CSBC — Annual Report 2017

Nov 28, 2018

Contents

I. Letter to Shareholders .................................................................................................................. 3 II. Company Profile 2.1 Date of Incorporation ................................................................................................................... 7 2.2 Company History .......................................................................................................................... 7 III. Corporate Governance Report 3.1 Organization ................................................................................................................................. 8 3.2 Directors, Supervisors and Management Team .......................................................................... 9 3.3 Implementation of Corporate Governance ............................................................................. 35 3.4 Information Regarding the Company’s Audit Fee and Independence ...................................... 80 3.5 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders ......... 81 3.6 Relationship among the Top Ten Shareholders ......................................................................... 83 3.7 Ownership of Shares in Affiliated Enterprises ........................................................................... 84 IV. Capital Overview 4.1 Capital and Shares ...................................................................................................................... 85 4.2 Bonds .......................................................................................................................................... 90 4.3 Global Depository Receipts ........................................................................................................ 90 4.4 Employee Stock Options ............................................................................................................ 90 4.5 Status of New Shares Issuance in Connection with Mergers and Acquisitions ......................... 90 4.6 Financing Plans and Implementation ......................................................................................... 90 V. Operational Highlights 5.1 Business Activities ...................................................................................................................... 90 5.2 Market and Sales Overview ..................................................................................................... 100 5.3 Human Resources .................................................................................................................... 107 5.4 Environmental Protection Expenditure ................................................................................... 107 5.5 Labor Relations......................................................................................................................... 108 5.6 Important Contracts ................................................................................................................. 109 VI. Financial Information 6.1 Five-Year Financial Summary ................................................................................................... 112 6.2 Five-Year Financial Analysis ..................................................................................................... 117 6.3 Supervisors’ /Audit Committee’s Report in the Most Recent Year ......................................... 119 6.4 Financial Statements for the Years Ended December 31, 2016 and 2015 .............................. 119 6.5 Consolidated Financial Statements for the Years Ended December 31, 2016 and 2015…………………………………………………………………………………………………………………..……….119 VII. Review of Financial Conditions, Operating Results, and Risk Management 7.1 Analysis of Financial Status ...................................................................................................... 120 7.2 Analysis of Operation Results ................................................................................................ 120 7.3 Analysis of Cash Flow ............................................................................................................... 121 7.4 The impact of the recent major capital expenditure on the financial business ...................... 122 7.5 Financial impact on the Company for the year ...................................................................... 122 7.6 Analysis of Risk Management .................................................................................................. 122

1

VIII. Special Disclosure

8.1 Summary of Affiliated Companies ........................................................................................... 129 8.2 Private Placement Securities in the Most Recent Years .......................................................... 131 8.3 The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years ......................................................................................................... 133

2

I. Letter to Shareholders

Dear Shareholders,

First of all, I would like to thank you for your continuing support throughout the year. CSBC has responded to the changing business climate by adopting an aggressive stance in strengthening our competitiveness. Total consolidated revenue (thousands) for 2017 was NT$16,404,344 thousands, a 4.17% increase compared with NT$15,747,699 thousands in 2016. Net loss increased to NT$6,353,042 thousands, compared with 2016 net loss income of NT$1,286,809 thousands. Similarly, diluted earnings per share was down to NT$-7.91, compared with NT$-1.73 a year earlier.

The results of our operating performance in 2017, business plan for 2018, corporate development strategy, external competitive environment, regulatory environment, and macroeconomic conditions, are illustrated as follows:

Operating Performance in 2017

1. Consolidated financial results

Unit: NT$ thousands

					Unit: NT$ thousa
	2017		2016		Percent Change （%）
Net sales	16,404,344	100%	15,747,699	100%	4.17%
Gross profit(loss)	(5,721,888)	-34.88%	(1,060,228)	-6.73%	-439.68%
Operating income(loss)	(6,228,965)	-37.97%	(1,565,030)	-9.94%	-298.01%
Pre-tax income(loss)	(6,353,042)	-38.73%	(1,535,402)	-9.75%	-313.77%
Net income(loss)	(5,883,199)	-35.86%	(1,286,809)	-8.17%	-357.19%
R&D expenses	126,676	0.77%	102,196	0.65%	23.95%
Interest income	2,368	0.01%	1,972	0.01%	20.08%
Interest expenses	21,281	0.13%	36,052	0.23%	-40.97%

Net sales amounted to NT$16,404,344 thousands and gross loss came in at NT$-5,721,888 thousands in 2017. Due to decreased operating performance and higher costs and operating expenses compared to the year before, net loss increased by more than -357.19% from 2016.

2. Budget implementation

According to the Company’s 2017 annual financial plan, our business failed our targets in revenue and net income, respectively.

3

3. Profitability analysis

	2017	2016
Debt to asset ratio (%)	71.37	55.80
Long-term capital to property, plant and equipment (%)	135.38	135.80
Current ratio (%)	126.38	118.51
Accounts receivable turnover (times)	15.14	29.24
Inventory turnover (times)	6.23	4.69
Return on assets (%)	-23.27	-4.79
Return on shareholders’ equity (%)	-63.23	-9.86
Basic after-tax EPS (NT$)	-18.79	-4.77

4. Research and development status

In 2017, CSBC invested a total of NT$127,000 thousands in R&D for the ship researches as well as the development of new products. Having successfully 22 developed projects in 2017, it goes into application for CSBC. CSBC is committed to investing in long-term growth by delivering continuous innovations.

Business Plan for 2018

1. Business objectives

• Reinforce product innovation and R&D to maintain competitive advantage;

• Integrate resources, lower costs, raise productive efficiency;

• Diversify into higher-margin and higher-growth businesses.

• Sales forecast and sales policy

Alphaliner predicts an approximate 5.6% increase in capacity of container fleet. CSBC has established full production capacity step-by-step in recent years, upgraded technology and earned product development certification.

The sales policy has outlined as follows in accordance with the projected sales volume of 179,740 CGTs in 2018:

• Maintain and establish an excellent brand image for the benefit of the client.

• Reinforce sensitivity and flexibility to sales changes in order to respond to market trends.

4

Development Strategy

The Company’s future performance is still very much dependent on an improvement in global economic growth; however, we will leverage our product portfolio, financial strength, intellectual property, human capital, and customer relationships to improve our operational efficiency. We aim to strike a balance between mid-term to long-term strategy development and short-term market demands. Our plan is to focus resources on high-margin products, and to lower production and operating costs. Our strong portfolio of intellectual property can be leveraged to create a formidable barrier to entry for competitors.

The 2018 operating strategies of CSBC was outlined as follows:

• Increase productivity.

• Cost down.

• Implement schedule control (CKP).

• start up the improving project of worse finance.

• Strive for the business of container ship.

• Diversify business layout (state-made ship and offshore wind power).

The Impact of the External Competitive Environment, Regulatory Environment, Macroeconomic Conditions, and Vision

1. External competitive environment

The shipbuilding is mature and intense competition all over the world. The diversity and homogeneity of products, controlled distribution channels, imitation of business models, pricing pressures, and quality requirements have all made the competition environment brutal. CSBC has responded to the severe competition with excellent R&D and management to fulfill consumers’ demands for variety and to differentiate ourselves from competitors through outstanding quality and a reputable brand image. We are able to negotiate with the owners of distribution channels by offering good quality and popular products; therefore, we will continue to innovate and develop products that has needed by consumers, and become the leading brand in the market.

2. Regulatory environment

Governments around the world are constantly adopting new tax, environmental, investment and labor regulations. CSBC stays up-to-date with changes in laws and regulations in all of our invested areas so appropriate adjustments and allocations can be made to company resources in order to respond to these environmental and legal changes.

5

3. Macroeconomic conditions, and vision

With respect to the severe business environment, global economic growth remains slow. Consumer confidence continues to be fragile, dampening market demand. By continuing to 、 cooperate the strategies of Government developing comprehensive shipbuilding technology and deepening our relationships with our clients, CSBC hopes to mitigate the adverse effects of the slowdown on overall market demand.

Finally, we will continue to establish more integrate relationship with consumers, clients, and society as a whole, with the aim of achieving higher returns for our shareholders.

Sincerely yours,

Chairman

President CHENG, WEN-LON TSENG, KUO-CHENG

6

II. Company Profile

2.1 Date of Incorporation : November 07, 1973

2.2 Company History

Year	Milestones
1973	In July, "China Shipbuilding Company" has established, in November to obtain approval to set up registration.
1974	January, "China Shipbuilding Company" started construction in Kaohsiung, and in May 31, 1976 to complete the construction.
1977	In July, the "China Shipbuilding Company" has changed to "state-owned". In December, it completed the construction of Taiwan's first 440,000 DWT super-large tanker, the Bo Ma Endeavor.
1978	In January, "China Shipbuilding Corporation" and "Taiwan Shipbuilding Company" were merged and reorganized to operate as "China Shipbuilding Company" with Taipei Office, Kaohsiung Plant and Keelung Plant. In July, it completed the construction of Taiwan's second 445,000 DWT super-large tanker, the "Bo Ma Enterprise".
1996	In January, Taipei company officially moved to Kaohsiung, Kaohsiung factory office and Kaohsiung.
2000	In line with the business development and the need for privatization, the Company and Kaohsiung General Plant from May 1 of the same year, staff and business mergers.
2008	April 1, the Securities and Exchange Bureau approved the first time for the company to apply for public offering of shares declaration. July 30 to complete the application to the Stock Exchange listed delivery. December 22 The Company listed and completed the privatization.
2010	January 14 by the Republic of China annual top ten enterprises Golden Torch Award.
2013	On November 29, he was awarded the "2013 Taiwan Enterprise Sustainability Award" - "Taiwan Top50 Enterprise Sustainability Report Award" manufacturing excellence.
2015	On October 30, he was awarded the "12th National Brand Yushan Award" - "Outstanding Enterprise" National Award; December 21 was awarded the "24th Taiwan Excellence Award."
2016	.November 20, 2016 was awarded the "Taiwan Enterprise Sustainability Report Award" traditional manufacturing silver medal; December 23, 2016 was awarded the "Sustainable Governance Practice Award." .Achieved "2016 TIPS basic verification" and the 18th outstanding enterprise Jinfeng Award: Ten outstanding innovation research and development.

7

III. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart

==> picture [441 x 582] intentionally omitted <==

3.1.2 Major Corporate Functions ： Please refer to page 11 of the Chinese annual

8

02 08, 2018	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Relation	－	－
		Name	－	－
		Title	－	－
	Other Position		Chairman of CSBC, Taiwan	President of CSBC, Taiwan
	Experience（Education）		.Deputy Mayor, Kaohsiung City Government .Chairman of CSBC, Taiwan (Ph.D., University of Washington, USA)	.Vice President of CSBC (Master, Department of Shipbuilding Engineering, National Taiwan University )
	Shareholding by Nominee Arrangement	％	－	－
		Shares	－	－
	Spouse & Minor Shareholding	％	－	－
		Shares	－	－
	Current Shareholding	％	33.5 7%	33.5 7%
		Shares	249,612 ,540	249,612 ,540
	Shareholding when Elected	％	33.5 7%	33.5 7%
		Shares	249,612 ,540	249,612 ,540
	Date First Elected		11 30, 2007	08 01, 2017
	Term (Years)		3	3
	Date Elected		06 23, 2016	08 01, 2017
	Name		CHENG, WEN-LON (Ministry of Economic Affairs Representative)	TSENG,(Notes1) KUO-CHENG (Ministry of Economic Affairs Representative)
	Nationality/ Country of Origin		Republic of China	Republic of China
	Title		Chairman	Director

－	－	－
－	－	－
－	－	－
National Kaohsiung University of Applied Sciences Industrial Engineering and Management Full-time professor	Director of Fishing Vessel and Marine Machinery Research Center, National Cheng Kung University	Chief of Fourth Division,State- owned Enterprise Commission, Ministry of Economic Affairs
.Hechun Technical College President, Head of the Department of Industrial Engineering and Management, Kaohsiung University of Applied Science and Technology, Director of the School of Nestle, Kaohsiung University of Applied Science and Technology (University of Pearce, UK )	.Vice Dean of Academic Affairs, National Cheng Kung University; Chairman and Dean of Department of Systems & Naval Mechatronic Engineering, National Cheng Kung University (Ph.D., Stevens Institute of Technology, USA )	.Executive Officer and Chief of State-owed Enterprise Commission, Ministry of Economic Affairs (Master, Graduate Institute of Chemical Engineering, National Central University)
－	－	－
－	－	－
－	－	－
－	－	－
33.5 7%	33.5 7%	33.5 7%
249,612 ,540	249,612 ,540	249,612 ,540
33.5 7%	33.5 7%	33.5 7%
249,612 ,540	249,612 ,540	249,612 ,540
09 23, 2016	07 04, 2002	07 29, 2013
3	3	3
09 23, 2016	06 23, 2016	06 23, 2016
Huang, Ying-Fang (Ministry of Economic Affairs Representative)	FANG, MING-CHUNG (Ministry of Economic Affairs Representative)	CHEN, YUNG-TSUNG (Ministry of Economic Affairs Representative)
Republic of China	Republic of China	Republic of China
Director	Director	Director

－	－	－	－	－
－	－	－	－	－
－	－	－	－	－
Chairman of Employees’ Welfare Committee, CSBC	Chairman, CSBC Keelung Yard Labor Union	－	Vice President of China Steel Corporation	－
.Supervisor, Director and Managing Director, CSBC Labor Union (Graduated from Sheet Metal Department, National Tainan Industrial High School )	.Senior Technician, Keelung Yard, CSBC (Department of Navigation, National Keelung Maritime Vocational High School)	－	.Assistant Deputy General Manager of China Steel Corporat .President of China Steel Global Trading Corporation (MBA of University of California)	－
－	－	－	－	－
－	－	－	－	－
－	－	－	－	－
－	－	－	－	－
33.5 7%	33.5 7%	6.33 %	2.48 %	0.71 %
249,612 ,540	249,612 ,540	47,030, 687	18,414, 641	5,246,3 36
33.5 7%	33.5 7%	6.33 %	2.48 %	0.71 %
249,612 ,540	249,612 ,540	47,030, 687	18,414, 641	5,246,3 36
06 23, 2010	11 11, 2005	07 30, 2009	11 17, 2016	02 13, 2009
3	3	3	3	3
06 23, 2016	06 23, 2016	06 23, 2016	11 17, 2016	06 23, 2016
HUANG, JIH-CHIN (Ministry of Economic Affairs Representative)	LAN, SYU-CING (Ministry of Economic Affairs Representative)	CPC (Corporation, Taiwan Representative)	Lee Xin-Min (China Steel Representative)	Yue-Li Investment Corporation
Republic of China	Republic of China	Republic of China	Republic of China	Republic of China
Director	Director	Director	Director	Director

－	－	－	－
－	－	－	－
－	－	－	－
Technician of CSBC; Representative of Industrial Labor Union, CSBC	Technician of CSBC; Representative of Industrial Labor Union, CSBC	Chun Yu Works & Co.,Ltd. Chairman	Professor, National Kaohsiung University of Applied Sciences
.Chairman, Industrial Labor Union, CSBC; Chairman, Employees’ Welfare Committee, CSBC; Chairman, Kaohsiung City Confederation of Trade Union ( Department of Electric Engineering, Kaohsiung Municipal Kaohsiung Industrial High School )	.Chairman of CSBC Corporation, Taiwan Staff Welfare Committee (Graduated from Department of Marine Engineering, Kaohsiung Institute of Marine Technology )	.Professor of Taiwan University Department of Engineering Science and Marine Engineering (Ph.D,Shipbuilding Engineering Institute, National Taiwan University)	.President of Metal Industries Research & Developent Centre (Ph.D. in Institute of Materials Science, National Sun Yat-sen University )
－	－	－	－
－	－	－	－
－	－	－	－
－	－	－	－
0.11 %	0.11 %	0	0
813,804	813,804	0	0
0.06 %	0.09 %	0	0
460,804	660,804	0	0
06.04, 2007	07 01, 2014	06 23, 2016	06 23, 2016
3	3	3	3
06 23, 2016	06 23, 2016	06 23, 2016	06 23, 2016
HOU, DE-LONG (Kaohsiung City Representative of Industrial Labor Union of CSBC)	HSIEH, KUO-JUNG (Kaohsiung City Representative of Industrial Labor Union of CSBC)	Independent Director LIN, HUI-JENG	Independent Director FU, HO-CHUNG
Republic of China	Republic of China	Republic of China	Republic of China
Director	Director	Independent Director	Independent Director

－	Notes: 1. The former retired,and new president was appointed by the board of directors at August 01,2017. 2. The tenure of the 16th Board of Directors is from June 23, 2016 to June 22, 2019.
－
－
Professor, National Sun Yat-sen University
.Securities and futures management committee of the Ministry of Finance (.Ph.D.in Institute of Economics, Ohio State University, USA)
－
－
－
－
0
0
0
0
06 23, 2016
3
06 23, 2016
Independent Director LIEU, DER-MING
Republic of China
Independent Director

02 08, 2017	Executives, Directors or Supervisors who are spouses or within two degrees of kinship	Relation	－	－	－
		Name	－	－	－
		Title	－	－	－
	Other Position		Chairman of CSBC, Taiwan	President of CSBC, Taiwan	National Kaohsiung University of Applied Sciences Industrial Engineering and Management Full-time professor
	Experience（Education）		Deputy Mayor, Kaohsiung City Government .Chairman of CSBC, Taiwan (Ph.D., University of Washington, USA)	.Vice President of CSBC (Graduated from Department of Marine Engineering, National Taiwan Ocean University)	.Hechun Technical College President, Head of the Department of Industrial Engineering and Management, Kaohsiung University of Applied Science and Technology, Director of the School of Nestle, Kaohsiung University of Applied Science and Technology (University of Pearce, UK)
	Shareholding by Nominee Arrangement	％	0	0	0
		Shares	0	0	0
	Spouse & Minor Shareholding	％	0	0	0
		Shares	0	0	0
	Current Shareholding	％	33.57%	33.57%	33.57%
		Shares	249,612,540	249,612,540	249,612,540
	Shareholding when Elected	％	33.57%	33.57%	33.57%
		Shares	249,612,540	249,612,540	249,612,540
	Date First Elected		11 30, 2007	08 24, 2012	09 23, 2016
	Term (Years)		3	3	3
	Date Elected		06 23, 2016	06 23, 2016	09 23, 2016
	gender		male	male	male
	Name		CHENG, WEN-LON (Ministryof Economic Affairs Representative)	CHEN, LIE-LIN (Ministry of Economic Affairs Representative)	Huang, Ying-Fang (Ministry of Economic Affairs Representative)
	Nationality/ Country of Origin		Republic of China	Republic of China	Republic of China
	Title		Director	Director	Director

－	－	－	－	－
－	－	－	－	－
－	－	－	－	－
Director of Fishing Vessel and Marine Machinery Research Center, National Cheng Kung University	Deputy Chief of Second Division,State- owned Enterprise Commission, Ministry of Economic Affairs	Chairman of Employees’ Welfare Committee, CSBC	Chairman, CSBC Keelung Yard Labor Union	－
.Vice Dean of Academic Affairs, National Cheng Kung University; Chairman and Dean of Department of Systems & Naval Mechatronic Engineering, National Cheng Kung University (Ph.D., Stevens Institute of Technology, USA)	.Executive Officer and Chief of State-owed Enterprise Commission, Ministry of Economic Affairs (Master, Graduate Institute of Chemical Engineering, National Central University)	.Supervisor, Director and Managing Director, CSBC Labor Union (Graduated from Sheet Metal Department, National Tainan Industrial High School)	.Senior Technician, Keelung Yard, CSBC (Department of Navigation, National Keelung Maritime Vocational High School)	－
0	0	0	0	0
0	0	0	0	0
0	0	0	0	0
0	0	0	0	0
33.57%	33.57%	33.57%	33.57%	6.33%
249,612,540	249,612,540	249,612,540	249,612,540	47,030,687
33.57%	33.57%	33.57%	33.57%	6.33%
249,612,540	249,612,540	249,612,540	249,612,540	47,030,687
07 04, 2002	07 29, 2013	06 23, 2010	11 11, 2005	06 23, 2016
3	3	3	3	3
06 23, 2016	06 23, 2016	06 23, 2016	06 23, 2016	06 23, 2016
male	male	male	male	-
FANG, MING-CHUNG (Ministry of Economic Affairs Representative)	CHEN, YUNG-TSUNG (Ministry of Economic Affairs Representative)	HUANG, JIH-CHIN (Ministry of Economic Affairs Representative)	LAN, SYU-CING (Ministry of Economic Affairs Representative)	CPC Corporation, Taiwan
Republic of China	Republic of China	Republic of China	Republic of China	Republic of China
Director	Director	Director	Director	Director

－	－	－	－
－	－	－	－
－	－	－	－
Vice President of China Steel Corporation	－	Technician of CSBC; Representative of Industrial Labor Union, CSBC	Technician of CSBC; Representative of Industrial Labor Union, CSBC
.Assistant Deputy General Manager of China Steel Corporat .President of China Steel Global Trading Corporation (MBA of University of California)	－	.Chairman, Industrial Labor Union, CSBC; Chairman, Employees’ Welfare Committee, CSBC; Chairman, Kaohsiung City Confederation of Trade Union ( Department of Electric Engineering, Kaohsiung Municipal Kaohsiung Industrial High School )	.Chairman of CSBC Corporation, Taiwan Staff Welfare Committee (Graduated from Department of Marine Engineering, Kaohsiung Institute of Marine Technology )
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
2.48%	0.71%	0.11%	0.11%
18,414,641	5,246,336	813,804	813,804
2.48%	0.71%	0.06%	0.09%
18,414,641	5,246,336	460,804	660,804
11 17, 2016	02 13, 2009	06.04, 2007	07 01, 2014
3	3	3	3
11 17, 2016	06 23, 2016	06 23, 2016	06 23, 2016
male	-	male	male
Lee Xin-Min (China Steel Representative)	Yue-Li Investment Corporation	HOU, DE-LONG (Kaohsiung City Representative of Industrial Labor Union of CSBC)	HSIEH, KUO-JUNG Kaohsiung City Representative of Industrial Labor Union of CSBC
Republic of China	Republic of China	Republic of China	Republic of China
Director	Director	Director	Director

－	－	－
－	－	－
－	－	－
.Professor of Department of Engineering Science and Ocean Engineering,Na tional Taiwan University .Chun Yu Works & Co.,Ltd. Chairman(seco nded)	Professor, National Kaohsiung University of Applied Sciences	Professor, National Sun Yat-sen University
.President of National Penghu University of Science and Technology (Ph.D,Shipbuilding Engineering Institute, National Taiwan University)	.President of Metal Industries Research & Developent Centre (Ph.D. in Institute of Materials Science, National Sun Yat-sen University )	.Securities and futures management committee of the Ministry of Finance (.Ph.D.in Institute of Economics, Ohio State University, USA)
0	0	0
0	0	0
0	0	0
0	0	0
0	0	0
0	0	0
0	0	0
0	0	0
06 23, 2016	06 23, 2016	06 23, 2016
3	3	3
06 23, 2016	06 23, 2016	06 23, 2016
male	male	male
Independent Director LIN, HUI-JENG	Independent Director FU, HO-CHUNG	Independent Director LIEU, DER-MING
Republic of China	Republic of China	Republic of China
Independent Director	Independent Director	Independent Director

◆ Major shareholders of the institutional shareholders

Dec. 31, 2017

Name of Institutional Stockholder	Major Stockholder
CPC Corporation,Taiwan	Ministryof Economic Affairs	100%
China Steel Corporation (Note)	Ministryof Economic Affairs(MOEA)	20.00%
	Employee’s Stock Trust of China Steel Corporation	4.42%
	TransgloryInvestment Corporation	1.58%
	Vanguard EmergingMarkets Stock Index Fund	1.32%
	WinningInvestment Corporation	1.01%
	Vanguard Total International Stock Index Fund	1.00%
	Public Service Pension Fund	0.99%
	GIC Asset Management Private Limited	0.97%
	Labor Insurance Fund	0.85%
	Fubon Life Insurance Co.,Ltd	0.85%
Yue-Li Investment Corporation	U-MingMarine Transport Corporation	68.18%
	U-MingMarine Transport(Singapore)Private Limited	31.82%

Note: China Steel Corporation compiled the list of major stockholders on the base date of August 1, 2017.

◆ Major shareholders of the Company’s major institutional shareholders

	Dec. 31,2017	Dec. 31,2017
Name of Institutional Shareholders	Major Stockholder
Transglory Investment Corporation (Note1)	China Steel Express Corporation	49.89%
	ChungHungSteel Corporation	40.91%
	China Steel Chemical Corporation	9.20%
Winning Investment Corporation (Note1)	Gains Investment Corporation	49.00%
	Maruichi Steel Tube Ltd.	42.00%
	TransgloryInvestment Corporation	9.00%
Fubon Life Insurance Co., Ltd(Note1)	Fubon Financial Holding Co., Ltd.	100%
U-Ming Marine Transport Corporation (Note 2)	Asia Cement Corporation	39.25%
	Fubon Life Insurance Co.,Ltd	4.00%
	Nan Shan Life Insurance Co.,Ltd.	2.84%
	CathayLife Insurance Co., Ltd.	2.11%
	Management Board of the Public Service Pension Fund	1.96%
	Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard International EquityIndex Funds	1.06%
	Yuan Ding Investment Corp.	1.05%

18

Name of Institutional Shareholders	Major Stockholder	Major Stockholder
	Yu-yuan Investment Corp.	0.94%
	Asia Investment Corp.	0.92%
	Fu Ti-Chen	0.84%
U-Ming Marine Transport (Singapore)Private Limited	U-Ming Marine Transport Corporation	99.99%

Note1: China Steel Corporation compiled the list of major stockholders on the base date of

August 1, 2017.

Note2: U-Ming Marine Transport Corporation compiled the list of major stockholders on the base date of July 12, 2017.

19

01 03, 2017		Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director	-	-	-	-	2	-	-	-
	Independence Criteria(Note)	10	-	-	-	-	-	-	-	-
		9	V	V	V	V	V	V	V	-
		8	V	V	V	V	V	V	V	-
		7	V	V	V	V	V	V	V	-
		6	V	V	V	V	V	V	V	-
		5	V	V	V	V	V	V	V	-
		4	V	V	V	V	V	V	V	-
		3	V	V	V	V	V	V	V	-
		2	-	-	-	-	-	-	-	-
		1	-	-	V	V	V	-	-	-
	Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	V	-	V	V	V	-	-	-
		A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	V	-	-	-	-	-	-	-
		An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	V	-	V	-	V	-	-	-
	Criteria	Name	Ministry of Economic Affairs Representative: CHENG, WEN-LON	Ministry of Economic Affairs Representative: TSENG, KUO-CHENG	Ministry of Economic Affairs Representative: FANG, MING-CHUNG	Ministry of Economic Affairs Representative: CHEN, YUNG-TSUNG	Ministry of Economic Affairs Representative: Huang, Ying-Fang	Ministry of Economic Affairs Representative: HUANG, JIH-CHIN	Ministry of Economic Affairs Representative: LAN, SYU-CING	CPC Corporation, Taiwan

Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to be elected or during the term of office. 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company. China Steel Representative Lee Xin-Min - - V V - V V - - V V V - - Yue-Li Investment Corporation - - - - - - - - - - - - - - Kaohsiung City Representative of Industrial Labor Union of CSBC HOU, DE-LONG - - - - - V V V V V V V - - Kaohsiung City Representative of Industrial Labor Union of CSBC HSIEH, KUO-JUNG - - - - - V V V V V V V - - Independent Director LIN, HUI-JENG V V V V V V V V V V V V V - Independent Director FU, HO-CHUNG V - V V V V V V V V V V V - Independent Director LIEU, DER-MING V - V V V V V V V V V V V 1	Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to be elected or during the term of office. 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company. China Steel Representative Lee Xin-Min - - V V - V V - - V V V - - Yue-Li Investment Corporation - - - - - - - - - - - - - - Kaohsiung City Representative of Industrial Labor Union of CSBC HOU, DE-LONG - - - - - V V V V V V V - - Kaohsiung City Representative of Industrial Labor Union of CSBC HSIEH, KUO-JUNG - - - - - V V V V V V V - - Independent Director LIN, HUI-JENG V V V V V V V V V V V V V - Independent Director FU, HO-CHUNG V - V V V V V V V V V V V - Independent Director LIEU, DER-MING V - V V V V V V V V V V V 1	Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to be elected or during the term of office. 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company. China Steel Representative Lee Xin-Min - - V V - V V - - V V V - - Yue-Li Investment Corporation - - - - - - - - - - - - - - Kaohsiung City Representative of Industrial Labor Union of CSBC HOU, DE-LONG - - - - - V V V V V V V - - Kaohsiung City Representative of Industrial Labor Union of CSBC HSIEH, KUO-JUNG - - - - - V V V V V V V - - Independent Director LIN, HUI-JENG V V V V V V V V V V V V V - Independent Director FU, HO-CHUNG V - V V V V V V V V V V V - Independent Director LIEU, DER-MING V - V V V V V V V V V V V 1	Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to be elected or during the term of office. 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company. China Steel Representative Lee Xin-Min - - V V - V V - - V V V - - Yue-Li Investment Corporation - - - - - - - - - - - - - - Kaohsiung City Representative of Industrial Labor Union of CSBC HOU, DE-LONG - - - - - V V V V V V V - - Kaohsiung City Representative of Industrial Labor Union of CSBC HSIEH, KUO-JUNG - - - - - V V V V V V V - - Independent Director LIN, HUI-JENG V V V V V V V V V V V V V - Independent Director FU, HO-CHUNG V - V V V V V V V V V V V - Independent Director LIEU, DER-MING V - V V V V V V V V V V V 1	Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to be elected or during the term of office. 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company. China Steel Representative Lee Xin-Min - - V V - V V - - V V V - - Yue-Li Investment Corporation - - - - - - - - - - - - - - Kaohsiung City Representative of Industrial Labor Union of CSBC HOU, DE-LONG - - - - - V V V V V V V - - Kaohsiung City Representative of Industrial Labor Union of CSBC HSIEH, KUO-JUNG - - - - - V V V V V V V - - Independent Director LIN, HUI-JENG V V V V V V V V V V V V V - Independent Director FU, HO-CHUNG V - V V V V V V V V V V V - Independent Director LIEU, DER-MING V - V V V V V V V V V V V 1	Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to be elected or during the term of office. 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company. China Steel Representative Lee Xin-Min - - V V - V V - - V V V - - Yue-Li Investment Corporation - - - - - - - - - - - - - - Kaohsiung City Representative of Industrial Labor Union of CSBC HOU, DE-LONG - - - - - V V V V V V V - - Kaohsiung City Representative of Industrial Labor Union of CSBC HSIEH, KUO-JUNG - - - - - V V V V V V V - - Independent Director LIN, HUI-JENG V V V V V V V V V V V V V - Independent Director FU, HO-CHUNG V - V V V V V V V V V V V - Independent Director LIEU, DER-MING V - V V V V V V V V V V V 1	Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to be elected or during the term of office. 1. Not an employee of the Company or any of its affiliates. 2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares. 3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings. 4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs. 5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings. 6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company. China Steel Representative Lee Xin-Min - - V V - V V - - V V V - - Yue-Li Investment Corporation - - - - - - - - - - - - - - Kaohsiung City Representative of Industrial Labor Union of CSBC HOU, DE-LONG - - - - - V V V V V V V - - Kaohsiung City Representative of Industrial Labor Union of CSBC HSIEH, KUO-JUNG - - - - - V V V V V V V - - Independent Director LIN, HUI-JENG V V V V V V V V V V V V V - Independent Director FU, HO-CHUNG V - V V V V V V V V V V V - Independent Director LIEU, DER-MING V - V V V V V V V V V V V 1
-	-	-	-	-	-	1
-	-	-	-	V	V	V
V	-	V	V	V	V	V
V	-	V	V	V	V	V
V	-	V	V	V	V	V
-	-	V	V	V	V	V
-	-	V	V	V	V	V
V	-	V	V	V	V	V
V	-	V	V	V	V	V
-	-	-	-	V	V	V
V	-	-	-	V	V	V
V	-	-	-	V	V	V
-	-	-	-	V	-	-
-	-	-	-	V	V	V
China Steel Representative Lee Xin-Min	Yue-Li Investment Corporation	Kaohsiung City Representative of Industrial Labor Union of CSBC HOU, DE-LONG	Kaohsiung City Representative of Industrial Labor Union of CSBC HSIEH, KUO-JUNG	Independent Director LIN, HUI-JENG	Independent Director FU, HO-CHUNG	Independent Director LIEU, DER-MING

Managers who are Spouses or Within Two Degrees of Kinship	Relat ion	－	－	－	－
	Name	－	－	－	－
	Title	－	－	－	－
	Other Position	Director of Ship and Ocean Industries R&D Center	committee of CR classification society	committee of CR classification society	None
	Experience（Education）	1.Master degree 2.Director of Department of Design 3.Senior Vice President 4.Executive Vice President	1.Bachelor degree 2.General Manager of Hull Works 3.Senior Vice President	1.Doctor degree 2.Director of Department of Design 3.Chief Supervisor	1.College degree 2. Deputy General Manager of Outfitting Works 3.General Manager of Outfitting Works
Shareholding by Nominee Arrangement	％	0	0	0	0
	Shares	0	0	0	0
Spouse & Minor Shareholding	％	0	0	0	0
	Shares	0	0	0	0
Shareholding	％	0.01299%	0.01381%	0	0
	Shares	96,594	102,669	0	0
Date Effective		08/01/2017	06/01/2014	03/23/2017	03/23/2017
gender		male	male	male	male
Name			,	LIN,FO UNG- TANG	WEI, CHENG- TZU
		SENG, UO- HENG	HANG CHIEH- TE
		T K C	C
Nationality /Country of Origin		R.O.C	R.O.C	R.O.C	R.O.C
Title		Executive Vice President	Executive Vice President	Executive Vice President	Executive Vice President

－	－	－	－	－	－	－
－	－	－	－	－	－	－
－	－	－	－	－	－	－
Director of CR classification society	None	None	None	None	None	None
1.Master degree 2.Deputy Director of Department of Design 3.Director of Department of Sales 4.Director of Department of Design	1.Bachelor degree 2.Deputy Director of Department of Quality Assurance	1.Bachelor degree 2.Deputy Director of Department of Human Resources and Administration	1.Master degree 2.Director of Department of Sales 3.Director of Department of Design	1.Master degree 2. Section Manager of Basic Design Section 3.Deputy Director of Department of Design	1.Master degree 2.Deputy Director of Department of Material	1.Master degree 2.Deputy Director of Department of Planning 3.Deputy Director of Department of Human Resources and Administration
0	0	0	0	0	0	0
0	0	0	0	0	0	0
0	0	0	0	0	0	0
0	0	0	0	0	0	0
0.01883%	0	0	0	0.00004%	0	0.00330%
140,035	0	0	0	300	0	24,514
08/02/2017	12/01/2013					03/23/2017
		12/01/2013	01/01/2017	08/02/2017	09/01/2016
male	male	male	male	male	male	male
CHOU, CHIH- MING	WANG, CHEN-FU	LIU, CHUNG -HE	TSAI, KUN-TSU NG	N, G- **N **	WU, HUI-TS AI	LEE, YEN-CHI ANG
				HE AN HU
				C LI C
R.O.C	R.O.C	R.O.C	R.O.C	R.O.C	R.O.C	R.O.C
Executive Vice President	Secretary General	Audit Office Auditor General	Departmen t of Sales Director	Departmen t of Design Director	Departmen t of Material Director	Departmen t of Planning Director

－	－	－	－	－	－
－	－	－	－	－	－
－	－	－	－	－	－
None	None	None	None	None	None
1.Bachelor degree 2.Director of Department of Planning 3. General Manager of Hull Works	1.Master degree 2.Deputy General Manager of Hull Works 3.Director of Department of Planning	1.Bachelor degree 2.Shop Master of Outfitting Works 3.Deputy General Manager of Outfitting Works	1.College degree 2.Deputy General Manager of Ship Repair Works	1.Bachelor degree 2.Shop Master of Land Machinery Shop 3.Section Manager of Business Section 4.Deputy General Manager of Machinery Works	1. Bachelor degree 2. Pilot
0	0	0	0	0	0
0	0	0	0	0
0	0	0	0	0	0
0	0	0	0	0	0
0.00239%	0.00269%	0	0	0	0
17,740	20,000	0	0	0	0
01/01/2017		03/23/2017	11/11/2015		01/01/2013
	01/01/2017			106/11/06
male	male	male	male	male	male
LIU, CHWAN -CHAN G	YU, MAO-H UA	, -I	LU, FENG-W EN	GUO, KUEN-C HERNG	CHOU, CHIN-I
		AO IEN
		K CH
R.O.C	R.O.C	R.O.C	R.O.C	R.O.C	R.O.C
Innovation and Research Center Chief Executive Officer	Hull Works General Manager	Outfitting Works General Manager	Ship Repair Works General Manager	Machinery Works General Manager	Dock Master's Office Dock Master

－	－	－	－	－	－
－	－	－	－	－	－
－	－	－	－	－	－
None	Director of Society for Nondestructive Testing & Certification of Taiwan(SNTCT)	None	Supervisor of TANG ENG IRON WORKS CO., LTD	None	None
1.Bachelor degree 2.Deputy Director of Department of Planning	1.College degree 2.General Manager of Ship Repair Works	1.Bachelor degree 2.Deputy General Manager of Hull Works 3.Deputy Director of Department of Human Resources and Administration	1.Bachelor degree 2.President enterprise China Holding Company Chief Financial Officer	1.Bachelor degree 2.Section Manager of Department of Accounting	1.Bachelor degree 2.Deputy General Manager of Machinery Works 3. General Manager of Machinery Works
0	0	0	0	0	0
0	0	0	0	0	0
0	0	0	0	0	0
0	0	0	0	0	0
0	0.00148%	0.00323%	0	0	0
0	10,970	24,000	0	0	0
05/10/2014				12/01/2013	11/06/2017
	01/01/2013	03/23/2017	12/01/2013
male	male	male	Female	male	male
WANG, FU-YING	CHEN, HUI-SHA N	CHIANG ,CHIH- WEN	HSIEH, LING-LIN G	SU, CHEN-A N	YEN, CHIH-M ING
R.O.C	R.O.C	R.O.C	R.O.C	R.O.C	R.O.C
Departmen t of Informatio n Technology Director	Departmen t of Quality Assurance Director	Departmen t of Human Resources and Administra tion Director	Departmen t of Financial Analysis Director	Departmen t of Accounting Director	Departmen t of Occupation al Safety and Health Director

－	－	3.2.3 Remuneration of Directors, President, and Vice President ◆Remuneration of Directors Unit: NT$ thousands
－	－
－	－
None	Director of Blue Ace corporation
1.Bachelor degree 2.Shop Master of Hull Works 3.Deputy General Manager of Hull Works	1. Bachelor degree 2. Project Manager
0	0
0	0
0	0
0	0
0.00077%	0.00215%
5,700	16,000
01/01/2017	08/10/2016
male	male
HOU, YA-WE N	TANG, JUNG- KUEI
R.O.C	R.O.C
Departmen t of Environme ntal Protection and Public Utilities Director	Keelung Yard General Manager

	Compensa tion Paid to Directors from an Invested Company	Compensa tion Paid to Directors from an Invested Company
Ratio of Total Compensation	(A+B+C+D+E+F+G) to Net Income (%)	All companies in the consolidated financial	statements
		The company
Relevant Remuneration Received by Directors Who are Also Employees	Profit Sharing- Employee Bonus (G)	Allcompanies in the consolidated financial statements	Stoc k
			Ca sh
		The company	Stoc k
			Ca sh
	Severance Pay (F)	All companies in the consolid ated	financial statements
		The company
	Salary, Bonuses, and Allowances (E)	All companies in the consolid ated	financial statements
		The company
Ratio of Total Remuneration	(A+B+C+D) to Net Income (%)	All companies in the consolidated financial	statements
		The company
Remuneration	Allowances (D)	All companies in the consolid ated	financial statements
		The company
	Bonus to Directors (C)	All companies in the consolid ated	financial statements
		The company
	Severance Pay (B)	All companies in the consolid ated	financial statements
		The company
	Base Compensation (A)	All companies in the consolid ated	financial statements
		The company
		Name
		Title

None	None	None	None
-0.053%	-0.002%	-0.063%	-0.018%
-0.051%	-0.002%	-0.063%	-0.018%
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	2,000	0
0	0	2,000	0
0	0	1,679	1,035
0	0	1,679	1,035
-0.053%	-0.002%	0	0
-0.051%	-0.002%	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
3,116	125	0	0
3,020	125	0	0
Ministry of Economic Affairs Represen tative CHENG, WEN-LON	Ministry of Economic Affairs Represen tative CHEN, YUNG-TS UNG	Ministry of Economic Affairs Represen tative CHEN, LIE-LIN
			Ministry of Economic Affairs Represen tative TSENG,KU O-CHENG
Chairman	Director	Director	Director

None	None	None	None
-0.002%	-0.002%	-0.019%	-0.020%
-0.002%	-0.002%	-0.019%	-0.020%
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	1,097	1,154
0	0	1,097	1,154
-0.002%	-0.002%	0	0
-0.002%	-0.002%	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
125	125	0	0
125	125	0	0
		Ministry of Economic Affairs Represen tative HUANG, JIH-CHIN
Ministry of Economic Affairs Represen tative FANG, MING-C HUNG	Ministry of Economic Affairs Represen tative Huang, Ying-Fang		Ministry of Economic Affairs Represen tative LAN, SYU-CING
Director	Director	Director	Director

None	None	None	None
-0.002%	-0.002%	-0.002%	-0.021%
-0.002%	-0.002%	-0.002%	-0.021%
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	1,098
0	0	0	1,098
-0.002%	-0.002%	-0.002%	-0.002%
-0.002%	-0.002%	-0.002%	-0.002%
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
125	125	125	125
125	125	125	125
		China Steel Corporati on Represent ative Lee Xin-Min	Kaohsiun g City Represent ative of Industrial Labor Union of CSBC HOU, DE-LONG
CPC Corporat ion, Taiwan	Yue-Li Investme nt Corporat ion
Director	Director	Director	Director

None	None	None	None
-0.021%	-0.012%	-0.012%	-0.012%
-0.021%	-0.012%	-0.012%	-0.012%
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
1,138	0	0	0
1,138	0	0	0
-0.002%	-0.012%	-0.012%	-0.012%
-0.002%	-0.012%	-0.012%	-0.012%
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
0	0	0	0
125	720	720	720
125	720	720	720
Kaohsiun g City Represent ative of Industrial Labor Union of CSBC HSIEH, KUO-JUN G	LIEU, DER-MIN G	FU, HO-CHUN G	LIN, HUI-JENG
Director	Independ ent Director	Independ ent Director	Independ ent Director

Unit: NT$ thousands	Compen sation Paid to Director s from an Invested Compan y	Compen sation Paid to Director s from an Invested Compan y	Compen sation Paid to Director s from an Invested Compan y	None	None	None	None	None
	Ratio of total compensation (A+B+C+D) to net income (%)	Companies in the consolidate d	financial statements	-0.063%	-0.020%	-0.022%	-0.035%	-0.022%
		The company		-0.063%	-0.020%	-0.022%	-0.035%	-0.022%
	Profit Sharing- Employee Bonus (D)	Companies in the consolidated financial statements	Stock	0	0	0	0	0
			Cash	0	0	0	0	0
		The company	Stock	0	0	0	0	0
			Cash	0	0	0	0	0
	Bonuses and Allowances (C)	Compani es in the consolid ated	financial stateme nts	248	172	162	272	180
		The company		248	172	162	272	180
	Severance Pay (B)	Companie s in the consolidat ed	financial statement s	2,000	0	0	0	0
		The compan y		2,000	0	0	0	0
	Salary(A)	Companie s in the consolidat ed	financial statement s	1,431	1,030	1,120	1,773	1,111
		The compan y		1,431	1,030	1,120	1,773	1,111
		Name		CHEN,LIE-LIN (7/31/2017 retirement)	TSENG,KUO-CH ENG	TSENG,KUO-CH ENG	CHANG,CHIEH- TE	WEI,CHENG-TZ U (Promote to Executive Vice President from 3/23/2017)
		Title		President	**President **	Executive Vice President	Executive Vice President	Executive Vice President

None	None	None	Note：Please refer to page 30 of the Chinese annual report.
-0.022%	-0.016%	-0.009%
-0.022%	-0.016%	-0.009%
0	0	0
0	0	0
0	0	0
0	0	0
180	120	63
180	120	63
0	0	0
0	0	0
1,115	811	469
1,115	811	445
LIN,FOUNG- TANG (Promote to Executive Vice President from 3/23/2017)	CHOU,CHIH- MING (Promote to Executive Vice President from 8/2/2017)	WANG,HAI-TA W (Transferred to Chief Supervisor from 3/23/2017) (7/31/2017 retirement)
Executive Vice President	Executive Vice President	Executive Vice President

3.2.4 Comparison of Remuneration for Directors, Supervisors, Presidents and Vice

Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for

Directors, Supervisors, Presidents and Vice Presidents

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

Year	Ratio of total remuneration paid to directors, presidents and Executive vicepresidents to net income(%)	Ratio of total remuneration paid to directors, presidents and Executive vicepresidents to net income(%)
	The company	Companies in the consolidated financial statements
2016	-1.96%	-1.97%
2017	-0.38%	-0.39%

• B. The policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance.

The Remuneration Committee assists the Board in discharging its responsibilities relating to the Company’s compensation and benefits policies, plans and programs, and the evaluation of the directors’ and executives’ compensation. The compensation to directors and other key management personnel were determined by the Remuneration Committee of the Company in accordance with the individual performance and the market trends. The compensation is measured based on the employee’s personal achievements, contribution made to the business operation, and the market averages. It has a positive correlation with the performance of the Company's business.

34

3.3 Implementation of Corporate Governance

3.3.1 Board of Directors

A total of 6 (A) meetings of the Board of Directors were held in the previous period. The attendance of director and supervisor were as follows:

Title	Name	Name	Attendan ce in Person (B)	By Proxy	Attendanc e Rate (%)【Ｂ /Ａ】	Remarks
Chairman	Ministryof Economic Affairs Representative CHENG, WEN-LON		6	0	100.00	-
Director	Ministryof ~~E~~conomic Affairs Representative	CHEN, LIE-LIN	3	0	50.00	The former retired,and new president was appointed by the board of directors at 2017.08.01
		TSENG, KUO-CHENG	3	0	50.00
Director	Ministryof Economic Affairs Representative HUANG, YING-FANG		4	2	66.67	-
Director	Ministryof Economic Affairs Representative FANG, MING-CHUNG		5	1	83.83	-
Director	Ministryof Economic Affairs Representative CHEN, YUNG-TSUNG		6	0	100.00	-
Director	Ministryof Economic Affairs Representative HUANG, JIH-CHIN		5	1	83.83	-
Director	Ministryof Economic Affairs Representative LAN, SYU-CING		6	0	100.00	-
Director	CPC Corporation, Taiwan Representative		5	1	83.83	-
Director	China Steel RepresentativeLEE XIN-MIN		3	3	50.00	-
Director	YUE-LI Investment Corporation		4	2	66.67	-
Director	Kaohsiung City Representative of Industrial Labor Union of CSBC HOU, DE-LONG		5	1	83.83	-
Director	Kaohsiung City Representative of Industrial Labor Union of CSBC HSIEH,KUO-JUNG		6	0	100.00	-
Independent director	LIN, HUI-JENG		6	0	100.00	-
Independent director	FU, HO-CHUNG		5	1	83.83	-
Independent director	LIEU, DER-MING		5	1	83.83	-
Other mentionable items:

35

1. If there are the circumstances referred to in Article 14-5 of the Securities and Exchange Act and resolutions which were not approved by the Audit Committee but were approved by two thirds or more of all directors, the dates of meetings, sessions, contents of motion, resolutions of the Audit Committee and the Company’s response to the Audit Committee’s opinion should be specified: (1)Matters referred to in Article 14-3 of the Securities and Exchange Act:

2. Please refer to the P28~P30 of the Annual Report.

3. (2)Other matters involving objections or expressed reservations by independent directors that were recorded or stated in writing that require a resolution by the board of directors:None

4. If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: 2017.08.01. The Board of Directors: approved Vice President TSENG, KUO-CHENG to be director and President concurrently of CSBC Corporation Taiwan, and Vice President TSENG, KUO-CHENG avoided attendance according to the law.

5. Measures taken to strengthen the functionality of the board: The Board of Directors has established an Audit Committee and a Remuneration Committee to assist the board in carrying out its various duties.

3.3.2 Audit Committee

A total of 5 (A) Audit Committee meetings were held in the previous period. The attendance of the independent directors was as follows:

	Title	Title	Name	Attendan ce in Person (B)	Attendan ce in Person (B)	By Proxy	Attendance Rate (%)【Ｂ /Ａ】	Attendance Rate (%)【Ｂ /Ａ】	Remarks	Remarks
	Independent director		LIN, HUI-JENG	5		0	100.00		2016.06.23 The 16th independent director of the Company is elected by the shareholders'meeting.
	Independent director		FU, HO-CHUNG	5		0	100.00		2016.06.23 The 16th independent director of the Company is elected by the shareholders'meeting.
	Independent director		LIEU, DER-MING	4		1	80.00		2016.06.23 The 16th independent director of the Company is elected by the shareholders'meeting.
	Other mentionable items: 1. If any of the following circumstances occur, the dates of meetings, sessions, contents of motion, resolutions of the Audit Committee and the Company’s response to the Audit Committee’s opinion should be specified: (1)Matters referred to in Article 14-5 of the Securities and Exchange Act:
	Board meeting Date	Major Item			Audit Committee Resolutions			Comapny response		Board Meeting Resolutions
	22,03,20 17 (The 5 session of 16)	The 2016 Financial Statements and Consolidated Financial Statements.			All attendance members of Audit Committee agreed to pass the case at 2017.3.14.			Submit to Board meeting review at 2017/3/22.		All attendance members of board meeting agreed to pass the case.
		Amendment to			All attendance			Submit to Board		All attendance

36

		the ”Procedu res for Acquisition or Disposal of Assets”.	members of Audit Committee agreed to pass the case at 2017.3.14.	meeting review at 2017/3/22.	members of board meeting agreed to pass the case.
		The 2016 Statement of Internal Control Systems.	All attendance members of Audit Committee agreed to pass the case at 2017.3.14.	Submit to Board meeting review at 2017/3/22.	All attendance members of board meeting agreed to pass the case.
		The 2016 financial statements(in clude consolidated financial statements) and filing returns assessed and certified by PwC Taiwan.	All attendance members of Audit Committee agreed to pass the case at 2017.3.14.	Submit to Board meeting review at 2017/3/22.	All attendance members of board meeting agreed to pass the case.
		The first quarter of 2017 accountants of Governing Auditing and Certification of Financial Statement be changed from Liu, Tzu-Meng and Lin, Tzu-Shu to Wang,kuo-hua and Wu,chien-chih .	All attendance members of Audit Committee agreed to pass the case at 2017.3.14.	Submit to Board meeting review at 2017/3/22.	All attendance members of board meeting agreed to pass the case.
		To Improve the financial ratio、 increase Working capital、 Capital expenditure plan and re-investment plan，raising NTD 5.5 billion funds used in 3-5 years.	All attendance members of Audit Committee agreed to pass the case at 2017.3.14.	Submit to Board meeting review at 2017/3/22.	All attendance members of board meeting agreed to pass the case.
		To Improve the LLC6 crane	All attendance members of	Submit to Board meeting review at	All attendance members of board

37

		replacement upgrade investment plan in Kaohsiung Yard.	Audit Committee agreed to pass the case at 2017.3.14.	2017/3/22.	meeting agreed to pass the case.
		To improve the 350 tons GOC crane replacement upgrade investment plan in Kaohsiung Yard.	All the members of audit committee whitch present the meeting agreed that the Company should amend the plan and confirm it with the audit Committee before passing.	The Company revise the plan and confirm it with the audit Committee and then passed to the board meeting at 2017/3/22.	All attendance members of board meeting agreed to pass the case.
	106.08.01 (The 8 session of 16)	The 2017 Q2 Consolidated Financial Statements.	All attendance members of Audit Committee agreed to pass the case at 2017.7.26.	Submit to Board meeting review at 2017/8/1.	All attendance members of board meeting was informed.
	106.11.03 (The 9 session of 16)	More than half of the capital loss report.	All attendance members of Audit Committee agreed to pass the case at 2017.10.31.	Submit to Board meeting review at 2017/11/3.	All attendance members of board meeting agreed to pass the case.
		The Proposal for 2017 Q1~ Q3 Deficit Compensation.	All attendance members of Audit Committee agreed to pass the case at 2017.10.31.	Submit to Board meeting review at 2017/11/3.	All attendance members of board meeting agreed to pass the case.
		The Capital Reduction.	All attendance members of Audit Committee agreed to pass the case at 2017.10.31.	Submit to Board meeting review at 2017/11/3.	All attendance members of board meeting agreed to pass the case.
		The issuance of new common shares in private placement.	All attendance members of Audit Committee agreed to pass the case at 2017.10.31.	Submit to Board meeting review at 2017/11/3.	All attendance members of board meeting agreed to pass the case.
		Amendment to the ”Procedu res for Acquisition or Disposal of Assets”.	All attendance members of Audit Committee agreed to pass the case at 2017.10.31.	Submit to Board meeting review at 2017/11/3.However ,the Ministry of Economic Affairs did not agree yet.	All attendance members of board meeting agreed undo the case.
		For Improve the financial ratio、	All attendance members of Audit Committee	Submit to Board meeting review at 2017/11/3.	All attendance members of board meeting agreed to

38

			increase Working capital、 Capital expenditure plan and re-investment plan，raising NTD.1.5 billion funds used in 3-5 years.	increase Working capital、 Capital expenditure plan and re-investment plan，raising NTD.1.5 billion funds used in 3-5 years.	agreed to pass the case at 2017.10.31.	agreed to pass the case at 2017.10.31.			pass the case.
			The #2 pier RS31 ground loading upgrade plan in Kaohsiung Yard.		All attendance members of Audit Committee agreed to pass the case at 2017.10.31.		Submit to Board meeting review at 2017/11/3.		All attendance members of board meeting agreed to pass the case.
	106.11.22 (The 10 session of 16 extraordinar y)		Amendment to the ”Procedu res for Acquisition or Disposal of Assets”.		All attendance members of Audit Committee agreed to pass the case at 2017.11.22.		Submit to Board meeting review at 2017/11/22.		All attendance members of board meeting agreed to pass the case.
	(2) Other matters which were not approved by the Audit Committee but were approved by two-thirds or more of all directors:None. 2. If there are independent directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified:None. 3. Communications between the independent directors, the Company's chief internal auditor and CPAs (e.g. the items, methods and results of audits of corporate finance or operations,etc.) Date Way Object Item Result 03.14.2017 Audit Committee meetings AuGeneral audit Visa accountant 1.Statement of Internal Control System for 2016. 2.2016 annual financial report and consolidated financial report. 3.Internal audit business report. Agreed to submit a statement on the internal control system for 2016. 05.03.2017 Audit Committee meetings AuGeneral audit Visa accountant 1.Review the consolidated financial statements for the first quarter of 2017. 2.Internal audit business report. 07.26.2017 Audit Committee meetings AuGeneral audit Visa accountant 1.Review the consolidated financial statements for the second
	Date	Way		Object		Item		Result
	03.14.2017	Audit Committee meetings		AuGeneral audit Visa accountant		1.Statement of Internal Control System for 2016. 2.2016 annual financial report and consolidated financial report. 3.Internal audit business report.		Agreed to submit a statement on the internal control system for 2016.
	05.03.2017	Audit Committee meetings		AuGeneral audit Visa accountant		1.Review the consolidated financial statements for the first quarter of 2017. 2.Internal audit business report.
	07.26.2017	Audit Committee meetings		AuGeneral audit Visa accountant		1.Review the consolidated financial statements for the second

39

quarter of 2017. 2.Internal audit business report. 1.Review the consolidated AuGeneral Audit financial statements audit 10.03.2017 Committee for the third quarter Visa meetings of 2017. accountant 2.Internal audit business report.

40

Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics. Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.
Implementation Status1	Abstract Illustration	CSBC has Codex on Corporate Governance and has been disclosed on the CSBC website and the Public Information Observatory. website http: // www. Csbcnet.com.tw investor and investor relations area.	On CSBC website , there is “Investor Area” (http://www.csbcnet.com.tw/Service/Investor). It discloses the hotline and email address to provide all the investors to contact with us. We established an internal operating procedure to manage this area. CSBC can collect the updated information of major shareholders and the list of ultimate owners of those shares.
	No
	Yes	v	V V
	Evaluation Item	1. Does the company establish and disclose the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?	2. Shareholding structure & shareholders’ rights (1) Does the company establish an internal operating procedure to deal with shareholders’ suggestions, doubts, disputes and litigations, and implement based on the procedure? (2) Does the company possess the list of its major shareholders as well as the ultimate owners of those shares?

Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics. Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.
Implementation Status1	Abstract Illustration	CSBC has set up specific management points and operating procedures for the financial and business-related operating methods of the related enterprise companies and implemented them. In addition, in order to implement a comprehensive risk control of subsidiaries, set the "subsidiary supervision and management points" of the internal control mechanism standards. To protect shareholders’ rights and fairly treat shareholders, CSBC has established “Directions Governing the Processing of Material Information and Prevention of Insider Trading” to forbid insiders trading on undisclosed information. The Company has also strongly advocated these rules in order to prevent any violations. The Direction can be look up on our website: http://www.csbcnet.com.tw/English/ServiceEng /InvestorEng.htm
	No
	Yes	V V
	Evaluation Item	(3) Does the company establish and execute the risk management and firewall system within its conglomerate structure? (4) Does the company establish internal rules against insiders trading with undisclosed information?

Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics. Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics. Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.
Implementation Status1	Abstract Illustration	The nominated directors and independent directors have included a wide range of backgrounds such as production, management, science and technology, finance and society. CSBC sets the Salary Remuneration Committee and the Audit Committee according to law CSBC established the "Board Performance Evaluation Method" in 2011. The performance evaluation was conducted on a regular basis from 2012 onwards. In addition to being a reference for the management of the business information and resources, it was also used as a reference for the directors' , And the results of the evaluation from 2016 onwards announced on the company's external website http://www.csbcnet.com.tw / Service / Investor
	No
	Yes	V V V
	Evaluation Item	3. Composition and Responsibilities of the Board of Directors (1) Does the Board develop and implement a diversified policy for the composition of its members? (2) Does the company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee? (3) Does the company establish a standard to measure the performance of the Board, and implement it annually?

Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.
Implementation Status1	Abstract Illustration	/ CorporateGovernance. Company’s managment departments assess the independence of CAP annually. The results had been reported to The Audit Committee on 2017.03.14 and to The Board of Directors on 2017.03.22, and passed. With departments’ assessment, two CPAs, Wang, Guo-Hua, and Wu, Chien-Chih, from The PriceWaterHouseCoopers, meet the standards of independence evaluation (Note 1). Both are capable of being our company’s certified accountants. The Firm has issued the independence declaration as well.	On CSBC website, there is “Stakeholder Area”(http://www.csbcnet.com.tw/Service/Inter estedArea.htm). It sorts the topics for each stakeholder to collect the information they want. It also provides the hotline and email address for various interested parties to contact with us.	CSBC designates Fubon Securities Co., Ltd. to deal with shareholder affairs.
	No
	Yes	V	V	V
	Evaluation Item	(4) Does the company regularly evaluate the independence of CPAs?	4. Whether the company has established a channel of communication with interested parties and set up stakeholder areas on the company's website and properly respond to important corporate social responsibility issues that are of interest to stakeholders?	5. Does the company appoint a professional shareholder service agency to deal with shareholder affairs?

Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics. Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.
Implementation Status1	Abstract Illustration	CSBC has set up a Chinese website (http://www.csbcnet.com.tw/) to disclose information regarding the Company’s financials, business and corporate governance status. ▓There is also English website(http://www. csbcnet.com.tw/English/ ). ▓CSBC has established a spokesman system to handle information disclosure. ▓2017.11.6 At the invitation of Risheng Secu -rities, it will publicly provide a description of the legal entity: http://www.csbcnet.com.tw/Service /Investor/StockInformation.htm .
	No
	Yes	V V
	Evaluation Item	6. Information Disclosure (1) Does the company have a corporate website to disclose both financial standings and the status of corporate governance? (2) Does the company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)?

Does it violate independence?		ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ
	no
	yes
Assessment result		none	none	none	none	none	none	none	none	none
Factors affecting accountants’ independence		Having a direct or material indirect interests in the Company. (such as acquire and hold shares, stocks, corporate bonds, loan or other securities.)	Having financing or guarantee behavior with Company, Company’s director, or independent director.	Having a significant close business relationship with Company, Company’s director, independent director, or managers.	Entering into a potential employment negotiations with the Company.	Entering into a contingent fee arrangement relating to an audit engagement.	A member of the assurance team being, or having been a director, or independent director, or employed in a position to exert significant influence over the subject matter of the engagement within the last two years.	The non-assurance service which performed by the firm that would affects directly a material item of the assurance engagement.	The firm promoting or brokering shares or other securities issued by the Company.	Besides legally permitted businesses, a professional accountant acting as an advocate on behalf of the Company in litigation or disputes with third parties.
Assessing Items		(1)	(2)	(3)	(4)	(5)	(1)	(2)	(1)	(2)
		1. Independence is influenced by self-interest	threat				2. Independence is influenced by self-review threat		3. Independence is influenced by	advocacy threat

Does it violate independence?		ˇ	ˇ	ˇ	ˇ	ˇ	ˇ
	no
	yes
Assessment result		none	none	none	none	none	none
Factors affecting accountants’ independence		A member of the engagement team having a close or immediate family member who is a director, independent director, or officer of the Company or an employee of the Company who is in a position to exert significant influence over the subject matter of the engagement.	A former partner within one year of disassociating from the firm joins the Company as a director, independent director, or officer or is in a key position to exert significant influence over the subject matter of the engagement.	A professional accountant accepting gifts or preferential treatment from Company, the Company’s director, independent director, officer or major stockholder.	A member of the audit engagement team being informed by a partner of the firm that a planned promotion will not occur unless the member agrees with Company’s inappropriate accounting treatment.	A firm being pressured to reduce inappropriately fees, in order to compel the firm to reduce the extent of work performed.	Does the same accountant performed more than seven years?
Assessing Items		(1)	(2)	(3)	(1)	(2)	(1)
		4. The effect on independence of familiarity			5. Independence is influenced by intimidation	threat	6. Period evaluation

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

2. (1) Status of employee rights and employee wellness:

   • A. For the benefit of employees, CSBC has signed a group agreement with the trade unions on August 17, 2015, including trade union activities, working hours, salary, bonus, welfare, safety and health, labor relations, human development, retirement Pensions and other working conditions, and in accordance with labor laws and regulations, the provisions of the rules of work and the management requirements, the contents of the staff rights and obligations and welfare items, and regular review to safeguard the rights and interests of employees.

B. CSBC provide considerable welfare measures, in addition to labor insurance, health insurance, and for staff mutual assistance insurance, the other for employees to insure 3 million group accident insurance, foreign travel safety insurance, employee health checks, and cultural and recreational, Activities and other subsidies, the current labor relations are quite harmonious.

• (2) Employee Concern:

CSBC express its concern for the sincere condolences of the practitioners who are hospitalized due to illness or injury.

CSBC has set “Practitioner’s injury and illness condolence clause " and sent Consolation money to the hospital practitioner colleagues at the Spring Festival, Dragon Boat Festival, the Mid-Autumn Festival.

• (3) Investor Relations:

CSBC has set up a spokesperson to communicate with investors. CSBC website to set up the investor area service website to expose corporate governance, financial information, shareholder information, contacts and product-related information to provide investors with timely service information. website is: http: // www. Csbcnet.com. Tw.

• (4) Supplier Relationships:

CSBC suppliers are managed by the Supplier Management Activity Benchmark and the Material Supplier Selection Benchmark. There are long-term supply contracts for good suppliers, and suppliers can match the needs of the company's production and marketing , And to maintain long-term relationship, and the quality of good supply, as the supplier of environmental protection, safety and health issues have been in the "supplier management benchmark" and "material supplier selection benchmark" norms.

48

• (5) stakeholders rights:

CSBC has set up a spokesman system. There is also a “Stakeholder Area” on the website (http://www.csbcnet.com.tw/Service/InterestedArea.htm). It sorts the topics for each stakeholder to collect the information they want. It also provides the hotline and email address for various interested parties to contact with us.

• (6) CSBC for the directors to purchase liability insurance situation: CSBC has purchased liability insurance for the directors, insured US$3 million, and submitted 106.8.1 the 16th eighth board report.

49

Course	Course	Law of Insider Equity Trading Follows and notice Seminar.			The Global Trend of Sustainable Development of Corporate Social Responsibility and the Response Planning of Operations Management.	An Analysis of the Internal Control Practices of the Latest Labor Law Amendments and Recent Corruption Cases.	Law of Insider Equity Trading Follows and notice Seminar.		Law of Insider Equity Trading Follows and notice Seminar.
			How do directors perform their duty of care and loyality.	How do directors perform their duty of care and loyality.				How do directors perform their duty of care and loyality.		How do directors perform their duty of care and loyality.
Sponsoring Organization		Taiwan Corporate Governance Association	Securities & Futures Institute	Taiwan Corporate Governance Association	Accounting Research and Development Foundation	Accounting Research and Development Foundation	Securities & Futures Institute	Taiwan Corporate Governance Association	Securities & Futures Institute	Taiwan Corporate Governance Association
Study period	To	7/7/2017	8/1/2017	8/1/2017	9/14/2017	11/24/2017	7/21/2017	8/1/2017	7/14/2017	8/1/2017
	From	7/7/2017	8/1/2017	8/1/2017	9/14/2017	11/24/2017	7/21/2017	8/1/2017	7/14/2017	8/1/2017
Training hours		3H	3H	3H	3H	6H	3H	3H	3H	3H
Name		Ministry of Economic Affairs	Representative CHENG,WEN-LON		Ministry of Economic Affairs Representative TSENG,KUO-CHENG
							Ministry of Economic Affairs	Representative FANG,MING-CHUNG	Ministry of Economic Affairs	Representative CHEN,YUNG-TSUNG
Title		Chairman			Director		Director		Director

Global Risk Trends and Business Opportunity Challenges.	Law of Insider Equity Trading Follows and notice Seminar.	The Global Trend of Sustainable Development of Corporate Social Responsibility and the Response Planning of Operations Management.	Law of Insider Equity Trading Follows and notice Seminar.		Law of Insider Equity Trading Follows and notice Seminar.		Latest Labor Law Amendment to Internal Control of Recent Corruption Cases .		Board of Supervisors Operational Practice and Corporate Governance Workshop.	Law of Insider Equity Trading Follows and notice Seminar.
				How do directors perform their duty of care and loyality.		How do directors perform their duty of care and loyality.		How do directors perform their duty of care and loyality.			How do directors perform their duty of care and loyality.
The Institute of Internal Auditors-Chinese Taiwan	Securities & Futures Institute	Accounting Research and Development Foundation	Securities & Futures Institute	Taiwan Corporate Governance Association	Securities & Futures Institute	Taiwan Corporate Governance Association	Securities & Futures Institute	Taiwan Corporate Governance Association	Taiwan Academy of Banking and Finance	Securities & Futures Institute	Taiwan Corporate Governance Association
4/21/2017	8/11/2017	9/14/2017	7/7/2017	8/1/2017	7/28/2017	8/1/2017	10/20/2017	8/1/2017	7/13/2017	8/11/2017	8/1/2017
4/21/2017	8/11/2017	9/14/2017	7/7/2017	8/1/2017	7/28/2017	8/1/2017	10/20/2017	8/1/2017	7/13/2017	8/11/2017	8/1/2017
6H	3H	3H	3H	3H	3H	3H	6H	3H	3H	3H	3H
	Ministry of Economic Affairs Representative HUANG,JIH-CHIN				CPC Corporation, Taiwan Representative YIN,LING-YING			Yue-Li Investment Corporation Representative WANG,SHU-JI		China Steel Corporation Representative Lee,Xin-Min
Ministry of Economic Affairs Representative HUANG,JIH-CHIN			Ministry of Economic Affairs	Representative LAN,SYU-CING
Director	Director		Director		Director			Director		Director

How do company directors, supervisors and supervision of risk management and crisis management.	Group governance.	Law of Insider Equity Trading Follows and notice Seminar.	How do directors perform their duty of care and loyality.	Law of Insider Equity Trading Follows and notice Seminar.	How do directors perform their duty of care and loyality.		Mergers and acquisitions scandal Research and Analysis - From the perspective of corporate governance.	Talking about the Legal Risk and Responsibility of Director Dong from the Major Business Corruption Cases.		Mergers and acquisitions scandal Research and Analysis - From the perspective of corporate governance.
						How do directors perform their duty of care and loyality.			How do directors perform their duty of care and loyality.
Taiwan Corporate Governance Association	Taiwan Corporate Governance Association	Securities & Futures Institute	Taiwan Corporate Governance Association	Securities & Futures Institute	Taiwan Corporate Governance Association	Taiwan Corporate Governance Association	Securities & Futures Institute	Securities & Futures Institute	Taiwan Corporate Governance Association	Securities & Futures Institute
6/13/2017	11/29/2017	8/11/2017	8/1/2017	8/11/2017	8/1/2017	8/1/2017	9/12/2017	9/12/2017	8/1/2017	9/12/2017
6/13/2017	11/29/2017	8/11/2017	8/1/2017	8/11/2017	8/1/2017	8/1/2017	8/1/2017	9/12/2017	8/1/2017	9/12/2017
3H	3H	3H	3H	3H	3H	3H	3H	3H	3H	3H
		Kaohsiung City Representative of Industrial Labor Union of CSBC HOU,DE-LONG		Kaohsiung City Representative of Industrial Labor Union of CSBC HSIEH,KUO-JUNG			LIN,HUI-JENG			FU,HO-CHUNG
		Director		Director			Independent Director		Independent Director

Talking about the Legal Risk and Responsibility of Director Dong from the Major Business Corruption Cases.	The Global Trend of Sustainable Development of Corporate Social Responsibility and the Response Planning of Operations Management.	Insider Trading and Corporate Social Responsibility Symposium of 2017.		B. Managers about corporate governance training	Course	Course	How to be a competent corporate spokesman.	Prevention of money laundering and combating the financing of terrorism practices.	How legal way to protect themselves facing trial investigation procedures.	Continuing education to the head of account of issuer firm.
			How do directors perform their duty of care and loyality.
Securities & Futures Institute	Accounting Research and Development Foundation	Securities & Futures Institute	Taiwan Corporate Governance Association		Sponsoring Organization		Securities & Futures Institute	Accounting Research and	Development Foundation	Accounting Research and Development Foundation
9/12/2017	9/14/2017	5/5/2017	8/1/2017		Study period	To	12/18/2017	8/18/2017	11/2/2017	7/31/2017
9/12/2017	9/14/2017	5/5/2017	8/1/2017			From	12/15/2017	8/18/2017	11/2/2017	7/28/2017
3H	3H	3H	3H		Training hours		12H	6H	6H	12H
		LIEU,DER-MING			Name		LIN,FOUNG-TANG	LIU,CHUNG-HE		SU,CHEN-AN
		Independent Director			Title		Executive Vice President	Audit Office Auditor General		Department of Accounting Director

We have established CSBC Academy to perform employee training function,total actualtraining fee was NT$ 26,336,000 in 2017,and training hours as follow:		Item classes Male Female Male Female High level manager training 15 26 1 189 12 Intermediate manager training 15 514 28 2,598 71 Engineering and management personnel training 47 1,678 195 13,184 1,897 Technical personnel training 76 2,639 50 32,106 178 Total 153 4,857 274 48,077 2,158 Technical apprentice training 6 64 4 8,704 544 Industry-school Corporation student training 2 40 0 24,128 0 Contractor training 95 4,750 91 16,545 310 D. With the financial information transparent relevant personnel to obtain the relevant authority to indicate the relevant circumstances: (A).One employee of the audit office of CSBC has obtained the internal auditor's certificate of the internal auditing association of the ROC. (B). One employee of accounting department of CSBC has obtained the certificate of Accountant professional.	Item classes Male Female Male Female High level manager training 15 26 1 189 12 Intermediate manager training 15 514 28 2,598 71 Engineering and management personnel training 47 1,678 195 13,184 1,897 Technical personnel training 76 2,639 50 32,106 178 Total 153 4,857 274 48,077 2,158 Technical apprentice training 6 64 4 8,704 544 Industry-school Corporation student training 2 40 0 24,128 0 Contractor training 95 4,750 91 16,545 310 D. With the financial information transparent relevant personnel to obtain the relevant authority to indicate the relevant circumstances: (A).One employee of the audit office of CSBC has obtained the internal auditor's certificate of the internal auditing association of the ROC. (B). One employee of accounting department of CSBC has obtained the certificate of Accountant professional.	Item classes Male Female Male Female High level manager training 15 26 1 189 12 Intermediate manager training 15 514 28 2,598 71 Engineering and management personnel training 47 1,678 195 13,184 1,897 Technical personnel training 76 2,639 50 32,106 178 Total 153 4,857 274 48,077 2,158 Technical apprentice training 6 64 4 8,704 544 Industry-school Corporation student training 2 40 0 24,128 0 Contractor training 95 4,750 91 16,545 310 D. With the financial information transparent relevant personnel to obtain the relevant authority to indicate the relevant circumstances: (A).One employee of the audit office of CSBC has obtained the internal auditor's certificate of the internal auditing association of the ROC. (B). One employee of accounting department of CSBC has obtained the certificate of Accountant professional.	Item classes Male Female Male Female High level manager training 15 26 1 189 12 Intermediate manager training 15 514 28 2,598 71 Engineering and management personnel training 47 1,678 195 13,184 1,897 Technical personnel training 76 2,639 50 32,106 178 Total 153 4,857 274 48,077 2,158 Technical apprentice training 6 64 4 8,704 544 Industry-school Corporation student training 2 40 0 24,128 0 Contractor training 95 4,750 91 16,545 310 D. With the financial information transparent relevant personnel to obtain the relevant authority to indicate the relevant circumstances: (A).One employee of the audit office of CSBC has obtained the internal auditor's certificate of the internal auditing association of the ROC. (B). One employee of accounting department of CSBC has obtained the certificate of Accountant professional.	Item classes Male Female Male Female High level manager training 15 26 1 189 12 Intermediate manager training 15 514 28 2,598 71 Engineering and management personnel training 47 1,678 195 13,184 1,897 Technical personnel training 76 2,639 50 32,106 178 Total 153 4,857 274 48,077 2,158 Technical apprentice training 6 64 4 8,704 544 Industry-school Corporation student training 2 40 0 24,128 0 Contractor training 95 4,750 91 16,545 310 D. With the financial information transparent relevant personnel to obtain the relevant authority to indicate the relevant circumstances: (A).One employee of the audit office of CSBC has obtained the internal auditor's certificate of the internal auditing association of the ROC. (B). One employee of accounting department of CSBC has obtained the certificate of Accountant professional.	Item classes Male Female Male Female High level manager training 15 26 1 189 12 Intermediate manager training 15 514 28 2,598 71 Engineering and management personnel training 47 1,678 195 13,184 1,897 Technical personnel training 76 2,639 50 32,106 178 Total 153 4,857 274 48,077 2,158 Technical apprentice training 6 64 4 8,704 544 Industry-school Corporation student training 2 40 0 24,128 0 Contractor training 95 4,750 91 16,545 310 D. With the financial information transparent relevant personnel to obtain the relevant authority to indicate the relevant circumstances: (A).One employee of the audit office of CSBC has obtained the internal auditor's certificate of the internal auditing association of the ROC. (B). One employee of accounting department of CSBC has obtained the certificate of Accountant professional.	Item classes Male Female Male Female High level manager training 15 26 1 189 12 Intermediate manager training 15 514 28 2,598 71 Engineering and management personnel training 47 1,678 195 13,184 1,897 Technical personnel training 76 2,639 50 32,106 178 Total 153 4,857 274 48,077 2,158 Technical apprentice training 6 64 4 8,704 544 Industry-school Corporation student training 2 40 0 24,128 0 Contractor training 95 4,750 91 16,545 310 D. With the financial information transparent relevant personnel to obtain the relevant authority to indicate the relevant circumstances: (A).One employee of the audit office of CSBC has obtained the internal auditor's certificate of the internal auditing association of the ROC. (B). One employee of accounting department of CSBC has obtained the certificate of Accountant professional.	Item classes Male Female Male Female High level manager training 15 26 1 189 12 Intermediate manager training 15 514 28 2,598 71 Engineering and management personnel training 47 1,678 195 13,184 1,897 Technical personnel training 76 2,639 50 32,106 178 Total 153 4,857 274 48,077 2,158 Technical apprentice training 6 64 4 8,704 544 Industry-school Corporation student training 2 40 0 24,128 0 Contractor training 95 4,750 91 16,545 310 D. With the financial information transparent relevant personnel to obtain the relevant authority to indicate the relevant circumstances: (A).One employee of the audit office of CSBC has obtained the internal auditor's certificate of the internal auditing association of the ROC. (B). One employee of accounting department of CSBC has obtained the certificate of Accountant professional.	Item classes Male Female Male Female High level manager training 15 26 1 189 12 Intermediate manager training 15 514 28 2,598 71 Engineering and management personnel training 47 1,678 195 13,184 1,897 Technical personnel training 76 2,639 50 32,106 178 Total 153 4,857 274 48,077 2,158 Technical apprentice training 6 64 4 8,704 544 Industry-school Corporation student training 2 40 0 24,128 0 Contractor training 95 4,750 91 16,545 310 D. With the financial information transparent relevant personnel to obtain the relevant authority to indicate the relevant circumstances: (A).One employee of the audit office of CSBC has obtained the internal auditor's certificate of the internal auditing association of the ROC. (B). One employee of accounting department of CSBC has obtained the certificate of Accountant professional.
	Training hours	Female	12	71	1,897	178	2,158	544	0	310
		Male	189	2,598	13,184	32,106	48,077	8,704	24,128	16,545
	Number of training	Female	1	28	195	50	274	4	0	91
		Male	26	514	1,678	2,639	4,857	64	40	4,750
	Number of	classes	15	15	47	76	153	6	2	95
		Item	High level manager training	Intermediate manager training		Technical personnel training	Total	Technical apprentice training	Industry-school Corporation student training	Contractor training
					Engineering and management personnel training

	Remarks	The third session convener	The third session member	The hird session member
	Number of Other Public Companies in Which the Individual is Concurrently Serving as an Remuneration Committee Member	1	None	None
Independence Criteria (Note)	8	ˇ	ˇ	ˇ
	7	ˇ	ˇ	ˇ
	6	ˇ	ˇ	ˇ
	5	ˇ	ˇ	ˇ
	4	ˇ	ˇ	ˇ
	3	ˇ	ˇ	ˇ
	2	ˇ	ˇ	ˇ
	1	ˇ	ˇ	ˇ
Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years’ Work Experience	Has work experience in the areas of commerce, law, finance, or accounting, or otherwise necessary for the business of the Company	ˇ	ˇ	ˇ
	A judge, public prosecutor, attorney, Certified Public Accountant, or other professional or technical specialist who has passed a national examination and been awarded a certificate in a profession necessary for the business of the Company	-	ˇ	-
	An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university	ˇ	ˇ	ˇ
Criteria	Name	LIEU, DER-MING	LIN, HUI-JENG	FU, HO-CHUNG
	Title	Independent Director	Independent Director	Independent Director

B. Attendance of Members at Remuneration Committee Meetings There are 3 members in the Remuneration Committee. The total of 2 (A) Remuneration Committee meetings were held in 3/8/2107 and 11/1/2017. The attendance record of the Remuneration Committee members was as follows:
	Remarks		The Third session member (August 9, 2016 to June 22, 2019)	The Third session member (August 9, 2016 to June 22, 2019)	Other mentionable items: 1. If the board of directors declines to adopt or modifies a recommendation of the remuneration committee, it should specify the date of the meeting, session, content of the motion, resolution by the board of directors, and the Company’s response to the remuneration committee’s opinion (eg., the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified): None. 2. Resolutions of the remuneration committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the date of the meeting, session, content of the motion, all members’ opinions and the response to members’ opinion should be specified: None.
		The third session convener (August 9, 2016 to June 22, 2019)
	Attendance Rate (%)【Ｂ/Ａ】	100%	100%	100%
	By Proxy	0	0	0
	Attendance in Person(B)	2	2	2
	Name	LIEU, DER-MING	LIN, HUI-JENG	FU, HO-CHUNG
	Title	Convener	Committee Member	Committee Member

Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics
Implementation Status1	Abstract Explanation2	(1) The Company has established the Corporate Social Responsibility Policy and the Principles of Corporate Social Responsibility, which have been reviewed and adopted by the board. In terms of the system, the Company has established the Corporate Social Responsibility Committee, which convenes two regular meetings each year to review the fulfillment of corporate social responsibility and implementation of corporate governance by the Company. (2) Every year, the company dispatches staff to participate in CSR-related seminars or seminars. When necessary, it also conducts a special report on corporate social responsibility to members of the “Corporate Social Responsibility Committee”. (3) The Department of Planning serves as the dedicated unit of the Company to be in charge of establishing a corporate social responsibility policy and promoting a corporate social responsibility system. So far, the Corporate Social Responsibility Policy and the Principles of Corporate Social Responsibility have been established in accordance with the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies, and reviewed and adopted by the board, to serve as the
	No
	Yes	√ √ √ √
	Evaluation Item	1. Corporate governance implementation (1) Has the Company established its corporate social responsibility policy or system and reviewed the results of implementation? (2) Does the Company organize educational training on corporate social responsibility on a regular basis? (3) Has the Company established an exclusively (or concurrently) dedicated unit that consists of first-line managers authorized by the board to be in charge of promoting corporate social responsibility and reporting the promotion status to the board? (4) Has the Company established a reasonable remuneration policy, integrated the employee performance appraisal system with its corporate social responsibility policy, and set up a clear and effective reward and discipline system?

Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics
Implementation Status1	Abstract Explanation2	basis for such promotion and implementation. An additional report will be submitted to the board when necessary. (4) For the remuneration policy of the Company, such factors as the working conditions, professional knowledge and skills, difficulty of work, and responsibilities constitute the relative value criteria for evaluating each position. Moreover, a pay scale (or points) is created to calculate the basic remuneration for each position. These measures are to ensure the reasonableness and fairness of jobs in the organization. Through such measures together with merit bonuses, performance bonuses, employee bonuses, and other remuneration schemes, the Company strives to motivate employees to increase productivity, guarantee a good quality of life and employment for employees, and fulfill its social responsibility in conjunction with the corporate social responsibility policy. The Company has established the Directions Governing Annual Employee Appraisals and Bonus Pays for conducting appraisals at the end of each year, and the Directions Governing Rewards and Punishments for Employees for rewarding and
	No
	Yes
	Evaluation Item

Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons		Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics
Implementation Status1	Abstract Explanation2	imposing punishments on employees.	(1) As the leading company in shipbuilding in Taiwan, we strive to develop a sustainable environment by introducing new technologies that improve the efficiency in the use of energy resources (for example, 614,464 kWh of the electrical energy was saved and 326,895 tons of CO2e reduced in 2015 after the installation of throttle control valves for the air compressors), and by putting more effort into controlling the use of fuel, water resources, kinetic and electrical energy of the moving air. In addition, the Company continues to improve the recycling, treatment, and reuse of wastewater. About 40,406 tons of recycled water was used in 2015. (2) In response to the international trend and stakeholder’s requirements, we have established an environment management system for every department, and have the certification of ISO 14001： 2015. (3)The verification was performed on the basis of ISO 14064-1, CNS 14064-1 and Environmental Protection Administration Executive Yuan, R.O.C(Taiwan) Guideline for greenhouse gas verification to execute consistent GHG emission self-inspection. The reviews of the Inventory and relevant documents have provided CSBC corporation with sufficient evidence to
	No
	Yes		√ √ √
	Evaluation Item		2. Sustainable environment development (1) Does the Company endeavor to utilize various resources more efficiently and use renewable materials which have low impact on the environment? (2) Has the Company established an environmental management system that is appropriate to the characteristics of the industry? (3) Does the Company monitor the impact of climate change on its operations, conduct greenhouse gas inspections, and develop strategies for energy conservation, carbon reduction, and greenhouse gas reduction?

Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons		Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics
Implementation Status1	Abstract Explanation2	determine the fulfillment of stated criteria. Total greenhouse gas emissions of whole company in 2015 is 66,004 tonnes of carbon dioxide equivalent. Total greenhouse gas emissions of whole company in 2016 is 64,322 tonnes of carbon dioxide equivalent.	(1) The Company complies with labor-related regulations, places importance on the internationally accepted principles for fundamental labor rights, and has entered into a collective agreement with the corporate labor union. Moreover, the Company has established work rules and various management regulations which explicitly stipulate the rights, obligations, and benefits of employees in accordance with labor-related laws and regulations, and has established a corporate labor union and convened meetings with employees in accordance with the law to sufficiently protect the legal rights and interests of employees. The recruitment, selection, promotion, pay, holidays, pension, and other benefits of employees of both genders not only conform to the regulations and the principle of equality, but even go beyond the requirements and standards. The basic salary and remuneration for female employees are the same as those for male employees in spite of the differences in gender, duties, and place of work. Besides, female employees are entitled to menstrual
	No
	Yes		√ √ √ √ √ √
	Evaluation Item		3. Preserving public welfare (1) Has the Company established appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights? (2) Has the Company set up an employee grievance mechanism or channel to handle complaints in an appropriate manner? (3) Does the Company provide a healthy and safe work environment and organize training on health and safety for its employees on a regular basis? (4) Does the Company provide a communication channel with employees on a regular basis, as well as reasonably inform employees of any changes in operations that may have a significant impact on them? (5) Does the Company provide its employees with effective career competency development and training programs? (6) Has the Company established any consumer protection policies and complaint procedures regarding its research, development,

Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics
Implementation Status1	Abstract Explanation2	leave as well as maternity and parental leave for unlimited times and periods. (2) In addition to the Guidelines for Handling Complaints of Employees and the Organizational Rules for the Employee Complaint Handling Committee, the Company has set up a grievance committee to handle employee complaints. The grievance committee consists of five employer representatives and two employee representatives, totaling seven members. When necessary, the grievance committee may request the complainants or their supervisors and other personnel related to the complaint cases to attend meetings and provide explanations in order to handle the complaints in an appropriate manner. The Company has also established the Guidelines for Sexual Harassment Prevention, Complaint Investigation, and Imposition of Punishment and set up a complaint review committee. Consisting of seven to fifteen members, the complaint review committee is responsible for handling sexual harassment complaints. (3) The collective agreement of the Company stipulates matters concerning safety and health, as follows, in accordance with labor regulations to offer its employees a healthy and safe work environment: A. Conducting general physical examinations for its
	No
	Yes	√ √ √
	Evaluation Item	procurement, production, operation, and service processes? (7) Does the Company market and label its products and services according to relevant regulations and international standards? (8) Does the Company evaluate the records of suppliers’ impact on the environment and society before starting a business with such suppliers? (9) Do the contracts between the Company and its major suppliers include termination or dissolution clauses which come into force once the suppliers breach the Company’s corporate social responsibility policy and cause a significant impact on the environment and society?

Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons
Implementation Status1	Abstract Explanation2	employees on a regular basis and physical examinations for the personnel who work in special environments on an annual basis; B. Establishing clinics and employing qualified medical personnel to provide medical advice and treatment to employees and their spouses and other immediate family members; C. Organizing professional training and safety and health training for its employees; D. Providing safety equipment and protective gear and regularly inspecting such equipment and gear to ensure the safety of employees at work; E. Establishing the Occupational Safety and Health Committee and the Department of Occupational Safety and Health to carry out management tasks regarding the safety and health of employees; F. Proposing remedies at meetings of the Occupational Safety and Health Committee or meetings with employees in the event that the workplace and production equipment affect the health and safety of employees. (4) The Company provides the following communication channels with employees on a
	No
	Yes
	Evaluation Item

Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics Based on the Corporate Social
Implementation Status1	Abstract Explanation2	regular basis: A. Convening regular meetings with employees as a common communication channel between employers and employees; B. Requesting the participation of top-level managers and department heads in the meetings of member representatives of the corporate labor union, in order to facilitate communication with employees; C. Appointing four employees as directors of the Company to take part in decision making and operation of the board of directors. (5)To develop effective career competency development and training programs for its employees, the Company design the Competency Development and Management System for employees . The Company have finished the Competency model for forman, intermediate manager, engineering and management personnel. And also have established "Job Description" Information System Management Mode. Fully develop the "Human Resource Development Management Model" based on competency functions. Gradually enhance company human resources management. (6) The Company has developed a spokesman system,
	No
	Yes
	Evaluation Item

Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics	Based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and company characteristics
Implementation Status1	Abstract Explanation2	set up an independent director mailbox, and established consumer protection policies and complaints procedures regarding its research, development, procurement, production, operation, and service processes. (7) The Company markets its products and services according to relevant regulations of the Republic of China and international standards. (8) The Company evaluates all suppliers and makes sure that they do not have records of causing major impact on the environment and society before starting a business with them. (9) The Company evaluates all suppliers to make sure that they do not have records of causing major impact on the environment and society, and enters into a supply agreement which contains clauses that allow termination or dissolution of the agreement at any time with them before starting a business with them.	CSBC discloses Financial Report, Annual General shareholders’ Meeting Handbook, CSR Report, etc. in Annual Report and on the website.(Website: http:// www.csbcnet.com.tw/ Service/Investor)
	No
	Yes		√
	Evaluation Item		4. Enhancing information disclosure (1) Does the Company disclose relevant and reliable information regarding its corporate social responsibility on its website and the Market Observation Post System?

Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	Deviations from the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons	5. If the Company has established its corporate social responsibility principles based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the principles and their implementation: The Company has established the Principles of Corporate Social Responsibility based on the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies for implementation purposes.	6. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices:▲See below for more details.	7. A clear statement shall be made if the corporate social responsibility reports of the Company have passed the verification standards set by relevant certification bodies: CSBC 2017 Corporate Social Responsibility Report has not been verified by a third party, but meets the requirements of the GRI Standards core options, as well as the AA1000 guarantee Standard type 1 medium guarantee rating.	Notes: The Company strives to promote (1) environmental protection, energy conservation, and carbon reduction (2) social and community services (3) safety and health activities and (4) industry-academia collaboration and talent training. While taking into consideration the operating profits, the Company places equal emphasis on social benefits and fulfills its corporate social responsibility based on the philosophy “giving back to society”. The descriptions of the mechanisms and measures adopted for the four major activities mentioned above and their implementation status are as follows: (1) Environmental protection, energy conservation, and carbon reduction: See “2. Sustainable environment development” in the
Implementation Status1	Abstract Explanation2
	No
	Yes
	Evaluation Item

The Company is committed to social and community engagement. Having established the Directions Governing the Use and	Review of Neighborhood Service Funds, the Company prepares a budget on an annual basis to engage in neighborhood services. In	2017, the Company spent a total of$1,580,000 on sponsoring neighborhood activities (including sports and recreational activities	of different agencies and schools, activities for village and community residents, the Salvation Ceremonies for the Ghost Festival,	volunteer meet-ups, energy conservation and environmental protection events, and club activities) in the Siaogang area in	Kaohsiung and on Hoping Island in Keelung ($1,180,000 for the Kaohsiung Yard and $400,000 for the Keelung Yard). For the major	cultural and social care activities conducted in2017, please refer to Page 00 of the Chinese version of the Annual Report.	(3) Safety and health activities:	All levels of the company have a strong determination to maintain occupational safety and health. The labor safety and	hygiene department is set as a dedicated unit to supervise the company's safety and health work. All safety and sanitation	engineers and safety personnel are assigned to each site to perform on-site safety and health. jobs. On the internal website,	websites such as "Occupational Disaster Notification," "Safety Bulletin," and "Work Safety Propaganda Information" have been	established for employees to read and use, thereby enhancing employees' awareness, experience and resilience of IGS.	In order to prevent occupational safety accidents, provide a friendly working environment, and ensure the safety of	employees and contractors, the company has successively introduced the occupational safety and health management system

since 1996, and obtained international certification of OHSAS 18001 occupational safety and health management system in 1997.	Obtained DNV charter certificate. In the following year, the TOSHMS Taiwan Occupational Safety and Health Management	System was internationally verified and the DNV charter certificate was obtained. Since then, the company's occupational safety	and health management work has been officially and systematically progressed toward systematic management. Since then,	Taiwan Shipbuilding Company has passed the OHSAS 18001 and CNS 15506:2011 (formerly TOSHMS) occupational safety and	health management system certification audits in 106 years and obtained BV charter certificates.	(4)Industry-academia collaboration and talent training:	1. Training for talent in engineering management	The Company attracts and engages young talent through work study programs conducted with schools and	industry-academia collaboration projects, so as to continuously achieve innovation and advancement. To cultivate and recruit	talents in the shipbuilding-related fields and attract outstanding students who are interested to the shipbuilding industry, the	Company offers scholarships to students currently enrolled in the master’s programs in naval architecture, marine engineering,	electrical engineering, ocean engineering, shipping and transportation management, transportation science, and other related	fields at the Taiwan University, Cheng Kung University, Taiwan Ocean University, Kaohsiung Marine University, SUN Yat-Sen	University, National Defense University Institute of Technology..	In 2017, the Company selected 12 students enrolled in the master’s programs in vessel or marine-related fields through a

screening process and awarded each of them with NT$60,000 per semester, as a way to encourage students to strive for progress	and engage in research and development. These awardees are obligated to work for the Company after graduation, and the	period of their service must not be shorter than the period during which they receive the scholarships.	2. Training for talent in technology	To develop and improve technologies and enhance the expertise of employees, the Company followed previous examples	and took part in the work study programs under the 1+3 Cultivation Program through Collaboration among Industry, Academia,	and Training Institutions, which was jointly organized by Fortune Institute of Technology and the	Kaohsiung-Pingtung-Penghu-Taitung Regional Branch of Workforce Development Agency, Ministry of Labor, in 2017. The	Company offered internships and monthly internship allowances to 15 of the students in the program. These students are	required to receive practical training in regard to welding and cold work from August 1, 2018 to June 30, 2021. At present, 26	students are receiving such training in the yards. Moreover, another 28 students in the industry-academia collaboration program	conducted with the Chung-Cheng Industrial High School and Kaohsiung Marine University have been undergoing internships that	will end on June 30, 2021 in the yards.

3. Training for talent in marine technology To cultivate talents in shipbuilding, the Company works with the Taiwan University, Cheng Kung University, Taiwan Ocean University, and Kaohsiung Marine University and offers the practical training program, Emerging Marine Affluent, to students of relevant departments during winter and summer vacations. The Intermediate Level Emerging Marine Affluent Program lasts four weeks, while the Advanced Level Emerging Marine Affluent Program lasts six weeks. In2017,31 students participated in the intermediate level program, and 19 students in the advanced level program, at the yards. 3.3.6 Ethical Corporate Management	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons	Reference to the listing and OTC Code of Ethical Corporate Practice and CSBC characteristics.
	Implementation Status1	Abstract Illustration	(1)We have established Code of Ethics to declare ethical corporate management policies,and also established Code of Ethics and Conduct for Directors and First-Level or Higher
		No
		Yes	V
		Evaluation Item	1. Establishment of ethical corporate management policies and programs (1) Does the company declare its ethical corporate management policies and procedures in its guidelines and external documents, as well as the commitment from its board to implement

					Reference to the listing	and OTC Code of Ethical	Corporate Practice and	CSBC characteristics.						Reference to the listing	and OTC Code of Ethical	Corporate Practice and	CSBC characteristics.
Management, Code of Ethics for Employees of	CSB, Procedures for Ethical Management and	Guidelines for Conduct .The query website is	available at: http://www.csbcnet.com.tw	Investor Zone.	(2) We have established Procedures for Ethical	Management and Guidelines for Conduct to	prevent unethical conduct with clear	statements regarding relevant procedures,	guidelines of conduct, punishment for	violation, rules of appeal, and the	commitment to implement the policies. The	query website is available at:	http://www.csbcnet.com.tw Investor Zone.	(3)We have established Code of Ethics to prevent	against the following:	(I) Offer and acceptance of bribery.	(II) Provision of illegal political donations.	(III)Improper charitable donation or sponsor	ship.	(IV) Provision or acceptance of unreasonabl	e gift, entertainment or other undue i	nterests.	(V)Infringement of business secrets, tradema	rk, patents, copyrights, and other intell
					V									V
the policies?					(2) Does the company establish policies to prevent	unethical conduct with clear statements	regarding relevant procedures, guidelines of	conduct, punishment for violation, rules of	appeal, and the commitment to implement the	policies?				(3) Does the company establish appropriate	precautions against high-potential unethical	conducts or listed activities stated in Article 2,	Paragraph 7 of the Ethical Corporate	Management Best-Practice Principles for	TWSE/TPEx Listed Companies?

	Reference to the listing and OTC Code of Ethical Corporate Practice and CSBC characteristics. Reference to the listing and OTC Code of Ethical Corporate Practice and CSBC characteristics.
ectual property rights. (VI) Engagement in unfair competition. (VII) Direct or indirect harm to the rights, health, and safety of consumers or oth er stakeholders during the research an d development, procurement, productio n, provision or sale of products and se rvices.	(1)We holds annual business meetings, conveying our integrity requirements to all our business partners. In addition, an ethic-related clause is included in every business contract. (2)To perfect the management of ethical operation, various internal units of the Company shall undertake the following tasks, while the Audit Office shall supervise the execution of such tasks and make regular reports to the board of directors. (I) Planning Department: 1. Help incorporate ethics and moral value into the Company’s business strategy. 2. Recommend on the adjustment of internal organization and
	V
	2. Fulfill operations integrity policy (1)Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts? (2)Does the company establish an exclusively (or concurrently) dedicated unit supervised by the Board to be in charge of corporate integrity?

responsibilities; establish mutual	supervision, check and balance	mechanism for business activities with	relatively higher risk of unethical	behaviors in the Company’s scope of	business.	(II) Legal Affairs Office:	In coordination with the laws, ensure	the effective execution of the	Precautionary Solutions for ethical	management and the relevant standard	operating procedures in each solution.	(III) Management Department:	1. Set down the “Ethical Management	Operating Procedures and Behavior	al Guidelines” (including the Precaut	ionary Solutions and the reporting s	ystem, whistleblower (reporter) prot	ection procedures and behavioral gu	idelines).	2. Promotion and coordination of the	ethical management policy publicity	and training.	(IV) Audit Office:	1. Accept reports and undertake repor	ter protection affairs, ensuring the	effective execution.	2. Assist the board of directors and t	he management in investigating and	evaluating the effective operation	of the precautionary measures estab	lished for the practical implementati

													Reference to the listing and OTC Code of Ethical	Reference to the listing and OTC Code of Ethical	Reference to the listing and OTC Code of Ethical	Corporate Practice and	CSBC characteristics.							Reference to the listing	and OTC Code of Ethical	Corporate Practice and	CSBC characteristics.	Reference to the listing	and OTC Code of Ethical	Corporate Practice and
on of ethical management, and con	duct regular compliance assessment		on the relevant business workflows	and compile reports on that.	(3) We have established Code of Ethics , Code of	Ethics and Conduct for Directors , First-Level or	Higher Management, Code of Ethics for	Employees of CSB, Procedures for Ethical	Management and Guidelines for Conduct , to	prevent conflicts of interest and provide	appropriate communication channels, and	implement it.		(4)We have established accounting and internal	control systems to ensure integrity in our operations.					(5) For new employees, training on ethical rules,		conflicts of interest, business morals, and all	other related subjects are carried out during	their first week of work.Employees are required	to receive integrity training .
														V										V				V
(3)Does the company establish policies to prevent		conflicts of interest and provide appropriate		communication channels, and implement it?								(4)Has the company established effective systems		for both accounting and internal control to		facilitate ethical corporate management, and are they audited by either internal auditors or		CPAs on a regular basis?	(5)Does the company regularly hold internal and	external educational trainings on operational	integrity?

CSBC characteristics.	Reference to the listing and OTC Code of Ethical Corporate Practice and CSBC characteristics. Reference to the listing and OTC Code of Ethical Corporate Practice and CSBC characteristics. Reference to the listing and OTC Code of Ethical Corporate Practice and CSBC characteristics.
	(1)We have established various reporting channels so that employees and relevant people can report improper business behaviors through the system. After a confidential investigation, anyone who violates the regulations on operational integrity will be punished according to the Company’s regulations on reward and punishment. In cases of illegal conduct, legal actions will be taken as well. (2)We have establish Procedures for Ethical Management and Guidelines for Conduct authorized by the Board which could be applied on any confidential investigations . (3) We have establish Code of Ethics ,Procedures for Ethical Management and Guidelines for Conduct to take whistleblower protection seriously since the core purpose is protection from unlawful reprisal for diligent employees who step forward to identify potential wrongdoing. We has a dedicated hotline for whistleblower protection whether first-line managers and the Board if necessary, can
	V v v
	3. Operation of the integrity channel (1)Does the company establish both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up? (2)Does the company establish standard operating procedures for confidential reporting on investigating accusation cases? (3)Does the company provide proper whistleblower protection?

	Reference to the listing and OTC Code of Ethical Corporate Practice and CSBC characteristics.	5. If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation. There have been no differences.	6. Other important information to facilitate a better understanding of the company’s ethical corporate management policies (e.g., review and amend its policies). (a) To implement the basics of ethical corporate management policies, We operate under the Company Act, Securities and Exchange Act, Businesses Entity Accounting Act, related regulations for TWSE/TPEx-Listed Companies, and other laws and decrees concerning business transactions. (b) For more detailed information, please refer to the Company’s official website: //www.csbcnet.com.tw Investor Zone..
directly review and determine appropriate actions against reprisal of complaints.	(1) We have established Code of Ethics , Code of Ethics and Conduct for Directors , First-Level or Higher Management, Code of Ethics for Employees of CSB, Procedures for Ethical Management and Guidelines for Conduct have been posted on the Company’s Chinese / English website and MOPS.
	v
	4. Strengthening information disclosure (1) Does the company disclose its ethical corporate management policies and the results of its implementation on the company’s website and MOPS?

3.3.7 Corporate Governance Guidelines and Regulations

Please refer to the Company’s website at http://www.csbcnet.com.tw /English/ServiceEng/InvestorEng.htm.

3.3.8 Other Important Information Regarding Corporate Governance ： None

3.3.9 Internal Control Systems

Please refer to page 65 of the Chinese annual report.

3.3.10 Major Resolutions of Shareholders’ Meeting and Board Meetings

Item	Date	Major resolutions
Board meeting	22,03,2017	1. Approval of the 2016 Financial Statements and Consolidated Financial Statements. 2. Approval of the 2016 business report. 3. Because no Pre - tax benefits,the 2016 Directors remuneration and Employee reward will not be paid. 4. Approval of the proposal for 2016 Deficit Compensation. 5. Approval of amendment to the ”Procedures for Acquisition or Disposal of Assets”. 6. Approval of held 2017 annual meeting of shareholders on 2017/6/21. 7. Approval of issue a notice to accept the written proposal of the shareholder. 8. Approval of the 2016 Statement of Internal Control Systems. 9. Approval of the 2016 financial statements (include consolidated financial statements) and filing returns assessed and certified by PwC Taiwan. 10.The first quarter of 2017 accountants of Governing Auditing and Certification of Financial Statement be changed from Liu, Tzu-Meng and Lin, Tzu-Shu to Wang,kuo-hua and Wu,chien-chih. 11.For Improve the financial ratio、increase Working capital、Capital expenditure plan and re-investment plan，raising funds used in 3-5 years. 12. Approval of that LIN, FOUNG-TANG promoted from Business Supervision to Vice General Manager. 13. Approved the job transfer of Wang Hai-tao Vice General Manager and WEI, CHENG-TZU General Manager. 14. Approved the units and duties change of seven first-level supervisor. 15. Approved Change Keelung yard Acting General Manager TANG, JUNG-KUEI to hold a concurrent post as a director of LANJIE CO., LTD. 16. Approved Change Machinery Works Deputy General Manager GUO, KUEN-CHERNG to hold a concurrent post as a director of Blue Ocean

76

		Wind Power Engineering (Hong Kong) Limited. 17. Approval of Executive Vice President TSENG, KUO-CHENG to hold a concurrent post as a CEO of SDCC (Submarine Development Center of CSBC). 18. For Improve the LLC 6 crane replacement upgrade investment plan in Kaohsiung Yard. 19. For improve the 350 tons GOC crane replacement upgrade investment plan in Kaohsiung Yard. Approved of revised "Directions of commission payment for attract business". 20. Approved of revised "Directions of commission payment for attract business".
Board meeting	05,10,2017	1. Approval of amendment to the ”Budgeting Management Practices”. 2. Approval of the hierarchy of Technology and service category from 14 upgrade to 15. 3. Approved the job transfer of 5 supervisors.
Board meeting (extraordinary)	06,21,2017	1. Approve of by negotiating with the shipowner to amend the H.1057 contract.
shareholders meeting	21,Jun,2017	1. Recognizes that the number of affirmative rights in the business report and financial report for the year 105 accounted for 98.9% of the voting rights of the attending shareholders, which was passed in the case. 2. Recognizing the profit and loss appropriation for the year of 105, the pro-weight equity accounted for 98.57% of the voting rights of the share -holders attending the meeting. The case was passed as approved. 3. Resolved to amend the company's "get or dispose of key points of asset management" case, the pro-weight equity accounted for 98.58% of the voting rights of the shareholders, which was passed in the case
Board meeting	08,01,2017	1. Approve of General manager appointed. 2. Approve of procedures for seal stamp management. 3. Approval of Executive Vice President Cheng-Tzu Wei to hold a concurrent post as a President of CSBC Coating Solutions Co., Ltd. 4. Approval of that Chih-Ming Chou promoted from Design Department Director to Vice General Manager. 5. Approved the job transfer of 5 supervisors.
Board meeting	11,03,2017	1. Consent for more than half of the capital loss report. 2. Approval of the Proposal for 2017 Q3 Deficit Compensation. 3. Approved the Capital Reduction. 4. Approved the issuance of new common shares in private placement. 5. Approval of held 2017 extraordinary

77

		shareholders' meeting on 2017/12/21. 6. Approval of "2018 Annual Audit Plan". 7. Approve of for Improve the financial ratio、 increase Working capital、Capital expenditure plan and re-investment plan，raising funds used in 3-5 years again. 8. For Improval the #2 pier RS31 ground loading upgrade plan in Kaohsiung Yard. 9. Approve of make the comapny “Seafarers’ working regulations”. 10. Approval of amendment to the company “Employee shareholding trust subsidy regulations”. 11. Approval of amendment to the "Audit Committee Charter". 12. Approval of amendment to the "Rules of Procedure for Board of Directors’ Meetings ". 13. Approval of amendment to the "Regulations on Scope of Responsibilities of Independent Directors". 14. Approved the job transfer of 3 supervisors.
Board meeting (extraordinary)	11,22,2017	1. Approval of amendment to the ”Procedures for Acquisition or Disposal of Assets”. 2. Approval of the Company's 2018 Annual Operating Plan. 3. Approval of LANJIE CO., LTD director's part time reward and traced back to 2017.3.29.
Interim Meeting of Shareholders	21.Dec,2017	1.Recognizing the financial report for the third quarter of 2006, the pro-weight equity ccounted for 98.96% of the voting rights of the attending shareholders, and this case was passed as app -roved. 2. Recognizing the loss compensation in the first three quarters of 2006, the pro-weight equity accounted for 98.9% of the voting rights of the attending shareholders, and the case was passed. 3. In the case of a resolution to reduce losses or make up for losses in the mid-term, the pro-weight equity accounted for 98.88% of the voting rights of the shareholders present, and the case was passed. 4. Resolving to handle the private equity common stock capital increase case, the pro-weight equity accounted for 98.71% of the voting rights of the attending shareholders, and the case was passed. 5. Resolved to amend the company's "get or dispose of key points of asset management" case, the pro-weight equity accounted for 98.97% of the voting rights of the attending shareholders, the case was passed.

78

Board meeting	03.23.2018	1. Approval of the 2017 Financial Statements and Consolidated Financial Statements. 2. Approval of the 2017 Business report. 3. Approved 2017 not to issue reward (bonuses) for directors and employees because the company has no Pre-tax benefits. 4. Approval of held 2018 annual meeting of shareholders on 2018/6/28. 5. Approval of announcement to accept the written proposal of the shareholder. 6. Approval of the 2017 Statement of Internal Control Systems. 7. Approval of the 2018 financial statements (include consolidated financial statements) and hire PwC Taiwan to process tax declaration visa. 8. Approved the revision of the company’s “Competition Prohibition and Confidentiality Regulations when employees departure”，and rename to“Confidentiality Regulations of employees and after they departure" 9. Approved of revised "Remuneration Committee Charter " 10. Approved of the number of employees required by the company.

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

79

3.3.12 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D.

				12/31/2017
Title	Name	Date of Appointment	Date of Termination	Reasons for Resignation or Dismissal
President	CHEN,LIE-LIN	07/04/2012	07/31/2017	Retirement

3.4 Information Regarding the Company’s Audit Fee and Independence 3.4.1 Audit Fee

Accounting Firm	Accounting Firm	Name of CPA	Period Covered by CPA’s Audit	Remarks
PriceWaterHouseCoopers		W GH/		-
		ang, uo-ua	2017.01.01~2017.12.31
		Wu, Chien-Chih

Note: If the Company has changed CPA or Accounting Firm during the current fiscal year, the company shall report the information regarding the audit period covered by each CPA and the replacement reason.

Unit: NT$ thousands

Accounting Firm PriceWater HouseCoopers	Name of CPA			Non-audit Fee	Non-audit Fee	Non-audit Fee		Period
		Audit	System of Design	Company Registration	Human Resource	Others	Subtotal
								Covered by	Remarks
		Fee
								CPA’s Audit
	Wang, Guo-Hua	1,800	-	-	-	-	-	2017.1.1~	-
								2017.12.31
	Wu, Chien-Chih

3.4.2 Replacement of CPA : Not Applicable.

3.4.3 Audit Independence

CSBC Chairman, Chief Executive Officer, Chief Financial Officer, and managers in charge of its finance and accounting operations did not hold any positions in the Company’s independent auditing firm or its affiliates during 2017.

Accounting Firm	Name of CPA	Period Covered by CPA’s Audit	Remarks
PriceWaterHouseCoopers	Wang, Guo-Hua/		PriceWaterHouseCoopers

Note: If the Company has changed CPA or Accounting Firm during the current fiscal year, the

80

company shall report the information regarding the audit period covered by each CPA and the replacement reason.

Unit: NT$ thousands

Accounting Firm	Name of CPA	Audit Fee		Non-audit Fee	Non-audit Fee			Period Covered by CPA’s Audit	Remarks
			System of Design	Company Registration	Human Resource	Others	Subtotal
PriceWater HouseCoopers	Liu,Tzu- Meng	1,800	-	-	-	-	-	2016.1.1~ 2016.12.31	-
	Lin, Tzu-Shu

3.4.2 Replacement of CPA : Not Applicable.

3.4.3 Audit Independence

CSBC Chairman, Chief Executive Officer, Chief Financial Officer, and managers in charge of its finance and accounting operations did not hold any positions in the Company’s independent auditing firm or its affiliates during 2016.

3.5 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

		Unit: Shares	Unit: Shares	Unit: Shares	Unit: Shares
Title	Name	2017		As of Mar. 31, 2018
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Director	Ministryof Economic Affairs	0	0	0	0
Representative	CHENG,WEN-LON	100,000	0	0	0
Director	Ministryof Economic Affairs	0	0	0	0
Representative	CHEN,YUNG-TSUNG	0	0	0	0
Director	Ministryof Economic Affairs	0	0	0	0
Representative	Huang,YING-FANG	0	0	0	0
Director	Ministryof Economic Affairs	0	0	0	0
Representative	FANG,MING-CHUNG	0	0	0	0
Director	Ministryof Economic Affairs	0	0	0	0
Representative	CHEN,LIE-LIN(Note 1)	0	0	-	-
Representative	TSENG,KUO-CHENG(Note 1)	0	0	0	0
Director	Ministryof Economic Affairs	0	0	0	0
Representative	HUANG,JIH-CHIN	0	0	0	0
Director	Ministryof Economic Affairs	0	0	0	0
Representative	LAN,SYU-CING	0	0	0	0
Director	CPC Corporation,Taiwan	0	0	0	0
Representative	LEE,SHAO-YI(Note 2)	0	0	-	-
Representative	YIN,LING- YING(Note 2)	0	0	0	0

81

Title	Name	2017	2017	As of Mar. 31, 2018	As of Mar. 31, 2018
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Director	China Steel Representative	0	0	0	0
Representative	Lee Xin-Min	0	0	0	0
Director	Yue-Li Investment Corporation	0	0	0	0
Director	Kaohsiung City Representative of Industrial Labor Union of CSBC	0	0	0	0
Representative	HOU,DE-LONG	0	0	0	0
Director	Kaohsiung City Representative of Industrial Labor Union of CSBC	0	0	0	0
Representative	HSIEH,KUO-JUNG	0	0	0	0
Independent Director	LIN, HUI-JENG	0	0	0	0
Independent Director	FU, HO-CHUNG	0	0	0	0
Independent Director	LIEU, DER-MING	0	0	0	0
Chairman of the board of directors	CHENG, WEN-LON	100,000	0	0	0
Manager	CHEN,LIE-LIN(Note 1)	0	0	-	-
Manager	WANG,HAI-TAW(Note 3)	0	0	-	-
Manager	TSENG,KUO-CHENG	0	0	0	0
Manager	CHANG,CHIEH-TE	0	0	0	0
Manager	LIN,FOUNG-TANG(Note 3)	0	0	0	0
Manager	WEI,CHENG-TZU(Note 3)	0	0	0	0
Manager	CHOU,CHIH-MING(Note 4)	0	0	0	0
Manager	SU,CHEN-AN	0	0	0	0
Manager	HSIEH,LING-LING	0	0	0	0
Major shareholder	Ministryof Economic Affairs	0	0	0	0

Note 1： On 2017/08/01, The director and manager CHEN, LIE-LIN was retired. TSENG, KUO-CHENG assumed the position.

Note 2： On 2017/5/1, CPC Corporation, Taiwan reappointed YIN, LING- YING as a director.

Note 3 ： On 2017/3/23, the manager WANG, HAI-TAW was retired. The manager LIN, FOUNG-TANG and WEI, CHENG-TZU assumed the position.

82

Note 4： On 2017/8/1, the manager CHOU, CHIH-MING assumed the position.

3.5.1 Shares Trading with Related Parties: None

3.5.2 Shares Pledge with Related Parties: None

3.6 Relationship among the Top Ten Shareholders

Name	Current Shareholding	Current Shareholding	Spouse’s/ minor’s Shareholdin g	Spouse’s/ minor’s Shareholdin g	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees	Re ma rks
	Shares	%	Shares	%	Shares	%	Name	Relationship
Ministry of Economic Affairs	249,612,540	33.57%	0	0	0	0	1. CPC Corporatio n, Taiwan 2. China Steel Corporatio n	1. Holding 100% shares of CPC 2. The major shareholder of CSC
Yuanta Commercial Bank Trust Account Representative: Chu,Che-Yi	59,970,030	8.07%	0 0 0 0 None The shareholder doesn’t provide.					None
CPC Corporation, Taiwan Responsible person: Tai,Chein	47,030,687	6.33%	0 0 0 0 Ministry of Economic Affairs The shareholder doesn’t provide.					Ministry of Economic Affairs is the only shareholder.
China Steel Corporation Responsible person: Weng,Chao-Dong	18,414,641	2.48%	0 0 China Steel Express Corporation 11,162 shares 0.0015 % Ministry of Economic Affairs The shareholder doesn’t provide.					Ministry of Economic Affairs is the major shareholder.
iShare Emerging Markets ETF	6,759,000	0.91%	0	0	0	0	None	None
Bureau of Labor Funds -Labor Pension Fund Representative: Tsay,Feng-Ching	5,870,480	0.79%	0 0 0 0 None The shareholder doesn’t provid					None
Yue-Li Investment Corporation Responsible person: Chen,Xiu-Neng	5,246,336	0.71%	0 0 0 The shareholder doesn’t			0 None provide.		None
FINI Dimensional Emerging Markets Value Fund	4,941,653	0.66%	0	0	0	0	None	None
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star	4,375,100	0.59%	0	0	0	0	None	None

83

Name	Current Shareholding	Current Shareholding	Spouse’s/ minor’s Shareholdin g	Spouse’s/ minor’s Shareholdin g	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees	Re ma rks
	Shares	%	Shares	%	Shares	%	Name	Relationship
Funds
DFA Emerging Markets Securities Fund	3,534,150	0.48%	0	0	0	0	None	None

3.7 Ownership of Shares in Affiliated Enterprises

Date ： 106.12.31

Name of Subsidiary	CSBC	CSBC	directors, supervisors, managers, directly or indirectly controlled bythe Company	directors, supervisors, managers, directly or indirectly controlled bythe Company	Comprehensive investment	Comprehensive investment
	No. of shares held	Stockholding (%)	No. of shares held	Stockholding (%)	No. of shares held	Stockholding (%)
CSBC Coating Solution Corporation	8,750,000	70%	0	0%	8,750,000	70%
Blue Ocean Wind Power Engineering (H.K.)Ltd.	USD7,000	70%	0	0%	USD7,000	70%
Blue Ace Corporation	1,750,000	70%	0	0%	1,750,000	70%
TOWSC	400,000	40%	0	0%	400,000	40%
Fuhai Wind Farm Corporation	15,000,000	37.97%	0	0%	15,000,000	37.97%

。 Note: The company uses long-term equity investment method

84

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Issued Shares

Year	Par Value (NT$)	Authorized Capital	Authorized Capital	Paid-in Capital	Paid-in Capital	Remark	Remark
		Shares	Amount (NT$ thousands)	Shares	Amount (NT$ thousands)	Sources of Capital	Capital Increased by Assets Other than Cash	Other
1976	10	220,000	2,200,000	220,000	2,200,000	cash capital increase 2,200,000	None	-
1977	10	320,003	3,200,032	320,003	3,200,032	cash capital increase 1,000,032	None	-
1978	10	428,510	4,285,108	428,510	4,285,108	cash capital increase 1,085,076	None	-
1979	10	561,507	5,615,075	561,507	5,615,075	cash capital increase 1,329,967	None	-
1980	10	679,174	6,791,740	679,174	6,791,740	cash capital increase 1,176,665	None	-
1981	10	809,174	8,091,740	809,174	8,091,740	cash capital increase 1,300,000	None	-
1982	10	826,174	8,261,740	826,174	8,261,740	cash capital increase 170,000	None	-
1983	10	866,174	8,661,740	866,174	8,661,740	cash capital increase 400,000	None	-
1984	10	929,174	9,291,740	929,174	9,291,740	cash capital increase 630,000	None	-
1985	10	979,174	9,791,740	979,174	9,791,740	cash capital increase 500,000	None	-
1986	10	1,029,174	10,291,740	1,029,174	10,291,740	cash capital increase 500,000	None	-
1987	10	1,055,174	10,551,740	1,055,174	10,551,740	cash capital increase 260,000	None	-
1988	10	1,105,174	11,051,740	1,105,174	11,051,740	cash capital increase 500,000	None	-
1989	10	1,280,174	12,801,740	1,280,174	12,801,740	cash capital increase 1,750,000	None	-
1990	10	1,695,233	16,952,335	1,695,233	16,952,335	cash capital increase 4,150,595	None	-

85

1998	10	1,113,900	11,138,997	1,113,900	11,138,997	capital reduction 5,813,338	None	-
2003	10	1,113,900	11,138,997	1,113,900	11,138,997	cash capital increase 5,000,000 capital reduction 5,000,000	None
2007	10	1,113,900	11,138,997	666,133	6,661,326	capital reduction 4,477,671	None
2009	10	1,113,900	11,138,997	672,793	6,727,939	capitalization of retained earnings 66,613	None
2010	10	1,113,900	11,138,997	721,908	7,219,079	capitalization of retained earnings 491,140	None
2012	10	1,113,900	11,138,997	743,565	7,435,652	capitalization of retained earnings 216,572	None

B. Type of Stock

Share Type		Authorized Capital		Remarks
	Issued Shares	Un-issued Shares	Total Shares
Common Stock	743,565,179	370,334,538	1,113,899,717	－

4.1.2 Status of Shareholders

Nov. 22, 2017

Item	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	1	1	63	37,892	110	38,067
Shareholding (shares)	249,612,540	1,000	142,625,914	309,446,284	41,879,441	743,565,179
Percentage	33.57%	0	19.18%	41.62%	5.63%	100.00%

86

4.1.3 Shareholding Distribution Status

A. Common Shares

Nov. 22, 2017

Class of Shareholding (Unit: Share)	Number of Shareholders	Shareholding (Shares)	Percentage
1- 999	9,766	1,704,776	0.23%
1,000- 5,000	17,608	38,630,282	5.20%
5,001- 10,000	4,578	33,085,756	4.45%
10,001- 15,000	2,108	24,808,597	3.34%
15,001- 20,000	949	17,152,414	2.31%
20,001- 30,000	1,060	25,949,683	3.49%
30,001- 50,000	885	34,476,245	4.64%
50,001- 100,000	649	45,557,943	6.13%
100,001- 200,000	292	39,538,951	5.32%
200,001- 400,000	110	30,102,503	4.05%
400,001- 600,000	27	12,638,656	1.70%
600,001- 800,000	6	4,150,130	0.56%
800,001- 1,000,000	4	3,487,608	0.47%
1,000,001 or over	25	432,281,635	58.14%
Total	38,067	743,565,179	100.00%

B. Preferred Shares ： None

87

4.1.4 List of Major Shareholders

4.1.4 List of Major Shareholders
	Nov. 22,2017
Shareholder's Name	Shareholding
	Shares	%
Ministryof Economic Affairs	249,612,540	33.57%
Yuanta Commercial Bank Trust Account	59,970,030	8.07%
CPC Corporation,Taiwan	47,030,687	6.33%
China Steel Corporation	18,414,641	2.48%
iShare EmergingMarkets ETF	6,759,000	0.91%
Bureau of Labor Funds-Labor Pension Fund	5,870,480	0.79%
Yue-Li Investment Corporation	5,246,336	0.71%
FINI Dimensional EmergingMarkets Value Fund	4,941,653	0.66%
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund,a series of Vanguard Star Funds	4,375,100	0.59%
DFA EmergingMarkets Securities Fund	3,534,150	0.48%

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share 翁季筠

			Unit: NT$
Items	2016	2017	01/01/2018- 03/31/2018
Market Priceper Share
Highest Market Price	16.60	16.05	19.20
Lowest Market Price	12.60	10.90	11.30
Average Market Price	14.82	12.85	15.19
Net Worthper Share
Before Distribution	16.38	8.52	7.38
After Distribution	16.38	Note4	-
Earnings per Share
Weighted Average Shares	743,565,179	743,565,179	743,565,179
Adjusted Weighted Average Shares(Note5)	312,991,749	312,991,749	312,991,749
Diluted Earnings Per Share	(1.73)	(7.91)	(1.14)
Adjusted Diluted Earnings Per Share	(4.11)	(18.79)	(2.71)
Dividendsper Share
Cash Dividends	0.00	Note4	-
Stock Dividends
� Dividends from Retained Earnings	0.00	Note4	-

88

� Dividends from Capital Surplus	0.00	Note4	-
Accumulated Undistributed Dividends	0.00	0.00	-
Return on Investment
Price/Earnings Ratio(Note 1)	(8.42)	(1.65)	(12.43)
Adjusted Price/Earnings Ratio	(3.54)	(0.69)	(5.23)
Price/Dividend Ratio(Note 2)	-	Note4	-
Cash Dividend Yield Rate(Note 3)	0.00	Note4	-

• Note 1: Price / Earnings Ratio = Average Market Price / Earnings per Share

• Note 2: Price / Dividend Ratio = Average Market Price / Cash Dividends per Share Note 3: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price Note 4: The loss offsetting proposal of 2017Q3 has been resolved by Extraordinary Shareholders’ Meeting of 2017. The loss offsetting proposal of 2017 haven’t been resolved by Annual General Shareholders’ Meeting.

• Note5: The capital reduction before the end of any fiscal year 2017 set the record date on May 10, 2018. The weighted average number of shares outstanding used for the loss per share computation was adjusted retroactively for the record date of the reduction on May 10, 2018. The record date of the reduction was after the 2018Q1 financial reporting date, but earlier than the issue date. Therefore, the loss per share was based on the outstanding share after the reduction.

4.1.6 Dividend Policy and Implementation Status

A. Dividend Policy

• If the Company has earnings in the current fiscal year after annual audit, it shall first pay the profit-seeking enterprise income tax and cover its accumulated losses in previous years. If there is a balance, the Company shall set aside 10% as legal reserves. However, the provision does not apply when the legal reserves have reached the toal amount of capital. Moreover, a special reserve shall be set aside in accordance with Article 41 of the Securities and Exchange Act. If there is still a balance, the Board of Directors shall propose an allocation plan in the shareholders’ meeting for resolution before allocation.

• Considering the business environment and growth of the Company, the Company may allocate 10% or more of the distributable earnings referred to in the preceding Paragraph as dividends and bonuses depending on the Company’s future demand for funds and its long-term financial planning, and satisfying shareholders’ demand for cash. Cash dividends shall not be less than 10% of the total dividends.

89

B. Proposed Distribution of Dividend

It would not distribute dividend of 2017, and it will be discuss at the Annual

General Shareholders’ Meeting.

4.1.7 Employee Bonus and Directors' and Supervisors' Remuneration

• A. Information Relating to Employee Bonus and Directors’ and Supervisors’ Remuneration in the Articles of Incorporation.

• The company charter prescribes the following for the employee bonus and compensation for directors :

• (a)1% ~ 5% as a bonus for employees;

• (b)Not exceeding 1% as compensation for directors ;

• B. The Estimated Basis for Calculating the Employee Bonus and Directors’ and Supervisors’ Remuneration

• No Employee Bonus and Directors’ Remuneration for 2017 because of no retained earnings before tax.

• C. Profit Distribution for Employee Bonus and Directors’ and Supervisors’ Remuneration for 2017 Approved in Board of Directors Meeting

• No Employee Bonus and Directors’ Remuneration for 2017 because of no retained earnings before tax.

4.1.8 Buyback of Treasury Stock ： None

4.2 Bonds ： None

4.3 Global Depository Receipts ： None

4.4 Employee Stock Options ： None

4.5 Status of New Shares Issuance in Connection with Mergers and Acquisitions ：

None

4.6 Financing Plans and Implementation

The private placement of common shares is approved by Extraordinary Shareholders’ Meeting of Dec. 21, 2017. Please refer to p. .

V. Operational Highlights

5.1 Business Activities

5.1.1 Business Scope

A. Main areas of business operations

Customers are mainly distributed in Europe, Asia and Africa and the Americas region.

B. Revenue distribution

Unit：NT$ One hundred million

Major Divisions	Total Sales in Year 2017	(%)of Total Sales
Domestic	75.37	45.95
Export	88.67	54.05
Total	164.04	100.00

90

C. Main products

C. Main products
	Unit：NT$ thousands
Major Products	Total Sales in Year 2017	(%)of Total Sales
Commercial ships	15,036,967	91.67
Militaryships	222,148	1.35
Commercial and military ship maintenance	1,075,447	6.56
Machinerymanufacturing	31,482	0.19
Other businessprojects	38,300	0.23
Total	16,404,344	100.00

D. New products development

Submarine design and construction, Naval or coast guard surface ship design and construction , marine engineering, business ships, offshore wind power components assembly and installation and operation and maintenance, marine engineering, rail vehicles, underwater welding, painting and corrosion.

91

5.1.2 Industry Overview

• A. Macroeconomic Environment

• ▓ ABS predicts that shipbuilding demand will gradually increase from 2018 .

==> picture [375 x 196] intentionally omitted <==

Source ： ABS World Shipping & Shipbuilding Outlook, Spring 2017

▓ With regard to the number of newbuildings or deadweight tonnage, the focus of the global shipbuilding industry is still in Asia. At present, the world shipbuilding market presents the situation in China, Japan and South Korea. As of the end of 2017, the number of orders for ships in the Three Kingdoms countries has reached 93% of the world total in modified gross tonnage (CGT), and it holds the world. Most of the shipbuilding market orders. In 2017, China’s handheld orders, new ship orders, and shipbuilding completions all surpassed South Korea, becoming the world's largest shipbuilding nation for the first time.

In order to occupy a small shipbuilding market, Japan and South Korea, the major shipbuilding industry countries, have demonstrated their technological superiority and foreign expansion strategy. They have competed with China for the market, especially in terms of green ship technology.

B. Current Status and Future Development of CSBC

▓ Faced with the global shipbuilding market competition, Taiwan Ships' new challenges in the future include (1) lowering costs, strengthening operational constitution, (2) manpower optimization, technological heritage, (3) adjusting product structure, and developing new business (4) accelerating product development and innovation ( 5) Innovate the business model and develop business. In response to these new challenges, the company has developed relevant strategies in 2013, and has established the “Senior Five-Year Plan”

92

(abbreviated as 168 scheme), actively promoting overall reduction of costs by 25%, and rejuvenation and optimization of personnel. And accelerate technological heritage to fully enhance the company's strengths and competitiveness. As of 2017, the total cost of implementing CGT per unit decreased by 12% compared with 2012, and the non-commercial ship revenue reached 8.34%.

▓ In 2017, the Company continued to promote its diversification operation strategy, formulate an upgrade and transformation plan, conduct a rolling review of the revised upgrade and transformation plan, and set the working philosophy and working guidelines, mastered the nine major work priorities, and actively oriented towards diversified operations to achieve constructive excellence. The goal of the Ocean Group is moving forward.

▓ In the year of 2007, the company has set a total of 45 projects for upgrading and transformation projects. As of January, the target achievement rate is 86.66%. It also aims to improve operations and turn profitability into profits. At the same time, it sets a throttling plan, with a total target value of 7.94 Billion for 106 to 107 years., as of January, the target achievement rate was 37.52%. The annual

upgrade and transformation plan and the thrift program all provide board tracking and control.

▓ Looking at the recovery of the global economy at least until 2020, the economy of the shipbuilding industry is not optimistic. However, in the future, under the guidance of the upgrade and transformation program, the company will actively target 1) the merchant ship industry, 2) the shipbuilding industry, and 3) diversification of offshore wind power operations to reduce the risk of product concentration and shipbuilding operations, with each block accounting for three One-third of the total revenue, the goal of building an excellent marine business group is moving forward. In the past, the company has laid a good foundation. In the future, we expect to pursue better operating performance, continue to pursue growth, and create new innovations under the business philosophy of “integrity, innovation, growth” and the core values of “commitment, safety, teamwork, and service”. In order to create the best interests of the company, employees and shareholders as a whole.

93

C. Relationship with Up-, Middle- and Downstream Companies

Shipbuilding industry, the middle and lower reaches of the supply of many manufacturers, shipbuilding supply chain construction and efficiency of the relationship between shipbuilding industry competitiveness, all the upper supply of shipbuilding plate, the middle of the ship main equipment (host, auxiliary, etc.) and paint and downstream East of the end user. CSBC has various types of ships independent design, installation, manufacturing capacity and a professional ship R & D design talent, and the upper, middle and lower reaches of the supply of manufacturers and owners to maintain good relations of supply and marketing to ensure product quality and delivery.

In the middle and upper reaches of the supply chain manufacturers supply chain building, CSBC has strict supplier evaluation system, and to diversify supply sources, in order to establish a complete supply chain system. On the downstream owners of services, in addition to timely delivery to meet the owner's demand, pay more attention to the use of the product after-sales service and satisfaction.

To ensure product quality and delivery, shipbuilding industry, the middle and lower reaches of the relationship between the closely related, any link problems will affect the downstream owners of services.

D. Product Trends and Competition

• (1) Product Trends

At present, the shipbuilding market in the world has formed a variety of ship types such as oil tankers, bulk carriers, container ships, special ships, and offshore engineering equipment ships. In 2017, the number of ship transactions, tankers, bulk carriers, container ships, and offshore projects (Offshore The proportions of Structure) were 32.46%, 32.61%, 18.24% and 8.96% respectively. Compared to the shipbuilding market in 2016, the growth of oil tankers was 14.13%, the bulk wheel recession was 18.53%, the container ships grew 24.21%, and special ships and offshore engineering equipment. The ship is down 3.45%.

94

(2) Product Competition

By analyzing the strategic development of the major shipbuilding countries by competition strategy, the Republic of Korea, through the economic scale, technology, management and related peripheral industry support, achieved various competitive advantages of low-cost shipbuilding, and gradually increased the proportion of products such as LNG and Offshore. In the past, Japan had made a difference in its strategy to maintain its competitive edge through the change of industrial structure (strategic alliance, merger or division of labor) and specialization (each shipyard focused on a certain type of ship), while cost leadership and professional differentiation . Continental Shipyard is currently in a low labor cost to gain a competitive advantage in the future through capacity expansion, equipment upgrades, technology improvement and efficiency improvement, cost leadership strategy development. Western European countries are still professional differentiation strategy, in the passenger ships, special ships firmly in the lead. CSBC are mainly container ship professional shipyards, and timely according to market demand with the bulk cargo ship or tanker business.

Considering the critical success factors of container ships, it is compared with Japan, Korea and mainland China shipyards. Overall, CSBC has advantages in quality, design and specification, material cost is mainly imported, and the industry scale is small. Bargaining power is weak, more Habitat disadvantage.

5.1.3 Research and Development

A. Research and Development Expenses in the Past Three Years

		Unit：Thousand (NTD)	Unit：Thousand (NTD)
Year Item	2015	2016	2017
R&D funding(A)	155,667	102,196	126,676
Company turnover(B)	21,457,697	15,747,699	16,404,344
(A)／(B)%	0.73%	0.65%	0.77%

95

• B. Education distribution of R&D personnel.

The department unit responsible for research and development is 「 Innovation and Research Center, IRC 」 in CSBC. And the 「 Department of Design 」 and 「 Submarine Development Center, SDCC 」 are responsible for research and development of the ship. And another major work of 「 Machinery Works 」 is responsible for promotion the marine engineering.

The R&D personnel education distribution as follows.

Statistics as of December 31, 2017

Item	Year	2014	2015	2016	2017
Education distribution	Doctor	5	5	6	8
	Master	54	68	79	77
	Bachelor	40	49	42	34
	Others	12	17	17	12
Total		111	139	144	131
Average working years		19.28	17.61	14.42	14.63

5.1.4 Long-term and Short-term Development

A. Long-term Development

• a. Strengthen corporate governance system and make full use of corporate social responsibility

In order to enhance the company’s performance in the capital market and the transparency of the company’s operations, the company’s corporate governance aspects such as safeguarding shareholders’ rights, treating shareholders equally, strengthening the structure and operation of the board, enhancing information transparency, and implementing corporate social responsibility Accepted the "Corporate Governance Review", the evaluation results are listed as 6% to 20% of the company. In order to expose the company’s management and achievements in promoting corporate social responsibility, the company publishes its “Corporate Social Responsibility Report” every year, and establishes a “Corporate Social Responsibility Center” on the company’s website to provide interested parties with access and understanding. Continuously optimize the corporate governance system and make good use of corporate social responsibility.

96

• b. Implementing transformation programs, diversification

• The company has set 1) the shipbuilding industry, 2) shipbuilding, and 3) offshore wind power for the diversification of the operating spindle and upgrading and transformation strategy targets, diversification aims to reduce the company's product concentration shipbuilding, because the global shipping and shipbuilding market by the global economy Business cycle cycle operational risks. The Company's diversification upgrade has been launched since the year of 106. Both internal organization, manpower and management systems will continue to be reviewed and built. The future will be dominated by shipbuilding, shipbuilding, and off-shore wind power. Compared with the plan, each will contribute 1/3 of the target, and the three most-versatile operation spindles are the core technologies of the company's shipbuilding industry. In the future, the company will continue to plow on these three major operation spindles, aiming to build a marine industry with competitive advantages. The group aims to move forward.

• c. Inheritance of knowledge and technology, building human resources

The aging of human resources, technological heritage, and the development of talent for the development of new businesses are challenges and issues that the company can't avoid and need to face. In response to the challenges and issues, the company established the “Taiwan Ship Institute” in October of 106 to continue training and training. To recruit talents, we must actively prepare various talents for the development of the company’s business and prepare and develop more sources of funds. The mission is to pass on the core technologies of shipbuilding and offshore industry, nurture shipbuilding and marine industry talents, and build quality cooperation between industry and academia. Talent cultivation model, development of high-efficiency digital and field environment learning environment. In the long-term goal, “Taiwan Ship College” will also provide a consulting platform for talent cultivation, cultivation and technical exchanges in the company’s diversified management industry chain, and play a key role in implementing the government’s localization policy for industrial development.

97

B. Short-term Development

• a. Actively strive for new business orders, turn losses into profits, and create profit The merchant ship industry will actively strive for a number of businesses including domestic and foreign merchant ships and official ships. At the same time, both Statecraft and Offshore Wind Power will be new businesses the company will actively strive for, in order to win state-owned and off-shore wind power new business, The company has made adjustments in its organization and set up potential launch centers and offshore engineering centers respectively to coordinate the company's limited resources and establish a new research and development center to integrate R&D strategies, develop new business development, and develop and develop core technologies. It will help sustain the growth of the business and create profits.

• b. Strengthen capacity control and reduce costs

The international shipping business is still in a sluggish state, which seriously affects the shipbuilding market. The low shipping prices, together with the large fluctuations in the exchange rate and raw material prices, and the backwardness of the project, caused losses in the operation in the past two years. Except for external uncontrollable factors, the progress of the project has been delayed. Control measures have been adopted to ensure that the subsequent construction of new vessels can be delivered on time and on schedule. At the same time, in order to effectively utilize production capacity, increase production, shipbuilding production (in CGT calculations) and combined quantities, set a target of higher than the year 101, in order to reach the production target for the first time. In addition, in order to increase productivity, the company is currently carrying out 800 tons of large crane investment cases and strengthening the carrying capacity of Pier 2. For the relevant project investment plan, please refer to Chapter 3 for a description of the major capital expenditures. At the same time, the company will continue to promote the throttling program. , Reduce overhead costs, and in the period of improving production efficiency and equipment renewal, comprehensively reduce operating costs to create profits.

• c. Continuously carry out internal transformation of the company to enhance competitiveness

According to the upgrade and transformation plan, the company has set 1) the merchant ship business, 2) the national shipbuilding company, 3) offshore wind power to be the main axis of the diversified operation, and the internal organization of the company has been adjusted at the same time, establishing a

98

new research and development center, a potential launch center, and offshore engineering. The Center and the Taiwan Shipbuilding Institute actively promoted the upgrading of transformation programs. The management system was also reviewed and revised at the same time. The employees were regularly assessed, combined with annual assessments, performance-based rewards were eliminated, and a corporate culture of equal importance and efficiency was created. The establishment of the Taiwan Shipbuilding Academy will shoulder the responsibility of human cultivation, development, and inheritance. At the same time, it will also combine production and academic cooperation to effectively enhance the company's R&D energy and core competitiveness. This will enable the company to become a competitive ocean organization.

d. Improve design energy and accelerate new ship development

In response to the development trend of energy saving and carbon reduction in the world, the company is committed to environmental protection, economy, energy conservation, and safety principles, developing energy-efficient ships, and developing new ship types in response to the needs of the shipbuilding market to meet customer needs and create customer value. The company has been in operation since 2005. Launched Energy Saving Plan (ES) and reached energy saving target of 30%. Energy-saving design results also include energy-saving boat pods (with high sea state adaptability), energy-saving ball pods (saving fuel consumption by 12%), and energy-saving rudder (Energy-saving 2 to 4% horsepower), vortex generator (designed for a patent to reduce propeller excitation force, humming sound and vibration, saving 1% horsepower), and currently launches SODO (Simba optimal ship design and operation technology) The service policy of the innovative design brand and the development of the smart ship of the 4IntShip all-ship network planning brand, in order to enhance the design energy, the company also cooperated with industry and universities, and actively recruited design talents to the various university departments to invest in new ship types. Design and development in order to strengthen the competitive advantage and competitiveness of the company in the highly competitive international shipbuilding market.

99

5.2 Market and Sales Overview

5.2.1 Market Analysis

A. Sales (Service) Region

Unit；NT$ One hundred million

Major Divisions	Total Sales in Year 2017	(%)of Total Sales
Domestic	75.37	45.95
Export	88.67	54.05
Total	164.04	100.00

B. Market Share (%) of Major Product Categories in the Last Two Years

The CSBC market is positioned as a container specialist shipyard. If it does not divide the ship type and analyzes the delivery volume of a single shipyard, the company accounts for approximately 1.21% of the total global delivery volume (in terms of CGT).

Taiwan Shipbuilding Company's market share in the past five years

Year	102	103	104	105	106
Cont.CGT	60.40	43.90	39.50	13.00	25.20
Csbc CGT	313,152.00	339,187.00	354,339.00	238,834.00	282,638.00
market share	0.05%	0.77%	0.90%	1.84%	1.21%

▓ If the container wheel statistics, the company's container wheel holding orders in 2017 ranked 15th in the world.

C. Market Analysis of Major Product Categories

ABS predicts that the demand for shipbuilding will gradually increase from 2018 onwards. The company will build container ships from 1,000 TEU to 14,000 TEU and bulk wheels from 35,000 DWT to 208,000 DWT. The quality, performance and reputation are higher than those of other shipyards. In addition, for special vessels, such as semi-submersible deck heavy cargo carriers (DCC), the company's products are known around the world.

In addition, the company is actively developing unique energy-saving technologies and brands, such as the development of ES, SODO and smart ship technology big data and 4INTship, etc., which are highly praised by shipowners. From the container wheel demand side, the future will focus on large container ships of 10,000 TEU or more and 2,999 TEU of subcontractor container wheels, which will show a dual polarization. These two types of ships are specialties for Taiwan shipping vessels, especially feeder wheel carriers, due to the Asia-Pacific market. With strong demand for rapid growth and replacement in the future, ship prices have a potential for growth. The company has a reputation for building the above-mentioned ship types. Therefore, the company will strive for such orders in the future.

100

Looking at the overview of the shipping and shipbuilding market in 2017, according to CLARKSON statistics, the global shipping volume of 2017 increased by 2.4% year-on-year to approximately 11.4 billion tons, which was lower than the 2.6% year-on-year increase in 2016; the global new shipbuilding market delivered RMB 130 million DWT in 2017, including bulk Wheels and container ships delivered 55.4 million DWTs and 1.617 million TEUs respectively. Compared to 2016, bulk and container ships delivered 46.775 million DWTs and 903,000 TEUs, respectively. The pressure on the two major ship types increased more than that of 2016, with an increase of about 4.6%, the increase in container wheel capacity was significant, constraining the development of the new container shipbuilding market.

D. Favorable and Unfavorable Factors in the Long Term

• ●Favorable Factors

• a. Container ship growth and stability, the company's annual business needs only a dozen, relatively stable source of business.

• b. Can focus on operating customer relationships, such as Evergreen, Yangming, Wanhai are based Container ship-based, and the list of the world's top 19 business list.

• c. Focus on container ship design, quality, cost, delivery, service at all levels Improve and enhance the competitiveness of container ships.

• ●Unfavorable Factors

• a. Container ships into the low threshold, the mainland shipyard capacity and energy capacity of the container ship will be rapidly upgrading, resulting in market prices fall.

• b. Product over-concentration, reduced ability to respond.

• c. Raw material prices, a substantial increase in production costs.

• d. Shipbuilding grass-roots technical labor shortage, rising wage costs.

5.2.2 Production Procedures of Main Products

• A. Major Products and Their Main Uses

• a. Container ship: The container carries the container to carry.

• b. Bulk ship: grain, ore, coal carrying.

• c. Tankers: crude oil and petroleum products to carry.

• d. Special Boat: semi-submersible load, cement, cold storage, floating dock.

• e. Official ships: the Navy and the Coast Guard patrol operations, logistics ships and the official mission of the ship.

101

• B. Major Products and Their Production Processes

Signing → Design → Lofting → Cutting → Bending → Initial Combination → Large Combination →

Launching → Painting and Finishing → Delivery → Post-sale Service

5.2.3 Supply Status of Main Materials

Main raw materials/equipment	Suppliers
Host	HYUNDAI、DIESEL UNITED、HUDONG、 DOOSAN、MITSUI、HITACHI、KHI、STX、 CMD、MITSUBISHI、YUCHI
generator	YANMAR、STX ENGINE、DAIHATSU、 HYUNDAI、WARTSILA、DOOSAN、 CUMMINS、ACD
Steelplate	CSC,POSCO

102

Unit: NT$ thousands	2018(As of March 31)		Corporate director -	-
		Relation with Issuer			-
		Percent	21.18	19.34		100.00
					59.48
		Amount	417,314	381,037		1,969,971
					1,171,620
		Company Name
			China Steel Corporati on	HITACHI ZOSEN CORPORA TION	Others	Net Total Supplies
	2017			Corporate director -
		Relation with Issuer
		Percent	18.99	11.98		100.00
					69.03
		Amount	1,964,957	1,240,118		10,349,573
					7,144,498
		Company Name
			HITACHI ZOSEN CORPORA TION	China Steel Corporati on	Others	Net Total Supplies
	2016		Corporate director	-
		Relation with Issuer
		Percent	18.98	81.02		100.00
		Amount	2,288,282	9,765,886		12,054,168
		Company Name		Others
			China Steel Corporati on			Net Total Supplies
		Item	1	2	3

Unit: NT$ thousands	2018(As of March 31)	Relation with Issuer	-	-	-
		Percent	45.55	20.44	16.22	17.79	100.00
		Amount	1,312,912	589,054	467,394	513,096	2,882,456
		Company Name	EVERGREE N MARINE CORP. (TAIWAN) LTD.	GPO GRACE LIMITED	Ministry of National Defense, R.O.C	Others	Net Sales
	2017	Relation with Issuer	-	-	-	-
		Percent	51.97	16.00	13.56	18.47	100.00
		Amount	8,525,296	2,624,566	2,225,076	3,029,406	16,404,344
		Company Name	EVERGREE N MARINE CORP. (TAIWAN) LTD.	GPO GRACE LIMITED	T.S. Lines Co., LTD.	Others	Net Sales
	2016	Relation with Issuer	-	-	Corporate director	-
		Percent	42.38	23.74	16.03	17.85	100.00
		Amount	6,673,401	3,739,180	2,524,409	2,810,709	15,747,699
		Compan y Name	SEASPAN CORPOR ATION	GPO GRACE LIMITED	CPC CORPOR ATION, TAIWAN	Others	Net Sales
		Item	1	2	3

2017	Amount	20,665,971	243,005	186,407	989,881	40,968	22,126,232
	Quantity	282,638	0	732
2016	Amount	16,197,705	4,421	58,747	530,308	16,746	16,807,927
	Quantity	238,834	0	1,332
	Unit	CGT	DISP	MT
	Year Output Major Products	Revenues from construction of ships and vessels	Revenues from construction of naval ships	Revenues from machine manufacturing	Service revenue	Other revenue	Total

2017	Amount	15,036,967	222,148	31,482	1,075,447	38,300	16,404,344
	Quantity	282,638	-	732
2016	Amount	15,085,251	-	87,900	524,855	49,693	15,747,699
	Quantity	238,834	-	1,332
	Unit	CGT	DISP	MT
	Year Shipments & Sales Major Products	Revenues from construction of ships and vessels	Revenues from construction of naval ships	Revenues from machine manufacturing	Service revenue	Other revenue	Total

5.3 Human Resources

	Year	2016	2017	February 28, 2018
Numb er of Emplo yees	Management	170	168	167
	personnel
	Engineering	552	580	571
	personnel
	Technical	2,213	2,235	2,216
	personnel
	Service personnel	4	4	4
	Total	2,939	2,987	2,958
Average Age		48.3	47.8	47.7
Average Years of Service		6.8	7.3 註	7.3 註
Educat ion	Ph.D.	11	12	12
	Masters	243	267	265
	Bachelor’s Degree	655	738	733
	Senior High School	507	500	490
	Below Senior High School	1,523	1,470	1,458
	Total	2,939	2,987	2,958

Note: Average Years of Service of employees was after privatization.

5.4 Environmental Protection Expenditure

5.4.1 Total Losses and Penalties

The loss or penalty caused by environmental pollution during the latest year and up to the printing date of this annual report:

CSBC was sentenced to pay a fine of three hundred thousand NTD after violating the Art. 31.1.(1)&(3) of Marine Pollution Control Act. We have not only strengthened the professional skill training and awareness of environmental protection, but also demanded the construction unit to set up oil barrier during the construction period.

5.4.2 Countermeasures

107

CSBC takes the following measures to protect the environment:

(1) Prevention of water pollution: in order to keep from pollution, CSBC’s wastewater is collected from recycling pipes, purified by wastewater treatment plants, and released into the water. The effluent water quality must conform with the water quality standard to obey the government regulations.

(2) Prevention of stationary pollution source: CSBC’s air control equipment is RTO system (Regenerative Thermal Oxidizer system), which can preheat the inflow gas by captured heat and increase the removal efficiency of air pollutants.

5.5 Labor Relations

Please refer to page 113 of the Chinese annual report.

108

5.6 Important Contracts

Counterparty	Period	Major Contents	Restrictions
Properties: merchant shipbuilding contract
Syra Shipping Limited	2014.01.16~2017.02.16	1,800TEU Container Vessel (N2052)	None
GPO Grace Limited	2014.10.06~2017.01.15	65,000DWT Semi-submersible Deck Cargo Carrier/Heavy Lift Carrier(N6057)	None
GPO Amethyst Limited	2014.10.06~2017.04.15	65,000DWT Semi-submersible Deck Cargo Carrier/Heavy Lift Carrier (N6058)	None
GPO Sapphire Limited	2014.10.06~2017.07.15	65,000DWT Semi-submersible Deck Cargo Carrier/Heavy Lift Carrier (N6059)	None
GPO Emerald Limited	2014.10.06~2017.10.15	65,000DWT Semi-submersible Deck Cargo Carrier/Heavy Lift Carrier (N6060)	None
T.S. Empire HoldingLimited	2015.07.24~2017.03.15	1,800TEU Container Vessel (N2061)	None
T.S. Kingdom HoldingLimited	2015.07.24~2017.04.30	1,800TEU Container Vessel (N2062)	None
T.S. Empire HoldingLimited	2016.05.31~2017.08.31	1,800TEU Container Vessel (N2063)	None
T.S. Kingdom HoldingLimited	2016.05.31~2017.11.15	1,800TEU Container Vessel (N2064)	None
GREEN COMPASS MARINE S. A.	2015.08.10~2017.06.30	2,800TEU Class Container Vessel(N6065)	None
EVERGREEN MARINE CORP. (TAIWAN) LTD.	2015.08.10~2017.07.31	2,800TEU Class Container Vessel (N6066)	None
GREEN COMPASS MARINE S. A.	2015.08.10~2017.09.30	2,800TEU Class Container Vessel(N6067)	None
EVERGREEN MARINE CORP. (TAIWAN) LTD.	2015.08.10~2017.10.31	2,800TEU Class Container Vessel (N6068)	None
GREEN COMPASS MARINE S. A.	2015.08.10~2017.12.31	2,800TEU Class Container Vessel(N6069)	None
EVERGREEN MARINE CORP. (TAIWAN) LTD.	2015.08.10~2017.12.31	2,800TEU Class Container Vessel (N6070)	None
GREEN COMPASS MARINE S. A.	2015.08.10~2018.01.31	2,800TEU Class Container Vessel (N6071)	None
EVERGREEN MARINE CORP. (TAIWAN) LTD.	2015.08.10~2018.02.28	2,800TEU Class Container Vessel (N6072)	None

109

GREEN COMPASS		2,800TEU Class Container
	2015.08.10~107.02.28		None
MARINE S. A.		Vessel (N6073)
EVERGREEN
		2,800TEU Class Container
MARINE CORP.	2015.08.10~107.03.31		None
		Vessel (N6074)
(TAIWAN) LTD.
China Steel	2018.01.16~2020.01.31	20,800DWT Bulk	None
Express		Carrier(N6108)
Corporation
China Steel	2018.01.16~2020.03.31	20,800DWT Bulk	None
Express		Carrier(N6109)
Corporation
China Steel	2017.08.17~2019.07.31	20,800DWT Bulk	None
Express		Carrier(N6099)
Corporation
China Steel	2017.08.17~2019.09.30	20,800DWT Bulk	None
Express		Carrier(N6100)
Corporation
Properties: official vessels and naval construction contract
Ministry of Science and Technology, ROC	2016.11.02-2019.02.15	500 gross tonnage class research vessel(N2088)	None
Ministry of Science and Technology, ROC	2016.11.02-2019.03.29	500 gross tonnage class research vessel(N2089)	None
Ministry of Science and Technology, ROC	2016.11.02-2019.06.14	1000 gross tonnage class research vessel(N2090)	None
Ministry of National Defence,ROC	2016.12.22-2019.12.23	Indigenous Defense Submarine Planning and Design(N6098)	None
Ministry of National Defence,ROC	2018.04.14-2022.04.13	Landing Platform Dock	None
Industry: Engineering Contract
Owner - TPC Customer - New Asia Cons- truction Company	1998.09.10~2017.03.31	Longmen nuclear four plan No. 1, No. 2 nuclear island area plant structure enclosing enclosures and a block body steel structure and other projects	N-STAMP
Owner - TPC	1998.09.10~2017.12.31	Longmen nuclear four plan of the first and second turbines generator and auxiliary equipment installation works	None
Owner - Fuhai Wind Power Company Preparatory Office	2014.04.01~2018.12.31	Offshore Wind Turbine Transport and Installation	None

110

Ministry of National Defence,ROC	2016.12.08-2018.05.31	Guppy class submarine pressure hull part of the repair and other 12 commissions	None
Properties: Long-term lease
Taiwan
International Port
	2006.01.01-2025.12.31	Land leasing	None
Corporation, Ltd.
Kaohsiung Branch
Taiwan
International Port
	2017.01.01-2021.12.31	90/91 wharf leasing	None
Corporation, Ltd.
Kaohsiung Branch
National Property
	2011.10.01-2019.12.31	Land leasing×6	None
Administration
Taiwan
International Port		Land leasing×5；Building
	2008.01.01-2027.12.31		None
Corporation, Ltd.		leasing×23
Keelung Branch
Long-term Borrowing
		Long-term borrowing NTD 2
Bank of Taiwan	2017.06.22-2022.06.22		None
		billion.
		Long-term borrowing NTD
JihSun Bank	2017.07.20-2020.07.20		None
		200 million.
Taishin
	2017.06.22-2020.06.22	FRCP NTD 500 million.	None
International Bank
			Daily
			minimum
			amount of
International Bills			credit must
	2017.06.22-2021.06.22	FRCP NTD 500 million.
Finance Corp.			reach more
			than 70% in
			the first 3
			years.
			Daily
			minimum
			amount of
China Bills Finance			credit must
	2017.09.26-2021.09.26	FRCP NTD 500 million.
Corp.			reach more
			than 70% in
			the first 3
			years.
			Daily
			minimum
Mega Bills Finance
	2017.09.26-2021.09.26	FRCP NTD 500 million.	amount of
Corp., Ltd.
			credit must
			reach more

111

			than 350
			million in
			the first 3
			years.
			Daily
			minimum
			amount of
China Bills Finance			credit must
	2017.10.27-2021.10.27	FRCP NTD 500 million.
Corp.			reach more
			than 70% in
			the first 3
			years.
Taishin
	2017.12.15-2020.12.15	FRCP NTD 300 million.	None
International Bank
			Daily
			minimum
			amount of
			credit must
Mega Bills Finance
	2017.12.15-2021.12.15	FRCP NTD 200 million.	reach more
Corp., Ltd.
			than 140
			million in
			the first 3
			years.
			Daily
			minimum
			amount of
			credit must
Mega Bills Finance
	2017.12.15-2021.12.15	FRCP NTD 300 million.	reach more
Corp., Ltd.
			than 210
			million in
			the first 3
			years.

VI. Financial Information

6.1 Five-Year Financial Summary

6.1.1 Condensed Balance Sheet

A. Condensed Consolidated Balance Sheet – Based on IFRS

	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Year Item	Financial Summary for The Last Five Years					As of March 31, 2018
	2013	2014	2015	2016	2017
Current assets	14,915,755	17,420,313	11,745,033	15,557,809	10,088,688	10,453,037
Held-to-maturity financial	99,000	99,000	－	－	－	－

112

assets-noncurrent	assets-noncurrent
Investments accounted for usingequitymethod		－	3,907	3,051	166,616	1,645	1,168
Property, Plant and Equipment		10,369,432	11,126,753	10,999,508	10,709,596	10,563,764	10,474,510
Intangible assets		31,442	38,910	36,945	28,847	23,010	22,801
Other assets		853,725	1,116,507	955,029	1,208,074	1,606,286	1,807,379
Total assets		26,269,354	29,805,390	23,739,566	27,670,942	22,283,393	22,758,895
Current liabilities	Before distribution	9,252,310	13,443,979	6,928,795	13,127,490	7,982,566	8,789,886
	After distribution	9,630,874	13,819,540	7,304,908	－	－	－
Non-current liabilities		3,352,011	2,603,327	2,946,399	2,313,794	7,921,743	8,439,176
Total liabilities	Before distribution	12,604,321	16,047,306	9,875,194	15,441,284	15,904,309	17,229,062
	After distribution	12,982,885	16,422,867	10,251,307	15,441,284	－	－
Equity attributable to shareholders of the parent		13,611,665	13,707,901	13,813,337	12,182,663	6,335,415	5,487,079
Capital stock		7,435,652	7,435,652	7,435,652	7,435,652	7,435,652	7,435,652
Capital surplus		1,965	1,965	1,965	1,965	1,965	1,965
Retained earnings	Before distribution	6,174,048	6,270,284	6,375,720	4,745,046	-1,102,202	-1,950,538
	After distribution	5,802,265	5,898,501	6,003,938	4,745,046	－	－
Other equity interest		－	－	－	－	－	－
Treasury stock		－	－	－	－	－	－
Non-controlling	interest	53,368	50,183	51,035	46,995	43,669	42,754
Total equity	Before distribution	13,665,033	13,758,084	13,864,372	12,229,658	6,379,084	5,529,833
	After distribution	13,286,469	13,382,523	13,488,259	12,229,658	－	－

B. Condensed Non-consolidated Balance Sheet – Based on IFRS

Unit: NT$ thousands

	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Year Item	Financial Summary for The Last Five Years
	2013	2014	2015	2016	2017
Current assets	14,714,683	17,217,134	11,512,244	15,385,437	9,944,905

113

Held-to-maturity financial assets-noncurrent	Held-to-maturity financial assets-noncurrent	99,000	99,000	－	－	－
Investments accounted for usingequitymethod		124,526	121,001	122,133	276,272	103,540
Property, Plant and Equipment		10,340,851	11,103,343	10,992,866	10,707,945	10,562,578
Intangible assets		30,843	38,519	36,783	28,761	22,968
Other assets		839,090	1,130,558	949,532	1,203,651	1,601,626
Total assets		26,148,993	29,709,555	23,613,558	27,602,066	22,235,617
Current liabilities	Before distribution	9,216,091	13,424,860	6,872,565	13,116,484	7,982,400
	After distribution	9,587,874	13,796,643	7,244,347	13,116,484	－
Non-current liabilities		3,321,237	2,576,794	2,927,656	2,302,919	7,917,802
Total liabilities	Before distribution	12,537,328	16,001,654	9,800,221	15,419,403	15,900,202
	After distribution	12,909,111	16,373,437	10,172,003	15,419,403	－
Capital stock		7,435,652	7,435,652	7,435,652	7,435,652	7,435,652
Capital surplus		1,965	1,965	1,965	1,965	1,965
Retained earnings	Before distribution	6,174,048	6,270,284	6,375,720	4,745,046	-1,102,202
	After distribution	5,802,265	5,898,501	6,003,938	4,745,046	－
Other equity interest		－	－	－	－	－
Treasury stock		－	－	－	－	－
Total equity	Before distribution	13,611,665	13,707,901	13,813,337	12,182,663	6,335,415
	After distribution	13,239,882	13,336,118	13,441,555	12,182,663	－

6.1.2 Condensed Statement of Comprehensive Income/Condensed Statement of Income

A. Condensed Consolidated Statement of Comprehensive Income – Based on IFRS

	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Year Item	Financial Summary for The Last Five Years					As of March 31, 2018
	2013	2014	2015	2016	2017
Operatingrevenue	24,892,573	25,497,653	21,457,696	15,747,699	16,404,344	2,882,456
Grossprofit(loss)	858,694	1,017,057	994,444	-1,060,228	-5,721,888	-1,046,675
Income(loss)from operations	341,923	506,354	436,634	-1,565,030	-6,228,965	-1,167,226
Non-operating income and expenses	160,480	23,161	142,391	29,628	-124,077	79,035

114

Income(loss)before tax	502,403	529,515	579,025	-1,535,402	-6,353,042	-1,088,191
Net income(Loss)	439,801	454,378	472,784	-1,286,809	-5,883,199	-849,251
Other comprehensive income (income after tax)	38,256	17,237	9,065	28,208	32,870	－
Total comprehensive income(loss)	478,057	471,615	481,849	-1,258,601	-5,850,329	-849,251
Net income(loss) attributable to shareholders of theparent	436,902	450,782	468,154	-1,287,100	-5,880,118	－
Net income attributable to non-controllinginterest	2,899	3,596	4,630	291	-3,081	-849,251
Comprehensive income(loss) attributable to Shareholders of theparent	475,158	468,019	477,219	-1,258,892	-5,847,248	-848,336
Comprehensive income attributable to non-controllinginterest	2,899	3,596	4,630	291	-3,081	-915
Earningsper share(Note)	1.41	1.45	1.51	-4.11	-18.79	-2.71
Note：The weighted average number of shares outstanding used for the

115

B. Condensed Non-consolidated Statement of Comprehensive Income – Based on IFRS

	Unit: NT$thousands Financial Summary for The Last Five Years 2013 2014 2015 2016 2017 24,810,144 25,377,982 21,398,829 15,739,331 16,381,651 838,035 994,765 967,014 -1,071,215 -5,725,052 329,283 493,996 426,248 -1,5674,067 -6,219,268 166,478 29,588 144,997 27,943 -128,797 495,761 523,584 571,245 -1,536,124 -6,348,065 436,902 450,782 468,154 -1,287,100 -5,880,118 38,256 17,237 9,065 28,208 32,870 475,158 468,019 477,219 -1,258,892 -5,847,248 1.40 1.44 1.50 -4.11 -18.79	Unit: NT$thousands Financial Summary for The Last Five Years 2013 2014 2015 2016 2017 24,810,144 25,377,982 21,398,829 15,739,331 16,381,651 838,035 994,765 967,014 -1,071,215 -5,725,052 329,283 493,996 426,248 -1,5674,067 -6,219,268 166,478 29,588 144,997 27,943 -128,797 495,761 523,584 571,245 -1,536,124 -6,348,065 436,902 450,782 468,154 -1,287,100 -5,880,118 38,256 17,237 9,065 28,208 32,870 475,158 468,019 477,219 -1,258,892 -5,847,248 1.40 1.44 1.50 -4.11 -18.79	Unit: NT$thousands Financial Summary for The Last Five Years 2013 2014 2015 2016 2017 24,810,144 25,377,982 21,398,829 15,739,331 16,381,651 838,035 994,765 967,014 -1,071,215 -5,725,052 329,283 493,996 426,248 -1,5674,067 -6,219,268 166,478 29,588 144,997 27,943 -128,797 495,761 523,584 571,245 -1,536,124 -6,348,065 436,902 450,782 468,154 -1,287,100 -5,880,118 38,256 17,237 9,065 28,208 32,870 475,158 468,019 477,219 -1,258,892 -5,847,248 1.40 1.44 1.50 -4.11 -18.79	Unit: NT$thousands Financial Summary for The Last Five Years 2013 2014 2015 2016 2017 24,810,144 25,377,982 21,398,829 15,739,331 16,381,651 838,035 994,765 967,014 -1,071,215 -5,725,052 329,283 493,996 426,248 -1,5674,067 -6,219,268 166,478 29,588 144,997 27,943 -128,797 495,761 523,584 571,245 -1,536,124 -6,348,065 436,902 450,782 468,154 -1,287,100 -5,880,118 38,256 17,237 9,065 28,208 32,870 475,158 468,019 477,219 -1,258,892 -5,847,248 1.40 1.44 1.50 -4.11 -18.79	Unit: NT$thousands Financial Summary for The Last Five Years 2013 2014 2015 2016 2017 24,810,144 25,377,982 21,398,829 15,739,331 16,381,651 838,035 994,765 967,014 -1,071,215 -5,725,052 329,283 493,996 426,248 -1,5674,067 -6,219,268 166,478 29,588 144,997 27,943 -128,797 495,761 523,584 571,245 -1,536,124 -6,348,065 436,902 450,782 468,154 -1,287,100 -5,880,118 38,256 17,237 9,065 28,208 32,870 475,158 468,019 477,219 -1,258,892 -5,847,248 1.40 1.44 1.50 -4.11 -18.79
Year Item	Financial Summary for The Last Five Years
	2013	2014	2015	2016	2017
Operatingrevenue	24,810,144	25,377,982	21,398,829	15,739,331	16,381,651
Grossprofit(loss)	838,035	994,765	967,014	-1,071,215	-5,725,052
Income(loss)from operations	329,283	493,996	426,248	-1,5674,067	-6,219,268
Non-operating income and expenses	166,478	29,588	144,997	27,943	-128,797
Income(loss)before tax	495,761	523,584	571,245	-1,536,124	-6,348,065
Net income(Loss)	436,902	450,782	468,154	-1,287,100	-5,880,118
Other comprehensive income (income after tax)	38,256	17,237	9,065	28,208	32,870
Total comprehensive income(loss)	475,158	468,019	477,219	-1,258,892	-5,847,248
Earningsper share(Note)	1.40	1.44	1.50	-4.11	-18.79

Note ： The weighted average number of shares outstanding used for the loss per share computation was adjusted retroactively for the record date of the reduction on May 10, 2018. The record date of the reduction was after the 2018Q1 financial reporting date, but earlier than the issue date. Therefore, the loss per share was based on the outstanding share after the reduction.

6.1.3 Auditors’ Opinions from 2012 to 2016

Year	AccountingFirm	Auditors’ Opinion
2013	Pricewaterhouse Coopers	Unqualified
2014	Pricewaterhouse Coopers	Unqualified
2015	Pricewaterhouse Coopers	Unqualified
2016	Pricewaterhouse Coopers	Unqualified
2017	Pricewaterhouse Coopers	Unqualified

116

6.2 Five-Year Financial Analysis

A. Consolidated Financial Analysis – Based on IFRS

Item	Year	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	As of March 31, 2018
		2013	2014	2015	2016	2017
Financial structure (%)	Debt Ratio	47.98	53.84	41.60	55.80	71.37	75.70
	Ratio of long-term capital to property, plant and equipment	164.11	147.05	152.83	135.80	135.38	133.36
Solvency (%)	Current ratio	161.21	129.58	169.51	118.51	126.38	118.92
	Quick ratio	6.49	6.30	18.69	7.99	22.73	20.09
	Interest earned ratio(times)	22.62	18.56	23.69	-22.20	-73.06	-43.28
Operating performance	Accounts receivable turnover (times)	65.01	90.43	64.20	29.24	15.14	7.98
	Average collectionperiod	5.61	4.04	5.69	12.48	24.11	45.74
	Inventoryturnover(times)	9.70	10.04	8.46	4.69	6.23	7.27
	Accounts payable turnover (times)	16.10	15.32	14.59	12.90	15.81	12.25
	Average days in sales	37.63	36.35	43.14	77.83	58.59	50.21
	Property, plant and equipment turnover(times)	2.42	2.37	1.94	1.45	1.54	1.10
	Total assets turnover(times)	0.94	0.91	0.80	0.61	0.66	0.51
Profitability	Return on total assets(%)	1.72	1.71	1.85	-4.79	-23.27	-3.68
	Return on stockholders' equity (%)	3.20	3.31	3.42	-9.86	-63.23	-14.26
	Pre-tax income to paid-in capital(%)	6.76	7.12	7.79	-20.65	-85.44	-14.63
	Profit ratio(%)	1.77	1.78	2.20	-8.17	-35.86	-29.46
	Earnings per share (NT$)(Note)	1.41	1.45	1.51	-4.11	-18.79	-2.71
Cash flow	Cash flow ratio(%)	─	─	74.92	─	─	─
	Cash flow adequacyratio(%)	─	─	─	138.25	80.01	97.53
	Cash reinvestment ratio(%)	-1.84	-1.20	14.85	-1.27	-0.00	─
Leverage	Operatingleverage	10.15	8.32	5.67	─	─	─
	Financial leverage	1.07	1.06	1.06	0.96	0.99	0.98

Note ： The weighted average number of shares outstanding used for the loss per

share computation was adjusted retroactively for the record date of the reduction on May 10, 2018. The record date of the reduction was after the 2018Q1 financial reporting date, but earlier than the issue date. Therefore, the loss per share was based on the outstanding share after the reduction.

117

B. Non-consolidated Financial Analysis – Based on IFRS

Item	Year	Financial Analysis for the Past Five Years	Financial Analysis for the Past Five Years	Financial Analysis for the Past Five Years	Financial Analysis for the Past Five Years	Financial Analysis for the Past Five Years
		2013	2014	2015	2016	2017
Financial structure (%)	Debt Ratio	47.95	53.86	41.50	55.86	71.51
	Ratio of long-term capital to fixed assets	163.75	146.66	152.29	135.28	134.94
Solvency (%)	Current ratio	159.66	128.25	167.51	117.30	124.59
	Quick ratio	4.80	4.89	15.46	6.70	20.96
	Interest earned ratio(times)	22.33	18.36	23.39	-22.21	-73.01
Operating performance	Accounts receivable turnover(times)	71.58	120.41	85.54	30.90	15.29
	Average collectionperiod	5.10	3.03	4.27	11.81	23.87
	Inventory turnover (times)	9.67	10.00	8.45	4.69	6.22
	Accounts payable turnover (times)	16.25	15.45	14.87	13.16	15.80
	Average days in sales	37.75	36.50	43.20	77.83	58.68
	Fixed assets turnover (times)	2.42	2.37	1.94	1.45	1.54
	Total assets turnover (times)	0.94	0.91	0.80	0.61	0.66
Profitability	Return on total assets(%)	1.72	1.70	1.84	-4.81	-23.31
	Return on stockholders' equity (%)	3.20	3.30	3.40	-9.90	-63.51
	Pre-tax income to paid-in capital(%)	6.67	7.04	7.68	-20.66	-85.37
	Profit ratio(%)	1.76	1.78	2.19	-8.18	-35.89
	Earnings per share (NT$)(Note)	1.40	1.44	1.50	-4.11	-18.79
Cash flow	Cash flow ratio(%)	─	─	73.80	─	─
	Cash flow adequacy ratio (%)	─	─	─	137.29	103.09
	Cash reinvestment ratio(%)	-1.85	-1.18	14.55	-1.22	-1.27
Leverage	Operatingleverage	10.43	8.44	5.72	─	─
	Financial leverage	1.08	1.07	1.06	0.96	0.99

Note ： The weighted average number of shares outstanding used for the loss per share computation was adjusted retroactively for the record date of the reduction on May 10, 2018. The record date of the reduction was after the 2018Q1 financial reporting date, but earlier than the issue date. Therefore, the loss per share was based on the outstanding share after the reduction.

118

6.3 Supervisors’ /Audit Committee’s Report in the Most Recent Year

Audit Committee's Review report

This proposal is the presentation by the Board of Directors of the Company's 2017 Business Report, Financial Statements, and the Deficit Compensation Proposal. Of these items, the Financial Statements have been audited by external auditors of PricewaterhouseCoopers(PwC) Taiwan, and an opinion and report have been issued on the Financial Statements.The aforementioned proposal regarding Business Report, Financial Statements, and the Deficit Compensation Proposal have been reviewed and determined to be correct and accurate by the Audit Committee. Per the regulations in Article 14-4 of Securities and Exchange Act and Article 219 of the Company Act, we hereby submit this report. To:

2018 General Shareholders' Meeting of CSBC Corporation.

CSBC CORPORATION,TAIWAN

Audit Committee Convenor: LIEU, DER-MING

March 23, 2018

6.4 Financial Statements for the Years Ended December 31, 2017 and 2016, and Independent Auditors Report.

Please refer to page APPENDIX 2 of the Chinese annual report.

6.5 Consolidated Financial Statements for the Years Ended December 31, 2017 and 2016.

As Appendix 1.

119

VII. Review of Financial Conditions, Financial Performance, and Risk Management 7.1 Analysis of Financial Status

Unit: NT$ thousands

			Unit: NT$ thousands	Unit: NT$ thousands
Year Item	2017	2016	Difference
			Amount	%
Current Assets	10,088,688	15,557,809	-5,469,121	-35.15
Funds & Long-term investments	1,645	166,616	-164,971	-99.01
Fixed Assets	10,563,764	10,709,596	-145,832	-1.36
Intangible assets	23,010	28,847	-5,837	-20.23
Other Assets	1,606,286	1,208,074	398,212	32.96
Total Assets	22,283,393	27,670,942	-5,387,549	-19.47
Current Liabilities	7,982,566	13,127,490	-5,144,924	-39.19
Long-term Liabilities	7,921,743	2,313,794	5,607,949	242.37
Total Liabilities	15,904,309	15,441,284	463,025	3.00
Capital stock	7,435,652	7,435,652	－	－
Capital surplus	1,965	1,965	－	－
Retained Earnings	-1,102,202	4,745,046	-5,847,248	-123.23
Non-controllinginterest	43,669	46,995	-3,326	-7.08
Total Stockholders' Equity	6,379,084	12,229,658	-5,850,574	-47.84

7.2 Analysis of Operation Results

Unit: NT$ thousands

Year Item	2017	2016	Difference	Difference
			Amount	%
Gross Sales	16,404,344	15,747,699	656,645	4.17
Cost of Sales	22,126,232	16,807,927	5,318,305	31.64
Gross Profit(loss)	-5,721,888	-1,060,228	-4,661,660	439.68
OperatingExpenses	507,077	504,802	2,275	0.45
OperatingIncome(loss)	-6,228,965	-1,565,030	-4,663,935	298.01
Non-operatingIncome and Expenses	-124,077	29,628	-153,705	-518.78
Income(loss)Before Tax	-6,353,042	-1,535,402	-4,817,640	313.77

120

Tax Benefit(Expense)	-469,843	-248,593	-221,250	89.00
Net income(loss)	-5,883,199	-1,286,809	-4,596,390	357.19
Other comprehensive income (income after tax)	32,870	28,208	4,662	16.53
Total comprehensive income(loss)	-5,850,329	-1,258,601	-4,591,728	364.83

7.3 Analysis of Cash Flow

7.3.1 Cash Flow Analysis for the Current Year

Unit: NT$ thousands

					Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Cash and Cash Equivalents, Beginning of Year (1)		Net Cash Flow from Operating Activities (2)	Cash Outflow (3)	Cash Surplus (Deficit) (1)+(2)-(3)	Leverage of Cash Deficit
					Investment Plans	Financing Plans
	281,814	(4,279,533)	1,010,592	(5,008,311)	0		5,272,784
Analysis of change in cash flow in the current year: The main change is about the operating activities, depreciation, fixed assets improve -ments,and short-term loan.

7.3.2 Remedy for Cash Deficit and Liquidity Analysis

Year Item	2017	2016	Variance (%)
Cash Flow Ratio(%)	-	-	-
Cash Flow AdequacyRatio(%)	80.01	138.25	-42.13
Cash Reinvestment Ratio(%)	-	-1.27	-
Analysis of financial ratio change: Decrease in Cash Flow Ratio (%) and Cash Reinvestment Ratio (%) is mainly due to decrease in Cash Flow from Operating Activities.

7.3.3 Cash Flow Analysis for the Coming Year ： None

121

7.4 The impact of the recent major capital expenditure on the financial business

7.4.1 Real estate, plant and equipment project investment plan

Plan name	Kaohsiung plant two giant tyrants gantry crane replacement project investment project	Kaohsiung plant new LLC-50 tons of a cable car project investment plan	Kaohsiung plant # 2 pier RS31 area lifting load project investment
property	New investment: Enhance Kaohsiung Plant Shipbuilding Energy and Efficiency	New investment: Enhance Kaohsiung plant hull factory shipbuilding energy and efficiency	New investment: Raise the RS31 area of Kao -hsiung Plant # 2 at a lifting load of 30 tons / m2
Plan period	March 2017 ~ September 2020	March 2017 ~ April 2019	November 2017 ~ December 2020
Investment	2,500 millionyuan	215 millionyuan	138 millionyuan

7.4.2 General investment plans for real estate, plant and equip -ment in 2016

2017 General Investment Budget Execution, Budget $ 504,480 thousand, Actual Occurrences 405,660 thousand dollars, the annual budget implementation rate of 80.41%.

Major projects:

• 1.35M aerial work platform car * 2 sets, 30M aerial work platform car * 2 sets.

• High-voltage equipment to improve and replace.

• 80RT dehumidifier

• 4 hull plant cold workshop PAQARA activities shed renovation.

• Keelung factory management team new plant project.

7.5 Financial impact on the Company for the year: No significant effect.

7.6 Analysis of Risk Management

122

7.6.1 Effects of Changes in Interest Rates and Foreign Exchange Rates on Corporate Finance, and Future Response Measures

• (1) Interest rate

The loss from interest in 2017 was an amount equivalent to 0.44% of total operating income. CSBC will continue to carefully monitor interest rate movements and make use of capital markets financing instruments to ensure that our financing costs are at a comparatively low level.

• (2) Foreign exchange rates

• The gain from foreign exchange transactions in 2017 was an amount equivalent to 0.1% of total operating income. CSBC has a clear operating strategy and risk control procedure to respond to changes in the spot exchange rate, stays in close contact with financial institutions, and adjusts its foreign exchange strategy to minimize the risk of exchange rate accordingly.

7.6.2 Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions

A.CSBC did not engage in high-risk or high-leveraged investments, and lending to others.

B. Derivative transactions follow CSBC’s “Directions for Asset Acquisition or Disposal”. As of Dec. 31, 2017, the forward foreign exchange contract amount is NTD$106 million and unrecognized net loss is NTD$280 thousands.

C.The transactions and procedures related to endorsement are based on CSBC’s “Guidelines Governing Management of Endorsement or Guarantee for Others”. As of Dec. 31, 2017, the balance of endorsement is NTD$1,323,938 thousand dollars. Actual using amount is NTD$75,000 thousand dollars.

7.6.3 Future Research & Development Projects and Corresponding Budget

A. R&D plan progress (as of March 31, 2018)

R&D plan	R&D Progress	Reenter the cost (Thousand)	Finish date	The main factor of success
1. Study on ice strengthening of a propulsive shafting system (3/3)	15%	2,031	20181231	Development of shaft calculation and analysis software that meets the practical requirements and the international laws of shaft design, strengthening of the theoretical basis of shaft design engineers, enhancement of the shaft design quality, and facilitation of shaft design automationprocedures.

123

2. Study on Underwater Welding Defects, Corrosion and Improvement of Offshore Wind Turbine Foundation (3/3)	15%	2,800	20181231	To accomplish AWS D3.6 Class “A” welds a semi-automatic gas metal arc welding (GMAW) or flux-cored arc welding (FCAW), process with a transparent and movable, local-dry enclosure would be an effective approach to develop.
3. Study on Application of HSLA - 80 Steel Plate Welding Process(2/2)	25%	1,500	20181231	1. Qualified materials and welding materials is hard to obtain. 2. High welding skill requirements. 3. Rigorous welding process.
4. Offshore Wind Farm Marine Warranty Survey Training (2/2)	35%	2,950	20181231	The actual marine engineering operations required.
5. The Study of Marine Construction Technologies and Design of Construction Appliances (2/3)	19%	4,770	20181231	Step-by-step, by learning how the successful foreign design construction machinery cases was achieved.
6. Study on the method and processes of solid modeling of selected Key Plan design drawings	41%	873	20181231	The schedule matching of the selected key plan design drawings and the 3D model construction, and the solid modeling group being immediately updated the modification situation of key plan design drawings are the two important factors that would have apparent influence on the achievement and benefit of the key plan solid modeling process.
7. Study and Analysis on Shipbuilding Market(107)	27%	1,050	20181231	Sufficient information for Shipbuilding Market.
8. The Study and Development of Potential Vessel Projects (107)	25%	40,530	20181231	1. Grasp the vessel requirement for the future market. 2. Overall analysis for design and business loading.
9. The development of new warship and government ship (107)	20%	10,970	20181231	International situation will affect the resource of equipment and technical assistance.

124

10. Economic Study Of The Project of Building Indigenous Naval Vessels	16%	964	20181231	To provide credibility with the policy doctrine for the company to expand business ship business.
11. A Study on Effectiveness Analysis and Dynamic Characteristics of Vibration Isolation Elements	22%	1,688	20181231	The establishment of the company’s vibration isolation elements design energy.
12. Estimation of the propellers and appendages performance in real sea conditions	16%	960	20181231	1. Basing on the design capacity and business needs, applying to the real ships. 2. Cooperating with ship owner to realize the real ship conditions.
13. Study of 3D Print & 3D Measure Technologies Application in Bell Mouth module Fabrication and Outward Measure Methods	13%	680	20181231	1. Shrinkage of 3D Print Product. 2. Strength of 3D Print product. 3. Make-up of 3D Print Product.
14. The development of underwater noise measurement and analysis system	19%	2,654	20181231	To research into regulations of underwater and build the system of underwater noise measurement and analysis that shall be a basis for ship's underwater noise development.
15. The exploratory study for hull vibration Compensator	20%	1,488	20181231	1. Complete the vibration compensator torque for application to hull vibration response. 2. Discussion the vibration compensator design and manufacturemethod.
16. Study on Reduction of Welding Angular Distortion Correction Requirements and Development of Corresponding Technologies and Facilities(1/2)	21%	1,500	20181231	1. To improve welding angular distortion analysis and control techniques. 2. To enhance R&D and maintenance capabilities for essensial facilities.

125

17. The Study of Geotechnical Design and Steps from Geotechnical Campaign to the Installation	30%	1,200	20181231	The Experience of Foreign Piling Analysis and Engineering Project.
18. Patented Technology Intelligence Analysis of Shipbuilding Technology in Competitive Countries	16%	1,110	20181231	The company could use the intelligence information of patented shipbuilding technology invested by competitor to plan the offensive and defensive market tactics. And avoid resources wasting by introducing the patent analysis before the technology development program application.
19. Trial manufacturing plan for key components of rolling stock(1/2)	20%	1,160	20181231	Making a real bogie frame to verify the flow of design is correct or not, it will help CSBC to approach the key factor of bogie frame design.
20. Study on Smart Ship Technology and Application(1/ 2)	33%	18,520	20181231	This project includes smart ship design, digital transformation in manufacturing and unified management system to promote smart technology in shipdesign.

B. R&D plans and estimated expenses in the future.

CSBC’s Research and development plans can be divided into self-research, coop -erative research and commissioned research in 2018. There are 7 plans belonging to self-research, 12 plans belonging to cooperative research, and one belong commissioned research. Totally are 20 plans for research and development and expect to spend NTD149 million in CSBC.

7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales

CSBC usually has a high degree of attention and proper ability to respond to the development of domestic and foreign political and economic situation and the legal changes. In recent years and as of the date of publication, important policies and legal changes at home and abroad have not had a significant impact on the Company's financial business.

126

7.6.5 Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales

In addition to participating in foreign shipbuilding technical seminars or annual meetings, shipbuilding and shipping exhibitions, CSBC has also organized seminars through the domestic shipbuilding industry consortium, the Joint Ship Design Center, and related surveying societies, schools and research institutes, Obtaining industry information and grasping recent market news to innovate the design of ships to meet the needs of the airlines, in addition to increase the company's profits, but also to enhance the development of shipbuilding and management technology.

7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures

CSBC in the industry's image has always been good, listed on December 22, 2008 listed, the company each year to accept the stock exchange corporate governance system assessment, evaluation results as 6% to 20% blue chip companies, the company's corporate image has a positive

7.6.7 Expected Benefits from, Risks Relating to and Response to Merger and

• Acquisition Plans ： None

7.6.8 Expected Benefits from, Risks Relating to and Response to Factory Expansion

Plans ： None

127

7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration

The main suppliers of steel products in the steel company focused on the steel, mainly in the steel company for the company's long supply of marine steel suppliers, the supply is good, and the steel near the company, steel plate through the company's steel plate storage, The only domestic can provide marine steel company, with the company to develop the required marine steel plate, so the main purchase of steel suppliers have focused on the phenomenon. As for the sales customers focus, mainly due to the company's market positioning in the container round, the order to the container wheel-based, as the container round order with the same boat composed of fleet characteristics, that is, each order to undertake 5 to 10 ships, and the company In order to reduce production costs, increase profits, but also a single design a large number of orders for the business direction, so a single year easy to focus on customer phenomenon.

Future sales continue to move towards diversification in order to avoid possible operational risks.

7.6.10 Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10% ： None

7.6.11 Effects of, Risks Relating to and Response to the Changes in Management

Rights ：

CSBC on December 22, 2008 to complete the listing and privatization of shares, to July 13, 2016 government agencies holding about 33.57% stake, the remaining shares scattered, there is no centralized fiscal situation, and listed companies based on legal norms Business, not because of the privatization of the company have a significant impact and risk.

7.6.12 Litigation or Non-litigation Matters

(1) Major ongoing lawsuits, non-lawsuits or administrative lawsuit: None.

(2) Major ongoing lawsuits, non-lawsuits or administrative lawsuits caused by directors, supervisors or shareholders with over 10% shareholdings: None.

7.6.13 Other Major Risks ： None

128

VIII. Special Disclosure

8.1 Summary of Affiliated Companies

A.Subsidiaries Relationship

==> picture [488 x 171] intentionally omitted <==

----- Start of picture text -----

CSBC
70% 40% 37.97%
CCSC TOWSC Fuhai
100% 100%
Blue Ocean Wind Power Blue Ace
Engineering (H.K.) Ltd. Corporation
----- End of picture text -----

B.Subsidiaries Profile

Name of Subsidiary	Date of Incorporation	Address	Paid-In Capital	Business Area
CCSC	2010.09.13	No.3, Jhonggang Rd., Siaogang District, Kaohsiung City 81234, Taiwan (R.O.C.)	NT$125,000 thousand	Ship Painting Engineering & Steel Structure Painting Engineering
Blue Ocean Wind Power Engineering (H.K.) Ltd.	2014.07.11	RM 2401,24/F 101 KING’S RD FORTRESS HILL HONG KONG	US$10,000	Engineering consultants & mechanical installation
TOWSC	2014.09.10	7F., No.6, Sec. 4, Xinyi Rd., Da'an Dist., Taipei City 106, Taiwan (R.O.C.)	NT$10,000 thousand	Operation and maintenance of offshore wind farm
Blue Ace Corporation	2016.07.28	No.224, He 1st Rd., Zhongzheng Dist., Keelung City 202, Taiwan (R.O.C.)	NT$25,000 thousand	Metal processing, painting engineering & manpower dispatch
Fuhai Wind Farm Corporation	2015.06.30	7F., No.6, Sec. 4, Xinyi Rd., Da'an Dist., Taipei City 106, Taiwan (R.O.C.)	NT$395,001 thousand	Power generation

129

C.Operation Performance of Subsidiaries

2017.12.31, NT$ thousand

Name of Subsidiary		paid-in	Total	Total	Net Worth	Revenue	Operati on Profit	Net income	EPS
		capital	Assets	Liabiliti es
CCSC		125,000	162,454	16,890	145,564	150,950	(8,043)	(10,156)	(0.81)
Blue Ocean Wind Power Engineering (H.K.)Ltd.		300	1,484	1,354	130	0	(63)	(1,955)	(65.17)
TOWSC		10,000	6,619	2,100	4,518	4,365	2,509	(1,832)	(1.83)
Blue Ace Corporation		25,000	29,076	4,776	24,300	81,278	(865)	(699)	(0.28)
Fuhai Wind Farm Corporation		395,001	366,727	400,548	(33,821)	0	(154,352)	(109,885)	(2.78)

D.Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year

CCSC was established on September 13, 2010, the main business is from CSBC’s ship coating business accounting for about 80% of the overall revenue. In the year of 2016, net loss of CCSC after the year is NT$10,156 thousands. In that, CSBC recognizes NT$7,189 thousands of investment loss due to CSBC holds 70% of CCSC shares.

TOWSC was established on September 10, 2014, the main business is from operation and maintenance of offshore wind farm. In the year of 2016, net income of TOWSC after the year is NT$ -1,832 thousands. In that, CSBC recognizes NT$ -733 thousands of investment interest due to CSBC holds 40% of TOWSC shares. The negative profit was caused by the delay of Fuhai offshore wind farm construction. The profit may become positive after 2018.

130

Fuhai was established on June 30, 2015, the main business is from power generation which was caused by offshore wind. In the year of 2016, net income of Fuhai after the year is NT$ -109,885 thousands. Because CSBC has estimated the value of Fuhai shares is equal to 0, CSBC recognizes NT$ 144,103 thousands of impairment losses on assets on June 2016. The construction of Fuhai wind farm has been stopped by the EIA issue.

CSBC will continue to strengthen its investment management in the coming year to enhance its investment income, and will also continue to invest in the development of the related industries beyond the core of the shipbuilding industry.

8.2 Private Placement Securities in the Most Recent Years:

Item	Privateplacement of common shares of 2018
Type of private placement sexurity	Common shares
The date and amount approved by Shareholdings’ Meeting	The total amount of private placement of common share approved by Extraordinary Shareholdings’ Meeting of Dec. 21, 2017 is within 200 million shares. The first timeestimated privateplacement is within 100 million shares.
The criteria and the reasonableness for determination of the price.	1. According to “Directions for Public Companies Conducting Private Placements of Securities”, the reference price shall be the higher of the following two calculations: a. The simple average closing price of the common shares of the TWSE listed or TPEx listed company for either the 1, 3, or 5 business days before the price determination date, after adjustment for any distribution of stock dividends, cash dividends or capital reduction. b. The simple average closing price of the common shares of the TWSE listed or TPEx listed company for the 30 business days before the price determination date, after adjustment for any distribution of stock dividends, cash dividends, or capital reduction. The price per share fixed for privately placed common shares would be not lower than 80 percent of the reference price.

131

	2. As above, The simple average closing price for the 30 business days before May 11,2018, after adjustment for capital reduction is reference price, NT$52.62. The price per share for private placement of common share is NT$42.10 ,equal to 80% of the reference price. It's conformed to the resolution of Extraordinary Shareholders' Meeting.	2. As above, The simple average closing price for the 30 business days before May 11,2018, after adjustment for capital reduction is reference price, NT$52.62. The price per share for private placement of common share is NT$42.10 ,equal to 80% of the reference price. It's conformed to the resolution of Extraordinary Shareholders' Meeting.	2. As above, The simple average closing price for the 30 business days before May 11,2018, after adjustment for capital reduction is reference price, NT$52.62. The price per share for private placement of common share is NT$42.10 ,equal to 80% of the reference price. It's conformed to the resolution of Extraordinary Shareholders' Meeting.	2. As above, The simple average closing price for the 30 business days before May 11,2018, after adjustment for capital reduction is reference price, NT$52.62. The price per share for private placement of common share is NT$42.10 ,equal to 80% of the reference price. It's conformed to the resolution of Extraordinary Shareholders' Meeting.	2. As above, The simple average closing price for the 30 business days before May 11,2018, after adjustment for capital reduction is reference price, NT$52.62. The price per share for private placement of common share is NT$42.10 ,equal to 80% of the reference price. It's conformed to the resolution of Extraordinary Shareholders' Meeting.
The method for selecting the specificpersons		In accordance with Article 43-6 of the Securities and Exchange Act.
In the reasons for the necessity for conducting the private placement		Considering the timeliness, convenience and issuance costs, the company conduct the private placement of common shares.
		shares.
The date of the price has been paid upin full		May 25, 2018
Placee
		Placee	Qualification	Shares	Relationship with the company
		National Development Fund, Executive Yuan	Article 43-6, paragraph 1, subparagraph 2 of the Securities and Exchange Act	30,000,000	Government relations
		Yao-Hwa Co.,Ltd Management Commission	Article 43-6, paragraph 1, subparagraph 2 of the Securities and Exchange Act	30,000,000	Government relations

132

	price collection. The deficiency of price collection is to grant a loan to meet the demand of working capital.
The actual private placementprice	NT$42.10 per share.
The discrepancy between actual private price and referenceprice	The actual private placement price NT$42.10 is 80% of the reference price NT$52.62.
Any effect of the private placement on shareholder equity	The Securities and Exchange Act regulates the qualification of placee, 3-year limit of transference, so there is certain protection on shareholder equity.
The status of utilization of the funds and the plan implementation progress	To enrich working capital and refund the short-term loan.
The realization of plan benefits	After capital increase, it would improve the financial structure, business operation and development, and benefit to the shareholders’ equity.

8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent

Years ： None

133

Appendixl

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS

DECEMBER 31, 2017 AND 2016

-----------------------------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES

Declaration of Consolidated Financial Statements of Affiliated Enterprises

Year ended December 31, 2017, pursuant to “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises,” the company that is required to be included in the consolidated financial statements of affiliates, is the same as the company required to be included in the consolidated financial statements of parent and subsidiary companies under IFRS 10. And if relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies, it shall not be required to prepare separate consolidated financial statements of affiliates.

Hereby declare,

CSBC CORPORATION, TAIWAN

WEN-LON CHENG

March 23, 2018

~1~

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR 17000351

To the Board of Directors and Shareholders of CSBC CORPORATION, TAIWAN

Opinion

We have audited the accompanying consolidated balance sheets of CSBC CORPORATION, TAIWAN and its subsidiaries (the “Group”) as at December 31, 2017 and 2016, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

~2~

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Accounting estimates and assumptions for total cost of construction contract

Description

Please refer to Note 4(13) for a description of the accounting policy on construction contracts. Please refer to Note 5 for critical accounting estimates and assumptions for total cost of construction contracts. The Group is engaged in in the business of designing and building of various ships and cruisers. Assumptions for estimated construction cost include cost for equipment, material, labor and etc. Data used for assumptions involves subjective judgement and accounting estimates and are highly uncertain. As a result, assumptions used are material to the total construction cost and further affects the calculation of construction profit.

As the data used for assumptions involves subjective judgement and accounting estimates are highly uncertain, this may affect the completeness and relevant assertions. Considering that the estimated total cost of construction contracts is material to the financial statements, therefore, we assessed that these accounting estimates and assumptions as one of the key audit matters for this year.

How our audit addressed the matter

The scope of our audit responded to the risk as follows:

1. Assessing the effectiveness of CSBC Group’s internal control regarding the estimation process of total cost of construction contract. This includes:

2. (1) Whether the data used by management for estimates and assumptions is complete, relevant and accurate.

3. (2) Whether accounting estimates and assumptions have been reviewed and approved by proper management level.

4. (3) Whether the segregation of duties is appropriate.

~3~

1. Obtaining the Estimate at Completion Reports, selecting sample reports and verifying the accuracy, completeness and relevance of the data that was used for assumptions and estimations. Checking whether the use of estimates and assumptions in the Estimate at Completion Reports are appropriate.

2. Comparing cost at completion for the same or similar ships and then assessing the reasonableness of the Estimate at Completion Report.

Assessment of construction loss

Description

Please refer to Note 4(13) for a description of the accounting policy on construction contracts.

There is a concern regarding the oversupply in the shipbuilding industry worldwide. Customers tend to behave conservatively which causes a decline in ship prices. Thus, there is a high possibility of total construction cost exceeding total construction revenue. In accordance with the Group’s accounting policy on construction contracts, when there is a high possibility of total construction cost exceeding total construction revenue, estimated loss shall be recognised immediately.

The aforementioned estimated loss shall include constructions that have not yet been initiated. As the estimated loss is material to the financial statements, therefore, we assessed that the estimated loss as one of the key audit matters for this year.

How our audit addressed the matter

The scope of our audit responded to the risk as follows:

1. Obtaining calculation table of construction in progress – construction income / loss. Checking whether it includes all the construction contracts including those contracts that have not yet been initiated.

2. Testing the accuracy of calculation table by selecting samples and performing the following audit procedures:

3. (1) Reviewing construction contracts and checking the contractual price and foreign exchange rates in order to verify the accuracy of calculation.

4. (2) Verifying estimated total construction cost to management’s calculation in order to check the consistency of estimates and assumptions used.

~4~

– Other matter Parent company only financial reports

We have audited and expressed an unqualified opinion on the parent company only financial statements of CSBC CORPORATION TAIWAN, as at and for the years ended December 31, 2017 and 2016.

Responsibilities of management and those charged with governance for the

consolidated financial statements

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

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

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

Auditor’s responsibilities for the audit of the consolidated financial statements

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

~5~

As part of an audit in accordance with ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

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

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

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

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

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

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

~6~

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

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

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

WANG, KUO-HUA WU, CHIEN-CHIH

For and on behalf of PricewaterhouseCoopers, Taiwan March 23, 2018

------------------------------------------------------------------------------------------------------------------------------------------------The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

~7~

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2)(22) 6(22) and 7 6(3)(22) 6(3)(22) and 7 7 6(4)(22) 6(5) and 7 6(7) 6(8)(9) and 10 6(8)(9) 6(10) 6(29) 7	December31,2017 AMOUNT % � ������� � ����� � ��������� � ������ � ��������� �� � � ������� � ������ � ��������� �� ������� � ��� � ���������� �� ����� � ���������� �� ������� � ������ � ��������� � ������ � ���������� �� � ���������� ���	December31,2016	December31,2016
		AMOUNT � ������� ����� ��������� ������ ��������� � ������� ������ ��������� ������� ��� ���������� ����� ���������� ������� ������ ��������� ������ ���������� � ����������	AMOUNT � ������� � ������� ����� ��������� ��������� ������ ������ ��������� ��������� ��� ���������� ������� ���������� ������� ������ ������� ������ ���������� � ����������	%
Current assets 1100 Cash and cash equivalents 1150 Notes receivable, net 1170 Accounts receivable, net 1180 Accounts receivable - related parties 1190 Receivables from customers on construction contracts 1195 Receivables from customers on construction contracts - related parties 1200 Other receivables 1210 Other receivables - related parties 130X Inventories, net 1410 Prepayments 1479 Other current assets, others 11XX Total current Assets Non-current assets 1550 Investments accounted for under equity method 1600 Property, plant and equipment, net 1760 Investment property, net 1780 Intangible assets, net 1840 Deferred income tax assets 1920 Refundable deposits 15XX Total non-current assets 1XXX Total assets				� � � � �� � � � �� � �
				��
				� �� � � � �
				��
				���

(Continued)

~8~

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	Notes 6(11) 6(12) 6(13) 6(22) and 7 6(22) and 7 6(3)(22) 6(3)(22) and 7 6(14) 6(18)(22) 6(16) 6(15) 6(29) 6(16) 6(16) 6(17) 6(19) 6(20) 6(21)(29) � 6(31), 7 and 9 10 11	December31,2017 AMOUNT % � ��������� �� ������� � ��� � �� � ������� � ��������� � ��������� � ��������� � ��������� � ��� � ������� � � � ������ � ��������� �� ��������� �� ��������� � ������� � ������ � ������� � ������� � ������ � ��������� �� ���������� �� ��������� �� ����� � ��������� � ��������� �� ����������� ��� ��������� �� ������ � ��������� �� � ���������� ���	December31,2016	December31,2016
		AMOUNT � ��������� ������� ��� �� ������� ��������� ��������� ��������� ��������� ��� ������� � ������ ��������� ��������� ��������� ������� ������ ������� ������� ������ ��������� ���������� ��������� ����� ��������� ��������� ����������� ��������� ������ ��������� � ����������	AMOUNT � ��������� ������� � � ������� ��������� ��������� � ��������� ����� ������� ������� ������ ���������� � ��������� ������� ������ ������� ������� ������ ��������� ���������� ��������� ����� ��������� ��������� ������� ���������� ������ ���������� � ����������	%
Current liabilities 2100 Short-term borrowings 2110 Short-term notes and bills payable 2120 Financial liabilities at fair value through profit or loss - current 2150 Notes payable 2160 Notes payable - related parties 2170 Accounts payable 2190 Payables to customers on construction contracts 2195 Payables to customers on construction contracts - related parties 2200 Other payables 2230 Current income tax liabilities 2250 Provisions for liabilities - current 2305 Other current financial liabilities - current 2310 Unearned receipts 21XX Total current Liabilities Non-current liabilities 2540 Long-term borrowings 2570 Deferred income tax liabilities 2610 Long-term notes, accounts and overdue payable 2630 Long-term deferred revenue 2640 Net defined benefit liability, non- current 2645 Guarantee deposits received 2670 Other non-current liabilities, others 25XX Total non-current liabilities 2XXX Total Liabilities Equity attributable to owners of parent Share capital 3110 Common stock Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings 31XX Total equity attributable to owners of the parent 36XX Non-controlling interest 3XXX Total equity Significant contingent liabilities and unrecognized contract commitments Significant disaster loss Significant subsequent events 3X2X Total liabilities and equity				�� � � � � � � � � � � � �
				��
				� � � � � � �
				�
				��
				�� � � �� �
				��
				�
				��
				���

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

~9~

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars, except loss per share)

Items

YearendedDecember31 2017 2016 Notes AMOUNT % AMOUNT % 6(23) and 7 � ���������� ��� � ���������� ��� 6(4)(10)(26)(27)(3 1) and 7 � ����������� ����� ������������ ���� � ���������� ���� ����������� �� 6(10)(26)(27) � ������ �� ������� � � �������� �� ��������� �� � �������� �� ��������� �� � �������� �� ��������� �� � ���������� ���� ����������� ��� 6(9)(16)(24)(31) ������ � ������ � 6(13)(25) and 10 � �������� � ������ � 6(3)(8)(16)(28) � ������ �� ������� � 6(7) � ������ �� ������� � � �������� � ������ � � ���������� ���� ����������� ��� 6(29) ������� � ������� � � ���������� ���� ����������� �� 6(17) � ������ � � ������ � 6(29) � ����� �� ������ � � ������ � � ������ � � ���������� ���� ����������� �� � ���������� ���� ����������� �� � ����� � ��� � � ���������� ���� ����������� �� � ���������� ���� ����������� �� � ����� � ��� � � ���������� ���� ����������� �� 6(30) � ����� �����

4000 Operating revenue 5000 Operating costs 5900 Net operating loss Operating expenses 6100 Selling expenses 6200 General and administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Operating loss Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7060 Share of loss of associates and joint ventures accounted for under equity method 7000 Total non-operating income and expenses 7900 Loss before income tax 7950 Income tax benefit 8200 Loss for the year Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss 8311 Gains on remeasurements of defined benefit plans 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss 8300 Other comprehensive income 8500 Total comprehensive loss for the year Profit (loss), attributable to: 8610 Equity holders of the company 8620 Non-controlling interest Total Comprehensive (loss) income attributable to: 8710 Equity holders of the company 8720 Non-controlling interest Total Basic loss per share 9750 Total basic loss per share

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

~10~

												Total equity		����������		�	��������	����������	������		������	����������		����������	����������	������		����	���������
														�			�	�			�	�		�	�			�	�
											Non-controlling	interest		� ������		�	�	���	�		� ������	� ������		� ������	� ������	�		� ����	� ������
												Total		����������		�	��������	����������	������		�	����������		����������	����������	������		�	���������
														�			�	�				�		�	�				�
CSBC CORPORATION, TAIWAN AND SUBSIDIARIES		CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY		YEARS ENDED DECEMBER 31, 2017 AND 2016		(Expressed in thousands of New Taiwan dollars)		Equity attributable to owners of the parent	Retained Earnings	Unappropriated	retained earnings	Capital surplus Legal reserve Special reserve (accumulated deficit)		� ����� ���������� ���������� � ���������		� ������ � � �������	� � � � ��������	� � � � ����������	� � � ������		� � � �	� ����� ���������� ���������� � �������		� ����� ���������� ���������� � �������	� � � � ����������	� � � ������		� � � �	� ����� ���������� ���������� �� ����������
											Share capital -	common stock		� ���������		�	�	�	�		�	� ���������		� ���������	�	�		�	� ���������
												Notes					6(21)
													2016	Balance at January 1, 2016	Distribution of 2015 earnings:	Legal reserve	Cash dividends	Net (loss) profit for 2016	Other comprehensive income for 2016	Cash dividends distributed to non-	controlling interests	Balance at December 31, 2016	2017	Balance at January 1, 2017	Net loss for 2017	Other comprehensive income for 2017	Cash dividends distributed to non-	controlling interests	Balance at December 31, 2017

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments Adjustments to reconcile profit (loss) Depreciation of property, plant and equipment Depreciation of investment property Amortization of intangible and other assets Provision for doubtful accounts Loss on investments accounted for using equity method Profit on valuation of financial assets and liabilities Government grant income Interest income Interest expense Disaster loss Loss on disposal of property, plant and equipment Impairment loss Changes in operating assets and liabilities Changes in operating assets (Increase) decrease in notes receivable Increase in accounts receivable (Increase) decrease in accounts receivable - related parties Decrease (increase) in receivables from customers on construction contracts Decrease (increase) in receivables from customers on construction contracts - related parties (Increase) decrease in other receivables Decrease in other receivables - related parties Decrease (increase) in inventories Decrease in prepayments Decrease in other current assets Changes in operating liabilities Increase in financial liabilities at fair value through profit or loss Increase in notes payable (Decrase) increase in notes payable - related partie Increase in accounts payable Decrease in payables to customers on construction contracts Increase (decrase) in payables to customers on construction contracts - related parties (Decrease) increase in other payables Increase (decrease) in provisions for liabilities - current Increased in unearned receipts Increase in net defined benefit liability - non-current Cash outflow generated from operations Interest received Payment of interest Income tax paid Net cash flows used in operating activities

Notes 2017 2016 �� ���������� �� ���������� 6(8)(26) ������� ������� 6(9)(26) ��� ��� 6(10)(26) ������ ������ 6(2) ����� ����� 6(7) ������ ������ 6(13)(25) � ������� � ���� 6(24) � ������� � ������� 6(24) � ������ � ������ 6(28) ������ ������ 6(25) and 10 � ������ 6(25) ����� ����� 6(7)(25) ������� � � ������ ����� � �������� � �������� � ������� ������ ��������� � ���������� ��������� � ���������� � ������� ������ ������ ������ ��������� � ���������� ������� ������� �� ��� ������ ��� �� � � �������� ������� ������ ������ � ���������� � ���������� ��������� � �������� � ������ ����� ��� � ������� ������ ����� ������ ������ � �������� � ���������� ����� ����� � ������� � ������� � ������ � ������ � �������� � ����������

(Continued)

~12~

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2017 AND 2016

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of held-to-maturity financial assets Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Increase in refundable deposits Decrease in refundable deposits Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) increase in short-term borrowings (Decrease) increase in short-term notes and bills payable Decrease in other financial liabilities - government grants Proceeds from long-term debt Increase in guarantee deposit received Decrease in guarantee deposit received (Decrease) increase in other non-current liabilities Cash dividends paid Cash dividends paid to non-controlling interests Net cash flows from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Notes 2017 2016 � � � ������ 6(32) � � �������� 6(32) � �������� � �������� � ����� 6(10) � ������� � ������ � �������� � �������� ������� ������� � �������� � �������� � ���������� ��������� � �������� ������� � � �������� ��������� � ������� ������� � �������� � �������� � ���� ����� 6(21) � � �������� � ���� � ������ ��������� ��������� ������ � �������� 6(1) ������� ������� 6(1) � ������� � �������

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

~13~

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2017 AND 2016

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANIZATION

• (1) On May 1, 1946, Taiwan Machinery and Shipbuilding Company was established by merging Taiwan Dockyard Company with Taiwan Steel Works and Tong Kuang Company in Kaohsiung. The Headquarters is located in Kaohsiung.

• (2) In July, 1973, China Shipbuilding Corporation (the “Company”) was established and reverted to being a state–owned company. In January, 1978, China Shipbuilding Corporation merged with Taiwan Machinery and Shipbuilding Company resulting in the formation of China Shipbuilding Corporation. The Group is engaged in the business of building, manufacturing and repair of various ships and onshore equipment, ship coating, anti-corrosion coating on large steel structure, surface treatment and professional coating.

• (3) On March 1, 2007, China Shipbuilding Corporation changed its name to CSBC Corporation, Taiwan.

• (4) The Company is a listed company since December 22, 2008.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on March 23, 2018

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

• (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments endorsed by FSC effective from 2017 are as follows:

New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 10, IFRS 12 and IAS 28, ‘Investment entities: applying the consolidation exception’ Amendments to IFRS 11, ‘Accounting for acquisition of interests in joint operations’ IFRS 14,‘Regulatory deferral accounts’ Amendments to IAS 1, ‘Disclosure initiative’	January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016

�����

NewStandards,Interpretations and Amendments

Effective date by International Accounting Standards Board

Amendments to IAS 16 and IAS 38,‘Clarification of acceptable methods of depreciation and amortisation’ Amendments to IAS 16 and IAS 41,‘Agriculture:bearer plants’ Amendments to IAS 19,‘Defined benefit plans: employee contributions’ Amendments to IAS 27,‘Equity method in separate financial statements’ Amendments to IAS 36,‘Recoverable amount disclosures for non- financial assets’ Amendments to IAS 39,‘Novation of derivatives and continuation of hedge accounting’ IFRIC 21,‘Levies’ Annual improvements to IFRSs 2010-2012 cycle Annual improvements to IFRSs 2011-2013 cycle Annual improvements to IFRSs 2012-2014 cycle

January 1, 2016 January 1, 2016 July 1, 2014 January 1, 2016 January 1, 2014 January 1, 2014 January 1, 2014 July 1, 2014 July 1, 2014 January 1, 2016

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2018 are as follows:

NewStandards,Interpretations and Amendments

Effective date by International Accounting Standards Board

Amendments to IFRS 2, ‘Classification and measurement of share- based payment transactions’ Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts’ IFRS 9, ‘Financial instruments’ IFRS 15, ‘Revenue from contracts with customers’ Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from contracts with customers’ Amendments to IAS 7, ‘Disclosure initiative’

January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017

�����

Effective date by International Accounting Standards Board

New Standards, Interpretations and Amendments

Amendments to IAS 12,‘Recognition of deferred tax assets for unrealised losses’	January 1, 2017
Amendments to IAS 40,‘Transfers of investment property’	January 1, 2018
IFRIC 22,‘Foreign currency transactions and advance consideration’	January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle- Amendments to	January 1, 2018
IFRS 1,‘First-time adoption of International Financial Reporting
Standards’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to	January 1, 2017
IFRS 12,‘Disclosure of interests in other entities’
Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28,‘Investments in associates and joint ventures’	January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

• A. IFRS 9, ‘Financial instruments’

• (a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.

• (b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Group shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.

�����

• B. IFRS 15, ‘Revenue from contracts with customers’

IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11 ‘Construction contracts’, IAS 18 ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognised when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:

Step 1: Identify contracts with customer.

Step 2: Identify separate performance obligations in the contract(s).

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price.

Step 5: Recognise revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

• C. Amendments to IAS 7, ‘Disclosure initiative’

This amendment requires that an entity shall provide more disclosures related to changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

The Group expects to provide additional disclosure to explain the changes in liabilities arising from financing activities.

When adopting the new standards endorsed by the FSC effective from 2018, the Group will apply the new rules under IFRS 9 retrospectively from January 1, 2018, with the practical expedients permitted under the statement. Further, the Group expects to adopt IFRS 15 using the modified retrospective approach. The significant effects of applying the new standards as of January 1, 2018 are summarised below:

• A. In accordance with IFRS 9, the Group expects to make an irrevocable election at initial recognition on equity instruments not held for dealing or trading purpose, and to reclassify financial assets at cost into financial assets at fair value through other comprehensive income.

�����

• B. Presentation of contract assets and contract liabilities

In line with IFRS 15 requirements, the Group expects to change the presentation of certain accounts in the balance sheet as follows:

• (a) IFRS requires revenue arising from construction contracts in relation to shipbuilding, vessel construction and machinery manufacturing to be recognised as contract assets prior to the receipt of consideration or payment from customers. The revenue arising prior to the rendering of services that has been committed but not transferred to customers is recognised as contract liabilities. In accordance with IAS 11, net income or loss will be reclassified as receivables or payables on construction contracts.

Under IAS 37, provision is recognised for onerous contracts. An expected loss associated with the construction work performed during prior reporting period is measured in accordance with IAS 11, ‘Construction contracts’ and adjusted to receivables or payables on construction contracts accordingly.

The resulting difference is adjusted by decreasing construction contracts receivables and payables on construction contracts in the amount of $5,326,519 and $2,084,753, as well as increasing contract assets, contract liabilities and provision in the amount of $6,269,651, $877,665 and $2,150,220, respectively.

• (b) Under IFRS 15, ship repairs and anti-corrosion coating contracts whereby services have been rendered but not yet billed are recognised as contract assets. As of January 1, 2018, the balance would amount to $55,447.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs endorsed by the FSC are as follows:

NewStandards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 9,‘Prepayment features with negative compensation’ Amendments to IFRS 10 and IAS 28,‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 16,‘Leases’ IFRS 17,‘Insurance contracts’ Amendments to IAS 19,‘Plan amendment,curtailment or settlement’	January 1, 2019 To be determined by International Accounting Standards Board January 1, 2019 January 1, 2021 January 1, 2019

�����

Effective date by International Accounting Standards Board

New Standards, Interpretations and Amendments

Amendments to IAS 28,‘Long-term interests in associates and joint ventures’	January 1, 2019
IFRIC 23,‘Uncertainty over income tax treatments’	January 1, 2019
Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete.

A. IFRS 16, ‘Leases’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a ‘right-of-use asset’ and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

• B. IFRIC 23, ‘Uncertainty over income tax treatments’

This Interpretation clarifies when there is uncertainty over income tax treatments, an entity shall recognise and measure its current or deferred tax asset or liability applying the requirements in IAS 12 , ‘Income taxes’ based on taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates determined applying this Interpretation.

• C. Annual improvements to IFRSs 2015-2017 cycle

• (a) Amendments to IAS 12, ‘Income taxes’

The amendment clarified that the income tax consequences of dividends on financial instruments classified as equity should be recognised according to where the past transactions or events that generated distributable profits were recognised. These requirements apply to all income tax consequences of dividends.

• (b) Amendments to IAS 23, ‘Borrowing costs’

The amendments clarified that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use or sale, it becomes part of general borrowings.

�����

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(2) Basis of preparation

• A. Except for the following items, these consolidated financial statements have been prepared under the historical cost convention:

• (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

• (b) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.

• B. The preparation of financial statements in compliance with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

• (a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

• (b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

• (c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.

�����

• (d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.

• (e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

• B. Subsidiaries included in the consolidated financial statements:

% of shares held as of

		%of shares held as of
Name of Investor Name of Subsidiary CSBC CORPORATION, TAIWAN CSBC Coating Solutions Co., Ltd. CSBC Coating Solutions Co., Ltd. BLUE ACE CORPORATION CSBC Coating Solutions Co., Ltd. Blue Ocean Wind Power Engineering (Hong Kong) Limited	Main business activities Marine coating, steel structure painting works, surface treatment, and high- tech anti-corrosion Marine coating, steel structure painting works, surface treatment, and high-tech anti-corrosion Marine works services	2017 2016 70 70 100 100 100 100 December 31,	Note
		2017 70 100 100
			Note

Note: The subsidiary was established in July 2016.

• C. Subsidiaries not included in the consolidated financial statements: None.

• D. Adjustments for subsidiaries with different balance sheet dates: None.

• E. Significant restrictions: None.

• F. Subsidiaries that have non-controlling interests that are material to the Group:

The non-controlling interests are not material to the Group.

�����

(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan Dollar, which is the Company’s functional and the Group’s presentation currency.

• A. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.

• B. Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon retranslation at the balance sheet date are recognised in profit or loss.

• C. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are retranslated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

• D. All foreign exchange gains and losses are presented in the statement of comprehensive income within ‘other gains and losses’.

(5) Classification of current and non-current items

• A. The Company is engaged in the business of shipbuilding, vessel building, major machinery building and ship repairing such that the contractual periods of these projects are usually over one year. Therefore, the assets and liabilities of these projects are classified as current assets or liabilities if the period of the project is shorter than the operating cycle; otherwise they are classified as non-current assets or liabilities. The classification criteria of assets and liabilities that are not project related are as follows � Current assets include cash, the assets held for trading or the assets arising from operating activities that are expected to be consumed or to be realized within twelve months from the balance sheet date; fixed assets and other assets that are not classified as current assets are non-current assets. Current liabilities include the liabilities arising mainly from trading activities and are expected to be settled within twelve months from the balance sheet date. The liabilities that are not classified as current liabilities are non-current liabilities.

�����

• B. Classification of current and non-current items of the Company’s subsidiaries is as follows:

• (a) Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

• i. Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

• ii. Assets held mainly for trading purposes;

• iii. Assets that are expected to be realised within twelve months from the balance sheet date;

• iv. Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

• (b) Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

• i. Liabilities that are expected to be settled within the normal operating cycle;

• ii. Liabilities arising mainly from trading activities;

• iii. Liabilities that are to be settled within twelve months from the balance sheet date;

• iv. Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(6) Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

(7) Financial assets at fair value through profit or loss

• A. Financial assets at fair value through profit or loss are financial assets held for trading or financial assets designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

• (a) Hybrid (combined) contracts; or

• (b) They eliminate or significantly reduce a measurement or recognition inconsistency; or

�����

• (c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

• B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using settlement date accounting.

• C. Financial assets at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in profit or loss.

(8) Held-to-maturity financial assets

• A. Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity date that the Group has the positive intention and ability to hold to maturity other than those that meet the definition of loans and receivables and those that are designated as at fair value through profit or loss or as available-for-sale on initial recognition.

• B. If the Group has sold or reclassified more than an insignificant amount of held-to-maturity investments before the maturity date during the current or the two preceding financial years, then any financial assets should not be classified as held-to-maturity financial assets and all of its remaining held-to-maturity investments must be reclassified as available-for-sale.

• C. On a regular way purchase or sale basis, held-to-maturity financial assets are recognised and derecognised using trade date accounting.

• D. Held-to-maturity financial assets are initially recognised at fair value on the trade date plus transaction costs and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Amortisation of a premium or a discount on such assets is recognised in profit or loss.

(9) Accounts receivable

Accounts receivable are claims resulting from undertaking construction projects or providing services. Receivables arising from transactions other than undertaking construction projects or providing services are classified as other receivables. Notes, accounts and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.

(10) Impairment of financial assets

• A. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

�����

• B. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:

• (a) Significant financial difficulty of the issuer or debtor;

• (b) A breach of contract, such as a default or delinquency in interest or principal payments;

• (c) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a concession that a lender would not otherwise consider;

• (d) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

• (e) The disappearance of an active market for that financial asset because of financial difficulties;

• (f) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;

• (g) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;

• (h) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

• C. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:

• (a) Financial assets measured at amortised cost

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

�����

(b) Financial assets measured at cost

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently. Impairment loss is recognised by adjusting the carrying amount of the asset directly.

(11) Derecognition of financial assets

The Group derecognises a financial asset when one of the following conditions is met:

• A. The contractual rights to receive the cash flows from the financial asset expire.

• B. The contractual rights to receive cash flows of the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.

• C. The contractual rights to receive cash flows of the financial asset have been transferred; however, the Group has not retained control of the financial asset.

(12) Inventories

The perpetual inventory system is adopted for inventory recognition. Inventories are stated at cost. The cost is determined using the weighted-average method. At the end of period, inventories are evaluated at the lower of cost or net realizable value, and the individual item approach is used in the comparison of cost and net realizable value. The calculation of net realizable value is based on the estimated selling price in the normal course of business, net of estimated costs of completion and estimated selling expenses.

(13) Construction contracts

• A. IAS 11, ‘Construction Contracts’, defines a construction contract as a contract specifically negotiated for the construction of an asset. If the outcome of a construction contract can be estimated reliably and it is probable that this contract would make a profit, contract revenue should be recognised by reference to the stage of completion of the contract activity, using the percentage-of-completion method of accounting, over the contract term. Contract costs are expensed as incurred. The stage of completion of a contract is measured by the proportion of contract costs incurred for work performed to date to the estimated total costs for the contract. An expected loss where total contract costs will exceed total contract revenue on a construction contract should be recognised as an expense as soon as such loss is probable. If the outcome of a construction contract cannot be estimated reliably, contract revenue should be recognised only to the extent of contract costs incurred that it is probable will be recoverable.

• B. Contract revenue should include the revenue arising from variations from the original contract work, claims and incentive payments that are agreed by the customer and can be measured reliably.

�����

• C. The excess of the cumulative costs incurred plus recognised profits (less recognised losses) over the progress billings on each construction contract is presented as an asset within ‘receivables from customers on construction contracts’. While, the excess of the progress billings over the cumulative costs incurred plus recognised profits (less recognised losses) on each construction contract is presented as a liability within ‘payables to customers on construction contracts’.

(14) Investments accounted for under the equity method - associates

• A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.

• B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

• C. When changes in an associate’s equity are not recognised in profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognises the Group’s share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.

• D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

• E. When the Group disposes its investment in an associate, if it loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it still retains significant influence over this associate, then the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.

(15) Property, plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

�����

• B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

Land improvements	5�50 years
Buildings and structures	5�65 years
Machinery and equipment	3�58 years
Transportation equipment	3�40 years
Leasehold improvements	29 years
Other equipment	3�14 years

(16) Operating leases (lessor)

Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

(17) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 60 years.

(18) Intangible assets

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 2 to 7 years.

�����

(19) Impairment of non-financial assets

The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

(20) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

(21) Notes and accounts payable

Notes and accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. However, short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as effect of discounting is immaterial.

(22) Financial liabilities at fair value through profit or loss

• A. Financial liabilities at fair value through profit or loss are financial liabilities held for trading or financial liabilities designated as at fair value through profit or loss on initial recognition. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorized as financial liabilities held for trading unless they are designated as hedges. Financial liabilities that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

• (a)Hybrid (combined) contracts; or

• (b)They eliminate or significantly reduce a measurement or recognition inconsistency; or

• (c)They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management policy.

�����

• B. Financial liabilities at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognised in profit or loss. Derivative liabilities that are linked to equity instruments which do not have a quoted market price in an active market and whose fair value cannot be reliably measured at fair value, and that must be settled by delivery of such unquoted equity instruments are presented in ‘financial liabilities measured at cost’.

(23) Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability specified in the contract is discharged or cancelled or expires.

(24) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

(25) Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Any changes in the fair value are recognised in profit or loss.

(26) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognised as interest expense. Provisions are not recognised for future operating losses.

(27) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

�����

B. Pensions

(a) Defined contribution plans

For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

(b) Defined benefit plans

• i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit net obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.

• ii.Remeasurement arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

iii. Past service costs are recognised immediately in profit or loss.

C. Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Group’s decision to terminate an employee’s employment before the normal retirement date, or an employee’s decision to accept an offer of redundancy benefits in exchange for the termination of employment. The Group recognises expense as it can no longer withdraw an offer of termination benefits or it recognises relating restructuring costs, whichever is earlier. Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.

• D. Employees’ compensation and directors’ and supervisors’ remuneration

Employees’ remuneration and directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal obligation or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is paid by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

�����

(28) Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

• C. Deferred income tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

• D. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.

• E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

• F. A deferred tax asset shall be recognised for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures, employees’ training costs and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

�����

(29) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are resolved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(30) Revenue recognition

A. The Company’s revenue recognition:

• (a) Details of revenue recognition of construction contract are provided in Note 4(13).

• (b) Service revenue (ship-repair revenue) is recognised when owners of the ship completes inspection.

• B. Consolidated subsidiary’s revenues are recognized as follows:

• (a) Revenue from delivering services is recognised under the percentage-of-completion method when the outcome of services provided can be estimated reliably. The stage of completion of a service contract is measured by the percentage of the actual services performed as of the financial reporting date to the total services to be performed. When the estimated contract costs are higher than the contract prices, the estimated loss is recognized immediately. However, when the estimated loss subsequently decreases, the loss reduction which was previously recognized in profit or loss shall be reversed and recognized as gain in current period.

• (b) If a reliable estimate of gain or loss from contracts for providing services cannot be made, and it is probable that contract costs incurred will be recoverable, then contract revenue should be recognized only to the extent of contract costs incurred that is probable to be recoverable; however, if it is improbable that contract costs incurred will be recoverable, then no revenue should be recognized. Contract costs should be expensed as incurred.

(31) Government grants

Government grants are recognised at their fair value only when there is reasonable assurance that the Group will comply with any conditions attached to the grants and the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises expenses for the related costs for which the grants are intended to compensate.

(32) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker. The Chief Operating Decision-Maker is responsible for allocating resources and assessing performance of the operating segments.

�����

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgments in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

(1) Critical judgements in applying the Group’s accounting policies

None.

(2) Critical accounting estimates and assumptions

Construction contracts

The Group recognises construction contract revenue and costs using the percentage-of-completion method, wherein the revenue to be recognised is equal to the percentage of completed work out of the total estimated work.

Assumptions for estimated construction cost include cost for equipment, material, labor and etc. Data used for assumptions involves subjective judgement and accounting estimates and are highly uncertain. As a result, assumptions used are material to the total construction cost and further affects the calculation of construction profit.

If the estimated total contract costs had increased/ decreased by 1% with all other variables held constant, construction profit for the year ended December 31, 2017 would have decreased by $355,480 or increased by $333,684 (the construction profit for the year ended December 31, 2016 would have decreased or increased by $363,997).

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash on hand and revolving funds Checking accounts and demand deposits Time deposits	December 31,2017 260 $ 219,005 62,549 281,814 $	December 31,2016
		320 $ 118,962 71,851
		191,133 $

A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

B. The Group has no cash and cash equivalents pledged to others.

�����

(2) Accounts receivable, net

Construction receivables Repair receivables Less: Allowance for doubtful accounts	December 31,2017 1,228,341 $ 149,138 15,529) ( 1,361,950 $	December 31,2016 673,406 $ 80,043 8,176) ( 745,273 $

• A. The counterparties to the above accounts receivable are government (including government-run entities) and private enterprises. In order to maintain the quality of accounts receivable, the Group has established procedures to manage operation-related credit risk. The Group assesses the customers’ credit quality based on several factors, such as the customers’ financial condition, historical transaction records and current economic situation that have influences on the customers’ capacity to meet financial commitments. Customers’ credit quality are assessed routinely and receivables that are neither overdue nor impaired are assessed to be having good credit quality.

• B. The Group does not hold any individual accounts receivable that are significantly impaired.

• C. Movement analysis of financial assets that were impaired is as follows:

At January 1 Provision for impairment At December 31 At January 1 Provision for impairment At December 31		2017
	Individualprovision - $ - - $	Group provision 8,176 $ 7,353 15,529 $ 2016	Total
			8,176 $ 7,353
			15,529 $
	Individualprovision - $ - - $	Group provision 5,565 $ 2,611 8,176 $	Total
			5,565 $ 2,611
			8,176 $

• D. The Group does not hold any collateral as security.

�����

(3) Construction contract

		December 31,2017		December 31,2016
Aggregate costs incurred plus	$	8,900,203	$	16,291,984
recognised profits (less
recognised losses)
Less: Progress billings	(	5,658,437)	(	9,367,760)
Net balance sheet position for
construction in progress	$	3,241,766	$	6,924,224
Presented as:
Receivables from customers on
construction contracts	$	5,326,519	$	7,743,504
Receivables from customers on
construction contracts-related parties		-		1,793,119
Payables to customers on
construction contracts	(	1,060,906)	(	2,612,399)
Payables to customers on
construction contracts-related parties	(	1,023,847)		-
	$	3,241,766	$	6,924,224

• A. As of December 31, 2017 and 2016, there has been no construction retentions related to construction contracts.

• B. Please refer to Note 6(23) ‘Operating revenue’ for the information about construction contract revenue for the years ended December 31, 2017 and 2016.

• C. Information for the Group’s capitalisation of borrowing costs of construction-in-progress is as follows:

Amount capitalised (including in construction in progress) Range of the interest rates for capitalisation	Years ended December 31,	Years ended December 31,
	2017 64,053 $ 0.55%~1.05%	2016
		30,130 $
		0.24%~0.98%

(4) Inventories

Raw materials Work in process and repair of goods		December 31,2017
	Cost 1,975,173 $ 380,750 2,355,923 $	Allowance for valuation loss 34,862) ($ - 34,862) ($	Book value
			1,940,311 $ 380,750
			2,321,061 $

�����

December 31, 2016

		December 31,2016
Raw materials Work in process and repair of goods	Cost 2,730,873 $ 2,017,900 4,748,773 $	Allowance for valuation loss 31,005) ($ 864,902) ( 895,907) ($	Book value
			2,699,868 $ 1,152,998
			3,852,866 $

The amount of inventories recognised as expense for the years ended December 31, 2017 and 2016 is as follows:

Raw materials costs (Gain from reversal of) loss on obsolete inventories	Years ended December 31,	Years ended December 31,
	2017 10,756,455 $ 861,045) ( 9,895,410 $	2016
		11,468,666 $ 864,528
		12,333,194 $

The Group reversed a previous inventory write-down and accounted this transaction as a reduction of expenses because the related inventory items were scrapped or sold in 2017.

(5) Prepayments

Prepayments of suppliers Excess VAT paid Other prepayments	December 31,2017 560,661 $ 56,132 9,499 626,292 $	December 31,2016
		870,419 $ 237,397 11,113
		1,118,929 $

(6) Financial assets measured at cost

• A. The Group has obtained 1.33% of the shares of Welland Shipping Agency Co., Ltd. and 3.13% of the shares of Yi Di Shipping Agency Co., Ltd., which were both formerly held by the Group’s debtors, through the compulsory enforcement of the court in the year 2007.

• B. As the shares held by the Group in Welland Shipping Agency Co., Ltd. and Yi Di Shipping Agency Co., Ltd. are not traded in active markets, and no sufficient industry information of companies similar to Welland Shipping Agency Co., Ltd. and Yi Di Shipping Agency Co., Ltd.’s financial information can be obtained, the fair value of the stock warrants cannot be measured reliably. The Group classified those stock warrants as ‘financial assets measured at cost’.

• C. The carrying value of the Group’s shares held in Welland Shipping Agency Co., Ltd. and Yi Di Shipping Agency Co., Ltd. are assessed to be $0 by the Group.

~37~

(7) Investments accounted for under equity method

A. Details of investments accounted for under equity method are as follows:

			2017				2016
At January 1	$			166,616	$			3,051
Additional investments accounted for
using the equity method				-				197,344
Share of profit or loss of investments
accounted for using the equity method	(			20,868)	(			33,779)
Provision for impairment	(			144,103)				-
At December 31	$			1,645	$			166,616
			December 31,	2017			December 31,	2016
Fuhai Wind Farm Corporation (Note 1)	$			-	$			164,238
Taiwan Offshore Wind Farm Services
Corporation (Note 2)				1,645				2,378
		$		1,645		$		166,616

• Note 1: On August 9, 2016, the Board of Directors resolved to invest in Fuhai Wind Farm Corporation and obtained 37.97% of ownership shares.

• Note 2: On March 21, 2014, the Board of Directors has resolved that the Company and Taiwan Generations Corporation will jointly establish Taiwan Offshore Wind Farm Services Corporation. The Company has acquired 40% of share capital in September 2014.

• B. The Group’s share of the operating results in all individually immaterial associates are summarized below:

		Years ended	December	31,
		2017		2016
Profit or loss for the year from
continuing operations	($	20,868)	($		33,779)
Other comprehensive income -
net of tax		-			-
Total comprehensive loss	($	20,868)	($		33,779)

• C.The Group has obtained 41.69% of the Yi Zhuyin Transocean Co., Ltd. shares, which was formerly held by the Group’s debtors, through the compulsory enforcement of the court in the year 2010. The carrying value of the Group’s shares held in Yi Zhuyin Transocean Co., Ltd. is assessed to be $0 by the Group. There is no subsequent loss recognised by the Group.

• D.The Group recognised impairment loss of $144,103 for investments accounted for using equity method as the carrying amount exceeds recoverable amount for the year ended December 31, 2017. The Group did not recognise impairment loss for the year ended December 31, 2016.

~38~

E.Beginning in July 2017, the Group ceased recognising its share of loss of associates arising from the investments in Fuhai Wind Farm Corporation which was accounted for using equity method. During the period from July 1 to December 31, 2017, the accumulated unrecognised loss of associates amounted to $21,588.

(8) Property, plant and equipment

Book value	Book value	Book value								December 31,2016	December 31,2016	December 31,2016
Land Land improvements Buildings and structures Machinery and equipment Transportation equipment Leasehold improvements Other equipment Construction in progress Opening net Cost book amount										$		6,096,033 347,971 946,784 2,011,752 454,755 438,816 55,113 358,372
										$		10,709,596
					Year ended December							Closing net book amount
		Opening net book amount		Additions		Disposals			Reclassifications (Note)
Land Land improvements Buildings and structures Machinery and equipment Transportation equipment Leasehold improvements Other equipment Construction in progress Total Accumulated depreciation and impairment		$ 6,096,033 997,998 7,422,915 9,570,491 947,254 1,072,631 136,678 358,372 26,602,372 Opening net book amount		$ - - - - - - - 370,983 370,983 $ Depreciation expense		- $ - 6,572) ( 55,360) ( 1,928) ( - 1,206) ( - 65,066) ($ Disposals		- $ 1,778 214,282 394,122 1,833 - 11,097 625,206) ( 2,094) ($ Reclassifications (Note)				6,096,033 $ 999,776 7,630,625 9,909,253 947,159 1,072,631 146,569 104,149 26,906,195 Closing net book amount
Land improvements Buildings and structures Machinery and equipment Transportation equipment Leasehold improvements Other equipment Total Book value	( 650,027) ( 6,476,131) ( 7,558,739) ( 492,499) 633,815) ( 81,565) ( 15,892,776) ( 10,709,596 $		($ 28,846) 93,917) ( 287,234) ( 46,018) ( 48,622) ( 10,909) ( 515,546) ($				- $ 6,127 54,596 1,928 - 1,194 63,845 $		- $ 2,046 - - - - 2,046 $		( 678,873) 6,561,875) ( 7,791,377) ( 536,589) ( 682,437) ( 91,280) ( 16,342,431) ( 10,563,764 $

Note: The reclassifications refer to items transferred into investment property.

~39~

Year ended December 31, 2016

Cost		Opening net book amount		Additions	Disposals	Disposals		Reclassifications		Closing net book amount
Land Land improvements Buildings and structures Machinery and equipment Transportation equipment Leasehold improvements Other equipment Construction in progress Total Accumulated depreciation and impairment		$ 6,096,033 981,391 7,402,890 9,610,397 951,989 1,072,631 151,030 302,431 26,568,792 Opening net book amount		$ - - - 301 36 - 77 324,804 325,218 $ Depreciation expense	- $ - 14,295) ( 253,317) ( 9,061) ( - 14,965) ( - 291,638) ($ Disposals			- $ 16,607 34,320 213,110 4,290 - 536 268,863) ( - $ Reclassifications		6,096,033 $ 997,998 7,422,915 9,570,491 947,254 1,072,631 136,678 358,372 26,602,372 Closing net book amount
Land improvements Buildings and structures Machinery and equipment Transportation equipment Leasehold improvements Other equipment Total Book value	( 621,326) ( 6,334,280) ( 7,492,795) ( 454,245) 585,193) ( 81,445) ( 15,569,284) ( 10,999,508 $		($ 28,701) 149,925) ( 275,746) ( 47,296) ( 48,622) ( 11,099) ( 561,389) ($			- $ 8,074 210,729 9,042 - 10,052 237,897 $	- $ - 927) ( - - 927 - $		650,027) ( 6,476,131) ( 7,558,739) ( 492,499) ( 633,815) ( 81,565) ( 15,892,776) ( 10,709,596 $

• A. Amount of borrowing costs capitalised as part of property, plant and equipment are as follows:

Amount capitalised Interest rate	Years ended December 31,	Years ended December 31,
	2017 443 $ 0.68%~1.05%	2016
		- $
		-

• B. Significant components and the useful lives of land improvements, buildings, and machinery equipment of the Group are as follows:

• (a) The significant components of land improvements include construction expenses for wharf, which are depreciated over 45 years.

• (b) The significant components of buildings include shipyard, plants and warehouse, and office buildings, which are depreciated over 40, 45 and 60 years, respectively.

• (c) The significant components of machinery equipment include hoisting machine, crane and substation, and carriers, welding machine as well as working platform, which are depreciated over 25, 20 and 10 years, respectively.

~40~

• C. The Group does not pledge any property, plant and equipment to others as collaterals.

• D. A portion of the Group’s property, plant and equipment has been seriously damaged by Typhoon Meranti on September 14, 2016. Please refer to Note 10 for details of significant disaster loss.

(9) Investment property, net

Investment property, net
Carryingamounts of	each category								December 31,2016
Land Buildings and structures Cost									$		226,918 7,464
									$		234,382
											At December31
		AtJanuary1		Additions		Disposals		Reclassifications (Note)
Land Buildings and structures Total Accumulated depreciation and impairment		$ 226,918 22,811 249,729 AtJanuary1		$ - - - $ Depreciation expense		$ - - - $ Disposals		- $ 2,094 2,094 $ Reclassifications (Note)			226,918 $ 24,905 251,823 At December31
Buildings and structures Book value		15,347) ( 234,382 $		375) ($		- $		2,046) ($		17,768) ( 234,055 $

Note: The reclassifications refer to items transferred from property, plant and equipment.

Cost				YearendedDecember31,2016	YearendedDecember31,2016	YearendedDecember31,2016	YearendedDecember31,2016	YearendedDecember31,2016		At December31
		AtJanuary1		Additions		Disposals		Reclassifications
Land Buildings and structures Total Accumulated depreciation and impairment		$ 226,918 22,811 249,729 AtJanuary1		$ - - - $ Depreciation expense		$ - - - $ Disposals		- $ - - $ Reclassifications		226,918 $ 22,811 249,729 At December31
Buildings and structures Book value		14,972) ( 234,757 $		375) ($		- $		- $	15,347) ( 234,382 $

~41~

• A. Rental income from the lease of the investment property and direct operating expenses arising from the investment property are shown below:

Rental income from the lease of the investment property Direct operating expenses arising from the investment property that generate rental income in the period Direct operating expenses arising from the investment property that did not generate rental income in the period	Years ended December 31,	Years ended December 31,
	2017 7,720 $ 1,996 $ - $	2016
		7,844 $
		1,410 $
		- $

The fair value of the investment property held by the Group as at December 31, 2017 and 2016 were $664,261 and $665,979, respectively, which was revalued by independent valuers. Valuations were made using the comparison method, cost method for land development analysis and the income approach.

(10) Intangible assets

Cost			Year ended December 31,2017	Year ended December 31,2017	Year ended December 31,2017	Closing net book amount	Closing net book amount
		Opening net book amount	Additions-acquired separately		Disposals
Software Accumulated amortisation and impairment		59,483 $ Opening net book amount		10,071 $ Amortization expense	11,602) ($ Disposals	57,952 $ Closing net book amount
Software Book value Cost		30,636) ( 28,847 $				34,942) ( 23,010 $ Closing net book amount
		Opening net book amount	Additions-acquired separately		Disposals
Software Accumulated amortisation and impairment		64,375 $ Opening net book amount		5,250 $ Amortization expense	10,142) ($ Disposals		59,483 $ Closing net book amount
Software Book value		27,430) ( 36,945 $		13,348) ($	10,142) ($	30,636) ( 28,847 $

~42~

Details of amortisation on intangible assets are as follows:

Operating costs Research and development expenses	Years ended December 31,	Years ended December 31,
	2017 15,894 $ 14 15,908 $	2016
		13,342 $ 6
		13,348 $

(11) Short-term loans

Type of loans Unsecured loans Unsecured loans Type of loans Unsecured loans Unsecured loans	December 31,2017 2,261,689 $ 26,095 2,287,784 $ December 31,2016 6,345,358 $ 49,767 6,395,125 $	Interest rate range 0.84%�1.57% 0.48%�2.89% Interest rate range 0.77%�1.40% 0.39%�2.14%	Collateral
			None None Collateral
			None None

Note: Please refer to Note 8 for details of pledged assets.

(12) Short-term notes and bills payable

Commercial papers payable Less: Unamortized discount Annual interest rates	December 31,2017 700,000 $ 231) ( 699,769 $ 0.51%�0.60%	December 31,2016
		1,000,000 $ 265) (
		999,735 $
		0.57%�0.65%

The above commercial paper payables are guaranteed and issued by MEGA Bills Finance Co., Ltd., Taiwan Cooperative Bills Finance Corporation, China Bills Finance Corporation and International Bill Finance Corporation.

(13) Current financial liabilities at fair value through profit or loss

Items Financial liabilities held for trading: Non-hedging derivatives	December 31,2017 280 $	December 31,2016
		- $

A. The Group recognised net gain of $11,463 and $824 on financial liabilities held for trading for the years ended December 31, 2017 and 2016, respectively,

~43~

B. The non-hedging derivative instruments transaction and contract information are as follows:

Derivative financial liabilities Forward foreign exchange contracts	December	31,2017
	Contract amount (notionalprincipal) JPY 400,000 thousand	Contractperiod
		2017.12.07�2018.02.09

The Group did not conduct such transaction for the year ended December 31, 2016.

The Group entered into forward foreign exchange contracts to hedge exchange rate risk of import proceeds. However, these forward foreign exchange contracts are not accounted for under hedge accounting.

(14) Other payables

Accrued expenses Construction payment refund Payables on equipment Others	December 31,2017 1,201,058 $ 60,503 - 23,257 1,284,818 $	December 31,2016
		1,043,508 $ 110,485 235,625 22,537
		1,412,155 $

- (15) Long term borrowings

Type of borrowings Long-term bank borrowings Unsecured borrowings Bank of Taiwan JihSun Bank	Borrowing period and repayment term	Interest rate range 1.36% 1.25%	Collateral None None	December 31,2017
	Borrowing period is from Jun. 22, 2017 to Jun. 22, 2022;principal is repayable in 4 installments beginning in the 4th year. Borrowing period is from Dec. 7, 2017 to Jul. 20, 2020; principal is repayable at maturity.			2,000,000 $ 200,000
				2,200,000 $

~44~

Borrowing period and Interest repayment term rate range Collateral December 31, 2017

Type of borrowings

Commercial papers payable International Bills Finance Corporation Borrowing period is from Jun 22, 2017 to Jun. 22, 2021. Details are set out below. 0.56% None Taishin International Bank Borrowing period is from Jun. 22, 2017 to Jun. 22, 2020. Details are set out below. 0.61% None China Bills Finance Corporation Borrowing period is from Sep. 26, 2017 to Sep. 26, 2020. Details are set out below. 0.45% None Mega Bills Finance Co., Ltd. Borrowing period is from Sep. 26, 2017 to Sep. 26, 2020. Details are set out below. 0.64% None Less: Discount on commercial papers payable

500,000 800,000 1,000,000 1,000,000 1,943) ( 3,298,057 5,498,057 $

The Group entered into an agreement for recurring issuance (maturity of 60~180 days) of certificates and dealership of commercial papers with the bill finance companies. During the contract term of 3~4 years, the Group is only liable for the service fees and interest and thus the commercial papers payable is included in long-term borrowings.

As of December 31, 2016, there was no such transaction.

(16) Government grants

• A. The Republic of China Government started to promote privatization starting from 2008. The Privatization Fund, Executive Yuan, would provide a loan in the amount of $1,500,000 to cover a portion of the shortfall to settle the pension and severance obligation as a result of the privatization. The Company was required to repay the loan to the Privatization Fund in a period of ten years, under the condition that the Company is profitable.

The Company uses the average long-term loan interest rate on the loan for discounting. The discounted values are recorded under “long-term notes payable and payables”, the difference between the discounted value and the amount received is listed in “deferred revenue”. The amounts that are payable within one year are listed in “other financial liabilities-current”. The unamortised amounts are shown below:

~45~

Other financial liabilities-current Long-term notes and accounts receivable Long-term deferred revenue	December 31,2017 - $ 659,156 82,344 741,500 $	December 31,2016
		150,000 $ 564,603 26,897
		741,500 $

• B. Government grants and interest expenses that should be amortised are recognised under ‘other revenue’ and ‘finance costs’, respectively, for the years 2017 and 2016. For more information, please refer to Notes 6(24) and (28).

(17) Pension

• A. (a)The Group has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Group contributes monthly an amount equal to 15% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by the end of December 31, every year. The Company has assessed that the balance is sufficient to pay the pension calculated by the aforementioned method, to the employees expected to be qualified for retirement next year.

(b)The amounts recognised in the balance sheet are as follows:

		December 31,2017		December 31,2016
Present value of funded obligations	($	1,516,485)	($	1,396,332)
Fair value of plan assets		1,344,783		1,215,818
Net defined benefit liability	($	171,702)	($	180,514)

~46~

(c) Movements in net defined benefit liabilities are as follows:

Present value of

	Present value of
Year ended December 31, 2017 Balance at January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets Experience adjustments Pension fund contribution Paid pension Balance at December 31 Year ended December 31, 2016 Balance at January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets Experience adjustments Pension fund contribution Paid pension Balance at December 31	defined benefit obligations		Fair value of plan assets	Net defined benefit liability
	1,396,332) ($ 174,904) ( 24,178) ( 1,595,414) ( - 49,825 49,825 - 29,104 1,516,485) ($ Present value of defined benefit obligations	1,215,818 $ - 22,292 1,238,110 10,223) ( - 10,223) ( 146,000 29,104) ( 1,344,783 $ Fair value of plan assets		180,514) ($ 174,904) ( 1,886) ( 357,304) ( 10,223) ( 49,825 39,602 146,000 - 171,702) ($ Net defined benefit liability
	1,258,771) ($ 179,147) ( 21,882) ( 1,459,800) ( - 45,903 45,903 - 17,565 1,396,332) ($	1,078,072 $ - 20,028 1,098,100 11,917) ( - 11,917) ( 147,200 17,565) ( 1,215,818 $		180,699) ($ 179,147) ( 1,854) ( 361,700) ( 11,917) ( 45,903 33,986 147,200 - 180,514) ($

~47~

• (d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2017 and 2016 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

• (e) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	Years ended December 31,	Years ended December 31,
	2017 1.75% 3.5%	2016
		1.75%
		3.5%

Future mortality rate is estimated with 70% of the 3rd Taiwan Standard Ordinary Experience Mortality Table.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

December 31, 2017 Effect on present value of defined benefit obligation December 31, 2016 Effect on present value of defined benefit obligation	Increase 0.25% Decrease 0.25% 39,302) ($ 40,721 $ 41,649) ($ 36,948 $ Discount rate	Increase 0.25% Decrease 0.25% 36,375 $ 35,363) ($ 32,918 $ 38,023) ($ Future salaryincreases
	Increase 0.25% 39,302) ($ 41,649) ($	Increase 0.25% 36,375 $ 32,918 $

~48~

The sensitivity analysis above is based on other conditions thate are unchanged but only one assumption is changed. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

• (f) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2018 amounts to $140,990.

• (g) As of December 31, 2017 the weighted average duration of that retirement plan is 11 years. The analysis of timing of the future pension payment was as follows:

Within 1 year	$	52,435
1-2 year(s)		57,734
2-5 years		113,815
Over 5 years		1,773,609

• B. Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. The pension costs under the defined contribution pension plans of the Group for the years ended December 31, 2017 and 2016 were $104,750 and $105,228, respectively.

(18) Provisions

The analysis of change in warranty liabilities are as follows:

The analysis of provisions is as follows: At January1,2017 Additions 139,687 $ 67,131 $ Realised in one year Realised after one year		Unused amounts Used reversed 56,520) 10,079) ($ December 31,2017 61,441 $ $ 78,778 140,219 $ $	Unused amounts Used reversed 56,520) 10,079) ($ December 31,2017 61,441 $ $ 78,778 140,219 $ $	At December 31,2017
	($			140,219 $
				December 31,2016
			$	41,568 98,119
			$	139,687

The Group gives warranties on construction contracts revenue. Provision for warranty is estimated based on historical warranty data of products.

~49~

(19) Common stock

As of December 31, 2017, the Company’s authorized capital was $11,138,997 and the paid-in capital was $7,435,652, consisting of 743,565 thousand shares of ordinary stock with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

The number of the Company’s ordinary shares outstanding at January 1 and December 31, 2017 and 2016 was the same.

The Company’s special shareholders’ meeting has approved the proposal regarding deficit compensation through capital reduction on December 21, 2017. The capital will be reduced by $4,305,734, consisting of 430,573 thousand shares and equivalent to 57.91% of paid-in capital. Meanwhile, the shareholders also approved the proposal for private placement in cash of less than 200,000 thousand share of common stock on the same date.

According to the resolution at the special shareholders’ meeting, the private placement will be held in multiple times within one year, for at least three times. The first issuance is expected to be 100,000 thousand shares. The investors in this private placement is entitled to the same rights and obligations as those of outstanding shares except that they cannot freely transfer the shares within 3 years of settlement unless under certain circumstances pursuant to Article 43-8 of Securities and Exchange Act. Under the resolution, the Board of Directors are authorised to file for listing the ordinary shares in private placement with the competent authority after 3 years of settlement.

The aforementioned interim proposal for deficit compensation through capital deduction was approved by Financial Supervisory Commission pursuant to Jin-Guan-Zheng-Fa-Zi Letter No.1060051278 dated January 17, 2018. The proposal will be registered accompanying with the proposal of 2018 private placement with the Ministry of Economic Affairs. As of the reporting date of these financial statements, both proposals are still in progress as the investors for the private placement are uncertain.

(20) Capital reserve

Pursuant to the R.O.C. Company Law, capital reserve arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital reserve to be capitalized mentioned above should not exceed 10% of the paid-in capital each year. Capital reserve should not be used to cover accumulated deficit unless the legal reserve is insufficient.

~50~

(21) Retained earnings

• A. Under the Company's Articles of Incorporation, the current year's earnings, if any, shall first be used to pay all taxes and offset prior years' operating losses and then 10% of the remaining amount shall be set aside as legal reserve until the legal reserve equals the total capital stock balance. Appropriation of the remainder shall be proposed by the Board of Directors and resolved by the stockholders.

• B. The Company’s dividend policy is summarized below:

As the Company operates in a volatile business environment and is in the stable growth stage, the residual dividend policy is adopted taking into consideration the Company’s financial structure, operating results and future expansion plans. According to the dividend policy adopted by the Board of Directors, at least 10% of the Company’s distributable earnings shall be appropriated as dividends, and cash dividends shall account for at least 10% of the total dividends distributed.

• C. Except for covering accumulated deficit or increasing capital, the legal reserve shall not be used for any other purpose. Capitalization of the legal reserve is permitted, provided that the balance of the reserve exceeds 50% of the Company’s paid-in capital and the amount capitalized does not exceed 25% of the balance of the reserve.

• D. a)In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• b)The amounts previously set aside by the Company as special reserve amounting to $3,201,365 on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently. Such amounts are reversed upon disposal or reclassified if the assets are investment property of land, and reversed over the use period if the assets are investment property other than land.

• c)The Company disposed land in 2013. Therefore, the Company reversed special reserve of $11,016 to undistributed earnings.

• E. The proposals for deficit compensation for the nine-month periods ended September 31, 2017 and 2016, were approved at the regular shareholders’ meeting on June 21, 2017 and special shareholders’ meeting on December 21, 2017, respectively. At the special shareholders’ meeting, the proposal for deficit compensation through capital reduction was also approved. Please refer to Note 6(19) for details.

~51~

On June 23, 2016, the stockholders resolved that total dividends for the distribution of earnings for the year 2015 was $371,782 at $0.5 (in dollars) per share.

On March 23, 2018, the Board of Directors has proposed the deficit compensation for year 2017.

(22) Analysis of assets and liabilities

Assets and liabilities of the Group related to the business of shipbuilding, vessel building, major machinery and ship repair, are classified as current or non-current based on the operating cycle. However, such assets and liabilities were analyzed on "one year" basis as follows:

December 31,2017 Assets Notes receivable Accounts receivable, net (including related parties) Receivables from customers on construction contracts (including related parties) Inventories, net Liabilities Notes payable (including related parties) Accounts payable (including related parties) Payables to customers on construction contracts (including related parties) Provision for liabilities	Less than 12 months 5,790 $ 1,365,391 4,857,047 2,321,061 8,549,289 $ 223,073 $ 1,156,762 170,951 61,441 1,612,227 $	More than 12 months - $ - 469,472 - 469,472 $ - $ - 1,913,802 78,778 1,992,580 $	Total
			5,790 $ 1,365,391 5,326,519 3,852,866
			9,018,761 $
			223,073 $ 1,156,762 2,084,753 140,219
			3,604,807 $

~52~

(23) (24)	Operating revenue Other income December 31,2016 Assets Accounts receivable, net (including related parties) Receivables from customers on construction contracts (including related parties) Inventories, net Liabilities Notes payable (including related parties) Accounts payable (including related parties) Payables to customers on construction contracts (including related parties) Provision for liabilities Construction contract revenue Sales revenue Service revenue Others Rental revenue Interest income: Interest income from bank deposits Other interest income Government grant revenue Indemnity revenue Others	Less than More than 12 months 12 months Total 743,704 $ - $ 743,704 $ 9,326,840 209,783 9,536,623 3,852,866 - 3,852,866 13,923,410 $ 209,783 $ 14,133,193 $ 324,457 $ - $ 324,457 $ 1,003,061 - 1,003,061 1,330,525 1,281,874 2,612,399 41,568 98,119 139,687 2,699,611 $ 1,379,993 $ 4,079,604 $ 2017 2016 13,944,784 $ 15,173,151 $ 1,345,813 - 1,098,141 533,079 15,606 41,469 16,404,344 $ 15,747,699 $ Years ended December 31, 2017 2016 10,008 $ 7,844 $ 2,368 1,603 - 369 11,018 14,452 9,198 4,706 13,023 21,010 45,615 $ 49,984 $ Years ended December 31,	Less than More than 12 months 12 months Total 743,704 $ - $ 743,704 $ 9,326,840 209,783 9,536,623 3,852,866 - 3,852,866 13,923,410 $ 209,783 $ 14,133,193 $ 324,457 $ - $ 324,457 $ 1,003,061 - 1,003,061 1,330,525 1,281,874 2,612,399 41,568 98,119 139,687 2,699,611 $ 1,379,993 $ 4,079,604 $ 2017 2016 13,944,784 $ 15,173,151 $ 1,345,813 - 1,098,141 533,079 15,606 41,469 16,404,344 $ 15,747,699 $ Years ended December 31, 2017 2016 10,008 $ 7,844 $ 2,368 1,603 - 369 11,018 14,452 9,198 4,706 13,023 21,010 45,615 $ 49,984 $ Years ended December 31,	Total
				743,704 $ 9,536,623 3,852,866
				14,133,193 $
				324,457 $ 1,003,061 2,612,399 139,687
				4,079,604 $
			2016
			7,844 $ 1,603 369 14,452 4,706 21,010
			49,984 $

~53~

(25) Other gains and losses

				Years ended December	Years ended December	31,
			2017			2016
Net gains on financial assets and		$		11,463	$		824
liabilities at fair value through
profit or loss
Net currency exchange gains				16,299			70,418
Disaster loss (Note 1)				-	(		17,379)
Losses on disposal of	(			1,221)	(		2,369)
property, plant and equipment
Impairment loss (Note 2)	(			144,103)			-
Other losses	(			9,981)	(		2,019)
	($			127,543)	$		49,475

‘ ’ Note 1: Details of disaster loss are provided in Note 10, Significant disaster loss .

Note 2: Please refer to Note 6(7) Investments accounted for under equity method for details.

(26) Expenses by nature

Change in inventory of finished goods and work in process Direct materials Employee benefit expense Depreciation and amortisation charges Outsourcing fees Other expenses Operating costs and expenses	2017 2016 3,537,016 $ 2,986,899) ($ 10,756,455 11,468,666 3,823,779 3,986,375 531,829 575,112 2,352,280 2,690,225 1,631,950 1,579,250 22,633,309 $ 17,312,729 $ Years ended December 31,

~54~

(27) Employee benefit expense

Wages and salaries Labor and health insurance fees Pension cost Other personnel expenses	Years ended December 31,	Years ended December 31,
	2017 3,218,248 $ 270,153 281,540 53,838 3,823,779 $	2016
		3,369,775 $ 269,104 286,229 61,267
		3,986,375 $

• A. According to the Articles of Incorporation of the Company, the Company shall distribute employees’ compensation, based on the distributable profit of the current year, in a ratio of profit. Employees’ compensation can be distributed in the form of shares or in cash. If a company has accumulated deficit, earnings should first be channeled to cover losses. Employees’ compensation shall account for 1% to 5%, directors’ remuneration shall account for less than 5%, of the amount of current year’s pre-tax profit but excluding the employees’ compensation and directors’ remuneration.

• B. The Company did not recognise employees’ compensation and directors’ renumeration as a result of the operating deficit for the years ended December 31, 2017 and 2016.

• The Board of Directors resolved not to appropriate employees’ compensation and directors’ renumeration as a result of the operating deficit for the years ended December 31, 2017 and 2016.

Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved by the meeting of Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(28) Finance costs

Interest expense: Bank loans Others Expenses amortised from government grants payable Less: Capitalisation of qualifying assets	Years ended December 31,	Years ended December 31,
	2017 74,239 $ 520 11,018 64,496) ( 21,281 $	2016
		30,076 $ 21,654 14,452 30,130) (
		36,052 $

~55~

(29) Income tax expense

• A. Income tax (benefit) expense

• (a) Components of income tax (benefit) expense:

			Years ended	Years ended	Years ended	December 31,	December 31,
			2017				2016
Current tax:
Current tax on profits for the
period	$		-			$	369
Under provision of income tax in
prior year			91				5,064
Total current tax			91				5,433
Deferred tax:
Origination and reversal of
temporary differences	(		469,934)		(		254,026)
Income tax benefit	($		469,843)		($		248,593)
(b) The income tax (charge)/credit relating to components of other comprehensive income is as
follows:
			Years ended			December 31,
			2017				2016
Remeasurement of defined
benefit obligations		$	6,732			$	5,778
Reconciliation between income tax benefit and accounting profit:
			Years ended		December		31,
			2017				2016
Tax calculated based on loss before
tax and statutory tax rate (Note)	($		1,081,227)	($			261,018)
Effects from items disallowed by tax
regulation			28,904				7,361
Taxable loss not recognised as			582,389				-
deferred tax assets
Under provision of income tax
in prior year			91				5,064
Income tax benefit	($		469,843)	($			248,593)

B. Reconciliation between income tax benefit and accounting profit:

Note: The basis for computing the applicable tax rate is the rate applicable in the parent company’s country.

~56~

• C. Amounts of deferred tax assets or liabilities as a result of temporary difference and tax losses are as follows:

			Year ended December 31,2017	Year ended December 31,2017	Year ended December 31,2017	Year ended December 31,2017	Year ended December 31,2017	Year ended December 31,2017	Year ended December 31,2017
							Recognised
			Recognised					in other
				in	profit or	comprehensive
	January1				loss			income	December 31
Deferred tax assets:
Temporary differences:
Estimation of construction loss	$	314,983	$		50,555	$		-	$	365,538
Unused compensated absences
payable		52,326	(		970)			-		51,356
Unrealized warranty liability		23,746			91			-		23,837
Accrued pension liabilities		30,687			5,234	(		6,732)		29,189
Unrealised investments gains	(	50)			219			-		169
Unrealised exchange losses		31			2,884			-		2,915
Inventory valuation loss		149,831	(		146,377)			-		3,454
Allowance for doubtful
accounts		492			147			-		639
Tax losses		316,514			558,151			-		874,665
	$	888,560	$		469,934	($		6,732)	$	1,351,762
Deferred tax liabilities:
Unrealised land value	(	1,324,910)			-			-	(	1,324,910)
incremental reserve	($	436,350)	$		469,934	($		6,732)	$	26,852

~57~

Recognised in Recognised other in profit or comprehensive January1 loss income December 31 Deferred tax assets: Temporary differences: Estimation of construction loss 411,479 $ 96,496) ($ - $ 314,983 $ Unused compensated absences payable 52,353 27) ( - 52,326 Unrealized warranty liability 28,301 4,555) ( - 23,746 Accrued pension liabilities 30,717 5,748 5,778) ( 30,687 Unrealised investments gains - 50) ( - 50) ( Unrealised exchange (gains) losses 332) ( 363 - 31 Inventory valuation loss 2,861 146,970 - 149,831 Allowance for doubtful accounts 492 - 492 Tax losses 114,441 202,073 - 316,514 640,312 $ 254,026 $ 5,778) ($ 888,560 $ Deferred tax liabilities: Unrealised land value 1,324,910) ( - - 1,324,910) ( incremental reserve 684,598) ($ 254,026 $ 5,778) ($ 436,350) ($ Year ended December 31,2016		Year ended December 31,2016
			December 31
			888,560 $
			1,324,910) (
			436,350) ($

D. Expiration dates of unused tax losses and amounts of unrecognised deferred tax assets are as follows:

follows:
	December 31,2017
Year incurred Amount filed/ assessed Unused amount 2015 Assessed 671,021 $ 2016 Amount filed 1,190,829 2017 Estimated filing amount 6,709,058 December 31,2016			Unrecognised deferred tax assets $ - - 3,425,820	Expiry year
				2025 2026 2027
Year incurred Amount filed/ assessed 2015 Amount filed 2016 Estimated filing amount		Unused amount 671,021 $ 1,190,829	Unrecognised deferred tax assets $ - -	Expiry year
				2025 2026

~58~

• E. The Company’s income tax returns through 2015 have been assessed and approved by the Tax Authority. As of March 23, 2018, there was no administrative remedies.

• F. With the abolishment of the imputation tax system under the amendments to the Income Tax Act promulgated by the President of the Republic of China in February, 2018, the information on unappropriated retained earnings and the balance of the imputation credit account as of December 31, 2017, as well as the estimated creditable tax rate for the year ended December 31, 2017 is no longer disclosed.

Unappropriated retained earnings on December 31, 2016:

Earnings generated in and after 1998

		December	31,	2016
	$			489,400

• G. As of December 31, 2016, the balance of the imputation tax credit account was $759,208. The creditable tax rate was 48.15% for the year ended December 31, 2016.

• (30) Losses per share

Basic losses per share Loss attributable to ordinary shareholders Basic losses per share Loss attributable to ordinary shareholders	Weigthted average number of ordinary Losses per Amount shares outstanding share after tax (shares in thousands) (in dollars) 5,880,118) ($ 743,565 7.91) ($ Weigthted average number of ordinary Losses per Amount shares outstanding share after tax (shares in thousands) (in dollars) 1,287,100) ($ 743,565 1.73) ($ Year ended December 31,2017 Year ended December 31,2016	Weigthted average number of ordinary Losses per Amount shares outstanding share after tax (shares in thousands) (in dollars) 5,880,118) ($ 743,565 7.91) ($ Weigthted average number of ordinary Losses per Amount shares outstanding share after tax (shares in thousands) (in dollars) 1,287,100) ($ 743,565 1.73) ($ Year ended December 31,2017 Year ended December 31,2016
	Amount after tax 1,287,100) ($	Weigthted average number of ordinary shares outstanding (shares in thousands) 743,565

~59~

(31) Operating leases

• A. The Group leases investment property to others under non-cancellable operating lease agreements. These leases will expire on August 31, 2020, and all these lease agreements are not renewable at the end of the lease period. The future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

Not later than one year Later than one year but not later than five years Later than five years	December 31,2017 6,601 $ 10,520 - 17,121 $	December 31,2016
		7,704 $ 17,121 -
		24,825 $

• B. The Group leases in assets for places of business from National Property Administration of Ministry of Finance and Taiwan International Ports Corporation, Ltd. under non-cancellable operating lease agreements. The lease terms are between 1996 and 2027, and all these lease agreements are renewable at the end of the lease period. Partial leases are charged extra rents following the changes in local price indexes. The Group recognised rental expenses of $262,906 and $262,892 in profit or loss for the years ended December 31, 2017 and 2016, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Not later than one year Later than one year but not later than five years Later than five years	December 31,2017 263,423 $ 1,001,217 810,169 2,074,809 $	December 31,2016
		263,423 $ 899,745 1,021,058
		2,184,226 $

~60~

(32) Supplemental cash flow information

A. Investing activities with partial cash payments:

Acquisition of investments accounted for using equity method Add�Beginning balance of other payables Less�Ending balance of other payables Cash paid on acquisition of investments accounted for using equity method during the year Purchase of property, plant and equipment Add�Beginning balance of payable on equipment Less�Ending balance of payable on equipment Cash paid on purchase of property, plant and equipment during the year	Years ended December 31,	Years ended December 31,
	2017 - $ 19,188 19,188) ( - $ 370,983 $ 110,485 60,503) ( 420,965 $	2016
		197,344 $ - 19,188) (
		178,156 $
		325,218 $ 64,593 110,485) (
		279,326 $

B. Investment and financing activities with no cash flow effects:

Payable on investments (shown as other payables) Long-term notes and accounts payable being transferred to other financial liabilities-current Interest expense amortised from government grants	Years ended December 31,	Years ended December 31,
	2017 19,188 $ - $ 11,018 $	2016
		19,188 $
		150,000 $
		14,452 $

~61~

7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship

Names of related parties Relationship with the Group CPC Corporation, Taiwan The Company's legal entity director China Steel Corporation The Company's legal entity director China Steel Express Corporation Subsidiary of the Company's legal entity director Fuhai Wind Farm Corporation Investee accounted for using equity method; it is newly invested beginning at the end of August 2016 Yung Chi Paint & Varnish Mfg. Shareholder who owns 30% of the Company's subsidiary Co., Ltd.

(2) Significant related party transactions and balances

A. Operating revenue

Key management: Legal entity director CPC Corporation, Taiwan Other related parties: Fuhai Wind Farm Corporation (Note) Yung Chi Paint & Varnish Mfg. Co., Ltd. China Steel Express Corporation	Years ended December 31,	Years ended December 31,
	2017 73,893 $ 4,987 261 - 79,141 $	2016
		2,524,409 $ 787 - 5,770
		2,530,966 $

Note: The investment accounted under equity method starts from the end of August, 2016. Thus, the related party transaction is from September 1 to December 31, 2016 which applies to all the related party transactions for this fiscal year.

• (a) The price was based on the contract signed by both parties, and the collection terms were approximately the same as those to third parties.

• (b) In August and December 2017, the Company was commissioned by China Steel Express Corporation to build 4 208,000 DWT double hull bulk cargo steamers for a total contract price of NT$5.6 billion. The expected delivery date of the last cargo steamer is by the year-end of 2020. The advance receipts arising for the contract amounted to $287,090, shown as current liabilities in ‘payables to customers on construction contracts’.

~62~

• (c) In March 2014, the Company was commissioned by Fuhai Wind Farm Corporation (hereafter referred to as Fuhai) for the construction of a meteorological observation tower, offshore windfarm off the coast of Changhua County included in Changhua Offshore Pilot Project and Fuhai offshore windfarm for a total contract price of NT$32 billion. However, Bureau of Energy, MOEA decided to reject the development project because of the disapproved Environmental Impact Assessment. For the receivables on contraction contracts, please refer to item D.

B. Purchases of goods

Key management: Legal entity director China Steel Corporation CPC Corporation, Taiwan Other related parties: Yung Chi Paint & Varnish Mfg. Co., Ltd.	Years ended December 31,	Years ended December 31,
	2017 1,240,118 $ 121,405 2,353 1,363,876 $	2016
		2,288,282 $ 112,585 135
		2,401,002 $

The price was based on the contract signed by both parties, and the collection terms were approximately the same as those to third parties.

C. Accounts receivable

Key management: Legal entity director CPC Corporation, Taiwan Other related parties: Yung Chi Paint & Varnish Mfg. Co., Ltd. Fuhai Wind Farm Corporation	December 31,2017 22,990 $ 1,986 - 24,976 $	December 31,2016
		- $ 1,621 2,143
		3,764 $

~63~

D. Receivables from customers on construction contracts

E. F. G.

Note: For the year ended December 31, 2017, the Group wrote-off $202,427 based on its estimate of uncollectability. Other receivables Prepaid accounts Refundable deposits December 31,2017 December 31,2016 Key management: Legal entity director CPC Corporation, Taiwan - $ 1,593,109 $ Other related parties: Fuhai Wind Farm Corporation (Note) - 200,010 - $ 1,793,119 $ December 31,2017 December 31,2016 Key management: Legal entity director China Steel Corporation 24,942 $ 41,849 $ Other related parties: Yung Chi Paint & Varnish Mfg. Co., Ltd. - 191 24,942 $ 42,040 $ December 31,2017 December 31,2016 Key management: Legal entity director China Steel Corporation 95,958 $ 146,862 $ CPC Corporation, Taiwan 30,157 9,108 126,115 $ 155,970 $ December 31,2017 December 31,2016 Key management: Legal entity director CPC Corporation, Taiwan - $ 1,512 $ Other related parties: Yung Chi Paint & Varnish Mfg. Co., Ltd. 2,182 3,921 2,182 $ 5,433 $

~64~

H. Notes payable

I.Accounts payable J.Payables to customers on construction contracts K.Endorsements and guarantees provided to related parties December 31,2017 Key management: Legal entity director China Steel Corporation 223,073 $ December 31,2017 Other related parties: Yung Chi Paint & Varnish Mfg. Co., Ltd. 1,947 $ December 31,2017 Other related parties: China Steel Express Corporation 1,023,847 $ December 31,2017 Other related parties: Fuhai Wind Farm Corporation 886,000 $		December 31,2016
		324,457 $
		December 31,2016
		466 $
		886,000 $

As of December 31, 2017 and 2016, endorsement / guarantees provided by the Group and used both amounted to $75,000.

(3) Key management compensation

Salaries and other short-term employee benefits Post-employment benefits	2017 2016 25,311 $ 22,766 $ 2,715 3,943 28,026 $ 26,709 $ Years ended December 31,	2017 2016 25,311 $ 22,766 $ 2,715 3,943 28,026 $ 26,709 $ Years ended December 31,
		2016 22,766 $ 3,943 26,709 $

8. PLEDGED ASSETS

None.

~65~

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

(1) (2) (3) (4) (5) (6)	The balance of the Group’s unused letters of credit for import of materials is as follows: The balance of the Group’s contracted ship/vessel construction projects to be completed is as follows: The amount of the contracted services to be delivered by the Group’s subsidiary is as follows: The guaranteed credit by banks for the Group’s construction projects is as follows: The amount of the Group’s purchase contracts and outsourcing construction contracts to be paid is as follows: The amount of construction performance promissory note issued by the Group for contracted construction is as follows: December 31,2017 December 31,2016 Balance of unused letters of credit 1,224,209 $ 2,149,195 $ December 31,2017 December 31,2016 Contracted projects to be completed 14,968,433 $ 27,506,964 $ December 31,2017 December 31,2016 Contracted services to be delivered 151,987 $ 627,158 $ December 31,2017 December 31,2016 Guaranteed credit by banks 4,522,610 $ 8,048,499 $ December 31,2017 December 31,2016 Purchase contracts to be paid 3,698,067 $ 8,467,209 $ Outsourcing construction contracts to be paid 1,266,499 1,439,039 4,964,566 $ 9,906,248 $ December 31,2017 December 31,2016 Construction performance promissory note 99,850 $ 99,850 $	The balance of the Group’s unused letters of credit for import of materials is as follows: The balance of the Group’s contracted ship/vessel construction projects to be completed is as follows: The amount of the contracted services to be delivered by the Group’s subsidiary is as follows: The guaranteed credit by banks for the Group’s construction projects is as follows: The amount of the Group’s purchase contracts and outsourcing construction contracts to be paid is as follows: The amount of construction performance promissory note issued by the Group for contracted construction is as follows: December 31,2017 December 31,2016 Balance of unused letters of credit 1,224,209 $ 2,149,195 $ December 31,2017 December 31,2016 Contracted projects to be completed 14,968,433 $ 27,506,964 $ December 31,2017 December 31,2016 Contracted services to be delivered 151,987 $ 627,158 $ December 31,2017 December 31,2016 Guaranteed credit by banks 4,522,610 $ 8,048,499 $ December 31,2017 December 31,2016 Purchase contracts to be paid 3,698,067 $ 8,467,209 $ Outsourcing construction contracts to be paid 1,266,499 1,439,039 4,964,566 $ 9,906,248 $ December 31,2017 December 31,2016 Construction performance promissory note 99,850 $ 99,850 $	The balance of the Group’s unused letters of credit for import of materials is as follows: The balance of the Group’s contracted ship/vessel construction projects to be completed is as follows: The amount of the contracted services to be delivered by the Group’s subsidiary is as follows: The guaranteed credit by banks for the Group’s construction projects is as follows: The amount of the Group’s purchase contracts and outsourcing construction contracts to be paid is as follows: The amount of construction performance promissory note issued by the Group for contracted construction is as follows: December 31,2017 December 31,2016 Balance of unused letters of credit 1,224,209 $ 2,149,195 $ December 31,2017 December 31,2016 Contracted projects to be completed 14,968,433 $ 27,506,964 $ December 31,2017 December 31,2016 Contracted services to be delivered 151,987 $ 627,158 $ December 31,2017 December 31,2016 Guaranteed credit by banks 4,522,610 $ 8,048,499 $ December 31,2017 December 31,2016 Purchase contracts to be paid 3,698,067 $ 8,467,209 $ Outsourcing construction contracts to be paid 1,266,499 1,439,039 4,964,566 $ 9,906,248 $ December 31,2017 December 31,2016 Construction performance promissory note 99,850 $ 99,850 $
	construction is as follows: Construction performance promissory note	December 31,2017 99,850 $
			99,850 $

(7) The non-cancellable operating leases with more than one-year lease term for the Group are stated in Note 6 (31).

~66~

• (8) The Group, Century Iron and Steel Industrial Co., Ltd. and Taiwan Generations Corp. are the jointoriginators for Fuhai Wind Farm Corporation (Fuhai Corporation). The joint-originators entered into “the Incentive Program of Offshore Wind Power Demonstration System” (“the Government Grant Scheme”), which was granted by the Ministry of Economic Affairs, and committed to be jointly responsible for Fuhai Corporation. The total amount of endorsement/guarantee provided by the Company amounted to NT$886 million. As of December 31, 2017 and 2016, the amount used is both $75,000. Please refer to Note 7 for details.

• (9) The ships under construction have all been insured with shipbuilding insurance. On September 14, 2016, Typhoon Meranti caused damages in the third party’s property and thus claimed for compensation of approximately NT$309 million. The case is still ongoing. However, according to Group’s designated lawyer, the damage loss is covered by the insurance so no material impact on the Group’s operation is expected.

10. SIGNIFICANT DISASTER LOSS

The Group’s property, plant and equipment has been insured under typoon insurance. On September 14, 2016, Typoon Meranti caused some damage loss amounting to $40,572 and insurance compensation amounted to $28,800. The remaining amount of $11,772 has been recognised as ‘other losses’(shown as ‘other gains and losses’). The Group did not incur significant disaster loss for the year ended December 31, 2017

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

• (1) Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February, 2018, the Company’s applicable income tax rate will be raised from 17% to 20% effective from January 1, 2018. This will increase the Company’s deferred tax assets by $238,546, which will be adjusted in the first quarter of 2018.

• (2) The Company’s interim proposal for 2017 deficit compensation through capital deduction has become effective after filing with the Financial Supervisory Commission on January 17, 2018. The proposal for 2017 deficit compensation and the proposal for 2018 private placement will proceed altogether pursuant to Article 168-1 of Company Act. Please refer to 6(19) for details.

12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Following the industry practices, the Group uses gearing ratio to control capital.

~67~

The Group’s policy is to maintain a stable gearing ratio. Ratios are as follows:

Gearing ratio	December 31,2017 71%	December 31,2016
		56%

(2) Financial instruments

A. Fair value information of financial instruments

The carrying amounts of the Group’s financial instruments not measured at fair value (including cash and cash equivalents, notes receivable, accounts receivable, receivables from customers on construction contracts, other receivables, refundable deposits, short-term borrowings, short-term notes and bills payable, notes payable, accounts payable, payables to customers on construction contracts, other payables, other financial liabilities - current, long-term borrowings, long-term notes, accounts and overdue payables and guarantee deposits received) are approximate to their fair values. The fair value information of financial instruments measured at fair value is provided in Note 12(3).

B. Financial risk management policies

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial position and financial performance. The Group uses financial instruments, for example, using forward exchange contracts to control its exposure to specific financial risks.

For supervising management, the Board of Directors has set related rules to authorize the management to perform daily operations within acceptable risk range and requires the internal audit to inspect the management and report on a regular basis. The internal audit must report to the Board of Directors if there is any unusual situation at any time, and respond to the situations adequately.

C. Significant financial risks and degrees of financial risks

(a) Market risk

Foreign exchange risk

• i. The foreign exchange risk is mainly arising from USD. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The group companies are required to hedge their entire foreign exchange risk exposure with the Group treasury. To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the Group use forward foreign exchange contracts, transacted with Group treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

~68~

ii.The Group’s businesses involve some non-functional currency operations. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

Financial assets Monetaryitems USD:NTD Financial liabilities Monetaryitems USD:NTD Financial assets Monetaryitems USD:NTD Financial liabilities Monetaryitems USD:NTD JPY:NTD		December 31,2017	December 31,2017
		Foreign Currency (in thousands) Exchange Rate 31,713 $ 29.710 737 29,810 December 31,2016		Book Value(NTD)
				942,193 $ 21,970
		Foreign Currency (in thousands) 21,471 $ 8,908 47,719	Exchange Rate 32.200 32.300 0.2776	Book Value(NTD)
				691,366 $ 287,728 13,247

iii.If NTD had appreciated/ depreciated by 1% against USD with all other variables held constant, effect to post-tax profit (loss) is as follows:

If NTD had appreciated/ depreciated by1%against tax Increase (decrease) in net profit (loss) after tax	Years ended December 31,	Years ended December 31,
	2017 7,638 $	2016
		3,240 $

iv.The net exchange gain arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2017 and 2016, amounted to $16,299 and $70,418, respectively.

~69~

Price risk

The Group is not exposed to significant commodity price risk.

Interest rate risk

The Group’s long-term and short-term borrowings carry fixed interest rate and therefore no significant cash flow interest rate risk arises.

(b)Credit risk

Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors.

Cash and cash equivalents and derivative financial instruments

The Group only trades with counterparties with good credit, in accordance with the Group’s transaction policies. There is no recent violation of significant cash and cash equivalents and derivative financial products.

Accounts receivable and other receivables

• i. No other receivables were past due (including other receivables, other receivable-related parties and refundable deposits).

• ii.Receivables arising from revenue from ship building shall be classified under accounts receivable or construction contracts receivable.

• iii.Credit information of accounts receivable is stated in Note 6 (2). When the Group enters into ship building contracts, the Group entrusts external agencies to verify customers’ credit and was informed that the possibility that the customers will default is low. Therefore, the credit risk of accounts receivable on ship building is low.

(c)Liquidity risk

• i. The Group uses cash and cash equivalents, bank borrowings and other contracts to control its liquidity. The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities and to the expected maturity date for derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

~70~

Non-derivative financial liabilities

December 31,2017 Bank borrowings Short-term notes and bills payable Payables Long-term borrowings		Less than 1 year	Between 1 and 2years		Between 2 and 5years		Over 5 Years
		2,290,668 $ 700,000 2,880,775 29,772 5,901,215 $	- $ - 105,209 30,829 136,038 $		- $ - 161,087 5,552,884 5,713,971 $		- $ - 595,571 - 595,571 $

Derivative financial instruments

Less than 1 Between 1 and Between 2 and December 31, 2017 year 2 years 5 years Over 5 Years Total amount Forward exchange contracts �Inflow $ 105,840 $ - $ - $ - �Outflow 106,120 - - -

Non-derivative financial liabilities

December 31,2016 Bank borrowings Short-term notes and bills payable Payables		Less than 1 year		Between 1 and 2years		Between 2 and 5years		Over 5 Years
		6,396,856 $ 999,735 3,185,846 10,582,437 $		- $ - 418,811 418,811 $		- $ - 308,324 308,324 $		- $ - - - $

Derivative financial instruments

As of December 31, 2016: None.

• ii. Among the borrowings with maturity of 2 to 5 years, principal dues totaled $200,000 (excluding interest totaling $6,458). The Group has repaid the principal of $200,164. Other than that, The Group does not expect the timing of occurrence of the cash flows estimated through the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

~71~

(3) Fair value estimation

• A. Details of the fair value of the Group’s financial assets and financial liabilities not measured at fair value are provided in Note 12(2)A. Details of the fair value of the Group’s investment property measured at cost are provided in Note 6(9).

• B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Group’s investment in derivative instruments is included in Level 2.

Level 3: Unobservable inputs for the asset or liability.

• C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2017 and 2016 is as follows:

December 31, 2017:

Level 1 Level 2 Level 3 Total

Liabilities Recurring fair value measurements Financial liabilities at fair value through profit or loss Forward foreign exchange contracts $ - $ 280 $ - $ 280

December 31, 2016: There was no related liabilities as mentioned above.

• D. The methods and assumptions the Group used to measure fair value are as follows:

The valuation of derivative financial instruments is based on valuation model widely accepted by market participants, such as present value techniques and option pricing models. Forward exchange contracts are usually valued based on the current forward exchange rate.

• E. For the years ended December 31, 2017 and 2016, there was no transfer between Level 2 and Level 3.

~72~

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

• A. Loans to others: None.

• B. Provision of endorsements and guarantees to others: Please refer to table 1.

• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): None.

• D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: None.

• E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paidin capital or more: Please refer to table 2.

• H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: None.

• I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes 6(13) and 12(3).

• J. Significant inter-company transactions during the reporting periods: Please refer to table 3.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 4.

(3) Information on investments in Mainland China

• A. Basic information: None.

• B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: None.

14. SEGMENT INFORMATION

(1) General information

Management has determined the operating segments based on the reports reviewed by the Chief Operating Decision-Maker that are used to make strategic decisions. The Chief Operating DecisionMaker considers the business from a product perspective. The reportable operating segments derive their revenue primarily from the construction of ships and vessels. As other businesses mainly including machinery engineering, ship/vessel repairs and coating do not meet the quantitative thresholds required by IFRS 8, the results of these operations are included in the ‘all other segments’ column.

~73~

(2) Measurement of segment information

The Chief Operating Decision-Maker assesses the performance of the operating segments based on the gross profit of each business category. This measurement basis excludes the effects of operating expenses, non-operating revenue and non-operating expenses from the operating segments.

(3) Information about segment profit or loss, assets and liabilities

The segment information provided to the Chief Operating Decision-Maker for the reportable segments for the years ended December 31, 2017 and 2016 is as follows:

Revenue from external customers Inter-segment revenue Total segment revenue Segment loss Undistributed amount: Operating expenses Depreciation and amortization Interest income Interest expense Income tax benefit Loss on investments accounted for using equity method Total undistributed amount Segment assets (Note 2) Investments accounted for under equity method Increase in non-current assets Segment liabilities (Note 2)	Year ended December 31,2017	Year ended December 31,2017	Year ended December 31,2017	Year ended December 31,2017	Year ended December 31,2017	Year ended December 31,2017
	Construction of ships and vessels			All other segments		Adjustments and eliminations (Note 1) Total - $ 16,404,344 $ 204,185) ( - 204,185) ($ 16,404,344 $ - $ 5,721,888) ($ 494,712) ($ 12,365) ( 2,368 74,759) ( 469,843 20,868) ( 130,493) ($ 22,283,393 $ 1,645 $ 381,054 $ 15,904,309 $
		15,259,115 $ - 15,259,115 $ 5,649,861) ($		1,145,229 $ 204,185 1,349,414 $ 72,027) ($

~74~

Year ended December 31, 2016

Revenue from external customers Inter-segment revenue Total segment revenue Segment (loss) profit Undistributed amount: Operating expenses Depreciation and amortization Interest income Interest expense Income tax benefit Loss on investments accounted for using equity method Total undistributed amount Segment assets (Note 2) Investments accounted for under equity method Increase in non-current assets Segment liabilities (Note 2)	Construction of ships and vessels	Construction of ships and vessels		All other segments		Adjustments and eliminations (Note 1) Total - $ 15,747,699 $ 534,519) ( - 534,519) ($ 15,747,699 $ - $ 1,060,228) ($ 492,809) ($ 11,993) ( 1,972 51,730) ( 248,593 33,779) ( 339,746) ($ 27,670,942 $ 166,616 $ 330,468 $ 15,441,284 $
		15,085,251 $ - 15,085,251 $ 1,116,874) ($		662,448 $ 534,519 1,196,967 $ 56,646 $

Note 1: Refers to the elimination of inter-segment revenue.

Note 2: Segment assets and liabilities are regularly provided to the Chief Operating Decision-Maker, but not distributed to each reportable segment.

~75~

(4) Information about segment profit or loss, assets and liabilities

The revenue from external parties reported to the Chief Operating Decision-Maker is measured in a manner consistent with that in the statement of comprehensive income. A reconciliation of segment profit to (loss) profit before tax and discontinued operations is provided as follows:

		Years ended	December	31,
		2017		2016
Segment loss	($	5,649,861)	($		1,116,874)
Other segment (loss) profit	(	72,027)			56,646
Total segments	(	5,721,888)	(		1,060,228)
Operating expenses	(	507,077)	(		504,802)
Non-operating income and expenses	(	124,077)			29,628
Loss before tax and discontinued
operations	($	6,353,042)	($		1,535,402)

(5) Information on products and services

Revenues from external customers are mainly derived from the construction of ships and vessels. Breakdown of the revenue from all sources is as follows:

Breakdown of the revenue from all sources	is as follows:	is as follows:
Construction contract revenue Revenue from construction of ships and vessels Revenues from machine manufacturing Sales revenue�revenue from construction of ships and vessels Service revenue Other revenue Total	Years ended December 31,
	2017 13,913,302 $ 31,482 1,345,813 1,098,141 15,606 16,404,344 $	2016
		15,085,251 $ 87,900 - 533,079 41,469
		15,747,699 $

~76~

(6) Geographical information

Revenue information by geographic area:

Taiwan Singapore Marshall Japan Hong Kong Panama Greece Others Total	Revenue Non-current assets Revenue Non-current assets 7,537,306 $ 10,820,829 $ 4,057,003 $ 10,972,825 $ 4,304,975 - 1,179,619 - 2,624,566 - 3,739,045 - 1,345,813 - 2,867 - 497,386 - 6,856,132 - 41,704 - 32,602 - - - 175,539) ( - 52,594 - 55,970 - 16,404,344 $ 10,820,829 $ 15,747,699 $ 10,972,825 $ Year ended and as of Year ended and as of December 31,2017 December 31,2016	Year ended and as of December 31,2016	Year ended and as of December 31,2016
	Revenue 7,537,306 $ 4,304,975 2,624,566 1,345,813 497,386 41,704 - 52,594 16,404,344 $		Non-current assets
			10,972,825 $ - - - - - - -
			10,972,825 $

(7) Major customer information

The customers accounting for more than 10% of the Group’s operating revenues are as follows:

Year ended December 31, 2017

Clients Client B Client G Client I Clients Client H Client G Client J	Sales amount 8,525,296 $ 2,624,566 2,220,273 $13,370,135 Year ended December 31,2016 Sales amount 6,673,401 $ 3,739,045 2,524,409 $12,936,855	Department Construction of ships and vessels Construction of ships and vessels Construction of ships and vessels Department Construction of ships and vessels Construction of ships and vessels Construction of ships and vessels

~77~

Outstanding endorsement/ guarantee amount at December 31, 2017 Actual amount drawn down Provision of endorsements/ guarantees to the party in Mainland China Footnote Amount of endorsements/ guarantees secured with collateral Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company Ceiling on total amount of endorsements/ guarantees provided Provision of endorsements /guarantees by parent company to subsidiary Provision of endorsements/ guarantees by subsidiary to parent company Provision of endorsements and guarantees to others Year ended December 31, 2017 Table 1 Expressed in thousands of NTD (Except as otherwise indicated) Party being endorsed/guaranteed Number Endorser/ guarantor Limit on endorsements/ guarantees provided for a single party Maximum outstanding endorsement/ guarantee amount as of December 31, 2017 Company name Relationship with the endorser/ guarantor

0 CSBC Corporation, Taiwan Blue Ocean Wind Power Engineering (Hong Kong) Limited Note 1 633,542 $ 437,938 $ 437,938 $ - $ - $ 6.91 3,167,708 $ Y N N Note 3 0 CSBC Corporation, Taiwan Fuhai Wind Farm Corporation Note 2 633,542 886,000 886,000 75,000 - 13.98 3,167,708 N N N Note 3 and 4 Note 1�The endorser/guarantor parent company and its subsidiaries jointly own more than 50% voting shares of the endorsed/guaranteed company. Note 2�Having business relationship. Note 3�In accordance with the Company’s Management Directions for Provision of Endorsements and Guarantees to Others, the total amount of endorsements and guarantees must not exceed 50% of the Company’s net assets while the amount of endorsements and guarantees for each entity must not exceed 10% of the Company’s net assets. Note 4�In accordance with the Company’s Management Directions for Provision of Endorsements and Guarantees to Others, in case the amount of endorsements and guarantees exceeds the limit because of change in circumstances, the Company shall take steps based on the improvement plan submitted to audit committee.

Purchases (sales) Amount Percentage of total purchases (sales) Credit term Unit price Credit term Balance Percentage of total notes/accounts receivable (payable) Expressed in thousands of NTD (Except as otherwise indicated) Differences in transaction terms compared to third party transactions Footnote Purchaser/seller Counterparty Relationship with the counterparty Transaction Notes/accounts receivable (payable) Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more Year ended December 31, 2017 Table 2

CSBC Corporation, Taiwan China Steel Corporation Corporate Director Purchases 1,240,118 $ 12 Note 1 Note 1 Note 1 223,073) ($ 17 Note 2 CSBC Corporation, Taiwan CPC Corporation, Taiwan Corporate Director Purchases 121,405 1 Note 1 Note 1 Note 1 - - Note 2 CSBC Corporation, Taiwan CSBC Coating Solutions Co., Ltd. Parent company Outsourcing expenses 132,093 Note 3 Note 1 Note 1 Note 1 3,204) ( - CSBC Coating Solutions Co., Ltd. CSBC Corporation, Taiwan Parent company Sale 132,093) ( 88 Note 1 Note 1 Note 1 3,204 16 Note 1�Based on the contract, the payment terms is the same as in general transactions. Note 2�Regarding the prepayments for purchases amounting to $95,958 from CG Corporation, Taiwan and $30,157 from CPC Corporation, Taiwan, prices are determined in accordance with mutual agreements; payment terms are no different from third parties. Note 3�Accounting for 7% of the Company's outsourcing overheads.

General ledger account Amount Transaction terms Percentage of consolidated total operating revenues or total assets (Note 3) Number (Note 1) Company name Counterparty Relationship (Note 2) Transaction (Except as otherwise indicated) Significant inter-company transactions during the reporting periods Year ended December 31, 2017 Table 3 Expressed in thousands of NTD

0 CSBC Corporation, Taiwan CSBC Coating Solutions Co., Ltd. Parent company to subsidiary Outsourcing expenses 132,093 $ Note 4 1 0 CSBC Corporation, Taiwan CSBC Coating Solutions Co., Ltd. Parent company to subsidiary Accounts payable 3,204 Note 4 - 0 CSBC Corporation, Taiwan BLUE ACE CORPORATION Parent company to subsidiary Outsourcing expenses 72,092 Note 4 - 0 CSBC Corporation, Taiwan BLUE ACE CORPORATION Parent company to subsidiary Accounts payable 14,622 Note 4 - Note 1�The numbers filled in for the transaction company in respect of inter-company transactions are as follows: (1)Parent company is ‘0’. (2)The subsidiaries are numbered in order starting from ‘1’. Note 2�If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction. Note 3�Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts, based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts. Note 4�Based on the contract, the payment terms is the same as in general transactions.

Balance as at December 31, 2017 Balance as at December 31, 2016 Number of shares Ownership (%) Book value Net profit (loss) of the investee for the year ended December 31, 2017 Investment income(loss) recognised by the Company for the year ended December 31, 2017 Footnote Investor Investee Location Main business activities Initial investment amount Shares held as at December 31, 2017 Information on investees Year ended December 31, 2017 Table 4 Expressed in thousands of NTD (Except as otherwise indicated)

CSBC Corporation, Taiwan Fuhai Wind Farm Corporation Taiwan Wind power industry 197,344 $ 197,344 15,000,000 37.97 $ - $ 109,885) ($ 20,135) ($ Note 1 CSBC Corporation, Taiwan CSBC Coating Solutions Co., Ltd. Taiwan Marine coating, steel structure painting works, surface treatment, and high-tech anti- corrosion etc. 87,500 87,500 8,750,000 70 101,895 10,156) ( 7,189) ( CSBC Corporation, Taiwan Taiwan Generations Corporation Taiwan Manufacturing of metal structure, building component, power generation and others 4,000 4,000 400,000 40 1,645 1,832) ( 733) ( CSBC Coating Solutions Co., Ltd BLUE ACE CORPORATION Taiwan Marine coating, steel structure painting works, surface treatment, and high-tech anti- corrosion etc. 25,000 30,000 - 100 24,300 699) ( 699) ( Note 2 CSBC Coating Solutions Co., Ltd. Blue Ocean Wind Power Engineering (Hong Kong) Limited Hong Kong Marine works services 304 304 100 100 130 1,955) ( 1,955) ( Note 2 Note 1�Please refer to Note 6(7) for details about investments accounted for under equity method.