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AIDC AGM Information 2018

Jul 6, 2018

52175_rns_2018-07-06_7898b457-93c3-4853-8265-1f9ca85f4ef3.pdf

AGM Information

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Stock Code: 2634

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Aerospace Industrial Development Corporation

2018 Annual Shareholders' Meeting

Meeting Handbook

(Translated from Mandarin)

Date: 26 June 2018 Place: No. 176, Lane 20, Zhongzhen Road, Shalu District, Taichung City, Taiwan (AIDC Hsiang-Yuan Complex)

Table of Contents

Meeting Procedure Meeting Procedure 1
Meeting Agenda 2
I.
Reports		 3
II.
Ratifications		 4
III.
Discussion (I)		 5
IV.
Election		 6
V.
Discussion (II)		 7
VI.
Extempore Motions		 8
VII. Meeting Adjournment 8
Appendix
Appendix I : Business Report of 2017 9
Appendix II : Audit Committee Review Report 13
Appendix III : 2017 Compensation to Employees and Directors 14
Appendix IV : Financial Statements of 2017 15
Appendix V : Proposal for Earnings Distribution of 2017 Profits 35
Appendix VI : Mapping of the amended provisions of the Acquisition
and Disposal Procedures for Assets 36
Appendix VII : The 8thBoard of Director and Independent Director
Candidates 50
Appendix VIII : Exemption of Restrictions for Directors 55

Aerospace Industrial Development Corporation (AIDC) 2018 Annual Shareholders′ Meeting Procedure

  • I. Meeting Commencement Announced

  • II. Chairman′s Address

  • III. Reports

  • IV. Ratifications

  • V. Discussion (I)

  • VI. Election

  • VII. Discussion (II)

  • VIII. Extempore Motions

  • IX. Meeting Adjournment

  • 1 -

Aerospace Industrial Development Corporation (AIDC)

2018 Annual Shareholders′ Meeting Agenda

  • Time: 10:00 a.m., 26 June 2018 (Tuesday)

  • Place: No.176, Lane 20, Zhongzhen Road, Shalu District, Taichung City, Taiwan (AIDC Hsiang-Yuan Complex)

  • I. Meeting Commencement Announced

  • II. Chairman′s Address

  • III. Reports

  • (1) Business Report of 2017

  • (2) Audit Committee Review Report of 2017

  • (3) 2017 Compensation to Employees and Directors

  • IV. Ratifications

  • (1) Ratification of the 2017 Business Report and Financial Statements

  • (2) Ratification of the proposal for Earnings Distribution of 2017 Profits

  • V. Discussion (I)

  • (1) Discussion on amendments to Company′s Acquisition and Disposal Procedures for Assets

  • VI. Election

  • (1) Electing the 8[th] Board of Directors

  • VII. Discussion (II)

  • (1) Discussion on exempting directors from non-competition restrictions

  • VIII. Extempore Motions

  • IX. Meeting Adjournment

  • 2 -

Reports
Item 1: Report on the business of 2017, are shown in Appendix I (Pages
9-12).
Item 2: Audit Committee Review Report of 2017, as shown in Appendix
II (Page 13).
Item 3: Report on 2017 compensation to employees and directors, as
shown in Appendix III (Page 14).
  • 3 -

Ratifications

Item 1: Ratification of the 2017 Business Report and Financial Statements (Proposed by the Board of Directors)

Description:

  • I. AIDC′s 2017 Financial Statements (including Balance Sheets, Statements of Comprehensive Income, Statements of Changes in Equity, and Statements of Cash Flows) have been reviewed and audited by Mrs. Lie-Dong Wu and Mr. Done-Yuin Tseng, CPA of Deloitte & Touche.

  • II. Business Report of 2017, Auditors′ Report, and aforementioned financial statements, are shown in Appendixes I and IV (Pages 9-12 and Pages 15-34).

Resolution:

Item 2: Ratification of the proposal for Earnings Distribution of 2017 Profits (Proposed by the Board of Directors)

  • Description: I. The company′s net profit after taxes for 2017 was NT$1,747,981,226. Based on the ″Articles of Incorporation″ article 28-1 reserve allocation, the current distributable surplus is NT$1,080,578,653, as shown in Appendixes V (Page 35).

  • II. The company plans to distribute a cash dividend of NT$1.13 per share for 2017. The distribution of cash dividend will be calculated to the nearest NT dollar. Residual amount, if any, less than one NT dollar will be transferred into and recognized as other income of the company.

Resolution:

  • 4 -

Discussion (I)

  • Proposal 1: Discussion on amendments to the Company′s Acquisition and Disposal Procedures for Assets (Proposed by the Board of Directors)

Description:

  • I. In support of the company's actual operating needs, the provisions contained in the existing procedures for acquisition and disposal of assets need to be amended in part.

  • II. The comparisons of the original as well as the amended provisions are shown in Appendix VI (Pages 36-49).

Resolution:

  • 5 -

Election

  • Proposal 1:

Electing the 8[th] Board of Directors

(Proposed by the Board of Directors)

  • Description: I. The incumbent 7[th] Board of Directors of the company have served and fulfilled the term of office on June 22, 2018. Pursuant to Articles 195 and Company Articles of Incorporation, this session of Shareholders shall elect the 8[th] Board of Directors for a term of 3 years from June 26, 2018 to June 25, 2021.

  • II. AIDC Directors shall be elected under a nomination system, and the election for a new Board in the General Meeting of Shareholders. The candidates of Directors for the 8[th] term which was passed by the Board in the session dated May 8, 2018, are shown in Appendixes VII (Pages 50-54).

  • III. Election will be held in accordance with the Company’s Procedure for the Election of Directors.

Resolution:

  • 6 -

Discussion (II)

  • Proposal 1: Exempt directors and their representatives from non-competition restrictions

(Proposed by the Board of Directors)

Description:

  • I. Pursuant to Article 209 of Law, a director, who acts for himself or another person on certain business categories which are also found within the company's business scope, shall address the shareholders' meeting to explain the contents of his actions and obtain permission for such actions.

  • II. Based on the requirement for the company's business promotion, in order to use the expertise and experiences of the company's directors, it is requested that the newly appointed directors and their legal representatives concurrently may operate or be employed in companies with the same or similar business scope as those of the company, thus they are exempted from restrictions on non-competition.

  • III. The exempted contents of the legal acts of the directors and their representatives as shown in Appendix VIII (Page 55).

Resolution:

  • 7 -

Extempore Motions

Meeting Adjournment

  • 8 -

Appendix I

Letter to Shareholders

Dear Valued Shareholders,

Amidst fierce global competition, threats from both advanced and emerging countries, stringent demands for quality, efficiency, and lower costs from international customers, and depreciation of U.S. dollar against N.T. dollar, AIDC continued its pursuit of business opportunities and responded prudently and responsibly to both possibilities and challenges alike. Again, with a concerted effort between the employees and the management, AIDC successfully overcame all the difficulties and achieved a significant revenue growth in FY 2017 comparing with that of FY 2016.

Based on current forecasts of the commercial aviation market for the next 20 years (2017‐2036), demand for new airplanes is estimated at 38000‐41000, representing a total value of approximately $5.3‐6.1 trillion U.S. dollars, which will continue to lead the momentum of the global market. In the face of varied challenges of the aerospace industry, AIDC remained dedicated to promoting the “Taiwan Aerospace Industry A‐Team 4.0 Alliance”, which has yielded productive results including; the increase in AS9100 certified suppliers from 62 to 85, signing of a MOU with 14 intelligent machinery suppliers, Advanced Jet Trainer (AJT) commission agreement with the National Chung Shan Institute of Science and Technology (NCSIST), participating in both the Paris Airshow and Taipei Aerospace and Defense Technology Exhibition, hosting Aerospace Composite Forum and 2017 Taiwan Aerospace Industry & Policy Forum; and signing of the first phase AJT contract with 48 suppliers.

Currently, Taiwan’s aerospace industry needs to work on three major missions, namely “Indigenous development of an advanced jet trainer”, “Intelligent manufacturing “, and “Supply chain integration”. Firstly, to achieve the “indigenous development of an advanced jet trainer”, AIDC is making every effort to improve development efficiency to meet schedule and achieve quality‐compliant objectives; meanwhile, AIDC is integrating activities and efforts by individual member suppliers of the Taiwan Aerospace Industry A‐Team 4.0 Alliance toward cultivating the talents and upgrading the industry through the AJT program, which will lay a sound foundation for both the defense and the aerospace industries.

Secondly, intelligent manufacturing plays an essential role in quality, efficiency and cost improvements. To support government’s “5+2 Industrial Transformation Plan”, AIDC applied the approach of integrating intelligent manufacturing with Taiwan's defense and aerospace industries into AIDC's " Pilot Project for Aerospace Intelligent Manufacturing Industrial Innovation " for intelligent production line which enhances our quality, production efficiency and competitiveness.

Thirdly, integration of Taiwan’s supply chain is a continuing effort by the Taiwan Aerospace Industry A‐Team 4.0 Alliance, through which AIDC provides assistance to supply chain members to obtain qualification to aerospace standards, expands the scope of Taiwan’s aerospace industry; and enhances the overall capability of executing international orders.

According to the 2017 Aerospace Manufacturing Attractiveness Ranking Report released by PricewaterhouseCoopers (PwC) Taiwan ranked 6th overall among the top ten countries for aerospace attractiveness, following the United States, Switzerland, United Kingdom, Australia, and Canada. The 2017 ranking index is based on a weighted score of categories including; labor, infrastructure, industry, economy, cost, tax policy and geopolitical risk.

Evidenced by the above, the attractiveness of Taiwan’s aerospace industry is recognized in the global market, and comparing with other top 10 countries, Taiwan ranked well in categories of cost and

  • 9 -

labor. As a major component of the Taiwan’s aerospace industry, AIDC is proud of the contributions made by all of us and remains committed to continuing Taiwan’s progress and expansion in the global aerospace market.

I would like to express our most sincere appreciation and gratitude to all our valued shareholders for your unwavering support of AIDC. The summary of the report on the operation results for FY 2017 and the business plan for FY 2018 are presented hereunder.

FY 2017 Operation Highlights

Revenue and Income

The Company had consolidated revenue of NT$27,537,414 thousand in FY 2017, which was an increase of NT$211,900 thousand from NT$27,325,514 thousand in FY 2016. Consolidated pre‐tax income in FY 2017 amounted to NT$2,278,789 thousand, which was a decrease of NT$315,434 thousand from NT$2,594,223 thousand of FY 2016. Net operating income increased NT$43,835 thousand, however non‐operating revenues and expenditures decreased due to depreciation of US dollar which resulted in an increase of exchange loss of NT$537,699 thousand than FY 2016.

(Note: Based on the disclosed amount of pre‐tax income of FY 2016, figures adopted in this paragraph and financial structure and profitability analysis of the next paragraph are based on the information of consolidated financial statements.)

Financial Structure and Profitability Analysis

As of December 31 2017, the financial structure of AIDC showed total consolidated assets of NT$33,752,881 thousand and total consolidated liabilities of NT$20,649,839 thousand. The analysis of overall profitability indicators are shown in the table below:

Indicators 2016 2017
ROA(%) 7.32 5.70
ROE(%) 17.43 13.72
EBT to Paid‐in Capital Ratio(%) 28.56 24.19
Net Profit Ratio(%) 7.62 6.34

Note 1: Return on assets (ROA): Increase of average total assets was due to increase of receivables resulted from major customers extending payment days, and increase in fixed assets for business purpose which resulted in a lower ROA than that of FY 2016.

Note 2: Return on equity (ROE): Average total equity increased with operating income which resulted in a lower ROE than that of FY 2016.

Note 3: EBT to Paid‐in Capital Ratio and Net Profit Ratio: The decrease of cumulative profit for FY 2017 resulted in a lower EPS than that of FY 2016.

Research and Development Outlook

The R&D expenses of AIDC in FY 2017 amounted to NT$407,178 thousand with the successful development of “Enhancement Program for Composite Control Surfaces Key Technology” together with 25 projects, results of which could help to upgrade the overall technological capability and production capacity while facilitating the pursuit of better business opportunity.

Credentials and Awards

＊Received “2016 Health Navigator Award for Healthy Workplace ” presented by Ministry of Health and Welfare in Jan. 2017

  • 10 -

  • ＊Received “2016 Green Procurement Enterprise and Group” Award by Taichung City Government in Jun. 2017

  • ＊Ranked 27th in the “CSR Award in Traditional Manufacturers Category” by the Global Views Magazine in Aug. 2017. (Ranked 38th in 2016)

  • ＊Presented “Taiwan i Sport Enterprise Certification” Award by the Sports Administration of the Ministry of Education in Oct. 2017

  • ＊Received “Excellent Occupational Safety and Health Workplace Award” and “Outstanding Personnel Award for the Promotion of Healthy Workplace “ by Kaohsiung City Government in Oct. 2017

  • ＊Presented “Enterprise Environment Protection Award‐Bronze Medal” by the Environment Protection Administration, Executive Yuan in Oct. 2017 for three years in a row

  • ＊Awarded ”2017 Taiwan Corporate Sustainability Awards”‐Corporate Sustainability Report Awards (Traditional Manufacturing: Bronze Medal) in Oct. 2017

  • ＊Received “Healthy Enterprise Award” and “Outstanding Personnel Award for the Promotion of Healthy Workplace” presented by Ministry of Labor in Nov. 2017 for the eight consecutive years

  • ＊Received ”Partner Award” for the Mitsubishi Regional Jet (MRJ) Program from Mitsubishi Aircraft Corporation in Nov. 2017

  • ＊Received “Certificate of Appreciation” for the contribution in the Alpha Magnetic Spectrometer (AMS‐02) project by NASA in Dec. 2017

Business Plan for FY 2018

Business Development Planning

  • ＊ In the area of defense business, AIDC seeks to successfully upgrade the performance of the jet fighters and to launch the new advanced jet trainer program as scheduled, and to make effort in securing orders for the maintenance of different types of aircraft.

  • ＊ In the area of commercial aviation, AIDC seeks to expand its supplier system for more production sources, as well as for more business in the high value‐added parts and components of aircraft segments and engines.

  • ＊ In the area of industrial technology service, AIDC will extend its momentum of aerospace technology to green energy business to support the national objective of energy saving and carbon reduction, and provide flight services for disasters prevention and rescue and atmospheric measurements.

Corporate Management Policy

In the face of harsh competition within the global aerospace industry, AIDC will spare no effort to secure and pursue business opportunities. Meanwhile, AIDC will continue to adopt a Balanced Scorecard (BSC) as a management tool. This BSC system helps to align and link the Company’s vision, strategy, objectives, to business activities, department tasks and action plans; with which AIDC will be able to continue to improve its business management while implementing the culture of accountability. The corporate management policy in FY 2018 will cover:

  • Optimize financial structure ▲ Upgrade business competitive power

  • ▲ Satisfy customer value proposition ▲ Continue engaging the lean activity ▲ Refine core business process ▲ Fortify the supply chain and integration with ▲ Vitalize human resources and strengthen outsourced contractors core competence ▲ Fulfill corporate social responsibility

  • 11 -

AIDC hereby reiterates our commitment to play an essential role in the three important missions mentioned earlier; that is, to meet the first flight schedule with a quality product to fulfill the objective of the “Indigenous Development of an advanced jet trainer”; to integrate intelligent manufacturing with aerospace and defense industries and apply it to AIDC’s “Pilot Project for the Aerospace Intelligent Manufacturing & Industrial Innovation” for establishing intelligent production lines to improve quality, production efficiency and competitiveness; and lastly to promote and implement integration of the Taiwan Aerospace Industry A‐Team 4.0 Alliance to connect Taiwan’s aerospace industry with global supply chains.

AIDC shall join hands with the suppliers of the aerospace and related industries together with government, academia and research institutes to; confront and overcome the challenges ahead, promote the upgrade of the domestic aerospace industry, and to boost the overall production value, while increasing the company＇s revenue and profit thereby enhancing the value of our shareholders’ interests.

May I wish you all good fortune and good health.

Chairman Jung‐Hsin Liao

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  • 12 -

Appendix II

  • 13 -

Appendix III

2017 Compensation to Employees and Directors

The Board of Directors consented to the proposal of the 2017 Employees′ Compensation and Remuneration to Directors in the board meeting of March 27, 2018. The proposal will be effective upon the approval by shareholders at the Annual Shareholders′ Meeting on June 26, 2018.

  1. The employees′ compensation and the directors remuneration are NT$102,359,496 and NT$12,767,421 in cash respectively.

  2. The amounts, cited above as expenses of 2017 net profit before income tax, are the same as the amounts proposed by the Board of Directors.

  3. 14 -

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  • 15 -

Impairment loss of inventory

The Group assesses impairment of raw materials based on individual identification. The impairment loss of the raw materials involves the management's significant judgment, and hence its assessment is considered as a key audit matter. The Group assesses the impairment loss of the raw materials based on current market conditions and future consumption, an assessment that ensures the valuation of raw materials of the Group aligns to the rules denoted in the IAS 2. Refer to Notes 5 and 9. Our key audit procedures performed in regard to the assessment thereof include the followings:

  1. Perform the inventory aging test to assure the completeness and accuracy of inventory aging report.

  2. Sample inventories which have been aging for more than a year without being provided for impairment.

  3. Test the net realizable value of unimpaired inventory, and recalculate the accuracy of allowance for impairment loss.

  4. Observe the inventory at year end to assess the appropriateness of allowance for impairment loss of inapplicable inventory.

Warranties

The Group provides warranties for military product maintenance, and the percentage of certain provisions involve management's significant judgment, and hence such type of warranties provisions is considered as a key audit matter. Refer to Notes 5 and 19. Our key audit procedures performed in regard to the provisions thereof include the followings:

  1. Obtain the documents on management’s decision of the provision rate and evaluate the reasonableness of percentage provided for abovementioned provisions.

  2. Recalculate the accuracy of the amount of provision.

  3. Perform a retrospective test to assure that the provisions are appropriate and sufficient.

Other Matter

We have also audited the parent company only financial statements of Aerospace Industrial Development Corporation as of and for the years ended December 31, 2017 and 2016 on which we have issued an unqualified opinion.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

  • 3 - - 16 -

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 members of the Audit Committee) are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

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

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

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

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

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

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

  7. 4 - - 17 -

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

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

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

The engagement partners on the audit resulting in this independent auditors’ report are Lie-Dong Wu and Done-Yuin Tseng.

Deloitte & Touche Taipei, Taiwan Republic of China March 27, 2018

Notice to Readers

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

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

  • 5 - - 18 -

AEROSPACE INDUSTRIAL DEVELOPMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4 and 6)

Notes receivable (Note 4)
Trade receivables from unrelated parties (Notes 4 and 8)
Trade receivables from related parties (Notes 4 and 29)
Other receivables (Notes 4 and 8)
Inventories (Notes 4, 5 and 9)
Other financial asset - current (Notes 4, 14 and 30)
Other current assets (Notes 4, 15 and 29)

Total current assets

NON-CURRENT ASSETS
Financial assets measured at cost - non-current (Notes 4 and 7)
Investment accounted for using equity method (Notes 4 and 11)
Property, plant and equipment (Notes 4, 12 and 30)
Intangible assets (Notes 4 and 13)
Deferred tax assets (Notes 4 and 24)
Prepayments for equipment
Other financial asset - non-current (Notes 4, 14 and 30)
Other non-current assets (Notes 4, 8 and 15)

Total non-current assets

TOTAL

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Notes 16 and 30)

Short-term bills payable (Note 16)
Trade payables to unrelated parties
Trade payables to related parties (Note 29)
Other payables (Notes 18 and 29)
Current tax liabilities (Notes 4 and 24)
Unearned receipts
Current portion of long-term borrowings (Notes 16 and 30)
Finance lease payables - current (Notes 4 and 17)
Net defined benefit liabilities - current (Notes 4 and 20)
Other current liabilities

Total current liabilities

NON-CURRENT LIABILITIES
Long-term borrowings (Notes 16 and 30)
Provisions - non-current (Notes 4, 5 and 19)
Deferred tax liabilities (Notes 4 and 24)
Long - term deferred income (Note 4)
Guarantee deposits

Total non-current liabilities

Total liabilities

EQUITY
Common stock
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Other equity

Total equity

TOTAL
 December 31
2017
2016
Amount
%
Amount
%
$ 1,065,791
3 $ 2,560,098
8
23,509
-
4,749
-
9,278,949 28
7,256,164 23
308,373
1
220,669
1
99,055
-
179,253
1
6,770,848 20
7,599,577 25
3,811,126 11
2,000,102
6

1,754,280

5

634,878

2

23,111,931
68

20,455,490
66
79,200
-
79,200
-
428,906
2
779,331
3
8,718,654 26
8,244,072 27
1,000,404
3
734,805
2
305,324
1
305,776
1
81,682
-
380,150
1
10,807
-
24,517
-

15,973

-

21,659

-

10,640,950
32

10,569,510
34
$ 33,752,881
100
$ 31,025,000
100
$ 6,515,000 19 $ 7,200,000 23
2,499,329
7
1,998,882
6
1,394,004
4
1,395,632
5
201,665
1
19,836
-
3,747,714 11
4,131,171 13
260,674
1
332,954
1
148,945
1
208,316
1
342,606
1
1,167,606
4
-
-
5,131
-
33,422
-
-
-

365,558

1

40,361

-

15,508,917
46

16,499,889
53
3,975,635 12
748,240
2
939,150
3
1,043,511
3
21,677
-
160,658
1
351
-
-
-

204,109

-

212,263

1

5,140,922
15

2,164,672

7

20,649,839
61

18,664,561
60
9,418,671 28
9,082,615 29
531,146
2
322,880
1
1,473,474
4
848,678
3
1,711,923
5
2,086,241
7

(32,172)

-

20,025

-

13,103,042
39

12,360,439
40
$ 33,752,881
100
$ 31,025,000
100		 December 31
2017
2016
Amount
%
Amount
%
$ 1,065,791
3 $ 2,560,098
8
23,509
-
4,749
-
9,278,949 28
7,256,164 23
308,373
1
220,669
1
99,055
-
179,253
1
6,770,848 20
7,599,577 25
3,811,126 11
2,000,102
6

1,754,280

5

634,878

2

23,111,931
68

20,455,490
66
79,200
-
79,200
-
428,906
2
779,331
3
8,718,654 26
8,244,072 27
1,000,404
3
734,805
2
305,324
1
305,776
1
81,682
-
380,150
1
10,807
-
24,517
-

15,973

-

21,659

-

10,640,950
32

10,569,510
34
$ 33,752,881
100
$ 31,025,000
100
$ 6,515,000 19 $ 7,200,000 23
2,499,329
7
1,998,882
6
1,394,004
4
1,395,632
5
201,665
1
19,836
-
3,747,714 11
4,131,171 13
260,674
1
332,954
1
148,945
1
208,316
1
342,606
1
1,167,606
4
-
-
5,131
-
33,422
-
-
-

365,558

1

40,361

-

15,508,917
46

16,499,889
53
3,975,635 12
748,240
2
939,150
3
1,043,511
3
21,677
-
160,658
1
351
-
-
-

204,109

-

212,263

1

5,140,922
15

2,164,672

7

20,649,839
61

18,664,561
60
9,418,671 28
9,082,615 29
531,146
2
322,880
1
1,473,474
4
848,678
3
1,711,923
5
2,086,241
7

(32,172)

-

20,025

-

13,103,042
39

12,360,439
40
$ 33,752,881
100
$ 31,025,000
100
2017














Amount
%
$ 1,065,791
3
23,509
-
9,278,949 28
308,373
1
99,055
-
6,770,848 20
3,811,126 11

1,754,280

5


23,111,931
68

79,200
-
428,906
2
8,718,654 26
1,000,404
3
305,324
1
81,682
-
10,807
-

15,973

-


10,640,950
32

$ 33,752,881
100

$ 6,515,000 19
2,499,329
7
1,394,004
4
201,665
1
3,747,714 11
260,674
1
148,945
1
342,606
1
-
-
33,422
-

365,558

1


15,508,917
46

3,975,635 12
939,150
3
21,677
-
351
-

204,109

-


5,140,922
15


20,649,839
61

9,418,671 28
531,146
2
1,473,474
4
1,711,923
5

(32,172)

-


13,103,042
39

$ 33,752,881
100











































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

  • 19 -

  • 6 -

AEROSPACE INDUSTRIAL DEVELOPMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

SALES (Notes 4, 22 and 29)

COST OF GOODS SOLD (Notes 9, 23 and 29)

GROSS PROFIT

OPERATING EXPENSES (Notes 23 and 29)
Selling and marketing expenses
General and administrative expenses
Research and development expenses

Total operating expenses

PROFIT FROM OPERATIONS

NON-OPERATING INCOME AND EXPENSES
Other income (Notes 4 and 23)
Other gains and losses (Notes 4 and 23)
Share of profit of associate (Note 4)
Finance costs

Total non-operating income and expenses

PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 4 and 24)

NET PROFIT FOR THE YEAR

OTHER COMPREHENSIVE INCOME (Note 4)
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement of defined benefit plans
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating the financial
statements of foreign operations

Other comprehensive loss for the year, net of
income tax

TOTAL COMPREHENSIVE INCOME FOR THE
YEAR
 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
Amount
%
$ 27,537,414 100

23,637,272
86


3,900,142
14

124,996
-
598,200
2

407,178

2


1,130,374

4


2,769,768
10

193,040
1
(805,416) (3)
240,264
1

(118,867)
(1)


(490,979)
(2)

2,278,789
8

530,808

2


1,747,981

6

(44,919)
-

(52,197)

-


(97,116)

-

$ 1,650,865

6
 2016































Amount
%
$ 27,325,514 100

23,210,018
85

4,115,496
15

146,684
1

587,051
2

655,828

2

1,389,563

5

2,725,933
10

189,197
1

(371,188) (1)

177,625
1

(127,344)
(1)

(131,710)

-

2,594,223 10

511,568

2

2,082,655

8

(2,985)
-

(10,590)

-

(13,575)

-
$ 2,069,080

8

(Continued)

  • 7 - - 20 -

AEROSPACE INDUSTRIAL DEVELOPMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

EARNINGS PER SHARE (Note 25)
Basic

Diluted
 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
Amount
%
$ 1.86

$ 1.85
 2016


Amount
%
$ 2.21
$ 2.20

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

  • 8 - - 21 -
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2017 AND 2016
(In Thousands of New Taiwan Dollars)		 Equity Attributable to Owners of the Corporation
Other Equity
Exchange
Retained Earnings (Note 21)
Differences on
Common Stock
Unappropriated
Translating Foreign
(Note 21)
Legal Reserve
Special Reserve
Earnings
Operations
Total Equity
BALANCE AT JANUARY 1, 2016
$ 9,082,615
$ 119,963
$ 239,927
$ 2,053,475
$ 30,615
$11,526,595
Appropriation of 2015 earnings
Legal reserve
-

202,917

-

(202,917)

-

-
Special reserve
-

-

608,751

(608,751)

-

-
Cash dividends distributed by the Company
-

-

-

(1,235,236)

-

(1,235,236)
Profit for the year ended December 31, 2016
-
-
-
2,082,655
-
2,082,655
Other comprehensive loss for the year ended December 31, 2016, net of income tax
-

-

-

(2,985)

(10,590)

(13,575)
Total comprehensive income (loss) for the year ended December 31, 2016
-

-

-

2,079,670

(10,590)

2,069,080
BALANCE AT DECEMBER 31, 2016
9,082,615

322,880

848,678

2,086,241

20,025

12,360,439
Appropriation of 2016 earnings
Legal reserve
-

208,266

-

(208,266)

-

-
Special reserve
-

-

624,796

(624,796)

-

-
Cash dividends distributed by the Company
-

-

-

(908,262)

-

(908,262)
Share dividends distributed by the Company
336,056

-

-

(336,056)

-

-
Profit for the year ended December 31, 2017
-
-
-
1,747,981
-
1,747,981
Other comprehensive loss for the year ended December 31, 2017, net of income tax
-

-

-

(44,919)

(52,197)

(97,116)
Total comprehensive income (loss) for the year ended December 31, 2017
-

-

-

1,703,062

(52,197)

1,650,865
BALANCE AT DECEMBER 31, 2017
$ 9,418,671
$ 531,146
$ 1,473,474
$ 1,711,923
$ (32,172)
$13,103,042
The accompanying notes are an integral part of the consolidated financial statements.
  • 22 -

AEROSPACE INDUSTRIAL DEVELOPMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)


CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax

Adjustments for:
Depreciation expenses
Amortization expenses
Reversal of impairment loss on trade receivables
Finance costs
Interest income
Dividend income
Share of profit of associate
Loss on disposal of property, plant and equipment
Impairment loss recognized on non-financial assets
Unrealized net loss (gain) on foreign currency exchange
Recognized (reversal) of provisions
Other income from liabilities
Net changes in operating assets and liabilities
Notes receivable
Trade receivables

Other receivables
Inventories
Other current assets

Trade payables
Other payables
Unearned receipts
Other current liabilities
Net defined benefit liabilities
Deferred income

Cash generated from operations
Interest received
Interest paid
Income tax paid

Net cash generated from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of financial assets measured at cost
Payments for property, plant and equipment

Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Payments for intangible assets
Increase in other financial assets

Decrease in other financial assets		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31







2017
$ 2,278,789

822,009
452,388
(4,027)
118,867
(67,964)
(78)
(240,264)
1,352
88,153
242,930
(24,962)
(5,951)
(18,782)
(2,153,203)
92,559
664,193
(1,173,522)
182,150
142,156
(59,371)
332,088
33,422

351

1,703,283
55,385
(120,343)

(608,346)


1,029,979

-
(1,462,412)
2,599
(16,160)
19,508
(656,011)
(1,993,822)
-		 2016
$ 2,594,223
653,783
804,933

(3,398)
127,344

(33,714)

(614)

(177,625)
116
136,660
(99,418)

69,995

(23,281)

15,074

(714,060)
(22,742)
1,002,931

784,702
(31,238)
47,078

(3,901)
42,820
-

-
5,169,668
31,791

(124,881)

(542,992)

4,533,586
(33,000)
(1,940,330)
-

(15,509)
23,469
(1,139,396)

-
578,071
(Continued)
  • 10 - - 23 -

AEROSPACE INDUSTRIAL DEVELOPMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)


Increase in prepayments for equipment

Dividend received

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings

Repayments of short-term borrowings

Proceeds from short-term bills payable
Repayments of short-term bills payable

Proceeds from long-term borrowings
Repayments of long-term borrowings

Proceeds of guarantee deposits received
Refund of guarantee deposits
Dividends paid to owners of the Company

Net cash generated from (used in) financing activities

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH AND CASH EQUIVALENTS HELD IN FOREIGN
CURRENCIES
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31












2017
$ (253,985)

544,148

(3,816,135)

52,302,000

(52,987,000)
8,692,399
(8,191,952)
3,570,000
(1,167,606)
252,141
(260,295)

(908,262)


1,301,425


(9,576)

(1,494,307)

2,560,098

$ 1,065,791
 2016
$ (689,758)

52,135
(3,164,318)
51,080,000
(49,530,000)
7,688,961
(7,387,671)
-

(964,399)
214,271

(229,370)
(1,235,236)

(363,444)

(465)

1,005,359

1,554,739
$ 2,560,098

  • 11 - - 24 -

  • 25 -- 1 -

impairment loss of the raw materials based on current market conditions and future consumption in accordance with IAS 2. Refer to Notes 5 and 9 to the financial statements for the relevant accounting policy, accounting judgments and estimation uncertainties, and other information. Our key audit procedures performed in regard to the impairment assessment include the followings:

  1. We tested the inventory aging report for completeness and accuracy.

  2. We inquired and assessed the reasons for inventories aged over one year but not provided allowence for impairment.

  3. We test-checked the net realizable value of inventory, and we evaluated the reasonableness of the allowance for impairment loss.

  4. We Observed the physical count of inventory at year end and we test-checked actual quantity counted on tags. We also noted those appearing as obsolete or slow-moving items and traced them to the Company’s impairment assessment worksheet.

Warranties

The Company provides warranties for military product maintenance, and the percentage of certain provisions involve management's critical judgment, hence, we consider provision for warranties as a key audit matter. Refer to Notes 5 and 18 for the relevant accounting policy, accounting judgments and estimation uncertainties, and other information. Our key audit procedures performed in regard to the provisions for warranties include the followings:

  1. We obtained the documents on the management’s decision on the provision rate and we evaluated the reasonableness of he rates compared with rates in the past periods.

  2. We recalculated the amount of provision.

  3. We evaluated the reasonableness of the provision against the actual usage of warranties.

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

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

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 members of the Audit Committee) are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in

  • 2 - - 26 -- 2 -

the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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

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

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

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

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

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

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

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.

  • 3 - - 27 -- 3 -

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

The engagement partners on the audit resulting in this independent auditors’ report are Lie-Dong Wu and Done-Yuin Tseng.

Deloitte & Touche Taipei, Taiwan Republic of China

March 27, 2018

Notice to Readers

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

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

  • 4 - - 28 -- 4 -

AEROSPACE INDUSTRIAL DEVELOPMENT CORPORATION

BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

ASSETS
CURRENT ASSETS
Cash (Notes 4 and 6)
Notes receivable (Note 4)
Trade receivables from unrelated parties (Notes 4 and 8)
Trade receivables from related parties (Notes 4 and 28)
Other receivables (Notes 4 and 8)
Inventories (Notes 4, 5 and 9)
Other financial asset - current (Notes 4, 13 and 29)
Other current assets (Notes 4, 14 and 28)
Total current assets
NON-CURRENT ASSETS
Financial assets measured at cost - non-current (Notes 4 and 7)
Investment accounted for using equity method (Notes 4 and 10)
Property, plant and equipment (Notes 4, 11 and 29)
Intangible assets (Notes 4 and 12)
Deferred tax assets (Notes 4 and 23)
Prepayments for equipment
Other financial asset - non-current (Notes 4, 13 and 29)
Other non-current assets (Notes 4, 8 and 14)
Total non-current assets
TOTAL
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Notes 15 and 29)
Short-term bills payable (Note 15)
Trade payables to unrelated parties
Trade payables to related parties (Note 28)
Other payables (Notes 17 and 28)
Current tax liabilities (Notes 4 and 23)
Unearned receipts
Current portion of long-term borrowings (Notes 15 and 29)
Finance lease payables - current (Notes 4 and 16)
Net defined benefit liabilities - current (Notes 4 and 19)
Other current liabilities
Total current liabilities
NON-CURRENT LIABILITIES
Long-term borrowings (Notes 15 and 29)
Provisions - non-current (Notes 4, 5 and 18)
Deferred tax liabilities (Notes 4 and 23)
Long-term deferred income (Note 4)
Guarantee deposits
Total non-current liabilities
Total liabilities
EQUITY
Common stock
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Other equity
Total equity
TOTAL		 December 31 December 31 December 31
2017 2016
Amount
%
$ 1,053,021
3
23,509
-
9,278,949
28
308,373
1
99,055
-
6,770,848
20
3,810,829
12
1,753,999
5
23,098,583
69
79,200
-
407,708
1
8,717,619
26
1,000,404
3
305,324
1
81,682
-
10,807
-
15,907
-
10,618,651
31
$ 33,717,234
100
$ 6,515,000
19
2,499,329
7
1,394,004
4
201,665
1
3,746,589
11
226,705
1
148,945
1
342,606
1
-
-
33,422
-
365,049
1
15,473,314
46
3,975,635
12
939,150
3
21,633
-
351
-
204,109
-
5,140,878
15
20,614,192
61
9,418,671
28
531,146
2
1,473,474
4
1,711,923
5
(32,172)
-
13,103,042
39
$ 33,717,234
100		 Amount
%
$ 2,545,007
8
4,749
-
7,256,164
23
220,669
1
179,253
1
7,599,577
25
2,000,102
6
634,703
2
20,440,224
66
79,200
-
795,692
3
8,242,666
27
734,805
2
305,776
1
380,150
1
24,517
-
21,587
-
10,584,393
34
$ 31,024,617
100
$ 7,200,000
23
1,998,882
6
1,395,632
5
19,836
-
4,131,262
13
332,915
1
208,316
1
1,167,606
4
5,131
-
-
-
40,042
-
16,499,622
53
748,240
2
1,043,511
3
160,542
1
-
-
212,263
1
2,164,556
7
18,664,178
60
9,082,615
29
322,880
1
848,678
3
2,086,241
7
20,025
-
12,360,439
40
$ 31,024,617
100

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

  • 29 -

  • 5 - - 5 -

AEROSPACE INDUSTRIAL DEVELOPMENT CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME

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

SALES (Notes 4, 21 and 28)
COST OF GOODS SOLD (Notes 9, 22 and 28)
GROSS PROFIT
OPERATING EXPENSES (Notes 22 and 28)
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Total operating expenses
PROFIT FROM OPERATIONS
NON-OPERATING INCOME AND EXPENSES
Other income (Notes 4 and 22)
Other gains and losses (Notes 4 and 22)
Share of profit of subsidiary and associate (Note 4)
Finance costs
Total non-operating income and expenses
PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 4 and 23)
NET PROFIT FOR THE YEAR
OTHER COMPREHENSIVE INCOME (Note 4)
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement of defined benefit plans
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translating the financial
statements of foreign operations
Other comprehensive loss for the year, net of
income tax
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
Amount
%
$ 27,537,414
100
23,650,352
86
3,887,062
14
127,206
-
583,057
2
407,178
2
1,117,441
4
2,769,621
10
193,037
1
(805,407)
(3)
162,895
1
(118,867)
(1)
(568,342)
(2)
2,201,279
8
453,298
2
1,747,981
6
(44,919)
-
(52,197)
-
(97,116)
-
$ 1,650,865
6		 2016
Amount
%
$ 27,325,514
100
23,210,018
85
4,115,496
15
146,684
1
587,442
2
655,828
2
1,389,954
5
2,725,542
10
189,183
1
(371,175)
(1)
177,861
1
(127,344)
(1)
(131,475)
-
2,594,067
10
511,412
2
2,082,655
8
(2,985)
-
(10,590)
-
(13,575)
-
$ 2,069,080
8
(Continued)
  • 6 - - 30 -- 6 -

AEROSPACE INDUSTRIAL DEVELOPMENT CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

EARNINGS PER SHARE (Note 24)
Basic
Diluted		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
Amount
%
$ 1.86
$ 1.85		 2016
Amount
%
$ 2.21
$ 2.20

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

(Concluded)

  • 7 - - 31 -- 7 -
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2017 AND 2016
(In Thousands of New Taiwan Dollars)		 Other Equity
Exchange
Retained Earnings (Note 20)
Differences on
Common Stock
Unappropriated
Translating Foreign
(Note 20)
Legal Reserve
Special Reserve
Earnings
Operations
Total Equity
BALANCE AT JANUARY 1, 2016
$ 9,082,615
$ 119,963
$ 239,927
$ 2,053,475
$ 30,615
$ 11,526,595
Appropriation of 2015 earnings
Legal reserve
-
202,917
-
(202,917)
-
-
Special reserve
-
-
608,751
(608,751)
-
-
Cash dividends distributed by the Company
-
-
-
(1,235,236)
-
(1,235,236)
Profit for the year ended December 31, 2016
-
-
-
2,082,655
-
2,082,655
Other comprehensive loss for the year ended December 31, 2016, net of income tax
-
-
-
(2,985)
(10,590)
(13,575)
Total comprehensive income (loss) for the year ended December 31, 2016
-
-
-
2,079,670
(10,590)
2,069,080
BALANCE AT DECEMBER 31, 2016
9,082,615
322,880
848,678
2,086,241
20,025
12,360,439
Appropriation of 2016 earnings
Legal reserve
-
208,266
-
(208,266)
-
-
Special reserve
-
-
624,796
(624,796)
-
-
Cash dividends distributed by the Company
-
-
-
(908,262)
-
(908,262)
Share dividends distributed by the Company
336,056
-
-
(336,056)
-
-
Profit for the year ended December 31, 2017
-
-
-
1,747,981
-
1,747,981
Other comprehensive loss for the year ended December 31, 2017, net of income tax
-
-
-
(44,919)
(52,197)
(97,116)
Total comprehensive income (loss) for the year ended December 31, 2017
-
-
-
1,703,062
(52,197)
1,650,865
BALANCE AT DECEMBER 31, 2017
$ 9,418,671
$ 531,146
$ 1,473,474
$ 1,711,923
$ (32,172)
$ 13,103,042
The accompanying notes are an integral part of the financial statements.
  • 32 -

AEROSPACE INDUSTRIAL DEVELOPMENT CORPORATION

STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Depreciation expenses
Amortization expenses
Reversal of impairment loss on trade receivables
Finance costs
Interest income
Dividend income
Share of profit of subsidiary and associate
Loss on disposal of property, plant and equipment
Impairment loss recognized on non-financial assets
Unrealized net loss (gain) on foreign currency exchange
Recognized (reversal) of provisions
Other income from liabilities
Net changes in operating assets and liabilities
Notes receivable
Trade receivables
Other receivables
Inventories
Other current assets
Trade payables
Other payables
Unearned receipts
Other current liabilities
Net defined benefit liabilities
Deferred income
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of financial assets measured at cost
Payments for investment accounted for using equity method
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease in refundable deposits
Payments for intangible assets
Increase in other financial assets
Decrease in other financial assets		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
$ 2,201,279
821,706
452,388
(4,027)
118,867
(67,961)
(78)
(162,895)
1,352
88,153
242,929
(24,962)
(5,951)
(18,782)
(2,153,203)
92,559
664,193
(1,173,416)
182,150
140,940
(59,371)
331,899
33,422
351
1,701,542
55,382
(120,343)
(564,694)
1,071,887
-
-
(1,462,377)
2,599
(16,160)
19,502
(656,011)
(1,993,525)
-		 2016
$ 2,594,067
653,628
804,933
(3,398)
127,344
(33,712)
(614)
(177,861)
116
136,660
(99,418)
69,995
(23,281)
15,074
(714,060)
(22,742)
1,002,931
784,878
(31,238)
47,169
(3,901)
42,501
-
-
5,169,071
31,789
(124,881)
(542,992)
4,532,987
(33,000)
(16,590)
(1,938,769)
-
(15,437)
23,469
(1,139,396)
-
578,071
(Continued)
  • 9 - - 33 -- 9 -

AEROSPACE INDUSTRIAL DEVELOPMENT CORPORATION

STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

Increase in prepayments for equipment
Dividend received
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings
Repayments of short-term borrowings
Proceeds from short-term bills payable
Repayments of short-term bills payable
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds of guarantee deposits received
Refund of guarantee deposits
Dividends paid to owners of the Company
Net cash generated from (used in) financing activities
NET INCREASE (DECREASE) IN CASH
CASH AT THE BEGINNING OF THE YEAR
CASH AT THE END OF THE YEAR		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2017
$ (253,985)
494,659
(3,865,298)
52,302,000
(52,987,000)
8,692,399
(8,191,952)
3,570,000
(1,167,606)
252,141
(260,295)
(908,262)
1,301,425
(1,491,986)
2,545,007
$ 1,053,021		 2016
$ (689,758)
52,135
(3,179,275)
51,080,000
(49,530,000)
7,688,961
(7,387,671)
-
(964,399)
214,271
(229,370)
(1,235,236)
(363,444)
990,268
1,554,739
$ 2,545,007

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

(Concluded)

  • 10 - - 34 -- 10 -

Appendix V

Aerospace Industrial Development Corporation Proposal for Earnings Distribution of 2017 Profits

Aerospace Industrial Development Corporation
Proposal for Earnings Distribution of 2017 Profits		 Aerospace Industrial Development Corporation
Proposal for Earnings Distribution of 2017 Profits
Currency: in NTD
Item Amounts
Undistributed earnings at beginning of period
Remeasurement of defined benefit plans
Undistributed earnings after adjustment
Annual net profit after tax
Less Items：
Legal reserve（10%）
Law-listingSpecial reserve
Self-listingSpecial reserve(25%)
Accumulate available for distribution surplus
Distribution Items：
Shareholder cash dividend (NT$ 1.13 per share)
Total current surplus distribution
Undistributed earnings at the end of period		 8,862,131
(44,919,600)
(36,057,469)
1,747,981,226
(171,192,376)
(32,171,789)
(427,980,939)
1,080,578,653
(1,064,309,824)
(1,064,309,824)
16,268,829
  • 35 -

Appendix VI

Mapping of the amended provisions of the Acquisition and Disposal Procedures for Assets

After amendment Before amendment Cause of
amendment
Article 3
Terms used in these
Regulations are defined as
follows:
1. Derivatives: Forward
contracts, options
contracts, futures
contracts, leverage
contracts, and swap
contracts, and compound
contracts combining the
above products, whose
value is derived from
assets, interest rates,
foreign exchange rates,
indexes or other interests.
The term "forward
contracts" does not include
insurance contracts,
performance contracts,
after-sales service
contracts, long-term
leasing contracts, or
long-term purchase (sales)
agreements.
2. Assets acquired or
disposed through mergers,
demergers, acquisitions, or
transfer of shares in
accordance with law:
Refers to assets acquired
or disposed through
mergers, demergers, or
acquisitions conducted
under the Business
Mergers and Acquisitions
Act and other acts, or to
transfer of shares from
another Company through
issuance of new shares of
its own as the
consideration therefor
(hereinafter "transfer of
shares") under Article 156,
paragraph 8 of the
Company Act.
3. Related party or
subsidiary:As definedin		 Article 3
Terms used in these
Regulations are defined as
follows:
1. Derivatives: Forward
contracts, options
contracts, futures
contracts, leverage
contracts, and swap
contracts, and compound
contracts combining the
above products, whose
value is derived from
assets, interest rates,
foreign exchange rates,
indexes or other interests.
The term "forward
contracts" does not include
insurance contracts,
performance contracts,
after-sales service
contracts, long-term
leasing contracts, or
long-term purchase (sales)
agreements.
2. Assets acquired or
disposed through mergers,
demergers, acquisitions, or
transfer of shares in
accordance with law:
Refers to assets acquired
or disposed through
mergers, demergers, or
acquisitions conducted
under the Business
Mergers and Acquisitions
Act, Financial Holding
Company Act, Financial
Institution Merger Actand
other acts, or to transfer of
shares from another
company through issuance
of new shares of its own as
the consideration therefor
(hereinafter "transfer of
shares") under Article 156,
paragraph 8 of the
CompanyAct.		 1. Amendment to
the provision.
2. Amendments
to the
provisions
refer to AIDC’s
business
operations
  • 36 -
After amendment Before amendment Cause of
amendment
the Regulations Governing
the Preparation of
Financial Reports by
Securities Issuers.
4. Professional appraiser:
Refers to a real property
appraiser or other person
duly authorized by law to
engage in the value
appraisal of real property
or equipment.
5. Date of occurrence: Refers
to the date of contract
signing, date of payment,
date of consignment trade,
date of transfer, dates of
boards of directors
resolutions, or other date
that can confirm the
counterpart and monetary
amount of the transaction,
whichever date is earlier;
provided, for investment
for which approval of the
competent authority is
required, the earlier of the
above date or the date of
receipt of approval by the
competent authority shall
apply.
6. Mainland China area
investment: Refers to
investments in the
mainland China area
approved by the Ministry
of Economic Affairs
Investment Commission or
conducted in accordance
with the provisions of the
Regulations Governing
Permission for Investment
or Technical Cooperation
in the Mainland Area.		 3. Related party or
subsidiary: As defined in
the Regulations Governing
the Preparation of
Financial Reports by
Securities Issuers.
4. Professional appraiser:
Refers to a real property
appraiser or other person
duly authorized by law to
engage in the value
appraisal of real property
or equipment.
5. Date of occurrence: Refers
to the date of contract
signing, date of payment,
date of consignment trade,
date of transfer, dates of
boards of directors
resolutions, or other date
that can confirm the
counterpart and monetary
amount of the transaction,
whichever date is earlier;
provided, for investment
for which approval of the
competent authority is
required, the earlier of the
above date or the date of
receipt of approval by the
competent authority shall
apply.
6. Mainland China area
investment: Refers to
investments in the
mainland China area
approved by the Ministry
of Economic Affairs
Investment Commission or
conducted in accordance
with the provisions of the
Regulations Governing
Permission for Investment
or Technical Cooperation
in theMainlandArea.
Article 5
When The procedures for the
acquisition and disposal of
assets are adopted or
amended, they shall be
approved by more than half
of all audit committee
members and submitted to
the board ofdirectorsfora		 Article 5
When The procedures for the
acquisition and disposal of
assets are adopted or
amended, they shall be
approved by more than half
of all audit committee
members and submitted to
the board ofdirectorsfora		 1. Amendment to
the provision.
2. In accordance
with
Governing the
Acquisition
and Disposal
of Assets by
  • 37 -
After amendment Before amendment Cause of
amendment
resolution. If approval of
more than half of all audit
committee members as
required is not obtained, the
procedures may be
implemented if approved by
more than two-thirds of all
directors, and the resolution
of the audit committee shall
be recorded in the minutes of
the board of directors
meeting.
Establish its procedures for
the acquisition or disposal of
assets in accordance with the
provisions of these
Regulations. After the
procedures have been
approved by the board of
directors and then to a
shareholders'meeting for
approval; the same applies
when the procedures are
amended.		 resolution. If approval of
more than half of all audit
committee members as
required is not obtained, the
procedures may be
implemented if approved by
more than two-thirds of all
directors, and the resolution
of the audit committee shall
be recorded in the minutes of
the board of directors
meeting.		 Public
Companies
Article 6.
Article 6
The acquisition and disposal
of assets shall be conducted
according to the subject
provisions and in compliance
with the following
procedures:
1. Related party transaction:
the provisions of
ESP-AR-023 Operating
Regulations of AIDC
Related Party Transaction.
2. Derivatives trading: the
provisions of ESP-GR-002
Operating Regulations of
AIDC Derivatives Trading.
3. Fixed and Intangible
Assets Disposal: the
provisions of SP-GR-023
Operating Regulations of
AIDC Fixed and Intangible
Assets Acquisition,
SP-GR-022 Operating
Regulations of AIDC
Fixed and Intangible
Assets Disposal.
4.Financial dispatch and
funding operation: the
provisions of SP-GR-001
Operating Regulations of		 Article 6
The acquisition and disposal
of assets shall be conducted
according to the subject
provisions and in compliance
with the following
procedures:
1. Related party transaction:
the provisions of
ESP-AR-023 Operating
Regulations of AIDC
Related party transaction.
2. Derivatives trading: the
provisions of ESP-GR-002
Operating Regulations of
AIDC Derivatives trading.
3. Fixed and Intangible Asset
Punishment: the provisions
of SP-GR-023 Operating
Regulations of AIDC
Fixed and Intangible Asset
Acquisition、SP-GR-022
Operating Regulations of
AIDC Fixed and Intangible
Asset Acquisition
Punishment.
4.Transfer of shares of
enterprises: the provisions
of SP-GR-020 Operating
Regulations of AIDC		 1. Amendment to
the provision.
2. Modification
of the
provisions
refers to
AIDC's
implementatio
n of the current
situation.
  • 38 -
After amendment Before amendment Cause of
amendment
AIDC Financing,
SP-GR-020 Operating
Regulations of AIDC
Trading of Financial
Products.
5.Reinvestment: the
provisions of SP-AR-007
Operating Regulations of
AIDC Reinvestment
Assessment and
Management
6.The degree of authority
delegated, and the levels to
which authority is
delegated: the provisions
of ESP-HR-009
Authorization and
Responsibilities for Board
of Directors, Chairman and
General Manager of
AIDC, SP-HR-049 AIDC
Authorization and
Responsibilities
Hierarchical List.
7.Subsidiary Governance:
the provisions of
ESP-AR-021 Operating
Regulations of AIDC
Supervision and
Management of
Subsidiaries.		 Transfer of shares of
enterprises.
5. The degree of authority
delegated, and the levels to
which authority is
delegated: the provisions
of ESP-HR-009
Authorization and
Responsibilities for Board
of Directors, Chairman and
General Manager of
AIDC、SP-HR-049 AIDC
Authorization and
Responsibilities
Hierarchical List.
6. Subsidiary Governance:
the provisions of
ESP-AR-021 Operating
Regulations of AIDC
supervision and
management of
subsidiaries.
Article 6-2 Total amounts of real
property,reinvestmentand
securities acquired by the
Company and each
subsidiary for non-business
use, and limits on individual
securities, except that
subsidiaries of the domestic
public companies shall
comply with their own
provisions of the procedures
for the acquisition or
disposal of assets, are
defined as follows:
1. The total amount of
reinvestment made on
other company as its
limited liability
shareholder shall not
exceed 60 percent of
AIDCpaid-in capital.
2. Total amounts of stocks,		 Article 6-2
Total amounts of real
property and securities
acquired by the company and
each subsidiary for
non-business use, and limits
on individual securities,
except that subsidiaries of the
domestic public companies
shall comply with their own
provisions of the procedures
for the acquisition or disposal
of assets, are defined as
follows:
1. The total amount of
reinvestment made on
other company as its
limited liability
shareholder shall not
exceed 60 percent of
paid-in capital.
2. Total amounts of securities
acquired by the company		 1. Amendment to
the provision.
2. Amendments
to the
provisions
refer to the
need to amend
the business
operations of
AIDC
Corporation.
  • 39 -
After amendment Before amendment Cause of
amendment
bonds and beneficial
interest securities for the
purpose of financial
dispatch and funding
operation shall not exceed
NT$ 600 million, and
limits onpreceding
individual securities shall
not exceed 50 percent of
total amounts.
The preceding securities
do not include the
acquisition or disposal of
government bonds,
certificates of deposit,
short-term bills, etc.
3. Subsidiaries’ investment in
securities shall be in
compliance with the
provisions of ESP-AR-021
Operating Regulations of
AIDC supervision and
management of
subsidiaries.
4.Total amounts of real
property acquired by the
Company and each
subsidiary for
non-business use shall not
exceed 10 percent of each
Company’s paid-incapital.		 shall not exceed $600
million, and limit on
individual securities is not
to exceed 50 percent of
total amounts.
Subsidiaries’ investment in
securities shall be in
compliance with the
provisions of ESP-AR-021
Operating Regulations of
AIDC supervision and
management of
subsidiaries.
3. Total amounts of real
property acquired by the
company and each
subsidiary for
non-business use shall not
exceed 10 percent of each
company’s paid-in capital.
Article 7
In acquiring or disposing of
real property or equipment
where the transaction amount
reaches 20 percent of the
company's paid-in capital or
NT$300 million or more, the
company, unless transacting
with a government agency,
engaging others to build on
its own land, engaging others
to build on rented land, or
acquiring or disposing of
equipment for business use,
shall obtain an appraisal
report prior to the date of
occurrence of the event from
a professional appraiser and
shall further comply with the
following provisions:
1. Where due to special
circumstances it is
necessary to give a		 Article 7
In acquiring or disposing of
real property or equipment
where the transaction amount
reaches 20 percent of the
company's paid-in capital or
NT$300 million or more, the
company, unless transacting
with a governmentagency,
engaging others to build on
its own land, engaging others
to build on rented land, or
acquiring or disposing of
equipment for business use,
shall obtain an appraisal
report prior to the date of
occurrence of the event from
a professional appraiser and
shall further comply with the
following provisions:
1. Where due to special
circumstances it is
necessary to give alimited		 1. Amendment to
the provision.
2. In accordance
with
Governing the
Acquisition
and Disposal
of Assets by
Public
Companies
Article 9.
  • 40 -
After amendment Before amendment Cause of
amendment
limited price, specified
price, or special price as a
reference basis for the
transaction price, the
transaction shall be
submitted for approval in
advance by the board of
directors, and the same
procedure shall be
followed for any future
changes to the terms and
conditions of the
transaction.
2. Where the transaction
amount is NT$1 billion or
more, appraisals from two
or more professional
appraisers shall be
obtained.
3. Where any one of the
following circumstances
applies with respect to the
professional appraiser's
appraisal results, unless all
the appraisal results for the
assets to be acquired are
higher than the transaction
amount, or all the
appraisal results for the
assets to be disposed of are
lower than the transaction
amount, a certified public
accountant shall be
engaged to perform the
appraisal in accordance
with the provisions of
Statement of Auditing
Standards No. 20
published by the ROC
Accounting Research and
Development Foundation
(ARDF) and render a
specific opinion regarding
the reason for the
discrepancy and the
appropriateness of the
transaction price:
A. The discrepancy
between the appraisal
result and the
transaction amount is
20 percent or more of
thetransaction amount.		 price, specified price, or
special price as a
reference basis for the
transaction price, the
transaction shall be
submitted for approval in
advance by the board of
directors, and the same
procedure shall be
followed for any future
changes to the terms and
conditions of the
transaction.
2. Where the transaction
amount is NT$1 billion or
more, appraisals from two
or more professional
appraisers shall be
obtained.
3. Where any one of the
following circumstances
applies with respect to the
professional appraiser's
appraisal results, unless all
the appraisal results for
the assets to be acquired
are higher than the
transaction amount, or all
the appraisal results for
the assets to be disposed
of are lower than the
transaction amount, a
certified public accountant
shall be engaged to
perform the appraisal in
accordance with the
provisions of Statement of
Auditing Standards No. 20
published by the ROC
Accounting Research and
Development Foundation
(ARDF) and render a
specific opinion regarding
the reason for the
discrepancy and the
appropriateness of the
transaction price:
A.The discrepancy
between the appraisal
result and the
transaction amount is
20 percent or more of
the transaction amount.
  • 41 -
After amendment Before amendment Cause of
amendment
B. The discrepancy
between the appraisal
results of two or more
professional appraisers
is 10 percent or more
of the transaction
amount.
4. No more than 3 months
may elapse between the
date of the appraisal report
issued by a professional
appraiser and the contract
execution date; provided,
where the publicly
announced current value
for the same period is used
and not more than 6
months have elapsed, an
opinion may still be issued
by the original
professionalappraiser.		 B.The discrepancy
between the appraisal
results of two or more
professional appraisers
is 10 percent or more
of the transaction
amount.
4. No more than 3 months
may elapse between the
date of the appraisal report
issued by a professional
appraiser and the contract
execution date; provided,
where the publicly
announced current value
for the same period is
used and not more than 6
months have elapsed, an
opinion may still be issued
by the original
professionalappraiser.
Article 9
The company acquires or
disposes of intangible assets
and the transaction amount
reaches 20 percent or more
of paid-in capital or NT$300
million or more, except in
transactions with a
government agency, the
company shall engage a
certified public accountant
prior to the date of
occurrence of the event to
render an opinion on the
reasonableness of the
transaction price; the CPA
shall comply with the
provisions of Statement of
Auditing Standards No. 20
published by theARDF.		 Article 9
The company acquires or
disposes of intangible assets
and the transaction amount
reaches 20 percent or more of
paid-in capital or NT$300
million or more, except in
transactions with a
governmentagency,the
company shall engage a
certified public accountant
prior to the date of
occurrence of the event to
render an opinion on the
reasonableness of the
transaction price; the CPA
shall comply with the
provisions of Statement of
Auditing Standards No. 20
published by theARDF.		 1. Amendment to
the provision.
2. In accordance
with
Governing the
Acquisition
and Disposal
of Assets by
Public
Companies
Article 11.
Article 11
When the company intends
to acquire or dispose of real
property from or to a related
party, or when it intends to
acquire or dispose of assets
other than real property from
or to a related party and the
transaction amount reaches
20 percent or more of paid-in
capital, 10 percent or more of
the company's total assets, or
NT$300 million or more,
exceptintrading of		 Article 11
When the company intends
to acquire or dispose of real
property from or to a related
party, or when it intends to
acquire or dispose of assets
other than real property from
or to a related party and the
transaction amount reaches
20 percent or more of paid-in
capital, 10 percent or more of
the company's total assets, or
NT$300 million or more,
exceptintrading of		 1. Amendment to
the provision.
2. In accordance
with
Governing the
Acquisition
and Disposal
of Assets by
Public
Companies
Article 14.
  • 42 -
After amendment Before amendment Cause of
amendment
government bonds or bonds
under repurchase and resale
agreements, or subscription
or redemption ofmoney
market funds issued by
domestic securities
investment trust enterprises,
the company may not
proceed to enter into a
transaction contract or make
a payment until the following
matters have been approved
by more than half of all audit
committee members and
submitted to the board of
directors for a resolution. If
approval of more than half of
all audit committee members
as required in the preceding
paragraph is not obtained,
the procedures may be
implemented if approved by
more than two-thirds of all
directors, and the resolution
of the audit committee shall
be recorded in the minutes of
the board of directors
meeting.
1. The purpose, necessity and
anticipated benefit of the
acquisition or disposal of
assets.
2. The reason for choosing
the related party as a
trading counterparty.
3. With respect to the
acquisition of real property
from a related party,
information regarding
appraisal of the
reasonableness of the
preliminary transaction
terms in accordance with
Article 12、Article 13 and
Article 14.
4. The date and price at
which the related party
originally acquired the real
property, the original
trading counterparty, and
that trading counterparty's
relationship to the
company and therelated		 government bonds or bonds
under repurchase and resale
agreements, or subscription
or redemption of domestic
money market funds, the
company may not proceed to
enter into a transaction
contract or make a payment
until the following matters
have been approved by more
than half of all audit
committee members and
submitted to the board of
directors for a resolution. If
approval of more than half of
all audit committee members
as required in the preceding
paragraph is not obtained, the
procedures may be
implemented if approved by
more than two-thirds of all
directors, and the resolution
of the audit committee shall
be recorded in the minutes of
the board of directors
meeting.
1. The purpose, necessity and
anticipated benefit of the
acquisition or disposal of
assets.
2. The reason for choosing
the related party as a
trading counterparty.
3. With respect to the
acquisition of real property
from a related party,
information regarding
appraisal of the
reasonableness of the
preliminary transaction
terms in accordance with
Article 13 and Article 14.
4. The date and price at
which the related party
originally acquired the real
property, the original
trading counterparty, and
that trading counterparty's
relationship to the
company and the related
party.
5. Monthly cash flow
forecasts for theyear
  • 43 -
After amendment Before amendment Cause of
amendment
party.
5. Monthly cash flow
forecasts for the year
commencing from the
anticipated month of
signing of the contract, and
evaluation of the necessity
of the transaction, and
reasonableness of the funds
utilization.
6. An appraisal report from a
professional appraiser or a
CPA's opinion obtained in
compliance with the
preceding article.
7. Restrictive covenants and
other important
stipulations associated with
the transaction.
The calculation of the
transaction amounts referred
to in the preceding paragraph
shall be made in accordance
with Article 26, paragraph 2
of the Act, and "within the
preceding year" as used
herein refers to the year
preceding the date of
occurrence of the current
transaction. Items that have
been approved by the board
of directors and recognized
by the audit committee need
not be counted toward the
transaction amount.
With respect to the
acquisition or disposal of
business-use equipment
between the company and its
parent or subsidiaries, the
company's board of directors
may pursuant to
ESP-HR-009 Authorization
and Responsibilities for
Board of Directors,
Chairman and General
Manager of AIDC delegate
the board chairman to decide
such matters when the
transaction is within a certain
amount and have the
decisions subsequently
submittedtoandratified by		 commencing from the
anticipated month of
signing of the contract, and
evaluation of the necessity
of the transaction, and
reasonableness of the
funds utilization.
6. An appraisal report from a
professional appraiser or a
CPA's opinion obtained in
compliance with the
preceding article.
7. Restrictive covenants and
other important
stipulations associated
with the transaction.
The calculation of the
transaction amounts referred
to in the preceding paragraph
shall be made in accordance
with Article 26, paragraph 2
of the Act, and "within the
preceding year" as used
herein refers to the year
preceding the date of
occurrence of the current
transaction. Items that have
been approved by the board
of directors and recognized
by the audit committee need
not be counted toward the
transaction amount.
With respect to the
acquisition or disposal of
business-use equipment
between the company and its
parent or subsidiaries, the
company's board of directors
may pursuant to
ESP-HR-009 Authorization
and Responsibilities for
Board of Directors,
Chairman and General
Manager of AIDC delegate
the board chairman to decide
such matters when the
transaction is within a certain
amount and have the
decisions subsequently
submitted to and ratified by
the next board of directors
meeting.
When a matter is submitted
  • 44 -
After amendment Before amendment Cause of
amendment
the next board of directors
meeting.
When a matter is submitted
for discussion by the board
of directors, the board of
directors shall take into full
consideration each
independent director's
opinions. If an independent
director objects to or
expresses reservations about
any matter, it shall be
recorded in the minutes of
the board of directors
meeting.		 for discussion by the board of
directors, the board of
directors shall take into full
consideration each
independent director's
opinions. If an independent
director objects to or
expresses reservations about
any matter, it shall be
recorded in the minutes of
the board of directors
meeting.
Article 19
The company participating in
a merger, demerger,
acquisition, or transfer of
shares shall prepare a public
report to shareholders
detailing important
contractual content and
matters relevant to the
merger, demerger, or
acquisition prior to the
shareholders meeting and
include it along with the
expert opinion when
sending shareholders
notification of the
shareholders meeting for
reference in deciding whether
to approve the merger,
demerger, or acquisition.
Provided, where a provision
of another act exempts a
company from convening a
shareholders meeting to
approve the merger,
demerger, or acquisition, this
restriction shall not apply.
However, the requirement of
obtaining an aforesaid
opinion on reasonableness
issued by an expert may be
exempted in the case of a
merger by the Company of a
subsidiary in which it
directly or indirectly holds
100 percent of the issued
shares or authorized capital,
and in the case of a merger
between subsidiaries in		 Article 19
The company participating in
a merger, demerger,
acquisition, or transfer of
shares shall prepare a public
report to shareholders
detailing important
contractual content and
matters relevant to the
merger, demerger, or
acquisition prior to the
shareholders meeting and
include it along with the
expert opinion when
sending shareholders
notification of the
shareholders meeting for
reference in deciding whether
to approve the merger,
demerger, or acquisition.
Provided, where a provision
of another act exempts a
company from convening a
shareholders meeting to
approve the merger,
demerger, or acquisition, this
restriction shall not apply.		 1. Amendment to
the provision.
2. In accordance
with
Governing the
Acquisition
and Disposal
of Assets by
Public
Companies
Article 22.
  • 45 -
After amendment Before amendment Cause of
amendment
which the Company directly
or indirectly holds 100
percent of the respective
subsidiaries’issued shares or
authorized capital.
Article 26
Under any of the following
circumstances, the company
acquiring or disposing of
assets shall publicly
announce and report the
relevant information on the
FSC's designated website in
the appropriate format as
prescribed by regulations
within 2 days counting
inclusively from the date of
occurrence of the event:
1. Acquisition or disposal of
real property from or to a
related party, or acquisition
or disposal of assets other
than real property from or
to a related party where the
transaction amount reaches
20 percent or more of
paid-in capital, 10 percent
or more of the company's
total assets, or NT$300
million or more; provided,
this shall not apply to
trading of government
bonds or bonds under
repurchase and resale
agreements, or
subscription or redemption
ofmoney market funds
issued by domestic
securities investment trust
enterprises.
2. Merger, demerger,
acquisition, or transfer of
shares.
3. Losses from derivatives
trading reaching the limits
on aggregate losses or
losses on individual
contracts set out in the
procedures adopted by the
company.
4.Where the type of asset
acquired or disposed is
equipment for business
use, the trading		 Article 26
Under any of the following
circumstances, the company
acquiring or disposing of
assets shall publicly
announce and report the
relevant information on the
FSC's designated website in
the appropriate format as
prescribed by regulations
within 2 days commencing
immediately from the date of
occurrence of the event:
1. Acquisition or disposal of
real property from or to a
related party, or acquisition
or disposal of assets other
than real property from or
to a related party where the
transaction amount reaches
20 percent or more of
paid-in capital, 10 percent
or more of the company's
total assets, or NT$300
million or more; provided,
this shall not apply to
trading of government
bonds or bonds under
repurchase and resale
agreements, or subscription
or redemption of domestic
money market funds.
2. Merger, demerger,
acquisition, or transfer of
shares.
3. Losses from derivatives
trading reaching the limits
on aggregate losses or
losses on individual
contracts set out in the
procedures adopted by the
company.
4. Where an asset transaction
other than any of those
referred to in the preceding
threesubparagraphs,a
disposal of receivables by
a financial institution,or an
investmentinthemainland		 1. Amendment to
the provision.
2. The deletion of
some
provisions is a
reference to the
company's
operating items
3. In accordance
with
Governing the
Acquisition
and Disposal
of Assets by
Public
Companies
Article 30.
  • 46 -
After amendment Before amendment Cause of
amendment
counterparty is not a
related party, and the
transaction amount meets
any of the following
criteria:
A. The company paid-in
capital is less than
NT$10 billion, the
transaction amount
reaches NT$500 million
or more.
B. The company paid-in
capital is NT$10 billion
or more, the transaction
amount reaches NT$1
billion or more.
5. Where land is acquired
under an arrangement on
engaging others to build on
the company's own land,
engaging others to build on
rented land, joint
construction and allocation
of housing units, joint
construction and allocation
of ownership percentages,
or joint construction and
separate sale, and the
amount the company
expects to invest in the
transaction reaches
NT$500 million.
6. Where an asset transaction
other than any of those
referred to in the preceding
fivesubparagraphs, a
disposal of receivables by
a financial institution, or
an investment in the
mainland China area
reaches 20 percent or more
of paid-in capital or
NT$300 million; provided,
this shall not apply to the
following circumstances:
A. Trading of government
bonds.
B. Trading of bonds under
repurchase/resale
agreements, or
subscription or
redemption ofmoney
market funds issued by		 China area reaches 20
percent or more of paid-in
capital or NT$300 million;
provided, this shall not
apply to the following
circumstances:
A. Trading of government
bonds.
B. Securities trading by
investment professionals
on foreign or domestic
securities exchanges or
over-the-counter
markets, or subscription
of securities by a
securities firm, either in
the primary market or in
accordance with relevant
regulations.
C. Trading of bonds under
repurchase/resale
agreements, or
subscription or
redemption of domestic
money market funds.
D. Where the type of asset
acquired or disposed is
equipment/machinery
for business use, the
trading counterparty is
not a related party, and
the transaction amount is
less than NT$500
million.
E. Acquisition or disposal
by a public company in
the construction business
of real property for
construction use, where
the trading counterparty
is not a related party, and
the transaction amount is
less than NT$500
million.
F. Where land is acquired
under an arrangement on
engaging others to build
on the company's own
land, engaging others to
build on rented land,
joint construction and
allocation of housing
units, joint construction

6.
  • 47 -
After amendment Before amendment Cause of
amendment
domestic securities
investment trust
enterprises.
The amount of transactions
above shall be calculated as
follows:
1. The amount of any
individual transaction.
2. The cumulative transaction
amount of acquisitions and
disposals of the same type
of underlying asset with
the same trading
counterparty within the
preceding year.
3. The cumulative transaction
amount of real property
acquisitions and disposals
(cumulative acquisitions
and disposals,
respectively) within the
same development project
within the preceding year.
4. The cumulative transaction
amount of acquisitions and
disposals (cumulative
acquisitions and disposals,
respectively) of the same
security within the
preceding year.
"Within the preceding year"
as used in the preceding
paragraph refers to the year
preceding the date of
occurrence of the current
transaction. Items duly
announced in accordance
with these Regulations need
not be counted toward the
transaction amount.
The company shall compile
monthly reports on the status
of derivatives trading
engaged in up to the end of
the preceding month by itself
and any subsidiaries that are
not domestic public
companies and enter the
information in the prescribed
format into the information
reporting website designated
by the FSC by the 10th day
ofeach month.		 and allocation of
ownership percentages,
or joint construction and
separate sale, and the
amount the company
expects to invest in the
transaction is less than
NT$500 million.
The amount of transactions
above shall be calculated as
follows:
1. The amount of any
individual transaction.
2. The cumulative transaction
amount of acquisitions and
disposals of the same type
of underlying asset with the
same trading counterparty
within the preceding year.
3. The cumulative transaction
amount of real property
acquisitions and disposals
(cumulative acquisitions
and disposals, respectively)
within the same
development project within
the preceding year.
4. The cumulative transaction
amount of acquisitions and
disposals (cumulative
acquisitions and disposals,
respectively) of the same
security within the
preceding year.
"Within the preceding year"
as used in the preceding
paragraph refers to the year
preceding the date of
occurrence of the current
transaction. Items duly
announced in accordance
with these Regulations need
not be counted toward the
transaction amount.
The company shall compile
monthly reports on the status
of derivatives trading
engaged in up to the end of
the preceding month by itself
and any subsidiaries that are
not domestic public
companies and enter the
information in the prescribed
  • 48 -
After amendment Before amendment Cause of
amendment
When the company at the
time of public announcement
makes an error or omission
in an item required by
regulations to be publicly
announced and so is required
to correct it, all the items
shall be again publicly
announced and reported in
their entirety within two
days counting inclusively
from the date of knowing of
such error or omission.
The company acquiring or
disposing of assets shall
keep all relevant contracts,
meeting minutes, log books,
appraisal reports and CPA,
attorney, and securities
underwriter opinions at the
company headquarters,
where they shall be retained
for 5 years except where
another act provides
otherwise.		 format into the information
reporting website designated
by the FSC by the 10th day
of each month.
When the company at the
time of public announcement
makes an error or omission in
an item required by
regulations to be publicly
announced and so is required
to correct it, all the items
shall be again publicly
announced and reported in
their entirety.
The company acquiring or
disposing of assets shall keep
all relevant contracts,
meeting minutes, log books,
appraisal reports and CPA,
attorney, and securities
underwriter opinions at the
company headquarters,
where they shall be retained
for 5 years except where
another act provides
otherwise.
  • 49 -

Appendix VII

The 8[th] Board of Director and Independent Director Candidates

Title Name Current
Position		 Major Education(Experience) Shareholdings Name of
institution
being
represented
Director Liao,
Jung‐Hsin		 Chairman,
AIDC		 Education：
War College of National Defense
University;
General Staff College of National
Defense University;
Air Force Academy
Experience：
Military Strategy Advisor to the
President of the ROC;
Vice Chief of General Staff,
Ministry of National Defense;
Administrative Deputy Minister of
Ministry of National Defense;
Commander, Air Defense Missile
Command, General Staff
Headquarters, Ministry of National
Defense;
Chairman, Taiwan Aerospace
Industry Association;
Director, Industrial Technology
Research Institute (ITRI);
Member of the Steering
Committee for the Artificial
Intelligence for Intelligent
Manufacturing Systems Research
Center;
Member of the Election
Committee for the Director of the
National Space Organization		 331,301,773 Ministry of
Economic
Affairs, MOEA
Director Lin, Nan‐Juh President,
AIDC		 Education：
MBA, Providence University;
Bachelor in Aerospace
Engineering, Tamkang University
Experience：
Director, Technology
Implementation, AIDC;
Director, Engineering, AIDC;
Senior Vice President, AIDC;
ManagingDirector,Aerospace		 331,301,773 Ministry of
Economic
Affairs, MOEA
  • 50 -
Title Name Current
Position		 Major Education(Experience) Shareholdings Name of
institution
being
represented
Industrial Development
Corporation (AIDC);
Director, Metro Consulting Service
Ltd.;
Executive Director, Taiwan
Aerospace IndustryAssociation
Director Shieu,
Fuh‐Sheng		 President,
National
Chung Hsing
University;
Distinguished
Professor,
Department of
Materials
Science and
Engineering,
NCHU		 Education：
Ph.D. and Master in Materials
Science and Engineering, Cornell
University;
Bachelor in Materials Science and
Engineering, National Tsinghua
University
Experience：
Dean, College of Engineering,
NCHU;
Chairman, Department of
Materials Science and Engineering,
NCHU;
Director, Institute of Materials
Engineering, NCHU;
Distinguished Professor,
Department of Materials Science
and Engineering, NCHU;
Director, Office of R&D, NCHU;
Director, Aerospace Industrial
Development Corporation (AIDC);
Director, Industrial Technology
Research Institute (ITRI);
Chairman, College Entrance
Examination Center;
Chairman, Academia Industry
Consortium for Science Park in
Central Taiwan (AICSPCT);
President, Chinese Institute of
Engineers‐TaichungDivision		 331,301,773 Ministry of
Economic
Affairs, MOEA
Director Chien,
Feng‐Yuan		 Chief of Branch
No.2,
State‐Owned
Enterprise
Commission,
MOEA		 Education：
Master’s degree, Institute of Land
Administration Studies, National
Chengchi University
Experience：
Chief of Branch No. 5,
State‐Owned Enterprise		 331,301,773 Ministry of
Economic
Affairs, MOEA
  • 51 -
Title Name Current
Position		 Major Education(Experience) Shareholdings Name of
institution
being
represented
Commission, MOEA;
Director, Tang Eng Iron Works Co.,
Ltd.;
Director, Aerospace Industrial
Development Corporation(AIDC)
Director Chang,
Ming‐Pin		 Executive
Secretary,
Investment
Commission,
MOEA; Acting
Director, Dept.
of Investment
Services,
MOEA		 Education：
Master of Law School, University of
Edinburgh;
Bachelor in Department of Law,
National Taiwan University;
Harvard Kennedy School‐Taiwan
Leadership Program
Experience：
CEO, Invest Taiwan, MOEA;
Chief, Deputy Executive Secretary,
and Spokesman of the Investment
Commission, MOEA;
Director, Kuo Kuang Power Co.,
Ltd.;
Member of Venture Capital Review
Committee, National Development
Fund, Executive Yuan;
Member of the application review
board, Export Processing Zone
Administration,MOEA		 331,301,773 Ministry of
Economic
Affairs, MOEA
Director Yu,
Cheng‐Tao		 Quality
Assurance
Engineer, AIDC		 Education：
Ph.D. in Industrial Engineering and
Management, National Yunlin
University of Science and
Technology;
Master in Industrial Engineering,
Feng Chia University
Experience：
Chairman, Aerospace Industrial
Development Corporation Labor
Union in Taichung		 331,301,773 Ministry of
Economic
Affairs, MOEA
Director Hsu,
Chung‐Ming		 Material
Specialist,
AIDC		 Education：
Master in Mechanical and
Electrical Systems Engineering,
National University of Tainan;
Bachelor in Department of Mold
Engineering, National Kaohsiung
Universityof Applied Sciences		 331,301,773 Ministry of
Economic
Affairs, MOEA
  • 52 -
Title Name Current
Position		 Major Education(Experience) Shareholdings Name of
institution
being
represented
Experience：
Material Specialist, AIDC;
Executive Director of AIDC Labor
Union;
Vice Chairman of AIDC Labor
Union‐Aero Engine Factory
Director Po,
Horng‐Huei		 Administrative
Deputy
Minister,
Ministry of
National
Defense
(MND)		 Education：
EMBA, National Taiwan University;
War College, Armed Forces
University;
Air Command and Staff College,
NDU;
Air Force Academy
Experience：
Chief of Staff, Air Force Command
Headquarters;
Director, Administration office,
MND;
Director, Defense Mission, TECRO
in USA;
Director, Congressional Liaison,
MND		 11,063,201 National
Defense
Industrial
Development
Foundation,
NDIDF
Indep.
Director		 Chan,
Chia‐Chang		 Vice President
and Professor
of Finance
Department,
Tung Hai
University		 Education：
DBA, National Sun Yat‐Sen
University
Experience：
In Tung Hai University:
Secretary‐General,
Dean, College of Management;
Chairman, Department of
Finance;
Director, Institute of Continuing
Education
Independent Director and Member
of Compensation Committee,
AIDC;
Independent Director and
Member of Compensation
Committee of Mobiletron Co.,Ltd.		 0 ‐
Indep.
Director		 Chen,
Yin‐Chin		 Associate
Professor,
Department of		 Education：
Ph.D. in Law, Taipei University		 0 ‐
  • 53 -
Title Name Current
Position		 Major Education(Experience) Shareholdings Name of
institution
being
represented
Finance and
Law, Chung
Yuan Christian
University		 Experience：
Chairperson and Associate
Professor, Department of Finance
and Law, Chung Yuan Christian
University;
Associate Professor, Department of
Finance & Taxation, Takming
College of Science and Technology;
Supervisor of Andes Technology
representing the National
Development Fund;
Supervisor of Light American
Sports Inc. representing the
National Development Fund;
Director, CSBC Corporation,
representing MOEA;
Member of the Fair Trade
Commission, Executive Yuan;
Member of the Complaint Review
Board for Government
Procurement, Public Construction
Commission,Executive Yuan
  • 54 -

Appendix VIII

Exemption of Restrictions for Directors

Director
Name		 Other companies and
position		 Scope of the company's business
Chan,
Chia‐Chang		 Independent Director,
Mobiletron Co., Ltd.		 C805050
Industrial Plastic Products Manufacturing
CB01010
Machinery and Equipment Manufacturing
CC01010
Electric Power Supply, Electric Transmission and
Power Distribution Machinery Manufacturing
CC01040
Lighting Facilities Manufacturing
CC01080
Electronic Parts and Components Manufacturing
CC01990
Electrical Machinery, Supplies Manufacturing
CD01030
Automobiles and Parts Manufacturing
CD01040
Motor Vehicles and Parts Manufacturing
CE01010
Precision Instruments Manufacturing
CP01010
Hand Tool Manufacturing
CC01101
Restrained Telecom Radio Frequency Equipments
and Materials Manufacturing
F401021
Restrained Telecom Radio Frequency Equipments
and Materials Import
F401030
Manufacture export
F113010
Wholesale of Machinery
F213080
Retail Sale of Machinery and Equipment
F113030
Wholesale of Precision Instruments
F213040
Retail Sale of Precision Instruments
F106010
Wholesale of Ironware
F206010
Retail Sale of Ironware
F114030
Wholesale of Motor Vehicle Parts and Supplies
F214030
Retail Sale of Motor Vehicle Parts and Supplies
F119010
Wholesale of Electronic Materials
F219010
Retail Sale of Electronic Materials
F113990
Wholesale of Other Machinery and Equipment
F213990
Retail Sale of Other Machinery and Equipment
ZZ99999
All business items that are not prohibited or
restricted by law, except those that are subject to
special approval.
Chang,
Ming‐Pin		 Director, Taiwan
Cogeneration Co., Ltd.		 D101011
Electric Power Supply
D101050
Steam and Electricity Paragenesis
E604010
Machinery Installation Construction
F113010
Wholesale of Machinery
F213080
Retail Sale of Machinery and Equipment
F113020
Wholesale of Household Appliance
F213010
Retail Sale of Household Appliance
  • 55 -

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