Senior high school graduate

‧ Director, Nienshin Investment Co., Ltd. ‧ Supervisor, Taiwan Innovation Development Corporation‧ Supervisor, Hsinchu Hill Garden Corporation ‧ Supervisor, Hualien Ocean Forum Corporation ‧ Supervisor, Hualien Culture Clubhouse Corporation‧ Supervisor, Taikai Xiamen Trading Corporation‧ Supervisor, Nanguowoo Corporation‧ Supervisor, Wind Lion Plaza Shopping Center‧ Supervisor, Taiwan Wind Lion Travel Services Corporation‧ Supervisor, Taiwan LanYang Development Corporation‧ Supervisor, Kinmen Forum Corporation Corporation

- - -


Dahe Media Co.,Ltd ― 07/01

/2014 3 years 07/01/2014 4.246 0.65 5.137 0.68

Major shareholders of the institutional shareholders

April 30,2017

Name of corporate shareholders Main shareholders of corporate shareholders

Hung Sheng Investment Co., Ltd. Chiu, Fu-Sheng (60.17%)

Shih Tuo Investment Co., Ltd. Harmony Forward Limited, registered in British Virgin Islands (100%)

Nienshin Investment Co., Ltd. Yeh, Hui-Ling (99.9%)

Dahe Media Co.,Ltd ERA Communications Inc. (100%)

Major shareholders of the Company’s major institutional shareholders

Name of corporate shareholder Main shareholders of corporate shareholders

ERA Communications Inc. Tongjia Development Co., Ltd. (17.27%)Jiaan Development Co., Ltd. (17.27%)

21




Term (Years)

Date First

Elected





degrees of kinship


Percentage(%)




Supervisor Republic of China Lin, Hung-Min Male 07/01

/2014 3 years 07/01/2011 0 0.00 0 0.00

‧ Assistant VP, Finance Dept., Hualien Cable TV Co., Ltd.

‧ Banking & Finance, Tamkang University

‧ Assistant VP, Finance Dept., Hualien Cable TV Co., Ltd. ‧ Director, Holiday Entertainment Co., Ltd. ‧ Director, Dahe Media Co.,Ltd‧ Supervisor, Satellite Entertainment Communication Co., Ltd.‧ Supervisor, Taiwan Innovation Development Corporation ‧ Supervisor, Taiwan Envirotech Development Corporation ‧ Supervisor, Taiwan Commerce Development Corporation ‧ Supervisor, Taiwan City Development Corporation ‧ Supervisor, Taiwan Mid-Town Development Corporation ‧ Supervisor, Dufry TCDC Ltd.‧ Supervisor, Taiwan Manpower Development Corporation

- - -


Nienshin Investment Co., Ltd.

―

07/01/2014 3 years 07/01

/2008 4.551 0.69

5.506 0.72 - - - - - - - - -

Representative: Hui-Ling Yeh Female 0.186 0.02 ‧ Director, Nienshin Investment Co., Ltd.

‧ Senior high school graduate

‧ Director, Nienshin Investment Co., Ltd. ‧ Supervisor, Taiwan Innovation Development Corporation‧ Supervisor, Hsinchu Hill Garden Corporation ‧ Supervisor, Hualien Ocean Forum Corporation ‧ Supervisor, Hualien Culture Clubhouse Corporation‧ Supervisor, Taikai Xiamen Trading Corporation‧ Supervisor, Nanguowoo Corporation‧ Supervisor, Wind Lion Plaza Shopping Center‧ Supervisor, Taiwan Wind Lion Travel Services Corporation‧ Supervisor, Taiwan LanYang Development Corporation‧ Supervisor, Kinmen Forum Corporation Corporation

- - -


Dahe Media Co.,Ltd ― 07/01

/2014 3 years 07/01/2014 4.246 0.65 5.137 0.68


B. Information on directors and supervisors (2)

　　　　Criteria

Name 　　　　　　

Meet One of the Following Professional Qualification Requirements, Together with at

Least Five Years Work Experience Independence Criteria(Note)

Number of Other Public Companies in Which the Individual is Concurrently

Serving as an

Independent Director

An Instructor or Higher

Position in a Department

of Commerce, Law, Finance, Accounting,

or Other Academic

Department Related to

the Business Needs of the Company in a Public or

Private Junior College,

College or University

A Judge, Public

Prosecutor, Attorney, Certified Public

Accountant, or Other

Professional or Technical Specialist Who has Passed a National

Examination and been

Awarded a Certificate in a Profession

Necessary for the Business

of the Company

Have Work Experience in the Areas of Commerce,

Law, Finance, or Accounting, or Otherwise Necessary for the Business

of the Company

1 2 3 4 5 6 7 8 9 10

Hung Sheng Investment Co., Ltd. Representative: Chiu, Fu-Sheng

ü ü ü ü ü ü ü -

Lian, Tai-Sheng ü ü ü ü ü ü ü ü -

Shih Tuo Investment Co., Ltd. ü ü ü ü ü ü ü ü ü ü -

Hung Sheng Investment Co., Ltd. Representative: Kow, Fu-Lin

ü ü ü ü ü ü ü ü -

Cheng, Ming-Chieh ü ü ü ü ü ü ü ü ü ü ü -

Hung Sheng Investment Co., Ltd. Representative: Cheng, Chi-Li

ü ü ü ü ü ü ü -

Lin, Hung-Min ü ü ü ü ü ü ü ü ü -

Nienshin Investment Co., Ltd. Representative: Yeh, Hui-Ling

ü ü ü ü ü ü ü ü -

Dahe Media Co.,Ltd ü ü ü ü ü ü ü ü ü ü

(2) Management Team April 30,2017

TitleNationality or place of registration


Current Shareholding Spouse & Minor Shareholding

Shareholding by nominee arrangement



degrees of kinship




Vice President Republic of China Cheng Chi-Li Female 01/01/2015 700,104 0.09% 0 0% 0 0%

Accounting & Statistics, College of Management, Shih Chien University

‧ Director of the Company ‧ Director, Taiwan Envirotech

Development Corporation ‧ Director, Hsinchu Hill Garden

Corporation‧ Director, Hualien Ocean Forum

Corporation ‧ Director, Hualien Culture Clubhouse

Corporation ‧ Director, Taiwan City Development

Corporation‧ Director, Taiwan LanYang

Development Corporation‧ Director, Taiwan Wind Lion Travel

Service Corporation

― ― ―

Vice President Republic of China

Guo, Zong-Xiong Male 05/01/2014 712,303 0.09% 0 0% 0 0% Master of Law, Ming

Chuan University

‧ President, Taiwan Commerce Development Corp.

‧ Director, Taiwan LanYang Development Corporation

― ― ―

23


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. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.

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 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.

4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs.

5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings.

6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company.

7. Not a professional individual who is 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. These restrictions do not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx“.

8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.

9. Not been a person of any conditions defined in Article 30 of the Company Law.

10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

(2) Management Team April 30,2017







degrees of kinship




Vice President Republic of China Cheng Chi-Li Female 01/01/2015 700,104 0.09% 0 0% 0 0%

Accounting & Statistics, College of Management, Shih Chien University

‧ Director of the Company ‧ Director, Taiwan Envirotech

Development Corporation ‧ Director, Hsinchu Hill Garden

Corporation‧ Director, Hualien Ocean Forum

Corporation ‧ Director, Hualien Culture Clubhouse

Corporation ‧ Director, Taiwan City Development

Corporation‧ Director, Taiwan LanYang

Development Corporation‧ Director, Taiwan Wind Lion Travel

Service Corporation

― ― ―

Vice President Republic of China

Guo, Zong-Xiong Male 05/01/2014 712,303 0.09% 0 0% 0 0% Master of Law, Ming

Chuan University

‧ President, Taiwan Commerce Development Corp.

‧ Director, Taiwan LanYang Development Corporation

― ― ―








degrees of kinship




Special assistant, Board of Directors Office

Republic of China Lin,Chien-chih Male 04/01/2016 126,453 0.02% 0 0% 0 0% Department of Drama,

Chinese Culture University ― ― ― ―

Manager, Public Affairs Department

Republic of China Smart Chiang Male 01/01/2011 917,515 0.12% 0 0% 0 0% Dept. of Journalism, Shih

Hsin University Assistant Vice President, Taikai Xiamen Trading Corporation ― ― ―


Republic of China Edward Wu Male 11/01/2011 479,289 0.06% 0 0% 0 0%

Dept. of Industrial Engineering, Feng Chia University

― ― ― ―

Manager, Planning Department.

Republic of China

Mao, Zhao-Kai Male 11/01/2014 664,187 0.09% 0 0% 0 0%

Master of Industrial Engineering, Feng Chia University and National Taiwan University

Manager, Taiwan Innovation Development Corporation ― ― ―

Assistant Vice President, Accounting Section, Finance Department

Republic of China

Chen, Wan-Ling Female 10/01/2008 327,147 0.04% 0 0% 0 0%

Master of Science Program in Accounting, Information and Law, National Chung Cheng University

Assistant Vice President, Finance Section, Taiwan Innovation Development Corporation

― ― ―

Assistant Vice President, Board of Directors Office

Republic of China Rocky Lo Male 11/01/2010 187,927 0.02% 0 0% 0 0% College of Law, National

Taiwan University Assistant Vice President, Administration Section, Taiwan Innovation Development Corporation

― ― ―

Manager, Administration Section of General Administration Department

Republic of China Ben Lin Male 11/01/2010 298,438 0.04% 3,852 0% 0 0%

Master of Business Administration, Fu Jen Catholic University

Manager, Administration Section, Taiwan Innovation Development Corporation Vice President, Taiwan Manpower Development Corporation

― ― ―

Manager, Finance Section of General Administration Department

Republic of China

Peng, Hua-Hui Female 11/01/2014 188,776 0.02% 0 0% 0 0%

Current student at Department of Commerce, National Open University

Manager, Finance Section, Taiwan Innovation Development Corporation ― ― ―

Manager, Pro-Construction Planning Department

Republic of China

Zeng,Zhi-Xiong Male 03/23/2017 77,436 0.01% 0 0% 0 0%

Master of Media Space Design, Ming Chuan University

― ― ― ―

Manager,OperationDepartment

Republic of China Jerry Nien Male 03/23/2017 224,900 0.03% 29,964 0% 0 0%

Dept. of NaturalResources, ChineseCulture University

― ― ― ―

(3) Remuneration of Directors, Supervisors, President, and Vice Presidents

Remuneration of Directors 　 Unit: NT$

Title Name

Remuneration Ratio of Total Remuneration

(A+B+C+D) to Net Income (%)

Relevant Remuneration Received by Directors Who are Also Employees Ratio of Total Compensation

(A+B+C+D+E+F+G) to Net Income (%)

Compensation Paid to

Directors from an Invested Company

Other than the Company’s Subsidiary

Base Compensation (A) Severance Pay (B) Directors Compensation(C) Allowances (D) Salary, Bonuses, and

Allowances (E) Severance Pay (F) Employee Compensation (G)

The company

All companies

in the consolidated financial

statements

The company

Companies in the

consolidated financial

statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The companyCompanies in the

consolidated financial statements The

company

Companies in the


statementsCash Stock Cash Stock

ChairmanHung Sheng Investment Co., Ltd. Representative: Chiu, Fu-Sheng

21,800,000 21,800,000 — — 2,184,954 2,184,954 2,208,000 2,928,000 10.39% 10.68% 3,400,000 3,400,000 108,000 108,000 1,315,162 — 1,315,162 — 12.30% 12.59% —

Vice Chairman Lian, Tai-Sheng

Director Shih Tuo Investment Co., Ltd.

DirectorHung Sheng Investment Co., Ltd. Representative: Kow, Fu-Lin

Director Cheng, Ming-Chieh

DirectorHung Sheng Investment Co., Ltd. Representative: Cheng, Chi-Li

Note 1: The Chairman is provided with 2 cars (monthly rental: NT$110,000) and a driver (monthly salary: NT$63,000). Note 2: The Company's actual severance pay and pension payout for 2016 was allocated from the severance pay and pension payout.

25








degrees of kinship




Special assistant, Board of Directors Office

Republic of China Lin,Chien-chih Male 04/01/2016 126,453 0.02% 0 0% 0 0% Department of Drama,

Chinese Culture University ― ― ― ―


Republic of China Smart Chiang Male 01/01/2011 917,515 0.12% 0 0% 0 0% Dept. of Journalism, Shih

Hsin University Assistant Vice President, Taikai Xiamen Trading Corporation ― ― ―


Republic of China Edward Wu Male 11/01/2011 479,289 0.06% 0 0% 0 0%

Dept. of Industrial Engineering, Feng Chia University

― ― ― ―

Manager, Planning Department.

Republic of China

Mao, Zhao-Kai Male 11/01/2014 664,187 0.09% 0 0% 0 0%

Master of Industrial Engineering, Feng Chia University and National Taiwan University

Manager, Taiwan Innovation Development Corporation ― ― ―

Assistant Vice President, Accounting Section, Finance Department

Republic of China

Chen, Wan-Ling Female 10/01/2008 327,147 0.04% 0 0% 0 0%

Master of Science Program in Accounting, Information and Law, National Chung Cheng University

Assistant Vice President, Finance Section, Taiwan Innovation Development Corporation

― ― ―

Assistant Vice President, Board of Directors Office

Republic of China Rocky Lo Male 11/01/2010 187,927 0.02% 0 0% 0 0% College of Law, National

Taiwan University Assistant Vice President, Administration Section, Taiwan Innovation Development Corporation

― ― ―

Manager, Administration Section of General Administration Department

Republic of China Ben Lin Male 11/01/2010 298,438 0.04% 3,852 0% 0 0%

Master of Business Administration, Fu Jen Catholic University

Manager, Administration Section, Taiwan Innovation Development Corporation Vice President, Taiwan Manpower Development Corporation

― ― ―

Manager, Finance Section of General Administration Department

Republic of China

Peng, Hua-Hui Female 11/01/2014 188,776 0.02% 0 0% 0 0%

Current student at Department of Commerce, National Open University

Manager, Finance Section, Taiwan Innovation Development Corporation ― ― ―

Manager, Pro-Construction Planning Department

Republic of China

Zeng,Zhi-Xiong Male 03/23/2017 77,436 0.01% 0 0% 0 0%

Master of Media Space Design, Ming Chuan University

― ― ― ―

Manager,OperationDepartment

Republic of China Jerry Nien Male 03/23/2017 224,900 0.03% 29,964 0% 0 0%

Dept. of NaturalResources, ChineseCulture University

― ― ― ―

(3) Remuneration of Directors, Supervisors, President, and Vice Presidents

Remuneration of Directors 　 Unit: NT$

Title Name

Remuneration Ratio of Total Remuneration

(A+B+C+D) to Net Income (%)

Relevant Remuneration Received by Directors Who are Also Employees Ratio of Total Compensation

(A+B+C+D+E+F+G) to Net Income (%)


Directors from an Invested Company


Base Compensation (A) Severance Pay (B) Directors Compensation(C) Allowances (D) Salary, Bonuses, and

Allowances (E) Severance Pay (F) Employee Compensation (G)

The company

All companies

in the consolidated financial

statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The companyCompanies in the

consolidated financial statements The

company

Companies in the



ChairmanHung Sheng Investment Co., Ltd. Representative: Chiu, Fu-Sheng

21,800,000 21,800,000 — — 2,184,954 2,184,954 2,208,000 2,928,000 10.39% 10.68% 3,400,000 3,400,000 108,000 108,000 1,315,162 — 1,315,162 — 12.30% 12.59% —

Vice Chairman Lian, Tai-Sheng

Director Shih Tuo Investment Co., Ltd.

DirectorHung Sheng Investment Co., Ltd. Representative: Kow, Fu-Lin

Director Cheng, Ming-Chieh

DirectorHung Sheng Investment Co., Ltd. Representative: Cheng, Chi-Li

Note 1: The Chairman is provided with 2 cars (monthly rental: NT$110,000) and a driver (monthly salary: NT$63,000). Note 2: The Company's actual severance pay and pension payout for 2016 was allocated from the severance pay and pension payout.


Range of Remuneration

Names of Directors

Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)

The companyCompanies in

the consolidated financial

statementsThe company Companies in the

consolidated

Under NT$ 2,000,000

Shih Tuo Investment Co., Ltd., Kow, Fu-

Lin, Cheng Ming-Chieh, Cheng,

Chi-Li


Lin, Cheng Ming-Chieh, Cheng,

Chi-Li


Lin, Cheng Ming-Chieh,


Lin, Cheng Ming-Chieh,

NT$2,000,001 ~ NT$5,000,000 Cheng, Chi-Li Cheng, Chi-Li

NT$5,000,001 ~ NT$10,000,000 Lian, Tai-Sheng Lian, Tai-Sheng Lian, Tai-Sheng Lian, Tai-Sheng

NT$10,000,001 ~ NT$15,000,000

NT$15,000,001 ~ NT$30,000,000 Chiu, Fu-Sheng Chiu, Fu-Sheng Chiu, Fu-Sheng Chiu, Fu-Sheng

NT$30,000,001~ NT$50,000,000

NT$50,000,001 ~ NT$100,000,000

Over NT$100,000,000

Total 26,192,954 26,912,954 31,016,116 31,736,116

Remuneration of Supervisors Unit: NT$

Title Name

Remuneration Ratio of Total Remuneration (A+B+C) to Net

Income (%)


Supervisors from an Invested Company


Base Compensation (A) Bonus to Supervisors (B) Allowances (C)

The company

Companies in the consolidated financial

statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

Supervisor

Nienshin Investment Co., Ltd. Representative: Yeh, Hui-Ling — — 819,358 819,358 1,080,000 1,800,000 0.75% 1.03% —

Supervisor Lin, Hung-Min

Supervisor Dahe Media Co.,Ltd

Range of Remuneration

Name of Supervisors

Total of (A+B+C)

The company Companies in the consolidated financial statements

Under NT$ 2,000,000 Yeh Hui-Ling, Lin Hung-Min, Dahe Media Co.,Ltd

Yeh Hui-Ling, Lin Hung-Min, Dahe Media Co.,Ltd

NT$2,000,001 ~ NT$5,000,000

NT$5,000,001 ~ NT$10,000,000

NT$10,000,001 ~ NT$15,000,000

NT$15,000,001 ~ NT$30,000,000

NT$30,000,001 ~ NT$50,000,000

NT$50,000,001 ~ NT$100,000,000

Over NT$100,000,000

Total 1,899,358 2,619,358

27


Remuneration of the President and Vice Presidents 　 Unit: NT$

Title Name

Salary(A) Severance Pay (B) Bonuses and Allowances (C) Employee Compensation (D)

Ratio of total compensation (A+B+C+D)

to net income (%)Compensation

Paid to the President and Vice

Presidents from an Invested Company


The company


statements

The company


statements

The company


statements

The companyCompanies in

the consolidated financial statements

The company



Vice Presiden

Cheng, Chi-Li

4,320,000 4,320,000 216,000 216,000 1,480,000 1,480,000 800,000 — 800,000 — 0.43% 0.43% —Vice

PresidenGuo, Zong-Xiong

Note 1: VP is provided with a car (monthly rental: NT$28,500) and a driver (monthly salary: NT$36,000).Note 2: The Company's actual severance pay and pension payout for 2016 was appropriated from the severance and pension fund.

Range of RemunerationName of President and Vice Presidents


Under NT$ 2,000,000

NT$2,000,001 ~ NT$5,000,000 Cheng Chi-Li,Guo Zong-Xiong

Cheng Chi-Li,Guo Zong-Xiong

NT$5,000,001 ~ NT$10,000,000

NT$10,000,001 ~ NT$15,000,000

NT$15,000,001 ~ NT$30,000,000

NT$30,000,001 ~ NT$50,000,000

NT$50,000,001 ~ NT$100,000,000

Over NT$100,000,000

Total 6,816,000 6,816,000


Title Name

Employee Compensation- in Stock

(Fair Market Value)

Employee Compensation

- in CashTotal

Ratio of Total Amount to Net Income

(%)

Executive Officers

CEO Chiu,Fu-Sheng

0 11,225,000 11,225,000 0.67%

Vice CEO Lian, Tai-Sheng

Vice President Cheng Chi-Li

Vice President Guo, Zong-Xiong

Special assistant, Board of Directors Office Lin,Chien-chih

Assistant Vice President, Public Affairs Department Lan, Chi-Jen

Manager, Public Affairs Department Smart Chiang

Manager, Public Affairs Department Edward Wu

Manager, Planning Department. Mao, Zhao-Kai

Assistant Vice President, Accounting Section, Finance Department Chen, Wan-Ling

Assistant Vice President, Board of Directors Office Rocky Lo

Manager, Administration Section of General Administration Department Ben Lin

Manager, Finance Section of General Administration Department Peng, Hua-Hui

(4) Comparison of Remuneration for Directors, Supervisors, President and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, President and Vice Presidents

The ratio of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the two most recent fiscal years to directors, supervisors, president and vice presidents of the Company, to the net income.

YearTitle

Ratio of total remuneration to net income (%)


2016 2015 2016 2015

Director 12.30 2.30 12.59 2.34

Supervisor 0.75 0.41 1.03 0.44

President, vice president 0.43 0.43 0.43 0.43

A. Remuneration to directors and supervisors includes two parts: Fixed transportation expenses associated with attending board meetings as well as remuneration to directors and supervisors. Transportation expenses are determined based on industry standards. Profit distribution as remuneration for directors and supervisors is determined by the Company's Articles of Incorporation as follows: at the time of allocating surplus profits (if any), as much as 2% of the surplus may be allocated as remuneration to directors and supervisors, with the exact percentage of the current year subject to Board approval within the range specified above. After the operating performance for the year and the extent of participation and contribution of the directors and supervisors have been taken into consideration, the Remuneration Committee will make a recommendation to the Board, which in turn will submit the proposal to the Annual Shareholders' Meeting for approval before payments for the remuneration may be made, and no risks are expected in the future.

B. Remuneration to President and VP includes salary, bonus and employee dividend, which are determined by the level of responsibilities of the position and performance.

29


C. The percentage of remuneration to directors and supervisors for 2016 is the same as that of 2015. For 2016, remuneration to directors, supervisors, President and vice presidents is higher than that of 2015 in terms of the proportion to net profit mainly due to the proposed revision to the Articles of Incorporation of the Company approved by the board of directors (pending submission at the shareholders' meeting) in accordance with the amendment to the Company Act promulgated on May 20, 2015. One percent of profit shall each be allocated as remuneration to directors and supervisors as well as employee compensation according to the profit of the current year, after deduction of cumulative losses.

3. Implementation of Corporate Governance (1) Board of Directors

A total of 13 (A) meetings of the Board of Directors were held in 2016. The attendance of director and supervisor were as follows:

Title Name Attendance in person( Ｂ )

Attendance by proxy

Attendance rate (%)

【Ｂ / Ａ】Notes

Chairman and Director

Hung Sheng Investment Co., Ltd. Representative: Chiu, Fu-Sheng

13 0 100

Vice Chairman and Director Lian, Tai-Sheng 0 13 0

A t t ended t he f o l l ow ing boa rd meetings by proxy: 17th term 20rd board meeting on 01/20/201617th term 21th board meeting on 02/17/201617th term 22th board meeting on 03/30/201617th term 23th board meeting on 04/13/201617th term 24th board meeting on 04/25/201617th term 25th board meeting on 05/30/201617th term 26rd board meeting on 06/23/201617th term 27th board meeting on 07/29/201617th term 28th board meeting on 08/25/201617th term 29th board meeting on 09/30/201617th term 30th board meeting on 10/12/201617th term 31th board meeting on 11/14/201617th term 32rd board meeting on 12/22/2016A=13

Director Hung Sheng Investment Co., Ltd. Representative: Kow, Fu-Lin

12 1 92.3A t t ended t he f o l l ow ing boa rd meetings by proxy: 17th term 28th board meeting on 08/25/2016

Director Hung Sheng Investment Co., Ltd. Representative: Cheng, Chi-Li

13 0 100

Director Cheng, Ming-Chieh 12 1 92.3A t t ended t he f o l l ow ing boa rd meetings by proxy: 17th term 27th board meeting on 07/29/2016

Director Shih Tuo Investment Co., Ltd. 13 0 100

Other mentionable items:1. If any of the following circumstances occur,, the dates of the meetings, sessions, contents of motion, all independent directors’ opinions

and the company’s response should be specified: (1) Matters referred to in Article 14-3 of the Securities and Exchange Act. (2) Other matters involving objections or expressed reservations by independent directors that were recorded or stated in writing that

require a resolution by the board of directors.2. If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and

voting should be specified: None3. Measures taken to strengthen the functionality of the board: The Board of Directors has established an Audit Committee and a

Remuneration Committee to assist the board in carrying out its various duties.


(2) Status of Audit Committee or Attendance of Supervisors for Board Meeting

A. The Company has not established an Audit Committee.

B. Attendance of supervisors for board meeting: A total of 13 (A) meetings of the board of directors were held in 2016. The attendance of supervisors was as follows:

Title Name Attendance in person (B) By proxy

Attendance rate (%)

[B/A]Notes

Supervisor Nienshin Investment Co., Ltd. Representative: Yeh, Hui-Ling

13 0 100

Supervisor Lin, Hung-Min 13 0 100

Supervisor Dahe Media Co.,Ltd 13 0 100

(3) Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

Evaluation Item

Implementation Status 1 Deviations from “the Corporate Governance Best-Practice

Principles for TWSE/

TPEx Listed Companies” and

Reasons

Yes No Abstract Illustration

1. Does the company establish and disclose the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?

ü The Company has been valuing shareholders’ equity. Although there is no Corporate Governance Code of Conduct in place at present but the internal control system and individual guidelines have encompassed the spirit of corporate governance. The compilation will be considered taking into account circumstances in the future.

None

2. Shareholding structure & shareholders’ rights

(1) Does the company establish an internal operating procedure to deal with shareholders’ suggestions, doubts, disputes and litigations, and implement based on the procedure?

(2) Does the company possess the list of its major shareholders as well as the ultimate owners of those shares?

(3) Does the company establish and execute the risk management and firewall system within its conglomerate structure?

(4) Does the company establish internal rules against insiders trading with undisclosed information?

ü

ü

ü

ü

(1) The Company has a spokesperson to take shareholders’ advice address their concern at any time. Although there are no related operating guidelines in place, there are specialists to address shareholders’ advice and issues with related control available.

(2) The Company gains access to the list of major shareholders and ultimate controllers of major shareholders through the register of shareholders provided by the shareholder services agency.

(3) In order to maintain a sound financial relationship with affiliated enterprises, the Company formulated its own "Guidelines for conducting financial business with affiliated enterprises" in accordance with Article 17 of the Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies, the purpose of which is to achieve risk control and the establishment of firewalls.

(4) The Company already included “prevention against insider trading” in its internal control system entitled as required by law and periodically communicates laws and regulations to related staff.

None

None

None

None

3. Composition and Responsibilities of the Board of Directors

(1) Does the Board develop and implement a diversified policy for the composition of its members?

(2) Does the company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee?

(3) Does the company establish a standard to measure the performance of the Board, and implement it annually?

ü

ü

ü

(1) Members of the Board of Directors include professionals in different fields, communication, engineering, finance, and accounting, etc. Not only professional capabilities of the members but also their moral behavior and leadership are important considerations.

(2) Besides the Remuneration Committee, the Company holds labor management meetings and has other functional committees such as Labor Safety and Health Group, Sexual Harassment Prevention Committee, and Employee Benefits Committee in place.

(3) There are no Board of Directors Performance Assessment Guidelines available at the Company but members’ attendance in meeting is being evaluated according to the names and number of members present in, on leave of absence, or absent from the meetings applying the Board of Directors Meeting Rules.

None

None

None

31


Evaluation Item




Reasons


(4) Does the company regularly evaluate the independence of CPAs?

ü (4) The Company has appointed PwC Taiwan to inspect and certify financial statements and the Board of Directors precisely follows the requirements in Article 29 of the Corporate Governance Best Practice Principles for TWSE/GTSM Listed Companies when evaluating the independence of hired CPAs each year. The Company’s CPAs have not been remaining the same without change for seven consecutive years and are not found with discipline or punishment records in the past five years according to the data released by the Securities and Futures Bureau, Financial Supervisory Commission. In addition, they are formally and substantially impartial and express their opinions in a just way in accordance with the Communique 10 of the Code of Professional Ethics for CPAs.

None

4. Does the company set up a corporate governance unit or appoint personnel responsible for corporate governance matters (including but not limited to providing information for directors and supervisors to perform their functions, handling work related to meetings of the board of directors and the shareholders' meetings, filing company registration and changes to company registration, and producing minutes of board meetings and shareholders’ meetings)?

ü The Company's General Administrative Department and responsible departments for related business operations administer Shareholders' Meetings and Board of Directors meetings in accordance with the actual situation. Board Directors and Supervisors implement business operation affairs and administer related corporate governance operations such as company incorporation and changes in incorporation registration.

None

5. Does the company establish a communication channel and build a designated section on its website for stakeholders (including but not limited to shareholders, employees, customers, and suppliers), as well as handle all the issues they care for in terms of corporate social responsibilities?

ü The Company maintains an effective communication and coordination channel, through dedicated departments, with various parties of interest, including banks, other debtors, proprietors, vendors, consumers and company employees, and the Company provides sufficient information and respects, maintains and protects the legitimate interests of these entities. The Company also has a stakeholders’ only section on its website.

None

6. Does the company appoint a professional shareholder service agency to deal with shareholder affairs?

ü The Company designates SinoPac Securities Inc. to deal with shareholder affairs.

None

7. Information Disclosure (1) Does the company have a

corporate website to disclose both financial standings and the status of corporate governance?

(2) Does the company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)?

ü

ü

(1) The Company has created a website in both Chinese and English at: www.tldc.com.tw for the dissemination of information such as financial business and corporate governance.

(2) Departments collect relevant information in accordance with their authorities and disclose it in the Market Observation Post System, corporate website and annual report; the Company has also designated a spokesperson and an acting spokesperson. There is also an Investor Relations section on the corporate website, providing information on the Company's business operation status, briefings given at institutional investor presentations, shareholders Q&A, and the status of corporate governance operations.

None

None

8. Is there any other important information to facilitate a better understanding of the company’s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors and supervisors)?

ü (1) E mployee rights and interests: The Company recruits talents via better remuneration and work environment, and arranges self-education and training opportunities for employees. The Company also takes measures to ensure the rights of employees guaranteed by the Labor Standards Act.

(2) Employee wellness: The Company cares about employees' physical and psychological well-being, and supports various activities associated with employee welfare, such as travel subsidy and club subsidy. With the establishment of an employee welfare committee, the labor-management meeting and the sexual harassment prevention committee, the Company maintains a good relationship with the employees.

None

None


Evaluation Item




Reasons


(3) Investor relations: The Company has engaged a professional shareholder services agency and established a spokesperson system as the point of contact between the Company and shareholders. With respect to information transparency, the "Investor Services" section on the Company's website provides shareholders with the Company's operating status and other business information to provide shareholders and investors with the most up-to-date and effective advisory services. These channels serve as an important bridge for communication between the Company and investors.

(4) Supplier relations: The Company's "Guidelines for engaging technical services organizations to provide technical services" and "Guidelines for construction project tendering" are established to provide a set of criteria for commissioning technical services and construction project tendering, the purpose of which is to create maximum value for the Company and to maintain good relations with suppliers.

(5) Stakeholder rights: The Company maintains an effective communication channel with banks, other debtors, employees, consumers, suppliers, the community and parties of interest, and the Company respects, maintains and protects their legitimate interests. The Company also provides sufficient information to banks and other debtors so that they will be able to make judgment and determine the course of action regarding the Company’s operation and financial position. Meanwhile, the “Stakeholders ＂ section is set up on the Company’s website to provide stakeholders with timely, rapid, and effective consultation services.

(6) Directors and supervisors' training records: The directors and supervisors of the Company have the appropriate professional background and practical management experience. During the current fiscal year, Cheng Ming-Chieh and Yu Ling-Chang participated in seminars on "Equity Planning of Publicly Listed Companies & Board Reelection Procedures" and "Advanced Practical Seminar for Board of Directors and Supervisors(including independent)--How Directors and Supervisors May Avoid Insider Trading" for a total of 6 hours. Cheng Chi-Li attended the 3-hour seminar on "Corporate Governance & Operational Practice of Independent Directors." Kow Fu-Lin participated in seminars entitled "Related Legal Responsibilities of Company Financial Forecast: Market, Law & Suggestions", "Equity Planning of Publicly Listed Companies & Board Reelection Procedures", "Advanced Practical Seminar for Board of Directors and Supervisors (including independent)--How Directors and Supervisors May Avoid Insider Trading", "Advanced Practical Seminar for Board of Directors and Supervisors (including independent)--Strategy & Key Performance Index", "Advanced Practical Seminar for Board of Directors and Supervisors (including independent)--Directors /Supervisors & Individual Income Tax Affairs Analysis" for a total of 15 hours.

(7) The implementation of risk management policies and risk evaluation measures: The Company is neither a securities firm, an investment trust or consulting enterprise, nor a futures commission merchant, so this is not applicable.

None.

None.

None.

None.

None.

33


Evaluation Item




Reasons


ü (8) The implementation of customer relations policies: A. The Company has designated dedicated sections on

the corporate website for various services provided and contact e-mail information, providing customers with prompt, convenient and comprehensive business information and access to grievance channel. In addition to handling cases, follow-ups and complaints about services rendered, the Company will also use the cases as materials for employee training purposes.

B. In compliance with the competent authority's requirements on "standard contract," the Company has clearly established the terms of the contract. Customers are informed of all fees with which they are charged and any use of customer information by outsourced operations when they enter into the agreement with the Company.

(9) Purchasing insurance for directors and supervisors; The Company submitted the proposal for obtaining insurance coverage for director and supervisor liability at the 2009 annual shareholders' and received the necessary approval. The Board of Directors has been authorized to follow up on the purchase of the approved insurance coverage.

(10) Major internal information management operating procedures: Following public announcement of material information in compliance with the law, the Company shall inform all presidents and directors of the matter immediately via short messages.

None.

9. Please explain the improvements which have been made in accordance with the results of the Corporate Governance Evaluation System released by the Corporate Governance Center, Taiwan Stock Exchange, and provide the priority enhancement measures.

The Company has disclosed improved measures for the implementation of the Annual Shareholders' Meeting, units concurrently responsible for corporate social responsibility, employee benefit measures and stakeholder contact in its annual operating report and official website respectively in 2017.

(4) Composition, Responsibilities and Operations of the Remuneration Committee

A. Professional Qualifications and Independence Analysis of Remuneration Committee Members

Title

Criteria

Name

Meets One of the Following Professional Qualification Requirements, Together with at

Least Five Years’ Work ExperienceIndependence Criteria (Note)

Number of Other Public Companies in Which the Individual is Concurrently Serving as an Remuneration

Committee Member

Remarks

An instructor or higher

position in a department

of commerce, law, finance, accounting,

or other academic

department related to

the business needs of the

Company in a public or private

junior college, college or university

A judge, public prosecutor,

attorney, Certified Public

Accountant, or other

professional or technical

specialist who has passed a national

examination and been awarded a

certificate in a profession necessary for the business

of the Company

Has work experience

in the areas of

commerce, law,

finance, or accounting, or otherwise necessary

for the business

of the Company

1 2 3 4 5 6 7 8

Others Hsieh, Chin-Ho ü ü ü ü ü ü ü ü ü

Others Christina Liu ü ü ü ü ü ü ü ü ü

Others Lee, Hong-yuan ü ü ü ü ü ü ü ü ü


1. Not an employee of the Company or any of its affiliates.

2. Not a director or supervisor of affiliated companies. Not applicable in cases where the person is an independent director of the parent company, or any subsidiary as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.

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 1% or more of the total number of outstanding shares of the Company, or ranking in the top 10 in holdings.

4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three sub-paragraphs.

5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company, or who holds shares ranking in the top five holdings.

6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution which has a financial or business relationship with the Company.

7. Not a professional individual, who is 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 a person of any conditions defined in Article 30 of the Company Law.

B. Attendance of Members at Remuneration Committee Meetings

There are 3 members in the Remuneration Committee. A total of 6 (A) Remuneration Committee meetings were held in the previous period. The attendance record of the Remuneration Committee members was as follows:

Title Name Attendance in Person(B) By Proxy Attendance Rate

(%)【Ｂ / Ａ】 Remarks

Convener Hsieh, Chin-Ho 6 0 100

CommitteeMember Christina Liu 6 0 100

CommitteeMember Lee, Hong-yuan 6 0 100

Other mentionable items: None.

35


(5) Corporate Social Responsibility

Evaluation Item

Implementation Status 1 Deviations from “the

Corporate Social Responsibility Best-Practice



Reasons

Yes No Abstract Explanation 2

1. Corporate Governance Implementation

(1) Does the company declare its corporate social responsibility policy and examine the results of the implementation?

(2) Does the company provide educational training on corporate social responsibility on a regular basis?

(3) Does the company establish exclusively (or concurrently) dedicated first-line managers authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board?

(4) Does the company declare a reasonable salary remuneration policy, and integrate the employee performance appraisal system with its corporate social responsibility policy, as well as establish an effective reward and disciplinary system?

ü

ü

ü

ü (1) A lthough a corporate social responsibility policy or system is yet to be established, the Company's corporate philosophy is based on technological innovation, cultural creativity and sustainability of the environment. Concrete actions are taken to fulfill its responsibility to society and to give back to the community. Land is given new value, an ideal way of life is being created, and harmony and mutual prosperity with the environment is emphasized. Related policies will be established in the future depending on the circumstances.

(2) The Company holds multiple activities on corporate social responsibilities each year to communicate the Company’s goals in implementing its corporate culture.

(3) The Public Affairs Department is charged with the responsibility to implement corporate social responsibilities and the higher-ranking management will periodically report to the Board of Directors on the implementation status.

(4) The Remuneration Committee of the Company has established the “Compensation Management Guidelines” and the Company inspects the performance of employees each year. To meet the actual demand, performance inspections will be reinforced and combined with the Company’s corporate social responsibilities in the future.

None

None

None

None

2. Sustainable Environment Development

(1) Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment?

(2) Does the company establish proper environmental management systems based on the characteristics of their industries?

ü

ü

(1) The Company leaves no stone unturned to promote the cherishing of resources and energy conservation measures, in addition to responding to the government's environmental protection policies and the call to reduce carbon emission and love the Earth through the enforcement of waste recycling & sorting, reducing paper usage, adopting energy-efficient lighting equipment, using environmentally-friendly packaging and sewage treatment, etc. The goal is to reduce the burden and impact on the environment, cultivate environmental-friendly habits, lifestyles and practices, in order to reduce the amount of garbage and recycle resources.

(2) The Company's Kinmen Wind Lion Plaza is the first building to be awarded with the Golden Smart Building logo under the four categories of bazaar/public congregation/warehouse/office. Aside from taking the lead to introduce advanced imported energy-saving, carbon-reducing and smart-sensing architectural designs, which are applied to control energy consumption such as lighting and air-conditioning on a daily basis, it is also fitted with a solar power-generating system, having generated 632,300kWh in accumulated electricity to reduce carbon emission by 388, 308.

As part of its strategy to respond to energy conservation, carbon reduction as well as reduction in greenhouse gases, the Company makes it a rule to

align with international LEED green building designs and credentials when planning for various development bases. The Company seeks to reduce energy consumption for development projects by aggressively introducing state-of-the-art know-how, building materials and methods, as trees are being continuously planted over expansive stretches of land at various bases. Thanks to green forests and cleaner environment, our buildings at Hualien and Kinmen combine to save more than 1,922 metric tons in carbon emission and 95,497,500 liters in water usage every year. Office temperature is controlled at 26 degrees Celsius. All of these measures are meant to echo with the government's policies and fulfill our duty to protect the environment and love the Earth.

None

None


Evaluation Item





Reasons


(3) Does the company monitor the impact of climate change on its operations and conduct greenhouse gas inspections, as well as establish company strategies for energy conservation and carbon reduction?

ü (3) All of the building projects and designs rolled out by the Company are environmentally-friendly green buildings. For example, the Kinmen plaza takes full advantage of the solar voltaic energy system installed at the rooftop to start wholesaling electricity. Inside the plaza, LED lighting is used extensively to effectively achieve source development as well as expenditure reduction in terms of energy.

None

3. Preserving Public Welfare (1) Does the company

formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights?

(2) Has the company set up an employee hotline or grievance mechanism to handle complaints with appropriate solutions?

(3) Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis?

ü (1) (2)(3) The Company has always treated employees in good faith and protected the legitimate rights and interests of employees in accordance with the requirements of the Labor Standards Act. The Company also abides by relevant labor regulations by establishing a "Labor-Management Committee," "Occupational Safety and Health Committee," "Sexual Harassment Prevention Committee" and "Employee Welfare Committee." The Company also organizes medical checkup and fire drills multiple times each year and maintains a healthy communication channel between management and employees.

None

(4) Does the company setup a communication channel with employees on a regular basis, as well as reasonably inform employees of any significant changes in operations that may have an impact on them?

(5) Does the company provide its employees with career development and training sessions?

(6) Does the company establish any consumer protection mechanisms and appealing procedures regarding research development, purchasing, producing, operating and service?

(7) Does the company advertise and label its goods and services according to relevant regulations and international standards?

(8) Does the company evaluate the records of suppliers’ impact on the environment and society before taking on business partnerships?

(9) Do the contracts between the company and its major suppliers include termination clauses which come into force once the suppliers breach the corporate social responsibility policy and cause appreciable impact on the environment and society?

ü

ü

ü

ü

ü

ü

(4) The Company has a "labor-management meeting" in place to provide a venue for dialogue between labor and management.

(5) The Company has annual educational training plans and plans intensive development training courses to help boost employees’ professional skills that meet the development demand taking into account the organizational strategies, work instructions, and personal performance and developments. A total of 109 such in-service training courses were held in 2016.

(6) The Company has a responsible customer service unit to address related issues of customers and discuss improvements and deficiencies accordingly in order to increase quality of products and customer satisfaction.

(7) The Company’s products and services are in compliance with applicable laws, regulations, and international guidelines.

(8) The Company has established the Operating Guidelines for Authorizing Technical Labor Providers with Technical Services and the Engineering Tender Operating Guidelines in place to govern authorization over technical services and engineering outsourcing as well as supplier evaluation.

(9) The contracts that the Company enters into with its suppliers include applicable restrictive and dismissal terms and conditions. If a supplier is found with circumstances with significantly unfavorable impacts on society, the Company may terminate the contract.

None

None

None

None

None

None

4. Enhancing Information Disclosure(1) Does the company disclose relevant

and reliable information regarding its corporate social responsibility on its website and the Market Observation Post System (MOPS)?

ü The Company disseminates relevant information and reports to the public through its website and public information observatory sites.

None

37


Evaluation Item





Reasons


5. If the Company has established the corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”, please describe any discrepancy between the Principles and their implementation:

The Company has not established corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/ TPEx Listed Companies”.。

6. Other important information to facilitate better understanding of the company´s corporate social responsibility practices： Jan. 2016 Sponsored the Hualien Women's Soccer Team, actively promoting fundamental developments for the sport of soccer Feb. 2016 Engaged in industrial-academic cooperation with Juang Jing Vocational High School, providing venues for vocational training

and internship while planning to organize and establish Hualien Bilingual Experimental High School to improve vocational skills and capabilities for students.

Mar. 2016 Held the Xinpu "Farmer for One Day" around-the-year planting campaign, promoting the awareness of organic planting and food education.

Apr. 2016 Held the "Hualien Hueilan Cup Super-Marathon" to foster international sports competitions in Hualien while promoting local economy.

May 2016 Held the "Huilanwan Sunrise Festival" to carry on the traditional spirit of the Austronesian culture; sponsored local grade school soccer activities to promote healthy lifestyles.

June 2016 Held the "Enjoy Taiwanese Flavors - 2016 Joint Promotional Exhibition for Taiwan's Agricultural & Specialty Products" to raise the profile of Taiwan's agricultural products by marketing specialty agricultural products from Taiwan across the Taiwan Strait via exhibitions and sales.

July 2016 Relocated nearly one hundred displaced peacocks in Nantou to the newly established "Hundred Peacock Garden" at the Hsinpu Eco Community for the sake of ecological preservation and restoration.

Aug. 2016 Conducted the "Draw a Painting for My Tribesmen and Tribe" painting and pottery art creation contest for aboriginal teenagers in Hualien, in order to encourage aboriginal children to show their artistic talent and preserve the aboriginal culture.

Sep. 2016 Organized the year-end creative marketplace and the "Ultra Marathon EXPO" to integrate the international competition with local marketplaces in an attempt to raise the awareness of Hualien internationally while promoting tourism in Hualien.

7. A clear statement shall be made below if the corporate social responsibility reports were verified by external certification institutions:None.

(6) Ethical Corporate Management

Evaluation Item

Implementation Status 1 Deviations from “the Ethical Corporate

Management Best-Practice



Reasons


1. Establishment of ethical corporate management policies and programs

(1) Does the company declare its ethical corporate management policies and procedures in its guidelines and external documents, as well as the commitment from its board to implement the policies?

(2) Does the company establish policies to prevent unethical conduct with clear statements regarding relevant procedures, guidelines of conduct, punishment for violation, rules of appeal, and the commitment to implement the policies?

(3) Does the company establish appropriate precautions against high-potential unethical conducts or listed activities stated in Article 2, Paragraph 7 of the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies?

ü

ü

(1) (2)The Company's "Ethical Corporate Management Guidelines", "Work Rules", "Service Undertaking", and "Internal Control Systems" all clearly stipulate guidelines for recusal in case of conflict of interest, unethical conduct prohibited, confidentiality obligations, ethical business activities, and requirements for protecting and properly upholding Company reputation, violation discipline and complaint system, and regulatory compliance. Members of the Board of Directors and the Company's staff all duly enforce said regulations to ensure honest operation and honor the principle of good faith.

(3) Operations of the Company are open, fair, transparent, and not violating its social responsibility. The Company’s employees do not accept unjustified giveaways in order to avoid undermining the Company’s rights. Auditors inspect high-risk operations from time to time and report to the Board of Directors as soon as they discover any abnormality.

None

None


Evaluation Item

Implementation Status 1 Deviations from “the Ethical Corporate

Management Best-Practice



Reasons


2. Fulfill operations integrity policy (1) Does the company evaluate

business partners’ ethical records and include ethics-related clauses in business contracts?

(2) Does the company establish an exclusively (or concurrently) dedicated unit supervised by the Board to be in charge of corporate integrity?

(3) Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it?

(4) Has the company established effective systems for both accounting and internal control to facilitate ethical corporate management, and are they audited by either internal auditors or CPAs on a regular basis?

(5) Does the company regularly hold internal and external educational trainings on operational integrity?

ü

ü

ü

ü

ü

(1) All of the Company’s business activities are fair and transparent. To avoid dealing or entering into contracts with parties with prior record of unethical conduct, the Company may terminate or rescind a contract at any time once a counterparty is found to be involved in unethical business practice.

(2) To ensure sound ethical corporate management, the Board Office is responsible for establishing and supervising the implementation of ethical corporate management policies and their countermeasures, and for reporting to the Board on a regular basis.

(3) The Company's "Ethical Corporate Management Guidelines" stipulate that: Suggestions and complaints regarding personal rights or corporate management may be submitted in accordance with Company regulations.

(4) The Company's accounting system was designed and established in reference to the Regulations Governing the Preparation of Financial Reports by Securities Issuers as well as the Company’s overall operational activities, and provides the basis for accounting treatment. The internal control systems were established in consideration of the overall operational activities of the Company and reviewed whenever necessary in response to changes in the internal and external environments. The internal control systems are documented and observed following approval by the Board of Directors. Internal audits are carried out in accordance with the annual audit plan passed by the Board of Directors.

(5) The Company has been practicing honest operations in daily activities and communicates regulations governing honest operations from time to time each year.

None

None

None

None

None

3. Operation of the integrity channel (1) Does the company establish

both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up?

(2) Does the company establish standard operating procedures for confidential reporting on investigating accusation cases?

(3) Does the company provide proper whistleblower protection?

ü

ü

ü

(1) The Company already specifies applicable self-discipline terms and conditions in its employees’ letter of undertaking. Employees can file complaints or submit suggestions by phone or mail following the Company’s procedures and related departments will be assigned to help them.

(2) For received reports and subsequent investigations, the Company will handle them confidentially and carefully.

(3) The Company will absolutely keep the name of the complainant and details of the complaint confidential and handle them properly.

None

None

None

4. Strengthening information disclosure (1) Does the company disclose its

ethical corporate management policies and the results of its implementation on the company’s website and MOPS?

ü The Company discloses its honest operation status on its website.

None

5. If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation.

There have been no differences.

6. Other important information to facilitate a better understanding of the company’s ethical corporate management policies (e.g., review and amend its policies).

None.

(7) Corporate Governance Guidelines and Regulations Please refer to the Company’s website at www.tldc.com.tw

(8) Other Important Information Regarding Corporate Governance Please refer to page 30

(9) Internal Control Systems

39


Taiwan Land Development Corporation Statement of Declaration on Internal Control System

Date: February 21,2017 　　In 2016 the Company conducted an internal audit in accordance with its Internal Control Regulation and hereby declares as follows: I. The Company acknowledges and understands that the establishment, implementation

and maintenance of the internal control system are the responsibility of the Board and managerial officers, and that the Company has already established such a system. The purpose is to provide reasonable assurance to the effectiveness and efficiency of business operations (including profitability, performance and security of assets), reliability of financial reporting and compliance with relevant regulatory requirements.

II. There are inherent limitations to even the most well designed internal control system. As such, an effective internal control system can only reasonably ensure the achievement of the aforementioned goals. Moreover, the operating environment and situation may change, impacting the effectiveness of the internal control system. The internal control system of the Company features a self-monitoring mechanism. Once identified, any deficiency will be rectified immediately.

III. The Company determines the effectiveness of the internal control system in design and implementation in accordance with the "Regulations Governing Establishment of Internal Control Systems by Public Companies" (hereinafter referred to as "the Regulations").The Regulations are instituted for judging the effectiveness of the design and implementation of the internal control system. There are five components of effective internal control as specified in the Regulations with which the procedure for effective internal control is measured, namely: (1) Control Environment, (2) Risk Evaluation, (3) Control Operation, (4) Information and Communication, and (5) Monitoring. Each of the elements in turn contains certain audit items. Refer to the Regulations for details.

IV. The Company has adopted the aforementioned internal control system for an internal audit on the effectiveness of the design and enforcement of the internal control system.

V. Based on the aforementioned audit findings, the Company holds that it has reasonably preserved the achievement of the aforementioned with the internal control system as of December 31, 2016 (including the monitoring over the subsidiaries), including the effectiveness and efficiency in operation, reliability in financial reporting and compliance with relevant regulatory requirements, and that the design and enforcement of internal control are effective.

VI. This statement shall form an integral part of the annual report and prospectus of the company and will be publicly announced. If any fraudulent information, concealment or unlawful practices are discovered in the content of the aforementioned information, the Company shall be held liable under Article 20, Article 32, Article 171 and Article 174 of the Securities and Exchange Act.

VII. This statement of declaration was approved by the Board on February 21,2017 in the presence of 6 directors, who concurred unanimously.

Taiwan Land Development Corporation

Chairman: Signature:

President: Signature:


(10)Major Resolutions of Shareholders’ Meeting and Board Meetings

A. Important resolutions and their implementation at the Annual Shareholders' Meeting in 2016

The Company held one Annual Shareholders' Meeting in 2016 as of the publishing date of the annual report. The Company's Annual Shareholders' Meeting for 2016 was held on June 29 2016. Resolutions approved during the meeting and their implementation are as follows:

(a) Discussion of the resolution for amendment to the Company's Articles of Incorporation The resolution was approved and changes have been registered with the Ministry of Economic Affairs within 15 days in accordance with laws and regulations.

(b) Ratification of the Company's operational financial statements for 2015. The resolution was approved and the statements have been submitted to the regulatory organization for memo and declaration of promulgation in accordance with laws and regulations.

(c) Ratification of the Company's 2015 earnings distribution proposal: The resolution was approved and stock and cash dividends were distributed on Sep. 30 2016 (for a total of NT$391,368,054)

(d) Discussion of earnings available for distribution in 2015 and the conversion of capital surplus into capital increase via the issuance of new shares: The resolution was approved and has been implemented.

(e) Proposal to approve the resolution of the Company's private placement for cash capital increase with the issuance of new shares: The resolution was approved. The resolution automatically became nullified as it had not been completed before the deadline expired.

B. Important resolutions adopted at the 20th meeting of the 17th Board (01/20/2016)

(a) Amendment to the Company's Articles of Incorporation: Approved.

(b) Review of the meeting minutes from the 4th meeting of the Company's 2nd Remuneration Committee: Approved.

(c) 15th buyback of the Company's shares: Approved.

(d) Proposal to transfer the Company's treasury shares to employees as an incentive to improve cohesiveness: Approved.

C. Important resolutions adopted at the 21st meeting of the 17th Board (02/17/2016)

(a) Transfer of the Company's treasury shares to employees as an incentive: Approved.

(b) Review of the Company's individual financial reports, consolidated financial report and consolidated business reports of affiliated companies for 2015: Approved.

D. Important resolutions adopted at the 22nd meeting of the 17th Board (03/30/2016)

(a) Issuance of the first secured common corporate bonds in 2016: Approved.

(b) The Company's loan to its affiliate Taiwan Innovation Development Corporation: Approved.

(c) Details of the 2016 Annual Shareholders' Meeting: Approved.

(d) Transfer of the Company's treasury shares to employees as an incentive to improve cohesiveness: Approved.

(e) Submission of one copy of the 2015 Business Report: Approved.

E. Important resolutions adopted at the 23rd meeting of the 17th Board (04/13/2016)

(a) Private placement for cash with the issuance of new shares: Approved.

F. Important resolutions adopted at the 24th meeting of the 17th Board (04/25/2016)

(a) The Company's earnings available for distribution in 2015 and the conversion of capital surplus into capital increase via the issuance of new shares: Approved.

(b) The Company's 2015 earnings distribution proposal: Approved.

(c) The Company's subscription to preferred shares A issued by its affiliate Taiwan Innovation Development Corporation: Approved.

41


G. Important resolutions adopted at the 25th meeting of the 17th Board (05/30/2016)

(a) 16th buyback of the Company's shares: Approved.

H. Important resolutions adopted at the 26th meeting of the 17th Board (06/23/2016)

(a) The Company's affiliate Taiwan Industrial & Commercial Development Corporation requests a loan of NT$50 million for operational needs, in which the Company is the joint and severable guarantor: Approved.

I. Important resolutions adopted at the 27th meeting of the 17th Board (07/29/2016)

(a) The amendment for the amount of bonus shares to the Company's proposal for earnings available for distribution in 2015 and the conversion of capital surplus into capital increase via the issuance of new shares: Approved.

(b) 17th buyback of the Company's shares: Approved.

(c) The Company's disposal of land parcel number 1054 of the Lian Wu section in the East District of Taichung City: Approved.

(d) The Company's donation of land parcel numbers 236 and 242-1 of the Bao Zheng section in Xinpu Township, Hsinchu County: Approved.

J. Important resolutions adopted at the 28th meeting of the 17th Board (08/25/2016)

(a) Baseline date for ex-rights and ex-dividends and payment date of shareholders' cash bonus, employees' bonus, and remunerations for directors and supervisors: Approved.

K. Important resolutions adopted at the 29th meeting of the 17th Board (09/30/2016)

(a) Meeting minutes from the 5th meeting of the 2nd Remuneration Committee: Approved.

L. Important resolutions adopted at the 30th meeting of the 17th Board (10/12/2016)

(a) Issuance of the second secured common corporate bonds in 2016: Approved.

N. Important resolutions adopted at the 31st meeting of the 17th Board (11/14/2016)

(a) Issuance of the third secured common corporate bonds in 2016: Approved.

(b) The Company's affiliate Wind Lion Plaza Corporation requests a loan of NT$50 million for operational needs, in which the Company is the joint and severable guarantor: Approved.

M. Important resolutions adopted at the 32nd meeting of the 17th Board (12/22/2016)

(a) 18th buyback of the Company's shares: Approved.

(b) The Company's loan for cash capital increase to its affiliate Taiwan Innovation Development Corporation: Approved.

(c) Submission of the drafts for the Company's Corporate Governance Practices & Guidelines, Corporate Social Responsibility Practices & Guidelines, Integrity Management Operating Procedures and Code of Conduct Guidelines: Approved.

O. Important resolutions adopted at the 34th meeting of the 17th Board (02/21/2017)

(a) Transfer of the Company's treasury shares to employees as an incentive : Approved.


P. Important resolutions adopted at the 35th meeting of the 17th Board (03/23/2017)

(a) Transfer of the Company's treasury shares to employees as an incentive : Approved.

(b) Submission of the Company's proposal to convene the 2017 Annual Shareholders' Meeting: Approved.

(c) Submission of amendment to the Company's Articles of Incorporation: Approved.

(d) The Company's proposal to re-elect all 9 Board of Directors (including three Independent Directors): Approved.


(e) Submission of amendment to the Company's Rules Governing the Election of Directors and Supervisors: Approved.

(f) Amendment to the Company's Procedural Rules of Shareholders' Meetings: Approved.

(g) The Company's proposal of private placement for cash capital increase with the issuance of new shares: Approved.

(h) Submission of the Company's individual financial reports, consolidated financial report and consolidated business reports of affiliated companies for 2016: Approved.

Q. Important resolutions adopted at the 36th meeting of the 17th Board (04/20/2017)

(a) 2016 earnings distribution proposal: Approved.


R. Important resolutions adopted at the 37th meeting of the 17th Board (05/03/2017)

(a) Amendment to the Company's Procedure for Acquisition or Disposal of Assets: Approved.

(b) Amendment to the Company's Procedure for Lending, Endorsement and Guarantee Operations: Approved.

S. Important resolutions adopted at the 38th meeting of the 17th Board (05/16/2017)

(a) Proposal to review the nomination of the candidates for Directors (including Independent Directors): Approved.

(b) Submission of the organic regulation draft for the Company's Audit Committee: Approved.

(11) Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors: None.

(12) Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D: None.

4. Information Regarding the Company’s Audit Fee and Independence (1) Audit Fee

Accounting Firm Name of CPA Period Covered by CPA’s Audit Remarks

PwC TaiwanUeng, Shyh-Rong

1/1/2016~12/31/2016Wang, Hui-Hsien

Unit: NT$ thousand

　　　　　　　　　　　　　　　　　　　　　　　　　　　　Fee Items　Fee Range Audit Fee Non-audit Fee Total

1 Under NT$ 2,000,000 ü

2 NT$2,000,001 ~ NT$4,000,000

3 NT$4,000,001 ~ NT$6,000,000 ü ü

4 NT$6,000,001 ~ NT$8,000,000

5 NT$8,000,001 ~ NT$10,000,000

6 Over NT$100,000,000

43


5. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders:

Unit: Shares

Title Name

2016 As of Apr. 30, 2017

HoldingIncrease

(Decrease)

PledgedHoldingIncrease

(Decrease)

HoldingIncrease

(Decrease)

PledgedHoldingIncrease

(Decrease)

Director Hung Sheng Investment Co., Ltd. 300,351 (3,500,000)

Director Shi Tuo Investment Co., Ltd. 241,422(510,000) (30,000)

Supervisor Nienshin Investment Co., Ltd. 254,513 (3,000,000)

Supervisor Dahe Media Co.,Ltd 237,461

Chairman Chiu, Fu-Sheng 9,100,240 13,500,000 5,296,000 6,000,000

Vice Chairman Lian, Tai-Sheng 1,243,595 55,000

Representative Director Kow, Fu-Lin 1,685

Representative Supervisor Yeh, Hui-Ling 8,610

Representative Director and Vice President Cheng, Chi-Li 125,058 108,000

Vice President Guo, Zong-Xiong 107,938(60,000) 53,000

Vice President Lin,Chien-chih 1,453 95,000

Assistant Vice President Rocky Lo 55,035(100,000) 79,000

Assistant Vice President Chen, Wan-Ling 13,781 29,000

Manager Smart Chiang 167,692(19,000) 167,000

Manager Ben Lin 88,926(48,000)

10,000(115,000)

Manager Edward Wu 32,278(660,000) 221,000

Manager Mao, Zhao-Kai 132,210(55,000)

54,000(20,000)

Manager Peng, Hua-Hui 36,276 53,000

Manager Zeng,Zhi-Xiong(Note 3) 20,000

Manager Jerry Nien (Note 1) 50,000

Assistant Vice President Lan, Chi-Jen (Note 2) 89,152(110,000)

Note 1: Mr.Jerry Nien was dismissed on April 1, 2016; Re-appointed on March 23,2017Note 2: Mr. Lan, Chi-Jen was dismissed on April 1,2016Note 3: Mr. Zeng,Zhi-Xiong appointed on March 23,2017

(1) Shares Trading with Related Parties: None.

(2) Shares Pledge with Related Parties: None.


6. Relationship among the Top Ten Shareholders 4/30/2017

Name Current Shareholding

Spouse’s/minor’s

Shareholding

Shareholdingby NomineeArrangement

Name and Relationship Between the Company’s Top Ten

Shareholders, or Spouses or Relatives Within Two Degrees

Remarks

Shares % Shares % Shares % Name Relationship

Primasia Securities Company Limited 49,965,781 6.57 - - - - None None

Chiu, Fu-Sheng 44,414,721 5.84 - - - - Chiu, Fu-Sheng

Chairman, Taiwan Land Development

Corporation

Lian, Tai-Sheng 26,958,432 3.54 - - - - Lian, Tai-Sheng

Vice Chairman, Taiwan Land Development

CorporationKirin Shipping Co., Ltd. 20,859,330 2.74 - - - - None None

Yushin Investment Co., Ltd. 18,452,774 2.43 - - - - None None

Huiwen Investment Co., Ltd. 15,727,016 2.07 - - - - None NoneVanguard Emerging Markets Stock Index Fund, A Series of Vanguard International Equity Index Funds

11,881,201 1.56 - - - - None None

PESCADORES 9,017,822 1.19 - - - - None NoneJPMorgan Chase Bank N.A. Taipei Branch in custody for Vanguard Total International Stock Index Fund a series of Vanguard Star Funds

8,145,744 1.07 - - - - None None

Investor account of DFA Emerging Market core Fund under the trust of CitiBank　

7,607,008 1.00 - - - - None None

7. Ownership of Shares in Affiliated Enterprises Unit: shares/ %

Affiliated EnterprisesOwnership by the

CompanyDirect or Indirect

Ownership by Directors/Supervisors/Managers

Total Ownership

Shares % Shares % Shares %

Taiwan Innovation Development Corporation 764,811,629 100 0 0 764,811,629 100

Hsinchu Hill Garden Corporation 100,000 100 0 0 100,000 100

Taiwan Midtown Development Corporation 100,000 100 0 0 100,000 100

Taiwan LanYang Development Corporation 1,479,000 51 0 0 1,479,000 51

Taiwan Commerce Development Corporation 0 0 224,629,416 100 224,629,416 100

Taiwan Envirotech Development Corporation 0 0 13,000,000 100 13,000,000 100

Taiwan City Development Corporation 0 0 100,000 100 100,000 100

Hualien Culture Clubhouse Corporation 0 0 4,434,000 100 4,434,000 100

Hualien Ocean Forum Corporation 0 0 100,000 100 100,000 100

Taikai Xiamen Trading Corporation 0 0 64,417 100 64,417 100

Nanguowoo Corporation 0 0 1,000,000 100 1,000,000 100

Wind Lion Plaza Shopping Center Corporation 0 0 54,000,000 100 54,000,000 100

Taiwan Manpower Development Corporation 0 0 600,000 100 600,000 100

Taiwan Wind Lion Travel Service Corporation 0 0 1,000,000 100 1,000,000 100

Kinmen Forum Corporation 0 0 300,000 100 300,000 100

IV. Capital Raised

1. Capital & Shares

2. Corporate bonds

3. Preferred stocks

4. Depositary Receipts

5. Employee Stock Options

6. New Shares to Employees with Restricted Rights

7. Status of New Shares Issuance in Connection with Mergers and Acquisitions

8. Financing Plans and Implementation


1. Capital & Shares (1) Source of capital stock

A. Source of capital stock April 30, 2017

Month/Year

Issue price

Authorized capital Paid-in Shares Notes

Shares Amount Shares Amount Source of capital stock

Capital increased by assets other then

cash

Others

06/1964

07/1972

07/1979

07/1986

08/1990

01/1991

11/1994

12/2004

05/2009

09/2009

02/2010

08/2010

07/2011

10/2011

11/2012

10/2014

03/2015

06/2015

10/2015

04/2016

10/2016

04/2017

10,000

10,000

10,000

10,000

10,000

10,000

10

10

10

10

11.8

10

10

11.8

10

10

10

10

10

10

10

10

15,000

20,000

50,000

100,000

270,000

300,000

300,000,000

350,000,000

500,000,000

500,000,000

500,000,000

500,000,000

500,000,000

800,000,000

800,000,000

800,000,000

800,000,000

990,000,000

990,000,000

990,000,000

990,000,000

990,000,000

150,000,000

200,000,000

500,000,000

1,000,000,000

2,700,000,000

3,000,000,000

3,000,000,000

3,500,000,000

5,000,000,000

5,000,000,000

5,000,000,000

5,000,000,000

5,000,000,000

8,000,000,000

8,000,000,000

8,000,000,000

8,000,000,000

9,900,000,000

9,900,000,000

9,900,000,000

9,900,000,000

9,900,000,000

15,000

20,000

50,000

100,000

270,000

300,000

300,000,000

300,000,000

300,000,000

314,419,033

394,419,033

410,057,794

469,798,173

619,798,173

655,300,218

679,110,295

662,010,295

662,010,295

725,881,325

725,890,618

760,784,871

760,884,077

150,000,000

200,000,000

500,000,000

1,000,000,000

2,700,000,000

3,000,000,000

3,000,000,000

3,000,000,000

3,000,000,000

3,144,190,330

3,944,190,330

4,100,577,940

4,697,981,730

6,197,981,730

6,553,002,180

6,791,102,950

6,620,102,950

6,620,102,950

7,258,813,250

7,258,906,180

7,607,848,710

7,608,840,770

Cash

Cash

Cash

Cash

Cash

Earnings

-

-

-

Earnings

Cash

Earnings

Earnings

Cash

Earnings

Earnings and capital decrease through

voidance of treasury stock

Capital decrease through voidance of

treasury stock

-

Earnings

Convertible Bond

Earnings and capital reserve

Convertible Bond

(Note 1)

(Note 2)

(Note 3)

(Note 4)

Note 1: Share capital revised in the 2nd provisional shareholders meeting in 2004.Note 2: Share capital revised in the shareholders meeting in 2009.Note 3: Share capital revised in the shareholders meeting in 2015. Note 4: Expected to complete registration in June 2017.

Unit: Shares

Shareholding typeAuthorized capital

NotesIssued shares Un-issued shares Total Total

common shares 760,884,077 229,115,923 990,000,000 Listed stocks

B. Information for shelf registration: None.

(2) Shareholder structure: April 30, 2017

Shareholder structure

Quantity

Governmental agencies

Financial institutions

Other legal entities

Domestic natural persons

Foreign institutions &

Natural personsTotal

No. of shareholders 2 6 123 52,318 128 52,577

Shares 2 53,715,452 121,434,102 500,220,037 85,514,484 760,884,077

Percentage(%) 0% 7.06% 15.96% 65.74% 11.24% 100%

47

IV　　CAPITAL RAISED

(3) Shareholding Distribution Status April 30, 2017

Class of shareholding No. of shareholders Holding Percentage(%)

1 to 999 29,256 2,571,271 0.34%

1,000 to 5,000 12,934 26,938,015 3.54%

5,001 to 10,000 3,528 25,582,331 3.36%

10,001 to 15,000 2,037 24,760,331 3.25%

15,001 to 20,000 948 16,740,561 2.20%

20,001 to 30,000 1,194 29,146,892 3.83%

30,001 to 50,000 1,052 40,396,393 5.31%

50,001 to 100,000 844 59,097,328 7.77%

100,001 to 200,000 403 55,554,504 7.30%

200,001 to 400,000 223 61,167,235 8.04%

400,001 to 600,000 48 23,588,613 3.10%

600,001 to 800,000 39 26,749,041 3.52%

800,001 to 1,000,000 13 11,596,174 1.52%

1,000,001 or above 58 356,995,388 46.92%

Total 52,577 760,884,077 100.00%

(4) List of Major Shareholders April 30, 2017

　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　ShareholdingShareholder's name　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　 Shares Percentage (%)

Primasia Securities Company Limited 49,965,781 6.57%

Chiu, Fu-Sheng 44,414,721 5.84%

Lian, Tai-Sheng 26,958,432 3.54%

Kirin Shipping Co., Ltd. 20,859,330 2.74%

Yushin Investment Co., Ltd. 18,452,774 2.43%

Huiwen Investment Co., Ltd. 15,727,016 2.07%

Vanguard Emerging Markets Stock Index Fund, A Series of Vanguard International Equity Index Funds　 11,881,201 1.56%

PESCADORES 9,017,822 1.19%

JPMorgan Chase Bank N.A. Taipei Branch in custody for Vanguard Total International Stock Index Fund a series of Vanguard Star Funds 8,145,744 1.07%

Investor account of DFA Emerging Market core Fund under the trust of CitiBank　 7,607,008 1.00%


(5) Share Prices for the Past Two Fiscal Years, together with the Company's Net Worth Per Share, Earnings Per Share, Dividends Per Share, and Related Information

　　　　　　　　　　　　　　　　　　　　　　　　　　　　　YearItem　　　　　　　　　　　　　　　　　　　　　　　　　　　　　　 2016 2015 Current fiscal year

up to 03/31/2017

Market price per share

Highest 12.75 17.95 11.95

Lowest 9.65 9.22 9.93

Average 10.63 12.22 10.73

Net worth per shareBefore distribution 23.81 25.52 23.81

After distribution ( Note 4) 24.30 -

EPS(after tax)

Weighted average shares 747,922,424 699,277,133

Diluted earnings per share 0.34 2.92 0.04

Adjusted diluted earnings per share ( Note 4) 2.78 0.04

Dividend per share

Cash dividend ( Note 4) 0.2 -

Stock dividend( Note 4) 0.06 - -

( Note 4) 0.43 - -

Accumulated undistributed dividends 0 0 -

Return on investment

Price-earnings ratio (Note 1) 31.26 4.18 -

Price-dividend ratio (Note 2) ( Note 4) 61.1 -

Cash dividend yield rate(Note 3) ( Note 4) 0.02 -

Note 1: Price-earnings (P/E) ratio = Average market price/Earnings per shareNote 2: Price-dividend (P/D) ratio = Average market price/Cash dividends per shareNote 3: Cash dividend yield rate = Cash dividend per share/Average market priceNote 4: The resolution for earning distribution was passed at the 17th-term 36th Board of Directors meeting on April 20, 2017, and awaits

approval in the 2017 annual shareholders meeting.

(6) Company's Dividend Policy and Implementation

Dividend policy:

According to the Company's Articles of Incorporation, at the time of allocating surplus profits (if any), the Company shall first set aside ten percent of such profits as a legal reserve after losses have been covered and all taxes and dues have been paid. The Company may appropriate another sum as a special reserve in accordance with business requirements and allocate one to eight percent of the earnings as employee bonus and one to two percent as remuneration for directors and supervisors; the remaining shall be determined via board resolutions. The board of directors shall be authorized to determine employee bonus and directors and supervisors' remuneration within the ranges specified above on an annual basis.

Implementation Status:

With regard to the Company's profit distribution plan for 2016, it was confirmed that the profit available for distribution was zero at the Board of Directors meeting on April 20, 2017. Therefore, no dividend distribution was planned.

49


(7) Effect of free-gratis dividend proposed in the current shareholders’ meeting on Company’s business performance and earnings per share: None.

(8) Employee Bonus and Director and Supervisor Remuneration

A. The percentages or ranges with respect to employee bonus and director/supervisor compensation, as set forth in the Company’s Articles of Incorporation: In the event of profit after closing of annual accounts(profit

refers to pre-tax earnings before deduction of compensation and remuneration distributed to employees as well as directors and supervisors), between one to eight percent shall be allocated as compensation to employees and no more than two percent shall be allocated as remuneration to directors and supervisors.

However, in the event the Company has sustained accumulative losses, a proportion of profit shall be reserved in advance for compensation purposes. The preceding employee compensation may be paid in cash or stock shares, and shall be payable to employees of subsidiary companies who meet the requirements stipulated by the board of directors. The preceding remuneration to directors and supervisors shall be paid in cash only.

Proposals for employee compensation and remuneration to directors and supervisors shall be approved by board meeting and shall be briefed in the shareholders' meeting.

B. The basis for estimating employee bonus and director and supervisor remuneration for the current period, the basis for calculating the number of shares distributed as stock dividends, the actual amount distributed and the variance with the estimates as well as accounting treatment:

(a) Per the regulations stipulated in the Articles of Incorporation of the Company, in the event of profit after annual account closing, one percent of profit shall be allocated respectively as employee compensation and remuneration to directors and supervisors.

(b) If there is a variance between the estimated and actual distributed amounts, the variance shall be regarded as the profit (loss) for the following year based on the changes in accounting estimates and will not affect the financial reports that have already been recognized.

C. Information on employee bonus distribution proposals adopted by the Board of Directors:

The 2016 earning distribution proposal has been approved at the 17th-term 36th Board meeting held on April 20, 2017; below is the status of employee bonus distribution adopted by the Board:

(a) NT$2,850,056 in cash bonus will be distributed to employees and the same amount will be distributed to directors and supervisors as remuneration. The recognized expense for the year is estimated at NT$3,004,312, respectively, a difference of NT$308,512 in estimation, which will be recorded under the 2017 gain/loss adjustment.

(b) Employee compensation shall on this occasion be paid in cash.

D. Use of earnings in 2015 fiscal year for distribution of employee bonus and director/supervisor remuneration:

The employee bonus distribution proposals approved at the 17th-term 22th Board meeting held on March 30, 2016 and the actual distribution status are as follows:

(a) The cash employee compensation and remuneration to directors and shareholders are NT$21,828,119 each. There has been no discrepancy from the NT$ 21,828,119 in estimated annual recognized expenses.

(b) Employee compensation shall on this occasion be paid in cash.


(9) Buyback of Treasury Stock:

Buyback of Treasury Stock: April 30, 2017

Treasury stocks in batches 15 th Batch 16th Batch 17th Batch 18th Batch 19th Batch

Purpose of buy-backTransfer

ownership of shares to employees

Transfer ownership

of shares to employees

Transfer ownership


Transfer ownership


Transfer ownership


Scheduled buy-back period 1/25/2016~2/26/2016

7/17/2016~7/29/2016

8/2/2016~9/30/2016

1/10/2017~2/21/2017

2/23/2017~4/14/2017

Price range NT$10.00 toNT$13.00

NT$10.00 toNT$12.50

NT$10.00 toNT$14.00

NT$9.00 toNT$12.00

NT$11.00 toNT$13.00

Type and quantity of shares already bought back

Common shares 4,786,000 shares





Value of buy-back shares NT$49,739,450 NT$15,983,488 NT$70,996,411 NT$41,736,145 NT$35,654,372

Shares voided/transferred 4,786,000 shares 1,497,000 shares 6,700,000 shares 4,000,000 shares 3,236,000 shares

Accumulated number of company shares held 0 shares 0 shares 0 shares 0 shares 3,236,000 shares

Rat io o f to ta l accumula ted company shares held to total shares issued (%)

0 % 0 % 0 % 0 % 0.43 %

51


2. Corporate bonds: (1) Profile of corporate bonds

Type First (term) secured corporate bond of 2014

First (term) secured corporate bond of 2015

First (term) domestic secured convertible bond of 2015

Issue date 4/25/2014 6/9/2015 8/18/2015

Denomination NT$ 1,000,000 NT$1,000,000 NT$100,000

Issue and transaction location Republic of China Republic of China Republic of China

Issue price Fully issued at face value Fully issued at face value Fully issued at face value

Total value NT$ 500,000,000 NT$800,000,000 NT$200,000,000

Interest rate 1.36% 1.55% 0%

Duration 3 years; date of expiration: 04/25/2017

Five-year term maturity date: June 9, 2020

Three-year term maturity date: August, 18, 2018

Guarantor Entie Commercial Bank, Ltd. Taiwan Cooperative Bank Taiwan Cooperative Bank

Trustee Bank Sinopac Company Limited

JihSun International Commercial Bank Co. Ltd


Underwriter Sinopac Financial Holding Company Limited

Sinopac Securities Company Limited

Sinopac Securities Company Limited

Certifying lawyer Lawyer Hui-Ji Guo at Yicheng Law Firm

Far East Law Office Attorney at law Charles Ya-Wen Chiu


Certifying CPA CPA Shi-Rong Weng at PwC Taiwan

PricewaterhouseCoopers (PwC) Taiwan Accountant

Shih-Jung Weng


Shih-Jung Weng

Payback method Principal to be returned in a lump sum upon maturity

Principal to be returned in a lump sum upon maturity

Please refer to Article 6 of the Regulations Governing the Issuance and Conversion of Corporate Bonds for more

details.

Principal yet to be paid back NT$ 500,000,000 NT$800,000,000 NT$198,900,000

Terms and conditions for redemption or early liquidation None None

Please refer to Article 18 of the Regulations Governing

the Issuance and Conversion of Corporate Bonds for more

details.

Restrictive terms and conditions None None None

Name of credit rating institution, rating date, outcome of corporate bond rating N/A N/A N/A

Additional rights

Value of common shares, depository receipts, or other securities that are converted (exchanged or subscribed) as of the date the annual report is printed

None None

As of the date of printing of the annual report, conversion

has been made in the total amount of NT$1,100,000 into 108,499 shares of common

stock.

Issuance and conversion (swapping or subscription) guidelines

None NonePlease refer to the

Regulations pertaining to issuance and conversion.

Impacts of issuance and conversion, exchange or subscription, issue conditions o n p o s s i b l e d i l u t i o n a n d e x i s t i n g shareholders’ equity

None NonePlease refer to the

Regulations pertaining to issuance and conversion.

Name of swap object custodian institution None None None


Type First (term) secured corporate bond of 2016

second (term) secured corporate bond of 2016

third (term) secured corporate bond of 2016

Issue date 4/29/2016 11/15/2016 12/5/2016

Denomination NT$ 1,000,000 NT$1,000,000 NT$1,000,000

Issue and transaction location Republic of China Republic of China Republic of China

Issue price Fully issued at face value Fully issued at face value Fully issued at face value

Total value A: NT$1,000,000,000B: NT$500,000,000 NT$800,000,000 NT$530,000,000

Interest rate A:1.2%B:1.4% 1.48% 1.5%

Duration Five-year term maturity date: April 29, 2021

Five-year term maturity date: November 15, 2021

Three-year term maturity date: December5, 2021

GuarantorA: Taiwan Cooperative BankB: Chang Hwa Commercial

BankCOTA Commercial Bank Taichung Commercial Bank

Trustee JihSun International Commercial Bank Co. Ltd



Underwriter Taiwan Cooperative Bank Hua Nan Securities Company Limited

Taichung Bank Securities Company Limited

Certifying lawyer Far East Law Office Attorney at law Charles Ya-Wen Chiu



Certifying CPAPricewaterhouseCoopers (PwC) Taiwan Accountant

Wang, Hui-HsienAccountant Ueng, Shyh-ong





Payback method Principal to be returned in a lump sum upon maturity



Principal yet to be paid back NT$1,500,000,000 NT$800,000,000 NT$530,000,000

Terms and conditions for redemption or early liquidation None None None

Restrictive terms and conditions None None None

Name of credit rating institution, rating date, outcome of corporate bond rating N/A N/A N/A

Additional rights

Value of common shares, depository receipts, or other securities that are converted (exchanged or subscribed) as of the date the annual report is printed

None None None

Issuance and conversion (swapping or subscription) guidelines

None None None

Impacts of issuance and conversion, exchange or subscription, issue conditions o n p o s s i b l e d i l u t i o n a n d e x i s t i n g shareholders’ equity

None None None

Name of swap object custodian institution None None None

53


(2) Information on conversion of corporate bonds:

Categories of corporate bond First secured convertible corporate bond

　　　　　　　　　　　　　　　　　　　　　　YearItem　　　　　　　　　　　　　　　　　　　　　　　 2015 2016 Current fiscal year up

to March 31, 2017

Market value of convertible corporate bond

Highest 108.2 119 118.1

Lowest 100.6 104.5 104.9

Average 103.28 110.12 113.85

Conversion price 10.76 10.7610.08(Note1) 10.08

Issue (processing) date and conversion price at issuance. Conversion price at

issuance on August 18, 2015 was NT$12.05

Conversion price at issuance on August 18,

2015 was NT$12.05

Conversion price at issuance on August 18,

2015 was NT$12.05

Methods of fulfilling conversion obligations None Issuance of9,293 new shares None

Note 1: With effect from Sep. 30, 2016, the conversion price has been adjusted to NT$10.08 from NT$10.76.

(3) Information on exchange of corporate bonds: none (4) Information for shelf registration: none (5) Information on corporate bonds with stop options: none

3. Preferred stocks: None.4. Depositary Receipts: None.5. Employee Stock Options: None.6. New Shares to Employees with Restricted Rights: None.7. Status of New Shares Issuance in Connection with Mergers and Acquisitions:

None.8. Financing Plans and Implementation (1) Details of the original proposal (a) Competent authority approval date and official letter reference number: Approval letter FSC-Zheng-Fa-

Zi No. 0980060739 issued by the Financial Supervisory Commission, Executive Yuan on November 20, 2009.

(b) Total required capital of NT$1,079,140,000.

(c) Issue of 80,000 thousand shares of common stock for cash capital increase at NT$11.8 per share in excess of par (NT$10). The total amount is NT$944,000 thousand. The remaining required capital is obtained via bank loans, from the Company’s own funds and other approaches.

(d) Project items and estimated progress

ItemExpected

completion date

Total amount

of capital

required

Scheduled rate of progress of fund utilization

2009 2010 2011 2012

Prior to Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Land development

2012Q3 1,079,140 94,876 22,902 60,662 36,620 81,040 201,776 120,960 120,960 120,960 126,810 80,640 － 10,934

Total 1,079,140 94,876 22,902 60,662 36,620 81,040 201,776 120,960 120,960 120,960 126,810 80,640 － 10,934

(e) "Internet Information System" reporting date entered: November 24, 2009

B. Details of modified proposal

(a) Total required capital of NT$2,679,771,000.


(b) Issue of 80,000 thousand shares of common stock for cash capital increase at NT$11.8 per share in excess of par (NT$10). The total amount is NT$944,000 thousand. The remaining required capital is obtained via bank loans, from the Company's own funds and other approaches.

(c) Project items and estimated progress 　　 Unit: NT$ thousand

ItemExpected

completion date

Total amount

of capital required


Before 2011

2012 2013 2014 2015

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Land development Q4 2015 2,679,771 594,304 72,898 66,840 63,491 149,673 134,637 121,316 121,316 121,316 146,809 146,809 146,809 146,809 161,686 161,686 161,686 161,686

Total 2,679,771 594,304 72,898 66,840 63,491 149,673 134,637 121,316 121,316 121,316 146,809 146,809 146,809 146,809 161,686 161,686 161,686 161,686

(d) "Internet Information System" reporting date entered: March 22, 2012

C. Implementation:

(a) Progress of fund implementation: 　　 Unit: NT$ thousand

Project item Implementation Status 2017 Q1

Implementation status as of Q1

2017Reason(s) that the project is ahead of or behind schedule and improvement plan

Land development

Amount of expenditurePlanned 0 2,679,771

The actual progress of fund utilization for the project fell behind the planned schedule, mainly due to longer-than-anticipated process for review of miscellaneous permit application. As a result , payments of development expenses were delayed.

Actual 15,454 1,019,792

Progress of implementation(%)

Planned 0.0% 100.00%

Actual 0.58% 38.06%

(b) The capital in the amount of NT$944,000,000 required for the development of Hsinchu Hsinpu Eco-community was raised on January 21, 2010.The planned expenditure for Q1 2015 was NT$2,194,713,000 in total, but the actual drawing of the fund for payment was NT$906,017,000.The actual progress of fund utilization for the project fell behind the planned schedule, mainly due to longer-than-anticipated process for review of miscellaneous permit application. As a result, payments of development expenses were delayed.

(c) Explanation of Benefits: After the hotel area of the Hsinchu Hsinpu Eco-community has been completed, it is expected that income will be generated from rooms, dining, rental of conference hall and wedding venue as well as shops inside the hotel. Currently no such information is available for assessment of target attainment.

(2) 2011 cash capital increase proposal

A. Details of the proposal

(a) Competent authority approval date and official letter reference number: Approval letter FSC-Zheng-Fa-Zi No. 1000035541 issued by the Financial Supervisory Commission, Executive Yuan on August 5, 2011.

(b) Total required capital of NT$4,744,827,000.

(c) Issue of 150,000 thousand shares of common stock for cash capital increase at NT$11.8 per share in excess of par (NT$10). The total amount is NT$1,770,000 thousand. The remaining required capital is obtained via bank loans, from the Company's own funds and other approaches.

55


(d) Project items and estimated progress 　　 Unit: NT$ thousand

ItemExpected

completion date

Total amount

of capital required

20102011 2012 2013 2014

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Land development Q4 2014 3,944,827 13,552 7,410 207 1,686,833 44,275 57,553 148,516 251,510 372,688 464,302 334,380 220,878 118,617 27,668 185,382 - 11,056

Investment in subsidiary

Taiwan Innovation

Development Corporation

Q3 2012 800,000 - - - - 400,000 100,000 150,000 150,000 - - - - - - - - -

Total 4,744,827 13,552 7,410 207 1,686,833 444,275 157,553 298,516 401,510 372,688 464,302 334,380 220,878 118,617 27,668 185,382 0 11,056

(e) "Internet Information System" reporting date entered: August 8, 2011

B. Implementation:

(a) Progress of fund implementation: 　　 Unit: NT$ thousand

Project item Fund utilization: Reason(s) that project is ahead of or behind schedule

Land development

Cumulative amount of expenditure

Planned 3,944,827 The process for public land release took longer than expected. As a result, we were behind schedule in land acquisition, which also affected the subsequent work schedule. Now we are contracting out works according to schedule and carry out acceptance check. The whole project is expected to be completed according to the original plan. The subsequent works to be carried out are expected to catch up on the planned schedule.

Actual 2,620,018

Cumulative progress of implementation

Planned 100%

Actual 66.41%

Investment in subsidiary Taiwan Innovation Development Corporation

Cumulative amount of expenditure

Planned 800,000

The amount of investment in subsidiary has been fully disbursed.

Actual 800,000

Cumulative progress of implementation

Planned 100%

Actual 100%

(b) With respect to capital raised in the 2011 cash capital increase with the issuance of new shares, the implementation progress and the amount of unused fund are considered reasonable without any major deviation as of Q1 2017. The Company has invested the whole raised fund in the project according to the original fund utilization plan without changes.

(c) Explanation of Benefits: With regard to the sale of factory land (I) for the Taichung Precision Machinery Technology Park Phase II development project commissioned by Taichung City Government, it is completed now. In addition, the recognized labor income accumulated for the company as of December 31, 2016 reached NT$467,699,000; expected benefits are essentially realized. With regard to the subsidiary Taiwan Innovation Development Corporation, it concentrates on the integration, marketing and planning operations at the present time to link up with its earlier efforts in land acquisition, project planning and development planning and to extend its business scope. Based on the actual operations of Taiwan Innovation, expected benefits are essentially realized.

(3) 2016 2nd Corporate Bonds A. Project Details

(a) Approval date and reference number of the Public Authority: Approved by the Financial Supervisory Commission R.O.C, Executive Yuan on November 9, 2016, Jin-Guan-Zheng- Fa-Zi Order No 10500321421.

(b) Total amount of capital required: NT$800,000,000.

(c) Source of capital: Issue 800 units of corporate bonds, the face value for each unit is NT$1,000,000.


(d) Project items and estimated progress

ItemExpected

completion date

Total amount

of capital required


2016 2017

Q4 Q1 Q2 Q3 Q4

Financial institution loan repayment 2016Q4 680,000 680,000 - - - -

Land development 2017Q4 120,000 - 29,936 24,600 28,100 37,364

Total 800,000 680,000 29,936 24,600 28,100 37,364

(e) "Internet Information System" reporting date entered: November 9, 2016

B. Implementation:

Project item Implementation Status End of Q1 2017

Reason(s) that the project is ahead of or behind schedule and improvement plan

Financial institution loan repaymentFinancial institution loan repayment

Amount of expenditure

Planned 709,936

Completed according to schedule.Actual 800,000

Progress of implementation(%)

Planned 100%

Actual 100%

C. Fund-raising status: As of Q4 of 2016, the Company was prepared to repay its loans to banks in the amount of NT$680 million. The actual amount of such repayment was NT$680 million, which was executed and completed in accordance with the original planned items and fund utilization schedule. Therefore, there has been no change of plan involved. Land development fund in the amount of NT$120 million was originally slated to be executed in Q1 of 2017; however, as the Company's proposed project for the development of the Shengang Fongjhou Technology Science-based Industrial Park is still undergoing stage two environmental assessment as well as development plan review, the Company decided to change it to bank loan repayment on March 26, 2017 in order to increase fund effectiveness and improve the Company's financial structure, after taking into account the level of difficulty in ascertaining the review progress.

D. Explanation on benefits: The Company has repaid bank loans in the amount of NT$800 million based on its original plan as well as the revised plan, which is expected to lead to savings on interest expenditure incurred from bank loans and alleviate the financial burden, while helping improve the Company's financial structure and debt-paying ability, in addition to lowering its dependency on bank loans as well as increasing the flexibility of fund utilization. After making the repayment to the banks, the Company expects to save NT$13.749 million in interest annually. As the utilization of the fund raised this time is consistent with the execution schedule for fund utilization, the anticipated benefits, therefore, are expected to manifest progressively, and there should be no major discrepancy from the actual scenario achieved.

V. Business Activities

1. Business Scope

2. Market and Sales Overview


4. Expenditures on Environmental Protection (General Management Department)

5. Labor Relations

6. Important Contracts


1. Business Scope (1) Business Scope

A. Principal business activities and revenue distribution

Business Scope Item2016

Amount (NT$ thousand)

Revenue Distribution (%)

Industrial park development and renewal Service revenue 85,206 29.10

Investment development business Revenue from product sales 169,512 57.89

Self-owned assets development business Rental/leasing revenue 33,868 11.57

Self-owned assets development business Revenue from product sales 4,245 1.44

Total 292,831 100

B. Current Products and Services

(a) Industrial park development business: Agency business and joint venture of industrial park development, investment and development of residential and commercial land.

(b) Self-owned assets development business: Provide strategies and sales management for real estate asset activation; assessment of new business associated with the development of Company-owned land; promotion of leisure agriculture and Taiwan’s special agricultural products; and leisure real estate development.

(c) Investment and development business: Assessment and participation in major zone expropriation, urban land readjustment, BOT projects and other new development projects in various cities and counties.

(d) Urban renewal business: Agency of urban renewal projects conducted by the government or by private enterprises, coordination of the settlement of residents, and effective follow-up advancement of construction and development.

C. Future Products and Services Currently Being Planned

(a) Key Development Projects for Industrial Park Development Business

‧ Hualien Guanghua LOHAS Creative Park – Adding value to and invigorating land for production – After the practice of land expropriation compensation based on market value has become law, the supply of industrial land decreases, while their prices go up. We acquired the land in this project in the early days based on the government-declared land value and hence enjoy the advantage of lower land acquisition costs. The Park will aggressively appeal to businesses in cultural creativity and media industries as well as international healthcare and wellness/leisure industries in coordination with the direction of industrial development policies for the eastern part of Taiwan and the overall planning of the Park with the aim to drive the industrial upgrade in Hualien.

‧ Taichung Precision Machinery Technology Innovation Park Phase II - Shaping and developing a comprehensive knowledge-based multifunction park to keep pace with the trend of knowledge-based economy.

‧ Taichung Shengang Fengzhou Industrial Park Phase 2 – Embracing the spirits of humanity, innovation and sustainability to build an “intelligent eco park” that are infused with the elements of knowledge, technology and future.

(b) Key Development of Businesses Associated with Company-owned Assets

‧ Hualien Guanghua LOHAS Creative Park–Development projects include the Hualien Huilanwan Cultural Plaza, the Hualien Huilanwan Tokaido Clubhouse, the Pacific Forum Center, the Hualien Huilanwan Sunrise Village Housing, the Huallywood Cinema Park, a leisure farm, a horse ranch, and ecologically-friendly waterfront green space, etc. They are expected to drive Hualien to become a tourism destination with high added values as well as a major city for creative LOHAS lifestyle.

59

V　　BUSINESS ACTIVITIES

‧ Hsinchu Hsinpu Eco-community–Located on beautiful sloped land in Hsinpu, a contemporary mountain city will be planned and built based on surrounding geological environment and conditions as well as local Hakka village architectural texture. The community embraces aesthetics, ecology and smart living, offering products such as a hot spring resort, a Starwood Hotel, hotel-style apartments, and a top-notch villa, complemented with 14 hectares of land that will be used to build a leisure farm, a forest garden, a tea garden, and boarding/dining area to provide an interface between man and nature.

‧ Nantou Caotun Zen Culture Park – A thousand plum trees and cherry blossoms will be planted to create the beautiful scenery of a mountain forest. Based on the theme of “Zen”, the Park will emphasize the philosophy of “less” to open a path to a healthy body and mind for modern people. The Park will contain a club house, service apartment, shops and learning space.

(c) Investment and Development Business

(d) After the inauguration of the duty-free shops on the Kinmen Wind Lion God Shopping Street, we continue to solicit and invite businesses to move in to generate profits, while aggressively investing in the development of phase two hotels.

(2) Industry Overview

A. The Present and the Future

The land development business continues to evolve with time. Confronted with increasing difficulty in land acquisition, how to create maximum land value becomes a critical issue in land development. In the face of global warming and ecological crisis, the question of how to achieve energy conservation, carbon reduction and sustainable environment has become highlight in land development; furthermore, according to estimates by the National Development Council, the elderly population will reach 3.44 million (accounting for 14.6%) by 2018, as Taiwan is set to become an aging society. By 2025, the elderly population will hit 4.85 million (accounting for 20.1%), as Taiwan is set to become an ultra-aging society. Taiwan's society is undergoing the transition of a rapidly aging population, adjustments in family structure and changes in lifestyles. Land development should aggressively provide more products going forward in order to meet the needs associated with long-term home care and small-area accommodation. On the other hand, Taiwan's industries are faced with the pressure to upgrade themselves. Therefore, in terms of the development of industrial parks, developers should offer innovative park design to meet the development needs of next-generation industries, in addition to reviving idle land and satisfying demands. Moreover, Taiwan is blessed with rich, abundant and diverse tourism resources as well as underlying cultural sophistication, as the numbers for outbound travelers and international tourist arrivals continue to grow. The government even predicts that revenues generated by foreign visitors will surpass NT$500 billion by 2018. Hence, a foreseeable blue ocean for land development lies in meeting rapidly growing tourism demands by providing more hotels and leisure products.


B. Relationship with upstream, middle-stream, and downstream companiesU

pstreamM

idstreamD

ownstream

Landowners

Financial institutions

Land developersConstruction companies

Consumers(Corporate or individual)

Consulting firmsReal estate management companies

Construction companies

Land brokersLand integrators

Steel, cement, electrical and plumbing, and building

materials suppliers

Sales department of construction companiesWarranty department of construction companies

Marketing companiesBrokers

Property management companies

C. Product Trends and Competition

(a) Product Trends

Land development products include intermediary development services and end real estate products.

Development services increasingly stress the capability to innovate and integrate: Innovation is stressed because it enhances the value of land and creates brand force. Integration is stressed because in the professional division of labor, tasks become more and more specialized, while the age of Internet also accelerates cross-industry integration.

Besides, in terms of real estate products, Taiwan's total population was 23 million in 2016, 3.11 million of which were people 65 years or older (accounting for 13%); Owing to factors such as longer life expectancy and fewer children, the rate of population aging has been accelerating, as our population is expected to shrink in the future. According to statistics by the Ministry of Interior Affairs, Taiwan's total population stood at 23 million in 2016, around 5.58 million of which were baby boomers born after World War 2 between 1946 and 1964. In order to accommodate the government's policies and market needs, the Group has identified the following highlighted trends for future product rollout: developing leisure industries built around LOHAS; creating LOHAS environment and lifestyles; developing membership systems; promoting and cultivating various healthy lifestyles & artistic and cultural experience clubs; providing members with continued healthcare to enjoy LOHAS lifestyles. More flexible development with compound functionality has become a trend, which will meet a wide variety of needs of modern people by providing commercial, residential, recreational and entertainment functions to create new lifestyles. In addition, sustainable architecture design and application of smart technology in space use are important trends in the development of real estate products that could lead to sustainable development and safer and more comfortable living.

61


(b) Competition

Under the trends of global liberalization and warming of cross-strait relations, the land development market is expected to attract more Chinese and foreign investors and market competition is expected to heat up more. Be it the provision of intermediary development service or real estate products in the end market, development ideas, integration of professionals and innovative capability will be keys to excelling in competition and success.

There is a pressing demand for industrial land in Taiwan. As land acquisition has to be based on market value and involves complex environmental feasibility study process, land acquisition and development become more difficult. Under the circumstances, industrial land assets currently owned by the Group are turned into valuable assets. As Taiwan attracts more foreign visitors and the life style of people in Taiwan changes, it becomes necessary for the Group to transform its business pattern and diversify its businesses to capitalize on the increase in land value, spread business risks and grasp more business opportunities.

The Company builds three parallel core businesses by incorporating the elements of "innovation, LOHAS, sustainability and intelligent" in all of its development projects and engages the services of first-rate professional teams at home and abroad, including Bjarke Ingels Group (BIG), an expert in LOHAS and creative design, a firm tapped to design New York's Two World Trade Center (2015) and the Opportunity Pavilion of Dubai Expo 2020, and a Chinese architectural firm MAD (principal designer for the Lucas Museum of Narrative Art in Chicago in 2014). Both BIG and MAD are on the list of 10 of the Best Upcoming Architects in 2016 selected by Highsnobiety. The Company also works with Japanese architect Kengo Kuma, internationally acclaimed architect known for his expertise in blending with the natural landscape and using natural building materials in fragile architecture and winning designer of the National Stadium for the 2020 Olympics in Tokyo, Kako Kikako Sekkeisha (KKS) from Japan, a firm credited with the design of the largest number of hotels in Asia, ARUP, an expert in sustainable development, and Dr. Ken Sakamura, the father of Japan's Internet of Things (IOT). The Company has also formed an alliance with Starwood Hotels & Resorts Worldwide. Future plans for collaborations in architectural planning, membership marketing and operations and management for hotels in Kinmen, Hsinpu, Hualien and Taichung are already in place. The goal is to develop the Company's leisure vacations business and become a leading brand of land development in Taiwan.

(3) Technology and R&D Overview

A. R&D investment in 2016 and during the current fiscal year up to the date of publication of the annual report

Unit: NT$ thousand

Item 2016 As of 2017/03/31 Description

R&D expense 19,704 ―

Operating revenue 292,831 158,007

R&D expense as a percentage of operating revenue 6.73% ―

B. Successfully developed technologies and/or products in 2015 and during The Company is also keen on developing mobile applications and smart services with Internet of Things (IoT) experiences at its core, including:

Researched and developed related solutions and smart services based on cloud service and the IoT, including:

‧Completion of the application for category 2 telecommunication license;

‧integrated marketing for WiFi Facebook check-in at the Hsinchu Hsinpu Eco-community;

‧launch of the lokosil smart app for guided tour;

‧interactive interface featuring floating emojis and image-posting for live video streaming;

‧IoT environment monitoring systems;

‧fourth-generation smart home system;

‧smart buildings and energy monitoring systems;


C. Future Directions for R&D Development

(a) Established the CDN platform for content; utilized cloud technology infrastructure to apply to the industrial development for new video entertainment media, healthcare and the IoT going forward.

(b) Researched and sought online video compression technology as well as partners and vendors for transmission service; conducted integrated applications and cooperation to improve live online video streaming quality and interactivity

(c) Developed new energy systems and integrated IoT applications, as well as products with added value based on green buildings and related projects; negotiated partnership & cooperation; developed mid- and long-term business opportunities

(d) Developed solutions for smart homes, smart cities and industry 4.0

(e) Planned and developed platforms for future medicine and genetic testing

(f) Development of e-commerce business operations

D. Future R&D Programs and Expected R&D Investment

The latest annual plan Current progress Further R&D investment

Expected completion date

Major factors for future success of

R&D

Development of social network and virtual/ physical integrated commerce platform

Development of phase 1 honeycomb marketing APP is completed.

Approx. NT$50,000,000 December, 2016

Innovative service models and mobile applications

(4) Short and Long Term Business Development Plans

A. Short-term plans

(a) Agency business of industrial park development:

‧ Develop land activation strategies to enable diversification of land utilization so that unleased and unsold industrial park land can be minimized.

‧ Introduce cultural creative, leisure and tourism, healthcare and beauty industries, wellness and long-term care to stimulate investment, increase productivity and provide employment opportunities, thus driving the growth and development of local communities.

(b) Self-owned assets development business

‧ Propose the best development ideas in line with the conditions of each individual project, and build an integrated professional team and integrate resources to create the value of assets.

‧ Modularized operation helps leverage Company resources and improve market competitiveness.

‧ Bring in cultural creative, leisure/tourism, health and beauty care, wellness and long-term care businesses to stimulate investment, boost productivity and create more job opportunities to drive the development and prosperity of local communities.

B. Long-term plans

‧ Internally, actively build an integrated professional team, accumulate know-how, and construct a complete lineup for the land development business to establish a solid foundation of sustainable development.

‧ Externally, create brand value and form extensive partnerships to expand the reach of Company business.

63


2. Market and Sales Overview (1) Market Analysis

A. Sales (Supply) and areas of distribution for principal products and services and their market shares

(a) Agency business of industrial park development and renewal: For newly developed industrial parks, the Taichung area is the primary target market, with aggressive marketing for Hualien Guanghua LOHAS Creative Park, Kaohsiung Kangshan Benjhou Industrial Park and Taichung Precision Machinery Technology Innovation Park. These are industrial park projects commissioned by the government and undertaken under the Company's agency business, and as a result no market share data has been calculated.

Unit:%

Projects for agency renewal business 2016 2015

Hualien Guanghua LOHAS Creative Park 13.66 6.18

Taichung Precision Machinery Technology Innovation Park Phase I 5.19 28.59

Taichung Precision Machinery Technology Innovation Park Phase II 4.18 4.66

Taichung Sheng-Gang Fengzhou Technology Industrial Park Phase 2 3.94 -

Taichung Industrial Park Phase 2 2.52 15.10

Taichung Technology Building - 10.64

Note: The numbers represent various revenues as percentages of operating income for the entire year.

(b) Development Business of Self-owned Assets: The Company's land resources are distributed throughout Taiwan. Currently the key development sites are company-owned land located at Hualien, Hsinpu, Hsinchu and Caotun, Nantou. Planning, designing and construction license application under way in 2016 included phase-one housing project of the Hualien Huilanwan Sunrise Village, the Hualien Huilanwan Tokaido Clubhouse, the Starwood Hotel at the Hsinchu Hsinpu Eco-community, hotel-style apartments, a hot spring villa, VILLA3, and the Zen Club at the Nantou Caotun Zen Ecological Park. Currently, no market shares have been calculated.

B. Future Market Supply and Demand and Future Growth

In the aspect of development service, the Company will concentrate on providing industrial park development services at the present stage. As cities and counties across Taiwan continue to develop new industrial parks, while expanding and renewing their existing ones, it provides the Company with significant business growth opportunity. The Company will continue to bolster its strength in innovative park development and vigorously vie for the business of developing new types of industrial parks.

With regard to the real estate market, as the market has remained bullish for several years, the government is implementing a number of measures with an aim to stabilize housing prices. However, with the scarcity of available land, the increasing level of difficulty in obtaining it and rising material costs, real estate values are relatively stable and the room for lower housing prices is limited in the long run. In terms of the overall real estate market, the performance of housing markets in different regions started to shown obvious divergence at the end of 2016, with northern region experiencing dropping prices and fewer transactions, and central and southern regions experiencing stable prices and stable turnover. The market activities are moving gradually towards the eastern area with the land prices in Hualien and Taitung rising every year. These market trends are particularly favorable to TLDC which holds a considerable amount of land assets and is embarking on several hotel and resort development projects in the areas. Through the sharing economy strategy, the Group will offer the opportunity for long-term holding of real estate for investment purpose that is poised to pay dividends.

The year of 2017 is a sales year for the Group, which will aggressively roll out projects such as phase one of the Huilanwan Sunrise Village, Aloft Hualien and hotel-style apartments at Hsinpu, Hsinchu. Sales will be conducted to coincide with the overall development timeline, as these projects are expected to offer leisure & life-nurturing housing products to more than 2,000 households and generate NT$50 billion in total sales volume.

C. Competitive Niche

(a) With solid performance records for industrial park development, the Company is presented with the opportunity to grab a greater share of the industrial park development service market.


(b) The Company owns more than 160,000 ping of land across Taiwan that puts the Company in a highly competitive position.

(c) The Company’s innovative development ideas facilitate the creation of brand image and competitive advantages in the market.

(d) The Company stays close in touch with social trends and makes forward-looking investments that present great opportunity.

(e) The Company has extensive deployment and a strong development team.

D. Advantages and Disadvantages of Company's Vision of Development and Response Measures Advantages

(a) Advantages

‧ The Company’s overall development deployment is consistent with social development trends and government policies.

‧ As Taiwan and China continue to boost ties and the government implements visa upon arrival at Kinmen for Mainland tourists and the free trade zone policy, significant business opportunities are expected to be created for investment as well as tourism and leisure development projects in Kinmen.

‧ With the promulgation of the Statute for Industrial Innovation, new opportunities for the development of industrial parks present themselves. Rising demands for industrial land are advantageous to the business of industrial park development.

(b) Disadvantages and Response Measures

‧ The global economy is recovering slowly but the risk of a reversal still exists and Taiwan’s export-oriented economy is vulnerable to the impact of global economy. Thus any land development should be planned thoroughly and seek more collaboration partners to reduce risk.

‧ Government policies, including flat tax rate for property and land, rising property tax and farmland used exclusively for agricultural purpose only, are expected to produce certain impact on the real estate market. The Company will formulate response strategies in view of government policies and market trends.

‧ Faced with increasingly scarce land resources and increasing difficulty to acquire land due to government’s adoption of land expropriation compensation by market value policy, the Company will resort to innovative development methods to add more value to the land.

(2) Important Applications and Manufacturing Processes of Major Products:

A. Important Applications of Major Products

(a) Industrial park development business: Providing industrial parks with comprehensive upstream, midstream and downstream services and complying with government policies for the integration of various specialized and financial resources to create the best industrial environment.

(b) Self-owned assets development business: Providing residential buildings, hotels, exhibition centers, business centers, leisure farms and other diversified products to meet the needs of future green lifestyle and cultural creativity.

(c) Investment and development business: We provide comprehensive services and planning according to different development cases and by integrating internal and external resources.

B. Project Implementation Process

(a) Development of industrial parks:

Industrial park establishment - Industrial park development - Industrial park sales and marketing - Industrial park management and maintenance - Industrial park renewal.

(b) Land development

Investigation and assessment - Product positioning - Planning and design - Advertising and marketing - Promotion and sales - Construction - Completion and delivery - After-sales services

65


(3) Supply Status of Main Materials

A. Purchases for construction projects: All engineering and construction projects handled by the Company are conducted with the turnkey model - contractors are responsible for providing construction work and building materials. In order to gain effective control of construction quality and the progress of projects, apart from clearly stating the rules for construction tendering and contracting technical services organizations to carry out services on behalf of the Company in our internal control system and prudently selecting building contractors with good reputation, the Company also maintains healthy, long-term cooperative relationships with construction firms to make sure there will not be no shortage or monopoly in the supply of construction resources.

B. Land for construction: The acquisition of land required for the Company's construction projects depends on the location of each case. In addition to purchasing land directly from landowners, we also participate actively in land made available by the government and court-auctioned property. Furthermore, since the Company is flexible in the mode of carrying out construction projects in which we invest, it is possible for us to acquire the necessary land by engaging in joint development and investment with other construction companies or with landowners. Therefore there is no shortage in the supply of land for construction.

(4) Names of customers who contributed to more than 10% of total purchase (or sales) amount in one of the most recent two years and the corresponding purchase (or sales) amounts and percentages, as well as reasons for their changes (if applicable):

A. Suppliers: List of suppliers with purchase amount exceeding 10% of total purchase

Unit: NT$ thousand

No.

2015 2016 2017, as of the end of previous quarter

Name Amount

As a percentage

of net purchase

(%)

Relationship with

Relationship with issuer

Name Amount

As a percentage

of net purchase

(%)

Relationship with


Name Amount

As a percentage

of net purchase

(%)


1Costco

Wholesale Corporation

40,362 28.73 NoneBjarke Ingels Group

66,546 33.13 None LAOX Co. Ltd. 20,172 42.24 None

2Bjarke Ingels Group

20,238 14.40 None LAOX Co. Ltd. 51,852 25.81 None

Costco Wholesale Corporation

9,005 18.86 None

3 Pentagram Design Inc. 19,496 13.88 None

Costco Wholesale

Corporation24,805 12.35 None Others 18,575 38.90 None

Others 60,402 42.99 None Others 57,664 28.71 None

Net purchase 140,498 100 Net

purchase 200,867 100 Net purchase 47,752 100.00

Note 1: The amount of purchase for construction projects includes contracting work, hypothesis engineering (such as soil preparation, fencing, security support and other non-foundation engineering) and site management fees.

Reasons for changes:

　　Purchases conducted by the Company include commodity purchases, construction purchases and land for construction. Purchases conducted in 2016 were primarily planning and design fees paid to domestic and foreign architectural firms for the new development project in Hualien. There has been an increase in merchandise purchases resulting from the operational needs of the Kinmen Wind Lion Plaza. With respect to land for construction, the acquisition of land required for the Company's construction projects depends on the location of each project. The Company's counterparties in land transactions are not specific to certain individuals and can come from multiple sources, and the inventory of commodities is mainly due to the purchase of related products to accommodate the needs of the shopping plazas. Therefore no exceptional situations are present.


B. Merchandise customers: List of customers with sales amount exceeding 10% of total sales

Unit: NT$ thousand

No.

2015 2016 2017, as of the end of previous quarter

Name Amount

As a percentage

of net purchase

(%)

Relationship with issuer Name Amount

As a percentage

of net purchase

(%)

Relationship with issuer Name Amount

As a percentage

of net purchase

(%)


1 Taichung City Government 357,323 60.35 None

Taichung City

Government46,352 15.83 None Taichung City

Government 95,707 60.57 None

2 Others 237,746 39.65 NoneHualien County

government40,015 13.66 None Others 62,300 39.43 None

3 Others 206,464 70.51 None

4

5

Net sales 592,069 100 Net sales 292,831 100 Net sales 158,007 100

Reasons for changes:

　　In addition to carrying out the development of industrial parks and renovation work on behalf of government agencies, the Company's main products comprise the sales of buildings commissioned through construction companies. The target buyers of these buildings are non-specific individuals and corporations. Due to the enormous amounts involved in real estate transactions, in general there is a low probability of repeat purchases by the same customers. Furthermore, service revenues for the development and renewal of industrial parks are mainly from government agencies and not from specific individuals or affiliated persons, so sales that are concentrated on government agencies should be considered a characteristic specific to this particular sector.

(5) Production Volumes and Values Table for the Most Recent Two Years 　 Unit: NT$ thousand

Year 2016 2015

　　　　　　　　Output quantity and value

Primary project　　　　　　　　　　　　Quantity produced Value produced Quantity produced Value produced

Guanghua LOHAS Creative Park - 223,874 - 237,605

Taichung Precision Machinery Technology Park Phase I - 111,227 - 505,781

Taichung Precision Machinery Technology Park Phase 2 84,338 221,686

Taichung Sheng-Gang Fengzhou Technology Industrial Park Phase 2 42,920 145,167

Kangshan Industrial Park - 39,926 - 26,919

Others - 420 - 15,773

Total - 502,705 - 1,152,931

Note: The various costs associated with and paid in advance by the Company's agency business for industrial park development commissioned by government agencies are based on the project owners' overall planning, and therefore the production quantity cannot be shown here.

67


(6) Sales Volumes and Values for the Most Recent Two Years 　 Unit: NT$ thousand

Year 2016 2015

　　　　　　　Quantity and value of sales

Primary project　　　　　　　　　　　　

Domestic sales Domestic sales

Collection of advance payments

(Note 1)Value

(Note 2)Collection of

advance payments(Note 1)

Value(Note 2)

Taichung Precision Machinery Technology Park Phase I 222,490 15,204 353,838 169,257

Taichung Precision Machinery Technology Park Phase 2 84,338 12,249 221,686 27,611

Guanghua LOHAS Creative Park 32,010 - 36,589

Taichung Industrial Park Phase 2 7,372 - 89,392

Taichung Technology Building - - 63,004

Others (1,026) - 20,055

Total 306,828 65,809 575,524 405,908

Note 1: The Company is commissioned by the government to develop industrial parks; the numbers shown are the collections of advance payments for development costs.

Note 2: The Company recognizes agency revenues in stages according to the progress of project construction and proportion of sales of industrial parks commissioned by the government.


Year 2015 2016From that year to

presentMarch 31, 2015

Total number of employees 86 79 75

Average age 46 46 46

Average years of service 8 9 9

EducationDistribution

Ph.D. 0 0 0

Masters 20 20 17

Bachelor's 58 51 50

Senior high school 8 8 8

Below senior high school 0 0 0

4. Expenditures on Environmental Protection (General Management Department) (1) Total losses (including damage awards) and fines for environmental pollution in 2015 and during the

current fiscal year up to the date of publication of the annual report: None.

(2) An explanation of the measures (including corrective measures) and possible disbursements to be made in the future (including an estimate of losses, fines, and compensation resulting from any failure to adopt responsive measures): None.

5. Labor Relations (1) Current Important Labor-management Agreements and Their Implementation:

A. Employee benefits measures:

(a) Leave system: For employees hired after privatization, three days per year for over half year and up to (and not including) one year of service; seven days per year for over one years and up to (and not including) two years of service; ten days per year for over two years and up to (and not including) three years of service; fourteen days per year for over three years and up to (and not including) five years of service; fifteen days per year for over five years and up to (and not including) ten years of service; For ten or more years of service, one extra day per year, up to a maximum of thirty days, is granted.

(b) Distribution of performance bonuses, annual bonuses and dividends

(c) The Employee Welfare Committee is responsible for administering various employee welfare-related matters, including periodic domestic or overseas travel, self-improvement activities, distribution of birthday cash gifts, sickness/injury benefits, cash gifts for the three traditional holidays/festivals and subsidies for social clubs.


B. Continuing education: The Company encourages employees to participate in continuing education and training outside of regular working hours and provides employees with an open and diverse learning environment. Employees will be able to improve themselves continuously through internal and external training, knowledge management and guidance from supervisors and peers. The Company has also planned a job training system to allow employees to bring together their personal life and career for a better future.

C. Training:

(a) Each year the Company allocates a budget for education and training and establishes training programs. Based on job functions and professional requirements, appropriate training courses are organized to improve employees' knowledge and enhance their overall quality in the hope that they will be able to develop professional know-how with enthusiasm and innovative ideas. Meanwhile, elites equipped with both professional expertise and practical management experience will be cultivated through the career-training program. The Company also conducts internal seminars at appropriate times, in addition to aggressively making arrangements for employees to take part in external training courses.

(b) Integrated educational training courses (including online digital learning and courses conducted via video-conferencing) for 2016 totaled 1906.5 hours, with 328 employees participating.

(c) In order to encourage employees to pursue further studies after work, companies within the Group provided related subsidies amounting to around NT$180,000 to approximately 50 employees in 2016.

(d) The Company strongly encourages employees to acquire job-related certificates and licenses. The Company's accounting department managers have obtained the license for accountant of higher examination. Managers in charge of construction have obtained the license for architect of higher examination.

D. Retirement system:

(a) Pursuant to the provisions of the "Retirement, pension and severance guidelines for employees of state-owned financial and insurance enterprises operated by the Ministry of Finance," the Company allocates a fixed percentage of the monthly salary, depending on the salary scale of each employee, into company- and self-contributed funds and pension funds for the benefit of employees in their retirement. The Company was officially privatized on January 8, 1999, at which time the provisions of the Labor Standards Act became applicable. The date was also designated the basis date for the re-evaluation of employee pension liabilities and expenses in accordance with SFAS Bulletin 18, "Principles of Pension Accounting." Since the 1999 special fiscal year, when labor retirement regulations were adopted, each month the Company has been allocating 8% of monthly payroll as employee pension reserve, which is deposited in a Central Trust of China account. In addition, due to the fact that the Company's Trust Department was sold to JihSun Bank on August 6, 2005, following the approval from the Labor Bureau of Taipei City government, the Company settled the seniority in the old retirement system with employees in accordance with the pension calculation formulas stipulated in the Labor Standards Act in order to safeguard the interests of employees. Therefore, the retirement seniority of Company employees now follows the rules of the new retirement system, making it unnecessary for the Company to allocate funds into the Central Trust of China pension account. And according to the Labor Pension Act, 6% is allocated, depending on the insurance coverage scale, as pension funds and deposited with the Labor Insurance Bureau.

(b) The Group invited retired employees and their dependents to participate in recreational and year-end parties in 2016 from time to time, such as the 2016 year-end party at the Hsinchu Hsinpu Eco-community, in order to show our appreciation for their contribution.

E. In order to spell out the rights and obligations between the employer and employees clearly, as well as to maintain order in the workplace, the "Code of Practice" has been established and filed with the competent authority before being announced publicly. In addition, in order to impose certain requirements and ethical standards on employee conduct, a "Service Commitment Statement," applicable to all employees, has also been established.

69


F. Work environment safety: Employees of the Company shall comply with applicable occupational safety and health laws as well as with the Company regulations so that safety in the workplace and a healthy environment can be maintained. In addition, to prevent theft, fire or other man-made disasters from occurring, the following labor safety and health regulations have been implemented:

(a) Regular medical check-ups will be conducted for employees on a regular basis (once every three years.)

(b) Occupational safety and health-related training will be conducted for employees.

(c) The Company's contractors are required to obtain comprehensive insurance coverage and to enhance the awareness of construction site safety and health management as well as to adopt appropriate measures.

G. Other important agreements: None.

(2) List any loss sustained as a result of labor disputes in 2014, and during the current fiscal year up to the date of publication of the annual report, disclose an estimate of losses incurred to date or likely to be incurred in the future, and indicate mitigation measures being or to be taken. If the loss cannot be reasonably estimated, make a statement to that effect: None.


6. Important Contracts December 31, 2016

Contract type PartiesCommencement date/expiration

dateMain businesses Restrictive

clauses

EntrustmentContract

Wu Cheng-rong Architects & Engineers

2016.09 Hualien community Phase 2 - Construction architectural design and supervision －

Hung Yi interior renovation 2016.09 Hualien commercial zone 2 - Container house Shopping Street

Interior decoration works －

BIG 2016.07 Hualien commercial zone 2 - Container house planning and design for hostel －

BIG 2016.05 Hualien commercial zone 1 - planning and design for hostel －

Ove Arup & Partners Hong Kong Ltd. 2016.04 Kinmen Commerce Leisure Park BOT project - Zone A Container

house planning and design for Hotel －

Ove Arup & Partners Hong Kong Ltd. 2016.02 LEED Certified Consultant General Counseling Service －

Kengo Kuma & Associates 2015.12 Nantou Caotun service apartment project– architectural and

interior planning and design －

Kengo Kuma & Associates 2015.10 Hualien Xianwu- Conceptual design of Cultural City －

BIG 2015.06 Hualien community land- Detailed development design service －

Kengo Kuma & Associates 2015.02 Nantou Caotun service apartment project – architectural and

landscape planning and design －

MAD 2014.12 Kinmen Commerce Leisure Park – Zone A and D development project – architectural design －

P49 2014.11 cHsinchu Hsinpu project – Hsinpu Starwood Hotel’s interior design onsulting service －

Kengo Kuma & Associates 2014.07 Hsinchu Hsinpu project – Detailed conceptual design of Villa3 －

Ove Arup & Partners Hong Kong Ltd. 2014.06 Consulting service for the directions and range of future

development. －

BIG 2014.02 Hualien commercial zone 2 development project – container home and warehouse wholesale design －

Kengo Kuma & Associates 2014.02 Kinmen development project – construction planning and

landscape design －

Wealthy Engineering Consultant 2013.01 Technical service contract for the design and supervision of

Shengang Fengzhou Industrial Park Phase 2 project －

PINHOLE (Japan) 2012.09 Taipei Chengde Building project – commercial facilities planning and design －

Wu Cheng-rong Architects & Engineers

2012.07 Taipei Bade Road renewal project – construction planning, design, and supervision service －

R. J. Wu Architects & Engineers 2012.05 Taichung Precision Machinery Technology Park Phase 2-

construction design and supervision service －

R. J. Wu Architects & Engineers 2012.04 Hualien Shiang-Yi Mall project – construction design and

supervision service －

R. J. Wu Architects & Engineers 2012.04 Hualien community project – construction design and supervision

for phase 1 plants-supervision contract －

R. J. Wu Architects & Engineers 2012.02 Jin Hua Lian Hotel in Hualien No. 15 and 18 hotel design project -

Construction architectural design and supervision －

R. J. Wu Architects & Engineers 2011.10 Impression Hualien - Hakka Tulou Cultural Center - Construction

architectural design and supervision －

R. J. Wu Architects & Engineers 2011.08 Hsinchu Hsinpu Eco-community - Construction architectural design

and supervision －

Ove Arup & Partners Hong Kong Ltd. 2011.03 Taipei City Bade Road, Sec. 2 urban renewal project – conceptual

design consulting service －

Ove Arup & Partners Hong Kong Ltd. 2011.02 Kinmen Commerce Recreation Par BOT project architectural

design planning contract －

HCCH & Associates Architects, Planners & Engineers

2011.02 Kinmen Commerce Recreation Park BOT project new construction (addition of construction sites in B+D zones) service agreement －

71


Contract type PartiesCommencement date/expiration

dateMain businesses Restrictive

clauses

EntrustmentContract

HCCH & Associates Architects, Planners & Engineers

2010.10 Kinmen Commerce Recreation Park BOT project new construction service agreement －

Ove Arup & Partners Hong Kong Ltd. 2010.03 Taichung Precision Machinery Technology Innovation Park

multifunction exhibition facilities service agreement －

Taichung City government 2007.08 Entrustment contract for the development of Taichung Precision

Machinery Technology Innovation Park Phase II －

Urban Regeneration R&D Foundation 2007.06

Urban renewal business planning service appointment contract for 55 tracts of land including the short section numbered 64 located at the Chenggong Section of Zhongzheng District, Taipei

－

Wealthy Engineering Consultant 2012.06

Technical service contract for the application, establishment, planning and development, leasing and management of Shengang Fengzhou Industrial Park Phase 2

－

Taichung City government 1998.10 Entrustment contract for the development of Taichung Precision

Machinery Technology Innovation Park －

Export Processing Zone Administration, MOEA

1998.05 Taichung Harbor Warehousing and Transshipment Area entrustment contract －

Kaohsiung County government 1994.11 Entrustment contract for the development of the Kaohsiung

Kangshan Benjhou Industrial Park －

Taichung City government 1990.11 Taichung Industr ial Park standard factory bui lding joint

development agreement －

Taichung City government 1989.08 Taichung Dali Industrial Park joint development agreement －

Hualien County government 1988.11 Hualien Guanghua Industrial Park joint development agreement －

Construction contract

ZHONG YING Interior Decoration Co., LtdLI YANG onstruction Co.

2015.01 Hualien sample house new construction －

JING CE Environmental Engineering Limited

2014.12Taichung Precision Machinery Technology Park - Sewage treatment plant.Water system and Monitoring system of 2015 and 2016

He Ku Construction Co. 2015.10 Taichung Precision Machinery Technology Park Phase 2 –Park

and green land construction work

Hao Jing Interior Decoration Co. 2014.10

Kinmen Commerce Recreation Park BOT project (new construction in Area B) - Interior decoration works for museum on 3F of North Building

Chang Chia Mechanical and Electrical Engineering Co

2014.07 Hualien commercial zone 1 new construction work Mechanical, electrical and elevator works

Jia Fu Interior Decoration Co. 2014.06

Kinmen Commerce Recreation Park BOT project (new construction in Zone B) – Interior decoration and mechanical and electrical works for 2F of North Building taken by Chii Li Coral, including B and C atrium space.

Lee Ming Construction Co., Ltd.

2013.12 Hualien commercial zone 1 mall project

Jin-Shi-Cheng Construction 2013.08 Kinmen BOT project – landscape work for new construction in

Area B)

Ji Yeh Construction and Engineering Co., Ltd.

2013.02 Taichung Precision Machinery Technology Park- Service Center works －

Jiapu Interior Design Co., Ltd. 2012.09

Kinmen Commerce Recreation Park BOT project (new construction in Area B) – Partition and miscellaneous works (North and West Buildings)

Sheng Yo Interior Decoration Co. 2012.09 Kinmen Commerce Recreation Park BOT project (new construction

in Area B) – Partition and miscellaneous works (South Building)

CHEN JE CORP. 2012.06 Kinmen Commerce Recreat ion Park BOT project - new construction service agreement

TECO Electric & Machinery Co 2012.05 Kinmen Commerce Recreation Park B Area equipment project

Kone Elevators 2012.05 Kinmen Commerce Recreation Park B Area elevator equipment


Contract type project Main businesses Restrictive clauses

Loan agreement

Agricultural Bank of Taiwan and Nantou Caotun Farmers´ Association

2016.05~2019.05

Line of credit: NT$239 million The purpose of the loan is for the construction and operating costs for the development of "Baozhen Section of Hsinpu Township, Hsinchu County." The 55 tracts of land at the Baozhen Section of Hsinpu Township are used as first-priority mortgage on a collateral for the loan with a maximum pledge amount of NT$286.8 million.

A syndicate of 11 banks with Mega International Bank as the lead bank

2016.08~2021.08

Line of credit: NT$26.94 billion1. Facility A of the loan is NT$2.246 billion. As guarantee for

a pledge created on the debt receivables from city (county) governments (advance development costs paid by the Company on their behalf).

2. Facility B of the loan amounts to NT$4.48 billion. The loan is secured by the senior mortgage on the company´s real estate assets under development up to 120% of valuation amount.

Collections from the collateral

are put into the sinking

fund designated

for repayment of principal

and interest.

Taichung Bank 2016.11~2019.11

Line of credit: NT$250 millionThe purpose of the loan is for the construction and operating costs for the development of "Guanghua Section of Jian Township, Hualien County." The 8 tracts of land at the Guanghua Section of Jian Township, Hualien County are used as first-priority mortgage on a collateral for the loan with a maximum pledge amount of NT$300 million.

Agricultural Bank of Taiwan and 15 farmers´ associations

2012.12~2017.12

Line of credit: NT$293 million The purpose of the loan is for the construction and operating costs for the development of "Guanghua Section of Jian Township, Hualien County." The 7 tracts of land at the Guanghua Section of Jian Township, Hualien County are used as first-priority mortgage on a collateral for the loan with a maximum pledge amount of NT$522 million.

HWATAI commercial bank 2017.03~2018.06

Line of credit: NT$400 millionThe purpose of the loan is for the construction and operating costs for the development of "Guanghua Section of Jian Township, Hualien County." The 4 tracts of land at the Guanghua Section of Jian Township, Hualien County are used as first-priority mortgage on a collateral for the loan with a maximum pledge amount of NT$480 million.

Mega International Commercial Bank 2016.01~2023.01

Line of credit: NT$1.1 billionThe purpose of the loan is for the development of Hualien cultural Square. The 4 tracts of land at the Guanghua Section of Jian Township and assets on the ground at Hualien cultural Square are used as first-priority mortgage on a collateral for the loan with a maximum pledge amount of NT$1.32 billion

A syndicate of 5 banks with Mega International Bank as the lead bank

2014.09~2019.09

Line of credit: NT$1.8 billion The purpose of the loan is for construction and working capital for the development of Kinmen BOT Project by Taiwan Commerce Development. The superficies on six tracks of land and five buildings at Zhongshanlin Section, Jing Ning Township, Kinmen County are used as first-priority mortgage on a collateral for the loan with a maximum pledge amount of NT$2.52 billion.

The First Credit Cooperative Of Hualien

2016.05~2036.05Line of credit: NT$60 millionThe purpose of this loan is for the purchase plant by Taiwan Envirotech Development Corporation

Note 1: Entrustment contracts are at NT$10 million at a minimum; contracts and Loan agreement are based on at least NT$50 million.

Note 2: Refer to page 122 for contracts with affiliated enterprises.

VI.Financial Information

1. Condensed balance sheet, income statement and auditors' opinions for the last five years

2. Financial Analysis of the Last Five Years





1. Condensed balance sheet, income statement and auditors' opinions for the last five years.

(1) Condensed balance sheet (consolidated IFRS) 　　 Unit: NT$ thousand

　　　　　　　　　　　　　　　　　　　Year

Item　　　　　　　　　　　　　　　　　　　　

Financial information for the last five years. Financial information

from the current fiscal year up to

03/31/20172012 2013 2014 2015 2016

Current Assets 14,233,266 10,104,909 10,675,490 9,604,072 10,520,071 11,147,857

Real Estate Properties, Factories and Equipment 4,115,538 724,981 892,790 1,390,278 2,547,056 2,592,803

Intangible Asset 12,606 22,481 22,213 35,266 31,363 26,028

Other Assets 1,519,950 7,197,569 16,012,920 19,514,962 20,102,685 20,429,539

Total Assets 19,881,360 18,049,940 27,603,413 30,544,578 33,201,175 34,196,227

Current LiabilitiesBefore distribution 11,997,634 8,852,723 8,639,098 9,365,675 8,760,091 9,386,767

After distribution 11,997,634 8,728,075 8,511,356 9,223,249 Note 2

Non-current Liabilities 1,148,584 1,406,143 3,224,951 3,737,958 6,514,992 6,827,670

Total LiabilitiesBefore distribution 13,146,218 10,258,866 11,864,049 13,103,633 15,275,083 16,214,437


Capital Stock 6,553,003 6,553,003 6,791,103 7,258,813 7,607,849 7,607,849

Capital Surplus 318,975 328,633 324,608 316,057 27,894 30,832

Retained EarningsBefore distribution 441,850 1,285,002 9,052,436 10,318,347 10,365,544 10,394,676

After distribution 441,850 848,734 8,285,984 10,133,193 Note 2

Other Equity 1,813 4,985 6,738 5,734 2,375 614

Treasury Stock (585,349) (380,549) (440,271) (471,595) (86,980) (67,113)

Non-controlling Interests 4,850 - 4,750 13,589 9,410 14,932

Total EquityBefore distribution 6,735,142 7,791,074 15,739,364 17,440,945 17,926,092 17,981,790

After distribution 6,735,142 7,666,426 15,611,622 17,298,519 Note 2 -

Note 1: The financial information for the past five years has been examined and certified by the CPA.Note 2: The resolution for earning distribution was passed at the 17th term, 36th Board of Directors meeting on April 20, 2017, and awaits

approval from the 2017 annual shareholders meeting.

(2) Condensed balance sheet (individual IFRS) 　 Unit: NT$ thousand

　　　　　　　　　　　　　　　　　　　Year

Item　　　　　　　　　　　　　　　　　　　

Financial information for the last five years. Financial information

from the current fiscal year up to

03/31/20172012 2013 2014 2015 2016

Current Assets 13,689,786 9,661,420 9,491,006 8,187,862 8,881,234

Real Estate Properties, Factories and Equipment 498,624 498,159 510,776 516,193 509,903

Intangible Asset - - - - -

Other Assets 3,673,786 5,991,570 14,234,119 18,001,520 20,465,767

Total Assets 17,862,196 16,151,149 24,235,901 26,705,575 29,856,904

Current LiabilitiesBefore distribution 11,046,474 8,277,312 7,764,414 7,453,968 7,754,222


Non-current Liabilities 85,430 82,763 736,873 1,824,251 4,186,000

Total LiabilitiesBefore distribution 11,131,904 8,360,075 8,501,287 9,278,219 11,940,222


Capital Stock 6,553,003 6,553,003 6,791,103 7,258,813 7,607,849

Capital Surplus 318,975 328,633 324,608 316,057 27,894

Retained EarningsBefore distribution 441,850 1,285,002 9,052,436 10,318,347 10,365,544

After distribution 441,850 848,734 8,285,984 10,133,193 Note 2

Other Equity 1,813 4,985 6,738 5,734 2,375

Treasury Stock (585,349) (380,549) (440,271) (471,595) (86,980)

Non-controlling Interests - - - - -

Total EquityBefore distribution 6,730,292 7,791,074 15,734,614 17,427,356 17,916,682


Note 1: The financial information for the past five years has been examined and certified by the CPA.Note 2: The resolution for earning distribution was passed at the 17th term, 36th Board of Directors meeting on April 20, 2017, and awaits

approval from the 2017 annual shareholders meeting.

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Ⅵ　　FINANCIAL INFORMATION

(3) Condensed balance sheet (Financial Accounting Standards in Taiwan) 　 Unit: NT$ thousand

　　　　　　　　　　　　　　　　　　　　Year

Item　　　　　　　　　　　　　　　　　　　　

Financial information for the last five years.

2012

Current Assets 13,689,786

Funds and Investments 2,230,487

Fixed Assets 1,093,005

Other Assets 849,200

Total Assets 17,862,478

Current LiabilitiesBefore distribution 11,044,067

After distribution 11,044,067

Long-term Liabilities -

Other Liabilities 85,430

Total liabilitiesBefore distribution 11,129,497


Capital Stock 6,553,003

Capital Surplus 318,975

Retained EarningsBefore distribution 444,539

After distribution 444,539

Unrealized gain or loss on financial instruments -

Cumulative translation adjustment 1,813

Net loss not recognized as pension cost -

Shareholers EquityBefore distribution 6,732,981


Note 1: The financial information for the past five years has been examined and certified by the CPA.

(4) Condensed Consolidated Income Statement (Consolidated IFRS) 　　 Unit: NT$ thousand

　　　　　　　　　　　　　　　　　　　　　YearItem　　　　　　　　　　　　　　　　　　　　　

Financial information for the last five years.Financial

information from the

current fiscal year up to

03/31/20172012 2013 2014 2015 2016

Operating revenue 382,171 2,536,417 1,791,486 592,069 292,831 158,007

Operating profit 584,015 1,455,774 1,730,425 461,653 147,696 122,581

Operating income 159,468 886,163 957,109 (376,842) (578,011) (44,356)

Non-operating revenue and expenses 33,582 (37,134) 4,503,447 2,575,988 980,708 75,041

Net profit before tax 193,050 849,029 5,460,556 2,199,146 402,697 30,685

Continuing operations Net Income 170,736 843,152 5,312,015 2,039,605 247,810 28,654

Loss from discontinued operations - - - - - -

Net Income (loss) 170,736 843,152 5,312,015 2,039,605 247,810 28,654

Other consolidated income (net after tax) (1,780) 3,172 1,753 (1,004) (3,359) (1,761)

Total consolidated income 168,956 846,324 5,313,768 2,038,601 244,451 26,893

Net income belongs to parent company 171,133 843,152 5,312,165 2,040,076 251,989 29,132

Net income belongs to non-controlling interests (377) - (150) (471) (4,179) (478)

Total comprehensive income (loss) attributable to parent company 169,333 846,324 5,313,918 2,039,072 248,630 27,371

Total comprehensive income (loss) attributable to non-controlling interest (377) - (150) (471) (4,179) (478)

EPS 0.28 1.30 7.39 2.78 0.34 0.04

Note 1: The financial information for the past five years has been examined and certified by the CPA.Note 2: EPS after capitalization of earnings and adjusted number of outstanding shares from 2012 to 2016.


(5) Condensed Consolidated Income Statement ( individual IFRS) 　　 Unit: NT$ thousand

　　　　　　　　　　　　　　　　　　　YearItem　　　　　　　　　　　　　　　　　　　　

Financial information for the last five years.Financial

information from the

current fiscal year up to

03/31/20172012 2013 2014 2015 2016

Operating revenue 937,113 2,487,207 1,724,939 411,718 79,579

Operating profit 631,010 1,485,768 1,719,589 412,390 80,975

Operating income 152,185 1,043,282 1,209,961 (72,693) (280,010)

Non-operating revenue and expenses 33,045 (184,655) 4,136,859 2,211,849 574,433

Net profit before tax 185,230 858,627 5,346,820 2,139,156 294,423

Continuing operations Net Income 171,113 843,152 5,312,165 2,040,076 251,989

Loss from discontinued operations - - - - -

Net Income (loss) 171,113 843,152 5,312,165 2,040,076 251,989

Other consolidated income (net after tax) (1,780) 3,172 1,753 (1,004) (3,359)

Total consolidated income 169,333 846,324 5,313,918 2,039,072 248,630

Net income belongs to parent company

Net income belongs to non-controlling interests -

Total comprehensive income (loss) attributable to parent company

Total comprehensive income (loss) attributable to non-controlling interest -

EPS 0.28 1.30 7.39 2.78 0.34

Note 1: The financial information for the past five years has been examined and certified by the CPA.Note 2: EPS after capitalization of earnings and adjusted number of outstanding shares from 2012 to 2016.

(6) Condensed income statement (Financial Accounting Standards in Taiwan) 　 Unit: NT$ thousand

　　　　　　　　　　　　　　　　　　　　YearItem　　　　　　　　　　　　　　　　　　　　

Financial information for the last five years.

2012

Operating revenue 937,113

Operating profit 631,010

Operating income 152,901

Non-operating income 88,264

Non-operating expenses (55,104)

Continuing operations Income before income tax 186,061

Income from continuing operations 171,944

Income from discontinued operations -

Extraordinary Items -

Changes in Accounting Principles Cumulative Effect -

Net income 171,944

EPS 0.28

Note 1: The financial information for the past five years has been examined and certified by the CPA.

(7) CPA's audit opinion

A. Names of certified accountants

(a) The audit of the 2012 financial statement was consigned to accountants Wang Chao-Ming and Wang, Hui-Hsien of PricewaterhouseCoopers.

(b) The audit of the 2013 through 2016 financial statement was consigned to accountants Weng, Shih-Jung and Wang, Hui-Hsien of PricewaterhouseCoopers.

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B. CPA's audit opinion:

(a) The CPA has issued an audit report containing an unqualified opinion with modified wording for the 2012 - 2015 financial statements of the Company.

(b) The CPA has issued an audit report containing an unqualified opinion with modified wording for the 2016 financial statements of the Company.

2. Financial Analysis of the Last Five Years. (1) Financial Analysis (IFRS consolidated)

　　　　　　　　　　　　　　　　　　　　　　YearAnalysis Item 　　　　　　　　　　　　　　　　　　

Financial Analysis of the Last Five Years. Current fiscal

year up to 3/31/20172012 2013 2014 2015 2016

Financial Structure (%)

Ratio of liabilities to assets 66.12 56.84 42.98 42.90 46.00 47.42

Ratio of long-term capital to real estate properties, factories and equipment 191.56 1,268.61 2,124.16 1,523.35 959.58 956.86

Solvency %

Current Ratio 118.63 114.14 123.57 102.54 120.09 118.76

Quick Ratio 89.57 97.04 108.34 86.7 105.01 104.23

Interest Protection Multiples 5.33 47.16 348.98 7.86 2.05 1.31

Operating ability

Receivables turnover (times) (Note 2) (Note 2) 15.36 42.52 29.03 27.72

Average collection period (Note 2) (Note 2) 23.75 8.56 12.57 13.17

Inventory turnover (times) (Note 2) (Note 2) 1.68 2.11 1.61 1.40

Payables turnover (times) (Note 2) (Note 2) 4.47 7.28 4.49 3.46

Average days in sales (Note 2) (Note 2) 217.03 172.16 226.7 260.71

Turnover ( t imes) o f rea l esta te properties, factories and equipment 0.12 1.05 2.14 0.51 0.14 0.25

Total assets turnover (times) 0.04 0.13 0.07 0.02 0.01 0.01

Profitability

ROA(％ ) 1.14 4.53 21.81 7.21 1.14 0.67

ROE(％ ) 2.51 11.61 40.20 12.29 1.4 0.64

Pre-tax profit to paid-in capital ratio(%) 2.95 12.96 80.40 30.29 5.29 0.40

Net profit ratio(％ ) 44.68 33.24 296.51 344.48 84.62 18.13

EPS (NT$) 0.28 1.30 7.39 2.78 0.34 0.04

Cash Flow

Cash flow ratio (％ ) (0.26) 48.21 15.17 (18.06) (20.52) (3.42)

Cash flow adequacy ratio (％ ) (Note 3) (Note 3) (Note 3) (Note 3) 85.82 95.41

Cash reinvestment ratio (％ ) (0.42) 138.5 28.56 (63.64) (35.07) (5.62)

LeverageOperational Leverage 0.01 2.28 1.13 0.56 0.67 (1.2)

1.39 1.02 1.02 0.84 0.80 0.57

Note 1: The financial information for the past five years has been examined and certified by the CPA.Note 2: The ratio is not applicable to the Company due to industry characteristics.Note 3: Not applicable as it is less than five years.


(2) Financial Analysis (IFRS individual)

　　　　　　　　　　　　　　　　　　　　　　　YearAnalysis Item　　　　　　　　　　　　　　　　　　　

Financial Analysis of the last five years. Current fiscal

year up to 3/31/20172012 2013 2014 2015 2016

Financial Structure (%)

Ratio of liabilities to assets 61.84 51.25 35.08 34.74 39.99

Ratio of long-term capital to real estate properties, factories and equipment 1,366.91 1,580.59 3,224.80 3,729.58 4,334.68

Solvency %

Current Ratio 123.93 116.72 122.24 109.85 114.53

Quick Ratio 91.48 109.80 115.33 102.41 107.07

Interest Protection Multiples 6.84 (Note 4) 629.67 13.99 3.49

Operating ability

Receivables turnover (times) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

Average collection period (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

Inventory turnover (times) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

Payables turnover (times) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

Average days in sales (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

Turnover ( t imes) o f rea l esta te properties, factories and equipment 1.87 4.99 3.43 0.80 0.16

Total assets turnover (times) 0.05 0.26 0.08 0.02 0.00

Profitability

ROA(％ ) 1.15 8.66 24.52 8.55 1.69

ROE(％ ) 2.52 11.61 40.22 12.30 1.43

Pre-tax profit to paid-in capital ratio(%) 2.83 13.10 78.73 29.47 3.87

Net profit ratio(％ ) 18.26 33.90 307.96 495.50 316.65

EPS (NT$) 0.28 1.30 7.39 2.78 0.34

Cash Flow

Cash flow ratio (％ ) 5.96 51.70 19.99 (17.68) (10.05)

Cash flow adequacy ratio (％ ) (Note 3) (Note 3) (Note 3) (Note 3) 0.00

Cash reinvestment ratio (％ ) 10.45 89.79 12.42 (10.74) (6.33)

LeverageOperational Leverage 3.58 1.99 1.04 0.81 0.97

Financial Leverage 1.26 1.00 1.01 0.31 0.51

Note 1: The financial information for the past five years has been examined and certified by the CPA.Note 2: The ratio is not applicable to the Company due to industry characteristics.Note 3: Not applicable as it is less than five years.Note 4: Not applicable as the interest is zero.

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(3) Financial Analysis-Financial Accounting Standards in Taiwan

　　　　　　　　　　　　　　　　　　　　　　　　　　　　YearAnalysis Item　　　　　　　　　　　　　　　　　　　　　　　　

Financial Analysis of the last five years.

2012

Financial Structure (%)Ratio of liabilities to assets 62.31

Ratio of long-term capital to fixed assets 616.01

Solvency (%)

Current Ratio 123.96

Quick Ratio 91.42

Interest Protection Multiples 6.69

Operating ability

Receivables turnover (times) (Note 3)

Average collection period (Note 3)

Inventory turnover (times) (Note 3)

Payables turnover (times) (Note 3)

Average days in sales (Note 3)

Fixed assets turnover 0.90

Total assets turnover 0.05

Profitability

ROA(％ ) 1.16

ROE(％ ) 2.53

Paid-in capital ratio

Operating income 2.33

Net income before income tax 2.84

Net profit ratio(％ ) 18.35

EPS (NT$) 0.28

Cash flow (Note 2)

Cash flow ratio (％ ) 5.99

Cash flow adequacy ratio (％ ) 107.19

Cash reinvestment ratio (％ ) 9.57

LeverageOperational Leverage 3.57

Financial Leverage 1.27

Note 1: The financial information for the past five years has been examined and certified by the CPA.Note 2: The cash flow of operational activities in the cash flow analysis is the net cash flow of operational activities in the cash flow

statement.Note 3: The ratio is not applicable to the Company due to industry characteristics.

(4) Reasons for changes in financial ratios in recent two years:

A. The fact that long-term funds accounted for a declining percentage of real estate, factories and facilities is due to increased long-term debts in this period.

B. The reduction in ensured interest multiples is due to reduced profits for the period.

C. The decline in the turnover ratio of accounts receivable is due to an increase in the average amount of accounts receivable for this period over the previous period, which resulted in an uptick in the average number of days for collecting accounts receivable.

D. The decline in the turnover ratio of goods in stock is due to continued commitment to development during this period, resulting in an increase in stock.

E. The decline in the turnover ratio of accounts payable is due to an increase in the average amount of accounts payable for this period over the previous period, which resulted in an uptick in the average number of days for sales.

F. The decline in profitability ratio is due to decreased operating revenue for this period.

G. The decline in cash flow ratio is due to decreased net cash outflow from business activities in this period over the previous period.

H. The decline in net cash flow adequacy ratio is due to decreased net cash flow from business activities as a result of developing long-term business operations.


I. The increase in cash reinvestment ratio is due to an increase in net cash outflow from investment activities in this period over the previous period.

The formulae of the financial analyses are as below

A. Financial Structure

(a) Ratio of liabilities to assets = Total liabilities/Total assets

(b) Ratio of long-term capital to real estate properties, factories and equipment=(Total equity+Non-current liabilities)/net amount of real estate properties, factories and equipment

B. Solvency

(a) Current ratio=Current assets/Current liabilities

(b) Quick Ratio=(Current assets-Inventories-Prepaid expenses)/Current liabilities

(c) Interest Protection Multiples= PBIT/Interest expenses for this period

C. Operating ability

(a) Receivables turnover (including accounts receivable and notes receivable generated from operation) = net sales/remaining sum of average receivables (including accounts payable and notes payable generated from operation) for every period

(b) Average collection period = 365/receivables turnover

(c) Inventory turnover = cost of sales/average inventory

(d) Payables turnover (including accounts payable and notes payable generated from operation) = cost of sales/remaining sum of average payables (including accounts payable and notes payable generated from operation) for every period

(e) Average days in sales = 365/Inventory turnover

(f) Turnover of real estate properties, factories and equipment = net sales/average net amount of real estate properties, factories and equipment

(g) Total assets turnover = net sales/average total assets

D. Profitability

(a) ROA = [income after tax + interest expense x (1-tax rate)]/average total assets

(b) ROE = income after tax/net average equity

(c) Net profit ratio = income after tax/net sales

(d) EPS = (income belonging to parent company - stock dividend of preferred stocks)/weighted average number of issued shares

E. Cash Flow

(a) Cash flow ratio = net cash flow of operating activities/current liabilities

(b) Net cash flow adequacy ratio = net cash flow of operating activities in the last 5 years/(capital expenditure + addendum of inventory + cash dividend) in the last 5 years

(c) Cash reinvestment ratio = (net cash flow of operating activities - cash dividend)/(gross amount of real estate properties, factories and equipment + long-term investment + other non-current assets + operating capital)

F. Leverage:

(a) Operating leverage = (net operating income - current operating cost and expense)/operating profit Financial leverage = operating profit/(operating profit - interest expense)

81



Taiwan Land Development Corporation2016 Annual ReportSupervisors' Report

　　The Company’s 2016 individual financial statements (including balance sheet, income statement, statement of changes in shareholders’ equity and cash flow statement) and consolidated financial report, together with the 2016 business report and consolidated business report of affiliates submitted and surplus distribution form to supervisors for the verification by the Board of the Company have been certified and audited by accountants Ueng Shyh-Rong and Wang Hui-Hsien of Pricewaterhouse Coopers. After careful examination of the supervisors, the supervisors concluded that these financial reports have been properly prepared in accordance with requirements of Article 219 of the Corporation Act of the Republic of China.

To the Shareholders’ Meeting of 2017

Corporation Supervisor: Nienshin Investment Co., Ltd.

Representative:

Corporation Supervisor: Dahe Media Co.,Ltd

Representative:

Supervisor:

April 20 , 2017


REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

ToTo the Board of Directors and Shareholders of Taiwan Land Development Corporation

Opinion

　　We have audited the accompanying balance sheets of Taiwan Land Development Corporation (the “Company”) as at December 31, 2016 and 2015, and the related statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.　　In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Issuers”.

Basis for opinion

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

Emphasis of matter –Land Development Receivables

　　As described in Note 6(3), the Taiwan Land Development Corporation has been consigned to develop the industrial parks since the period it was government-operated. According to the consignment contract, the Company should pay all the development costs in advance, with the payments to be reimbursed when the land is sold. The land development receivables increased by $502,705 thousand, the collection of land development receivables amounted to $306,828 thousand for the year ended December 31, 2015, and the uncollected balance of land development receivables was $5,301,274 thousand as of December 31, 2016.

Key audit matters

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


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Investment property

Description　　For a description of accounting policy on investment property, please refer to Note 4(12). For the accounting estimates and assumption uncertainty in relation to investment property, please refer to Note 5. For the details of investment property, please refer to Note 6(7).　　The Company’s investment properties consisted of hotels and shopping centres constructed in order to collect rents, and the land under development, and stated initially at its cost and measured subsequently using the fair value model. Also, the Company’s valuation of investment properties are taken to be the best use based on the purpose of the land’s legal usage, land usage intensity and changes in land use efficiency from land development and improvements. The Company’s investment properties were recognised based on the appraisal report from external appraisers.　　We considered that the aforementioned amount involved future year’s forecasting, assumptions were unobservable inputs have high estimation uncertainty, and the estimated outcome has a significant effect in valuing investment properties. Since the aforementioned circumstances were existing in the Company’s subsidiaries which were accounted for using equity method, we determined that the investment properties as one of the key areas of focus for this year’s audit.

How our audit addressed the matter　　We performed the following audit procedures on the above key audit matter:1. Assessed the appointed external appraisers in conformity with the rules of qualification and

independence.2. Obtained the appraisal report of investment properties which was provided by the external

appraisers, and confirmed that the appraisal method used met the rules of “ Regulations Governing the Preparation of Financial Reports by Securities Issuers.”

3. Evaluated the estimation procedures of the Company’s future cash flows made by the external appraiser for the investment properties which were evaluated by using income approach, and compared with future year’s cash flows that was listed in the valuation model with management’s operation plan.

4. For investment properties under land development analysis, checked prices of each similar property and compared with similar asset prices available using public information.

5. Checked the accuracy of valuation model calculation, and confirmed that the recognition amount was in agreement with the appraisal report.

Recognition of service revenue from industrial park

Description　　For a description of accounting policy on revenue recognition, please refer to Note 4(6) (22). For details of revenue recognition, please refer to Note 6(21).　　The Company entered into industrial park development contracts with the government and operates in the development and leasing business of industrial parks according to the Statute for Industrial Innovation. According to the consignment contract, the government was in charge of land acquisition and cadastration and the Company shall raise funds for the costs, with the development costs to be reimbursed when the land is sold or leased. In addition, processing fee was calculated within the scopes of development and lease business after completing the agreements, and was recognized as development cost. Also, the Company recognized service revenue based on the percentage of land sold or leased.


　　Since the service revenue from the industrial park was recognized and calculated by the percentage of the land sold or leased, and has a significant percentage in operating revenue, we determined that the service revenue from industrial park as one of the key areas of focus for this year’s audit.

How our audit addressed the matter　　We performed the following audit procedures on the above key audit matter:1. Obtained an understanding and assessed the reasonableness of policies and procedures which

were used to recognize service revenue.2. Obtained an understanding and assessed the internal controls of related outsourcing

procedures, the sale and leasing business and revenue recognition of industrial parks, and performed related tests.

3. Obtained details of development cost, and selected samples to verify the amount of related vouchers and compared with carrying amount.

4. Obtained and checked the development contract and industrial park sales rate table, and verified and recalculated the accuracy of sales rate and service revenue.

Responsibilities of management and those charged with governance for the financial statements

　　Management is responsible for the preparation and fair presentation of the financial statements in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Issuers”, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 　　In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. 　　Those charged with governance, including supervisors, are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements

　　Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 　　As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:1. Identify and assess the risks of material misstatement of the financial statements, whether due

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

85


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

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

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

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

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

　　We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 　　We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 　　From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Weng, Shih-Jung Wang, Hui-Hsien

For and on behalf of PricewaterhouseCoopers, TaiwanMarch 24, 2017


TAIWAN LAND DEVELOPMENT CORPORATIONPARENT COMPANY ONLY BALANCE SHEETSYEARS ENDED DECEMBER 31(Expressed in thousands of New Taiwan dollars)

Assets NotesDecember 31, 2016 December 31, 2015

AMOUNT % AMOUNT %Current assets

1100 Cash and cash equivalents 6(1) $ 2,034,256 7 $ 2,139,552 8

1110 Financial assets at fair value through profit or loss - current 6(2) and 7 370,280 1 80 -

1170 Accounts receivable, net 1,759 - 9 -1200 Other receivables 6(3) and 8 5,369,528 18 5,107,493 191210 Other receivables - related parties 7 34,510 - 97,238 11220 Current income tax assets 295 - - -130X Inventories, net 6(4) and 8 504,766 2 502,629 21410 Prepayments 7 74,346 - 51,431 -1470 Other current assets 8 491,494 2 289,430 111XX Current Assets 8,881,234 30 8,187,862 31

Non-current assets

1546 Investments in debt instrument without active market - noncurrent 7 1,144,660 4 - -

1550 Investments accounted for under equity method 6(5) 11,737,383 39 11,090,006 411600 Property, plant and equipment, net 6(6)(9) and 8 509,903 2 516,193 21760 Investment property, net 6(7), 7 and 8 6,474,503 21 5,832,163 221900 Other non-current assets 6(8) and 8 1,109,221 4 1,079,351 415XX Non-current assets 20,975,670 70 18,517,713 691XXX Total assets $ 29,856,904 100 $ 26,705,575 100

Liabilities and EquityCurrent liabilities

2100 Short-term borrowings 6(10) and 8 1,287,341 4 1,263,341 52110 Short-term notes and bills payable 6(11) and 8 186,344 1 186,132 12150 Notes payable 311 - 799 -2170 Accounts payable 129 - 30 -2200 Other payables 6(12) 2,160,515 7 2,393,283 92220 Other payables - related parties 7 118,796 1 16,834 -2230 Current income tax liabilities - - 1,952 -2300 Other current liabilities 6(13)(14)(15) 4,000,786 13 3,591,597 1321XX Current Liabilities 7,754,222 26 7,453,968 28

Non-current liabilities2530 Corporate bonds payable 6(14) 3,814,167 13 1,489,265 62570 Deferred income tax liabilities 6(27) 300,938 1 258,504 12600 Other non-current liabilities 7 70,895 - 76,482 -25XX Non-current liabilities 4,186,000 14 1,824,251 72XXX Total Liabilities 11,940,222 40 9,278,219 35

EquityShare capital 6(18)

3110 Share capital - common stock 7,607,849 25 7,258,813 27Capital surplus 6(19)

3200 Capital surplus 27,894 - 316,057 1Retained earnings 6(20)

3310 Legal reserve 965,381 3 761,373 33320 Special reserve 9,163,601 31 6,873,013 263350 Unappropriated retained earnings 236,562 1 2,683,961 10

Other equity interest3400 Other equity interest 2,375 - 5,734 -3500 Treasury stocks 6(18) ( 86,980) - ( 471,595) ( 2)3XXX Total equity 17,916,682 60 17,427,356 65

Commitments and contingent liabilities 6(14) and 9Significant events after the balance sheet date 11

3X2X Total liabilities and equity $ 29,856,904 100 $ 26,705,575 100

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

87


TAIWAN LAND DEVELOPMENT CORPORATIONPARENT COMPANY ONLY STATEMENTS OF INCOMEFOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015(Expressed in thousands of New Taiwan dollars, except earnings per share amounts)

Items Notes

Years ended December 31

2016 2015

AMOUNT % AMOUNT %

4000 Sales revenue 6(21) and 7 $ 79,579 100 $ 411,718 100

5000 Operating costs 6(25) and 7 1,396 2 672 -

5950 Net operating margin 80,975 102 412,390 100

Operating expenses 6(25) and 7

6100 Selling expenses ( 134,892) ( 170) ( 222,916) ( 54)

6200 General & administrative expenses ( 226,093) ( 284) ( 262,167) ( 64)

6000 Total operating expenses ( 360,985) ( 454) ( 485,083) ( 118)

6900 Operating loss ( 280,010) ( 352) ( 72,693) ( 18)

Non-operating income and expenses

7010 Other income 6(22) and 7 63,179 80 31,057 7

7020 Other gains and losses 6(23) 475,137 597 633,049 154

7050 Finance costs 6(24) ( 81,817) ( 103) ( 71,683) ( 17)

7070 Share of profit of associates and joint ventures accounted for using equity method, net 6(5) 117,934 148 1,619,426 393

7000 Total non-operating income and expenses 574,433 722 2,211,849 537

7900 Profit before income tax 294,423 370 2,139,156 519

7950 Income tax expense 6(27) ( 42,434) ( 54) ( 99,080) ( 24)

8200 Profit for the year $ 251,989 316 $ 2,040,076 495

Other comprehensive income

Components of other comprehensive income that will be reclassified to profit or loss

8361 Other comprehensive income, before tax, exchange differences on translation ( 3,359) ( 4) ( 1,004) -

8500 Total comprehensive income for the year $ 248,630 312 $ 2,039,072 495

Basic earnings per share 6(28)

9750 Total basic earnings per share $ 0.34 $ 2.78

9850 Total diluted earnings per share $ 0.33 $ 2.75



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89


TAIWAN LAND DEVELOPMENT CORPORATIONPARENT COMPANY ONLY STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31. 2016 AND 2015(Expressed in thousands of New Taiwan dollars)

NotesYears ended December 31

2015 2014

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax $ 294,423 $ 2,139,156

Adjustments

Adjustments to reconcile profit (loss)

Gain on reversal of market value of inventories 6(4) ( 2,100) ( 1,871)

Depreciation 6(6) 8,761 14,250

Interest expense (including capitalized interest) 6(24) 272,750 211,136

Interest income 6(22) ( 75,596) ( 11,847)

(Reversal of) impairment loss 6(23) ( 825) ( 1,588)

Dividends received from investments accounted for using the equity method 6(5) ( 117,934) ( 1,619,426)

Loss (gain) on disposal of property, plant and equipment 6(23) 14 ( 144)

Losses on financial assets at fair value through profit or loss 6(2) 27,750 -

Adjustments of fair value of investment properties 6(7)(23) ( 502,086) ( 631,665)

Compensation cost of share-based payments 15,624 300

Changes in operating assets and liabilities

Changes in operating assets

Accounts receivable, net ( 1,750) 29

Other receivables, net ( 262,020) ( 577,200)

Inventories ( 37) 9,156

Prepayments ( 22,915) ( 26,104)

Changes in operating liabilities

Notes payable ( 488) 34

Accounts payable 99 ( 1,738)

Other payables ( 254,222) ( 626,351)

Other payables - related parties 1,962 ( 2,530)

Other current liabilities 34,644 23,224

Cash outflow generated from operations ( 583,946) ( 1,103,179)

Interest received 75,581 11,658

Interest paid ( 268,586) ( 209,889)

Income tax paid ( 2,247) ( 16,408)

Net cash flows used in operating activities ( 779,198) ( 1,317,818)


NotesYears ended December 31

2015 2014

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of financial assets at fair value through profit or loss ($ 397,950) $ -

Decrease (increase) in other receivables - related parties 62,728 ( 95,630)

(Increase) decrease in other assets-current ( 202,064) 105,458

Acquisition of investments accounted for using equity method 6(5) ( 530,000) ( 609,690)

Acquisition of property, plant and equipment 6(6) ( 1,660) ( 3,100)

Proceeds from disposal of property, plant and equipment - 428

Acquisition of investment properties 6(29) ( 116,717) ( 158,003)

Increase in other non-current assets ( 49,635) ( 83,650)

Increase in refundable deposits ( 240) ( 20,527)

Decrease in refundable deposits 20,006 107

Increase in investments in debt instrument without active market - noncurrent ( 1,144,660) -

Net cash flows used in investing activities ( 2,360,192) ( 864,607)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from short-term loans 790,000 587,341

Repayment of short-term loans ( 766,000) ( 24,000)

Increase in short-term notes and bills payable 212 430

Increase in other payables - related parties 100,000 -

Proceeds from long-term debt 2,965,800 -

Repayment of long-term debt ( 3,091,256) ( 262,000)

Proceeds from issuance of bonds 6(14) 2,818,750 991,677

(Decrease) increase in guarantee deposits received ( 5,587) 1,743

Cash dividends paid 6(20) ( 142,426) ( 127,742)

Payments to acquire treasury shares 6(18) ( 219,979) ( 364,039)

Treasury shares sold to employees 584,580 140,771

Net cash flows from financing activities 3,034,094 944,181

Net decrease in cash and cash equivalents ( 105,296) ( 1,238,244)

Cash and cash equivalents at beginning of year 2,139,552 3,377,796

Cash and cash equivalents at end of year $ 2,034,256 $ 2,139,552


91


TAIWAN LAND DEVELOPMENT CORPORATIONNOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTSDECEMBER 31, 2016 AND 2015(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANIZATION Taiwan Land Development Corporation (the “Company”) was established on June 30, 1964 as a government-

operated company and the principal business was land development. In July 1972, the Company was renamed as “Taiwan Trust and Development Corporation” and its principal business became financial services and land development. The Company became a listed company in January 1999 after privatization.

To comply with the government’s “Second Financial Reformation Policy” and the rules of Trust Enterprise Act, the Company sold its trust department through a public bidding in August 2005. Consequently, the Company became a professional land development company from a financial institution with the approval of the Financial Supervisory Commission on September 13, 2005. The stockholders subsequently resolved to change the company name back to its original name “Taiwan Land Development Corporation” on December 14, 2005 with the principal business of land development and urban renewal development. The Company changed its type of industry in the Taiwan Stock Exchange to Building Material and Construction after March 2006.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE PARENT COMPANY ONLY FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These parent company only financial statements were authorized for issuance by the Board of Directors on March 23, 2017.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting

Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

None.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Company

New standards, interpretations and amendments endorsed by FSC effective from 2017 are as follows:

New Standards, Interpretations and Amendments Effective Date by

International Accounting Standards Board

Investment entities: applying the consolidation exception (amendments to IFRS 10, IFRS 12 and IAS 28) January 1, 2016

Accounting for acquisition of interests in joint operations (amendments to IFRS 11) January 1, 2016

IFRS 14,‘Regulatory deferral accounts’ January 1, 2016

Disclosure initiative (amendments to IAS 1) January 1, 2016

Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38) January 1, 2016

Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016

Defined benefit plans: employee contributions (amendments to IAS 19R) July 1, 2014

Equity method in separate financial statements (amendments to IAS 27) January 1, 2016

Recoverable amount disclosures for non-financial assets (amendments to IAS 36) January 1, 2014

Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) January 1, 2014

IFRIC 21, ‘Levies’ January 1, 2014

Improvements to IFRSs 2010-2012 July 1, 2014


Improvements to IFRSs 2012-2014 January 1, 2016

The above standards and interpretations have no significant impact to the Company’s financial condition and operating result based on the Company’s assessment.


(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRS endorsed by the FSC effective from 2017 are as follows:



Classification and measurement of share-based payment transactions (amendments to IFRS 2) January 1, 2018

Applying IFRS 9 ‘Financial instruments’ with IFRS 4 ‘Insurance contracts’ (amendments to IFRS 4) January 1, 2018

IFRS 9, ‘Financial instruments’ January 1, 2018

Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28)

To be determined by International Accounting

Standards Board

IFRS 15, ‘Revenue from contracts with customers’ January 1, 2018

Clarifications to IFRS 15, ‘Revenue from contracts with customers’ (amendments to IFRS 15) January 1, 2018

IFRS 16, ‘Leases’ January 1, 2019


Recognition of deferred tax assets for unrealised losses (amendments to IAS 12) January 1, 2017

Transfers of investment property (amendments to IAS 40) January 1, 2018

IFRIC 22, ‘Foreign currency transactions and advance consideration’ January 1, 2018

Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ January 1, 2018

Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 12, ‘Disclosure of interests in other entities’ January 1, 2017

Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28, ‘Investments in associates and joint ventures’ January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Company’s financial condition and operating result based on the Company’s assessment. The quantitative impact will be disclosed when the assessment is complete.

A. IFRS 9, ‘Financial instruments’

(a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.

(b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.

B. IFRS 15, ‘Revenue from contracts with customers’

IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11 ‘Construction contracts’, IAS 18 ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognised when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:

93


Step 1: Identify contracts with customer

Step 2: Identify separate performance obligations in the contract(s)

Step 3: Determine the transaction price

Step 4: Allocate the transaction price.

Step 5: Recognise revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

C. Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from Contracts with Customers‘

The amendments clarify how to identify a performance obligation (the promise to transfer a good or a service to a customer) in a contract; determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and determine whether the revenue from granting a license should be recognised at a point in time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new Standard.

D. IFRS 16, ‘Leases’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a 'right-of-use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

E. Amendments to IAS 7, ‘Disclosure initiative’

This amendment requires that an entity shall provide more disclosures related to changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

F. Amendments to IAS 40, ‘Transfers of investment property’

The amendment clarified that to transfer to, or from, investment properties there must be a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A change in management’s intentions, in isolation, does not provide evidence of the change in use. In addition, the amendments added examples for the evidence of a change in use. The examples include assets under construction or development (not completed properties) transfer from investment property to owner-occupied property at commencement of development with a view to owner-occupation and transfer from inventories to investment property at inception of an operating lease to another party.

The Company is assessing the potential impact of the new standards, interpretations and amendments above. The impact on the consolidated financial statements will be disclosed when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these parent company only financial statements are

set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

The parent company only financial statements of the Company have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

(2) Basis of preparation

A. Except for the following items, the parent company only financial statements have been prepared under the historical cost convention:

(a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.


(b) Investment property is subsequently measured at fair value.

B. The preparation of financial statements in compliance with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

(3) Classification of current and non-current items

The Company classifies assets and liabilities relating to the construction department as current and non-current by its operating cycle (which is normally longer than one year). The following are the classification criteria for other departments:

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

(a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

(b) Assets held mainly for trading purposes;

(c) Assets that are expected to be realised within twelve months from the balance sheet date;

(d) Cash, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

(a) Liabilities that are expected to be settled within the normal operating cycle;

(b) Liabilities arising mainly from trading activities;

(c) Liabilities that are to be settled within twelve months from the balance sheet date;

(d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(4) Financial assets at fair value through profit or loss

A. Financial assets at fair value through profit or loss are financial assets held for trading or financial assets designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

(a) Hybrid (combined) contracts; or

(b) They eliminate or significantly reduce a measurement or recognition inconsistency; or

(c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.

C. Financial assets at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in profit or loss.

95


(5) Accounts receivable

Accounts receivable are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(6) Consigned land development business

A. The government organizations consign land development business to the Company, and the Company is also in charge of marketing the development in some cases.

B. During the consignment period, the Company, as a consignee, pays on behalf of consignors for compensation fees of land collection, construction costs, supervision costs and inspection costs, etc. Consignors compute interest payable on cost paid by the Company. When conducting consigned land development business, including industrial parks, land restructuring and land repurchase, costs are recognised pursuant to the agreements in each consignment contract and contracts with contractors. When the proceeds from sale of land exceed the cost, in accordance with Article 47 of Act for Industrial Innovation, developing organizations can make an agreement on receiving certain portion of profit with the commission organizations. In the case of industrial parks development, the Company recognises service income based on sales rate and progress of construction, when meeting all the following criteria:

(a) Costs attributed to the contract can be reasonably confirmed.

(b) Except for the collectible costs, other contract costs can be reasonably estimated.

(c) The collectibility of service income can be reasonably confirmed.

C. Development costs are debited to the account “Land Development Receivables”, and receipts from buyers are credited to the account “Other current liabilities – deposit for sale of industrial park received in advance”, which are then offset with land development receivables when buyers settle the last payment.

(7) Impairment of financial assets

A. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

B. The criteria that the Company uses to determine whether there is objective evidence of an impairment loss is as follows:

(a) Significant financial difficulty of the issuer or debtor; or

(b) A breach of contract, such as a default or delinquency in interest or principal payments.

C. As the Company has assessed that there is objective evidence that the financial assets measured at amortised cost are impaired, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognised in profit or loss. 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 loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(8) Inventories

A. Except for land development agency, the Company’s inventories are land for construction, construction in progress and land and buildings for sale.


B. Development costs are stated at cost, and qualified interest costs incurred during construction are capitalised. Inventories are transferred to construction costs on ratio-of-area method or ratio of selling price method consistently. Inventories are transferred to property for self-use when they are for self-use. When the purpose of use is changed and the inventories are then leased to others under operating leases, inventories are transferred to investment property.

C. Buildings and land held for sale, construction in progress and land held for construction site are evaluated at the lower of cost or net realisable value, and the individual item approach is used in the comparison of cost and net realisable value.

D. Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The item by item approach is used in applying the lower of cost and net realisable value.

(9) Investments in debt instrument without active market

A. Investments in debt instrument without active market are loans and receivables not originated by the entity. They are bond investments with fixed or determinable payments that are not quoted in an active market, and also meet all of the following conditions:

(a) Not designated on initial recognition as at fair value through profit or loss;

(b) Not designated on initial recognition as available-for-sale;

(c) Not for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.

B. On a regular way purchase or sale basis, investments in debt instrument without active market are recognised and derecognised using trade date accounting.

C. Investments in debt instrument without active market are initially recognised at fair value on the trade date plus transaction costs and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Amortisation of a premium or a discount on such assets is recognised in profit or loss.

(10) Investments accounted for using equity method/subsidiaries

A. Subsidiaries are all entities (including structured entities) controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

B. Unrealised profit (loss) that occurred from the transactions between the Company and subsidiaries have been offset. The accounting policies of the subsidiaries have been adjusted to be consistent with the Company’s accounting policies.

C. The Company’s share of its subsidiaries’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company’s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise losses proportionate to its ownership.

D. If changes in shareholdings in subsidiaries do not result in loss of control (transaction with non-controlling interest), transactions shall be considered as equity transactions, which are transactions between owners. Difference of adjustment of non-controlling interest and fair value of consideration paid or received is recognised in equity.

E. When the Company loses control of a subsidiary, the Company remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Company loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

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F. Pursuant to the “Rules Governing the Preparation of Financial Statements by Securities Issuers,” profit (loss) of the current period and other comprehensive income in the parent company only financial statements shall equal to the amount attributable to owners of the parent in the consolidated financial statements. Owners’ equity in the parent company only financial statements shall equal to equity attributable to owners of the parent in the consolidated financial statements.

(11) Property, plant and equipment

A. Property, plant and equipment are initially recorded at cost.

B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost must be depreciated separately.

D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

Buildings 55 years

Transportation equipment 5~15 years

Utility equipment 4~15 years

Leasehold assets 3 years

Other equipment 5~10 years

Leasehold improvements 5 years

(12) Investment property

A. Investment property is property held to earn rent or increase value or for both (including property under construction for the purpose). Investment property also includes land whose purpose of use has not been decided and is thus considered as capital appreciation. Investment property is transferred to property for self-use when it is for self-use. Investment property is transferred to inventory when it is held-for-sale.

B. An investment property is stated initially at its cost and measured subsequently using the fair value model. A gain or loss arising from a change in the fair value of investment property is recognised in profit or loss.

(13) Impairment of non-financial assets

The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

(14) Borrowings

A. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.


B. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

(15) Accounts payable

Accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. However, short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(16) Financial liabilities and equity instruments

A. Ordinary corporate bonds

Ordinary corporate bonds issued by the Company are initially recognised at fair value, net of transaction costs incurred. Ordinary corporate bonds are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is accounted for as the premium or discount on bonds payable and presented as an addition to or deduction from bonds payable, which is amortised in profit or loss as an adjustment to the ‘finance costs’ over the period of bond circulation using the effective interest method.

B. Convertible corporate bonds payable

Convertible corporate bonds issued by the Company contain conversion options (that is, the bondholders have the right to convert the bonds into the Company’s common shares by exchanging a fixed amount of cash for a fixed number of common shares) and call options. The Company classifies the bonds payable and derivative features embedded in convertible corporate bonds on initial recognition as a financial asset or an equity instrument (‘capital surplus—stock warrants’) in accordance with the substance of the contractual arrangement and the definitions of a financial asset and an equity instrument. Convertible corporate bonds are accounted for as follows:

(a) Call options embedded in convertible corporate bonds are recognised initially at net fair value as ‘financial assets at fair value through profit or loss’. They are subsequently remeasured and stated at fair value on each balance sheet date; the gain or loss is recognised as ‘gain or loss on valuation of financial assets at fair value through profit or loss’.

(b) Bonds payable of convertible corporate bonds is initially recognised at fair value and subsequently stated at amortised cost. Any difference between the proceeds and the redemption value is accounted for as the premium or discount on bonds payable and presented as an addition to or deduction from bonds payable, which is amortised in profit or loss as an adjustment to the ‘finance costs’ over the period of bond circulation using the effective interest method.

(c) Conversion options embedded in convertible corporate bonds issued by the Company, which meet the definition of an equity instrument, are initially recognised in ‘capital surplus—stock warrants’ at the residual amount of total issue price less amounts of ‘financial assets at fair value through profit or loss’ and ‘bonds payable—net’ as stated above. Conversion options are not subsequently remeasured.

(17) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

B. Pensions

For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

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C. Employees’ compensation, directors’ and supervisors’ remuneration

Employees’ compensation, directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal obligation or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

(18) Employee share-based payment

For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

(19) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

C. Deferred income tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

D. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.

(20) Treasury shares

Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(21) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are approved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.


(22) Revenue recognition

A. Construction revenues

The Company’s activities involve developing and investing in fixed assets and mainly focus on developing and selling residential and enterprise buildings. As the customer hasop limited ability to influence the design or the customer can make little changes to basic design, the sale of residential and enterprise buildings is considered as sale of goods. Revenue should be recognised when the Company has delivered the goods to the customer, significant risks and rewards of ownership have been transferred to the customer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity.

B. Sales of services

The Company serves as an agent of land development on behalf of government organizations and is responsible to sell partial development projects. Sales of services are recognised at the percentage of completion when the following conditions are met:

(a) Amount of sales revenue can be measured reliably;

(b) It is probable that the future economic benefits associated with the transaction will flow to the entity;

(c) Percentage of completion of transactions at the end of reporting period can be measured reliably;

(d) Costs incurred and will incur to complete the transaction can be measured reliably.

Please refer to Note 4(5) for related revenue recognised.

C. Catering income

Food service revenue is recorded when the services are rendered. The Company provides catering and film related entertainment services. Revenue is measured at the fair value of the consideration received or receivable. Revenue is recorded when the amount can be reliably measured and the economic benefit concerning the transactions can be accrued by the Company.

D. Rental revenue

It is recognised as income on a straight-line basis during leasing period.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

Measurement of investment property

As investment property is measured at fair value, the Company must determine the net fair value of investment property such as land and buildings on balance sheet date using experts’ judgements and estimates. The Company must adjust costs to fair value based on the valuation reports by experts. Such assessment of investment property is principally based on the demand for the products within the specified period in the future, trading trends of buildings and experts’ judgements and estimates, and may influence the measurement of fair value. Therefore, there might be material changes to the evaluation.

As of December 31, 2016, the Company has recognised investment property of $6,474,503.

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6. DETAILS OF SIGNIFICANT ACCOUNTS (1) Cash and cash equivalents

December 31, 2016 December 31, 2015

Cash on hand and revolving funds $ 1,710 $ 1,545

Checking accounts and demand deposits 2,032,546 2,138,007

$ 2,034,256 $ 2,139,552

A. The Company transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

B. The Company has appropriately reclassified the cash provided for collateral, and the information on pledged assets is provided in Note 8.


Items December 31, 2016 December 31, 2015

Current items: Financial assets held for trading Derivative financial instruments-Bonds payable $ 80 $ 80

Financial assets at fair value through profit or loss, designated as upon initial recognition- preference share 370,200 -

$ 370,280 $ 80

A. The Company recognised net loss of $27,750 and $0 on these financial assets for the years ended December 31, 2016 and 2015, respectively,

B. The counterparties of the Company’s debt instrument investments have good credit quality; their credit rating levels are twBBB and above. The maximum exposure to credit risk at balance sheet date is the carrying amount of financial assets at fair value through profit or loss.

C. On May 5, 2016, the Company purchased 150,000,000 cumulative redeemable preference shares of Taiwan Innovation Development Corporation with a par value of NT$10. On May 5, 2021, these shares will be redeemed forcibly with the par value. Each year, the Company accrues 3% as dividend.

D. The Company has no financial assets at fair value through profit or loss pledged to others.

(3) Other receivables


Land development receivables $ 5,301,274 $ 5,105,397

Other receivables 68,254 2,096

$ 5,369,528 $ 5,107,493

A. The details on land development receivables were as follows:

December 31, 2016Accumulated

service income atDecember31, 2016

Consignors

Kuang Hua Lohas Creative Park $ 3,773,882 $ 792,700 Hualien County Government

Kaohsiung Kangshan Benzhou Industrial Park 897,902 1,430,264 Kaohsiung City Government

Taichung Port Warehouse Park 17,432 176,632 Export Processing Zone, MOEA

Taichung City 1st Precision Machinery Innovation Technology Park 40,680 2,851,667 Taichung City

Government Taichung City 2nd Precision Machinery Innovation Technology Park - 467,699 Taichung City

Government

Taichung City, Feng Chou High-Tech Industrial Park 441,800 17,405 Taichung City Government

Taichung City, Wen- Shan Industrial Park 39,694 4,593 Taichung City Government

Taichung Aviation Industrial Park and Astronavigation 89,884 7,388 Taichung City Government

$ 5,301,274 $ 5,748,348


December 31, 2015 Accumulated


Consignors



Taichung Port Warehouse Park 17,432 176,632 Export Processing Zone, MOEA

Taichung City 1st Precision Machinery Innovation Technology Park 151,943 2,836,463 Taichung City

Government Taichung City 2nd Precision Machinery Innovation Technology Park - 455,450 Taichung City

Government


Taichung City, Wen- Shan Industrial Park 39,694 4,593 Taichung City Government

Taichung Aviation Industrial Park and Astronavigation 89,464 7,388 Taichung City Government

$ 5,105,397 $ 5,689,912

B. The movements on land development receivables for the year ended December 31, 2016 are as follows:

Items Beginning balances Additions Collections Ending

balances

Kuang Hua Lohas Creative Park $ 3,550,008 $ 223,874 $ - $ 3,773,882

Kaohsiung Kangshan Benzhou Industrial Park 857,976 39,926 - 897,902

Taichung Port Warehouse Park 17,432 - - 17,432

Taichung City 1st Precision Machinery Innovation Technology Park 151,943 111,227 ( 222,490) 40,680

Taichung City 2nd Precision Machinery Innovation Technology Park - 84,338 ( 84,338) -

Taichung City, Feng Chou High -Tech Industrial Park 398,880 42,920 - 441,800

Others 129,158 420 - 129,578

$ 5,105,397 $ 502,705 ($ 306,828) $ 5,301,274

The movements on land development receivables for the year ended December 31, 2015 are as follows:

Items Beginning balances Additions Collections Ending

balances




Taichung City 1st Precision Machinery Innovation Technology Park - 505,781 ( 353,838) 151,943



Others 113,385 15,773 - 129,158

$ 4,527,990 $ 1,152,931 ($ 575,524) $ 5,105,397

C. For the years ended December 31, 2016, and 2015, interests paid on behalf of consignors recognised as deduction of interest expense were $172,710 and $139,453, respectively.

D. The reasons for the Company not providing reserve allowance for uncollectible accounts are as follows:

(a) The debtors of the land development receivables are government organizations, and the possibility of non-payment is remote.

(b) According to the development contracts, proceeds from the sale and rental of the land are to be used first to repay the land development receivables. In addition, the Company can also claim for any related subsidies offered by the government to repay the development costs. Therefore, there is no significant doubt or uncertainty on the collectability of the land development receivables.

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(c) The government is the subject of the development and also the owner of the land. Hence, the collectability of the development costs is not associated with the market values of the land. The inspected costs and prices are greater than costs already incurred and the land was sold on inspected prices and the proceeds were all collected. When settling the industrial park revenues and costs, in revenue-above-cost cases, the difference should be handed over to the industrial parks development and management fund based on the “Statute for Industrial Innovation” Article 47. Otherwise, the Company would be compensated by the fund according to the “Act for Industrial Innovation.”

E. The Company’s other receivables that were neither past due nor impaired were fully performing in line with the credit standards prescribed based on counterparties’ industrial characteristics, scale of business and profitability.

F. As of December 31, 2016 and 2015, the Company did not hold other receivables that were past due but not impaired.

G. Please refer to Note 8 for the details of pledged land development receivables.

(4) Inventories

A. The details of the Company’s inventories are as follows:


Land $ 326,908 $ 326,908

Buildings 186,065 186,065

Construction in progress 5,766 5,766

Merchandise inventory 22,631 22,640

Restaurant supplies 175 129

541,545 541,508

Less: allowance for price decline ( 36,779) ( 38,879)

$ 504,766 $ 502,629

For the years ended December 31, 2016 and 2015, the valuation allowance for lands and buildings available for sale were $36,779 and $38,879, respectively.

B. Related loss (gain) on inventories:

Years ended December 31,

2016 2015

Land cost $ - $ 399

Building cost - 194

Food service costs 669 499

Reversal of allowance for inventory obsolescence and market price decline ( 2,100) ( 1,871)

($ 1,431) ($ 779)

Due to the change in real estate market recovery, the Company recognised reversal of allowance for inventory obsolescence and market price decline amounting to $2,100 and $1,871 for the years ended December 31, 2016 and 2015, respectively, which were in accordance with appraisal reports issued by independent appraisers.

C. No interest expense was capitalized for the years ended December 31, 2016 and 2015.

D. Please refer to Note 8 for the details of pledged inventories as of December 31, 2016 and 2015.


(5) Investments accounted for using equity method

2016 2015

At January 1 $ 11,090,006 $ 8,211,894

Addition of investments accounted for using the equity method 530,000 1,259,690

Share of profit or loss of investments accounted for using the equity method 117,934 1,619,426

Treasury stock transferred to subsidiary’s employees 2,802 -

Changes in other equity items ( 3,359) ( 1,004)

At December 31 $ 11,737,383 $ 11,090,006

Subsidiaries:


Taiwan Innovation Development Corporation $ 11,726,256 $ 11,074,408

Hsinchu Hill Garden Corporation 612 673

Taiwan Midtown Development Corporation 722 783

Taiwan LanYang Development Corporation 9,793 14,142

$ 11,737,383 $ 11,090,006

A. The summarized financial information of the subsidiaries that are material to the Company is as follows:

Balance sheet

Taiwan Innovation Development Corporation


Current assets $ 1,750,794 $ 1,195,877

Non-current assets 12,920,345 11,515,060

Current liabilities ( 828,370) ( 1,581,778)

Non-current liabilities ( 2,080,889) ( 54,751)

Total net assets $ 11,761,880 $ 11,074,408

Share in subsidiary's net assets $ 11,761,880 $ 11,074,408

Carrying amount of the subsidiary $ 11,726,256 $ 11,074,408

Statement of comprehensive income



Revenue $ 64,101 $ 95,282

Profit for the period from continuing operations 134,329 1,620,040

Other comprehensive income, net of tax ( 3,359) ( 1,004)

Total comprehensive income $ 130,970 $ 1,619,036

Dividends received from subsidiary $ - $ -

B. For the related information about subsidiaries, please refer to Note 4(3) of consolidated financial statements in 2016.

C. The Company has paid cash to invest in Taiwan Innovation Development Corporation, amounting to $530,000 in December 2016.

D. The Company has capitalized its loans and paid cash to invest in Taiwan Innovation Development Corporation, amounting to $650,000 and $600,000 in March and September 2015, respectively.

E. The Company has invested a total cash of $9,690 in Taiwan LanYang Development Corporation in October 2015.

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Land Buildings Transportation equipment

Utility equipment

Leasehold assets

Other equipment

Leasehold improvements Total

At January 1, 2016Cost $ 308,895 $ 197,309 $ 26,994 $ 9,509 $ 3,500 $ 9,678 $ 27,299 $ 583,184

Accumulated depreciation and impairment

- ( 23,053) ( 3,828) ( 6,115) ( 1,240) ( 5,456) ( 27,299) ( 66,991)

$ 308,895 $ 174,256 $ 23,166 $ 3,394 $ 2,260 $ 4,222 $ - $ 516,193

2016Opening net book amount $ 308,895 $ 174,256 $ 23,166 $ 3,394 $ 2,260 $ 4,222 $ - $ 516,193

Additions - - 914 90 - 656 - 1,660

Depreciation charge - ( 3,523) ( 2,019) ( 946) ( 875) ( 1,398) - ( 8,761)

Disposals - - - ( 1) - ( 13) - ( 14)

Reversal of impairment loss - 825 - - - - - 825

Closing net book amount $ 308,895 $ 171,558 $ 22,061 $ 2,537 $ 1,385 $ 3,467 $ - $ 509,903

At December 31, 2016Cost $ 308,895 $ 197,309 $ 25,867 $ 8,253 $ 3,500 $ 10,092 $ 27,299 $ 581,215


- ( 25,751) ( 3,806) ( 5,716) ( 2,115) ( 6,625) ( 27,299) ( 71,312)

$ 308,895 $ 171,558 $ 22,061 $ 2,537 $ 1,385 $ 3,467 $ - $ 509,903


Utility equipment

Leasehold assets

Other equipment

Leasehold improvements Total

At January 1, 2015Cost $ 308,895 $ 197,309 $ 11,558 $ 8,774 $ 3,500 $ 9,474 $ 27,299 $ 566,809


- ( 21,117) ( 3,619) ( 5,079) ( 365) ( 4,012) ( 21,841) ( 56,033)

$ 308,895 $ 176,192 $ 7,939 $ 3,695 $ 3,135 $ 5,462 $ 5,458 $ 510,776

2015

Opening net book amount $ 308,895

$ 176,192

$ 7,939 $ 3,695 $ 3,135 $ 5,462 $ 5,458 $ 510,776

Additions - - 2,160 736 - 204 - 3,100

Transferred - - 15,263 - - - - 15,263

Depreciation charge - ( 3,524) ( 1,912) ( 1,037) ( 875) ( 1,444) ( 5,458) ( 14,250)

Disposals - - ( 284) - - - - ( 284)

Reversal of impairment loss - 1,588 - - - - - 1,588

Closing net book amount $ 308,895 $ 174,256 $ 23,166 $ 3,394 $ 2,260 $ 4,222 $ - $ 516,193

At December 31, 2015Cost $ 308,895 $ 197,309 $ 26,994 $ 9,509 $ 3,500 $ 9,678 $ 27,299 $ 583,184


- ( 23,053) ( 3,828) ( 6,115) ( 1,240) ( 5,456) ( 27,299) ( 66,991)

$ 308,895 $ 174,256 $ 23,166 $ 3,394 $ 2,260 $ 4,222 $ - $ 516,193


A. There is no capitalisation of interest on property, plant and equipment for the years ended December 31, 2016 and 2015.

B. Impairment information about the property, plant and equipment is provided in Note 6(9).

C. Information about the property, plant and equipment that were pledged to others as collateral is provided in Note 8.


2016 2015

At January 1 $ 5,832,163 $ 5,032,844

Additions - from subsequent expenditures 140,254 167,654

Disposals - -

Adjustment of fair value 502,086 631,665

At December 31 $ 6,474,503 $ 5,832,163

A. Rental income from the lease of the investment property and direct operating expenses arising from the investment property are shown below:


2016 2015

Rental income from the lease of the investment property $ 3,721 $ 3,295

Direct operating expenses arising from the investment property that generated rental income in the period $ 479 $ 130

Direct operating expenses arising from the investment property that did not generate rental income in the period $ 4,933 $ 4,184

B. Fair value basis of investment property

The Company’s investment property is mainly located in Ji’an Township in Hualien County, Xinpu Township in Hsinchu County and Beitun Dist. in Taichung City. The investment properties are still under development and are mainly built as hotels and shopping centres for collecting rents. Rent is calculated at a fixed amount plus a certain percentage of the lessee’s sales. The related assumptions as of December 31, 2016 and 2015 are as follows:

December 31, 2016

(a) The location and valuation method of the Company’s investment property:

Object Location Valuation method

Ji'an Commercial Zone 5 Ji’an Township, Hualien County Income approach

Hsinchu Xinpu Xinpu Township, Hsinchu County Land development analysis

Taichung Dakeng Beitun Dist., Taichung City Land development analysis

(b) Ji’an Commercial Zone 5 is analysed based on discounted cash flow of income approach, which is to use the object’s future discounted cash flow to analyse net profit and ending balance for each reporting period, and further estimate the price of the object using an appropriate discount rate. The object is expected to generate net cash inflow annually for the next 10 years after completion. The net cash inflow is discounted annually at an appropriate discount rate and equals the total of the present value.

i. The future cash inflow of Ji’an Commercial Zone 5 is mainly hotel rental revenue and shopping centre rental revenue assessment of revenue is as follows:

Operating revenue Estimated rent Local or similar objects

Hotel rental revenue (per dollar/per room/daily) $2,600~$34,400 Slightly higher than the estimated rent

Shopping centre rental revenue (per dollar/per level ground/monthly) $1,100 Approximate to the estimated rent

ii. Future cash outflow

a. Operating costs

Expendable expenses and direct expenses are operating costs. Hotel and shopping centre rental revenue is estimated to constitute 30% and 11.5% of the rental revenue, respectively. The rental revenue is calculated at a steady state.

107


b. Operating expenses

Operating expenses are personnel expenses, administrative expenses, repairs and maintenance expenses, utility expenses, promotion expenses, cleaning expenses, afforestation and taxes which are necessary for and directly related to operations.

c. Substantial replacement allowance (including beginning cost of construction sales and interior design)

iii. Discount rates are based on the interest rate for a two-year small amount time deposit offered by the Directorate General of the Postal Remittances and Savings Bank plus 3 quarters (currently 1.845%). Risk premium is determined based on liquidity, risk, value increment and the difficulty of management. As of December 31, 2016, Ji'an Commercial Zone 5 adopted a discount rate of 4.81%.

iv. As of December 31, 2016, the fair value of the investment property of Ji'an Commercial Zone 5 is based on the valuation report by Lin Chin-Sheng from Excellence International Real Estate Appraiser Firm, and the valuation date was December 31, 2016.

(c) Some primary investment property are land assets under development. Those land assets cannot be measured using the income approach and thus is measured using land development analysis, which takes into consideration legal usage, land use intensity and changes in land use efficiency arising from development and improvements, to estimate the total selling price after development or construction, and less direct costs, indirect costs, capital interest and profit rate to reach to the land development price breakdown before development or construction. The focus of the projects concerning primary investment property using land development analysis is to construct buildings with no more than 5 floors.

Hsinchu Xinpu Taichung Dakeng

Estimated total sales $2,379,335 $2,779,632

Profit margin 24% 15%

Capital interest comprehensive ratio 0.96% 2.27%

Appraiser Firm Excellence International Real Estate Appraiser Firm

Leader-Crown International Real Estate Appraiser Affairs

Appraiser Lin Chin-Sheng Tseng Yu-Kai

Valuation date (Note) December 31, 2016 December 29, 2016

December 31, 2015

(a) The location and valuation method of the Company’s investment property:


Ji'an Commercial Zone 5 Ji’an Township, Hualien County Income approach



(b) Ji'an Commercial Zone 5 is analysed based on discounted cash flow of income approach, which is to use the object’s future discounted cash flow to analyse net profit and ending balance for each reporting period, and further estimate the price of the object using an appropriate discount rate. The object is expected to generate net cash inflow annually for the next 10 years after completion. The net cash inflow is discounted annually at an appropriate discount rate and equals the total of the present value.

i. The future cash inflow of Ji’an Commercial Zone 5 is mainly hotel rental revenue and shopping centre rental revenue assessment of revenue is as follows:






a. Operating costs




c. Substantial replacement allowance (including beginning cost of construction sales and interior design).

iii. Discount rates are based on the interest rate for a two-year small amount time deposit offered by the Directorate General of the Postal Remittances and Savings Bank plus 3 quarters (currently 2.125%). Risk premium is determined based on liquidity, risk, value increment and the difficulty of management. As of December 31, 2015, Ji’an Commercial Zone 5 adopted a discount rate of 4.925%.

iv. As of December 31, 2015, the fair value of the investment property of Ji’an Commercial Zone 5 is based on the valuation report by Lin Chin-Sheng from Excellence International Real Estate Appraiser Firm, and the valuation date was December 23, 2015.

(c) Some primary investment property are land assets under development. Those land assets cannot be measured using the income approach and thus is measured using land development analysis, which takes into consideration legal usage, land use intensity and changes in land use efficiency arising from development and improvements, to estimate the total selling price after development or construction, and less direct costs, indirect costs, capital interest and profit rate to reach to the land development price breakdown before development or construction. The focus of the projects concerning primary investment property using land development analysis is to construct buildings with no more than 5 floors :







Appraiser Lin, Chin-Sheng Chen, Yueh-Ling

Valuation date (Note) September 30, 2015 September 30, 2015

C. Amount of borrowing costs capitalized as part of investment property and the range of the interest rates for such capitalization are as follows:


2016 2015

Amount capitalised $ 18,223 $ -

Interest rate 3.63%~3.82% -

D. Information about the investment property that was pledged to others as collateral is provided in Note 8.

E. Please refer to Note 7 for the details of property transactions with related parties.

109


(8) Other non-current assets


Receivables for planning and investigation $ 21,201 $ 21,201

Long-term receivables for selling land 417,176 417,176

Payment for land in Hsinchu County 341,215 341,215

Payment for land in Nantou County 31,278 31,278

Long-term prepaid expenses 61,607 38,959

Refundable deposits 6,888 6,654

Long-term prepaid rents 145,569 145,569

Others 84,287 77,299

$ 1,109,221 $ 1,079,351

A. The receivables for planning and investigation are fees prepaid by the Company on behalf of the Industrial Development Bureau, Ministry of Economic Affairs (MOEA) for the project “Preparation of pre-project expenses for Fenglin Industrial Park in Hualien County and Chihshang Industrial Park in Taitung County”. In accordance with the resolution of MOEA, as the Company finishes settling costs, MOEA will prepare a budget for reimbursement.

B. The Company sold the research building of South Environmental Protection Technology Park in Kangshan Industrial Park to Kaohsiung City Government in 2004. According to the contract, Kaohsiung City Government should pay by installment for 30 years, and the Company recognized discounted receivable and interest expense accordingly. After renegotiation in 2008, the Kaohsiung City Government agreed that the Company take the uncollected receivables plus interest as uncollected land development receivables in accordance with the land development contract of Kangshan Industrial Park. In accordance with Jing-Gong-Zi Letter No.10135463200 issued by Kaohsiung City Government on December 6, 2012. Furthermore, the settlement of Kangshan Industrial Park development business was accepted by the Kaohsiung City Government in accordance with the development contract and the “Act for Industrial Innovation”.

C. The Company acquired land nos. 105, 106, 236, 236-1, 237~240, 259, 259-1, 260, 262, 265, 267, 268, 279~284, 287, 436, 442, 444, 456~459 and 466 in Hsinpu Town, Hsinchu County for development. This acquisition was conducted using the Company Chairman’s name, as agricultural land is not allowed to be acquired by any corporate entity based on the Agricultural Development Act. The land is pledged to the Company and the Chairman also signed the letter of commitment to secure the Company’s ownership.

D. The Company acquired land nos. 667 in Caotun Township, Nantou County for development. This acquisition was conducted using the Company Chairman’s name, as agricultural land is not allowed to be acquired by any corporate entity based on the Agricultural Development Act. The land is pledged to the Company and the Chairman also signed the letter of commitment to secure the Company’s ownership.

E. The Company has signed contracts of superficies on nos. 744-47, 744-48, and 744-49 in Xintou, Jinhu Township, Jinmen County with Northern Region Branch, National Property Administration, MOF for a duration of 50 years in December 2012 and July 2013, respectively. The Company has paid royalty of $45,689 and $99,880 in full when the contract was signed and was recorded as long-term prepaid rents.


The Company recognized reversal of impairment loss for the years ended December 31, 2016 and 2015 amounting to $825 and $1,588, respectively. Details of such gain are as follows:

Year ended December 31, 2016

Recognized in profit or loss

Recognized in other comprehensive

income Reversal of impairment loss － property, plant and equipment ($ 825) $ -



Recognized in other comprehensive

income

Reversal of impairment loss － property, plant and equipment ($ 1,588) $ -


Due to the change in real estate market recovery, the Company recognized “reversal of allowance for loss on non-financial assets”, which were in accordance with appraisal reports issued by independent appraisers.

(10) Short-term borrowings


Bank loans

King’s Town Bank secured loans $ 1,110,000 $ 1,176,000

Mega Bank secured loans 87,341 87,341

HuaNan Bank secured loans 90,000 -

Total $ 1,287,341 $ 1,263,341

Interest rate range 2.92%~3.39% 3.5%~3.54%

Please refer to Note 8 for the details of pledged assets.

(11) Notes and bills payable


Commercial paper payable –Taiwan Cooperative Bills $ 150,000 $ 150,000

Commercial paper payable –International Bills 37,000 37,000

187,000 187,000

Less: discount on commercial paper payable ( 656) ( 868)

$ 186,344 $ 186,132

Interest rate 2.738%~2.968% 2.788%~2.968%


(12) Other payables


Rent payable for land development $ 59,605 $ 59,443

Accrual for industrial zone construction 1,445,794 1,525,688

Remaining funds for industrial zone 506,899 500,839

Accrued expenses 76,576 110,024

Payables for industrial zone construction 60,838 188,514

Other payables - other 10,803 8,775

$ 2,160,515 $ 2,393,283

(13) Other current liabilities


Deposit for sale of industrial park received in advance $ 9,240 $ 34,883

Long-term liabilities-current portion 3,201,544 3,327,000

Bonds payble of expiring within one year 500,000 -

Others 290,002 229,714

$ 4,000,786 $ 3,591,597

111


(14) Corporate bonds payable


Ordinary corporate bond

1st issuance in 2014 $ 500,000 $ 500,000

1st issuance in 2015 800,000 800,000

1st issuance in 2016 1,500,000 -

2nd issuance in 2016 800,000 -

3rd issuance in 2016 530,000 -

4,130,000 1,300,000

Less: Discount on bonds payable ( 10,125) -

Less: Bonds payable of expiring within one year ( 500,000) -

3,619,875 1,300,000

Convertible corporate bonds

1st domestic issuance 199,900 200,000

Less: Discount on bonds payable ( 5,608) ( 10,735)

194,292 189,265

Total $ 3,814,167 $ 1,489,265

A. In 2016, the Company issued the first domestic secured ordinary corporate bonds for $1,500,000 in total, as approved by the competent authority. In this issuance, bond A was issued for $1,000,000 with 1.2% coupon rate and bond B was issued for $500,000 with 1.4% coupon rate covering 5 years. The circulation period is from April 29, 2016 to April 29, 2021. The bonds will be redeemed in cash at face value at the maturity date. On April 29, 2016, the bonds were listed on the Taipei Exchange.

B. The Company issued $800,000, 1.48%, 2nd domestic secured ordinary corporate bonds in 2016, as approved by the regulatory authority. The bonds mature 5 years from the issue date (November 15, 2016 ~ November 15, 2021) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on November 15, 2016.

C. The Company issued $530,000, 1.5%, 3rd domestic secured ordinary corporate bonds in 2016, as approved by the regulatory authority. The bonds mature 5 years from the issue date (December 5, 2016 ~ December 5, 2021) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on December 5, 2016.

D. The Company issued $800,000, 1.55%, 1st domestic secured ordinary corporate bonds in 2015, as approved by the regulatory authority. The bonds mature 5 years from the issue date (June 9, 2015 ~ June 9, 2020) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on June 9, 2015.

E. The Company issued $500,000, 1.36%, 1st domestic secured ordinary corporate bonds in 2014, as approved by the regulatory authority. The bonds mature 3 years from the issue date (April 25, 2014 ~ April 25, 2017) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on April 25, 2014.

F. The issuance of domestic convertible bonds by the Company.

(a) The terms of the 1st domestic secured convertible bonds issued by the Company are as follows

i. The Company issued $200,000, 0%, 1st domestic secured convertible corporate bonds, as approved by the regulatory authority. The bonds mature 3 years from the issue date (August 18, 2015 ~ August 18, 2018) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on August 18, 2015.

ii. The bondholders have the right to ask for conversion of the bonds into common shares of Company during the period from the date after one month of the bonds issue to 10 days before the maturity date, except the stop transfer period as specified in the terms of the bonds or the laws/regulations. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.


iii. The conversion price was set effective on August 10, 2015. The calculation is based on 110% of the basic price, which is one of the arithmetic mean of the closing prices at 1, 3 and 5 working days prior to the effective date. Ex-rights or ex-dividends price shall be calculated if the ex-rights or ex-dividends date is prior to the conversion date. Conversion prices shall be adjusted in accordance with the formula if the shares go ex-rights or ex-dividends prior to the issuance date. In accordance with the aforementioned approach, the conversion price was NT$12.05 per share at issuance.

iv. The conversion price of the bonds is set up based on the pricing model in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price will be reset based on the pricing model in the terms of the bonds on each effective date regulated by the terms. If the reset conversion price is higher than the conversion price before the reset, the conversion price will not be adjusted. As of December 31, 2016, the conversion price was adjusted to NT$10.08.

v. The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at any time after the following events occur: (i) the closing price of Company common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after one month of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after one month of the bonds issue to 40 days before the maturity date.

vi. Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.

(b) Regarding the issuance of convertible bonds, the equity conversion options amounting to $4,380 were separated from the liability component and were recognised in ‘capital surplus—stock warrants’ in accordance with IAS 32. The call options embedded in bonds payable were separated from their host contracts and were recognised in ‘financial assets or liabilities at fair value through profit or loss’ in net amount in accordance with IAS 39 because the economic characteristics and risks of the embedded derivatives were not closely related to those of the host contracts. The effective interest rate of the bonds payable after such separation was 2.67%.

(15) Long-term borrowings

Type of loans Interest rate range Contract duration December 31, 2016

Secured borrowingsSyndicated loans provided by Agricultural Bank of Taiwanand others 3.141% 105.05.22~108.05.22 $ 239,000

Syndicated loans provided by Mega Bank and others (1) 2.679%~3% 101.08.31~106.08.31 -

Syndicated loans provided by Mega Bank and others (2) 2.679%~3% 105.08.18~110.08.18 2,694,000

Ji-an Township Farmers' Association 3.155% 105.01.21~108.01.21 9,800

Sunny Bank 2.540% 105.02.19~108.02.19 8,744

Taichung Commercial Bank 2.850% 105.11.25~108.11.25 250,000

3,201,544

Less: current portion ( 3,201,544)

$ -

Type of loans. Interest rate range Contract duration December 31, 2015

Secured borrwings Syndicated loans provided by Agricultural Bank of taiwan and other 3.225% 102.05.22~105.05.22 $ 239,000

Syndicated loans provided by Mega Bank and others 2.9%~3.2211% 101.08.31~106.08.31 3,088,000

3,327,000


$ -

113


A. On May 22, 2013, the Company has applied for credit line of $239,000 with the Agricultural Bank of Taiwan (the host organizer) and Tsaotun Township Farmers’ Association in Nantou County (the co-host and manage organiser) for turnover of construction and entered into a supplementary contract on May 22, 2016. The credit line has been fully utilised as of December 31, 2016. The principal will be repaid in full at maturity.

B. To develop business and improve the financial structure, the Company signed a long-term syndicated loan contract (1) to obtain a credit line of $5,300,000 with Mega Bank and other 16 banks on August 14, 2012, including credit line A for $4,800,000 and credit line B for $500,000. Credit line A was used to pay off the syndicated loan signed in 2005, and credit line B was used for mid term working capital. Only credit line B is revolving. The credit line A and credit line B have been fully utilised as of December 31, 2016. According to the contract’s provisions, the Company must maintain certain financial ratios inspected at least once every half year. If not, the Company would be required to pay the penalties monthly until the date of improvement. The loan was successively repaid at the agreed upon debt service ratio starting from August 2013. As of December 31, 2016, the credit line has been fully paid.

C. To develop business and improve the financial structure, the Company signed a long-term syndicated loan contract (2) to obtain a credit line of $2,694,000 with Mega Bank and other 16 banks on August 10, 2016, including credit line A for $2,246,257 and credit line B for $447,743. Credit line A and credit line B ware used for mid term working capital. Only credit line B is revolving. The credit line A and credit line B have been fully utilised as of December 31, 2016. According to the contract’s provisions, the Company must maintain certain financial ratios inspected at least once every half year. If not, the Company would be required to pay the penalties monthly until the date of improvement. The loan was successively repaid at the agreed upon debt service ratio starting from August 2017 and will be repaid in full at maturity.

D. The Company has applied for credit line of $9,800 with the Ji-an Township Farmers’ Association of Hualien County for development of business on January 21, 2016. The credit line has been fully utilised as of December 31, 2016. The principal will be repaid in full at maturity.

E. The Company has applied for credit line of $12,000 with the Sunny Bank for development of business on February 19, 2016. The credit line has been fully utilised as of December 31, 2016. The borrowing period is 3 years. The principal and interest are repaid monthly.

F. The Company has applied for credit line of $250,000 with the Taichung Commercial Bank for turnover of operation on November 25, 2016. The credit line has been fully utilised as of December 31, 2016. The interest is payable monthly for the abovementioned borrowings. The principal is evenly repaid quarterly.

G. Please refer to Notes 7 and 8 for the details of pledged assets.

(16) Pensions

A. Effective July 1, 2005, the Company established a funded defined contribution pension plan (the “New Plan”) under the Labor Pension Act. Employees have the option to be covered under the New Plan. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are portable when the employment is terminated.

B. The pension costs under the defined contribution pension plan for the years ended December 31, 2016 and 2015 were $4,347 and $4,246, respectively.

(17) Share-based payment

A. The Company’s share-based payment arrangements were as follows:

For the year ended December 31, 2016:

Type of arrangement Grant date Quantity granted (in thousand shares)

Vesting conditions

Treasury stock transferred to employees 2016.01.20 8,800 Vested immediately






Vesting conditions



Abovementioned share-based payment arrangements are settled by equity.

B. Details of the share-based payment arrangements are as follows:

2016 2015

No. ofoptions

(in thousands)

Weighted-average exercise price

(in dollars)

No. ofoptions

(in thousands)


(in dollars)

Options outstanding at January 1 14,500 $ 10.58 - $ -

Options granted 41,417 10.45 26,500 11.12

Options exercised ( 55,917) 10.49 ( 12,000) 11.77

Options outstanding at December 31 - - 14,500 10.58

C. The weighted-average stock price of stock options at exercise dates for the years ended December 31, 2016 and 2015 was NT$11.03 and NT$14.23 (in dollars) per share, respectively.

D. Expenses incurred on share-based payment transactions are shown below:


2016 2015

Equity-settled $ 15,624 $ 300

(18) Share capital

A. As of December 31, 2016, the authorized common stock was $9,900,000 with par value of NT$10 (dollars) per share, and the outstanding common stock was $7,607,849 (760,785 thousand shares).

Movements in the number of the Company’s ordinary shares outstanding are as follows:

Unit: In thousands of shares

2016 2015

At January 1 682,900 640,410

Treasury stock purchased by employees 55,917 12,000

Shares retired ( 21,133) ( 33,381)

Conversion of convertible bonds 10 -

Earnings capital surplus transferred to capital increase 34,894 63,871

At December 31 752,588 682,900

B. On July 29, 2016, the Board of Directors revised its resolution to issue 34,894 thousand new shares from unappropriated retained earnings of $42,728 and capital surplus of $306,215 for capital increase. The proposal for capital increase was approved by the competent authority. On October 18, 2016, the alteration registration was completed.

115


C. Treasury stocks

(a) Reason for share reacquisition and movements in the number of the Company’s treasury stocks are as follows:

Name of company holding the shares

December 31, 2016

Reason for reacquisition Number of

shares (thousand shares)

Carrying amount

The Company To be reissued to employees 8,197 $ 86,980


December 31, 2015

Reason for reacquisition Number of

shares (thousand shares)

Carrying amount


(b) Reacquisition of treasury shares is as follows:


14th 15th 16th 17th

Term of reacquisition Reason for reacquisition To be reissued to employees

To be reissued to employees



Type and quantity of reacquired shares (shares in thousands)

Common stock 8,150

Common stock 4,786

Common stock 1,497

Common stock 6,700

Amount of reacquired shares $ 83,260 $ 49,739 $ 15,984 $ 70,996


11th 12th 13th 14th

Term of reacquisition Reason for reacquisition To be reissuedto employees


(Note)To be reissuedto employees



Common stock 4,900

Common stock 8,800

Common stock 8,977

Common stock 10,704


Note: The change of reason for reacquisition has been resolved by the Board of Directors on April 28, 2015 and was approved by FSC.

(c) In 2016, the Board of Directors has resolved to transfer the shares to employees from the 11th, 12th, 13th, 14th and 15th time treasury share buyback amounting to 14,500 thousand shares, 8,800 thousand shares, 8,977 thousand shares, 18,854 thousand shares and 4,786 thousand shares, respectively. The post-tax amount, net of securities transactions tax, was $152,950, $91,859, $193,801 and $145,970, respectively.

(d) In 2015, the Board of Directors has resolved to transfer the shares to employees from the 5th and 6th time treasury share buyback amounting to 1,500 thousand shares and 10,500 thousand shares, respectively. The post-tax amount, net of securities transactions tax, was $16,824 and $123,947, respectively.

(e) On February 25, 2015, the Board of Directors has resolved to retire 17,100 thousand shares from the 10th time treasury share reacquired amounting to $184,461. Capital surplus - additional paid-in capital and capital surplus - treasury share transactions were decreased by $7,154 and $5,777, respectively. The capital reduction date was set to be effective on March 3, 2015, which has been registered.

(f) Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought back as treasury stock should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital reserve.

(g) Pursuant to the R.O.C. Securities and Exchange Law, treasury stocks should not be pledged as collateral and is not entitled to dividends before it is reissued to the employees.

(h) Pursuant to the R.O.C. Securities and Exchange Law, treasury stocks should be reissued to the employees within three years and shares not reissued within the three-year period are to be retired.


(i) Events after the Balance Sheet Date

i. On February 21, 2017, the Board of Directors has resolved to transfer the shares to employees from the 16th and 17th treasury shares reacquired of 8,197 thousand shares in accordance with the Company’s ‘Regulations governing transfer of reacquired shares to employees’. The employees’ acquisition was set to be effective on February 24, 2017.

ii. On February 21, 2017, the Board of Directors has resolved to reacquire treasury shares from February 22 to April 20, 2017. The expected reacquisition amount is 10,000 thousand shares and the price range is NT$11 to NT$13 (dollars) per share.

(19) Capital surplus

2016

Share premium

Treasury stock

transactions Stock options Others Total

At January 1 $ 276,955 $ - $ 4,380 $ 34,722 $ 316,057

Retirement of treasury share ( 276,955) - - ( 29,260) ( 306,215)

Employee stock options issued - - 18,426 - 18,426

Treasury shares purchased by employees - 18,050 ( 18,426) - ( 376)

Conversion of convertible bonds 4 - ( 2) - 2

At December 31 $ 4 $ 18,050 $ 4,378 $ 5,462 $ 27,894

2015

Share premium

Treasury stock

transactions Stock options Others Total

At January 1 $ 284,109 $ 5,777 $ - $ 34,722 $ 324,608

Retirement of treasury stock ( 7,154) ( 5,777) - - ( 12,931)

Employee stock options issued - - 300 - 300

Treasury shares purchased by employees - - ( 300) - ( 300)

Convertible corporate bonds issued - - 4,380 - 4,380

At December 31 $ 276,955 $ - $ 4,380 $ 34,722 $ 316,057

A. Pursuant to the R.O.C. Company Law, capital reserve arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital reserve to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital reserve should not be used to cover accumulated deficit unless the legal reserve is insufficient.

B. On June 29, 2016, the shareholders’ meeting resolved to issue 31,334 thousand common shares with capital surplus of $313,336 out of distributable earnings and the dividend per share was NT$0.44. Subsequently, on July 29, 2016, the Board of Directors resolved to adjust capital surplus to $306,215 to meet the regulatory requirement given that the capital surplus relating to some convertible bonds does not fall under “the income derived from the issuance of new shares at a premium” stipulated in paragraph 1 of Article 241 of Company Act.

(20) Retained earnings

A. Where the Company accrues a profit each year, 10% of which should be set aside as legal reserve after paying tax and offsetting accumulated deficit of prior years unless the legal reserve equals total authorised capital. In addition, special reserve that has been appropriated or reversed in accordance with related regulations along with the beginning unappropriated retained earnings can be appropriated as dividend provided that the appropriation is proposed by the Board of Directors and approved by shareholders’ meeting.

117


B. The Company’s policy of dividend appropriation aligns with existing and future development plan by taking into account of factors such as investment environment, capital needs, domestic and overseas competition, as well as the consideration of shareholders’ interest. Each year the dividend may not be appropriated or be appropriated with no less than 50% of appropriable earnings. The dividend can be appropriated in the form of cash or share, among which the maximum cash dividend accounts for 30% and the rest is share dividend.

C. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.

D. In accordance with the Financial Supervisory Commission, Securities and Futures Bureau, No. 1030006415 correspondence, as the investment property is measured at fair value, the Company shall accrue and reverse special reserve, accordingly.

E. The appropriations of 2015 and 2014 earnings had been resolved at the stockholders’ meeting on June 29, 2016 and June 30, 2015, respectively. Details are summarized below:


2015 2014

Amount Dividendsper share

(in dollars) Amount

Dividendsper share

(in dollars)

Legal reserve $ 204,008 $ 531,216

Special reserve 2,290,588 5,469,551

Cash dividends 142,426 $ 0.20 127,742 $ 0.2

Stock dividends 42,728 0.06 638,710 1.0

$ 2,679,750 $ 0.26 $ 6,767,219 $ 1.2

F. For the information relating to employees’ remuneration and directors’ and supervisors’ remuneration, please refer to Note 6(26).

(21) Operating revenue


2016 2015

Service revenue $ 65,809 $ 405,908

Construction revenue 6,224 649

Rental revenue 3,721 3,295

Food service revenue 1,713 1,231

Other operating revenues 2,112 635

$ 79,579 $ 411,718

(22) Other income


2016 2015

Interest income from bank deposits $ 1,721 $ 5,792

Other interest income 73,875 6,055

Other non-operating income ( 12,417) 19,210

$ 63,179 $ 31,057

A. For the information relating to other interest income, please refer to Note 7 H.(c).

B. For the years ended December 31, 2016 and 2015, the subsidiary, Taiwan Innovation Development Corporation, appropriated directors and supervisors’ remuneration at $2,360 and $17,035, respectively, which are recognised as miscellaneous income. On November 23, 2016, the Board of Directors resolved not to appropriate directors and supervisors’ remuneration for the year ended December 31, 2015. Therefore, the Company reversed the amount by recognising $17,035 as deduction of miscellaneous income.


(23) Other gains and losses


2016 2015

Gain on reversal of impairment loss, property, plant and equipment $ 825 $ 1,588

Gain on fair value adjustment of investment property 502,086 631,665

(Loss) gain on disposal of property, plant and equipment ( 14) 144

Losses on financial assets at fair value through profit or loss ( 27,750) -

Service expenses - ( 346)

Currency exchange loss ( 10) ( 2)

$ 475,137 $ 633,049

(24) Finance costs


2016 2015

Interest expense:

Bank loans $ 162,417 $ 164,699

Commercial paper 5,503 4,782

Bonds payable 98,525 41,411

Others 6,305 244

272,750 211,136

Less: Capitalisation of qualifying assets ( 18,223) -

Interest reimbursement for industrial zones ( 172,710) ( 139,453)

Finance cost $ 81,817 $ 71,683

(25) Expenses by nature


2016 2015

Employee benefit expense $ 139,538 $ 163,196

Depreciation 8,761 14,250

Rent expense 30,420 30,457

Advertisement expense 16,708 51,680

Entertainment expense 31,752 35,283

Donation expense 3,189 5,073

Taxes 11,556 12,205

Service expense 41,779 67,045

General and administrative expenses 11,140 11,201

Other operating costs 704 606

Other expenses 64,042 93,415

$ 359,589 $ 484,411

Note: In order to promote Taiwan brands, the Company has donated $2,500 to Branding Taiwan Association for the year ended December 31, 2015. There is no other commitment.

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(26) Employee benefit expense


2016 2015

Wages and salaries $ 126,283 $ 149,130

Labour and health insurance fees 6,695 6,996

Pension costs 4,347 4,246

Other personnel expenses 2,213 2,824

$ 139,538 $ 163,196

A. As of December 31, 2016 and 2015, the Company had approximately 83 and 91 employees, respectively.

B. According to the Articles of Incorporation of the Company, the distribution of earnings is based on the profit of the current year. Where there is distributable earnings after deducting those reserved to offset accumulated deficit, the Company shall distribute 1~8% of which as employees’ compensation and no more than 2% of which as directors and supervisors’ remuneration. The Company should reserve earnings to offset accumulated deficit if there is any.

The aforementioned employees’ compensation can be paid in the form of stock or cash. The recipients can be employees worked for the subsidiaries who are eligible based on the resolution of Board of Directors. As for the directors’ and supervisors’ remuneration, it can only be paid by cash.

C. For the years ended December 31, 2016 and 2015, employees’ compensation was accrued at $3,004 and $21,828, respectively; directors’ remuneration was accrued at $2,003 and $15,875, respectively. The aforementioned amounts were recognized in salary expenses.

The employees’ compensation and directors’ and supervisors’ remuneration were both estimated and accrued based on 1% of distributable profit of current year for the year ended December 31, 2016. The accrued amount has not been resolved by the Board of Directors. The employees’ compensation will be distributed in the form of cash or shares.

The employees’ compensation and directors’ and supervisors’ remuneration were both estimated and accrued based on 1% of distributable profit of current year for the year ended December 31, 2015. Where the accrued amounts for employees’ compensation and directors’ and supervisors’ remuneration are different from the actual distributed amounts as resolved by the stockholders at their stockholders’ meeting subsequently, the differences are accounted for as changes in estimates. The difference between employees’ compensation and directors’ and supervisors’ remuneration as resolved by the shareholders’ meeting and the amount of employees’ compensation and directors’ and supervisors’ remuneration are in agreement with those recognised in the 2015 financial statements.

Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved by the Board of Directors and the shareholders at the shareholders’ meeting will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(27) Income tax

A. Components of income tax expense


2016 2015

Current tax:

Current tax on profits for the period $ - $ -

Tax on undistributed earnings - 3,302

Adjustments in respect of prior years - ( 592)

Total current tax - 2,710

Deferred tax:

Origination and reversal of temporary differences 42,434 96,370

Income tax expense $ 42,434 $ 99,080


B. Reconciliation between income tax expense and accounting profit


2016 2015

Tax calculated based on profit before tax and statutory tax rate $ 50,052 $ 363,657

Temporary difference not recognized as deferred tax assets 2,657 4,754

Taxable loss not recognized as deferred tax assets 49,500 11,210

Additional 10% tax on undistributed earnings - 3,302

Effect from different tax rates on temporary differences ( 44,390) ( 12,482)

Tax exempt income by tax regulation ( 15,385) ( 270,769)

Prior year income tax overestimation - ( 592)


C. Expiration dates of unused tax losses and amounts of unrecognized deferred tax assets are as follows:

December 31, 2015

Year incurred Amount filed/ assessed Unused amount Unrecognised

deferred tax assets Usable until year

2015 $ 58,214 $ 58,214 $ 58,214 2025

2016 291,178 291,178 291,178 2026

$ 349,392 $ 349,392 $ 349,392

December 31, 2015

Year incurred Amount filed/ assessed Unused amount Unrecognised

deferred tax assets Usable until year

2015 $ 65,945 $ 65,945 $ 65,945 2025

D. The amounts of deductible temporary differences that are not recognized as deferred tax assets are as follows:


Deductible temporary differences

Allowance for sales return $ 11,423 $ 11,225

Temporary difference on service revenue 33,458 31,248

Allowance for price decline on inventories 7,157 7,513

Unrealized impairment loss 13 153

Others 1,929 1,182

$ 53,980 $ 51,321

E. As of December 31, 2016 and 2015, the amount of deferred tax liabilities was $300,938 and $258,504, respectively. The land value increment tax originally applied to the Company’s Trust department in accordance with ‘Enterprise Merger and Acquisition Act’ was transferred to JihSun Bank. As of December 31, 2016 and 2015, the increment tax amounting to $15,868 will be paid when the land is transferred again, and the tax related accrual arising from the fair value of the other investment property was $285,070 and $242,636, respectively.

F. As of December 31, 2016, the Company’s income tax returns through 2014 have been assessed and approved by the Tax Authority.

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G. Unappropriated retained earnings


Earnings generated in and before 1997 $ - $ -

Earnings generated in and after 1998

a.Unappropriated earnings assessed with 10% income tax - 610,868

b.Unappropriated earnings not yet assessed with 10% income tax 236,562 2,073,093

$ 236,562 $ 2,683,961

As of December 31, 2016 and 2015, the balance of the imputation tax credit account was $184 and $21,250, respectively. The creditable tax rate was 0.87% for the year ended December 31, 2015 and is estimated to be 0.07% for the year ended December 31, 2016.

(28) Earnings per share

The calculation of earnings per share is as follows:


Amount after tax

Weighted average number of ordinary shares utstanding

(shares in thousands)

Earnings per share

(in dollars)

Basic earnings per share

Profit for the period $ 251,989 747,922 $ 0.34

Diluted earnings per share

Assumed conversion of all dilutive potential ordinary shares

Employees’ bonus - 771

Convertible bonds 4,252 19,490

Profit plus assumed conversion of all dilutive potential ordinary shares $ 256,241 768,183 $ 0.33


Amount after tax

Weighted average number of ordinary shares utstanding

(shares in thousands)

Earnings per share

(in dollars)


Profit for the period $ 2,040,076 733,542 $ 2.78



Employees’ bonus - 2,170


Profit plus assumed conversion of all dilutive potential ordinary shares $ 2,041,642 742,977 $ 2.75


(29) Supplemental cash flow information

A. Investing activities with partial cash payments


2016 2015

Purchase of investment property $ 140,254 $ 167,654

Add: opening balance of other accounts payable 9,651 -

Less: ending balance of other accounts payable ( 14,965) ( 9,651)

Less: capitalized interest ( 18,223) -

Cash paid during the year $ 116,717 $ 158,003

B. Investing activities without cash payments or receipts


2016 2015

Capitalisation of loans into subsidiaries $ - $ 650,000

7. RELATED PARTY TRANSACTIONS (1) Significant related party transactions

A. Other receivables


Subsidiaries $ 4,510 $ 17,034

It mainly resulted from the appropriation of directors and supervisors’ remuneration by the subsidiary, Taiwan Innovation Development Corporation, as well as electricity fee of $2,150 paid on behalf of the subsidiary, Taiwan LanYung Development Corporation.

B. Prepayments

As of December 31, 2016 and 2015, the prepayments for compensation to the key management amounted to $6,000 and $6,667, respectively.

C. Rental revenue


2016 2015

Associates $ 255 $ -

It mainly resulted from rental revenue accrued from leasing office.

D. Purchases of services


2016 2015


(a) The services purchased from subsidiaries are mainly classified as service expenses of $18,789 for the year ended December 31, 2016.

(b) The services purchased from subsidiaries are mainly classified as service expenses of $11,143 and advertisement expense of $32,747 for the year ended December 31, 2015.

(c) The total price of the contract is decided by bilateral negotiation. The payment term is based on service-providing schedule as provided by the contract.

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E. Operating expenses


2016 2015

Associates $ 1,563 $ -

It mainly resulted from entertainment expense incurred by purchasing present from associates.

F. Other payables



Associates 12,061 -

$ 18,511 $ 16,834

It mainly resulted from payables for the marketing and planning service provided by the subsidiary, Taiwan Innovation Development Corporation, as well as construction bill owned to Taiwan Envirotech Development Corporation.

G. Property transactions

(a) In October 2009, the Company signed a contract to sell the land located in Hualien, Guanghua LOHAS Creative Park with TIDC. The selling price amounting to $570,128 is based on an appraisal report issued by independent appraisers. As of December 31, 2011, the Company had received $342,532 and recognised it as “receipts in advance”. In March 2012, the Company signed a supplementary contract with TIDC because the Board of Directors’ committee approved a resolution to raise the selling price to $626,000, which is based on an appraisal report of 2011, received all payments, and recognised “construction revenue” of $626,000. The gain on sale of land amounting to $53,333 was recorded as “Other non-current liabilities (deferred credit - gain between related parties)” because TIDC has not yet sold the land to a third party.

(b) In August 2016, the Company sold the land in Lianwu Section, East District, Taichung City numbered 1054 to the subsidiary, Taiwan Innovation Development Corporation, for a total contract price of $161,040 and had received in advance two installments totaling $48,312 (and recognised as other current liabilities).

H. Loans to related parties:

(a) Loans to related parties:

i. Outstanding balance (Other receivables):


Subsidiaries $ - $ 80,204

ii. Interest income (Other income)


2016 2015

Subsidiaries $ 151 $ 5,988

Associates 1,051 -

$ 1,202 $ 5,988

Loans to subsidiaries and related parties are short-term financing for subsidiaries and related parties’ capital needs, and carried an interest at 3.3% per annum for the years ended December 31, 2016 and 2015.

(b) Loans from related parties:

i. Outstanding balance (Other payables):


Subsidiaries $ 100,000 $ -


ii. Interest payable (Other payables)


Subsidiaries $ 285 $ -

iii. Interest expense


2016 2015


It mainly resulted from the borrowings from the subsidiary out of short-term financing needs. For the year ended December 31, 2016, the interest rate was 3.8% per annum.

(c) Acquisition of preference share from related parties:

i. Outstanding balance:



Current financial assets at fair value through profit or loss 1,144,660 -

Non-current preference shares investment without active market $ 1,514,860 $ -

ii. Dividends on preference share receivable (Other receivables)



iii. Dividends on preference share (Other income)


2016 2015


I. Endorsements and guarantees

(a) Endorsements and guarantees provided by related parties:


Key management of the Company $ 4,675,885 $ 4,777,341

Subsidiaries 4,186,074 1,086,074

$ 8,861,959 $ 5,863,415

(b) Endorsements and guarantees provided to related parties:

As of December 31, 2016 and 2015, the amount of endorsement/ guarantee that the Company has provided was $3,332,000 and $3,608,800, respectively.

J. Others

Please refer to Notes 6 (22) and (25).

(2) Key management compensation


2016 2015

Salaries and other short-term employee benefits $ 33,788 $ 59,213

Termination benefits 216 265

$ 34,004 $ 59,478

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8. PLEDGED ASSETS

Pledged asset December 31,

Purpose 2016 2015

Other current assets

- Demand deposits $ 1 $ 28,185 Long-term borrowings compensation account

- Demand deposits 17,024 17,007 Land compensation fee account

- Demand deposits 159,114 159,114 Guarantee for development projects

- Demand deposits 100 100 Reserve for rental of land

- Time deposits 306,788 75,531 Guarantee for development projects and long- term borrowings

- Time deposits 160 160 Guarantee for projects

483,187 280,097

Other non-current assets

- Land in Hsinchu 311,590 311,590 Guarantee for short-term borrowings

- Long-term prepaid rents 145,569 145,569 Guarantee for short-term borrowings

- Refundable deposits 6,888 6,654 Guarantee for projects and leases

- Others 5,724 508 Security

469,771 464,321

Other receivables

- Land development receivables 3,814,562 4,559,927 Long-term borrowings

Inventories 301,854 301,854 Guarantee for long-term and short-term borrowings and short-term bills payable

Investment property 4,633,587 4,152,649 Guarantee for long-term and short-term borrowings and short-term bills payable

Property, plant and equipment Guarantee for short-term borrowings

- Land and buildings 480,526 361,406

$ 10,183,487 $ 10,120,254

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

(1) Contingencies

A. The Company invested in development of Kaohsiung Benzhou Industrial Park and entered into a contract, “Contract of Development in Kaohsiung Gungshan Industrial Park assigned by Kaohsiung county government”, with Kaohsiung city government. The contract provided that the Company should build the sewage treatment plant and transfer it to Kaohsiung city government. However, Kaohsiung city government, which had merged with city government, filed a lawsuit against the Company and claimed compensation amounting to $67,062 for negligence in management and maintenance of sewage treatment plant and remedy for facility damages in December 2015. Meanwhile, the Company has provided related evidences to prove that the facility was damaged because the companies in the industrial park disposed sewage without a permit, and poor management by Kaohsiung city government. Therefore, the Company has no responsibility in this case. The case is now pending with the by Kaohsiung district court. Since the court has not rendered the decision, the Company is unable to reasonably estimate the possible loss.

B. The Company signed a contract,「Construction of Sewage Treatment Plant for the development in Kaohsiung Benzhou Industrial Park」with Puchun Environmental Protection Engineering Corp. (hereafter “Puchun Corp.”) for the development of sewage treatment plant located in Kaohsiung Gangshan Benzhou Industrial Park. Later the trial run was pending due to the failure to collect adequate sewage. The plant was then transferred to Kaohsiung county government (now Kaohsiung city government) and confirmed as acceptance completed. After Kaohsiung city government assigned the construction of the plant to another contractor and altered the sewage treatment process, the trial run was affirmed to be impracticable so that the acceptance of the construction was affirmed not to have occurred. In January 2016, Puchun Corp. filed a lawsuit against the Company and claimed the Company owes the last construction payment of $21,042 and obliges to inform Hua Nan Commercial Bank to relieve its performance guarantee for the fourth phase. The Company claimed that the allegations of Puchun Corp. had no basis. The case is still pending with the Taipei District Court, Taiwan. Since the court has not made a ruling on this case, Company is unable to reasonably estimate the possible loss.


C. The Company terminated the design service contract which was commissioned by Huang Chien-chung Architects Firm for urban renewal at south-east side of Taipei Main Station. Huang Chien-chung filed a lawsuit against the Company for design compensation, and the Court ordered the Company to pay $31,500 to Huang Chien-chung and interest starting from July 28, 2011 until the debt is fully repaid. However, the Company contested that the service compensation should be calculated according to the design service contract rather than $31,500 ordered in first instance, and claimed the outstanding amount of service compensation was $538. The Company has appealed to the Taiwan High Court. The high court has not made a ruling on this case, as a result, the Company is unable to reasonably estimate the possible loss to the Company.

(2) Commitments

As of December 31, 2016 and 2015, except for commitments mentioned in Note 6(15), the Company’s aggregate commitments under the consignments for construction and services were $671,644 and $606,288, respectively.

10. SIGNIFICANT DISASTER LOSS None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE A. The Group has resolved to issue shares within 1 billion shares through private placement, the basis of

par value is no less than 80% of reference price and NT $12, and the par value is NT $12 in this private placement. Shareholders’ meeting has adopted a resolution authorizing the Board of Directors to make actual issuance price according to particular persons, market conditions and no less than the ratio that was approved in the shareholders’ meeting.

B. Please refer to Note 6(18) C(i) for the related information.

12. OTHERS (1) Operational policies

To relieve the pressure brought by the substantial payments on behalf of others incurred by the assigned projects of land development business, the Company consolidated its loans from several financial institutions into a 7-year long-term syndicated loan contract with a credit line of $16,500,000 in August 2005. With the repayments for the past years, the debt balance was considerably reduced. In order to lift unfavorable limitations for business growth, the Company once again signed a 5-year long-term syndicated loan contract with a credit line of $5,300,000 in August 2012. In August 2016, the borrowings was decreased to $2,694,000 following the reorganisation of syndicated loan aiming to repay former debt and replenish working capital. As of December 31, 2016, the syndicated loan amounted to $2,694,000.

The Company is committed to a diversified land development and value innovation integrated to providing a high-quality lifestyle. The Company tries to infuse new value into the land with ubiquitous technology and green energy technology.

A. Value-oriented development strategies:

The Company adds value to the land through cultural creativity and technological innovation by integrating art as part of life and creating a sustainable healthy LOHAS park.

B. Sustainable development of the IOT and O2O with the cloud the source of value in the future:

The Company will next focus on transforming IoT (Internet of Things) into an industry and realising it in learning and realistic creativity aspects in daily life industry.

C. Consolidation of the development of Kinmen as the border trade center:

The visa-on-arrival policy in Kinmen has enabled the number of visitors from Mainland China to hit a record high. Implementation of increased duty-free shopping quota for people coming from Mainland China through Kinmen and the relaxation of Xiamen as a free trade zone further contributed to a steady growth in bilateral trade volume, the importation of excessive quantities of goods to Xiamen, and significantly increased bilateral trade with Xiamen and the West Coast Zone, consolidating the development of Kinmen as a border trade center.

127


D. Core values of sustainable enterprise:

Employing “green, intelligent, and cultural creativity” as core beliefs, we infuse the land with new value, creating a unique brand image, communicating our corporate philosophy and committing to the construction of high-quality LOHAS spaces for living.

E. Specialization within the Company

Pursuit of overall rationalization of the Company and further enhancement of enterprise synergy through interaction and cooperation of all employees within the Company.

(2) Capital risk management

A. The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Company monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the balance sheet) less cash. Total capital is calculated as ‘equity’ as shown in the balance sheet plus net debt.

B. During 2016, the Company’s strategy, which was unchanged from 2015, was to maintain the gearing ratio under 50%. The gearing ratios at December 31, 2016 and 2015 were as follows:


Total borrowings $ 8,989,396 $ 6,265,738

Less: cash ( 2,034,256) ( 2,139,552)

Net debt 6,955,140 4,126,186

Total equity 17,916,682 17,427,356

Total capital $ 24,871,822 $ 21,553,542

Gearing ratio 27.96% 19.14%

(3) Financial instruments

A. Fair value information of financial instruments

Except for those listed in the table below, the carrying amounts of the Company’s financial instruments not measured at fair value (including notes receivable, accounts receivable, other receivables, long-term receivables, other financial assets, refundable deposits, short-term loans, short-term notes and bills payable, notes payable, accounts payable, other payables, long-term loans and guarantee deposits) are approximate to their fair values. The fair value information of financial instruments measured at fair value is provided in Note 12(4).

December 31, 2016

Book value Fair value

Level 1 Level 2 Level 3

Financial liabilities:

Bonds payable $ 4,314,167 $ - $ 4,396,448 $ -

December 31, 2015




Bonds payable $ 1,489,265 $ - $ 1,518,831 $ -


B. Financial risk management policies

The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial position and financial performance.

C. Significant financial risks and degrees of financial risks

(a) Credit risk

Credit risk refers to the risk of financial loss to the Company arising from default by the clients on the contract obligations. According to the Company’s credit policy, each local entity in the Company is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. The counterparties are government organisations of all cities and counties with high credit quality, thus, there is no critical credit risk.

(b) Liquidity risk

Cash flow forecasting is performed in the operating entities of the Company and aggregated by Company treasury. Company treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Company’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and external regulatory or legal requirements.


December 31, 2016 Less than 1 year Over 1 year Total

Short-term borrowings $ 1,300,934 $ - $ 1,300,934

Short-term notes and bills payable 187,358 - 187,358

Notes payable 311 - 311

Accounts payable 129 - 129

Other payables (including related parties) 1,772,412 506,899 2,279,311

Long-term borrowing (including current portion) 278,153 3,330,618 3,608,771

Bonds payable (including current portion) 553,314 4,003,447 4,556,761




Notes payable 799 - 799

Accounts payable 30 - 30

Other payables (including related parties) 1,909,278 500,839 2,410,117

Long-term borrowing (including current portion) 1,358,348 2,143,805 3,502,153

Bonds payable 19,200 1,537,091 1,556,291

(4) Fair value information

A. Details of the fair value of the Company’s financial assets and financial liabilities not measured at fair value are provided in Note 12(3).

B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

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Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Company’s investment in bank debentures is included in Level 2.

Level 3: Unobservable inputs for the asset or liability. The fair value of the Company’s investment in derivatives is included in Level 3.

C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2016 and 2015 is as follows:

December 31, 2016 Level 1 Level 2 Level 3 Total

Assets

Recurring fair valuemeasurementsFinancial assets at fair value through profit or loss

Derivative financial instruments $ - $ 370,280 $ - $ 370,280

Bond investment without active market - - 1,144,660 1,144,660

Investment property (Note) - - 6,474,503 6,474,503

Total $ - $ 370,280 $ 7,619,163 $ 7,989,443

December 31, 2015 Level 1 Level 2 Level 3 Total

Assets

Recurring fair valuemeasurementsFinancial assets at fair value through profit or loss

Derivative financial instruments $ - $ 80 $ - $ 80


Total $ - $ 80 $ 5,863,441 $ 5,863,521

Note: Investment property is measured at fair value.

D. The methods and assumptions the Company used to measure fair value are as follows:

(a) The fair value of financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the consolidated balance sheet date (i.e. yield curves on the Taipei Exchange, average commercial paper interest rates quoted from Reuters).

(b) When assessing non-standard and low-complexity financial instruments, for example, debt instruments without active market, interest rate swap contracts, foreign exchange swap contracts and options, the Company adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.

(c) Under “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, the Company appoints external valuers, by using the income approach to calculate the fair value of investment property. Related assumption and information of inputs are as follows:

i. Cash flow: Cash flow shall be valuated on the basis of existing lease contracts, rent at local market rates, or current market rents for similar comparable properties in the same location and condition, and overvalued and undervalued comparable properties shall be excluded. If there is a period-end value, the discounted present period-end value may be added.

ii. Analysis period: When there is no specified period for the income, the analysis period in principle shall not be longer than 10 years; when there is a specified period for the income, the income shall be estimated for the remainder of the specified period.


iii. Discount rate: The discount rate shall be determined using the risk premium approach only, with the calculation based on a certain interest rate, plus the estimate for the individual characteristics of the investment property. The language “based on a certain interest rate” means the interest rate may not be lower than the floating interest rate on a 2-year time deposit of a small amount, as posted by the Chunghwa Post Co. Ltd., plus 0.75 percentage points.

E. For the years ended December 31, 2016 and 2015, there was no transfer between Level 1 and Level 2.

F. For the movements of Level 3 for the years ended December 31, 2016 and 2015, please refer to Note 6(7).

G. For the years ended December 31, 2016 and 2015, there was no transfer into or out from Level 3.

H. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Fair value atDecember 31,

2016Valuation technique

Significant unobservable

input

Range (weighted average)

Relationship of inputs to fair value

Investment property $ 2,342,373 Discounted cash

flowLong-term revenue

growth rate, discount rate

Note

the higher the long-term revenue

growth rate, the higher the fair

value; the higher the discount rate, the lower the fair

value

Investment property 4,132,130 Land development

analysis

Profit rate, Capital interest comprehensive

ratioNote

the higher the profit rate, the lower the fair

value; the higher the capital interest

comprehensive ratio, the lower the

fair value


2015Valuation technique

Significant unobservable

input

Range (weighted average)

Relationship of inputs to fair value

Investment property $ 2,104,510 Discounted cash

flowLong-term revenue

growth rate, discount rate

Note

the higher the long-term revenue

growth rate, the higher the fair

value; the higher the discount rate, the lower the fair

value

Investment property $ 3,727,653 Land development

analysis


ratioNote

the higher the profit rate, the lower the fair

value; the higher the capital interest

comprehensive ratio, the lower the

fair value

Note: Details of the discount rate range are provided in Note 6(7).

13. SUPPLEMENTARY DISCLOSURES (1) Significant transactions information

A. Loans to others: Please refer to table 1.

B. Provision of endorsements and guarantees to others: Please refer to table 2.

C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): None.

D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: Please refer to table 3.

E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 4.

131


H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 5.

I. Trading in derivative instruments undertaken during the reporting periods: Conversion rights of convertible bonds. Please refer to Note 6(14).

J. Significant inter-company transactions during the reporting periods: Please refer to table 6.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 7.

(3) Information on investments in Mainland China

A. Basic information: Please refer to table 8.

B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: None.

14. SEGMENT INFORMATION Disclosure is not required.


Table 1

TAIWAN LAND DEVELOPMENT CORPORATIONLoans to othersYear ended December 31, 2016

Expressed in thousands of NTD (Except as otherwise indicated)

No.（Note 2） Creditor Borrower

Generalledger account

（Note 3）

Is a related party

Maximumoutstanding

balance duringthe year endedDecember 31,

2016（Note 4）

Balance atDecember

31,2016

（Note 5）

Actual amount

drawn down（Note 6）

Interest rate

Nature ofloan

（Note 7）

Amount oftransactions

with theborrower

（Note 8）

Reasonfor short-

termfinancing

（Note 9）

Allowancefor

doubtfulaccounts

CollateralLimit on loans

granted toa single party（Note 10）

Ceiling ontotal loans

granted（Note 10）

FootnoteItem Value

0 The Company Taiwan Envirotech Development Corp.

"Other receivables-related parties"

Yes $ 100,000 $ - $ - 3.30% 2 $ - Working capital $ - None $ - $ 3,583,337 $ 8,958,342

0 The Company Taiwan Innovation Development Corp.


Yes 100,000 100,000 - 3.30% 2 - Working capital - None - 3,583,337 8,958,342

1 Taiwan Innovation Development Corp.

Taiwan Envirotech Development Corp.


Yes 130,000 200,000 45,000 3.80% 2 - Working capital - None - 4,704,752 4,704,752

1 Taiwan Innovation Development Corp. The Company



1 Taiwan Commerce Development Corp.

Taiwan Innovation Development Corp.



Note 1: Except for actural amount drawn down (Note 7), amount of transactions with the borrower (Note 9) and allowance for doubtful accounts, the balances and amounts mentioned in this table refer to the ceiling or amount of loans to others on the date of occurrence (dates of boards of directors' resolutions, date of signing the contract, date of payment or other date that can confirm the counterparty and monetary amount of the transaction, whichever date is earlier) pursuant to Article 7 of the Regulations.

Note 2: The numbers filled in for the loans provided by the Company or subsidiaries are as follows: (1)The Company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’, and the same number refers to the same subsidiary. Note 3: Fill in the name of account in which the loans are recognised, such as receivables–related parties, current account with

stockholders, prepayments, temporary payments, etc. Note 4: Accumulated maximum outstanding balance of loans to others as of the reporting month of the current year. Note 5: Fill in the effective ceiling/amount of loans to others as of the reporting month.（The amounts of funds to be loaned to

others which have been approved by the board of directors of a public company in accordance with Article 14, Item 1 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies" should be included in its published balance of loans to others at the end of the reporting period to reveal the risk of loaning the public company bears, even though they have not yet been appropriated. However, this balance should exclude the loans repaid when repayments are done subsequently to reflect the risk adjustment. In addition, if the board of directors of a public company has authorized the chairman to loan funds in instalments or in revolving within certain lines and within one year in accordance with Article 14, Item 2 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”, the published balance of loans to others at the end of the reporting period should also include these lines of loaning approved by the board of directors, and these lines of loaning should not be excluded from this balance even though the loans are repaid subsequently, for taking into consideration they could be loaned again thereafter.

Note 6: Fill in the actual amount of loan to the debtors which does not exceed the ceiling.

133


Table 1





（Note 3）

Is a related party

Maximumoutstanding


2016（Note 4）

Balance atDecember

31,2016

（Note 5）

Actual amount


Interest rate

Nature ofloan

（Note 7）


with theborrower

（Note 8）

Reasonfor short-

termfinancing

（Note 9）

Allowancefor

doubtfulaccounts





FootnoteItem Value


















Note 7: The column of ‘Nature of loan’ shall fill in ‘Business transaction or ‘Short-term financing’. (1)Business relationship is ‘1’. (2)Short-term financing is ‘2’. Note 8: Fill in the amount of business transactions when nature of the loan is related to business transactions. Note 9: Fill in purpose of loan when nature of loan is for short-term financing, for example, repayment of loan, acquisition of

equipment, working capital, etc. Note10: Fill in limit on loans granted to a single party and ceiling on total loans granted as prescribed in the creditor company’s

“Procedures for Provision of Loans”, and state each individual party to which the loans have been provided and the calculation for ceiling on total loans granted in the footnote.

(1) Ceiling on total loans granted to others is 50% of the Company's net assets; limit on loans granted to a single party is 20% of the Company's net assets.

(2) Ceiling on total loans granted to others is 40% of the TIDC's net assets; limit on loans granted to a single party is 40% of TIDC's net assets.

Note11: The amounts of funds to be loaned to others which have been approved by the board of directors of a public company in accordance with Article 14, Item 1 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies" should be included in its published balance of loans to others at the end of the reporting period to reveal the risk of loaning the public company bears, even though they have not yet been appropriated. However, this balance should exclude the loans repaid when repayments are done subsequently to reflect the risk adjustment. In addition, if the board of directors of a public company has authorized the chairman to loan funds in instalments or in revolving within certain lines and within one year in accordance with Article 14, Item 2 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies”, the published balance of loans to others at the end of the reporting period should also include these lines of loaning approved by the board of directors, and these lines of loaning should not be excluded from this balance even though the loans are repaid subsequently, for taking into consideration they could be loaned again thereafter.


Table 2

TAIWAN LAND DEVELOPMENT CORPORATIONProvision of endorsements and guarantees to othersYear ended December 31, 2016

Expressed in thousands of NTD(Except as otherwise indicated)

Number(Note 2)

Endorser/guarantor

Party being endorsed/guaranteedLimit on

endorsements/guarantees

provided for asingle party（Note 4）

Maximumoutstanding

endorsement/guarantee

amount as ofDecember 31,

2016（Note 5）

Outstandingendorsement/

guaranteeamount at

December 31,2016

（Note 6）

Actual amountdrawn down（Note 7）

Amount ofendorsements/

guaranteessecured with

collateral（Note 8）

Ratio ofaccumulatedendorsement/

guarantee amount to

net asset value ofthe endorser/

guarantor company

Ceiling ontotal amount ofendorsements/

guaranteesprovided

（Note 4）

Provision ofendorsements/guarantees by

parent company

to subsidiary(Note 9)

Provision ofendorsements/guarantees bysubsidiary to

parent company(Note 9）

Provision ofendorsements/guarantees to

the party inMainland

China（Note 9）

FootnoteCompany name

Relationshipwith the

endorser/guarantor（Note 3）

0 The Company Taiwan Innovation Development Corp. 4 $ 5,375,005 $ 32,000 $ 32,000 $ 28,267 $ 32,000 0.18% $ 8,958,342 Y N N

0 The Company Taiwan Innovation Development Corp. 4 5,375,005 380,000 - - - 0.00% 8,958,342 Y N N

0 The Company Taiwan Innovation Development Corp. 4 5,375,005 1,100,000 1,100,000 426,110 - 6.14% 8,958,342 Y N N

0The Company and Taiwan Innovation Development Corp.

Taiwan Commerce Development Corp. 4 5,375,005 2,100,000 2,100,000 1,692,000 - 11.72% 8,958,342 Y N N


Taiwan Commerce Development Corp. 4 5,375,005 50,000 50,000 5,217 - 0.28% 8,958,342 Y N N


Wind Lion Plaza Corporation 4 5,375,005 50,000 50,000 872 50,000 0.28% 8,958,342 Y N N

0 The Company Taikai Xiamen Trading Corp. 4 5,375,005 28,800 - - - 0.00% 8,958,342 Y N Y

1 Taiwan Innovation Development Corp. The Company 4 10,585,691 86,074 86,074 86,074 86,074 0.73% 10,585,691 N Y N

1 Taiwan Innovation Development Corp. The Company 4 10,585,691 1,000,000 1,000,000 1,000,000 1,000,000 8.50% 10,585,691 N Y N




Note 1: Except for actual amount drawn down (Note 7), the balances and amounts mentioned in this table refer to the maximum amount or amount of endorsement/guarantees to others on the date of occurrence (the earlier of dates of boards of directors resolutions, date of signing the contract, date of payment or other date that can confirm the counter party and monetary amount of the transaction) pursuant to Article 7 of the Regulations.

Note 2: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows: (1) The Company is ‘0’. (2) The subsidiaries are numbered in order starting from ‘1’and the same number refers to the same subsidiary. Note 3: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is as follows: (1) Having business relationship. (2) The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/guaranteed

subsidiary. (3) The endorser/guarantor parent company and its subsidiaries jointly own more than 50% voting shares of the endorsed/

guaranteed company. (4) The endorsed/guaranteed parent company directly or indirectly owns more than 50% voting shares of the endorser/

guarantor subsidiary. (5) Mutual guarantee of the trade as required by the construction contract. (6) Due to joint venture, each shareholder provides endorsements/guarantees to the endorsed/guaranteed company in

proportion to its ownership.

135


Table 2



Number(Note 2)

Endorser/guarantor




Maximumoutstanding



2016（Note 5）


guaranteeamount at

December 31,2016

（Note 6）






guarantee amount to


guarantor company


guaranteesprovided

（Note 4）


parent company






China（Note 9）



















Note 4: Fill in limit on endorsements/guarantees provided for a single party and ceiling on total amount of endorsements/guarantees provided as prescribed in the endorser/guarantor company’s “Procedures for Provision of Endorsements and Guarantees”, and state each individual party to which the endorsements/guarantees have been provided and the calculation provided in the footnote.

(1) Ceiling on total endorsements/guarantees is 50% of the Company's net asset; limit on endorsements/guarantees to a single party is 30% of the Company's net assets.

(2) Ceiling on total endorsements/guarantees is 90% of TIDC's net assets; limit on endorsements/guarantees to a single party is 90% of TIDC's net assets.

Note 5: The maximum outstanding endorsement/guarantee amount as of the reporting month of the current year. Note 6: Fill in the ceiling or amount of existing endorsements/guarantees as of the reporting month. Note 7: Fill in the actual amount of endorsements/guarantees used by the endorsed/guaranteed company. Note 8: Fill in the amount of endorsements/guarantees secured with collateral. Note 9: Fill in ‘Y’ for those cases of provision of endorsements/guarantees by the Company to subsidiary and provision by subsidiary

to the Company, and provision to the party in Mainland China.


Table 4

TAIWAN LAND DEVELOPMENT CORPORATIONPurchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or moreYear ended December 31, 2016


Purchaser/seller Counterparty

Relationship with the

counterparty

TransactionDifferences in transaction terms

compared to third party transactions（Note 1）

Notes/accounts receivable(payable)

Footnote（Note 2）

Purchases(sales) Amount Percentage of total

purchases (sales) Credit term Unit price Credit term BalancePercentage of total

notes/accounts receivable(payable)

Taiwan Commerce Development Corp.

Wind Lion Plaza Corporation

Same Parent Company (sales) $ 155,119 73.40% Based on the

contract Negotiated price Approximately the same as third parties $ 41,763 92.42% -

Note 1: If terms of related-party transactions are different from third-party transactions, explain the differences and reasons in the ‘Unit price’ and ‘Credit term’ columns.

Note 2: In case related-party transaction terms involve advance receipts (prepayments) transactions, explain in the footnote the reasons, contractual provisions, related amounts, and differences in types of transactions compared to third-party transactions.

Note 3: Paid-in capital referred to herein is the paid-in capital of parent company. In the case that shares were issued with no par value or a par value other than NT$10 per share, the 20 % of paid-in capital shall be replaced by 10% of equity attributable to owners of the parent in the calculation.

Table 3

TAIWAN LAND DEVELOPMENT CORPORATIONAcquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company's paid-in capitalYear ended December 31, 2016


InvestorMarketable securities

（Note 1）


Counterparty （Note 2）

Relationship with the investor（Note 2）

Balance as at January 1,2016 Addition Disposal Balance as at December 31, 2016

Number of shares Amount Number of

shares Amount Number of shares Selling price Book value Gain (loss)

on disposalNumber of

shares Amount

The CompanyTaiwan Innovation Development Corp. - common stock

Investment accounted for under the equity method


Subsidiary 711,811,629 $ 3,850,000 53,000,000 $ 530,000 - - - - 764,811,629 $ 4,380,000

The CompanyTaiwan Innovation Development Corp. - preferred stock

Non-current bond investment without active market


Subsidiary - - 150,000,000 1,500,000 - - - - 150,000,000 1,500,000

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities. Note 2: Fill in the columns the counterparty and relationship if securities are accounted for under the equity method; otherwise leave

the columns blank. Note 3: Aggregate purchases and sales amounts should be calculated separately at their market values to verify whether they

individually reach NT$300 million or 20% of paid-in capital or more. Note 4: Paid-in capital referred to herein is the paid-in capital of parent company. In the case that shares were issued with no par

value or a par value other than NT$10 per share, the 20 % of paid-in capital shall be replaced by 10% of equity attributable to owners of the parent in the calculation.

Note 5: The Company has paid cash to invest in TIDC, amounting to $530,000 in December 2016, and the Company purchased 150,000,000 cumulative redeemable preference shares of TIDC with a par value of $10 in May 2016.

137


Table 4





counterparty












Table 3




（Note 1）








shares Amount




Subsidiary 711,811,629 $ 3,850,000 53,000,000 $ 530,000 - - - - 764,811,629 $ 4,380,000




Subsidiary - - 150,000,000 1,500,000 - - - - 150,000,000 1,500,000


Table 6

TAIWAN LAND DEVELOPMENT CORPORATIONSignificant inter-company transactions during the reporting periodsYear ended December 31, 2015


Number(Note 1) Company name Counterparty Relationship

(Note 2)

Transaction

General ledger account Amount Transaction termsPercentage of consolidated total operating revenues or

total assets (Note 3)

0 The Company Taiwan Innovation Development Corp. 1 Interest revenue from preference shares $ 72,610 Note 5 24.80%

1 Taiwan Innovation Development Corp. The Company 2 Service revenue 18,789 Note 5 6.42%

1 Taiwan Innovation Development Corp. The Company 2 nterest revenue from lending 4,571 Note 5 1.56%

3 Taiwan Envirotech Development Corp. Taiwan Commerce Development Corp. 3 Construction revenue 75,953 Note 6 25.94%

3 Taiwan Envirotech Development Corp. Taiwan Innovation Development Corp. 2 Construction revenue 42,044 Note 6 14.36%

2 Taiwan Commerce Development Corp. Taiwan Innovation Development Corp. 3 Rental revenue 37,216 Note 5 12.71%

2 Taiwan Commerce Development Corp. Wind Lion Plaza Corporation 3 Rental revenue 155,119 Note 5 52.97%

0 The Company Taiwan Innovation Development Corp. 1 Endorsements and guarantees 454,377 None 1.37%

0 The Company Taiwan Commerce Development Corp. 1 Endorsements and guarantees 1,697,217 None 5.11%

0 Taiwan Innovation Development Corp. Taiwan Commerce Development Corp. 3 Endorsements and guarantees " None 5.11%

1 Taiwan Innovation Development Corp. The Company 2 Endorsements and guarantees 4,186,074 None 12.61%

Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1)Parent company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’. Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the

number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.):

(1)Parent company to subsidiary.

Table 5

TAIWAN LAND DEVELOPMENT CORPORATIONReceivables from related parties reaching NT$100 million or 20% of paid-in capital or moreYear ended December 31, 2016


Creditor Counterparty Relationship with the counterparty

Balance as at December

31, 2016（Note 1）

Turnover rate (times)

Overdue receivables Amount collectedsubsequent to thebalance sheet date

Allowance fordoubtful accounts

Amount Action taken

Taiwan Innovation Development Corp. The Company The Company $ 100,000 Note 3 $ - - $ - $ -

Taiwan Envirotech Development Corp. Taiwan Commerce Development Corp. Subsidiary 145,935 0.46 - - - -

Note 1: Fill in separately the balances of accounts receivable–related parties, notes receivable–related parties, other receivables–related parties….


Note 3: Other receivables arising from loan to others.

139


Table 6




(Note 2)

Transaction














Table 5





31, 2016（Note 1）




Amount Action taken



(2)Subsidiary to parent company. (3)Subsidiary to subsidiary. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based

on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Note 4: The Company may decide to disclose or not to disclose transaction details in this table based on the Materiality Principle. (Transactions less than 1% are not disclosed.)

Note 5: The above transactions were based on agreements with the counterparties. Note 6: Based on the sales rate and progress of construction in contract.


Table 7

TAIWAN LAND DEVELOPMENT CORPORATIONInformation on investees (not including investees in Mainland China)Year ended December 31, 2016


Investor Investee Location Main businessactivies

Initial investment amount Shares held as at December 31, 2015Net profit (loss)of the investee

for the yearended December

31, 2016

Investmentincome(loss)

recognised by the Company for the yearended December 31,

2016

Footnote Balance as at December

31, 2016


31, 2015 Number of shares Ownership (%) Book value

The Company Taiwan Innovation Development Corp. Taiwan Metropolis renewal conformity service $ 4,380,000 $ 3,850,000 764,811,629 100 $ 11,726,256 $ 134,329 $ 122,405 Subsidiary

The Company Hsinchu Hill Garden Corp. Taiwan Development of Hsinpu, Hsinchu 1,000 1,000 100,000 100 612 ( 61) ( 61) Subsidiary

The Company Taiwan Midtown Development Corp. Taiwan Development of Taichung 1,000 1,000 100,000 100 722 ( 61) ( 61) Subsidiary

The Company Taiwan LanYung Development Corp. Taiwan Development of Yilan 14,790 14,790 1,479,000 51 9,793 ( 8,529) ( 4,349) Subsidiary


Taiwan Commerce Development Corp. Taiwan Kinmen BOT project 1,795,184 1,550,000 224,629,416 100 2,946,128 71,672 62,278 Indirectly-owned subsidiary


Taiwan Envirotech Development Corp. Taiwan Construction and Technology 130,000 30,000 13,000,000 100 123,160 ( 14,862) ( 17,342) Indirectly-owned subsidiary


Taiwan City Development Corp. Taiwan City renewal integration 1,000 1,000 100,000 100 541 ( 90) ( 90) Indirectly-owned subsidiary


Hualien Culture Clubhouse Corp. Taiwan Development of Hualien 30,000 30,000 4,434,000 100 46,267 692 692 Indirectly-owned subsidiary

Taiwan Innovation Development Corp. Hualien Ocean Forum Corp. Taiwan Development of Hualien 1,000 1,000 100,000 100 326 ( 62) ( 62) Indirectly-owned subsidiary

Taiwan Innovation Development Corp. Nanguowoo Corp. Taiwan International trade 10,000 10,000 1,000,000 100 8,204 ( 498) ( 498) Indirectly-owned subsidiary

Taiwan Innovation Development Corp. Wind Lion Plaza Corp. Taiwan General merchandise retail 540,000 300,000 54,000,000 100 47,395 ( 199,884) ( 199,884) Indirectly-owned subsidiary


Taiwan Talent Development Corp. Taiwan Human capital cultivation $6,000 $6,000 600,000 100 $3,000 ($ 71) ($ 71) Indirectly-owned subsidiary

Taiwan Innovation Development Corp. Dufry TCDC Ltd. Taiwan Management of duty free shops 29,400 29,400 2,940,000 49 17,891 - - Investments accounted for

using equity method


Taiwan Wind Lion Travel Service Corp. Taiwan Travel agency related business 10,000 10,000 1,000,000 100 9,859 ( 48) ( 48) Indirectly-owned subsidiary

Taiwan Innovation Development Corp. Kinmen Forum Corp. Taiwan Hotel management and conference

and exhibition business 3,000 3,000 300,000 100 2,997 3 3 Indirectly-owned subsidiary

141


Table 7






31, 2016



2016


31, 2016





















using equity method






Table 8

TAIWAN LAND DEVELOPMENT CORPORATIONInformation on investments in Mainland ChinaYear ended December 31, 2016


Investee in Mainland China

Main business activities

Paid-in capital Investment

method（Note 1）

Accumulatedamount of

remittance fromTaiwan to

Mainland Chinaas of January 1,

2016

Amount remitted fromTaiwan to Mainland

China / Amount remitted backto Taiwan for the year

ended December 31, 2016

Accumulatedamount

of remittancefrom Taiwan toMainland Chinaas of December

31, 2016

Net income ofinvestee as ofDecember 31,

2016

Ownership heldby

the Company(direct orindirect)

Investment income(loss)

recognised by theCompany for the

yearended December

31,2016（Note 2）

Book value ofinvestments in

Mainland Chinaas of December

31, 2016

Accumulatedamount

of investmentincome

remitted back toTaiwan as of

December 31,2016

Footnote

Remitted toMainland

China

Remittedback toTaiwan

Taikai Xiamen Trading Corp.

Trading Business $ 64,417 (1) $ 64,417 $ - $ - $ 64,417 ($ 4,696) 100 ($ 4,696) $ 39,220 $ -

Company name Accumulated amount of remittance from Taiwan toMainland China as of December 31, 2016

Investment amount approved by the InvestmentCommission of the Ministry of Economic Affairs (MOEA)

Ceiling on investments in Mainland Chinaimposed by the Investment Commission of MOEA

Taikai Xiamen Trading Corp. $ 64,417 $ 92,967 $ 10,755,655

Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to: (1)Directly invest in a company in Mainland China.. (2)Through investing in an existing company in the third area, which then invested in the investee in Mainland China. (3)Others Note 2: The financial statements that are audited and attested by R.O.C. parent company’s CPA. Note 3: The numbers in this table are expressed in New Taiwan Dollars.

143


Table 8






method（Note 1）




2016




Accumulatedamount


31, 2016


2016

Ownership heldby




yearended December

31,2016（Note 2）



31, 2016

Accumulatedamount

of investmentincome


December 31,2016

Footnote

Remitted toMainland

China











REPORT OF INDEPENDENT ACCOUNTANTSTo the Board of Directors and Shareholders of Taiwan Land Development Corporation

Opinion

　　We have audited the accompanying consolidated balance sheets of Taiwan Land Development Corporation and its subsidiaries (the “Group”) as at December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.　　In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

　　We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of matter –Land Development Receivables

　　As described in Note 6(4), the Taiwan Land Development Corporation has been consigned to develop the industrial parks since the period it was government-operated. According to the consignment contract, the Company should pay all the development costs in advance, with the payments to be reimbursed when the land is sold. The land development receivables increased by $502,705 thousand, the collection of land development receivables amounted to $306,828 thousand for the year ended December 31, 2016, and the uncollected balance of land development receivables was $5,301,274 thousand as of December 31, 2016.

Key audit matters

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

145


Investment property

Description　　For a description of accounting policy on investment property, please refer to Note 4(13). For the accounting estimates and assumption uncertainty in relation to investment property, please refer to Note 5. For details of investment property, please refer to Note 6(8).　　The Group’s investment properties consisted of hotels and shopping centres constructed in order to collect rents, and the land under development, and stated initially at its cost and measured subsequently using the fair value model. Also, the Company’s investment properties are taken to be the best use based on the purpose of land’s usage, intensity and changes in benefit from land development and improvement resulting an optimum usage in land. The Group’s investment properties were recognised based on the appraisal report from external appraisers.　　We considered that the aforementioned amount involved future year’s forecasting, assumptions were unobservable inputs and high estimate uncertainty, and the estimated outcome was significant in valuing investment properties. Therefore, we determined that the investment properties as one of the key areas of focus for this year’s audit.

How our audit addressed the matter　　We performed the following audit procedures on the above key audit matter:1. Assessed the appointed external appraisers in conformity with the rules of qualification and

independence.2. Obtained the appraisal report of investment properties which was provided by external

appraisers, and confirmed that the appraisal method used met the rules of “ Regulations Governing the Preparation of Financial Reports by Securities Issuers.”

3. Evaluated the estimation procedures of the Group’s future cash flows made by the external appraiser for the investment properties which were evaluated by using income approach, and compared with future year’s cash flows that was listed in the valuation model with management’s operation plan.

4. For investment properties under land development analysis, checked prices of each similar property and compared with similar asset prices available using public information.

5. Checked the accuracy of valuation model calculation, and confirmed that the recognition amount was in agreement with the appraisal report.

Recognition of service revenue from industrial park

Description　　For description of accounting policy on revenue recognition, please refer to Note 4(8) (24). For details of revenue recognition, please refer to Note 6(23).　　The Company entered into industrial park development contracts with the government and operates in the development and leasing business of industrial parks according to the Statute for Industrial Innovation. According to the consignment contract, the government was in charge of land acquisition and cadastration and the Company shall raise funds for the costs, wth the development costs to be reimbursed when the land is sold or leased. In addition, processing fee was calculated within the scopes of development and lease business after completed the agreements, and was recognized as development cost, also, the Company recognized service revenue based on percentage of land is sold or leased.　　Since the service revenue from the sale and lease of industrial park was recognized and calculated by the percentage of the land is sold or leased, and has a significant percentage in operating revenue, therefore , we determined that the service revenue from industrial park as one


of the key areas of focus for this year’s audit.

How our audit addressed the matter　　We performed the following audit procedures on the above key audit matter:1. Obtained an understanding and assessed the reasonableness of policies and procedures which

were used to recognize service revenue.2. Obtained an understanding and assessed the internal controls of related outsourcing procedure,

the sale and leasing business and revenue recognition of industrial parks, and performed related tests.

3. Obtained details of development costs, and selected samples to verify the amount of related vouchers and compared with carrying amount.

4. Obtained and checked the development contracts and industrial park sales rate table, and verified and recalculated the accuracy of sales rate and service revenue.

Other matter – Parent company only financial reports

　　We have audited and expressed an unmodified opinion on the parent company only financial statements of Taiwan Land Development Corporation as at and for the years ended December 31, 2016 and 2015.

Responsibilities of management and those charged with governance for the consolidated financial statements

　　Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 　　In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. 　　Those charged with governance, including supervisors, are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

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

147


　　As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:1. Identify and assess the risks of material misstatement of the consolidated financial statements,

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

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

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

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

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

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

　　We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 　　We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 　　From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Weng, Shih-Jung Wang, Hui-Hsien

For and on behalf of PricewaterhouseCoopers, TaiwanMarch 24, 2017


TAIWAN LAND DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDECEMBER 31, 2016 AND 2015(Expressed in thousands of New Taiwan dollars)

Assets NotesDecember 31, 2016 December 31, 2015AMOUNT % AMOUNT %

Current assets1100 Cash and cash equivalents 6(1) $ 3,022,827 9 $ 2,622,966 8

1110 Financial assets at fair value through profit or loss - current 6(2) 80 - 4,080 -

1144 Financial assets carried at cost - current 4 - - -1150 Notes receivable, net 3 - - -1170 Accounts receivable, net 6(3) 6,510 - 2,988 -1200 Other receivables 6(4) and 8 5,383,847 16 5,107,881 171220 Current income tax assets 2,847 - 1,895 -130X Inventories, net 6(5) and 8 1,320,713 4 1,159,774 41410 Prepayments 7 270,311 1 323,608 11470 Other current assets 8 512,929 2 380,880 111XX Current Assets 10,520,071 32 9,604,072 31

Non-current assets

1550 Investments accounted for under equity method 6(6) 17,891 - 17,891 -

1600 Property, plant and equipment, net 6(7) and 8 2,547,056 8 1,390,278 51760 Investment property, net 6(8) and 8 18,860,265 57 18,236,113 601780 Intangible assets, net 6(9) 31,363 - 35,266 -1840 Deferred income tax assets 6(29) 18,548 - 23,270 -1900 Other non-current assets 6(10) and 8 1,205,981 3 1,237,688 4 15XX Non-current assets 22,681,104 68 20,940,506 69 1XXX Total assets $ 33,201,175 100 $ 30,544,578 100

Liabilities and EquityCurrent liabilities

2100 Short-term borrowings 6(12) $ 1,401,823 4 $ 1,752,061 62110 Short-term notes and bills payable 6(13) 186,344 - 186,132 12150 Notes payable 81,296 - 316,887 12170 Accounts payable 187,234 1 153,354 12200 Other payables 6(14) 2,278,029 7 2,558,794 82230 Current income tax liabilities - - 1,952 -2300 Other current liabilities 6(15)(16)(17) 4,625,365 14 4,396,495 1421XX Current Liabilities 8,760,091 26 9,365,675 31

Non-current liabilities2530 Corporate bonds payable 6(16) 3,814,167 12 1,489,265 52540 Long-term borrowings 6(17) 1,960,464 6 1,654,971 52570 Deferred income tax liabilities 6(29) 713,154 2 563,185 22600 Other non-current liabilities 27,207 - 30,537 - 25XX Non-current liabilities 6,514,992 20 3,737,958 12 2XXX Total Liabilities 15,275,083 46 13,103,633 43

Equity attributable to owners of parentShare capital 6(20)

3110 Share capital - common stock 7,607,849 23 7,258,813 24Capital surplus 6(21)

3200 Capital surplus 27,894 - 316,057 1Retained earnings 6(22)

3310 Legal reserve 965,381 3 761,373 23320 Special reserve 9,163,601 27 6,873,013 233350 Unappropriated retained earnings 236,562 1 2,683,961 9

Other equity interest3400 Other equity interest 2,375 - 5,734 -3500 Treasury stocks 6(20) ( 86,980) - ( 471,595) ( 2)

31XX Equity attributable to owners of the parent 17,916,682 54 17,427,356 57

36XX Non-controlling interest 9,410 - 13,589 - 3XXX Total equity 17,926,092 54 17,440,945 57

Commitments and contingent liabilities 9

Significant events after the balance sheet date 11

3X2X Total liabilities and equity $ 33,201,175 100 $ 30,544,578 100 The accompanying notes are an integral part of these consolidated financial statements.

149


TAIWAN LAND DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEARS ENDED DECEMBER 31,2016 AND 2015(Expressed in thousands of New Taiwan dollars, except earnings per share amounts)

Items Notes

Years ended December 31

2016 2015

AMOUNT % AMOUNT %

4000 Sales revenue 6(23) $ 292,831 100 $ 592,069 100

5000 Operating costs 6(5)(27) ( 145,135) ( 50) ( 130,416) ( 22)

5950 Net operating margin 147,696 50 461,653 78

Operating expenses 6(27)(28)

6100 Selling expenses ( 236,985) ( 81) ( 322,320) ( 55)

6200 General & administrative expenses ( 488,722) ( 167) ( 516,175) ( 87)

6000 Total operating expenses ( 725,707) ( 248) ( 838,495) ( 142)

6900 Operating loss ( 578,011) ( 198) ( 376,842 ( 64)

Non-operating income and expenses

7010 Other income 6(24) 8,904 3 12,532 2

7020 Other gains and losses 6(25) 1,113,219 380 2,641,111 446

7050 Finance costs 6(26) ( 141,415) ( 48) ( 69,425) ( 12)

7060 Share of profit/(loss) of associates and joint ventures accounted for under equity method 6(6) - - ( 8,230) ( 1)

7000 Total non-operating income and expenses 980,708 335 2,575,988 435

7900 Profit before income tax 402,697 137 2,199,146 371

7950 Income tax expense 6(29) ( 154,887) ( 53) ( 159,541) ( 27)

8200 Profit for the year $ 247,810 84 $ 2,039,605 344

Other comprehensive income

Components of other comprehensive income that will be reclassified to profit or loss

8361 Financial statement translation differences of foreign operations ($ 3,359) ( 1) ($ 1,004) -

8500 Total comprehensive income for the year $ 244,451 83 $ 2,038,601 344

Profit (loss), attributable to:

8610 Owners of the parent $ 251,989 85 $ 2,040,076 344

8620 Non-controlling interest ( 4,179) ( 1) ( 471) -

$ 247,810 84 $ 2,039,605 344

Comprehensive income attributable to:

8710 Owners of the parent $ 248,630 84 $ 2,039,072 344

8720 Non-controlling interest ( 4,179) ( 1) ( 471) -

$ 244,451 83 $ 2,038,601 344

Basic earnings per share 6(30)

9750 Total basic earnings per share $ 0.34 $ 2.78

9850 Total diluted earnings per share $ 0.33 $ 2.75

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


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151


TAIWAN LAND DEVELOPMENT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015(Expressed in thousands of New Taiwan dollars)

Notes Years ended December 31 2016 2015

CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax $ 402,697 $ 2,199,146Adjustments

Adjustments to reconcile profit (loss) Proceeds from disposal of financial assets at fair value through profit or loss 6(25) ( 41) -

Gain on reversal of market value of inventories 6(5) ( 2,100) ( 1,871)Share of loss of associates accounted for using equity method 6(6) - 8,230Depreciation 6(7)(27) 39,326 30,001(Reversal of) impairment loss on non-financial assets 6(11)(25) ( 825) ( 1,588)Loss (gain) on disposal of property, plant and equipment 6(25) 14 ( 145)Adjustments of fair value of investment properties 6(25) ( 1,112,681) ( 2,640,321)Amortization 6(9)(27) 6,666 4,761Interest income 6(24) ( 2,854) ( 7,269)Interest expense 6(26) 382,173 320,550Compensation cost of share-based payments 6(19) 18,426 300

Changes in operating assets and liabilitiesChanges in operating assets

Financial assets at fair value through profit or loss- current 4,041 -Notes receivable, net ( 3) 282Accounts receivable, net ( 3,522) ( 267)Other receivables, net ( 276,058) ( 561,962)Inventories ( 100,969) ( 33,377)Prepayments ( 59,288) ( 133,351)

Changes in operating liabilitiesAccounts payable 22,759 1,401Notes payable ( 6,211) 8,416Other payables ( 524,700) ( 793,400)Other current liabilities ( 247,487) ( 390,243)

Cash outflow generated from operations ( 1,460,637) ( 1,990,707)Interest received 2,946 7,218Interest paid ( 336,494) ( 320,765)Income tax paid ( 3,100) ( 19,715)

Net cash flows used in operating activities ( 1,797,285) ( 2,323,969)CASH FLOWS FROM INVESTING ACTIVITIES

(Increase) decrease in other assets - current ( $ 134,774) $ 78,084Acquisition of financial assets at cost ( 4) -Acquisition of property, plant and equipment 6(31) ( 411,398) ( 159,836)Proceeds from disposal of property, plant and equipment - 429Acquisition of investment properties 6(31) ( 397,673) ( 613,001)Acquisition of intangible assets 6(9) ( 553) ( 7,658)Increase in prepayments for business facilities ( 2,131) ( 5,661)Increase in refundable deposits ( 210,426) ( 66,035)Decrease in refundable deposits 238,009 823Increase in other non-current financial assets ( 12) ( 77,026)Decrease in other non-current financial assets 50,000 75,000Decrease in non-current financial assets ( 45,467) ( 94,249)

Net cash flows used in investing activities ( 914,429) ( 869,130)CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from short-term loans 876,243 2,947,780Repayment of short-term loans ( 1,226,481) ( 2,274,719)Increase in short-term notes and bills payable 212 430Increase in other current liabilities 238,178 415,423Proceeds from issuance of bonds 6(16) 2,818,750 991,677Proceeds from long-term debt 3,505,570 170,000Repayment of long-term debt ( 3,461,899) ( 382,777)(Decrease) increase in guarantee deposits received ( 3,330) 6,947Payments to acquire treasury shares 6(20) ( 219,979) ( 364,039)Treasury shares sold to employees 584,580 140,771Change in non-controlling interests - 9,310

Net cash flows from financing activities 3,111,844 1,660,803 Effect of exchange rate changes on cash and cash equivalents ( 269) ( 28)Net increase (decrease) in cash and cash equivalents 399,861 ( 1,532,324)Cash and cash equivalents at beginning of year 2,622,966 4,155,290 Cash and cash equivalents at end of year $ 3,022,827 $ 2,622,966 The accompanying notes are an integral part of these consolidated financial statements.


TAIWAN LAND DEVELOPMENT CORPORATION AND SUBSIDIARIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANIZATION Taiwan Land Development Corporation (the “Company”) was established on June 30, 1964 as a government-

operated company and the principal business was land development. In July 1972, the Company was renamed as “Taiwan Trust and Development Corporation” and its principal business became financial services and land development. The Company became a listed company in January 1999 after privatization.

To comply with the government’s “Second Financial Reformation Policy” and the rules of Trust Enterprise Act, the Company sold its trust department through a public bidding in August 2005. Consequently, the Company became a professional land development company from a financial institution with the approval of the Financial Supervisory Commission on September 13, 2005. The stockholders subsequently resolved to change the company name back to its original name “Taiwan Land Development Corporation” on December 14, 2005 with the principal business of land development and urban renewal development. The Company changed its type of industry in the Taiwan Stock Exchange to Building Material and Construction after March 2006.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on March 23, 2017.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting

Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

None.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group

New standards, interpretations and amendments endorsed by FSC effective from 2017 are as follows:



Investment entities: applying the consolidation exception(amendments to IFRS 10, IFRS 12 and IAS 28) January 1, 2016

Accounting for acquisition of interests in joint operations(amendments to IFRS 11) January 1, 2016

IFRS 14,‘Regulatory deferral accounts’ January 1, 2016


Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38) January 1, 2016

Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016

Defined benefit plans: employee contributions(amendments to IAS 19R) July 1, 2014

Equity method in separate financial statements(amendments to IAS 27) January 1, 2016

Recoverable amount disclosures for non-financial assets(amendments to IAS 36) January 1, 2014

Novation of derivatives and continuation of hedge accounting(amendments to IAS 39) January 1, 2014

IFRIC 21, ‘Levies’ January 1, 2014



Improvements to IFRSs 2012-2014 January 1, 2016

The above standards and interpretations have no significant impact to the Group’s financial condition and operating result based on the Group’s assessment.

153


(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRS endorsed by the FSC effective from 2017 are as follows:





IFRS 9, ‘Financial instruments’ January 1, 2018

Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28)

To be determined byInternational Accounting

Standards Board

IFRS 15, ‘Revenue from contracts with customers’ January 1, 2018

Clarifications to IFRS 15, ‘Revenue from contracts with customers’ (amendments to IFRS 15) January 1, 2018

IFRS 16, ‘Leases’ January 1, 2019


Recognition of deferred tax assets for unrealised losses(amendments to IAS 12) January 1, 2017

Transfers of investment property (amendments to IAS 40) January 1, 2018

IFRIC 22, ‘Foreign currency transactions and advance consideration’ January 1, 2018

Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 1, ‘First-time adoption of Iinternational Financial Reporting Standards' January 1, 2018

Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 12, ‘Disclosure of interests in other entities’ January 1, 2017

Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28, ‘Investments in associates and joint ventures’ January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and operating result based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete.

A. IFRS 9, ‘Financial instruments’

(a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.

(b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.

B. IFRS 15, ‘Revenue from contracts with customers’

IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11 ‘Construction contracts’, IAS 18 ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognised when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.


The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:

Step 1: Identify contracts with customer.

Step 2: Identify separate performance obligations in the contract(s).

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price.

Step 5: Recognise revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

C. Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from Contracts with Customers‘

The amendments clarify how to identify a performance obligation (the promise to transfer a good or a service to a customer) in a contract; determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and determine whether the revenue from granting a license should be recognised at a point in time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new Standard.

D. IFRS 16, ‘Leases’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a ‘right-of-use asset’ and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

E. Amendments to IAS 7, ‘Disclosure initiative’

This amendment requires that an entity shall provide more disclosures related to changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

F. Amendments to IAS 40, ‘Transfers of investment property’

The amendment clarified that to transfer to, or from, investment properties there must be a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A change in management’s intentions, in isolation, does not provide evidence of the change in use. In addition, the amendments added examples for the evidence of a change in use. The examples include assets under construction or development (not completed properties) transfer from investment property to owner-occupied property at commencement of development with a view to owner-occupation and transfer from inventories to investment property at inception of an operating lease to another party.

The Group is assessing the potential impact of the new standards, interpretations and amendments above. The impact on the consolidated financial statements will be disclosed when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out

below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

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(2) Basis of preparation

A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:

(a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

(b) Investment property is subsequently measured at fair value.

B. The preparation of financial statements in compliance with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

A. Basis for preparation of consolidated financial statements:

(a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

(b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

(c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

(d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.


B. Subsidiaries included in the consolidated financial statements:

Name of Investor Name of Subsidiary Main Business Activities

Ownership (%)

December 31, 2015

December 31, 2014

The Company Taiwan InnovationDevelopment Corporation(TIDC)

Urban renewal services Marketing and e-commerce 100 100

The Company Hsinchu Hill GardenCorporation

Land development of Hsinpu Town in Hsinchu 100 100

The Company Taiwan Midtown Development Corporation

Real estate lease and business Land development of Taichung 100 100

The Company Taiwan LanYung Development Corporation

Real estate lease and business Land development of IlanReal estate management

51 51

TIDC Taiwan Commerce Development Corporation

Development of Jinmen commerce and leisure parkReal estate management Retail trading

100 100

TIDC Taiwan Envirotech Development Corporation Information and technology business 100 100

TIDC Taiwan City DevelopmentCorporation Urban renewal services 100 100

TIDC Hualien Ocean Forum CorporationReal estate lease and business Hualien Kuang Hua Lohas Creative Park development business

100 100

TIDC Hualien Culture Clubhouse Corporation

Real estate lease and business Hualien Kuang Hua Lohas Creative Park development business

100 100

TIDC Wind Lion Plaza Corporation General merchandise retail 100 100

TIDC Nanguowoo Corporation International trade 100 100

TIDC Taiwan Talent Development Corporation Human capital cultivation 100 100

TIDC Taikai Xiamen TradingCorporation Trading business 100 100

TIDC Taiwan Wind Lion Travel Service Corporation Travel agency related business 100 100

TIDC Kinmen Forum Corporation Hotel management Conference and exhibition business 100 100

C. Subsidiaries not included in the consolidated financial statements: None.

D. Adjustments for subsidiaries with different balance sheet dates: None.

E. Significant restrictions: None.

F. Subsidiaries that have non-controlling interests that are material to the Group: None.

(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan Dollars, which is the Company’s functional and the Group’s presentation currency.

A. Foreign currency transactions and balances

(a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.

(b) Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.

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(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

B. Translation of foreign operations

The operating results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(a) Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

(b) Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

(c) All resulting exchange differences are recognised in other comprehensive income.

(5) Classification of current and non-current items

The Group classifies assets and liabilities relating to the construction department as current and non-current by its operating cycle (which is normally longer than one year). The following are the classification criteria for other departments:

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

(a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

(b) Assets held mainly for trading purposes;

(c) Assets that are expected to be realised within twelve months from the balance sheet date;

(d) Cash, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

(a) Liabilities that are expected to be paid off within the normal operating cycle;

(b) Liabilities arising mainly from trading activities;

(c) Liabilities that are to be settled within twelve months from the balance sheet date;

(d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.


A. Financial assets at fair value through profit or loss are financial assets held for trading or financial assets designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorised as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

(a) Hybrid (combined) contracts; or

(b) They eliminate or significantly reduce a measurement or recognition inconsistency; or

(c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.


B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using trade date accounting.

C. Financial assets at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in profit or loss.


Accounts receivable are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(8) Consigned land development business

A. The government organizations consign land development business to the Company, and the Company is also in charge of marketing the development in some cases.

B. During the consignment period, the Company, as a consignee, pays on behalf of consignors for compensation fees of land collection, construction costs, supervision costs and inspection costs, etc. Consignors compute interest payable on cost paid by the Company. When conducting consigned land development business, including industrial parks, land restructuring and land repurchase, costs are recognised pursuant to the agreements in each consignment contract and contracts with contractors. When the proceeds from sale of land exceed the cost, in accordance with Article 47 of Act for Industrial Innovation, developing organizations can make an agreement on receiving certain portion of profit with the commission organizations. In the case of industrial parks development, the Company recognises service income based on sales rate and progress of construction, when meeting all the following criteria:

(a) Costs attributed to the contract can be reasonably confirmed.

(b) Except for the collectible costs, other contract costs can be reasonably estimated.

(c) The collectibility of service income can be reasonably confirmed.

C. Development costs are debited to the account “Land Development Receivables”, and receipts from buyers are credited to the account “Other current liabilities – deposit for sale of industrial park received in advance”, which are then offset with land development receivables when buyers settle the last payment.

(9) Impairment of financial assets

A. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

B. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:

(a) Significant financial difficulty of the issuer or debtor; or

(b) A breach of contract, such as a default or delinquency in interest or principal payments.

C. As the Group has assessed that there is objective evidence that the financial assets measured at amortised cost are impaired, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognised in profit or loss. 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 loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

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(10) Inventories

A. Except for land development agency, the Company’s inventories are land for construction, construction in progress and land and buildings for sale.

B. Development costs are stated at cost, and qualified interest costs incurred during construction are capitalised. Inventories are transferred to construction costs on ratio-of-area method consistently. Inventories are transferred to property for self-use when they are for self-use. When the purpose of use is changed and the inventories are then leased to others under operating leases, inventories are transferred to investment property.

C. Buildings and land held for sale, construction in progress and land held for construction site are evaluated at the lower of cost or net realisable value, and the individual item approach is used in the comparison of cost and net realisable value.

D. Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The item by item approach is used in applying the lower of cost and net realisable value.

(11) Investments accounted for using equity method / associates

A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.

B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

C. When changes in an associate’s equity are not recognised in profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognises change in ownership interests in the associate in ‘capital surplus’ in proportion to its ownership.

D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

E. When the Group disposes its investment in an associate, if it loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it still retains significant influence over this associate, then the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.


A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalized.

B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost must be depreciated separately.


D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

Buildings 55 years

Transportation equipment 5~15 years

Utility equipment 4~15 years

Machinery and equipment 5 years

Leasehold assets 5 years

Other equipment 4~10 years

Leasehold improvements 5 years


A. Investment property is property held to earn rent or increase value or for both (including property under construction for the purpose). Investment property also includes land whose purpose of use has not been decided and is thus considered as capital appreciation. Investment property is transferred to property for self-use when it is for self-use. Investment property is transferred to inventory when it is held-for-sale.

B. An investment property is stated initially at its cost and measured subsequently using the fair value model. A gain or loss arising from a change in the fair value of investment property is recognised in profit or loss.

(14) Intangible assets

A. Trademarks are stated at cost and amortised over the estimated life of 47 years using the straight-line method.

B. Operating rights are stated at cost and amortised over the estimated life of 10 years using the straight-line method.

C. Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 3 to 5 years.


The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

(16) Borrowings

A. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

B. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

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(17) Notes and accounts payable

Notes and accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. However, short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(18) Financial liabilities and equity instruments

A. Ordinary corporate bonds payable

Ordinary corporate bonds issued by the Group are initially recognised at fair value, net of transaction costs incurred. Ordinary corporate bonds are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is accounted for as the premium or discount on bonds payable and presented as an addition to or deduction from bonds payable, which is amortised in profit or loss as an adjustment to the ‘finance costs’ over the period of bond circulation using the effective interest method.

B. Convertible corporate bonds payable

Convertible corporate bonds issued by the Group contain conversion options (that is, the bondholders have the right to convert the bonds into the Group’s common shares by exchanging a fixed amount of cash for a fixed number of common shares) and call options. The Group classifies the bonds payable and derivative features embedded in convertible corporate bonds on initial recognition as a financial asset or an equity instrument (‘capital surplus—stock warrants’) in accordance with the substance of the contractual arrangement and the definitions of a financial asset and an equity instrument. Convertible corporate bonds are accounted for as follows:

(a) Call options embedded in convertible corporate bonds are recognised initially at net fair value as ‘financial assets at fair value through profit or loss’. They are subsequently remeasured and stated at fair value on each balance sheet date; the gain or loss is recognised as ‘gain or loss on valuation of financial assets at fair value through profit or loss’.

(b) Bonds payable of convertible corporate bonds is initially recognised at fair value and subsequently stated at amortised cost. Any difference between the proceeds and the redemption value is accounted for as the premium or discount on bonds payable and presented as an addition to or deduction from bonds payable, which is amortised in profit or loss as an adjustment to the ‘finance costs’ over the period of bond circulation using the effective interest method.

(c) Conversion options embedded in convertible corporate bonds issued by the Group, which meet the definition of an equity instrument, are initially recognised in ‘capital surplus—stock warrants’ at the residual amount of total issue price less amounts of ‘financial assets at fair value through profit or loss’ and ‘bonds payable—net’ as stated above. Conversion options are not subsequently remeasured.

(19) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

B. Pensions

For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.


C. Employees’ compensation, directors’ and supervisors’ remuneration

Employees’ compensation, directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal obligation or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

(20) Employee share-based payment

For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

(21) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

C. Deferred income tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

D. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.

(22) Treasury shares

Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(23) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are approved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

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(24) Revenue recognition

A. Construction revenues

The Group’s activities involve developing and investing in fixed assets and mainly focus on developing and selling residential and enterprise buildings. As the customer has limited ability to influence the design or the customer can make little changes to basic design, the sale of residential and enterprise buildings is considered as sale of goods. Revenue should be recognised when the Group has delivered the goods to the customer, significant risks and rewards of ownership have been transferred to the customer, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity.

B. Sales of services

The Group serves as an agent of land development on behalf of government organizations and is responsible to sell partial development projects. Sales of services are recognised at the percentage of completion when the following conditions are met:

(a) Amount of sales revenue can be measured reliably;

(b) It is probable that the future economic benefits associated with the transaction will flow to the entity;

(c) Percentage of completion of transactions at the end of reporting period can be measured reliably;

(d) Costs incurred and will incur to complete the transaction can be measured reliably.

Please refer to Note 4(8) for related revenue recognised.

C. Catering and entertainment income

Food service revenue and ticket revenue are recorded when the services are rendered. The Group provides catering and film related entertainment services. Revenue is measured at the fair value of the consideration received or receivable. Revenue is recorded when the amount can be reliably measured and the economic benefit concerning the transactions can be accrued by the Group.

D. Sales of goods

The Group provides goods-related services. Revenue is measured at the fair value of the consideration received or receivable taking into account of increment tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities. Revenue arising from the sales of goods should be recognised when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

(25) Operating segments

The information on operating segments of the Group is consistent with the internal management report which is prepared for the Chief Operating Decision-Maker. The Chief Operating Decision-Maker is responsible for allocating resources to the operating segments and for evaluating their performance.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:


(1) Realisability of deferred income tax assets

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Assessment of the realisability of deferred income tax assets involves critical accounting judgements and estimates of the management, including the assumptions of expected future sales revenue growth rate and profit rate, available tax credits, tax planning, etc. Any variations in global economic environment, industrial environment, and laws and regulations might cause material adjustments to deferred income tax assets.

As of December 31, 2016, the Group recognised deferred income tax assets amounting to $18,548.

(2) Measurement of investment property

As investment property is measured at fair value, the Group must determine the net fair value of investment property such as land and buildings on balance sheet date using experts’ judgements and estimates. The Group must adjust costs to fair value based on the valuation reports by experts. Such assessment of investment property is principally based on the demand for the products within the specified period in the future, trading trends of buildings and experts’ judgements and estimates, and may influence the measurement of fair value. Therefore, there might be material changes to the evaluation.

As of December 31, 2016, the Group has recognised investment property of $18,860,265.

6. DETAILS OF SIGNIFICANT ACCOUNTS (1) Cash and cash equivalents


Cash on hand and revolving funds $ 4,351 $ 8,572

Checking accounts and demand deposits 3,018,476 2,614,394

$ 3,022,827 $ 2,622,966

A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

B. As of December 31, 2016 and 2015, details of cash and cash equivalents pledged to others as collateral are provided in Note 8.


Items December 31, 2016 December 31, 2015

Current items:

Financial assets held for trading Hwatai Bank-Financial bonds $ - $ 4,000

Derivative financial instruments-Bonds payable 80 80

$ 80 $ 4,080

A. For the years ended December 31, 2016 and 2015, the Group did not recognise any gain or loss on these financial assets.

B. The counterparties of the Group’s debt instrument investments have good credit quality; their credit rating levels are twBBB and above. The maximum exposure to credit risk at balance sheet date is the carrying amount of financial assets at fair value through profit or loss.

C. The Group has no financial assets at fair value through profit or loss pledged to others.



Accounts receivable $ 20,630 $ 17,108

Less: allowance for bad debts ( 14,120) ( 14,120)

$ 6,510 $ 2,988

A. The Group’s accounts receivable that were neither past due nor impaired were fully performing in line with the credit standards prescribed based on counterparties’ industrial characteristics, scale of business and profitability.

165


B. As of December 31, 2016 and 2015, the Group has no accounts receivable that were past due but not impaired.

C. Movement analysis of financial assets that were impaired is as follows:

(a) As of December 31, 2016 and 2015, the Group’s accounts receivable that were impaired amounted to $14,120.

(b) Movements on the Group’s provision for impairment of accounts receivable are as follows:

2016

Individual provision Group provision Total

At January 1 $ 14,120 $ - $ 14,120

Provision for impairment - - -

Reversal of impairment - - -

At December 31 $ 14,120 $ - $ 14,120

2015

Individual provision Group provision Total

At January 1 $ 14,120 $ - $ 14,120

Provision for impairment - - -

Reversal of impairment - - -

At December 31 $ 14,120 $ - $ 14,120

(4) Other receivables


Land development receivables $ 5,301,274 $ 5,105,397

Other receivables 82,573 2,484

$ 5,383,847 $ 5,107,881

A. The details on land development receivables were as follows:


service income atDecember 31, 2016

Consignors



Taichung Port Warehouse Park 17,432 176,632 Export Processing Zone, MOEA Taichung City 1st Precision Machinery Innovation Technology Park 40,680 2,851,667 Taichung City Government

Taichung City 2nd Precision Machinery Innovation Technology Park - 467,699 Taichung City Government


Taichung City, Wen- Shan Industrial Park 39,694 4,593 Taichung City GovernmentTaichung Aviation Industrial Park and Astronavigation 89,884 7,388 Taichung City Government

$ 5,301,274 $ 5,748,348




Consignors



Taichung Port Warehouse Park 17,432 176,632 Export Processing Zone, MOEA Taichung City 1st Precision Machinery Innovation Technology Park 151,943 2,836,463 Taichung City Government

Taichung City 2nd Precision Machinery Innovation Technology Park - 455,450 Taichung City Government


Taichung City, Wen- Shan Industrial Park 39,694 4,593 Taichung City Government Taichung Aviation Industrial Park and Astronavigation 89,464 7,388 Taichung City Government

$ 5,105,397 $ 5,689,912

B. The movements on land development receivables for the year ended December 31, 2016 are as follows:

Items Beginning balances Additions Collections Ending balances




Taichung City 1st Precision Machinery Innovation Technology Park 151,943 111,227 ( 222,490) 40,680



Others 129,158 420 - 129,578

$ 5,105,397 $ 502,705 ($ 306,828) $ 5,301,274

The movements on land development receivables for the year ended December 31, 2015 are as follows:

Items Beginning balances Additions Collections Ending balances




Taichung City 1st Precision Machinery Innovation Technology Park - 505,781 ( 353,838) 151,943



Others 113,385 15,773 - 129,158

$ 4,527,990 $ 1,152,931 ($ 575,524) $ 5,105,397

C. For the years ended December 31, 2016, and 2015, interests paid on behalf of consignors recognised as deduction of interest expense were $172,710 and $139,453, respectively.

D. In January 2016, the Company paid earnings accrued by the development project of Taichung Industrial Park Technology Building and recognised as other receivable, others amounting to $66,332 as ordered in the official document from Taichung City Government.

E. The reasons for the Company not providing reserve allowance for uncollectible accounts are as follows:

(a) The debtors of the land development receivables are government organizations, and the possibility of non-payment is remote.

(b) According to the development contracts, proceeds from the sale and rental of the land are to be used first to repay the land development receivables. In addition, the Company can also claim for any related subsidies offered by the government to repay the development costs. Therefore, there is no significant doubt or uncertainty on the collectability of the land development receivables.

167


(c) The government is the subject of the development and also the owner of the land. Hence, the collectability of the development costs is not associated with the market values of the land. The inspected costs and prices are greater than costs already incurred and the land was sold on inspected prices and the proceeds were all collected. When settling the industrial park revenues and costs, in revenue-above-cost cases, the difference should be handed over to the industrial parks development and management fund based on the “Statute for Industrial Innovation” Article 47. Otherwise, the Company would be compensated by the fund according to the “Act for Industrial Innovation.”

F. The Group’s other receivables that were neither past due nor impaired were fully performing in line with the credit standards prescribed based on counterparties’ industrial characteristics, scale of business and profitability.

G. As of December 31, 2016 and 2015, the Group did not hold other receivables that were past due but not impaired.

H. Please refer to Note 8 for the details of pledged land development receivables.

(5) Inventories

A. The details of the Group’s inventories are as follows:


Land $ 357,561 $ 357,561

Building 188,084 188,084

Construction in progress 735,974 604,046

Merchandise inventory 74,864 48,268

Restaurant supplies 1,009 694

1,357,492 1,198,653

Less: allowance for price decline ( 36,779) ( 38,879)

$ 1,320,713 $ 1,159,774

For the years ended December 31, 2016 and 2015, the valuation allowance for lands and buildings available for sale were $36,779 and $38,879, respectively.

B. Related loss (gain) on inventory:


2016 2015

Land cost $ - $ 399

Building cost - 194

Cost of sales 73,683 93,386

Food service costs 27,217 10,028

Reversal of allowance for inventory obsolescence and market price decline ( 2,100) ( 1,871)

$ 98,800 $ 102,136

Due to the change in real estate market recovery, the Group recognised reversal of allowance for inventory obsolescence and market price decline amounting to $2,100 and $1,871 for the years ended December 31, 2016 and 2015, respectively, which were in accordance with appraisal reports issued by independent appraisers.

C. Interest expense capitalized for the years ended December 31, 2016 and 2015 amounted to $14,653 and $22,306, respectively.

D. Please refer to Note 8 for the details of pledged inventories as of December 31, 2016 and 2015.


(6) Investments accounted for using equity method

A. Taiwan Innovation Development Corp. and Dufry International AG have jointly established Dufry TCDC Ltd. in March 2014. Taiwan Innovation Development Corp. has invested $29,400 and acquired 49% of capital share. Dufry TCDC Ltd. engages in providing products and services at Wind Lion Plaza, Kinmen. As of December 31, 2016 and 2015, the investment balance both were $17,891. The share of loss of associates and joint ventures accounted for using equity method were $0 and $8,230, respectively for the years ended December 31, 2016 and 2015.

2016 2015

At January 1 $ 17,891 $ 26,121

Share of profit or loss of investments accounted for using equity method - ( 8,230)

At December 31 $ 17,891 $ 17,891

B. The summarized financial information of the associates that are material to the Group is as below:

Dufry TCDC Ltd. Years ended December 31,

2016 2015

Current assets $ 36,512 $ 36,512

Non-current assets - -

Current liabilities - -

Non-current liabilities - -

Total net assets $ 36,512 $ 36,512

Share in associate's net assets $ 17,891 $ 17,891

Goodwill - -

Carrying amount of the associate $ 17,891 $ 17,891

Dufry TCDC Ltd. Years ended December 31,

2016 2015

Revenue $ - $ -

Loss for the period from continuing operations $ - ($ 16,749)

Loss for the period from discontinued operations - -

Other comprehensive income, net of tax - -

Total comprehensive loss $ - ($ 16,749)

C. Dufry TCDC Ltd. Has been resolved by its shareholders to be dissolved on November 16, 2015 and the registratration of dissolution has been approved by the Ministry of Economic Affairs on December 1, 2015. Dufry TCDC Ltd, has filed a liquidation completion application to the courts and expects to complete the liquidation in March 2017.

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Utility equipment

Machineryand

equipment Leasehold

assetsOther

equipmentLeasehold

improvements Construction

in progress

Total

At January 1, 2016Cost $ 461,184 $ 248,122 $ 35,843 $ 23,364 $ 546 $ 3,500 $ 121,294 $ 30,212 $ 572,271 $ 1,496,336


- ( 34,299) ( 6,943) ( 12,396) ( 124) ( 1,240) ( 22,520) ( 28,536) - ( 106,058)

$461,184 $213,823 $ 28,900 $ 10,968 $ 422 $ 2,260 $ 98,774 $ 1,676 $572,271 $ 1,390,278

2016Opening net book amount $ 461,184 $ 213,823 $ 28,900 $ 10,968 $ 422 $ 2,260 $ 98,774 $ 1,676 $ 572,271 $ 1,390,278

Additions - 35,565 3,302 973 7,655 - 9,985 1,173 137,334 195,987

Disposals - - - ( 1) - - ( 13) - - ( 14)

Transferred 337,363 646,760 - ( 17) 1,735 - 16,418 - -

1,002,259 Depreciation charge - ( 15,189) ( 3,198) ( 2,660) ( 1,200) ( 875) ( 15,730) ( 474) - ( 39,326)

Reversal of impairment loss - 825 - - - - - - - 825

Net exchange differences - ( 2,887) ( 66) - - - - - - ( 2,953)

Closing net book amount $798,547 $878,897 $ 28,938 $ 9,263 $ 8,612 $ 1,385 $109,434 $ 2,375 $709,605 $ 2,547,056

At December 31, 2016Cost $ 798,547 $ 925,134 $ 35,276 $ 21,736 $ 9,861 $ 3,500 $ 146,646 $ 31,385 $ 709,605 $ 2,681,690


- ( 46,237) ( 6,338) ( 12,473) ( 1,249) ( 2,115) ( 37,212) ( 29,010) - ( 134,634)

$798,547 $878,897 $ 28,938 $ 9,263 $ 8,612 $ 1,385 $109,434 $ 2,375 $709,605 $ 2,547,056


Utility equipment

Machineryand

equipment Leasehold

assetsOther

equipmentLeasehold

improvements Construction

in progress

Total

At January 1, 2015Cost $ 461,184 $ 247,490 $ 18,736 $ 22,251 $ 546 $ 3,500 $ 42,119 $ 30,212 $ 142,970 $ 969,008


- ( 28,573) ( 4,139) ( 9,752) ( 74) ( 365) ( 10,711) ( 22,604) - ( 76,218)

$461,184 $218,917 $ 14,597 $ 12,499 $ 472 $ 3,135 $ 31,408 $ 7,608 $142,970 $ 892,790

2015Opening net book amount $ 461,184 $ 218,917 $ 14,597 $ 12,499 $ 472 $ 3,135 $ 31,408 $ 7,608 $ 142,970 $ 892,790

Additions - - 2,160 1,113 - - 14,646 - 429,301 447,220

Disposals - - ( 284) - - - - - - ( 284)

Transferred - - 15,263 - - - 64,528 - - 79,791

Depreciation charge - ( 5,884) ( 2,808) ( 2,644) ( 50) ( 875) ( 11,808) ( 5,932) - ( 30,001)

Reversal of impairment loss - 1,588 - - - - - - - 1,588

Net exchange differences - ( 798) ( 28) - - - - - - ( 826)

Closing net book amount $461,184 $213,823 $ 28,900 $ 10,968 $ 422 $ 2,260 $ 98,774 $ 1,676 $572,271 $ 1,390,278

At December 31, 2015Cost $ 461,184 $ 248,122 $ 35,843 $ 23,364 $ 546 $ 3,500 $ 121,294 $ 30,212 $ 572,271 $ 1,496,336


- ( 34,299) ( 6,943) ( 12,396) ( 124) ( 1,240) ( 22,520) ( 28,536) - ( 106,058)

$461,184 $213,823 $ 28,900 $ 10,968 $ 422 $ 2,260 $ 98,774 $ 1,676 $572,271 $ 1,390,278


A. Amount of borrowing costs capitalized as part of property, plant and equipment and the range of the interest rates for such capitalization are as follows:


2016 2015

Amount capitalized $ 22,494 $ 10,797

Interest rate 3.15%~3.78% 2.69%~3.55%

B. For the year ended December 31, 2016, please refer to Note 6(8) D. and H. for details about those transferred from investment property.

C. Impairment information about the property, plant and equipment is provided in Note 6(11).

D. Information about the property, plant and equipment that were pledged to others as collateral is provided in Note 8.


2016 2015

At January 1 $ 18,236,113 $ 14,793,170

Additions - from subsequent expenditures 442,112 589,313

Reclassifications ( 550,061) 213,309

Adjustment of fair value 1,112,681 2,640,321

Transfer ( 380,580) -

At December 31 $ 18,860,265 $ 18,236,113

A. Rental income from the lease of the investment property and direct operating expenses arising from the investment property are shown below:


2016 2015

Rental income from the lease of the investment property $ 27,644 $ 23,042

Direct operating expenses arising from the investment property that generated rental income in the period $ 12,035 $ 11,265

Direct operating expenses arising from the investment property that did not generate rental income in the period $ 20,462 $ 8,252

B. Fair value basis of investment property

The Group’s investment property is mainly located in Jinhu Township in Kinmen County, Ji’an Township in Hualien County, Xinpu Township in Hsinchu County and Beitun Dist. in Taichung City. Except for the investment property located in Jinhu Township in Kinmen County which has started to operate, others are still under development. The investment property is mainly built as hotels and shopping centres for collecting rents. Rent includes a certain percentage of the lessee’s sales calculated based on the business practices. The related assumptions as of December 31, 2016 and 2015 are as follows:

December 31, 2016

(a) The location and valuation method of the Group’s investment property:


Kinmen BOT Jinhu Township, Kinmen County Income approach

Ji'an Commercial Zone 1 to Commercial Zone 4 Jián Township, Hualien County Income approach

Ji'an Commercial Zone 5 Jián Township, Hualien County Income approach

Community lots Jián Township, Hualien County Income approach



171


(b) Kinmen BOT is building Wind Lion Plaza and a star-rated hotel on investment property held by Taiwan Commerce Development Corp. in Jinning Township, Kinmen County. The investment property is evaluated using income approach. The shopping centre is expected to operate for the next 45 years and the star-rated hotel is expected to be completed in 2025 and to operate for the next 35 years. In addition, the Company plans to make alterations in the exhibition and performance center and to utilise it as hotel rooms. The construction is expected to commence in 2017 and to operate till 2059 after its completion in 2020. The net income and ending value of the objects are analysed based on the future discounted cash flow, and are discounted at the valuation date.

i. Future cash inflow of Kinmen BOT:


Shopping centre rental revenue (per dollar/per level ground/monthly) Approximately $2,000~$3,150 Slightly higher than the estimated rent

Parking lot rental revenue (per dollar/per parking space/hourly) $20 -

Hotel rental revenue (per dollar/per room/daily) Approximately $2,450~$5,000 Approximate to the estimated rent

ii. Future cash outflow of Kinmen BOT:

a. Operating costs

Expendable expenses and direct expenses are operating costs and are estimated to constitute 30%~35% of the rental revenue.


Operating expenses are personnel expenses, promotion expenses, repairs and maintenance expenses, utility expenses and taxes which are necessary for and directly related to operations.

c. Substantial replacement allowance (including beginning cost of construction sales).

iii. Discount rates are based on the interest rate for a two-year small amount time deposit offered by the Directorate General of the Postal Remittances and Savings Bank plus 3 quarters (currently 1.845%). Discount rates are further determined based on individual characteristics such as liquidity, risk, value increment and the difficulty of management. As of December 31, 2016, the discount rate was estimated to be 5.14%.

iv. As of December 31, 2016, the fair value of the investment property of Kinmen BOT was based on the valuation report by Chang Shih-Hsien from Zhan Mao Real Estate Appraisals Office, and the valuation date was December 31, 2016.

(c) The Group’s commercial zone 1 to commercial zone 5 are located in Ji’an Township, Hualien County and they are to be built hotels and malls to earn rents. Rental revenue includes certain percentage of fees based on the sales performance of lessees, according to the custom in this industry. The valuation method uses discounted cash flow of income approach, which is to use the object’s future discounted cash flow to analyse net profit and ending balance for each reporting period, and further estimate the price of the object using an appropriate discount rate. All objects are expected to generate net cash inflow annually for the next 10 years after completion. The net cash inflow is discounted annually at an appropriate discount rate and equals the total of the present value.

i. Future cash inflow is mainly hotel rental revenue and shopping centre rental revenue. Assessment of revenue is as follows:


Ji'an Commercial Zone 1 with Commercial Zone 2, Commercial Zone 3 and Commercial Zone 4 :



Ji'an Commercial Zone 5:





a. Operating costs




c. Substantial replacement allowance (including beginning cost of construction sales and interior design)

iii. Discount rates are based on the interest rate for a two-year small amount time deposit offered by the Directorate General of the Postal Remittances and Savings Bank plus 3 quarters (currently 1.845%). Risk premium is determined based on liquidity, risk, value increment and the difficulty of management. As of December 31, 2016, Ji’an Commercial Zone 1 to Commercial Zone 4 and Commercial Zone 5 adopted a discount rate of 4.865% and 4.81%, respectively.

iv. As of December 31, 2016, the fair value of the investment property of Ji’an Commercial Zone 1 to Commercial Zone 5 is based on the valuation report by Lin Chin-Sheng from Excellence International Real Estate Appraiser Firm, and the valuation date was December 31, 2016.

(d) Community lots are analysed using discounted cash flow of income approach, which is to compare with adjacent markets and rental of the lots, taking into account the lots’ condition, planned usage and rent in nearby or similar area.

Pre-calculated rent after adjustment is analysed using the cash flow, which is to use the object’s future discounted cash flow to analyse net profit and ending balance for each reporting period, and further estimate the price of the object using an appropriate discounted rate.

i. Future cash inflow of community lots:

a. Rent income


Rent of buildings (per dollar/per level ground/monthly) Approximately $671~$1,542 Approximate to the estimated rent

Parking lot rental revenue (per dollar/ per parking space / monthly) $2,000 Approximate to the

estimated rent

b. Interest income on rental deposits: estimated using the rent for 3 months and interest rate for one-year time deposits (1.4%).

c. Losses on earnings: calculated based on vacancy for 2 months every year.

ii. Future cash outflow of community lots:

a. Construction costs

Construction cost is approximately $150 per ping (or 3.306 square metres), which is estimated based on development project in the neighbouring area and is estimated to be incurred in 2018~2020.


Operating expenses include depreciation, taxes, repairs and maintenance expenses, administrative expenses and fire insurance.

c. Labour costs

Labour costs are estimated at 20% of income value of built-up property.

iii. Discount rate was calculated at the interest rate for two-year time deposits offered by the Directorate General of the Postal Remittances and Savings Bank plus 1.3%. As of December 31, 2016, the discount rate which applies to the community lots is 2.395%.

173


iv. As of December 31, 2016, the fair value of the investment property of community lots is based on the valuation report by Lin Chin-Sheng from Excellence International Real Estate Appraiser Firm, and the valuation date was December 31, 2016.

(e) Some primary investment property are lands under development. Those lands cannot be measured using the income approach and thus is measured using land development analysis, which takes into consideration legal usage, land use intensity and changes in land use efficiency arising from development and improvements, to estimate the total selling price after development or construction, and less direct costs, indirect costs, capital interest and profit rate to reach to the land development price breakdown before development or construction. The focus of the projects concerning primary investment property using land development analysis is to construct buildings with no more than 5 floors.







Appraiser Lin Chin-Sheng Tseng Yu-Kai

Valuation date (Note) December 31, 2016 December 29, 2016

December 31, 2015

(a) The location and valuation method of the Group’s investment property:


Kinmen BOT Kinmen BOT Income approach

Ji'an Commercial Zone 1 to Commercial Zone 4 Ji'an Commercial Zone 1 to Commercial Zone 4 Income approach

Ji'an Commercial Zone 5 Ji'an Commercial Zone 5 Income approach

Community lot Community lot Income approach

Hsinchu Xinpu Hsinchu Xinpu Land development analysis

Taichung Dakeng Taichung Dakeng Land development analysis

(b) Kinmen BOT is building Wind Lion Plaza and a star-rated hotel on investment property held by Taiwan Commerce Development Corp. in Jinhu Township, Kinmen County. The investment property is evaluated using income approach. The shopping centre is expected to operate for the next 45 years and the star-rated hotel is expected to be completed in 2018 and to operate for the next 41 years. The net income and ending value of the objects are analysed based on the future discounted cash flow, and are discounted at the valuation date.

i. Future cash inflow of Kinmen BOT:


Shopping centre rental revenue (per dollar/per level ground/monthly) Approximately $1,300~$2,700 Slightly higher than the estimated rent

Parking lot rental revenue (per dollar/per parking space/hourly) $20 -

Hotel rental revenue (per dollar/per room/daily) Approximately $3,000~$3,800 Approximate to the estimated rent

ii. Future cash outflow of Kinmen BOT:

a. Operating costs

Expendable expenses and direct expenses are operating costs and are estimated to constitute 20%~30% of the rental revenue.


Operating expenses are personnel expenses, promotion expenses, repairs and maintenance expenses, utility expenses and taxes which are necessary for and directly related to operations.

c. Substantial replacement allowance (including beginning cost of construction sales).


iii. Discount rates are based on the interest rate for a two-year small amount time deposit offered by the Directorate General of the Postal Remittances and Savings Bank plus 3 quarters (currently 2.125%). Discount rates are further determined based on individual characteristics such as liquidity, risk, value increment and the difficulty of management. As of December 31, 2015, the discount rate was estimated to be 4.78%.

iv. As of December 31, 2015, the fair value of the investment property of Kinmen BOT was based on the valuation report by Chang Shih-Hsien from Zhan Mao Real Estate Appraisals Office, and the valuation date was December 23, 2015.

(c) Commercial Zone 1 to Commercial Zone 5 are both analysed based on discounted cash flow of income approach, which is to use the object’s future discounted cash flow to analyse net profit and ending balance for each reporting period, and further estimate the price of the object using an appropriate discount rate. All objects are expected to generate net cash inflow annually for the next 10 years after completion. The net cash inflow is discounted annually at an appropriate discount rate and equals the total of the present value.

i. Future cash inflow is mainly hotel rental revenue and shopping centre rental revenue. Assessment of revenue is as follows:


Ji'an Commercial Zone 1 to Commercial Zone 4 :


Shopping centre rental revenue (per dollar/per level ground/monthly) $3,000 Approximate to the

estimated rent

Ji'an Commercial Zone 5 :


Shopping centre rental revenue (per dollar/per level ground/monthly) $1,100 Approximate to the

estimated rent


a. Operating costs




c. Substantial replacement allowance (including beginning cost of construction sales and interior design).

iii. Discount rates are based on the interest rate for a two-year small amount time deposit offered by the Directorate General of the Postal Remittances and Savings Bank plus 3 quarters (currently 2.125%). Risk premium is determined based on liquidity, risk, value increment and the difficulty of management. As of December 31, 2015, Ji’an Commercial Zone 1 to Commercial Zone 4 and Commercial Zone 5 adopted a discount rate of 4.995% and 4.925%, respectively.

iv. As of December 31, 2015, the fair value of the investment property of Ji’an Commercial Zone 1 to Commercial Zone 5 is based on the valuation report by Lin Chin-Sheng from Excellence International Real Estate Appraiser Firm, and the valuation date was December 23, 2015.

(d) Community lots are analysed using discounted cash flow of income approach, which is to compare with adjacent markets and rental of the lots, taking into account the lots’ condition, planned usage and rent in nearby or similar area.

Pre-calculated rent after adjustment is analysed using the cash flow, which is to use the object’s future discounted cash flow to analyse net profit and ending balance for each reporting period, and further estimate the price of the object using an appropriate discounted rate.

175


i. Future cash inflow of community lots:

a. Rent income


Rent of buildings (per dollar/per level ground/monthly) Approximately $600~$1,400 Approximate to the estimated rent

Parking lot rental revenue (per dollar/ per parking space / monthly) $2,000 Approximate to the

estimated rent

b. Interest income on rental deposits: estimated using the rent for 3 months and interest rate for one-year time deposits (1.4%).

c. Losses on earnings: calculated based on vacancy for 2 months every year.

ii. Future cash outflow of community lots:

a. Construction costs

Construction cost is approximately $150 per ping (or 3.306 square metres), which is estimated based on development project in the neighbouring area and is estimated to be incur in 2016~2018.


Operating expenses include depreciations, taxes, repairs and maintenance expenses, administrative expenses and fire insurance.

c. Labour costs

Labour costs are estimated at 20% of income value of built-up property.

iii. Discount rate was calculated at the interest rate for two-year time deposits offered by the Directorate General of the Postal Remittances and Savings Bank plus 0.8%. As of December 31, 2015, the discount rate which applies to the community lots is 2.105%.

iv. As of December 31, 2015, the fair value of the investment property of community lots is based on the valuation report by Lin Chin-Sheng from Excellence International Real Estate Appraiser Firm, and the valuation date was December 23, 2015.

(d) The land under development in Xinpu of Hsinchu County and Dakeng of Taichung City cannot be measured using the income approach and thus is measured using land development analysis, which takes into consideration legal usage, land use intensity and changes in land use efficiency arising from development and improvements, to estimate the total selling price after development or construction, and less direct costs, indirect costs, capital interest and profit rate to reach to the land development price breakdown before development or construction. The investment property measured using land development analysis is mainly for construction of buildings under 5 floors:







Appraiser Lin, Chin-Sheng Chen, Yueh-Ling

Valuation date (Note) September 30, 2015 September 30, 2015

Note: The reasonableness of fair value was proved by the effective appraisal issued by the appraisers on December 31, 2015.

C. For the year ended December 31, 2016, some investment property were transferred into own-occupied property so that the amount of which recorded as property, plant and equipment were $550,061.

D. For the year ended December 31, 2016, the lands were subdivided due to purpose of usage and recorded as property, plant and equipment amounted to $43,217 and $337,363.

E. For the year ended December 31, 2015, as the purpose of inventories was changed to leasing, inventories were reclassified as property investment amounting to $213,309.


F. The fair value information about the financial instruments is provided in Note 12(4).

G. Amount of borrowing costs capitalized as part of investment property and the range of the interest rates for such capitalization are as follows:


2016 2015

Amount capitalised $ 30,901 $ 78,569

Interest rate 3.15%~4.08% 3.55%~4.107%

H. On November 3, 2009, the subsidiary of TIDC, Taiwan Commerce Development Corporation (TCDC), signed a 50-year “Build, Operate and Transfer” (BOT) contract with the government of Jinmen County to develop Jinmen Commerce and Leisure Park. The related agreements are as follows:

(a) The bank was entrusted to offer $50,000 as performance guarantee, and TCDC provided certificate of deposit worth at $50,000, which was no longer pledged as collateral in 2015.

(b) In February, 2010, Jinmen County set the right of superficies of Jinmen Commerce and Leisure Park to TCDC. TCDC shall return the right of superficies upon expiration of the term. TCDC has to disburse the rental payment to the government of Jinmen County every year according to the “Regulation for favorable rentals regarding public land lease and right of superficies in infrastructure projects” and related laws.

(c) The Company has paid development royalties amounting to $15,000 to the government of Jinmen County in accordance with the agreement and will pay annual royalties computed as a certain percentage of operating income after its commercial launch.

I. Information about the investment property that was pledged to others as collateral is provided in Note 8.

(9) Intangible assets

Operating rights Trademark Computer software Total

At January 1, 2016

Cost $ 9,500 $ 21,212 $ 21,208 $ 51,920

Accumulated amortisation and impairment ( 8,312) ( 5,770) ( 2,572) ( 16,654)

$ 1,188 $ 15,442 $ 18,636 $ 35,266

2016

Opening net book amount $ 1,188 $ 15,442 $ 18,636 $ 35,266

Additions － acquired separately - - 553 553

Transferred - - 2,210 2,210

Amortisation charge ( 950) ( 1,939) ( 3,777) ( 6,666)

Closing net book amount $ 238 $ 13,503 $ 17,622 $ 31,363

At December 31, 2016

Cost $ 9,500 $ 21,212 $ 23,971 $ 54,683


$ 238 $ 13,503 $ 17,622 $ 31,363

177


Operating rights Trademark Computer software Total

At January 1, 2015

Cost $ 9,500 $ 20,337 $ 4,269 $ 34,106


$ 2,137 $ 17,035 $ 3,041 $ 22,213

2015

Opening net book amount $ 2,137 $ 17,035 $ 3,041 $ 22,213

Additions － acquired separately - 875 6,783 7,658

Transferred - - 10,156 10,156

Amortisation charge ( 949) ( 2,468) ( 1,344) ( 4,761)

Closing net book amount $ 1,188 $ 15,442 $ 18,636 $ 35,266

At December 31, 2015

Cost $ 9,500 $ 21,212 $ 21,208 $ 51,920


$ 1,188 $ 15,442 $ 18,636 $ 35,266

A. The Group recognized amortization charges on intangible assets as general and administrative expenses in the consolidated statements of comprehensive income for the years ended December 31, 2016 and 2015.

B. TIDC signed a contract of acquisition for Jun Guo Construction Corporation (Jun Guo Construction) with Jun Guo Corporation (Jun Guo). TIDC paid by installment the total price of $9,500 to acquire all of Jun Guo’s equity. The excess of purchase price over the recognizable net assets fair value was recognized as “intangible assets – operating rights” based on the appraisal report issued by Ernst & Young Financial Advisory Co., Ltd. and amortized over the estimated life of 10 years.

C. Trademark is the logo of Jinmen Wind Lion Plaza designed by an external designer. The design contract price amounted to $17,829. As of December 31, 2016, TCDC had paid $10,080.

(10) Other non-current assets


Receivables for planning and investigation $ 21,201 $ 21,201

Long-term receivables for selling land 417,176 417,176

Payment for land in Hsinchu County 341,215 341,215

Payment for land in Nantou County 31,278 31,278

Long-term prepaid expenses 74,520 46,442

Long-term prepaid rents 145,569 145,569

Prepayment for business facilities 2,659 2,263

Refundable deposits 58,396 78,962

Other financial assets 18,045 68,033

Others 95,922 85,549

$ 1,205,981 $ 1,237,688

A. The receivables for planning and investigation are fees prepaid by the Company on behalf of the Industrial Development Bureau, Ministry of Economic Affairs (MOEA) for the project “Preparation of pre-project expenses for Fenglin Industrial Park in Hualien County and Chihshang Industrial Park in Taitung County”. In accordance with the resolution of MOEA, as the Company finishes settling costs, MOEA will prepare a budget for reimbursement.


B. The Company sold the research building of South Environmental Protection Technology Park in Kangshan Industrial Park to Kaohsiung City Government in 2004. According to the contract, Kaohsiung City Government should pay by installment for 30 years, and the Company recognized discounted receivable and interest expense accordingly. After renegotiation in 2008, the Kaohsiung City Government agreed that the Company take the uncollected receivables plus interest as uncollected land development receivables in accordance with the land development contract of Kangshan Industrial Park. In accordance with Jing-Gong-Zi Letter No.10135463200 issued by Kaohsiung City Government on December 6, 2012. Furthermore, the settlement of Kangshan Industrial Park development business was accepted by the Kaohsiung City Government in accordance with the development contract and the “Act for Industrial Innovation”.

C. The Company acquired land nos. 105, 106, 236, 236-1, 237~240, 259, 259-1, 260, 262, 265, 267, 268, 279~284, 287, 436, 442, 444, 454~459 and 466 in Hsinpu Town, Hsinchu County for development. This acquisition was conducted using the Company Chairman’s name, as agricultural land is not allowed to be acquired by any corporate entity based on the Agricultural Development Act. The land is pledged to the Company and the Chairman also signed the letter of commitment to secure the Company’s ownership.

D. The Company acquired land nos. 667 in Caotun Township, Nantou County for development. This acquisition was conducted using the Company Chairman’s name, as agricultural land is not allowed to be acquired by any corporate entity based on the Agricultural Development Act. The land is pledged to the Company and the Chairman also signed the letter of commitment to secure the Company’s ownership.

E. The Company has signed contracts of superficies on nos. 744-47, 744-48, and 744-49 in Xintou, Jinhu Township, Jinmen County with Northern Region Branch, National Property Administration, MOF for a duration of 50 years in December 2012 and July 2013, respectively. The Company has paid royalty of $45,689 and $99,880 in full when the contract was signed and was recorded as long-term prepaid rents.

F. Refundable deposits are mainly guarantee deposits of $6,500 for the acquisition of cultivation right for the agricultural development project paid by TIDC, guarantees of $6,000 for the registration of self-provided bonded warehouse paid by TCDC and guarantee deposits of $25,000 paid for bank borrowings. T The remaining of refundable deposits is mainly lease deposits.


The Group recognized reversal of impairment loss for the years ended December 31, 2016 and 2015 amounting to $825 and $1,588, respectively. Details of such gain are as follows:



Recognized in other comprehensive income

Reversal of impairment loss － property, plant and equipment ($ 825) $ -



Recognized in other comprehensive income

Reversal of impairment loss － property, plant and equipment ($ 1,588) $ -

Due to the change in real estate market recovery, the Group recognized “reversal of allowance for loss on non-financial assets”, which were in accordance with appraisal reports issued by independent appraisers.

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(12) Short-term borrowings


Bank loans

King´s Town Bank secured loans $ 1,110,000 $ 1,176,000

Taiwan Cooperative Bank secured loans 45,000 45,000

Taiwan Cooperative Bank unsecured loans 30,000 -

Hwatai Bank secured loans - 410,000

Bank of Panhsin secured loans 23,600 24,000

Mega Bank secured loans 103,223 97,061

HuaNan Bank secured loans 90,000 -

Total $ 1,401,823 $ 1,752,061

Interest rate range 2.29%~3.52% 2.93%~3.54%

A. In January 2016, the creditor banks have approved to extend the balance of Bank of Panhsin secured loans amounting to $23,600 to be paid in January 21, 2017.

B. In May 2016, the creditor banks have approved to extend the balance of Taiwan Cooperative Bank secured loans amounting to $45,000 to be paid in May 5, 2017.

C. Please refer to Notes 7 and 8 for the details of pledged assets.

(13) Notes and bills payable


Commercial paper payable –Taiwan Cooperative Bills $ 150,000 $ 150,000

Commercial paper payable –International Bills 37,000 37,000

187,000 187,000

Less: discount on commercial paper payable ( 656) ( 868)

$ 186,344 $ 186,132

Interest rate 2.738%~2.968% 2.788%~2.968%


(14) Other payables


Rent payable for land development $ 59,605 $ 59,443

Accrual for industrial zone construction 1,445,794 1,525,688

Remaining funds for industrial zone 506,899 500,839

Accrued expenses 179,726 220,584

Payables for industrial zone construction 60,838 188,514

Other payables - other 25,167 63,726

$ 2,278,029 $ 2,558,794

(15) Other current liabilities


Deposit for sale of industrial park received in advance $ 9,240 $ 34,883

Long-term liabilities-current portion 3,863,376 4,125,198

Bonds payble of expiring within one year 500,000 -

Others 252,749 236,414

$ 4,625,365 $ 4,396,495


(16) Corporate bonds payable


Ordinary corporate bond

1st issuance in 2014 $ 500,000 $ 500,000

1st issuance in 2015 800,000 800,000

1st issuance in 2016 1,500,000 -

2nd issuance in 2016 800,000 -

3rd issuance in 2016 530,000 -

4,130,000 1,300,000

Less: Discount on bonds payable ( 10,125) -

Less: Bonds payable expiring within one year ( 500,000) -

3,619,875 1,300,000

Convertible corporate bonds

1st domestic issuance 199,900 200,000

Less: Discount on bonds payable ( 5,608) ( 10,735)

194,292 189,265

Total $ 3,814,167 $ 1,489,265

A. In 2016, the Company issued the first domestic secured ordinary corporate bonds for $1,500,000 in total, as approved by the competent authority. In this issuance, bond A was issued for $1,000,000 with 1.2% coupon rate and bond B was issued for $500,000 with 1.4% coupon rate covering 5 years. The circulation period is from April 29, 2016 to April 29, 2021. The bonds will be redeemed in cash at face value at the maturity date. On April 29, 2016, the bonds were listed on the Taipei Exchange.

B. The Company issued $800,000, 1.48%, 2nd domestic secured ordinary corporate bonds in 2016, as approved by the regulatory authority. The bonds mature 5 years from the issue date (November 15, 2016 ~ November 15, 2021) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on November 15, 2016.

C. The Company issued $530,000, 1.5%, 3rd domestic secured ordinary corporate bonds in 2016, as approved by the regulatory authority. The bonds mature 5 years from the issue date (December 5, 2016 ~ December 5, 2021) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on December 5, 2016.

D. The Company issued $800,000, 1.55%, 1st domestic secured ordinary corporate bonds in 2015, as approved by the regulatory authority. The bonds mature 5 years from the issue date (June 9, 2015 ~ June 9, 2020) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on June 9, 2015.

E. The Company issued $500,000, 1.36%, 1st domestic secured ordinary corporate bonds in 2014, as approved by the regulatory authority. The bonds mature 3 years from the issue date (April 25, 2014 ~ April 25, 2017) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on April 25, 2014.

F. The issuance of domestic convertible bonds by the Company.

(a) The terms of the 1st domestic secured convertible bonds issued by the Company are as follows

i. The Company issued $200,000, 0%, 1st domestic secured convertible corporate bonds, as approved by the regulatory authority. The bonds mature 3 years from the issue date (August 18, 2015 ~ August 18, 2018) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on August 18, 2015.

ii. The bondholders have the right to ask for conversion of the bonds into common shares of Company during the period from the date after one month of the bonds issue to 10 days before the maturity date, except the stop transfer period as specified in the terms of the bonds or the laws/regulations. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

181


iii. The conversion price was set effective on August 10, 2015. The calculation is based on 110% of the basic price, which is one of the arithmetic mean of the closing prices at 1, 3 and 5 working days prior to the effective date. Ex-rights or ex-dividends price shall be calculated if the ex-rights or ex-dividends date is prior to the conversion date. Conversion prices shall be adjusted in accordance with the formula if the shares go ex-rights or ex-dividends prior to the issuance date. In accordance with the aforementioned approach, the conversion price was NT$12.05 per share at issuance.

iv. The conversion price of the bonds is set up based on the pricing model in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price will be reset based on the pricing model in the terms of the bonds on each effective date regulated by the terms. If the reset conversion price is higher than the conversion price before the reset, the conversion price will not be adjusted. As of December 31, 2016, the conversion price was adjusted to NT$10.08.

v. The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at any time after the following events occur: (i) the closing price of Company common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after one month of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after one month of the bonds issue to 40 days before the maturity date.

vi. Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.

(b) Regarding the issuance of convertible bonds, the equity conversion options amounting to $4,380 were separated from the liability component and were recognised in ‘capital surplus—stock warrants’ in accordance with IAS 32. The call options embedded in bonds payable were separated from their host contracts and were recognised in ‘financial assets or liabilities at fair value through profit or loss’ in net amount in accordance with IAS 39 because the economic characteristics and risks of the embedded derivatives were not closely related to those of the host contracts. The effective interest rate of the bonds payable after such separation was 2.67%.

(c) As of December 31, 2016, the bonds totaling $100 (face value) had been converted into 10 thousand shares of common stock.

(17) Long-term borrowings


Secured borrowings Syndicated loans provided by Agricultural Bank of Taiwan and others 3.141% 105.05.22~108.05.22 $ 239,000

Syndicated loans provided by Mega Bank and others (1) 2.679%~3% 101.08.31~106.08.31 -

Syndicated loans provided by Mega Bank and others (2) 2.679%~3% 105.08.18~110.08.18 2,694,000

Ji-an Township Farmers' Association 3.155% 105.01.21~108.01.21 9,800

Sunny Bank 2.540% 105.02.19~108.02.19 8,744

Taichung Commercial Bank 2.850% 105.11.25~108.11.25 250,000

Syndicated loans provided by Agricultural Bank of Taiwan and others 3.141% 101.12.27~106.12.27 435,000

Mega Bank 3.5%~3.75% 105.01.18~112.01.18 427,770

Hua Nan Bank 2.680% 105.05.04~110.05.04 28,267

Syndicated loans provided by Mega Bank and others (3) 3.416% 103.09.01~108.09.01 1,656,000

The First Credit Cooperative of Hualien 1.946% 103.08.29~123.08.29 17,359


5,823,840


$ 1,960,464



Secured borrwings Syndicated loans provided by Agricultural Bank of taiwan and other 3.225% 102.05.22~105.05.22 $ 239,000

Syndicated loans provided by Mega Bank and others 2.9%~3.2211% 101.08.31~106.08.31 3,088,000

Taiwan Life 3.68% 102.08.16~105.08.16 220,000

Syndicated loans provided byAgricultural Bank of Taiwan and others 3.35% 101.12.27~105.12.27 435,000

Syndicated loans provided byMega Bank and others 3.900% 103.09.01~108.09.01 1,780,000


5,780,169


$ 1,654,971

A. On May 22, 2013, the Company has applied for credit line of $239,000 with the Agricultural Bank of Taiwan (the host organizer) and Tsaotun Township Farmers’ Association in Nantou County (the co-host and manage organiser) for turnover of construction and entered into a supplementary contract on May 22, 2016. The credit line has been fully utilised as of December 31, 2016. The principal will be repaid in full at maturity.

B. To develop business and improve the financial structure, the Company signed a long-term syndicated loan contract (1) to obtain a credit line of $5,300,000 with Mega Bank and other 16 banks on August 14, 2012, including credit line A for $4,800,000 and credit line B for $500,000. Credit line A was used to pay off the syndicated loan signed in 2005, and credit line B was used for mid term working capital. Only credit line B is revolving. The credit line A and credit line B have been fully utilised as of December 31, 2016. According to the contract’s provisions, the Company must maintain certain financial ratios inspected at least once every half year. If not, the Company would be required to pay the penalties monthly until the date of improvement. The loan was successively repaid at the agreed upon debt service ratio starting from August 2013. As of December 31, 2016, the credit line has been fully paid.

C. To develop business and improve the financial structure, the Company signed a long-term syndicated loan contract (2) to obtain a credit line of $2,694,000 with Mega Bank and other 16 banks on August 10, 2016, including credit line A for $2,246,257 and credit line B for $447,743. Credit line A and credit line B ware used for mid term working capital. Only credit line B is revolving. The credit line A and credit line B have been fully utilised as of December 31, 2016. According to the contract’s provisions, the Company must maintain certain financial ratios inspected at least once every half year. If not, the Company would be required to pay the penalties monthly until the date of improvement. The loan was successively repaid at the agreed upon debt service ratio starting from August 2017 and will be repaid in full at maturity.

D. The Company has applied for credit line of $9,800 with the Ji-an Township Farmers’ Association of Hualien County for development of business on January 21, 2016. The credit line has been fully utilised as of December 31, 2016. The principal will be repaid in full at maturity.

E. The Company has applied for credit line of $12,000 with the Sunny Bank for development of business on February 19, 2016. The credit line has been fully utilised as of December 31, 2016. The borrowing period is 3 years. The principal and interest are repaid monthly.

F. The Company has applied for credit line of $239,000 with the Taichung Commercial Bank for turnover of operation on November 25, 2016. The credit line has been fully utilised as of December 31, 2016. The interest is to be repaid in each period and the principal is to be repaid once the loan is due.

G. To develop business and improve the financial structure, TIDC signed a loan contract with the following bank:

(a) The loan contract with Taiwan Life Insurance Corporation (Taiwan Life) amounted to $380,000, which has been repaid beforehand in May 2016.

183


(b) The Company signed a long-term syndicated loan contract to obtain a credit line of $435,000 with Agricultural Bank of Taiwan and 15 other banks in December, 2012. As of December 31, 2016, the credit line has been fully utilised. The principal will be repaid in full at maturity.

In December 2016, TIDC signed a supplementary contract with Agricultural Bank of Taiwan and 15 other financial institutions, which postponed the maturity date from December 27, 2016 to December 27, 2017.

(c) To meet the capital demand for developing Hualien culture square, the Company requested with Mega Bank for credit line of $1,100,000, which is divided into $100,000 in tranche A, $720,000 in tranche B and $280,000 in tranche C. The credit line is to fund for the land financing, construction and repair of the culture square located in Hualien special district and the credit is not reusable. As of December 31, 2016, the credit line had $672,230 remaining.

Under the credit contract, the Company must not distribute cash dividend or share dividend except for the circumstances that the Company has accumulated the repayment to over 0.6 billion NT dollars or the Company’s is listed on Taipei Exchange. Non-compliance gives rise to a monthly default penalty computed using the outstanding principal times agreed annual rate. The period of the aforementioned borrowings begins from the first year from January 18, 2016 and every following half year up to the expiration date. In each period the borrowings is to be repaid according to the repayment rate and settled at the expiration date.

(d) To meet the business demand, the Company requested with Hua Nan Bank for a credit line of $32,000 for financing and which is not reusable. As of December 31, 2016, all the credit line had been used. The borrowing period is 5 years. The principal and interest are repaid monthly.

H. To develop Jinmen Commerce and Leisure Park, Taiwan Commerce Development Corporation (TCDC) signed a long-term syndicated loan contract (3) to obtain a credit line of $2,100,000 with Mega Bank and other 5 banks on August 18, 2014, including credit line A for $600,000, credit line B for $1,200,000 and credit line C for $300,000. Credit line A was used to pay off the unpaid syndicated loan signed with Bank SinoPac in 2012. Credit line B was used to pay for construction costs of the Kinmen Commerce and Leisure Park. Credit line C was used to pay for construction expenses of the Kinmen Commerce and Leisure Park. None of the credit lines is revolving. As of December 31, 2016, the unused credit line was $300,000. According to the contract’s provisions, the Group must maintain certain financial ratios that are inspected annually, based on the financial statements audited by the borrower’s independent accountant who is approved by the bank. If the Group fails to meet the requirement, the Group would be required to pay the penalties monthly at the agreed upon annual rate until the date of improvement. According to the contract, the Group has pledged all its shares of Taiwan Commerce Development Corp. at Mega Bank on October 31, 2014. The loan will be subsequently repaid at the agreed upon debt service ratio starting from March 2016 and will be repaid in full at maturity.

I. In order to purchase employee dormitories, Hualien Culture Clubhouse Corp. has signed a loan contract with The First Credit Cooperative of Hualien in August 2014. The amount of the loan is $19,200 and borrowing period is 20 years. The principal and interest are repaid monthly.

J. In May 2016, Taiwan Envirotech Development Corp. has signed a loan contract with The First Credit Cooperative of Hualien to purchase lands and buildings. The amount of loan is $60,000 and the agreed borrowing period is 20 years. The principal and interest are repaid monthly.

K. Please refer to Notes 7 and 8 for the details of pledged assets.

(18) Pensions

A. Effective July 1, 2005, the Company and subsidiaries established a funded defined contribution pension plan (the “New Plan”) under the Labor Pension Act. Employees have the option to be covered under the New Plan. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are portable when the employment is terminated.

B. The pension costs under the defined contribution pension plan for the years ended December 31, 2016 and 2015 were $10,584 and $10,675, respectively.


(19) Share-based payment

A. The Group’s share-based payment arrangements were as follows:



Vesting conditions






Vesting conditions



Abovementioned share-based payment arrangements are settled by equity.

B. Details of the share-based payment arrangements are as follows:

2016 2015

No. ofoptions

(in thousands)


(in dollars)

No. ofoptions

(in thousands)


(in dollars)

Options outstanding at January 1 14,500 NT$ 10.58 - NT$ -

Options granted 41,417 10.45 26,500 11.12

Options exercised ( 55,917) 10.49 ( 12,000) 11.77

Options outstanding at December 31 - - 14,500 10.58

C. The weighted-average stock price of stock options at exercise dates for the years ended December 31, 2016 and 2015 was NT$11.03 and NT$14.23 (in dollars), respectively.

D. Expenses incurred on share-based payment transactions are shown below:


2016 2015

Equity-settled $ 18,426 $ 300

(20) Share capital

A. As of December 31, 2016, the authorized common stock was $9,900,000 with par value of NT$10 (dollars) per share, and the outstanding common stock was $7,607,849 (760,785 thousand shares).

Movements in the number of the Company’s ordinary shares outstanding are as follows:

Unit: In thousands of shares

2016 2015

At January 1 682,900 640,410

Treasury stock purchased by employees 55,917 12,000

Shares retired ( 21,133) ( 33,381)

Conversion of convertible bonds 10 -

Earnings capital surplus transferred to capital increase 34,894 63,871

At December 31 752,588 682,900

B. On July 29, 2016, the Board of Directors revised its resolution to issue 34,894 thousand new shares from unappropriated retained earnings of $42,728 and capital surplus of $306,215 for capital increase. The proposal for capital increase was approved by the competent authority. On October 18, 2016, the alteration registration was completed.

185


C. Treasury stocks

(a) Reason for share reacquisition and movements in the number of the Company’s treasury stocks are as follows:


Reason for reacquisition

December 31, 2016

Number ofshares

(thousand shares) Carrying amount



Reason for reacquisition

December 31, 2015

Number ofshares

(thousand shares) Carrying amount


(b) Reacquisition of treasury shares is as follows:


14th 15th 16th 17th

Term of reacquisitionReason for reacquisition

To be reissuedto employees





Common stock 8,150

Common stock 4,786

Common stock 1,497

Common stock 6,700



11th 12th 13th 14th

Term of reacquisitionReason for reacquisition



(Note)To be reissuedto employees



Common stock 4,900

Common stock 8,800

Common stock 8,977

Common stock 10,704


Note: The change of reason for reacquisition has been resolved by the Board of Directors on April 28, 2015 and was approved by FSC.

(c) In 2016, the Board of Directors has resolved to transfer the shares to employees from the 11th, 12th, 13th, 14th and 15th time treasury share buyback amounting to 14,500 thousand shares, 8,800 thousand shares, 8,977 thousand shares, 18,854 thousand shares and 4,786 thousand shares, respectively. The post-tax amount, net of securities transactions tax, was $152,950, $91,859, $193,801 and $145,970, respectively.

(d) In 2015, the Board of Directors has resolved to transfer the shares to employees from the 5th and 6th time treasury share buyback amounting to 1,500 thousand shares and 10,500 thousand shares, respectively. The post-tax amount, net of securities transactions tax, was $16,824 and $123,947, respectively.

(e) On February 25, 2015, the Board of Directors has resolved to retire 17,100 thousand shares from the 10th time treasury share reacquired amounting to $184,461. Capital surplus - additional paid-in capital and capital surplus - treasury share transactions were decreased by $7,154 and $5,777, respectively. The capital reduction date was set to be effective on March 3, 2015, which has been registered.

(f) Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought back as treasury stock should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital reserve.

(g) Pursuant to the R.O.C. Securities and Exchange Law, treasury stocks should not be pledged as collateral and is not entitled to dividends before it is reissued to the employees.


(h) Pursuant to the R.O.C. Securities and Exchange Law, treasury stocks should be reissued to the employees within three years and shares not reissued within the three-year period are to be retired.

(i) Events after the Balance Sheet Date

i. On February 21, 2017, the Board of Directors has resolved to transfer the shares to employees from the 16th and 17th time treasury share reacquired of 8,197 thousand in accordance with the Company’s ‘Regulations governing transfer of reacquired shares to employees’. The employees’ acquisition was set to be effective on February 24, 2017.

ii. On February 21, 2017, the Board of Directors has resolved to reacquire treasury shares from February 22 to April 20, 2017. The expected reacquisition amount is 10,000 thousand shares and the price range is NT$11 to NT$13 (dollars) per share.

(21) Capital surplus

2015

Share premium

Treasury stock

transactions Stock

options Others Total

At January 1 $ 276,955 $ - $ 4,380 $ 34,722 $ 316,057

Capitalisation of capital surplus ( 276,955) - - ( 29,260) ( 306,215)

Employee stock options issued - - 18,426 - 18,426

Treasury shares purchased by employees - 18,050 ( 18,426) - ( 376)

Conversion of convertible bonds 4 - ( 2) - 2

At December 31 $ 4 $ 18,050 $ 4,378 $ 5,462 $ 27,894

2015

Share premium

Treasury stock

transactions Stock

options Others Total

At January 1 $ 284,109 $ 5,777 $ - $ 34,722 $ 324,608

Retirement of treasury stock ( 7,154) ( 5,777) - - ( 12,931)

Employee stock options issued - - 300 - 300

Treasury shares purchased by employees - - ( 300) - ( 300)

Convertible corporate bonds issued - - 4,380 - 4,380

At December 31 $ 276,955 $ - $ 4,380 $ 34,722 $ 316,057

A. Pursuant to the R.O.C. Company Law, capital reserve arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital reserve to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital reserve should not be used to cover accumulated deficit unless the legal reserve is insufficient.

B. On June 29, 2016, the shareholders’ meeting resolved to issue 31,334 thousand common shares with capital surplus $313,336 out of distributable earnings and the dividend per share was NT$0.44. Subsequently, on July 29, 2016, the Board of Directors resolved to adjust capital surplus to $306,215 to meet the regulatory requirement given that the capital surplus relating to some convertible bonds does not fall under “the income derived from the issuance of new shares at a premium” stipulated in paragraph 1 of Article 241 of Company Act.

187


(22) Retained earnings

A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve. Bonus distributed to the employees and remuneration paid to the directors and supervisors should account for 1% ~ 8% and 1% ~2%, respectively, of the total distributed amount. The remainder shall be considered with the industry environment and needs for future business or investee with other related factors that is to be proposed by the Board of Directors and resolved by the stockholders for no appropriation or appropriation of no less than 50% for the year. Employees’ compensation and directors’ and supervisors’ remuneration are authorized at the Board of Directors’ meeting in accordance with the aforementioned rules and with chronological orders.

B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.

C. As of December 31, 2016 and 2015, in accordance with the Financial Supervisory Commission, Securities and Futures Bureau, No. 1030006415 correspondence, as the investment property is measured at fair value, the Company shall accrue special reserve amounted to $9,163,601, accordingly.

D. The appropriations of 2015 and 2014 earnings had been resolved at the stockholders’ meeting on June 29, 2016 and June 30, 2015, respectively. Details are summarized below:


2015 2014

Amount Dividendsper share

( in Dollars) Amount

Dividendsper share

( in Dollars)

Legal reserve $ 204,008 $ 531,216

Special reserve 2,290,588 5,469,551

Cash dividends 142,426 $ 0.20 127,742 $ 0.20

Stock dividends 42,728 0.06 638,710 1.00

$ 2,679,750 $ 0.26 $ 6,767,219 $ 1.20

E. For the information relating to employees’ remuneration and directors’ and supervisors’ remuneration, please refer to Note 6(28).

(23) Operating revenue


2016 2015

Enginneering service revenue $ 19,397 $ -

Service revenue 65,809 408,005

Construction revenue 6,224 649


Food service revenue 44,769 16,649

Sales revenue 93,151 110,722

Ticket revenue 26,769 27,203

Other operating revenues 9,068 5,799

$ 292,831 $ 592,069

(24) Other income


2016 2015

Interest income from bank deposits $ 2,854 $ 7,269

Other non-operating income 6,050 5,263

$ 8,904 $ 12,532


(25) Other gains and losses


2016 2015

Gain on reversal of impairment loss, property, plant and equipment $ 825 $ 1,588

Gain on fair value adjustment of investment property 1,112,681 2,640,321

(Loss) gain on disposal of property, plant and equipment ( 14) 145

Gain on disposal of financial assets 41 -

Service expenses - ( 375)

Currency exchange loss (gain) ( 314) 22

Other non-operating losses - ( 590)

$ 1,113,219 $ 2,641,111

(26) Finance costs


2016 2015

Interest expense:

Bank loans $ 272,047 $ 274,116

Commercial paper 5,503 4,782

Bonds payable 98,525 41,411

Others 6,098 241

382,173 320,550

Less: Capitalisation of qualifying assets ( 68,048) ( 111,672)

Interest reimbursement for industrial zones ( 172,710) ( 139,453)

Finance cost $ 141,415 $ 69,425

(27) Expenses by nature


2016 2015

Employee benefit expense $ 290,135 $ 372,919

Depreciation 39,326 30,001

Amortisation 6,666 4,761

Entertainment expense 37,225 39,647

Rent expense 48,399 46,479

Advertisement expense 22,593 67,176

Taxes 46,248 37,554

Service expense 64,640 62,002

General and administrative expenses 11,806 12,129

Commission expense 10,415 20,008

Donation expense 3,260 5,073

Changes in inventory of merchandise and food service 100,900 103,414

Cost of ticket 14,761 16,382

Other operating costs 29,474 10,620

Other expenses 144,994 140,746

$ 870,842 $ 968,911

Note: In order to promote Taiwan brands, the Group has donated $2,500 to Branding Taiwan Association for the year ended December 31, 2015. There is no other commitment.

189


(28) Employee benefit expense


2016 2015

Wages and salaries $ 254,446 $ 336,653

Labour and health insurance fees 18,106 18,341

Pension costs 10,646 10,675

Other personnel expenses 6,937 7,250

$ 290,135 $ 372,919

A. As of December 31, 2016 and 2015, the Group had approximately 335 and 273 employees, respectively.

B. According to the Articles of Incorporation of the Company, the distribution of earnings is based on the profit of the current year. Where there is distributable earnings after deducting those reserved to offset accumulated deficit, the Company shall distribute 1~8% of which as employees’ compensation and no more than 2% of which as directors and supervisors’ remuneration. The Company should reserve earnings to offset accumulated deficit if there is any.

The aforementioned employees’ compensation can be paid in the form of stock or cash. The recipients can be employees worked for the subsidiaries who are eligible based on the resolution of Board of Directors. As for the directors’ and supervisors’ remuneration, it can only be paid by cash.

C. For the years ended December 31, 2016 and 2015, employees’ compensation was accrued at $3,004 and $21,828, respectively; directors’ remuneration was accrued at $1,502 and $15,761, respectively. The aforementioned amounts were recognized in salary expenses.

The employees’ compensation and directors’ and supervisors’ remuneration were both estimated and accrued based on 1% of distributable profit of current year for the year ended December 31, 2016. The accrued amount has not been resolved by the Board of Directors. The employees’ compensation will be distributed in the form of cash or shares.

The expenses recognised for the year of 2015 were accrued based on the net income of 2015 and 1% of which are estimated for both employees and directors/supervisors, taking into account other factors such as legal reserve. Where the accrued amounts for employees’ compensation and directors’ and supervisors’ remuneration are different from the actual distributed amounts as resolved by the stockholders at their stockholders’ meeting subsequently, the differences are accounted for as changes in estimates. The difference between employees’ compensation and directors’ and supervisors’ remuneration as resolved by the shareholders’ meeting and the amount of employees’ compensation and directors’ and supervisors’ remuneration are in agreement with those recognised in the 2015 financial statements.

Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved by the Board of Directors and the shareholders at the shareholders’ meeting will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(29) Income tax

A. Components of income tax expense


2016 2015

Current tax:

Current tax on profits for the period $ - $ -

Tax on undistributed earnings - 3,302

Adjustments in respect of prior years 196 1,372

Total current tax 196 4,674

Deferred tax:

Origination and reversal of temporary differences 154,691 154,867



B. Reconciliation between income tax expense and accounting profit


2016 2015

Tax calculated based on profit before tax and statutory tax rate $ 67,795 $ 659,692

Temporary difference not recognized as deferred tax assets 2,849 4,754

Taxable loss not recognized as deferred tax assets 113,532 38,212

Additional 10% tax on undistributed earnings - 3,302

Prior year income tax underestimation 197 1,372

Effect from different tax rates on temporary differences ( 41,416) ( 302,371)

Tax exempt income by tax regulation 11,930 ( 245,420)


C. Expiration dates of unused taxable loss and amounts of loss carryforward of unrecognized deferred tax assets are as follows:

Year incurred Amount filed/ assessed

December 31, 2016

Unused amount Unrecognized deferred tax assets Usable until year

The Company:

2015 $ 58,214 $ 58,214 $ 58,214 2025

2016 291,178 291,178 291,178 2026Taiwan Innovation Development Corp. :2013 10,900 10,900 10,900 2023

2014 46,126 46,126 46,126 2024

2015 151,603 151,603 151,603 2025

2016 158,009 158,009 158,009 2026Taiwan Envirotech Development Corp.:2015 5,492 5,492 5,492 2025

2016 17,283 17,283 17,283 2026

Wind Lion Plaza Corp.:

2013 26 26 26 2023

2014 87,108 87,108 87,108 2024

2015 202,571 202,571 202,571 2025

2016 199,884 199,884 199,884 2026Taiwan LanYung Development Corp:2014 307 307 307 2024

2015 962 962 962 2025

2016 8,529 8,529 8,529 2026

Taikai Xiamen Trading Corp:

2014 6,457 6,457 6,457 2024

2015 6,532 6,532 6,532 2025

2016 4,696 4,696 4,696 2026

$ 1,255,877 $ 1,255,877 $ 1,255,877

191


Year incurred Amount filed/ assessed

December 31, 2015

Unused amount Unrecognized deferred tax assets Usable until year

The Company:

2015 $ 65,945 $ 65,945 $ 65,945 2025Taiwan Innovation Development Corp. :2013 10,901 10,901 10,901 2023

2014 54,116 54,116 54,116 2024

2015 152,184 152,184 152,184 2025Taiwan Envirotech Development Corp.:2015 6,471 6,471 6,471 2025

Wind Lion Plaza Corp.:

2013 26 26 26 2023

2014 87,108 87,108 87,108 2024

2015 202,786 202,786 202,786 2025Taiwan LanYung Development Corp.:2014 307 307 307 2024

2015 962 962 962 2025

Taikai Xiamen Trading Corp:

2014 6,457 6,457 6,457

2015 6,532 6,532 6,532 2025

$ 593,795 $ 593,795 $ 593,795

D. The amounts of deductible temporary differences that are not recognized as deferred tax assets are as follows:


Deductible temporary differences

Allowance for bad debts $ 1,905 $ 1,905

Interest expense 3,594 3,594

Allowance for sales return 11,423 11,225

Temporary difference on service revenue 33,458 31,248

Allowance for price decline on inventories 7,157 7,513

Unrealized impairment loss 13 153

Others 1,929 1,182

$ 59,479 $ 56,820

E. The Group’s deferred tax assets are deductible temporary differences arising from Taiwan Commerce Development Corp.’s taxable loss. As of December 31, 2016 and 2015, the amount of deferred tax assets was $18,548 and $23,270, respectively.

F. As of December 31, 2016 and 2015, the amount of deferred tax liabilities was $713,154 and $563,185, respectively. The land value increment tax originally applied to the Company’s Trust department in accordance with ‘Enterprise Merger and Acquisition Act’ was transferred to JihSun Bank. As of December 31, 2016 and 2015, the increment tax amounting to $15,868 will be paid when the land is transferred again, and the tax related accrual arising from the fair value of the other investment property was $697,286 and $547,317, respectively.

G. As of December 31, 2016, the Company’s income tax returns through 2014 have been assessed and approved by the Tax Authority.


H. Unappropriated retained earnings


Earnings generated in and before 1997 $ - $ -

Earnings generated in and after 1998

a.Unappropriated earnings assessed with 10% income tax - 610,868

b.Unappropriated earnings not yet assessed with 10% income tax 236,562 2,073,093

$ 236,562 $ 2,683,961

As of December 31, 2016 and 2015, the balance of the imputation tax credit account was $184 and $21,250, respectively. The creditable tax rate was 0.87% for the year ended December 31, 2015 and is estimated to be 0.07% for the year ended December 31, 2016.

(30) Earnings per share

The calculation of earnings per share is as follows:


Amount after tax Weighted average number of ordinary shares outstanding (shares in thousands)

Earnings per share (in dollars)


Profit attributable to ordinary shareholders of the parent $ 251,989 747,922 $ 0.34



Employees´ bonus - 771


Profit plus assumed conversion of all dilutive potential ordinary shares $ 256,241 768,183 $ 0.33


Amount after tax Weighted average number of ordinary shares outstanding (shares in thousands)

Earnings per share (in dollars)


Profit attributable to ordinary shareholders of the parent $ 2,040,076 733,542 $ 2.78



Employees´ bonus - 2,170


Profit plus assumed conversion of all dilutive potential ordinary shares $ 2,041,642 742,977 $ 2.75

193


(31) Supplemental cash flow information

Investing activities with partial cash payments


2016 2015

Purchase of property, plant and equipment $ 195,987 $ 447,220

Add: opening balance of notes payable 300,561 67,277

Add: opening balance of accounts payable 54,377 11,074

Less: ending balance of notes payable ( 74,078) ( 300,561)

Less: ending balance of accounts payable ( 42,955) ( 54,377)

Less: capitalized interest ( 22,494) ( 10,797)



2016 2015

Purchase of investment property $ 442,112 $ 589,313

Add: opening balance of notes payable 7,046 208,299

Add: opening balance of accounts payable 143,837 44,841

Less: ending balance of accounts payable ( 4,149) ( 7,046)

Less: ending balance of notes payable ( 160,272) ( 143,837)

Less: capitalized interest ( 30,901) ( 78,569)


7. RELATED PARTY TRANSACTIONS (1) Significant related party transactions

A. Prepayments

As of December 31, 2016 and 2015, the prepayments for compensation to the key management amounted to $6,000 and $6,667, respectively.

B. Endorsements and guarantees provided to related parties


Key management of the Group (Note) $ 11,243,463 $ 8,719,230

Note: Key management is the joint guarantor for the Group’s financing.

C. Others

Please refer to Note 6(27).

(2) Key management compensation


2016 2015

Salaries and other short-term employee benefits $ 43,771 $ 89,371

Termination benefits 344 641

$ 44,115 $ 90,012


8. PLEDGED ASSETS

Pledged asset December 31,

Purpose 2016 2015

Other current assets

- Demand deposits $ 1 $ 28,185 Long-term borrowings compensation account

- Demand deposits 17,024 17,007 Land compensation fee account

- Demand deposits 159,114 159,114 Guarantee for development projects

- Demand deposits 8,868 82,276 Guarantee for short-term borrowings

- Time deposits 306,788 75,531 Guarantee for development projects and long- term borrowings

- Time deposits 160 160 Guarantee for projects

- Time deposits - 1,500 Guarantee for short-term borrowings

491,955 363,773

Other non-current assets

- Demand deposits 18,045 68,033 Guarantee for Kinmen BOT project

- Refundable deposits 58,396 78,962 Guarantee for projects and leases

- Land in Hsinchu 311,590 311,590 Guarantee for short-term borrowings

- Long-term prepaid rents 145,569 145,569 Guarantee for short-term borrowings

- Others 5,724 508 Security

539,324 604,662

Other receivables

- Land development receivables 3,814,562 4,559,927 Long-term borrowings

Inventories 844,076 801,157 Guarantee for long-term and short-term borrowings and short-term notes and bills payable

Investment property 15,843,459 16,556,760 Guarantee for long-term borrowings, short- term notes and bills payable and bonds payable

Property, plant and equipment - Land and buildings 1,496,268 499,117 Guarantee for long-term and short-term borrowings

and short-term bills payable $ 23,029,644 $ 23,385,396

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

(1) Contingencies

A. The Company invested in development of Kaohsiung Benzhou Industril Park and entered into a contract, “Contract of Development in Kaohsiung Gungshan Industrial Park assigned by Kaohsiung county government”, with Kaohsiung city government. The contract provided that the Company should build the sewage treatment plant and transfer it to Kaohsiung city government. However, Kaohsiung city government, which had merged with city government, filed a lawsuit against the Company and claimed compensation amounting to $67,062 for negligence in management and maintenance of sewage treatment plant and remedy for facility damages in December 2015. Meanwhile, the Company has provided related evidences to prove that the facility was damaged because the companies in the industrial park disposed sewage without a permit, and poor management by Kaohsiung city government. Therefore, the Company has no responsibility in this case. The case is now pending with the Kaohsiung district court. Since the court has not rendered the decision, the Company is unable to reasonably estimate the possible loss.

B. The Company signed a contract,「Construction of Sewage Treatment Plant for the development in Kaohsiung Benzhou Industrial Park」with Puchun Environmental Protection Engineering Corp. (hereafter “Puchun Corp.”) for the development of sewage treatment plant located in Kaohsiung Gangshan Benzhou Industrial Park. Later the trial run was pending due to the failure to collect adequate sewage. The plant was then transferred to Kaohsiung county government (now Kaohsiung city government) and confirmed as acceptance completed. After Kaohsiung city government assigned the construction of the plant to another contractor and altered the sewage treatment process, the trial run was affirmed to be impracticable so that the acceptance of the construction was affirmed not to happen. In January 2016, Puchun Corp. filed a lawsuit against the Company and claimed the Company owes the last construction payment of $21,042 and obliges to inform Hua Nan Commercial Bank to relieve its performance guarantee for the fourth phase.

195


The Company claimed that the allegations of Puchun Corp. had no basis. The case is still pending with the Taipei District Court, Taiwan. Since the court has not made a ruling on this case, the Company is unable to reasonably estiamte the possible loss.

C. The Group terminated the design service contract which was commissioned by Huang Chien-chung Architects Firm for urban renewal at south-east side of Taipei Main Station. Huang Chien-chung filed a lawsuit against the Group for design compensation, and the Court ordered the Group to pay $31,500 to Huang Chien-chung and interest starting from July 28, 2011 until the debt is fully repaid. However, the Group contested that the service compensation should be calculated according to the design service contract rather than $31,500 ordered in first instance, and claimed the outstanding amount of service compensation was $538. The Group has appealed to Taiwan High Court. Since the high court has not made a ruling on this case, the Company is unable to reasonably estiamte the possible loss.

D. On May 15, 2012, Taiwan Envirotech Development Corporation and TECO Electric and Machinery Corp. signed the contract,「Construction of Kinmen Industrial & Business Park - B Section of Kinmen BOT project - Engineering construction, to be commissioned for electrical and mechanical work for Kinmen BOT project with the agreed compensation of $377,000. Nevertheless, TECO Electric advocated there were outstanding payment of $171,128 in dispute. Since the court has not made a ruling on this case, the Company is unable to reasonably estiamte the possible loss.

(2) Commitments

A. As of December 31, 2016 and 2015, except for commitments mentioned in Notes 6 (8), (9) and (17), the Company’s aggregate commitments under the consignments for construction and services were $3,005,905 and $2,906,125, respectively. The Company’s aggregate payments under consignments above amounted to $1,832,503 and $1,931,640, respectively.

B. As Taiwan Commerce Development Corp. has applied to establish duty-free shops in Kinmen, in accordance with Kinmen’s regulations governing establishment of duty-free shops on outlying islands, after receiving the license, Taiwan Commerce Development Corp. shall pay fees based on 10% of its monthly sales to Kinmen Government.

10. SIGNIFICANT DISASTER LOSS None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE A. The Group has resolved to issue shares within 1 billion shares through private placement, the basis of par

value is no less than 80% of reference price and NT $12, and the par value is NT $12 in this private placement. Shareholders’ meeting has adopted a resolution authorizing the Board of Directors to make actual issuance price according to particular persons, market conditions and no less than the ratio that was approved in the shareholders’ meeting.

B. Please refer to Note 6(20) C(i) for the related information.

12. OTHERS (1) Operational policies

To relieve the pressure brought by the enormous payments on behalf of others incurred by the assigned projects of land development business, the Company consolidated its loans from several financial institutions into a 7-year long-term syndicated loan contract with a credit line of $16,500,000 in August 2005. With the repayments for the past years, the debt balance was considerably reduced. In order to lift unfavorable limitations for business growth, the Company once again signed a 5-year long-term syndicated loan contract with a credit line of $5,300,000 in August 2012. In August 2016, the borrowings was decreased to $2,694,000 following the reorganisation of syndicated loan aiming to repay former debt and replenish working capital. As of December 31, 2016, the syndicated loan amounted to $2,694,000.

The Company is committed to a diversified land development and value innovation integrated to providing a high-quality lifestyle. The Company tries to infuse new value into the land with ubiquitous technology and green energy technology.


A. Value-oriented development strategies:

The Group adds value to the land through cultural creativity and technological innovation by integrating art as part of life and creating a sustainable healthy LOHAS park.

B. Sustainable development of the IOT and O2O with the cloud the source of value in the future:

The Company will next focus on transforming IoT (Internet of Things) into an industry and realising it in learning and realistic creativity aspects in daily life industry.

C. Consolidation of the development of Kinmen as the border trade center:

The visa-on-arrival policy in Kinmen has enabled the number of visitors from Mainland China to hit a record high. Implementation of increased duty-free shopping quota for people coming from Mainland China through Kinmen and the relaxation of Xiamen as a free trade zone further contributed to a steady growth in bilateral trade volume, the importation of excessive quantities of goods to Xiamen, and significantly increased bilateral trade with Xiamen and the West Coast Zone, consolidating the development of Kinmen as a border trade center.

D. Core values of sustainable enterprise:

Employing “green, intelligent, and cultural creativity” as core beliefs, we infuse the land with new value, creating a unique brand image, communicating our corporate philosophy and committing to the construction of high-quality LOHAS spaces for living.

E. Specialization within the Group

Pursuit of overall rationalization of the Group and further enhancement of enterprise synergy through interaction and cooperation of all employees within the Group.

(2) Capital risk management

A. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non-current borrowings’ as shown in the balance sheet) less cash. Total capital is calculated as ‘equity’ as shown in the balance sheet plus net debt.

B. During 2016, the Group’s strategy, which was unchanged from 2015, was to maintain the gearing ratio under 50%. The gearing ratios at December 31, 2016 and 2015 were as follows:


Total borrowings $ 11,726,174 $ 9,207,627

Less: cash ( 3,022,827) ( 2,622,966)

Net debt 8,703,347 6,584,661

Total equity 17,926,092 17,440,945

Total capital $ 26,629,439 $ 24,025,606

Gearing ratio 32.68% 27.41%

(3) Financial instruments

A. Fair value information of financial instruments

Except for those listed in the table below, the carrying amounts of the Group’s financial instruments not measured at fair value (including notes receivable, accounts receivable, other receivables, long-term receivables, other financial assets, refundable deposits, short-term loans, short-term notes and bills payable, notes payable, accounts payable, other payables, long-term loans and guarantee deposits) are approximate to their fair values. The fair value information of financial instruments measured at fair value is provided in Note 12(4).

197


December 31, 2016




Bonds payable $ 4,314,167 $ - $ 4,396,448 $ -

December 31, 2015




Bonds payable $ 1,489,265 $ - $ 1,518,831 $ -

B. Financial risk management policies

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial position and financial performance.

C. Significant financial risks and degrees of financial risks

(a) Market risk

The Group’s businesses involve some non-functional currency operations. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

(Foreign currency: functional currency)

December 31, 2016

Foreign currency amount

(in thousands)

Exchange rate

Book value(NTD)

Sensitivity analysis

Degree ofvariation

Effect on profit

or loss

Effect on othercomprehensive

income

Financial assets

　Non-monetary items

RMB:NTD $ 8,495 4.617 $ 39,220 1% $ - $ 392

(Foreign currency: functional currency)

December 31, 2015

Foreign currency amount

(in thousands)

Exchange rate

Book value(NTD)

Sensitivity analysis

Degree ofvariation

Effect on profit

or loss

Effect on othercomprehensive

income

Financial assets

　Non-monetary items

RMB:NTD $ 9,465 4.995 $ 47,276 1% $ - $ 473

For the years ended December 31, 2016 and 2015, there is no significant unrealized exchange gain (loss) on the Group’s monetary items.

(b) Liquidity risk

Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets and external regulatory or legal requirements.






Notes payable 81,296 - 81,296

Accounts payable 187,234 - 187,234

Other payables 1,771,130 506,899 2,278,029

Bonds payable 553,314 4,003,447 4,556,761





Notes payable 316,887 - 316,887

Accounts payable 153,354 - 153,354

Other payables 2,057,955 500,839 2,558,794

Bonds payable 19,200 1,537,091 1,556,291


(4) Fair value information

A. Details of the fair value of the Group’s financial assets and financial liabilities not measured at fair value are provided in Note 12(3).

B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Group’s investment in bank debentures is included in Level 2.

Level 3: Unobservable inputs for the asset or liability. The fair value of the Group’s investment in investment property is included in Level 3.

C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2016 and 2015 is as follows:

December31, 2016 Level 1 Level 2 Level 3 Total

Assets

Recurring fair value measurementsFinancial assets at fair value through profit or loss

Derivative financial instruments $ - $ 80 $ - $ 80


Total $ - $ 80 $ 18,860,265 $ 18,860,345

199


December31, 2015 Level 1 Level 2 Level 3 Total

Assets

Recurring fair value measurementsFinancial assets at fair value through profit or loss

Debt securities $ - $ 4,000 $ - $ 4,000

Derivative financial instruments - 80 - 80


Total $ - $ 4,080 $ 18,236,113 $ 18,240,193

Note: Investment property is measured at fair value.

D. The methods and assumptions the Group used to measure fair value are as follows:

(a) The fair value of financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the consolidated balance sheet date (i.e. yield curves on the Taipei Exchange, average commercial paper interest rates quoted from Reuters).

(b) Under “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, the Group appoints external valuers, by using the income approach to calculate the fair value of investment property. Related assumption and information of inputs are as follows:

i. Cash flow: Cash flow shall be valuated on the basis of existing lease contracts, rent at local market rates, or current market rents for similar comparable properties in the same location and condition, and overvalued and undervalued comparable properties shall be excluded. If there is a period-end value, the discounted present period-end value may be added.

ii. Analysis period: When there is no specified period for the income, the analysis period in principle shall not be longer than 10 years; when there is a specified period for the income, the income shall be estimated for the remainder of the specified period.

iii. Discount rate: The discount rate shall be determined using the risk premium approach only, with the calculation based on a certain interest rate, plus the estimate for the individual characteristics of the investment property. The language “based on a certain interest rate” means the interest rate may not be lower than the floating interest rate on a 2-year time deposit of a small amount, as posted by the Chunghwa Post Co. Ltd., plus 0.75 percentage points.

(c) The fair value of some investment property measured at fair value cannot be valuated using the income approach because they are undeveloped lands. According to the Regulations Governing the Preparation of Financial Reports by Securities Issuers, the land development analysis approach is adopted instead by assigning an external appraiser, relevant parameters or assumptions and inputs are listed below:

i. total sales price: An estimated total sales price after development and construction based on the regulatory purpose, use intensity and the changes caused by development and improvement of land.

ii. The rate of return: take into account of factors such as the business risk, how many years it last, and market condition on the basis of the average rate of return in the same industry.

iii. the overall capital interest rate: take into account of the ratio in own funds and financing capital in calculation based on one-year deposit interest rate and standard loan interest rate.

E. For the years ended December 31, 2016 and 2015, there was no transfer between Level 1 and Level 2.

F. For the movements of Level 3 for the years ended December 31, 2016 and 2015, please refer to Note 6(8).

G. For the years ended December 31, 2016 and 2015, there was transfer into or out from Level 3, please refer to Note 6(8).


H. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:


2016 Valuation

technique Significant

unobservable input

Range(weighted average)

Relationshipof inputs to fair value

Investment property $ 14,573,468 Discounted cash flow

Long-term revenue growth rate, discount rate

Notethe higher the long-term revenue growth rate, the higher the fair value; the higher the discount rate, the lower the fair value

Investment property 4,286,797 Land

development analysis


ratioNote

the higher the profit rate, the lower the fair value; the higher the capital interest comprehensive ratio, the lower the fair value


2015 Valuation

technique Significant

unobservable input

Range(weighted average)

Relationshipof inputs to fair value

Investment property $ 14,508,460 Discounted cash flow

Long-term revenue growth rate, discount rate

Notethe higher the long-term revenue growth rate, the higher the fair value; the higher the discount rate, the lower the fair value

Investment property 3,727,653 Land

development analysis


ratioNote

the higher the profit rate, the lower the fair value; the higher the capital interest comprehensive ratio, the lower the fair value

Note: Details of the discount rate range are provided in Note 6(8).

13. SUPPLEMENTARY DISCLOSURES (1) Significant transactions information

A. Loans to others: Please refer to table 1.

B. Provision of endorsements and guarantees to others: Please refer to table 2.

C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): None.

D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: Please refer to table 3.

E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 4.

H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 5.

I. Trading in derivative instruments undertaken during the reporting periods: Conversion rights of convertible bonds. Please refer to Note 6(2) and (16).

J. Significant inter-company transactions during the reporting periods: Please refer to table 6.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 7.

(3) Information on investments in Mainland China

A. Basic information: Please refer to table 8.

B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: None.

201


14. SEGMENT INFORMATION (1) General information

Management has determined the operating segments based on the reportable segments that are included in the reports reviewed by the Board of Directors and used to make strategic decisions.

The Group’s business composition, basis for segmentation and measurement of segment information did not change significantly during the period. The measurement of segment profit reported to the Chief Operating Decision-maker is the same as the profit in the income statements. Internal transactions were eliminated.

(2) Information about segment profit or loss, assets and liabilities

The segment information provided to the Board of Directors for the reportable segments for the years ended December 31, 2016 and 2015 were as follows:

Year ended December 31, 2016:

Construction work and service

Real estate Marketing

and E-commerce

ARKI gallery hall

Merchandise and

entertaiment Total

Revenue of department $ 85,206 $ 33,868 $ 420 $ 3,825 $ 169,512 $ 292,831

Cost of department ( 18,158) ( 10,194) ( 71) ( 704) ( 116,008) ( 145,135)

Gross profit of department $ 67,048 $ 23,674 $ 349 $ 3,121 $ 53,504 $ 147,696

Segment assets (Note) $ - $ - $ - $ - $ - $ -

Segment liabilities (Note) $ - $ - $ - $ - $ - $ -

Depreciations expense $ - $ - $ - $ - $ 1,157 $ 1,157

Year ended December 31, 2015:

Construction work and service

Real estate Marketing

and E-commerce

ARKI gallery hall

Merchandise and

entertaiment Total

Revenue of department $ 405,908 $ 23,691 $ 93 $ 1,866 $ 160,511 $ 592,069

Cost of department - ( 10,509) ( 3) ( 606) ( 119,298) ( 130,416)

Gross profit of department $ 405,908 $ 13,182 $ 90 $ 1,260 $ 41,213 $ 461,653

Segment assets (Note) $ - $ - $ - $ - $ - $ -

Segment liabilities (Note) $ - $ - $ - $ - $ - $ -

Depreciations expense $ - $ - $ - $ - $ - $ -

Note: The Group does not use segment information relating to assets and liabilities to evaluate segment performance. As a result, such information is not disclosed in the financial statements.

(3) Reconciliation for segment income (loss)

A reconciliation of reportable segment income or loss to the income/(loss) before tax from continuing operations for the years ended December 31, 2016 and 2015 are provided as follows:


2016 2015

Gross profit of operating department $ 147,696 $ 461,653

Operating expenses ( 725,707) ( 838,495)

Financial costs ( 141,415) ( 69,425)

Gain on fair value adjustment of investment property 1,112,681 2,640,321

Others 9,442 5,092

Profit before tax-operating department $ 402,697 $ 2,199,146


(4) Information on products and services

Revenues from external customers are merchandise and entertaiment and mainly industrial park development. Breakdown of the revenue from all sources is as follows:


2016 2015

Construction revenue $ 6,224 $ 649


Revenue from merchandise and entertainment 169,512 160,511

Service revenue from industrial park 85,206 405,908

Other operating revenue 4,245 1,959

$ 292,831 $ 592,069

(5) Geographical information

Geographical information for the years ended December 31, 2016 and 2015 is as follows:


2016 2015

Revenue assets Revenue assets

Taiwan $ 292,831 $ 22,532,977 $ 592,059 $ 20,711,229

China - 35,247 10 41,121

Total $ 292,831 $ 22,568,224 $ 592,069 $ 20,752,350

A. The Group’s revenue by geographical areas is counted based on different sales territories.

B. Non-current assets include property, plants and equipment, investment property, intangible assets and other non-current assets but exclude financial instruments and deferred tax assets.

(6) Major customer information

Major customer information of the Group for the years ended December 31, 2016 and 2015 is as follows:


2016 2015

Revenue Segment Revenue Segment

Hualien County Government $ 32,010 Industrial Park Development $ 36,589 Industrial Park

Development

Taichung City Government 34,960 Industrial Park Development 357,323 Industrial Park

Development


Note 1: Except for actural amount drawn down (Note 7), amount of transactions with the borrower (Note 9) and allowance for doubtful accounts, the balances and amounts mentioned in this table refer to the ceiling or amount of loans to others on the date of occurrence (dates of boards of directors' resolutions, date of signing the contract, date of payment or other date that can confirm the counterparty and monetary amount of the transaction, whichever date is earlier) pursuant to Article 7 of the Regulations.

Note 2: The numbers filled in for the loans provided by the Company or subsidiaries are as follows: (1)The Company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’, and the same number refers to the same subsidiary. Note 3: Fill in the name of account in which the loans are recognised, such as receivables–related parties, current account with

stockholders, prepayments, temporary payments, etc. Note 4: Accumulated maximum outstanding balance of loans to others as of the reporting month of the current year. Note 5: Fill in the effective ceiling/amount of loans to others as of the reporting month.（The amounts of funds to be loaned to

others which have been approved by the board of directors of a public company in accordance with Article 14, Item 1 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies" should be included in its published balance of loans to others at the end of the reporting period to reveal the risk of loaning the public company bears, even though they have not yet been appropriated. However, this balance should exclude the loans repaid when repayments are done subsequently to reflect the risk adjustment. In addition, if the board of directors of a public company has authorized the chairman to loan funds in instalments or in revolving within certain lines and within one year in accordance with Article 14, Item 2 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies＂, the published balance of loans to others at the end of the reporting period should also include these lines of loaning approved by the board of directors, and these lines of loaning should not be excluded from this balance even though the loans are repaid subsequently, for taking into consideration they could be loaned again thereafter.

Note 6: Fill in the actual amount of loan to the debtors which does not exceed the ceiling.

Table 1





（Note 3）

Is a related party

Maximumoutstanding


2016（Note 4）

Balance atDecember

31,2016

（Note 5）

Actual amount


Interest rate

Nature ofloan

（Note 7）


with theborrower

（Note 8）

Reasonfor short-

termfinancing

（Note 9）

Allowancefor

doubtfulaccounts





FootnoteItem Value


















205


Table 1





（Note 3）

Is a related party

Maximumoutstanding


2016（Note 4）

Balance atDecember

31,2016

（Note 5）

Actual amount


Interest rate

Nature ofloan

（Note 7）


with theborrower

（Note 8）

Reasonfor short-

termfinancing

（Note 9）

Allowancefor

doubtfulaccounts





FootnoteItem Value


















Note 7: The column of ‘Nature of loan’ shall fill in ‘Business transaction or ‘Short-term financing’. (1)Business relationship is ‘1’. (2)Short-term financing is ‘2’. Note 8: Fill in the amount of business transactions when nature of the loan is related to business transactions. Note 9: Fill in purpose of loan when nature of loan is for short-term financing, for example, repayment of loan, acquisition of

equipment, working capital, etc. Note10: Fill in limit on loans granted to a single party and ceiling on total loans granted as prescribed in the creditor company’s

“Procedures for Provision of Loans＂, and state each individual party to which the loans have been provided and the calculation for ceiling on total loans granted in the footnote.

(1) Ceiling on total loans granted to others is 50% of the Company's net assets; limit on loans granted to a single party is 20% of the Company's net assets.

(2) Ceiling on total loans granted to others is 40% of the TIDC's net assets; limit on loans granted to a single party is 40% of TIDC's net assets.

Note11: The amounts of funds to be loaned to others which have been approved by the board of directors of a public company in accordance with Article 14, Item 1 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies" should be included in its published balance of loans to others at the end of the reporting period to reveal the risk of loaning the public company bears, even though they have not yet been appropriated. However, this balance should exclude the loans repaid when repayments are done subsequently to reflect the risk adjustment. In addition, if the board of directors of a public company has authorized the chairman to loan funds in instalments or in revolving within certain lines and within one year in accordance with Article 14, Item 2 of the “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies＂, the published balance of loans to others at the end of the reporting period should also include these lines of loaning approved by the board of directors, and these lines of loaning should not be excluded from this balance even though the loans are repaid subsequently, for taking into consideration they could be loaned again thereafter.


Note 1: Except for actual amount drawn down (Note 7), the balances and amounts mentioned in this table refer to the maximum amount or amount of endorsement/guarantees to others on the date of occurrence (the earlier of dates of boards of directors resolutions, date of signing the contract, date of payment or other date that can confirm the counter party and monetary amount of the transaction) pursuant to Article 7 of the Regulations.

Note 2: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows: (1) The Company is ‘0’. (2) The subsidiaries are numbered in order starting from ‘1’and the same number refers to the same subsidiary. Note 3: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is as follows: (1) Having business relationship. (2) The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/guaranteed

subsidiary. (3) The endorser/guarantor parent company and its subsidiaries jointly own more than 50% voting shares of the endorsed/

guaranteed company. (4) The endorsed/guaranteed parent company directly or indirectly owns more than 50% voting shares of the endorser/

guarantor subsidiary. (5) Mutual guarantee of the trade as required by the construction contract. (6) Due to joint venture, each shareholder provides endorsements/guarantees to the endorsed/guaranteed company in

proportion to its ownership.

Table 2



Number(Note 2)

Endorser/guarantor




Maximumoutstanding



2016（Note 5）


guaranteeamount at

December 31,2016

（Note 6）






guarantee amount to


guarantor company


guaranteesprovided

（Note 4）


parent company






China（Note 9）



















207


Table 2



Number(Note 2)

Endorser/guarantor




Maximumoutstanding



2016（Note 5）


guaranteeamount at

December 31,2016

（Note 6）






guarantee amount to


guarantor company


guaranteesprovided

（Note 4）


parent company






China（Note 9）



















Note 4: Fill in limit on endorsements/guarantees provided for a single party and ceiling on total amount of endorsements/guarantees provided as prescribed in the endorser/guarantor company’s “Procedures for Provision of Endorsements and Guarantees＂, and state each individual party to which the endorsements/guarantees have been provided and the calculation provided in the footnote.

(1) Ceiling on total endorsements/guarantees is 50% of the Company's net asset; limit on endorsements/guarantees to a single party is 30% of the Company's net assets.

(2) Ceiling on total endorsements/guarantees is 90% of TIDC's net assets; limit on endorsements/guarantees to a single party is 90% of TIDC's net assets.

Note 5: The maximum outstanding endorsement/guarantee amount as of the reporting month of the current year. Note 6: Fill in the ceiling or amount of existing endorsements/guarantees as of the reporting month. Note 7: Fill in the actual amount of endorsements/guarantees used by the endorsed/guaranteed company. Note 8: Fill in the amount of endorsements/guarantees secured with collateral. Note 9: Fill in ‘Y’ for those cases of provision of endorsements/guarantees by the Company to subsidiary and provision by subsidiary

to the Company, and provision to the party in Mainland China.


Note 1: If terms of related-party transactions are different from third-party transactions, explain the differences and reasons in the ‘Unit price’ and ‘Credit term’ columns.

Note 2: In case related-party transaction terms involve advance receipts (prepayments) transactions, explain in the footnote the reasons, contractual provisions, related amounts, and differences in types of transactions compared to third-party transactions.


Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities. Note 2: Fill in the columns the counterparty and relationship if securities are accounted for under the equity method; otherwise leave

the columns blank. Note 3: Aggregate purchases and sales amounts should be calculated separately at their market values to verify whether they

individually reach NT$300 million or 20% of paid-in capital or more. Note 4: Paid-in capital referred to herein is the paid-in capital of parent company. In the case that shares were issued with no par

value or a par value other than NT$10 per share, the 20 % of paid-in capital shall be replaced by 10% of equity attributable to owners of the parent in the calculation.

Note 5: The Company has paid cash to invest in TIDC, amounting to $530,000 in December 2016, and the Company purchased 150,000,000 cumulative redeemable preference shares of TIDC with a par value of $10 in May 2016.

Table 4





counterparty












Table 3




（Note 1）








shares Amount




Subsidiary 711,811,629 $ 3,850,000 53,000,000 $ 530,000 - - - - 764,811,629 $ 4,380,000




Subsidiary - - 150,000,000 1,500,000 - - - - 150,000,000 1,500,000

209


Table 4





counterparty












Table 3




（Note 1）








shares Amount




Subsidiary 711,811,629 $ 3,850,000 53,000,000 $ 530,000 - - - - 764,811,629 $ 4,380,000




Subsidiary - - 150,000,000 1,500,000 - - - - 150,000,000 1,500,000


Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1)Parent company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’. Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the

number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.):

(1)Parent company to subsidiary.

Note 1: Fill in separately the balances of accounts receivable–related parties, notes receivable–related parties, other receivables–related parties….


Note 3: Other receivables arising from loan to others.

Table 6




(Note 2)

Transaction














Table 5





31, 2016（Note 1）




Amount Action taken



211


Table 6




(Note 2)

Transaction














Table 5





31, 2016（Note 1）




Amount Action taken



(2)Subsidiary to parent company. (3)Subsidiary to subsidiary. Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based

on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Note 4: The Company may decide to disclose or not to disclose transaction details in this table based on the Materiality Principle. (Transactions less than 1% are not disclosed.)

Note 5: The above transactions were based on agreements with the counterparties. Note 6: Based on the sales rate and progress of construction in contract.


Table 7






31, 2016



2016


31, 2016





















using equity method





213


Table 7






31, 2016



2016


31, 2016





















using equity method






Table 8






method（Note 1）




2016




Accumulatedamount


31, 2016


2016

Ownership heldby




yearended December

31,2016（Note 2）



31, 2016

Accumulatedamount

of investmentincome


December 31,2016

Footnote

Remitted toMainland

China









215


Table 8






method（Note 1）




2016




Accumulatedamount


31, 2016


2016

Ownership heldby




yearended December

31,2016（Note 2）



31, 2016

Accumulatedamount

of investmentincome


December 31,2016

Footnote

Remitted toMainland

China









VII.�

Review�of�Financial

Conditions�and�Performance,

Operating�Results,�and�Risk

Management

1. Financial Condition

2. Financial Performance

3. Cash Flow

4. Effect of Major Capital Expenditures in 2016 on Financial Operations

5. 2016 Investment Policy, Main Causes for Profits or Losses, Improvement Plans and the Investment Plans for the Coming Year

6. Risk Management

7. Other Important Matters


1. Financial Condition (1) Main Reasons and Impact of Any Material Change in the Company's Assets, Liabilities, or

Shareholders' Equity during the Past Two Fiscal Years 　　 Unit: NT$ thousand

　　　　　　　　　　　　　　　　　　　　YearItem　　　　　　　　　　　　　　　　　　　 2016 2015

Variance

Amount Percentage(％ )

Current assets 10,520,071 9,604,072 915,999 9.54

Non-current assets 22,681,104 20,940,506 1,740,598 8.31

Total assets 33,201,175 30,544,578 2,656,597 8.70

Current liabilities 8,760,091 9,365,675 -605,584 -6.47

Non-current liabilities 6,514,992 3,737,958 2,777,034 74.29

Total liabilities 15,275,083 13,103,633 2,171,450 16.57

Capital Stock 7,607,849 7,258,813 349,036 4.81

Capital surplus 27,894 316,057 -288,163 -91.17

Retained Earnings 10,365,544 10,318,347 47,197 0.46

Other equity 2,375 5,734 -3,359 -58.58

Treasury stock (86,980) (471,595) 384,615 -81.56

Total stockholders’ equity attributable to parent 17,916,682 17,427,356 489,326 2.81

Non-controlling interest 9,410 13,589 -4,179 -30.75

Total equity 17,926,092 17,440,945 485,147 2.78

(2) Description of Material Changes:

The value of each of the items below has changed by 10% or more over the previous period and the amount of change is above NT$100 million:

A. Non-current Liabilities increase: Due to measures taken for the increase of corporate bonds.

B. Treasury stocks reduce: Resulting from stock transfer to employees.

C. Reduction in Capital Surplus: It is attributable to administering the conversion of capital surplus into capital increase by issuing new shares.

219

VII　　REVIEW OF FINANCIAL CONDITIONS AND PERFORMANCE, OPERATING RESULTS, AND RISK MANAGEMENT

2. Financial Performance Main reasons for the major changes to operating income, net operating profit and Net PBIT over the last two years,

expected volume of sales and its basis, and response plans to address the possible impact on the Company’s future financial operations. 　　 Unit: NT$ thousand

　　　　　　　　　　　　　　　　　　　YearItem　　　　　　　　　　　　　　　　　　　 2016 2015 Amount of

changePercentage of

change (%)

Operating revenue 292,831 592,069 -299,238 -50.54

Operating Costs 145,135 130,416 14,719 11.29

Operating profit (loss) 147,696 461,653 -313,957 -68.01

Operating profit (loss), net 147,696 461,653 -313,957 -68.01

Operating Expenses 725,707 838,495 -112,788 -13.45

Operating income (loss) -578,011 -376,842 -201,169 -53.38

Non-operating revenue and expenses 980,708 2,575,988 -1,595,280 -61.93

Income (loss) before tax 402,697 2,199,146 -1,796,449 -81.69

Income tax expense (benefit) 154,887 159,541 -4,654 -2.92

Net income (loss) from continuing operations 247,810 2,039,605 -1,791,795 -87.85

Net income (loss) 247,810 2,039,605 -1,791,795 -87.85

Other comprehensive income (loss), net -3,359 -1,004 -2,355 -234.56

Total consolidated income 244,451 2,038,601 -1,794,150 -88.01

Net income (loss) attributable to parent 251,989 2,040,076 -1,788,087 -87.65

Net income (loss) attributable to non-controlling interest -4,179 -471 -3,708 -787.26

Total comprehensive income (loss) attributable to parent 248,630 2,039,072 -1,790,442 -87.81

Total comprehensive income (loss) attributable to non-controlling interest -4,179 -471 -3,708 -787.26

Analysis of changes in proportion:



A. Decrease in operating revenue: Mostly due to reduction in service revenues for this year.

B. Decrease in Operating profit: Overall gross profits for this year declined due to reduction in service despite increased gross profits in product sales generated from the Wind Lion Duty Free Plaza.

C. Reduction in operating expenses: Operating expenses declined due to reduction in marketing expense for the year.

D. Operating profits declined as a result of decreasing gross operating profits

E. Declining non-operating revenue and expenses: refer to dwindling value appreciation benefits subsequent valuation of real estate investment shall be recognized with the fair value model.


3. Cash Flow Liquidity Analysis of the Past Two Years

　　　　　　　　　　　　　　　　　　　　Year Item　　　　　　　　　　　　　　　　　　　　 2016 2015 Variance (%) Percentage of

change (%)

Cash flow ratio (%) (20.52) (18.06) (2.46) (13.62)

Net cash flow adequacy ratio (%) 85.82 ― ― ―

Cash reinvestment ratio (%) (35.07) (63.64) 28.57 44.89

(1) Analysis of cash flow change in 2016:

A. The decrease of cash flow ratio was due to decrease in net cash flow from operating activities.

B. Increase in the ratio of cash reinvestment is due to the fact that net cash outflow has been generated from business operations over the past two periods. Therefore, the ratio of cash reinvestment has increased under the condition of increased fixed assets.

(2) Improvement Plan for Insufficient Liquidity: None.

(3) Cash Flow Analysis for the Coming Year: 　　 Unit: NT$ thousand

Cash balance at beginning of period

Net cash inflow from operating

activities

Net cash inflow from investment

and financing activities

Cash balanceCapital resources for inadequate cash

Investment plans Financing plans

2,034,256 1,275,769 355,492 3,665,517 - -

Analysis of cash flow change in 2017:1. Operating activities: Payables and expenses associated with the planned development of industrial parks as well as company-

owned land that are expected to result in cash outflow of approximately NT$1,276 million. 2. Investment activities: Planned investment in the development of company-owned assets that are expected to result in cash

outflow of NT$493 million.3. Financing activities: Anticipated financing activities mostly intended for the repayment of bank loans are expected to result in

cash inflow of NT$138 million.4. It is expected that in the coming year cash will be adequate and it is unlikely that insufficient liquidity will be a problem.

4. Effect of Major Capital Expenditures in 2016 on Financial Operations: None.5. 2016 Investment Policy, Main Causes for Profits or Losses, Improvement Plans

and the Investment Plans for the Coming Year (1) Reinvestment Policy:

In order to facilitate the Hualien area to expand and develop business and generate profits as well as participate in the operation and management of the Hualien Harbor area, the Company has reinvested to establish the Hualien branch office of the Wind Lion Plaza Corporation.

(2) Reason for Profitability:

TIDC's revenues mostly came from undertaking the Company's derivative business operations, including integrated marketing business operation, the development of special projects as well as consulting service business operation; After-tax earnings per share was NT$0.15 for 2016, with profitability mostly attributable to the fact that the fair value model was adopted in the follow-up evaluation of investment property asset and the adjusted benefits of fair value was recognized.

(3) Plans for Improvement:

TIDC will continue to focus on cultural creative marketing, application of smart technologies, resource integration and green development to help the Company expand its innovative business and endeavors.

(4) Investment Plans for the Coming Year:

Depending on the overall development of the industry, the economic and business cycles, and capital requirements and operational conditions of TIDC and its invested businesses, the company will infuse cash into TIDC to expand its operations and sources of revenue.

221

VII　　REVIEW OF FINANCIAL CONDITIONS AND PERFORMANCE, OPERATING RESULTS, AND RISK MANAGEMENT

6. Risk Management: (1) Effects of Changes in Interest Rate and Exchange Rate and Inflation on the Company’s Finance,

and Future Response Measures

A. Interest rate: In light of the steady increase in consumer prices in Taiwan as well as a slower pace in global economic recovery, the Central Bank continues to uphold a lax monetary policy and keep interest rate policy, which have no significant impact on the Company.

B. Exchange rate: The Company is in the housing and real estate industry serving mainly the domestic market. Thus exchange rate fluctuations have no material impact on the Company.

C. Inflation: With the pressure of inflation eased, real estate has always been regarded as the best weapon to fight inflation and circumvent risks. Such notion aids the sale of the Company’s land in industrial parks and real estate assets.

D. Response measures: Upon assessment, it is determined that the risks stated above have no significant impact on the Company loss or profit. The Company shall, however, endeavor to gain the latest market information in order to respond in a timely manner should the need arise.

(2) Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions:

Currently the Company does not possess any high-risk or highly leveraged investments. In the future, if the Company engages in lending to other parties, providing endorsements and guarantees or trading derivative instruments, the Company shall conduct these transactions in accordance with the provisions of the “Regulations Governing the Acquisition and Disposal of Assets by Public Companies,” “Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies” and regulations that apply to the Company.

(3) Future Research and Development Projects and Corresponding budget: Refer to page 61.

(4) Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales:

A. The policy of "Real Price Listing" enforced since August 2012 has had minimal short-term impact on property transactions, as its long-term impact hinges on complementing measures. After the "System of Income Tax on the Consolidated Income from House and Land Transactions" was implemented on Jan. 1, 2016, it has become more difficult for real estate sales as the tax rates on sellers were increased, while property supply and demand as well as prices were impacted. After the "Five day workweek" amendment to the Labor Standards Act was implemented on Dec. 21 2016, operations of the Group's subsidiary start-up businesses were directly impacted. For business units operating plazas such as the Kinmen Wind Lion Plaza, a direct increase in manpower cost has been incurred. Moving forward, we plan to counter with diverse channels and measures including manpower planning, adjustments in leave days or stores' closed days.

B. Measures in response to market risks: Implementing environmental protection, innovation and technology based on the notion of "Green; Cultural Creativity; Intelligent" at various development projects, in an attempt to forge quality LOHAS space to whet consumer's appetite for purchase.

C. Measures in response to interest rate fluctuations: In order to lower the burden of land purchase or house purchase on corporations or consumers, the Company will consult with various major banks to operate in coordination with the mechanism of special discounted loans and vie for more favorable interest rates.

(5) Effects of and Response to Changes in Technology and in Industry Relating to Corporate Finance and Sales: None.

(6) The Impact of Changes in Corporate Image on the Corporate Risk Management, and the Company’s Response Measures: None.

(7) Expected Benefits from, Risk Relating to and Response to Merger and Acquisition Plans: None.

(8) Expected Benefits from, Risk Relating to and Response to Factory and Expansion Plans: None.


(9) Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive

Business operations of the Company and its subsidiaries encompass industrial park development, real estate transactions, construction, retail and recreation industries. Goods purchased include construction work contracting, construction land and the purchase of merchandise, etc. In terms of contracting, we make it a rule to carefully select the evaluation procedure to award construction works to the most appropriate contractors based on the nature of the works. With regard to retail and recreation operations, goods are mostly purchased from established brands with dedicated retail counters, food ingredient companies and retail suppliers. Our products are diverse with a wide variety of choices. As the sourcing of goods is dispersed, there is no risk associated with concentrated sourcing of goods. In terms of merchandise sales, the objects for industrial park development are various levels of county and city governments. For retail and recreation operations, they are mostly general consumers. The clientèle is diverse with no risk associated with concentrated sales.

(10) Effects of, Risks Relating to and Response to Large Share Transfer or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholding of over 10%: None.

(11) Effects of, Risks Relating to and Response to Changes in Control over the Company: None.

(12) Litigation or Non-litigation Matters:

The Company's subsidiary U-Home & Taiwan Envirotech Development Corporation signed a construction contract with TECO Electric and Machinery Co., Ltd named "Kinmen Industrial & Commercial Recreational Park BOT Project Section B New Construction Work -- Electrical & Mechanical Work" on May 15, 2012. The contract was worth a total of NT$377,000,000. However, TECO claimed that the Company owes it NT$171,128,582 in controversial construction payment.

This lawsuit is currently being heard at the Taiwan Taipei District Court. At present, it is difficult to estimate the possible loss the Company may sustain.

(13) Other Major Risks: None.

7. Other Important Matters: None.

VIII. Special Disclosures

1. Summary of Affiliated Companies

2. Private Placement of Securities in Years 2016 to present

3. The Shares in the Company Held or Disposed by Subsidiaries in Years 2016 to present

4. Other Supplementary Matters

5. Matters that Have Significantly Affected Shareholders' Equity and Prices of Securities Pursuant to Item 2, Subparagraph 2, Article 36 of Securities Exchange Law in Years 2016 to present


1. Summary of Affiliated Companies (1) Consolidated Operation Report Date: December 31,2016

A. Organization chart of affiliates

B. Profile of affiliates 　　 Unit: NT$ thousand

Name of corporation Date of establishment Address Paid-in capital Major operating or producing

items

Taiwan Innovation Development Corporation 2006.05.17 13F-3, No. 51, Hengyang Rd., Taipei 10,076,152 Urban renewal integration service

Marketing

Hsinchu Hill Garden Corporation 2011.01.26 14F, No. 51, Hengyang Rd., Taipei 1,000 Development of Hsinchu Hsinpu

Eco-community

Taiwan Midtown Development Corporation 2012.10.19 14F-1, No. 51, Hengyang Rd., Taipei 1,000 Development and investment

business

Taiwan LanYang Development Corporation 2014.08.05 13F-3, No. 51, Hengyang Rd., Taipei 29,000 Yilan area development business

Taiwan Commerce Development Corporation 2009.10.28 No.8 -6 , Zhongshan Rd . , J inhu

Township, Kinmen County 2,300,000Development of Prosperous Kinmen Property management General merchandise import business

Taiwan Envirotech Development Corporation 2010.06.30 13F-3, No. 51, Hengyang Rd., Taipei 130,000 Information and construction

technology business

Taiwan City Development Corporation 2010.06.23 13F-3, No. 51, Hengyang Rd., Taipei 1,000 Urban renewal integration

business

Hualien Culture Clubhouse Corporation 2010.08.27 No.388, Zhongyuan Rd., Hualien City 44,340 Development of Impression

Hualien

Hualien Ocean Forum Corporation 2010.09.09 14F, No. 51, Hengyang Rd., Taipei 1,000 Development of Impression

Hualien

Taikai Xiamen Trading Corporation 2010.10.20

Room 615, Technology Building, No. 800, Sunban N. Rd., Houxi Township, Jimei District, Xiamen

64,417(US$2,200,000) Trade and agency business

Nanguowoo Corporation 2012.08.16 13F-3, No. 51, Hengyang Rd., Taipei 10,000 Real estate development and sale

Wind Lion Plaza Corporation 2012.08.17 No.8 -6 , Zhongshan Rd . , J inhu

Township, Kinmen County 540,000 Shopping mall operation and management

Taiwan Talent Development Corporation 2012.11.21 13F-3, No. 51, Hengyang Rd., Taipei 6,000 Manpower recruitment business

Taiwan Wind Lion Travel Service Corporation 2014.09.24 7F-7, No. 51, Hengyang Rd., Taipei 10,000 Tourism and travel business

Kinmen Forum Corporation 2014.12.12 No.8 -6 , Zhongshan Rd . , J inhu

Township, Kinmen County 3,000Operation, management and conference business of hotels in Kimen

Taiwan C

omm

erce D

evelopment C

orporation

Taiwan E

nvirotech D

evelopment C

orporation

Taiwan C

ity D

evelopment C

orporation

Hualien C

ulture Clubhouse

Corporation

Hualien O

cean Forum

Corporation

Taikai Xiam

en Trading C

orporation

Nanguow

oo Corporation

Wind Lion P

laza C

orporation

Taiwan Talent

Developm

ent Corporation

Taiwan W

ind Lion travel service C

orporation

Kinmen Forum

C

orporation

Percentage100%

Percentage100%

Percentage100%

Percentage100%

Percentage100%

Percentage100%

Percentage100%

Percentage100%

Percentage100%

Percentage100%

Percentage100%

Taiwan Land Development Corporation

Hsinchu Hill Garden Corporation

Taiwan Midtown Development Corporation


Taiwan LanYang Development Corporation

Percentage 100%

Percentage 51%Percentage 100%Percentage 100%Percentage 100%

225

VIII　　SPECIAL DISCLOSURES

C. The information of identical shareholders presumed to have control and subsidiary relationship: Not applicable.

D. Industries covered by the operations of all affiliates: Business operated by the Company and its affiliates cover the following industries: buildings and construction, urban renewal integration, real estate development, rental, and leasing, general merchandise import and information technology.

E. Collaboration with the Company: Taiwan Land Development Corporation (TLDC) engages in agency business of industrial parks development and asset development and management, and urban renewal. TLDC entrusts TIDC to conduct urban renewal integration and marketing services, and commissions Taiwan Innovation Development Co. to conduct construction contracting services and information management operations for the Group. Hsinchu Hill Garden Corporation, Taiwan Midtown Development Corporation, Taiwan Commerce Development Corporation, Hualien Culture Clubhouse Corporation, Hualien Ocean Forum Corporation and Taikai Xiamen Trading Corporation, Nanguowoo Corporation, Wind Lion Plaza Corporation and Taiwan Talent Development Corporation are independently operated corporations.

F. Names and shareholdings or capital increase status of directors, supervisors, and presidents of affiliates

Unit: No. of shares; %

Name of corporation Title Name or representativeHolding

Shares Percentage (%)


Chairman Taiwan Land Development CorporationRepresentative: Chiu, Fu-Sheng 1,007,615,205 100%

Vice Chairman Taiwan Land Development CorporationRepresentative: Lian, Tai-Sheng 1,007,615,205 100%

Director Taiwan Land Development CorporationRepresentative: Luo, Chi-Cheng 1,007,615,205 100%

Director Taiwan Land Development CorporationRepresentative: Lin, Chih-Hua 1,007,615,205 100%

Director Taiwan Land Development CorporationRepresentative: Huang, Kuo-Chun 1,007,615,205 100%

Director Taiwan Land Development CorporationRepresentative: Kuo, Nein Hsiung 1,007,615,205 100%

Supervisor Taiwan Land Development CorporationRepresentative: Yeh, Hui-Ling 1,007,615,205 100%

Supervisor Taiwan Land Development CorporationRepresentative: Lin, Hung-Min 1,007,615,205 100%

Hsinchu Hill Garden Corporation

Chairman Taiwan Land Development Corporation Representative: Chiu, Fu-Sheng 100,000 100%

Director Taiwan Land Development Corporation Representative: Lian, Tai-Sheng 100,000 100%

Director Taiwan Land Development Corporation Representative: Cheng, Chi-Li 100,000 100%

Supervisor Taiwan Land Development Corporation Representative: Yeh, Hui-Ling 100,000 100%

Taiwan Midtown Development Corporation

Chairman Taiwan Land Development Corporation Representative: Chiu, Fu-Sheng 100,000 100%

Director Taiwan Land Development Corporation Representative: Lian, Tai-Sheng 100,000 100%

Director Taiwan Land Development Corporation Representative: Kuo, Nein Hsiung 100,000 100%

Supervisor Taiwan Land Development Corporation Representative: Lin, Hung-Min 100,000 100%




Taiwan LanYang Development Corporation

Chairman Hwawei International Innovation Co., Ltd. Representative: Li, Yu-Kuang 676,000 24.5%

Director Hwawei International Innovation Co., Ltd. Representative: Li, Wei-Hua 676,000 24.5%

Director Wu, Chi-Ming 50,000 5%

Director Taiwan Land Development Corporation Representative: Chiu, Fu-Sheng 1,479,000 51%

Director Taiwan Land Development Corporation Representative: Kuo, Tsung Hsiung 1,479,000 51%

Director Taiwan Land Development Corporation Representative: Luo, Chi-Cheng 1,479,000 51%

Director Taiwan Land Development Corporation Representative: Cheng, Chi-Li 1,479,000 51%

Supervisor Lin, Chao-Chin 195,000 19.5%

Supervisor Taiwan Innovation Development Corporation Representative: Yeh, Hui-Ling 0 0%

Taiwan Commerce Development Corporation

Chairman Taiwan Innovation Development CorporationRepresentative: Chiu, Fu-Sheng 230,000,000 100%

Director Taiwan Innovation Development CorporationRepresentative: Lian, Tai-Sheng 230,000,000 100%

Director Taiwan Innovation Development CorporationRepresentative: Kuo, Nein Hsiung 230,000,000 100%

Supervisor Taiwan Innovation Development CorporationRepresentative: Lin, Hung-Min 230,000,000 100%

Taiwan Envirotech Development Corporation



Director Taiwan Innovation Development CorporationRepresentative: Kow, Fu-Lin 13,000,000 100%

Director Taiwan Innovation Development CorporationRepresentative: Cheng, Chi-Li 13,000,000 100%

Director Taiwan Innovation Development CorporationRepresentative: Lin, Chih-Hua 13,000,000 100%

Director Taiwan Innovation Development CorporationRepresentative: Huang, Kuo-Chun 13,000,000 100%

Supervisor Taiwan Innovation Development CorporationRepresentative: Lin, Hung-Min 13,000,000 100%

Taiwan City Development Corporation

Chairman Taiwan Innovation Development CorporationRepresentative: Chiu, Fu-Sheng 100,000 100%

Director Taiwan Innovation Development CorporationRepresentative: Lian, Tai-Sheng 100,000 100%

Director Taiwan Innovation Development CorporationRepresentative: Cheng, Chi-Li 100,000 100%

Supervisor Taiwan Innovation Development CorporationRepresentative: Lin, Hung-Min 100,000 100%

Hualien Culture Clubhouse Corporation




Supervisor Taiwan Innovation Development CorporationRepresentative: Yeh, Hui-Ling 4,434,000 100%

227

VIII　　SPECIAL DISCLOSURES



Hualien Ocean Forum Corporation



Director Taiwan Innovation Development CorporationRepresentative: Cheng, Chi-Li 100,000 100%

Supervisor Taiwan Innovation Development CorporationRepresentative: Yeh, Hui-Ling 100,000 100%

Taikai Xiamen Trading Corporation

Chairman Taiwan Innovation Development CorporationRepresentative: Chiu, Fu-Sheng － 100%

Director Taiwan Innovation Development CorporationRepresentative: Kuo, Nein Hsiung － 100%

Director Taiwan Innovation Development CorporationRepresentative: Smart Chiang － 100%

Supervisor Taiwan Innovation Development CorporationRepresentative: Yeh, Hui-Ling － 100%

Nanguowoo Corporation



Director Taiwan Innovation Development CorporationRepresentative: Kuo, Nein Hsiung 100,000 100%





Director Taiwan Innovation Development CorporationRepresentative: Kuo, Nein Hsiung 35,000,000 100%


Taiwan Talent Development Corporation



Director Taiwan Innovation Development CorporationRepresentative: Kuo, Nein Hsiung 600,000 100%

Supervisor Taiwan Innovation Development CorporationRepresentative: Lin, Hung-Min 600,000 100%

Taiwan Wind Lion Travel Service Corporation


Director Taiwan Innovation Development CorporationRepresentative: Luo, Chi-Chen 1,000,000 100%



Kinmen Forum Corporation


Director Taiwan Innovation Development CorporationRepresentative: Luo, Chi-Chen 300,000 100%

Director Taiwan Innovation Development CorporationRepresentative: Kuo, Tsung Hsiung 300,000 100%



(2) Operation of Affiliates

December 31, 2016; Unit: NT$ thousand

Name of corporation Capital (paid-in)

Total assets

Total liabilities Net worth Operating

revenueOperating

incomeNet income

(loss)(after tax)

Earnings per share

(NT$)(after tax)

Taiwan Innovation Development Corporation 10,606,152 14,671,139 2, 909,259 11,761,880 64,101 (152,685) 134,329 0.15

Hsinchu Hill Garden Corporation 1,000 722 - 722 - (62) (61) (0.61)

Taiwan Midtown Development Corporation 1,000 722 - 722 - (62) (61) (0.61)

Taiwan LanYang Development Corporation 29,000 25,343 6,140 19,203 17,776 (8,535) (8,529) (2.94)

Taiwan Commerce Development Corporation 2,300,000 5,092,004 2,136,482 2,955,522 211,325 94,433 71,672 0.33

Taiwan Envirotech Development Corporation 130,000 466,426 337,439 128,987 132,347 (12,799) (14,862) (1.68)

Taiwan City Development Corporation 1,000 540 - 540 - (91) (90) (0.90)

Hualien Culture Clubhouse Corporation 44,340 65,791 19,525 46,266 - (753) 692 0.16

Hualien Ocean Forum Corporation 1,000 326 - 326 - (63) (62) (0.62)

Taikai Xiamen Trading Corporation 64,417 43,208 3,988 39,220 - (4,700) (4,696) -

Nanguowoo Corporation 10,000 8,763 559 8,204 2,282 (466) (498) (0.49)

Wind Lion Plaza Corporation 540,000 139,760 92,365 47,395 126,531 (199,233) (199,884) (3.70)

Taiwan Talent Development Corporation 6,000 3,000 - 3,000 - (74) (71) (0.12)

Taiwan Wind Lion Travel Service Corporation 10,000 9,864 5 9,859 - (73) (48) (0.05)

Kinmen Forum Corporation 3,000 2,997 - 2,997 - - 3 0.01

(3) Consolidated Financial Statement of Affiliates: Refer to page 144.

2. Private Placement of Securities in Years 2016 to present: None3. The Shares in the Company Held or Disposed by Subsidiaries in Years 2016 to

present: None.4. Other Supplementary Matters: None.5. Matters that Have Significantly Affected Shareholders' Equity and Prices of

Securities Pursuant to Item 2, Subparagraph 2, Article 36 of Securities Exchange Law in Years 2016 to present: None.

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