CSBC — Annual Report 2018

Jul 8, 2019

Stock Code: 2208

CSBC CORPORATION, TAIWAN.

2018 Annual Report

Notice to readers

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

Taiwan Stock Exchange Market Observation Post System: http://newmops.twse.com.tw CSBC Annual Report is available at : http://www.csbcnet.com.tw/Service/Investor Printed on 06 10, 2019

Spokesperson Name: Chou, Chih-MingL Title: Vice President Tel: 886-7-8059888 E-mail: 077167@csbcnet.com.tw

Deputy Spokesperson Name: Chen, Hui-Shan Title: Vice President Tel: 886-7-8059888 E-mail: 091587@csbcnet.com.tw

Stock Transfer Agent

Fubon Securities Co., Ltd. Address:169 Section 4 Jen Ai Rd. Taipei 10686 Taiwan (R.O.C.) Tel: 886-2-23611300 Website: http//www.fbs.com.tw

Headquarters and Plant

Headquarters Address: No. 3, Jhonggang Rd. Siaogang Dist. Kaohsiung 81234, Taiwan (R.O.C.) Tel: 886-7-8059888

Plant-1

Address: No. 3, Jhonggang Rd. Siaogang Dist. Kaohsiung 81234, Taiwan (R.O.C.) Tel: 886-7-8059888

Plant-2

Address: No. 224, Ho-1 Rd. Ho-Ping Island. Keelung 20203, Taiwan (R.O.C.) Tel: 886-2-24631021

Auditors

PricewaterhouseCoopers Taiwan Auditors: Wang, Guo-Hua, Wu, Chien-Chih. Address: 22F, 95 Minzu 2nd Rd. Kaohsiung, 80048 Taiwan (R.O.C.) Tel.: 886-7-2373116 Website: http//www.pwc.tw

Corporate Website

http://www. Csbcnet.com.tw

Contents

I. Letter to Shareholders 3
II. Company Profile
2.1 Date of Incorporation 6
2.2 Company History 6
III. Corporate Governance Report
3.1 Organization 7
3.2 Directors, Supervisors and Management Team 8
3.3 Implementation of Corporate Governance 29
3.4 Information Regarding the Company's Audit Fee and Independence 76
3.5 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders 77
3.6 Relationship among the Top Ten Shareholders 79
3.7 Ownership of Shares in Affiliated Enterprises 80
IV. Capital Overview
4.1 Capital and Shares 81
4.2 Bonds 85
4.3 Global Depository Receipts 85 4.4 Employee Stock Options 85
4.5 Status of New Shares Issuance in Connection with Mergers and Acquisitions 85
4.6 Financing Plans and Implementation 85
V. Operational Highlights
5.1 Business Activities 86
5.2 Market and Sales Overview 95
5.3 Human Resources 102
5.4 Environmental Protection Expenditure 102 5.5 Labor Relations 103
5.6 Important Contracts 104
VI. Financial Information
6.1 Five-Year Financial Summary 110
6.2 Five-Year Financial Analysis 110
6.3 Supervisors' /Audit Committee's Report in the Most Recent Year 114
6.4 Financial Statements for the Years Ended December 31, 2016 and 2015……………………………116 6.5 Consolidated Financial Statements for the Years Ended December 31, 2016
and 2015………………………………………………………………………………………………………………………….116
VII. Review of Financial Conditions, Operating Results, and Risk Management
7.1 Analysis of Financial Status 117
7.2 Analysis of Operation Results 118
7.3 Analysis of Cash Flow 118
7.4 The impact of the recent major capital expenditure on the financial business 120
7.5 Financial impact on the Company for the year 121 7.6 Analysis of Risk Management 121

VIII. Special Disclosure

8.1 Summary of Affiliated Companies 128
8.2 Private Placement Securities in the Most Recent Years 130
8.3 The Shares in the Company Held or Disposed of by Subsidiaries
in the Most Recent Years 131

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 for 2018 was NT\$13,012,326 thousands, a 20.68% decrease compared with NT\$16,404,344 thousands in 2017. Net loss decreased to NT\$3,100,085 thousands, compared with 2017 net loss of NT\$5,883,199 thousands.

The results of our operating performance in 2018 and business plan for 2019 are illustrated as follows:

Operating Performance in 2018

1.	Consolidated financial results

Unit: NT\$ thousands

	2018	2017	Percent Change (%)
Net sales	13,012,326	16,404,344	-20.68%
Gross profit(loss)	-2,593,864	-5,721,888	54.67%
Operating	-3,417,597	-6,228,965	45.13%
income(loss)
Pre-tax income(loss)	-3,338,941	-6,353,042	47.44%
Net income(loss)	-3,100,085	-5,883,199	47.31%

Net sales amounted to NT\$13,012,326 thousands and gross loss came in at NT\$2,593,864 thousands in 2018. Net loss decreased by more than 47.31% from 2017.

2. The description of Orderbook

(1) The orderbook of CSBC

As of the end of December, 2018 we had 18 merchant-ship orders (18 in Kaohsiung) and 23 official-ship orders (5 in Kaohsiung plus 18 in Keelung). The orderbook in Kaohsiung factory is already planned to delivery in September of 2025, and that in the Keelung factory is in October of 2023. And in October of 2018 CSBC signed 60 underwater pin-piles of offshore wind power.

(2) Ship deliveried

There are 8 vessels in Kaohsiung factory (one semi-submersible vessel and seven 2,800TEU container vessels) and one is in Keelung factory (1,800 TEU container vessel).

3. Research and development status

In 2018, CSBC invested a total of NT\$117,000 thousands in R&D for the ship researches as well as the development of new products. Having successfully 17 developed projects in 2018, it goes into application for CSBC. CSBC is committed to investing in long-term growth by delivering continuous innovations.

4. Major investment status

In 2018, CSBC invested a total of NT\$40.32 billions in major investments including the replacement of GOC& LLC-6, the enhancement of capacity of the RS31 area of the pier, the construction of 140-meter barge, multi-purpose steel production line.

Business Plan for 2019

According to journal reports, the shipping and shipbuilding market in 2019 will gradually balance between supply and demand, and the data of various indicators are tending to be optimistic and conservative.

The production volume in 2019 is 244,873 CGT, which is about 36.2% higher than in 2018. CSBC will follow the national shipbuilding policy and actively strive for the IDS business and the patrol frigate business; CSBC is expected to undertake the business of offshore wind farm turnkey project and anti-corrosion engineering, in addition to the barge and underwater basic structure business.

In the 2019 Annual Outlook Meeting, CSBC formulates the EP10 plan, and develops the company's nine major foci under the belief "inheriting shipbuilding, guarding the ocean" and principles "turning losses into profits, profiting new businesses, and reengineering". The nine foci are as below:

• 1. Improve production and administrative efficiency
• 1. Adher to CKP-81
• 1. Strengthen to add profit and reducing cost
• 1. On-time production of offshore structure
• 1. Contract for offshore engineering business
• 1. Contract and execution of repaired ship business
• 1. Complete the project of investment plan
• 1. The adjustment of organization and plant planning
• 1. Completion Inheritance and human resource

CSBC continues to upgrade productivity, profit & performance. Therefore, we expect to achieve goals.

Finally, CSBC is moving towards stable operation and taking the three major businesses of merchant ship, military naval ship and offshore wind power, and using relevant measures to promoting operational performance. It is expected to create more core competitiveness and expand overall benefit. Let CSBC be the sustainable enterprise and create maximum value for shareholders.

Sincerely yours,

Chairman President

CHENG,WEN-LON TSENG,KUO-CHENG

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.
2017	▓Awarded the 18th Outstanding Enterprise Golden Summit Award: Top Ten Outstanding
	Innovation R&D.
	▓Pass the 106-year TIPS Class A verification login certificate.
2018	The 27th Taiwan Excellence Award and the Bay Boutique Gold Award.

I. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart

Note:Issued by the Management Office at 1086650336 on March 20, 2019.

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

m
ment Tea
Manage
3.2 Directors, Supervisors and

3.2.1 Directors and Supervisors

3.2.1.1 The 16th Directors

04 15, 2019	Executives, Directors or Supervisors who within two degrees	Title Name Relation	-	-
	are spouses or of kinship		-	-
			-	-
	Position Other		CSBC, Taiwan Chairman of	President of CSBC, Taiwan
	(Education) Experience		.Deputy Mayor, Kaohsiung City .Chairman of CSBC, Taiwan (Ph.D., University of Washington, USA) Government	National Taiwan University ) Shipbuilding Engineering, (Master, Department of .Vice President of CSBC
		%	-	-
	Arrangement by Nominee	Shares	-	-
		%	-	-
	Shareholding Shareholding Spouse & Minor	Shares	-	-
		%	28.1 7%	28.1 7%
	Shareholding Current	Shares	105,070 ,366	105,070 ,366
		%	33.5 % 7	33.5 % 7
	Shareholding when Elected	Shares	249,612 ,540	249,612 ,540
	Elected Date First		11 30, 2007	08 01, 2017
	(Years) Term		3	3
	Elected Date		06 23, 2016	08 01, 2017
	Name		Economic Affairs Representative) (Ministry of WEN-LON CHENG,	Economic Affairs Representative) KUO-CHENG (Ministry of TSENG,
	Nationality/ Country of Origin		Chairman Republic of China	Republic of China
	Title			Director

-	-	-	-
-	-	-	-
-	-	-	-
University of Management Science and Engineering Technology Kaohsiung Industrial National professor and	Revitalization of Office the New Village Zhongxing Counselor Director adjunct Project	Director of me nt Bureau Industrial MOEA) Deputy Develop the (	Chairman of Employees' Committee, Welfare CSBC
Engineering and Management, University of Applied Science School of Nestle, Kaohsiung Technology, Director of the .Hechun Technical College Department of Industrial (University of Pearce, UK Kaohsiung University of President, Head of the Applied Science and and Technology )	(Master of Department of Administration Director .Central Region Branch, Earth Sciences, NCKU) National Property	.Section chief of the Industrial Development Bureau (MOEA) Economics, University of (Master of International Wyoming )	Managing Director, CSBC Labor (Graduated from Sheet Metal Department, National Tainan .Supervisor, Director and Industrial High School Union )
-	-	-	-
-	-	-	-
-	-	-	-
-	-	-	-
28.1 7%	28.1 7%	28.1 7%	28.1 7%
105,070 ,366	105,070 ,366	105,070 ,366	105,070 ,366
33.5 % 7	28.1 7%	28.1 7%	33.5 % 7
249,612 ,540	105,070 ,366	105,070 ,366	249,612 ,540
09 23, 2016	11 26, 2018	11 26, 2018	06 23, 2010
3	3	3	3
09 23, 2016	11 26, 2018	11 26, 2018	06 23, 2016
Economic Affairs Representative) (Ministry of Ying-Fang Huang,	Economic Affairs Representative) Wen-Kuei (Ministry of (Notes 1) Wu,	Economic Affairs Representative) Wen-Tsan (Ministry of (Notes 2) Lu,	HUANG, JIH-CHIN Economic Affairs Representative) (Ministry of
Republic of China	Republic of China	Republic of China	Republic of China
Director	Director	Director	Director

-	-	-	-	-	-
-	-	-	-	-	-
-	-	-	-	-	-
Keelung Yard Labor Union Chairman, CSBC	-	President of China Steel Corporation Vice	-	e of Industrial Labor Union, Technician of Representativ CSBC; CSBC	e of Industrial Labor Union, Technician of Representativ CSBC; CSBC
(Department of Navigation, .Senior Technician, Keelung National Keelung Maritime Vocational High School) Yard, CSBC	-	Economics,Tunghai University) .Assistant Vice President of China Steel Corporation (Bachelor of	-	Kaohsiung City Confederation Committee, CSBC; Chairman, Department .Chairman, Industrial Labor Kaohsiung Industrial High Union, CSBC; Chairman, of Electric Engineering, Kaohsiung Municipal Welfare School ) Employees' of Trade Union (	Kaohsiung Institute of Marine (Graduated from Department Corporation, Taiwan Staff of Marine Engineering, Welfare Committee .Chairman of CSBC Technology )
-	-	-	-	-	-
-	-	-	-	-	-
-	-	-	-	-	-
-	-	-	-	-	-
28.1 7%	5.31 %	2.08 %	0.59 %
105,070 ,366	23,777, 487	2.48% 7,751,3 46	2,652,4 11	411,438 0.09 %	411,438 0.09 %
33.5 % 7	6.33 %		0.71 %
249,612 ,540	47,030, 687	18,414,6 41	5,246,3 36	460,804 0.06 %	660,804 0.09 %
11 11, 2005	07 30, 2009	7 1, 2018	02 13, 2009	06.04, 2007	07 01, 2014
3	3	3	3	3	3
06 23, 2016	06 23, 2016	2018 7 1,	06 23, 2016	06 23, 2016	06 23, 2016
Economic Affairs LAN, SYU-CING Representative) (Ministry of	(Corporation, Representative) Taiwan CPC	CHIEN-CHIH(Note 3) Representative) (China Steel HWANG,	Yue-Li Investment Corporation	Representative of Industrial Labor (Kaohsiung City HOU, DE-LONG Union of CSBC)	HSIEH, KUO-JUNG Representative of Industrial Labor (Kaohsiung City Union of CSBC)
Republic of China	Republic of China	Republic of China	Republic of China	Republic of China	Republic of China
Director	Director	Director	Director	Director	Director

-	-
-	-
-	-
.Chun Yu Works & Chairman Co.,Ltd.	National Sun Professor, University Yat-sen
(Ph.D,Shipbuilding Engineering .Professor of Taiwan University Department of Engineering Institute, National Taiwan Science and Marine Engineering University)	management committee of the Economics, Ohio State .Securities and futures (.Ph.D.in Institute of Ministry of Finance University, USA)
-	-
-	-
-	-
-	-
0	0
0	0
0	0
0	0
06 23, 2016	06 23, 2016
3	3
06 23, 2016	06 23, 2016
Independent LIN, HUI-JENG Director	LIEU, DER-MING Independent Director
Republic of China	Republic of China
Independent Director	Independent Director

Notes:1.The former retired,and new president was appointed by the board of directors at November 26,2018. 2.The former retired,and new president was appointed by the board of directors at November 26,2018.

3.The former job changed,and new president was appointed by the board of directors at July 1,2018. 4.The tenure of the 16th Board of Directors is from June 23, 2016 to June 22, 2019.

◆ Major shareholders of the institutional shareholders

Feb. 1, 2019

Name of Institutional Stockholder	Major Stockholder
CPC Corporation, Taiwan	Ministry of Economic Affairs	100%
	Ministry of Economic Affairs	20.00%
	Employee's Stock Trust of China Steel Corporation	4.22%
	Transglory Investment Corporation	1.62%
	Vanguard Emerging Markets Stock Index Fund	1.19%
China Steel Corporation	Vanguard Total International Stock Index Fund	1.13%
(Note)	Winning Investment Corporation	1.01%
	Labor Insurance Fund	0.97%
	Norges Bank Investment Management	0.94%
	Public Service Pension Fund	0.94%
	Fubon Life Insurance Co., Ltd	0.85%
Yue-Li Investment	U-Ming Marine Transport Corporation	68.18%
Corporation	U-Ming Marine Transport (Singapore) Private Limited	31.82%

Note 1: China Steel Corporation compiled the list of major stockholders on Dec. 31. 2018.

Note 2: Yue-Li Investment Corporation compiled the list of major stockholders on Dec. 31. 2018.

◆ Major shareholders of the Company's major institutional shareholders

	Dec. 31, 2018
Name of Institutional Shareholders	Major Stockholder
	China Steel Express Corporation	49.89%
Transglory Investment	Chung Hung Steel Corporation	40.91%
Corporation (Note1)	China Steel Chemical Corporation	9.20%
	Gains Investment Corporation	49.00%
Winning Investment	Maruichi Steel Tube Ltd.	42.00%
Corporation (Note1)	Transglory Investment Corporation	9.00%
Fubon Life Insurance Co., Ltd (Note1)	Fubon Financial Holding Co., Ltd.	100%
	Asia Cement Corporation	39.25%
	Cathay life insurance co. ltd	4.66%
U-Ming Marine Transport	Fubon Life Insurance Co., Ltd	2.33%
Corporation (Note 2)	Management Board of the Public Service Pension Fund	1.96%
	Nan Shan Life Insurance Co., Ltd.	1.71%
	Yuan Ding Investment Corp.	1.05%

Name of Institutional Shareholders	Major Stockholder
	Ding shen Investment Corp.	1.04%
	Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard International Equity Index Funds	1.03%
	Yu-yuan Investment Corp.	0.94%
	Asia Investment Corp.	0.92%
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 August 1, 2017.

Note2: U-Ming Marine Transport Corporation compiled the list of major stockholders on July 8, 2018.

													04 15, 2019
		with at Least Five Years	Meet One of the Following Professional Qualification Requirements, Together Work Experience				Independence Criteria(Note)
Criteria Name	Finance, Accounting, Department Related Company in a Public Higher Position in a or Other Academic College, College or Commerce, Law, or Private Junior An Instructor or to the Business Department of Needs of the University	Professional or Technical Awarded a Certificate in a Profession Necessary for the Business of the Examination and been Prosecutor, Attorney, Accountant, or Other Who has Passed a National Certified Public A Judge, Public Company Specialist	Work Experience in the Otherwise Necessary for the Finance, or Accounting, or Areas of Commerce, Law, Business of the Company Have	1	2	3	4	5	6	7	8	10 9	Companies in Serving as an Concurrently Other Public Individual is Independent Number of Which the Director
Ministryof Economic Affairs CHENG, WEN-LON Representative:	V	V	V	-	-	V	V	V	V	V	V	- V	-
Ministry of Economic Affairs TSENG, KUO-CHENG Representative:	-	-	-	-	-	V	V	V	V	V	V	- V	-
Ministry of Economic Affairs Wen-Kuei Representative: Wu,	-	-	-	V	-	V	V	V	V	V	V	- V	-
Ministry of Economic Affairs Wen-Tsan Representative: Lu,	-	V	-	V	-	V	V	V	V	V	V	- V	-
Ministry of Economic Affairs Huang, Ying-Fang Representative:	V	-	V	V	-	V	V	V	V	V	V	- V	2
nistry of Economic Affairs HUANG, JIH-CHIN Representative:	-	-	-	-	-	V	V	V	V	V	V	- V	-

Professional qualifications and independence analysis of directors and supervisors

- Ministry of Economic Affairs	-	-	-	-	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	1
	-

Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term of office.

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

2. 1. 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. 1. 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. 1. 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. 1. 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. 1. 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.

1. Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the "Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx".

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

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

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

03,08,2019 Unit:Share

Managers employee obtain stock	certificate option	-	-	-
Managers who are Within Two Degrees of	Relation	-	-	-
Kinship Spouses or	Name	-	-	-
	Titl e	-	-	-
	Other Position	Director of Ship Industries R&D and Ocean Center	CR classification Solutions Co., committee of CSBC Coating Director and President of society Ltd	None
Experience	(Education)	Department of 4.Executive Vice Master degree 3.Senior Vice 2.Director of President President Design 1.	Manager of Works 3.Senior Vice President 1.Bachelor 2.General degree Hull	2. Deputy General 1.College degree Manager of Manager of Outfitting Outfitting 3.General Works Works
	%	0	0	0
Shareholding Arrangement by Nominee	Shares	0	0	0
	%	0	0	0
Spouse & Minor Shareholding	Shares	0	0	0
Shareholding	%	0.01179%	0.01189%	0.00162%
	Shares	55,787	56,216	7,662
Date	Effective	08/01/2017	06/01/2014	03/23/2017
	gender	male	male	male
	Name	KUO-CHENG TSENG,	CHIEH-TE CHANG,	CHENG-TZU WEI,
Nationality	/Country of Origin	R.O.C	R.O.C	R.O.C
	Title	Vice President Executive	Vice President Executive	Vice President Executive

3.2.2 Management Team

-	-	-
-	-	-
-	-	-
-	-	-
Director of CR classification society	None	None
2.Deputy Director of Department Department of Department of Master degree 4. Director of 3.Director of of Design Design Sales 1. 0	3. Department of 1.College degree Manager of Ship Repair Assurance Director 2.General Quality Works 0	Department of Department of Massachusetts 2.Undergraduate Manager of Manager of Technology Institute of 1. Bachelor Planning 3. Section 4. Section degree Design of 0
0	0	0
	0	0
0.00214%
10,110	0	0
0.01824%	0.00156%	0.00251%
86,291	7,358	11,858
08/02/2017	03/18/2019	10/01/2018
male	male	male
CHIH-MING CHOU,	HUI-SHAN CHEN,	KAI-MING YEN,
R.O.C	R.O.C	R.O.C
Vice President Executive	Vice President Executive	Secretary General

-	-	-	-	-
-	-	-	-	-
-	-	-	-	-
-	-	-	-	-
None	None	None	None	None
Department of Resources and Administration Director of 1.Bachelor Human degree 2.Deputy 0	Department of Department of Manager of Director of 1. Bachelor 2. Section 3. Deputy degree Sales Sales 0	Department of Department of Master degree Manager of Director of 2. Section 3. Deputy Design Sales 1. 0	2.Deputy Director of Department Master degree of Material 1. 0	2.Deputy Director 3.Deputy Director of Department of Department Resources and Administration 1.Master degree of Planning of Human 0
0	0	0	0	0
0	0	0.00254%	0	0
0	0	12,000	0	0
0.00148%	0	0.00338%	0.00634%	0.00557%
7,000	0	16,000	30,000	26,345
12/01/2013	03/18/2019	03/18/2019	09/01/2016	03/23/2017
male	male	male	male	male
CHUNG-HE KUO-LUNG YUAN, LIU,		CHUN-MUN YEN,	HUI-TSAI WU,	YEN-CHIANG LEE,
R.O.C R.O.C		R.O.C	R.O.C	R.O.C
Audit Office General Auditor	Department of Director Sales	Department of Director Design	Department of Material Director	Department of Planning Director

-		-	-	-	-
-		-	-	-	-
-		-	-	-	-
-		-	-	-	-
None		None	None	None	None
1.Bachelor degree	2.Deputy Director of Department department of Information of Planning Technology 3. Director of 0	3.Deputy General 2.Shop Master of Manager of Outfitting Outfitting 1.Bachelor degree Works Works 0	2.Deputy General Department of Master degree Manager of Works 3.Director of Planning Hull 1. 0	2.Deputy General 1.College degree Manager of Ship Repair Works 0	1. Master degree Department Department Information Information Manager of 2. Engineer of Technology Technology 3. Section 0
	0	0	0	0	0
	0	0	0	0	0
	0	0	0	0	0
	0.00363%	0	0.00317%	0.00148%	0.00147%
	17,178	0	15,000	7,000	6,932
	03/18/2019	08/13/2018	08/13/2018	11/11/2015	03/18/2019
	male	male	male	male	male
	WANG, FU-YING	CHIEN-I KAO,	MAO-HUA YU,	WEN LU, FENG-	FUN-SUANG WANG, H
	R.O.C	R.O.C	R.O.C	R.O.C	R.O.C
	and Research Center Chief Innovation Executive Officer	Works Manager General Hull	Outfitting Manager General Works	Ship Repair Manager General Works	Department of Information Technology Director

-	-	-
-	-	-
-	-	-
-	-	-
None	Taiwan Internati Training Corp. Windpower Director of onal	None
2. Shop Master of Department of Department of Manager of Ship Repair Assurance 4.Director of 1.Bachelor Material Quality degree 3.Section Works 0	2.Deputy General Department of Resources and Administration Manager of Works Director of 1.Bachelor Human degree 3.Deputy Hull 0	Company Chief China Holding enterprise 2.President Financial 1.Bachelor degree Officer 0
0	0	0
0	0	0
0	0	0
0.00151%	0.00846%	0.00123%
7,144	40,000	5,838
03/18/2019	03/23/2017	12/01/2013
male	male	Female
CHIEN-SHENG WANG,	WEN CHIANG, CHIH-	LING-LING HSIEH,
R.O.C	R.O.C	R.O.C
Department of Assurance Director Quality	Administration Department of Resources and Director Human	Department of Finance and Accounting Director

-	-	-	-
-	-	-	-
-	-	-	-
-	-	-	-
None	None	None	Director of Blue Ace corporation
of Accounting 2. Senior Officer Department Department Manager of Accounting 1.Bachelor 3. Section degree 0	2.Deputy General Manager of Manager of Machinery Machinery 1.Bachelor 3. General degree Works Works 0	3.Deputy General 2.Shop Master of Manager of Works Works 1.Bachelor degree Hull Hull 0	1. Bachelor Manager 2. Project degree 0
0	0	0	0
0	0	0	0
0	0	0	0
0.00206%	0.00298%	0.00310%	0.00452%
9,761	14,085	14,679	21,357
12/01/2018	11/06/2017	01/01/2017	08/10/2016
	male	male	male
YANG,CHIEN-AN Female	CHIH-MING YEN,	WEN HOU, YA-	TANG, JUNG KUEI
R.O.C	R.O.C	R.O.C	R.O.C
Department of Accounting ) Department Finance and Accounting Director of (Deputy Head of	Department of Occupational Safety and Director Health	Department of Protection and Environmental Public Utilities Director	Keelung Yard Manager General

muneration of Directors, President, and Vice President
3.2.3 Re

◆Remuneration of Directors

Unit: NT\$ thousands

	Compensation Directors from an Invested Paid to	Company		None	None	None	None	None
		companies in the All	statements consolidate d financial	-0.082%	-0.004%	-0.065%	-0.0004%	-0.004%
Ratio of Total	(A+B+C+D+E+F+G) to Net Income (%) Compensation	company The		-0.079%	-0.004%	-0.065%	-0.0004%	-0.004%
		in the consolidated financial statements	Stock	0	0	0	0	0
		All companies	Cash	0	0	0	0	0
	Sharing- Employee Bonus (G)		Stock	0	0	0	0	0
	Profit	The company	Cash	0	0	0	0	0
Relevant Remuneration Received by Directors Who are Also Employees	Severance Pay (F)	All companies consolidated in the	statements financial	0	0	0	0	0
		company The		0	0	0	0	0
	Salary, Bonuses, and companies Allowances (E) All		statements consolidate d financial	0	0	2,023	0	0
		compan The y		0	0	2,023	0	0
	statements companies consolidate d financial in the All			-0.082%	-0.004%	0	-0.0004%	-0.004%
Ratio of	Total Remuneration to Net Income (%) (A+B+C+D)	company The		-0.079%	-0.004%	0	-0.0004%	-0.004%
		statements companies consolidate d financial in the All		0	0	0	0	0
	Allowances (D)	company The		0	0	0	0	0
		companies in the All	statements consolidate d financial	0	0	0	0	0
Remuneration	To Directors (C) Bonus	company The		0	0	0	0	0
		companies in the All	statements consolidate d financial	0	0	0	0	0
	Severance Pay (B)	company The		0	0	0	0	0
		companies in the All	statements consolidate d financial	2,556	125	0	12	113
	Base Compensation (A)	company The		2,460	125	0	12	113
Name		Representative Ministry of WEN-LON Economic CHENG, Affairs	Representative YUNG-TSUNG Ministry of Economic Affairs CHEN,	Representative KUO-CHENG Ministry of Economic TSENG, Affairs	Representative WEN-TSAN Ministry of Economic Affairs LU,	Representative MING-CHUNG Ministry of Economic Affairs FANG,
Title			Chairman	Director	Director	Director	Director

None	None	None	None	None	None	None	None
-0.004%	-0.0004%	-0.037%	-0.038%	-0.004%	-0.004%	-0.002%	-0.002%
-0.004%	-0.0004%	-0.037%	-0.038%	-0.004%	-0.004%	-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	0	0	0	0	0	0
0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0
0	0	1,146	1,166	0	0	0	0
0	0	1,146	1,166	0	0	0	0
-0.004%	-0.0004%	0	0	-0.004%	-0.004%	-0.002%	-0.002%
-0.004%	-0.0004%	0	0	-0.004%	-0.004%	-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	0	0	0	0	0	0
0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0
113	12	0	0	125	125	62	62
113	12	0	0	125	125	62	62
Representative Ministry of Ying-Fang Economic Huang, Affairs	Representative WU,WEN-GUEI Ministry of Economic Affairs	Representative Ministry of Economic JIH-CHIN HUANG, Affairs	Representative Ministry of SYU-CING Economic Affairs LAN,	Corporation, Taiwan CPC	Corporation Investment Yue-Li	Representative Corporation China Steel Xin-Min Lee,	Representative Corporation China Steel JIAN-JR HUNG,
Director	Director	Director	Director	Director	Director	Director	Director

None	None	None	None	None
-0.040%	-0.041%	-0.023%	-0.023%	-0.023%
-0.040%	-0.041%	-0.023%	-0.023%	-0.023%
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	0
1,102	1,160	0	0	0
1,102	1,160	0	0	0
-0.004%	-0.004%	-0.023%	-0.023%	-0.023%
-0.004%	-0.004%	-0.023%	-0.023%	-0.023%
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	0
125	125	720	720	720
125	125	720	720	720
Representative Labor Union of Kaohsiung City of Industrial CSBC HOU, DE-LONG	Representative Labor Union of Kaohsiung City of Industrial KUO-JUNG HSIEH, CSBC	DER-MING LIEU,	HO-CHUNG FU,	HUI-JENG LIN,
Director	Director	Independen t Director	Independen t Director	Independen t Director

Note:Please refer to page 29 of the Chinese annual report.

muneration of the President and Vice President
	◆Re

		Compen sation	Paid to	Invested Presiden from an ts	Compan y		None	None	None		None	None
		(A+B+C+D) to net compensation Ratio of total income (%)		Companies consolidate in the	financial d	statements	-0.065%	-0.062%	-0.059%		-0.060%	-0.060%
Unit: NT\$ thousands				company The			-0.065%	-0.062%	-0.059%		-0.060%	-0.060%
				financial statements Companies in the	Stock		0	0	0		0	0
				consolidated	Cash		0	0	0		0	0
	Profit Sharing- Employee Bonus (D)				Stock		0	0	0		0	0
			The company	Cash		0	0	0		0	0
	Allowances (C) Bonuses and			Compani es in the consolid	financial ated	stateme nts	0	263	256		256	256
				company The			0	263	256		256	256
		Severance Pay (B)		Companies consolidat in the	financial ed	statements	0	0	0		0	0
				company The			0	0	0		0	0
	Salary(A)			Companie consolidat s in the	financial ed	statement s	2,023	1,645	1,580		1,616	1,599
				company The			2,023	1,645	1,580		1,616	1,599
				Name			TSENG,KUO-CH ENG	CHANG,CHIEH TE	WEI,CHENG-TZ U	LIN,FOUNG TANG	(02/28/ 2019 retirement)	CHOU,CHIH MING
				Title			President	Vice President Executive	Vice President Executive	Executive	Vice President	Vice President Executive

Note:Please refer to page 28 of the Chinese annual report.

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, presidents and vice presidents of the Company, to the net income.

Year	Ratio of total remuneration paid to directors, presidents and Executive vice presidents to net income (%)
	The company	Companies in the consolidated financial statements
2017	-0.38%	-0.39%
2018	-0.63%	-0.64%

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.

In 2018, due to annual losses, the chairman and president reduced their salary by 20%, and there was no performance bonus, year-end, performance appraisal bonus. The remuneration of the chairman and president was related to the business performance or surplus.

• C. Performance evaluation of directors, president and vice presidents:
• 1. Performance appraisal of the directors of the company: Setting out the rules for Performance Evaluation of the Board of Directors of the Company and the performance evaluation standards of directors.
• 1. Performance evaluation standards and assessment procedures of vice Executive presidents and financial accounting manager , according to "the company's practitioners annual assessment and bonus implementation rules ".

• The president performance appraisal: Setting out the "The rule of salary of the chairman and president, and performance evaluation of the president", approved by the March 15, 2019 board of directors. Performance evaluation of the president included president's performance evaluation criteria, evaluation procedures and performance bonuses. The president's performance evaluation criteria include short-term financial performance indicators and long-term performance indicators. Short-term financial performance indicators include operating income achievement rate, gross profit achievement rate, and after-tax profit and loss achievement rate. And other three, long-term performance indicators include business and institutional change performance, R & D innovation performance, future business growth performance, corporate social responsibility execution performance, etc.

3.3 Implementation of Corporate Governance

3.3.1 Board of Directors

A total of 9 (A) meetings of the Board of Directors were held in the previous period.

The attendance of director and supervisor were as follows:

Title	Name		Attendan ce in Person (B)	By Proxy	Attendanc e Rate (%)【B/ A】	Remarks
Chairman	Ministryof Economic Affairs Representative CHENG, WEN-LON		9	0	100.00	-
Director	Ministryof Economic Affairs Representative TSENG, KUO-CHENG		9	0	100.00	-
Director	Ministryof Economic Affairs	HUANG, YING-FANG	6	2	66.67	The M O E A appointed Mr. Wu,Wen-Kuei to take over as director at
	Representative	Wu,Wen-Kuei	1	0	11.11	2018.11.26
Director	Ministryof Economic Affairs	FANG, MING-CHUNG	8	0	88.89	The M O E A appointed Mr. Lu,Wen-Tsan to take over
	Representative	Lu,Wen-Tsan	1	0	11.11	as director at 2018.11.26
Director	Ministryof Economic Affairs Representative CHEN, YUNG-TSUNG		9	0	100.00	The M O E A appointed Mr. HUANG,YING-FANG to take over as director at 2019.1.28
Director	Ministryof Economic Representative HUANG, JIH-CHIN	9	0	100.00	-
Director	Ministryof Economic Affairs Representative LAN, SYU-CING	9	0	100.00	-
Director	CPC Corporation, Representative	Taiwan	7	2	77.78	-
		LEE XIN-MIN	2	3	22.22	The China Steel Representative
Director	China Steel Representative	HWANG, CHIEN-CHIH	3	1	33.33	appointed Mr. HWANG, CHIEN-CHIH to take over as director at 2018.7.1
	Director YUE-LI Investment Corporation		4	5	44.44	-
Director	Kaohsiung Representative of Industrial Labor Union of CSBC DE-LONG	City 9 HOU,	0	100.00	-
Director	Kaohsiung Representative of Industrial Labor Union of CSBC KUO-JUNG	City HSIEH,	9	0	100.00	-
Independent director	LIN, HUI-JENG		9	0	100.00	-

Independent director	FU, HO-CHUNG	8	1	88.89	-
Independent director	LIEU, DER-MING	7	2	77.78	-

Other mentionable items:

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:

Please refer to the Page 34 of the Annual Report.

• (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
• 2.If there are directors' avoidance of motions in conflict of interest, the directors' names, contents of motion, causes for avoidance and voting should be specified:

2019.03.15. The Board of Directors: approval of revised and rename "Specification for Chairman and General Manager's reward and General Manager Performance Evaluation", and President Tseng, Kuo-Cheng avoided attendance according to the law.

3.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	Name	Attendan ce in Person (B)	By Proxy	Attendance Rate (%)【B/ A】	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	Major Item	Audit	Comapny response	Board Meeting
meeting		Committee		Resolutions
Date		Resolutions
03.23,	The 2017	All attendance	Submit to Board	All attendance
2018	Financial	member of Audit	meeting review on	member of board
(The 5	Statements and	Committee	2018/3/23.	meeting agreed to
session of	Consolidated	agreed to pass		pass the case.
11)	Financial	the case on
	Statements	2018.3.16.
	The 2017	All attendance	Submit to Board	All attendance
	Statement of	member of Audit	meeting review on	member of board
	Internal	Committee	2018/3/23.	meeting agreed to
	Control Systems.	agreed to pass the case on		pass the case.
		2018.3.16.
	The 2018	All attendance	Submit to Board	All attendance
	financial	member of Audit	meeting review on	member of board
	statements(in	Committee	2018/3/23.	meeting agreed to
	clude	agreed to pass		pass the case
	consolidated	the case on
	financial statements)	2018.3.16 and suggest
	and filing	accountant
	returns	assist the
	assessed and	company's more
	certified by	active
	PwC Taiwan.	financial
		planning.
05.11.	The	All attendance	Submit to Board	All attendance
2018 (The 13	investment project about	member of Audit Committee	meeting review on 2018/5/11.	member of board meeting agreed to
session of	building a	agreed to pass		pass the case.
16)	140 meters	the case on
	barge.	2018.5.4.
08.10.	The 2018 Q2	All attendance	Submit to Board	All attendance
2018	Consolidated	member of Audit	meeting review on	member of board
(The 16	Financial	Committee	2018/8/10	meeting knowed
session of	Statements.	agreed to pass
16)		the case on 2018.8.3.
	cash to	All attendance	Submit to Board	All attendance
	increase the	member of Audit	meeting review on	member of board
	capital of	Committee	2018/8/10.	meeting agreed to
	new shares	agreed to pass		pass the case.
	issued in	the case on
	2018.	2018.8.3.
09.12.2018	More than half	All attendance	Submit to Board	All attendance
(The 17	of the capital	member of Audit	meeting review on	member of board
session of 16 extra	loss report.	Committee agreed to pass	2018/9/12.	meeting agreed to pass the case.
ordinary)		the case on
		2018.9.12.
	The company	All attendance	Submit to Board	All attendance
	joint venture	member of Audit	meeting review on	member of board
	with GeoSea	Committee	2018/9/12.	meeting agreed to
	to form CDWE.	agreed to pass		pass the case.
		the case on

		2018.9.12.
	The Multi-purpos e steel structure production line plan at Kaohsiung Yard.	All attendance member of Audit Committee agreed to pass the case on 2018.9.12.	Submit to Board meeting review on 2018/9/12.	All attendance member of board meeting agreed to pass the case.
11.09.2018 (The 18 session of 16)	Did not continue the remaining amount of new common shares of private placement.	All attendance member of Audit Committee agreed to pass the case on 2018.11.6.	Submit to Board meeting review on 2018/11/19.	All attendance member of board meeting agreed to pass the case.
	The job transfer of Accounting department first-level supervisor.	All attendance member of Audit Committee agreed to pass the case on 2018.11.6.	Submit to Board meeting review on 2018/11/19.	All attendance member 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.

• 1. 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.
• 1. 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
03.16.2018	Audit Committee meetings	AuGeneral audit Visa accountant	1.Statement of Internal Control System for 2017. 2.2017 annual financial report and consolidated financial report. 3.Internal audit business report.	Agreed to submit a statement on the internal control system for 2017.
05.04.2018	Audit Committee meetings	AuGeneral audit Visa accountant	1.Review the consolidated financial statements for the first quarter of 2018. 2.Internal audit business report.
08.03.2018	Audit Committee meetings	AuGeneral audit Visa accountant	1.Review the consolidated financial statements for the second quarter of 2018.

			2.Internal audit business report.
11.06.2018	Audit Committee meetings	AuGeneral audit Visa accountant	1.Review the consolidated financial statements for the third quarter of 2018. 2.Internal audit business report.

3.3.3 Corporate Governance Implementation Status and Deviations from "the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies".

			mentation Status 1 mple I	m "the Corporate Deviations fro
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Corporate Governance Best-Practice Principles			has been disclosed on the CSBC website and the	Code of Corporate Governance
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mpanies"? WSE/TPEx Listed Co Principles for T			w investor m.t w. Csbcnet.co w website http: // w	characteristics.
			and investor relations area.
Shareholding structure & shareholders' rights 2.
mpany establish an internal Does the co (1)	V		On CSBC website , there is "Investor Area"	Reference to the listing and OTC
operating procedure to deal with shareholders'			w/Service/Investor). m.t w.csbcnet.co w (http://w	Code of Corporate Governance
suggestions, doubts, disputes and litigations,			mail address to It discloses the hotline and e	Practice and CSBC
ment based on the procedure? mple and i			We provide all the investors to contact with us.	characteristics.
			established an internal operating procedure to
			manage this area.
Does the co	V		mation of
wners of major mpany possess the list of its mate o shareholders as well as the ulti (2)			mate major shareholders and the list of ulti CSBC can collect the updated infor	Reference to the listing and OTC Code of Corporate Governance
those shares?			wners of those shares. o	Practice and CSBC
				characteristics.

			mentation Status 1 mple I	m "the Corporate Deviations fro
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m Evaluation Ite	Yes	No	Abstract Illustration	WSE/TPEx Listed Principles for T
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mpany establish and execute the risk Does the co (3)	V		ment points and manage CSBC has set up specific	Reference to the listing and OTC
m within its wall syste ment and fire manage			operating procedures for the financial and	Code of Corporate Governance
merate structure? conglo			methods of the business-related operating	Practice and CSBC
			mented mple mpanies and i related enterprise co	characteristics.
			ment a mple m. In addition, in order to i the
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mpany establish internal rules Does the co (4)	V		To protect shareholders' rights and fairly treat	Reference to the listing and OTC
against insiders trading with undisclosed mation? infor			shareholders, CSBC has established "Directions	Code of Corporate Governance Practice and CSBC
			Material Governing the Processing of
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			mpany has also strongly mation. The Co infor
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			m.tw/ Service (http://www.csbcnet.co website:
			/Investor/Corporate Governance/Internal
			Regulations.htm)

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m Evaluation Ite	Yes	No	Abstract Illustration	WSE/TPEx Listed Governance Best-Practice Principles for T
				mpanies" and Reasons Co
mposition and Responsibilities of the Board of Directors 3.Co
mposition of its ment a mple Does the Board develop and i diversified policy for the co mbers? me (1)	V		multi-pronged policy for directors in the Corporate Governance Code. minated directors and independent mpany has a ▓The no ▓The co	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC
			ment, science and technology, finance and society. manage directors have included a wide range of backgrounds such as production,	characteristics.
mpany voluntarily establish other mittees in addition to the mittee and the Audit m muneration Co m functional co Does the co Re (2)	V		mittee w mittee according to la m muneration Co CSBC sets the Salary Re m and the Audit Co	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC
mittee? m Co				characteristics.
mpany establish a standard to Does the co (3)	V		mance CSBC established the "Board Perfor	Reference to the listing and OTC
mance of the Board, and ment it annually? measure the perfor mple i			mance Method" in 2011. The perfor Evaluation	Code of Corporate Governance Practice and CSBC
			evaluation was conducted on a regular basis wards. In addition to being a m 2012 on fro	characteristics.
			ment of the business manage reference for the
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			reference for the directors' , And the results of
			wards announced m 2016 on the evaluation fro
			mpany's external website on the co
			w / Service / Investor m.t w.csbcnet.co w http://w

			mentation Status 1 mple I	m "the Corporate Deviations fro
Evaluation Ite				Governance Best-Practice
m	Yes	No	Abstract Illustration	WSE/TPEx Listed Principles for T
				mpanies" and Reasons Co
			/ Corporate Governance.
mpany regularly evaluate the Does the co (4)	V		ments assess the ment depart manag mpany's Co	Reference to the listing and OTC
independence of CPAs?			independence of CAP annually. The results had	Code of Corporate Governance
			mittee on m been reported to The Audit Co	Practice and CSBC
			2018.03.16 and to The Board of Directors on	characteristics.
			2018.03.23, and passed.
			wo CPAs, ment, t ments' assess With depart
			m The Wu, Chien-Chih, fro Wang, Guo-Hua, and
			meet the standards WaterHouseCoopers, Price
			Both are of independence evaluation (Note 1).
			mpany's certified capable of being our co
			m has issued the accountants. The Fir
			independence declaration as well.
mpany has set up corporate Whether the co 4.	V		mpany's planning office is a corporate ▓The co	Reference to the listing and OTC
me units or personnel governance special/part-ti			governance unit, and designated personnel are	Code of Corporate Governance
responsible for corporate governance related			responsible for corporate governance related	Practice and CSBC
matters.			mpany registration and matters, such as co	characteristics.
			change registration and corporate governance
			evaluation.
			▓The board of directors and shareholders'
			matters shall be handled by the meeting
			secretary's office of the board of directors, and
			ment shall cooperate with managerial depart the

			mentation Status 1 mple I	m "the Corporate Deviations fro
m Evaluation Ite	Yes	No	Abstract Illustration	WSE/TPEx Listed Governance Best-Practice Principles for T
				mpanies" and Reasons Co
			moting corporate governance mpany's top executive is the director of the board of directors. ▓At this stage, the co responsible for pro m. the
mpany has established a channel of munication with interested parties and set up mpany's website and mportant corporate social responsibility issues that are of interest to stakeholder areas on the co properly respond to i Whether the co stakeholders? m co 5.	V		w/Service/Inter website: http:// various interested parties to contact with us. It sorts the topics for each stakeholder to mail address for mation they want. It also On CSBC website, there is "Stakeholder m.t And CSR area ( w/csr/). w.csbcnet.co provides the hotline and e m.t w2 .csbcnet.co w collect the infor m) Area"(http://w estedArea.ht w w	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.
mpany appoint a professional shareholder service agency to deal with shareholder affairs? Does the co 6.	V		CSBC designates Fubon Securities Co., Ltd. to deal with shareholder affairs.	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.
disclose both financial standings and the status mpany have a corporate website to of corporate governance? mation Disclosure Does the co 7. Infor (1)	V		mpany's financials, business and corporate governance status. w/) to disclose CSBC has set up a Chinese website mation regarding the Co m.t w.csbcnet.co w (http://w infor	Reference to the listing and OTC Code of Corporate Governance Practice and CSBC characteristics.

			mentation Status 1 mple I	m "the Corporate Deviations fro
m Evaluation Ite	Yes	No	Abstract Illustration	WSE/TPEx Listed Governance Best-Practice Principles for T
				mpanies" and Reasons Co
mation mpany have other infor Does the co (2)			w. w ▓There is also English website(http://w	Reference to the listing and OTC
disclosure channels (e.g. building an English
website, appointing designated people to	V		w/English/ ). m.t csbcnet.co	Code of Corporate Governance
mation collection and disclosure, handle infor			m to man syste ▓CSBC has established a spokes	Practice and CSBC
m, webcasting man syste creating a spokes			mation disclosure. handle infor	characteristics.
investor conferences)?			▓CSBC was invited to attend the investor
			conference by KGI Security. The relevant
			mation can be look up on our website: infor
			w/Service/Investor m.t w.csbcnet.co w http://w
			m mation.ht /StockInfor

ms Assessing Ite		Factors affecting accountants' independence	ment result Assess	independence? Does it violate
				yes	no
1. Independence is influenced by	(1)	mpany. (such as acquire and corporate bonds, loan or other securities.) material indirect interests in the Co hold shares, stocks, Having a direct or	none		ˇ
self-interest threat	(2)	mpany's director, or mpany, Co Having financing or guarantee behavior with Co independent director.	none		ˇ
	(3)	mpany's mpany, Co Having a significant close business relationship with Co managers. director, independent director, or	none		ˇ
	(4)	mpany. ment negotiations with the Co mploy Entering into a potential e	none		ˇ
	(5)	ment. ment relating to an audit engage Entering into a contingent fee arrange	none		ˇ
2. Independence is w threat influenced by self-revie	(1)	m being, or having been a director, or independent mployed in a position to exert significant influence over the subject wo years. ment within the last t mber of the assurance tea matter of the engage director, or e me A	none		ˇ
	(2)	m that would affects directly med by the fir ment. m of the assurance engage The non-assurance service which perfor material ite a	none		ˇ
3. Independence is	(1)	mpany. moting or brokering shares or other securities issued by the Co m pro The fir	none		ˇ
advocacy threat influenced by	(2)	mpany in litigation or disputes with third parties. mitted businesses, a professional accountant acting as an advocate on behalf of the Co Besides legally per	none		ˇ
independence of 4. The effect on miliarity fa	(1)	mployee mpany who is in a position to exert significant influence over the subject mber me mpany or an e mily mediate fa who is a director, independent director, or officer of the Co m m having a close or i ment tea ment. mber of the engage matter of the engage of the Co me A	none		ˇ

Note1:The assessment standards of accounts' independence.

ms Assessing Ite		Factors affecting accountants' independence	ment Assess	independence? Does it violate
			result	yes	no
	(2)	m joins the m the fir mer partner within one year of disassociating fro A for	none		ˇ
		mpany as a director, independent director, or officer or is in a key position to Co
		ment. matter of the engage exert significant influence over the subject
	(3)	m ment fro A professional accountant accepting gifts or preferential treat	none		ˇ
		major mpany's director, independent director, officer or mpany, the Co Co
		stockholder.
5. Independence is	(1)	m med by a partner of the fir m being infor ment tea mber of the audit engage me A	none		ˇ
influenced by		mber agrees with me motion will not occur unless the that a planned pro
midation threat inti		ment. mpany's inappropriate accounting treat Co
	(2)	m mpel the fir m being pressured to reduce inappropriately fees, in order to co A fir	none		ˇ
		med. to reduce the extent of work perfor
6. Period evaluation (1)		more than seven years? med me accountant perfor Does the sa	none		ˇ

• 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)?
• (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 5 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 has 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 Investors area service website to expose corporate governance, financial information, shareholder information, contacts and product-related information to provide investors with timely service information. Website: http: // www. Csbcnet.com. Tw.

(4) Supplier Relationships:

CSBC suppliers has 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.

(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 3/23/2018 the 16th eighth board report.

(7) Directors and managers and staff training records:

A. Director about corporate governance training

Title				Study period
	Name	Training hours	From	To	Sponsoring Organization	Course
Chairman	Affairs Representative Ministry of Economic	3H	07/30/2018	07/30/2018	Securities & Futures Institute	minar of insider equity transaction of listed and unlisted w se companies. Law follo
	WEN-LON CHENG,	3H	08/10/2018	08/10/2018	Governance Association Taiwan Corporate	Latest Company law amendment analysis.
	Ministry of Economic	3H	08/10/2018	08/10/2018	Governance Association Taiwan Corporate	Latest Company law amendment analysis.
Director	Affairs Representative TSENG,KUO-CHENG	3H	08/03/2018	08/03/2018	Development Foundation Accounting Research and	minar of insider equity transaction of listed and unlisted w se companies. Law follo
Director	Affairs Representative Ministry of Economic	3H	07/20/2018	07/20/2018	Securities & Futures Institute	minar of insider equity transaction of listed and unlisted w se companies. Law follo
	FANG,MING-CHUNG	3H	08/10/2018	08/10/2018	Governance Association Taiwan Corporate	Latest Company law amendment analysis.
	Ministry of Economic	3H	07/24/2018	07/24/2018	Securities & Futures Institute	minar of insider equity transaction of listed and unlisted w se companies. Law follo
Director	Affairs Representative CHEN,YUNG-TSUNG	3H	03/14/2018	03/14/2018	Taiwan Academy of Banking and Finance	Corporate governance lecture hall.
		3H	08/10/2018	08/10/2018	Governance Association Taiwan Corporate	Latest Company law amendment analysis.

Director	Affairs Representative Ministry of Economic HUANG, YING-FANG	6H	08/20/2018	08/20/2018	Accounting Research and Development Foundation	IFRS16 leasing accounting under the internal control practice
Director	Affairs Representative Ministry of Economic HUANG,JIH-CHIN	3H	08/10/2018	08/10/2018	Governance Association Taiwan Corporate	Corporate governance lecture hall.
	Ministry of Economic	3H	04/11/2018	04/11/2018	Taiwan Academy of Banking and Finance	Corporate governance lecture hall.
Director	Affairs Representative LAN,SYU-CING	3H	08/10/2018	08/10/2018	Governance Association Taiwan Corporate	Latest Company law amendment analysis.
Director	CPC Corporation, Taiwan	3H	07/13/2018	07/13/2018	Securities & Futures Institute	minar of insider equity transaction of listed and unlisted w se companies. Law follo
	Representative YIN,LING-YING	3H	08/10/2018	08/10/2018	Governance Association Taiwan Corporate	Latest Company law amendment analysis.
Director	Yue-Li Investment Corporation	3H	08/10/2018	08/10/2018	Governance Association Taiwan Corporate	Latest Company law amendment analysis.
	Representative WANG,SHU-JI	3H	07/24/2018	07/24/2018	Taiwan Academy of Banking and Finance	Board operation practice and corporate governance
	Corporation China Steel	3H	08/03/2018	08/03/2018	Securities & Futures Institute	minar for listed and unlisted (cabinet) companies Insider equity trading se
Director	Representative HUNG,JIAN-JR	3H	08/10/2018	08/10/2018	Governance Association Taiwan Corporate	Latest Company law amendment analysis.

			minar for listed		minar for listed
Latest Company law amendment analysis.	Latest Company law amendment analysis.	Latest Company law amendment analysis.	and unlisted (cabinet) companies Insider equity trading se	Latest Company law amendment analysis.	and unlisted (cabinet) companies Insider equity trading se	anti-tax avoidance Latest revision trend and analysis of Global and cross-strait policies and measures Governance Association Taiwan Corporate Taiwan Corporate 05/15/2018 08/13/2018 05/15/2018 08/13/2018 3H 3H LIEU,DER-MING Independent Director
Governance Association Taiwan Corporate	Governance Association Taiwan Corporate	Governance Association Taiwan Corporate	Securities & Futures Institute	Governance Association Taiwan Corporate	Securities & Futures Institute
08/10/2018	08/10/2018	08/10/2018	07/20/2018	08/10/2018	07/20/2018
08/10/2018	08/10/2018	08/10/2018	07/20/2018	08/10/2018	07/20/2018
3H	3H	3H	3H	3H	3H
Industrial Labor Union Representative of Kaohsiung City HOU,DE-LONG of CSBC	Industrial Labor Union Representative of HSIEH,KUO-JUNG Kaohsiung City of CSBC		LIN,HUI-JENG		FU,HO-CHUNG
Director	Director	Independent	Director	Independent	Director

Managers about corporate governance training
B.

	Course	Seminar to promote the adoption of the International Financial Reporting Guidelines IFRS16 Seminar	Seminar to promote the adoption of the International Financial Reporting Guidelines	Seminar of 2018 for the thing that the head financial and account should be know of	The impact and response of the company law amendment	Whistleblower of of Prevention Perspective The Correlation between the Protection System and the Crimes from the Corporate Governance Financial	The latest labor law practice analysis	The focus of the investment business and by subsidiaries the of supervision internal control the	The operation and functions of the directors and functional committees of publicly issued companies	Continuing education to the head of account of issuer firm.	Seminar for Labor law
	Sponsoring Organization	Taiwan Stock Exchange	Taiwan Stock Exchange	PwC Taiwan	PwC Taiwan			Securities & Futures Institute		Development Foundation Accounting Research and	Professional Training Center Economic of Ministry Affairs of
Study period	To	11/19/2018	03/5/2018	02/27/2018	08/10/2018	08/17/2018	08/17/2018	11/05/2018	11/05/2018	07/13/2018	06/13/2018
	From	11/19/2018	03/5/2018	02/27/2018	08/10/2018	08/17/2018	08/17/2018	11/05/2018	11/05/2018	07/12/2018	06/11/2018
	Training hours	4H	4H	4H	4H	3H	3H	3H	3H	12H	18H
	Name		YANG,CHING-AN					LIU,CHUNG-HE		SU,CHEN-AN retirement) (12/01/2018	WANG,SHU-CHING
	Title	Head of	(Deputy Director Department Accounting	of Department of Finance and	Accounting )		Audit Office	Auditor General		Department Accounting Head of	Deputy Director Of Department of Material

C.staff training records:

We have established CSBC Academy to perform employee training function, total actual training fee was NT\$ 31,409,000 in 2018,and training hours as follow:

	mber of Nu	training	Training hours
m Ite	Male	male Fe	Male	male Fe
manager training High level	194	18	1,326	127
manager training mediate Inter	269	15	2,411	80
ment personnel training manage Engineering and	1,128	251	8,124	1,524
Technical personnel training	4,339	13	32,515	30
Total	5,930	297	44,376	1,761
Technical apprentice training	41	0	367	0
training Industry-school Corporation student	92	0	30,048	0
Contractor training	3,246	556	11,459	2,054

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. 3.3.4 Composition, Responsibilities and Operations of the Remuneration Committee

CSBC has established the Remuneration Committee's Organizational Rules in accordance with the provisions of Article 14 of the Securities Exchange Act and the Measures for the Listing of the Stock Exchange or the Administration of the Salary and Remuneration of the Companies in the Securities and Futures Businesses promulgated by the Executive Yuan Financial Supervision and Management Commission The Remuneration Committee is composed of three independent directors whose terms of reference are the policies, systems, standards and structure for the purpose of formulating and regularly reviewing the performance and remuneration of directors and managers. Three remuneration committees were held on March 16, 2018, August 3, 2018, and November 1, 2018. FU, HO-CHUNG member Resigned on January 1,2019。On March 15, 2019, the board of directors passed the associate professor Chen, Hongz-hong of Kaohsiung University of Science and Technology as a Remuneration committee.(Term of member from March 15, 2019 to June 22, 2019)。

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

A. Professional Qualifications and Independence Analysis of Remuneration Committee Members

January 1,2019。 Resigned on member.	directors passed the On March 15, 2019, associate professor March 15, 2019 to Chen, Hong-zhong member.( Term of The hird session Technology as a June 22, 2019) Remuneration member from of Kaohsiung University of the board of Science and committee.
	None
	ˇ
	ˇ
	ˇ
	ˇ
	ˇ ˇ
	ˇ
	ˇ
	ˇ
	-
	ˇ
	HONG-ZHONG CHEN,
Director	other

B. Attendance of Members at Remuneration Committee Meetings

There are 3 members in the Remuneration Committee. The total of 3 (A) Remuneration Committee meetings were held in recent year(2018). The attendance record of the Remuneration Committee members was as follows:

Title	me Na	Attendance in Person(B)	By Proxy	Attendance Rate A】 B/ 【 %) (	marks Re
Convener	MING LIEU, DER-	3	0	% 100	(August 9, 2016 to June 22, 2019) The third session convener
mittee mber Me m Co	LIN, HUI-JENG	3	0	% 100	(August 9, 2016 to June 22, 2019) mber me The Third session
mittee mber Me m Co	FU, HO-CHUNG	3	0	% 100	(August 9, 2016 to June 22, 2019) Resigned on January 1,2019。 mber me The Third session
mittee, the circu 2. Resolutions of the re mentionable ite m m the Other co co	mstances and cause for the difference shall be specified): None. 1. If the board of directors declines to adopt or m meeting, session, content of the muneration co mittee's opinion (eg., the re ms:	modifies a reco mittee objected to by	mendation of the re me m	muneration co muneration passed by the Board of Directors exceeds the reco motion, resolution by the board of directors, and the Co	mittee, it should specify the date of muneration mbers or subject to a qualified opinion and recorded or declared in muneration mpany's response to the re mendation of the re m m

writing, the date of the meeting, session, content of the motion, all members' opinions and the response to members' opinion should be specified: None.

3.3.5 Fulfillment of Corporate Social Responsibility

			mentation Status 1 mple I	m the Corporate Deviations fro
				Social Responsibility
m Evaluation Ite	Yes	No	Abstract Explanation 2	mpanies Best-Practice Principles for WSE/TPEx Listed Co T
				and Reasons
mentation mple 1. Corporate governance i			mpany has established the Corporate Social (1) The Co	Based on the Corporate Social
mpany established its corporate social (1) Has the Co	√		Responsibility Policy and the Principles of Corporate	Responsibility Best-Practice
wed the m and revie responsibility policy or syste			wed and Social Responsibility, which have been revie	WSE/TPEx Listed Principles for T
mentation? mple results of i			m, the ms of the syste adopted by the board. In ter	mpany mpanies and co Co
mpany organize educational training (2) Does the Co	√		mpany has established the Corporate Social Co	characteristics
on corporate social responsibility on a regular			wo mittee, which convenes t m Responsibility Co
basis?			ment of w the fulfill meetings each year to revie regular
mpany established an exclusively (or (3) Has the Co	√		mentation of mple corporate social responsibility and i
concurrently) dedicated unit that consists of			mpany. corporate governance by the Co
managers authorized by the board to be in first-line			mpany dispatches staff to (2) Every year, the co	Based on the Corporate Social
moting corporate social responsibility charge of pro			When minars. minars or se participate in CSR-related se	Responsibility Best-Practice
motion status to the board? and reporting the pro			necessary, it also conducts a special report on	WSE/TPEx Listed Principles for T
mpany established a reasonable (4) Has the Co	√		mbers of the me corporate social responsibility to	mpany mpanies and co Co
mployee muneration policy, integrated the e re			mittee". m "Corporate Social Responsibility Co	characteristics
m with its corporate mance appraisal syste perfor
social responsibility policy, and set up a clear and			ment of Planning serves as the (3) The Depart	Based on the Corporate Social
m? ward and discipline syste effective re			mpany to be in charge of dedicated unit of the Co	Responsibility Best-Practice
			establishing a corporate social responsibility policy	WSE/TPEx Listed Principles for T
			moting a corporate social responsibility and pro	mpany mpanies and co Co
			m. So far, the Corporate Social Responsibility syste	characteristics
			Policy and the Principles of Corporate Social
			Responsibility have been established in accordance
			with the Corporate Social Responsibility Best-Practice
			mpanies, and WSE/TPEx Listed Co Principles for T
			wed and adopted by the board, to serve as the revie

			mentation Status 1 mple I	m the Corporate Deviations fro
				Social Responsibility
m Evaluation Ite	Yes	No	Abstract Explanation 2	mpanies Best-Practice Principles for WSE/TPEx Listed Co T
				and Reasons
			mentation, And mple motion and i basis for such pro
			report to the board of directors.
			mpany, such muneration policy of the Co (4) For the re
			factors as the working conditions, professional	Based on the Corporate Social
			wledge and skills, difficulty of work, and kno	WSE/TPEx Listed Responsibility Best-Practice Principles for T
			responsibilities constitute the relative value criteria for	mpany mpanies and co Co
			Moreover, a pay scale (or evaluating each position.	characteristics
			muneration points) is created to calculate the basic re
			measures are to ensure the for each position. These
			reasonableness and fairness of jobs in the
			measures together with organization. Through such
			mployee mance bonuses, e merit bonuses, perfor
			mes, the muneration sche bonuses, and other re
			mployees to increase motivate e mpany strives to Co
			productivity, guarantee a good quality of life and
			mployees, and fulfill its social ment for e mploy e
			responsibility in conjunction with the corporate social
			responsibility policy.
			mpany has established the Directions The Co
			mployee Appraisals and Bonus Governing Annual E
			Pays for conducting appraisals at the end of each year,
			wards and and the Directions Governing Re
			warding and mployees for re ments for E Punish
			mployees. ments on e mposing punish i

			mentation Status 1 mple I	m the Corporate Deviations fro
				Social Responsibility
m Evaluation Ite	Yes	No	Abstract Explanation 2	mpanies Best-Practice Principles for WSE/TPEx Listed Co T
				and Reasons
ment ment develop 2. Sustainable environ			mproving the mitted to i m mpany is co (I) The Co
mpany endeavor to utilize various (1) Does the Co	√		utilization efficiency of various resources, investing in	Based on the Corporate Social
wable more efficiently and use rene resources			ment, and is energy-saving and high-efficiency equip	Responsibility Best-Practice
mpact on the w i materials which have lo			mitted to the control of oil, water, air kinetic m co	WSE/TPEx Listed Principles for T
ment? environ			energy and electrical energy use, and for waste sorting	mpany mpanies and co Co
mental mpany established an environ (2) Has the Co	√		ment. Reuse, wage) water recycling treat and waste (se	characteristics
m that is appropriate to the ment syste manage			website: mentation of the CSR area ( mple the i
characteristics of the industry?			w/csr/), CSR Report m.t w2.csbcnet.co w http://w
mate mpact of cli monitor the i mpany (3) Does the Co	√		2.1/2.2/2.4.
change on its operations, conduct greenhouse gas
inspections, and develop strategies for energy			mpany has passed the ISO/CNS 14001 (2) The co	Based on the Corporate Social
conservation, carbon reduction, and greenhouse			m, and the special ment syste manage mental environ	Responsibility Best-Practice
gas reduction?			mprehensively unit is the public office, which co	WSE/TPEx Listed Principles for T
			maintenance mental quality and manages the environ	mpany mpanies and co Co
			wage. of waste, air pollution and waste, se	characteristics
			mpany has established "standard operating (3) The co	Based on the Corporate Social
			me weather response" to respond standards for extre	Responsibility Best-Practice
			mate me weather caused by cli mpact of extre to the i	WSE/TPEx Listed Principles for T
			mpany conducted a change. In addition, the co	mpany mpanies and co Co
			voluntary greenhouse gas inventory, conducted a	characteristics
			106-year greenhouse gas inventory in 107 years, and
			mation logged on the EPD website and public infor
			observatory. In 108 years, the results of the 107
			annual greenhouse gas inventory were checked and
			will be registered on the EPD website. The results of
			wo the greenhouse gas inventory survey for the past t
			mation years were disclosed at the public infor

			mentation Status 1 mple I	m the Corporate Deviations fro
				Social Responsibility
m Evaluation Ite	Yes	No	Abstract Explanation 2	mpanies Best-Practice Principles for WSE/TPEx Listed Co T
				and Reasons
			observatory and provided for consultation by
			interested parties.
3. Preserving public welfare
mpany established appropriate (1) Has the Co	√		mplies with labor-related mpany co (1) The Co	Based on the Corporate Social
ment policies and procedures according to manage			mportance on the internationally regulations, places i	Responsibility Best-Practice
relevant regulations and the International Bill of			mental labor rights, and accepted principles for funda	WSE/TPEx Listed Principles for T
man Rights? Hu			ment with the has entered into a collective agree	mpany mpanies and co Co
mployee grievance mpany set up an e (2) Has the Co	√		mpany has Moreover, the Co corporate labor union.	characteristics
mplaints in an m or channel to handle co mechanis			ment manage established work rules and various
manner? appropriate			regulations which explicitly stipulate the rights,
mpany provide a healthy and safe work (3) Does the Co	√		mployees in accordance obligations, and benefits of e
ment and organize training on health and environ			ws and regulations, and has with labor-related la
mployees on a regular basis? safety for its e			established a corporate labor union and convened
munication m mpany provide a co (4) Does the Co			w mployees in accordance with the la meetings with e
mployees on a regular basis, as well channel with e	√		to sufficiently protect the legal rights and interests of
mployees of any changes in m e as reasonably infor			motion, ment, selection, pro mployees. The recruit e
mpact on may have a significant i operations that			pay, holidays, pension, and other benefits of
m? the			m to the mployees of both genders not only confor e
mployees with mpany provide its e (5) Does the Co			regulations and the principle of equality, but even go
ment and mpetency develop effective career co	√		ments and standards. The basic beyond the require
ms? training progra			mployees are the male e muneration for fe salary and re
mer mpany established any consu (6) Has the Co			mployees in spite of the male E me as those for sa
mplaint procedures protection policies and co	√		differences in gender, duties, and place of work.
ment, regarding its research, develop			menstrual mployees are entitled to male e Besides, fe
ment, production, operation, and service procure			maternity and parental leave for leave as well as
processes?			mes and periods. mited ti unli

			mentation Status 1 mple I	m the Corporate Deviations fro
				Social Responsibility
m Evaluation Ite	Yes	No	Abstract Explanation 2	mpanies Best-Practice Principles for WSE/TPEx Listed Co T
				and Reasons
market and label its products mpany (7) Does the Co			(2) In addition to the Guidelines for Handling	Based on the Corporate Social
and services according to relevant regulations and	√		mployees and the Organizational Rules mplaints of E Co	Responsibility Best-Practice
international standards?			mittee, the m mplaint Handling Co mployee Co for the E	WSE/TPEx Listed Principles for T
mpany evaluate the records of (8) Does the Co			mittee to handle m mpany has set up a grievance co Co	mpany mpanies and co Co
ment and society mpact on the environ suppliers' i	√		mittee m mplaints. The grievance co mployee co e	characteristics
before starting a business with such suppliers?			wo mployer representatives and t consists of five e
mpany and its ween the Co (9) Do the contracts bet			mbers. me mployee representatives, totaling seven e
mination or dissolution major suppliers include ter	√		may mittee m When necessary, the grievance co
me into force once the suppliers clauses which co			mplainants or their supervisors and request the co
mpany's corporate social breach the Co			mplaint cases to other personnel related to the co
mpact responsibility policy and cause a significant i			meetings and provide explanations in order to attend
ment and society? on the environ			manner. mplaints in an appropriate handle the co
			mpany has also established the Guidelines for The Co
			mplaint ment Prevention, Co Sexual Harass
			ment and set mposition of Punish Investigation, and I
			mittee. Consisting of seven m w co mplaint revie up a co
			mittee m w co mplaint revie mbers, the co me to fifteen
			ment is responsible for handling sexual harass
			mplaints. co
			mpany ment of the Co (3) The collective agree	Based on the Corporate Social
			matters concerning safety and health, as stipulates	WSE/TPEx Listed Responsibility Best-Practice Principles for T
			ws, in accordance with labor regulations to offer follo	mpany mpanies and co Co
			ment: mployees a healthy and safe work environ its e	characteristics
			minations for its A. Conducting general physical exa
			mployees on a regular basis and physical e
			minations for the personnel who work in special exa

			mentation Status 1 mple I	m the Corporate Deviations fro
				Social Responsibility
m Evaluation Ite	Yes	No	Abstract Explanation 2	mpanies Best-Practice Principles for WSE/TPEx Listed Co T
				and Reasons
			ments on an annual basis; environ
			medical mploying qualified B. Establishing clinics and e
			ment medical advice and treat personnel to provide
			mployees and their spouses and other to e
			mbers; me mily mediate fa m i
			C. Organizing professional training and safety and
			mployees; health training for its e
			ment and protective gear and D. Providing safety equip
			ment and gear to regularly inspecting such equip
			mployees at work; ensure the safety of e
			E. Establishing the Occupational Safety and Health
			ment of Occupational mittee and the Depart m Co
			ment tasks manage Safety and Health to carry out
			mployees; regarding the safety and health of e
			meetings of the Occupational medies at F. Proposing re
			meetings with mittee or m Safety and Health Co
			mployees in the event that the workplace and e
			ment affect the health and safety production equip
			mployees. of e
			wing mpany provides the follo (4) The Co
			mployees on a munication channels with e m co
			regular basis:
			mployees as a meetings with e A. Convening regular

Abstract Explanation 2 mentation Status 1 mple I
m mon co m co
mployers and e e
B. Requesting the participation of top-level
ment heads in the and depart
representatives of the corporate labor union, in
order to facilitate co
C. Appointing four e
operation of the board of directors. mpany to take part in decision Co
(5)To develop effective career co
ment and training progra develop
mpany design the Co ment Syste Manage the Co and
mpany have finished the Co Co
mediate man, inter for
ment personnel. And also have established manage
Mode in 2017", " The eHRD Hu "Job Description, " Infor
in 2018". Fully develop the "Hu
ment Develop
mpetency functions. Gradually enhance co co
man resources hu
mpany has developed a spokes (6) The Co
set up an independent director
established consu

			mentation Status 1 mple I	m the Corporate Deviations fro
m Evaluation Ite	Yes	No	Abstract Explanation 2	mpanies Best-Practice Principles for Social Responsibility WSE/TPEx Listed Co T
				and Reasons
			ment, production, operation, mplaints procedures regarding its research, and service processes. ment, procure develop co	mpany mpanies and co characteristics Co
			according to relevant regulations of the Republic of markets its products and services China and international standards. mpany (7) The Co	WSE/TPEx Listed Based on the Corporate Social Responsibility Best-Practice mpany mpanies and co characteristics Principles for T Co
			ment and society before starting major makes sure that they do not have records of causing mpany evaluates all suppliers and m. mpact on the environ a business with the (8) The Co i	WSE/TPEx Listed Based on the Corporate Social Responsibility Best-Practice mpany mpanies and co characteristics Principles for T Co
			mpact m. make sure w ment at any m before starting a business with the ment and society, and enters into a ment which contains clauses that allo major i mpany evaluates all suppliers to that they do not have records of causing mination or dissolution of the agree on the environ me with the supply agree (9) The Co ter ti	WSE/TPEx Listed Based on the Corporate Social Responsibility Best-Practice mpany mpanies and co characteristics Principles for T Co
mpany disclose relevant and reliable mation regarding its corporate social mation disclosure 4. Enhancing infor (1) Does the Co infor	√		Meeting Handbook, CSR Report, etc. in Website: http:// CSBC discloses Financial Report, Annual General Annual Report and on the website.( shareholders'	WSE/TPEx Listed Based on the Corporate Social Responsibility Best-Practice Principles for T
Market responsibility on its website and the m? Observation Post Syste			w/ Service/Investor) m.t w.csbcnet.co w w	mpany mpanies and co characteristics Co

			mentation Status 1 mple I	m the Corporate Deviations fro
m Evaluation Ite	Yes	No	Abstract Explanation 2	mpanies Best-Practice Principles for Social Responsibility and Reasons WSE/TPEx Listed Co T
5. If the Co			mpany has established its corporate social responsibility principles based on the Corporate Social Responsibility Best-Practice Principles for
mpanies, please describe any discrepancy bet WSE/TPEx Listed Co The Co T			mpany has established the Principles of Corporate Social Responsibility based on the Corporate Social Responsibility Best-Practice Principles for mentation: mple ween the principles and their i
mentation purposes. mple mpanies for i WSE/TPEx Listed Co T
mation to facilitate better understanding of the Co mportant infor 6. Other i			mpany's corporate social responsibility practices:	more details. w for ▲See belo
made if the corporate social responsibility reports of the Co ment shall be 7. A clear state			mpany have passed the verification standards set by relevant
certification bodies:
CSBC 2018 Corporate Social Responsibility Report has not been verified by a third party, but options, as well as the AA1000 guarantee Standard type 1			meets the require m guarantee rating. mediu	ments of the GRI Standards core
mote (1) environ mpany strives to pro Notes: The Co			mental protection, energy conservation, and carbon reduction (2) social and co	munity m
services (3) safety and health activities and (4) industry-acade			mia collaboration and talent training.	While taking into consideration
mpany places equal e the operating profits, the Co			mphasis on social benefits and fulfills its corporate social responsibility based on
the philosophy "giving back to society". The descriptions of the			measures adopted for the four ms and mechanis	major activities
mple mentioned above and their i			ws: mentation status are as follo

(1) Environmental protection, energy conservation, and carbon reduction: See "2. Sustainable environment development" in the table above.

munity services:
m
(2) Social and co

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 2018, the Company spent a total of \$1,542,000 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 (\$1,152,000 for the Kaohsiung Yard and \$390,000 for the Keelung Yard). For the major cultural and social care activities conducted in 2018, 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

Occupational Safety and matic was obtained. Since then, the co since 1996, and obtained international certification of OHSAS 18001 occupational safety and health merly TOSH ward syste OHSAS 18001 and CNS 15506:2011 (for matically progressed to wan MS Tai wing year, the TOSH was internationally verified and the DNV charter certificate work has been officially and syste DNV charter certificate. In the follo mpany has passed the ment wan Shipbuilding Co manage and health Obtained m Syste Tai	m in 1997. ment mpany's occupational safety ment. Since then, MS) occupational safety and Manage ment syste Health manage manage
m certification audits in 2017 years and obtained BV charter certificates. ment syste manage health
mia collaboration and talent training: (4) Industry-acade

1. Training for talent in engineering and 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 University of Science and Technology, SUN Yat-Sen University, National Defense University Institute of Technology.. In 2018, the Company selected 20 students enrolled in the master's programs in vessel or marine-related fields through a

mester, as a way to encourage students to strive for progress m with NT\$60,000 per se warded each of the screening process and a
mpany after graduation, and the work for the Co wardees are obligated to ment. These a and engage in research and develop
must not be shorter than the period during which they receive the scholarships. period of their service
2. Training for talent in technology
mployees, Four classes of industry-school cooperation mprove technologies and enhance the expertise of e To develop and i
in 2018:
Senior Zhongzheng City Kaohsiung with Cooperation class: special shipbuilding cooperation (1) Industry-university
with special classes University of Science and Technology, 34 students National Kaohsiung Vocational Industrial School and
work were engaged in cold wing practice and 23 people were engaged in dra May 1, 2018, 11 people entered the factory on
practice.
National Kaohsiung with wer Industry Course: Cooperation Wind Po Mechanical Engineering and (2) Ship Electrical and
m University of Science and Technology. There are 13 students in special classes entered the factory on August 1, 2018. All of the
will be practice until July 30, 2019.
with Hechun Institute of Technology. Six students entered the m: Cooperation (3) 1+3 industry-school Cooperation progra
factory on August 27, 2018, and all the students for electric welding practice will be conducted until June 30, 2021.
ment of Occupational Safety and Health of Fuying University of Science and Technology: 20 with the Depart (4) Cooperation

will be
students entered the factory on June 11, 2018, and practiced such as electrician, fitter, and refrigeration control, and
	practice until June 30, 2022.

1. 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 four weeks. In 2018, 34 students participated in the intermediate level program, and 11 students in the advanced level program, at the yards.

			mentation Status 1 mple I
m Evaluation Ite	Yes	No	Abstract Illustration	mpanies" and Reasons Best-Practice Principles WSE/TPEx Listed m "the Ethical Corporate ment Deviations fro Manage for T Co
mpany declare its ethical corporate ment ments, as well as ment ment policies and procedures in its mple manage m its board to i ment of ethical corporate guidelines and external docu ment fro ms policies and progra the policies? Does the co mit m manage the co Establish (1) 1.	V		query website is mployees of ment and We have established Code of Ethics to declare also established Code of Ethics and Conduct ment policies,and w m.t for Directors and First-Level or Higher w.csbcnet.co Manage ment, Code of Ethics for E Guidelines for Conduct .The CSB, Procedures for Ethical manage w available at: http://w ethical corporate Investor Zone. Manage (1)	and OTC Code of Ethical Reference to the listing Corporate Practice and CSBC characteristics.
ment the mpany establish policies to prevent regarding relevant procedures, guidelines of ment for violation, rules of ments mple unethical conduct with clear state ment to i mit m appeal, and the co conduct, punish Does the co (2)	V		ment and Guidelines for Conduct to We have established Procedures for Ethical ments regarding relevant procedures, ment for prevent unethical conduct with clear guidelines of conduct, punish Manage state (2)	and OTC Code of Ethical Reference to the listing Corporate Practice and CSBC characteristics.
policies?			violation, rules of appeal, and the

3.3.6 Ethical Corporate Management

and OTC Code of Ethical Reference to the listing Corporate Practice and CSBC characteristics.		and OTC Code of Ethical Reference to the listing Corporate Practice and
or sponsor We have established Code of Ethics to prevent ment the policies. The donations. w Investor Zone. bribery. donation political query website is available at: of m.t Offer and acceptance mproper charitable w.csbcnet.co of illegal mple wing: ment to i Provision against the follo w http://w mit ship. m (III)I (II) co (I) (3)	products and se unreasonabl undue i ma other intell oth during the research an productio m to the rights, business secrets, trade or mpetition. mers other ment, patents, copyrights, and of of consu or or acceptance unfair co procure of property rights. har ment or sale health, and safety or indirect ment, entertain er stakeholders ment in of provision ment develop Provision nterests. Direct gift, rvices. Engage ectual (V)Infringe rk, n, d e (VII) (IV) (VI)	partners. In addition, an ethic-related clause is meetings, conveying ments to all our business We holds annual business our integrity require (1)
V		V
conducts or listed activities stated in Article 2, precautions against high-potential unethical ment Best-Practice Principles for mpany establish appropriate Paragraph 7 of the Ethical Corporate mpanies? WSE/TPEx Listed Co Does the co Manage T (3)		mpany evaluate business partners' ethical records and include ethics-related clauses in business contracts? 2. Fulfill operations integrity policy (1)Does the co

CSBC characteristics.	and OTC Code of Ethical Reference to the listing Corporate Practice and CSBC characteristics.
included in every business contract.	ethical ment be and responsibilities, and shall be reported to the shall Manage rights of units ment their the wing manage by to follo Organized according the the ment , perfect operation, handled Depart (2)To	Office for moral and Audit ethics by the ment: Help incorporate supervision and reporting: (I) Planning Depart Directors of 1. Board	business of ment adjust mpany's the Co on the mend value into strategy. m Reco 2.	and mutual balance with m for business activities establish and organization check responsibilities; supervision, mechanis internal	unethical of mpany's scope of risk Co higher behaviors in the relatively business.	ensure the ethical of ws, for with the la execution Solutions (II) Legal Affairs Office: In coordination effective Precautionary the	ment and the relevant standard operating procedures in each solution. manage
	concurrently) dedicated unit supervised by the Board to be in charge of corporate integrity? mpany establish an exclusively (or (2)Does the co

mini man Resources and Ad (III) Dept. of Hu stration:	ment Manage "Ethical wn the do Set 1.	Behavioral and Procedures Operating	the (including Guidelines"	the and Solutions Precautionary	wer whistleblo m, syste reporting	and procedures protection (reporter)	behavioral guidelines).	of the coordination and motion Pro 2.	publicity policy ment manage ethical	and training.	(IV) Audit Office:	1. Accept reports and undertake reporter	the ensuring affairs, protection	effective execution.	Assist the board of directors and the 2.	and investigating in ment manage	of operation effective evaluating the	measures precautionary the	practical the for established	ethical of mentation mple i	regular conduct and ment, manage	ment on the relevant mpliance assess co	mpile co and ws workflo business	reports on that.
																								V
													mpany establish policies to prevent (3)Does the co	conflicts of interest and provide appropriate	ment it? mple munication channels, and i m co							ms mpany established effective syste (4)Has the co	for both accounting and internal control to	ment, and manage facilitate ethical corporate	are they audited by either internal auditors or	CPAs on a regular basis?

external educational trainings on operational mpany regularly hold internal and (5)Does the co integrity?		Ethics and Conduct for Directors , First-Level or ment and Guidelines for Conduct , to We have established Code of Ethics , Code of mployees of CSB, Procedures for Ethical prevent conflicts of interest and provide ment, Code of Ethics for Manage Manage Higher E (3)	and OTC Code of Ethical Reference to the listing Corporate Practice and CSBC characteristics.
	V	munication channels, and m appropriate co ment it. mple i
	V	We have established accounting and internal ms to ensure integrity in our control syste (4)	and OTC Code of Ethical Reference to the listing
		operations.	Corporate Practice and CSBC characteristics.
		mployees, training on ethical rules, morals, and all conflicts of interest, business w e (5) For ne	and OTC Code of Ethical Reference to the listing
		mployees are required other related subjects are carried out during their first week of work.E	Corporate Practice and CSBC characteristics.
		to receive integrity training .
Operation of the integrity channel 3.
mpany establish both a (1)Does the co	V	We have established various reporting channels (1)	Reference to the listing
m and an integrity ment syste ward/punish re		mployees and relevant people can so that e	and OTC Code of Ethical
hotline? Can the accused be reached by an		mproper business behaviors through the report i	Corporate Practice and
w-up? appropriate person for follo		m. After a confidential investigation, syste	CSBC characteristics.
		anyone who violates the regulations on

operational integrity will be punished according ward and ment. In cases of illegal conduct, legal mpany's regulations on re actions will be taken as well. to the Co punish	and OTC Code of Ethical Reference to the listing Corporate Practice and CSBC characteristics. authorized by the Board which could be applied ment and Guidelines for Conduct We have establish Procedures for Ethical on any confidential investigations . Manage (2) v operating procedures for confidential reporting mpany establish standard on investigating accusation cases?	and OTC Code of Ethical Reference to the listing Corporate Practice and CSBC characteristics. We have establish Code of Ethics ,Procedures seriously since the core purpose is protection mployees We has a dedicated hotline for wer protection whether first-line ment and Guidelines for mine appropriate wer protection managers and the Board if necessary, can ward to identify potential mplaints. wful reprisal for diligent e actions against reprisal of co Conduct to take whistleblo w and deter Manage wrongdoing. directly revie who step for for Ethical whistleblo m unla fro (3) v mpany provide proper wer protection?	and OTC Code of Ethical Reference to the listing Corporate Practice and CSBC characteristics. Ethics and Conduct for Directors , First-Level or ment and Guidelines for Conduct have We have established Code of Ethics , Code of mployees of CSB, Procedures for Ethical ment, Code of Ethics for Manage Higher E (1) v mpany disclose its ethical corporate mpany's website and ment policies and the results of its mation disclosure mentation on the co
	(2)Does the co	(3)Does the co whistleblo	Strengthening infor Does the co manage MOPS? mple i (1) 4.

mpany's Chinese / MOPS. been posted on the Co English website and
ment Best-Practice Manage ment policies based on the Ethical Corporate manage mpany has established the ethical corporate If the co 5.
mentation. mple ween the policies and their i mpanies, please describe any discrepancy bet WSE/TPEx Listed Co Principles for T
There have been no differences.
w and ment policies (e.g., revie manage mpany's ethical corporate mation to facilitate a better understanding of the co mportant infor Other i 6.
mend its policies). a
mpany Act, Securities and Exchange Act, We operate under the Co ment policies, manage ment the basics of ethical corporate mple To i (a)
ws and decrees concerning business mpanies, and other la WSE/TPEx-Listed Co Businesses Entity Accounting Act, related regulations for T
transactions.
w Investor Zone m.t w.csbcnet.co w mpany's official website: //w mation, please refer to the Co more detailed infor For (b)

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

shareholders 28,Jun,2018 1. Recognizes that the number of affirmative rights meeting in the business report and financial report for the year of 2017 , the pro-weight equity accounted for 98.99% of the voting rights of the attending shareholders, which was passed in the case.Report of the public information observatory on the stock exchange on March 28, 2018.
2. Recognizing the profit and loss appropriation for
the year of 2017, the pro-weight equity
accounted for 98.92% of the voting rights of the
share -holders attending the meeting. The case
was passed as approved, No dividends were paid
and the declaration was completed on June 28,
2018.
Temporary 09,Nov,2018 1. Report of one-half of the amount of paid-up
meeting of capital and inquired.
shareholders 2. Improve the business plan 2018 annual
situation report and inquired.
Board meeting 05,04,2018 1.Approval of the record date of the capital
(extraordinary) reduction.
2.Approval of the record date of the capital
increase、shares、price、applicants & other
related issues.
Board meeting 05,11,2018 1.Approval of the proposal for 2017 Deficit
Compensation.
2.Approval of updating the contents of the 2018
shareholders' meeting.
3.Approval of the investment project about
building a 140 meters barge .
4.Approval of some revisions about the Purchasing
operations of CSBC CORPORATION,TAIWAN.
5.Approval of the general manager Cheng-Tzu Wei of of CSBC Coating Solutions Co., Ltd. to hold a
concurrent post as a director of BLUE ACE. 6.Approval of that Chen Chiou-Wen promoted

		from special assistant to the vice general
		manager of CSBC Coating Solutions Co., Ltd.
		7.Approval of the organization abolition about
		Machinery factory.
		8.Approved the units and duties change of vice
		president LIN,FOUNG-TANG & other 3 people.
Board meeting	05,11,2018	1.Approve that the price determination of the first
(extraordinary)		private placement was uncompleted.
		2.Approval of the record date of the capital
		increase、shares、price、applicants & other
		related issues.
Board meeting	05,25,2018	1.Approval of in 2018, after the expiration of the
(extraordinary)		payment of the private equity common stock,
		the actual private equity and paid-up shares.
Board meeting	08,10,2018	1.Approved cash to increase the capital of new
		shares issued in 2018.
		2.Approval the Directions of employees use cash to
		increase share subscription specifications.
		3.Approval the Directions of Receivables and notes
		receivables for the assessment of bad debts and
		overdue collections.
		4.Approved the job transfer of eight first-level
		supervisor.
Board meeting	09.12.2018	1.Consent for more than half of the capital loss
(extraordinary)		report.
		2.Approval of 2018 strengthen operational planed
		situation report.
		3.Approval of held 2018 extraordinary
		shareholders' meeting on 2018/11/9.
		4.Approval of joint venture with GeoSea to form
		CDWE.
		5.For Improve the Multi-purpose steel structure
		production line plan at Kaohsiung Yard.
Board meeting	11.09.2018	1.Approval of the Company's 2019 Annual
		Operating Plan.
		2.Approval of "2019 Annual Audit Plan".
		3.Approval of research day labor employ standard.
		4.To approve did not continue the remaining amount of new common shares of private
		placement.
		5.Aproved to revised "Work Rules".
		6.Approved of revised "Directions for trust stock
		subsidy".
		7.Approval of revised "Organizational Highlights".
		8.Approved the job transfer of 4 first-level

		supervisor.
		9.Aproved to cancellation of NT\$811 million quota
		provided to Fuhai Company.
Board meeting	12.17.2018	1.Approved the 2018 Capital increase and issue of
(extraordinary)		shares New stock price and related matters.
		2.Approval of Executive Vice President Chieh-Te
		Chang to hold a concurrent post as a President of
		CSBC Coating Solutions Co., Ltd.
Board meeting	03.15.2019	1.Approval of the 2018 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.Consent for more than half of the capital loss
		report.
		5.Approval of the proposal for 2017 Deficit
		Compensation.
		6.Approved the endorsement guarantee for Fuhai
		offshore wind farm exceeds the limit was
		improved.
		7.Approval of amendment to the "Procedures for
		Acquisition or Disposal of Assets".
		8.Approval of election of 15 directors for 17 th
		(including 3 independent directors) at the 2019
		annual meeting of shareholders.
		9.Approval of held 2019 annual meeting of
		shareholders on 2019/6/26.
		10.Approval of announcement to accept the
		written proposal of the shareholder. 11.Approval of the 2017 Statement of Internal
		Control Systems.
		12.Approval of the 2019 financial
		statements(include consolidated financial
		statements) and hire PwC Taiwan to process tax
		declaration visa.
		13.The first quarter of 2019 accountants of
		Governing Auditing and Certification of Financial
		Statement be changed from Wang,kuo-hua and
		Wu,chien-chih to Wang,kuo-hua and
		Tien,chung-yu.
		14.For Improve the TP production line plan at
		Kaohsiung Yard.
		15.Approval of revised "Specification for
		re-investment operations" and "Specification for
		supervision and management of subsidiaries".

16.Approval of revised the "Corporate Governance principles".
17.Approval of revised the "Specification for
Related person transaction".
18.Approval of increase and revision the Chinese
and English "Corporate social responsibility
policy".
19.Approval of revised and rename "Specification
for Chairman and General Manager's reward and
General Manager Performance Evaluation".
20.Approval of formulate "Handling standard
operating procedures required by directors".
21.Approved LANJIE CO., LTD director is still served
by TANG,JUNG-KUEI.
22.Approval of hire Hongzhong Chen associate
professo serve the company's Third session
Remuneration committee member.
23.Approved the job transfer of Lin,Foung-Tang and
Chen,Hui-Shan.
24.Approved the job transfer of twelve first-level
supervisor.
25.Approval of revised "Organizational Highlights".

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

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.

				02/28/2019
Title	Name	Date of Appointment	Date of Termination	Reasons for Resignation or Dismissal
Heads of Accounting department	SU,CHEN-AN	12/01/2013	11/30/2018	Retirement
Heads of R&D department	LIU,CHWAN- CHANG	01/01/2017	02/28/2019	Retirement

3.4 Information Regarding the Company's Audit Fee and Independence

3.4.1 Audit Fee 莊玥嬛

Accounting Firm	Name of CPA	Period Covered by CPA's Audit	Remarks
PriceWaterHouseCoopers	Wang, Guo-Hua/ Wu, Chien-Chih	2018.01.01~2018.12.31	-

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

					Non-audit Fee			Period
Accounting Firm	Name of CPA	Audit Fee	System of Design	Company Registration	Human Resource	Others	Subtotal	Covered by CPA's Audit	Remarks
	Wang,							2018.1.1~	Register
PriceWater	Guo-Hua			60			320	2018.12.31	the
HouseCoopers	Wu,	1,800	-		-	260			capital
	Chien-Chih								reduction

3.4.2 Replacement of CPA: Not Applicable. 莊玥嬛

3.4.3 Audit Independence 莊玥嬛

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 2018.

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

					Unit: Shares
		2018 (Note 1)			As of Mar. 31, 2019 (Note 7)
Title	Name	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Director	Ministry of Economic Affairs	(144,542,174)	0	0	0
Representative	Cheng, Wen-Lon	(57,935)	0	8,911	0
Director	Ministry of Economic Affairs	(144,542,174)	0	0	0
Representative	Chen, Yung-Tsung(Note 6)	0	0	0	0
Representative	Huang, Ying-Fang(Note 6)	0	0	0	0
Director	Ministry of Economic Affairs	(144,542,174)	0	0	0
Representative	Huang, Ying-Fang(Note 2)	0	0	0	0
Representative	Lu,Wen-Tsan(Note 2)	0	0	0	0
Director	Ministry of Economic Affairs	(144,542,174)	0	0	0
Representative	Fang, Ming-Chung(Note 2)	0	0	0	0
Representative	Wu,Wen-Kuei(Note 2)	0	0	0	0
Director	Ministry of Economic Affairs	(144,542,174)	0	0	0
Representative	Tseng,Kuo-Cheng	(55,935)	0	15,128	0
Director	Ministry of Economic Affairs	(144,542,174)	0	0	0
Representative	Huang, Jih-Chin	(52,392)	0	20,631	0
Director	Ministry of Economic Affairs	(144,542,174)	0	0	0
Representative	Lan, Syu-Cing	0	0	16,514	0
Director	CPC Corporation, Taiwan	(27,233,879)	0	3,980,679	0
Representative	Yin, Ling- Ying	0	0	0	0
Director	China Steel Representative	(10,663,295)	0	0	0
Representative	Lee Xin-Min(Note 3)	0	0	0	0
Representative	Hwang, Chien-Chih (Note 3)	0	0	0	0
Director	Yue-Li Investment Corporation	(3,037,975)	0	444,050	0
Director	Kaohsiung City Representative of Industrial Labor Union of CSBC	(471,246)	0	85,442	0
Representative	Hou, De-Long	(10,289)	0	11,275	0
Director	Kaohsiung City Representative of Industrial Labor Union of CSBC	(471,246)	0	85,442	0
Representative	Hsieh, Kuo-Jung	(162,139)	0	33,815	0
Independent Director	Lin, Hui-Jeng	0	0	0	0

		2018 (Note 1)		As of Mar. 31, 2019 (Note 7)
Title	Name	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Independent Director	Fu, Ho-Chung(Note 5)	0	0	0	0
Independent Director	Lieu, Der-Ming	0	0	0	0
Chairman of the
board of	Cheng, Wen-Lon	(57,935)	0	8,911	0
directors
Manager	Tseng,Kuo-Cheng	(55,935)	0	15,128	0
Manager	Chang,Chieh-Te	(59,453)	0	13,000	0
Manager	Lin,Foung-Tang (Note 8)	0	0	5,000	0
Manager	Chen,Hui-Shan (Note 9)	-	-	0	0
Manager	Wei,Cheng-Tzu	0	0	7,662	0
Manager	Chou, Chih-Ming	(81,090)	0	27,346	0
Manager	Hsieh,Ling-Ling	0	0	5,838	0
Manager	Su,Chen-An(Note 4)	0	0	0	0
Manager	Yang,Ching-An(Note4)	0	0	9,761	0
Major shareholder	Ministry of Economic Affairs	0	0	0	0

Note 1:Capital reduction in 2018.

Note 2:On 2018/11/26, Ministry of Economic Affairs reappointed the representatives.

Note 3:On 2018/07/01, CSC Corporation reappointed the representatives.

Note 4:On 2018/11/30, the Accounting manager, Su, Chen-An, was retired. On 2018/12/01, the Accounting manager, Yang,Ching-An, assumed the position.

• Note 5:2019/01/01, the Independent Director was resigned.
• Note 6:2019/01/28, Ministry of Economic Affairs reappointed the representatives.
• Note 7:Capital increase in 2019.
• Note 8:2019/02/28, the manager was retired.

Note 9: 2019/03/18, the manager was 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		Spouse's/ minor's Shareholdin g		Shareholding by Nominee Arrangement		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	105,070,366	22.21%	0	0	0		0 1. CPC Corporation,	1. Holding 100%
Affairs							Taiwan	shares of CPC

Name	Current Shareholding		Spouse's/ minor's Shareholdin g		Shareholding by Nominee Arrangement		Name and Relationship Between the Company's Top Ten Shareholders, or Spouses or Relatives Within Two Degrees		Re ma rks
	Shares	%	Shares	%	Shares	%	Name 2. China Steel Corporation 3. Yao-Hwa Co.,Ltd Management Commission	Relationship 2. The major shareholder of CSC. 3. The major shareholder of Yao-Hwa.
Yao-Hwa Co.,Ltd Management Commission	36,032,305	7.62%	0	0	0	0	Ministry of Economic Affairs	Ministry of Economic Affairs is the major shareholder.
Representative: Chuan-Neng Lin	The shareholder doesn't provide.
National Development Fund, Executive Yuan	36,032,305	7.62%	0	0	0	0	None	None
Representative: Chen, Mei-Ling							The shareholder doesn't provide.
Yuanta Commercial Bank Trust Account	30,586,059	6.47%	0	0	0	0	None	None
National Defense Industrial Development Foundation	25,000,000	5.29%	0	0	0	0	None	None
Representative: Yen, De-Fa	The shareholder doesn't provide.
CPC Corporation, Taiwan	47,030,687	6.33%	0	0	0	0	Ministry of Economic Affairs	Ministry of Economic Affairs is the only shareholder.
Responsible person: Ou, Jia-Ruey							The shareholder doesn't provide.
China Steel Corporation	18,414,641	2.48%	0	0	0	0	Ministry of Economic Affairs	Ministry of Economic Affairs is the major shareholder.
Responsible person: Weng, Chao-Dong							The shareholder doesn't provide.
Bank SinoPac as Custodian for Triorient Investments Limited Investment Account	4,000,000	0.85%	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 Funds	3,294,881	0.70%	0	0	0	0	None	None
VANGUARD EMERGING MARKETS STOCK INDEX FUND, A SERIES OF VANGUARD INTERNATIONAL EQUITY INDEX FUNDS	2,834,540	0.60%	0	0	0	0	None	None

3.7 Ownership of Shares in Affiliated Enterprises

	CSBC		directors, supervisors, managers, directly or indirectly controlled by the Company		Comprehensive investment
Name of Subsidiary	No. of shares held	Stockholding (%)	No. of shares held	Stockholding (%)	No. of shares held	Stockholding (%)
CSBC Coating	8,750,000	70%	0	0%	8,750,000	70%
Solution Corporation
Blue Ocean Wind
Power Engineering	USD7,000	70%	0	0%	USD7,000	70%
(H.K.) Ltd.
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%
Taiwan International
Windpower	1,200,000	12%	0	0	1,200,000	12%
Training
Corporation

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

IV.Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Issued Shares

			Authorized Capital		Paid-in Capital	Remark
Year	Par Value (NT\$)	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 1987	10 10	1,029,174 1,055,174	10,291,740 10,551,740	1,029,174 1,055,174	10,291,740 10,551,740	cash capital increase 500,000 cash capital increase	None None	- -
1988	10	1,105,174	11,051,740	1,105,174	11,051,740	260,000 cash capital increase	None	-
1989	10	1,280,174	12,801,740	1,280,174	12,801,740	500,000 cash capital increase	None	-
1990	10	1,695,233	16,952,335	1,695,233	16,952,335	1,750,000 cash capital increase	None	-
1998	10	1,113,900	11,138,997	1,113,900	11,138,997	4,150,595 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
2018	10	1,113,900	11,138,997	372,991	3,729,917	capital reduction 4,305,734 cash capital increase 600,000	None
2019	10	1,113,900	11,138,997	472,991	4,729,917	cash capital increase 1,000,000	None

B. Type of Stock

Share Type	Issued Shares	Un-issued Shares	Total Shares	Remarks
Common Stock	472,991,749	640,907,968	1,113,899,717	-

4.1.2 Status of Shareholders

Feb. 1, 2019

Item	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	2	2	67	50,896	106	51,073
Shareholding (shares)	141,102,671	31,000	132,823,075	179,816,561	19,218,442	472,991,749
Percentage	29.83%	0.01%	28.08%	38.02%	4.06%	100.00%

4.1.3 Shareholding Distribution Status

A. Common Shares

			Feb. 1, 2019
Class of Shareholding (Unit: Share)	Number of Shareholders	Shareholding (Shares)	Percentage
1- 999	20,474	7,178,001	1.518
1,000- 5,000	24,119	49,197,038	9.133
5,001- 10,000	3,480	24,108,968	5.097
10,001- 15,000	1,090	13,247,956	2.801
15,001- 20,000	481	8,360,869	1.768
20,001- 30,000	570	13,765,532	2.910
30,001- 40,000	252	8,700,475	1.839
40,001- 50,000	169	7,510,027	1.588
50,001- 100,000	250	17,035,414	3.602
100,001- 200,000	96	13,336,722	2.820
200,001- 400,000	45	11,666,083	2.466
400,001- 600,000	17	8,215,351	1.737
600,001- 800,000	6	4,105,672	0.868
800,001- 1,000,000	4	3,624,005	0.766
1,000,001 or over	20	288,939,636	61.088
Total	51,073	472,991,749	100.000%

B. Preferred Shares:None

4.1.4 List of Major Shareholders

Feb. 1, 2019

	Shareholding
Shareholder's Name	Shares	%
Ministry of Economic Affairs	105,070,366	22.21%
Yao-Hwa Co.,Ltd Management Commission	36,032,305	7.62%
National Development Fund, Executive Yuan	36,032,305	7.62%
Yuanta Commercial Bank Trust Account	30,586,059	6.47%
National Defense Industrial Development Foundation	25,000,000	5.29%
CPC Corporation, Taiwan	23,777,487	5.03%
China Steel Corporation	7,751,346	1.64%
Bank SinoPac as Custodian for Triorient Investments Limited Investment Account	4,000,000	0.85%
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds	3,294,881	0.70%
VANGUARD EMERGING MARKETS STOCK INDEX FUND, A SERIES OF VANGUARD INTERNATIONAL EQUITY INDEX FUNDS	2,834,540	0.60%

			Unit: NT\$ / thousand shares
			01/01/2019-
Items	2017	2018	03/31/2019
Market Price per Share
Highest Market Price	16.05	42.90	30.60
Lowest Market Price	10.90	11.30	23.40
Average Market Price	12.85	23.15	27.38
Net Worth per Share
Before Distribution	8.52	15.93	16.70
After Distribution	8.52	15.93	16.70
Earnings per Share
Weighted Average Shares	312,992	349,322	439,662
Diluted Earnings Per Share(Note5)	(18.79)	(8.87)	(0.67)
Dividends per Share
Cash Dividends	0.00	Note4	-
Stock Dividends
y Dividends from Retained Earnings	0.00	Note4	-
y Dividends from Capital Surplus	0.00	Note4	-
Accumulated Undistributed Dividends	0.00	0.00	0.00
Return on Investment
Price / Earnings Ratio (Note 1)	(0.69)	(2.76)	(39.80)
Price / Dividend Ratio (Note 2)	-	Note4	-
Cash Dividend Yield Rate (Note 3)	0.00	Note4	-

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

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 2018 hasn't been resolved by Annual General Shareholders' Meeting.

Note5: The weighted average number of shares outstanding used for the loss per share computation was adjusted retroactively for the record date of capital reduction on May 10, 2018. 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 total 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.

B. Proposed Distribution of Dividend

It would not distribute dividend of 2018, and it will be discuss at the Annual General Shareholders' Meeting.

4.1.7 Employee Bonus and Directors' Remuneration

A. Information Relating to Employee Bonus and Directors'Remuneration in the Articles of Incorporation.

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

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

(b)Not exceeding 1% as Remuneration for directors ;

B. The Estimated Basis for Calculating the Employee Bonus and Directors' Remuneration No Employee Bonus and Directors' Remuneration for 2018 because of no

retained earnings before tax.

C. Profit Distribution for Employee Bonus and Directors' Remuneration for 2018 Approved in Board of Directors Meeting No Employee Bonus and Directors' Remuneration for 2018 Approved in Board of Directors Meeting 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.145 .

The Board of Director of Aug. 10, 2018 resolved the capital increase. The price collection completed on Jan. 31, 2019. It was offering 100,000 thousand shares and NTD2,252 million dollars. It was used to enrich working capital in the first quarter of 2019.

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 2018	(%) of Total Sales
Domestic	65.52	50.36
Export	64.60	49.64
Total	130.12	100.00

C. Main products

	Unit:NT\$ thousands
Major Products	Total Sales in Year 2018	(%) of Total Sales
Commercial ships	10,355,714	79.58
Military ships	1,465,670	11.26
Commercial and military ship	976,476	7.51
maintenance
Machinery manufacturing	85,605	0.66
Other business projects	128,861	0.99
Total	13,012,326	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.

5.1.2 Industry Overview

A. Macroeconomic Environment

▓ABS analysis that shipbuilding demand will gradually increase from 2018 .

Source:ABS World Shipping & Shipbuilding Outlook, Spring 2018

▓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"

(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.

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%.

(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)

Year Item	2016	2017	2018
R&D funding(A)	102,196	126,676	117,013
Company turnover(B)	15,747,699	16,404,344	13,012,326
(A)/(B)%	0.65%	0.77%	0.90%

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」(dissolved on Mar. 18, 2019) are responsible for research and development of the ship. And another major work that develops maritime engineering technology is the "CSBC-DEME Wind Engineering" (established on Feb. 26, 2019) and the "Dept. of Ship Management" (established on Mar. 18, 2019).

The R&D personnel education distribution as follows.

				Statistics as of December 31, 2018
	Year
Item		2015	2016	2017	2018
	Doctor	5	6	8	8
Education	Master	68	79	77	79
distribution	Bachelor	49	42	34	58
	Others	17	17	12	13
Total		139	144	131	158
	Average working years	17.61	14.42	14.63	13.18

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 Zone" 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.

b. Implementing transformation programs, diversification

The company has set 1) the merchant ship business, 2) the national shipbuilding company, 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 operational risks. The Company's diversification upgrade has been launched since the year of 2017. Both internal organization, manpower and management systems will continue to be reviewed and built. 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 " CSBC Academy " in October of 2017 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, and " CSBC Academy " 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.

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 「 Submarine Development Center, SDCC 」 (dissolved on Mar. 18, 2019), "CSBC-DEME Wind Engineering" (established on Feb. 26, 2019), "Dept. of Ship Management" (established on Mar. 18, 2019) and " CSBC Academy " , 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. In addition, in order to increase productivity, the company is currently carrying out 800 tons of large crane investment cases and has strengthened 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 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.

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 2018	(%) of Total Sales
Domestic	65.52	50.36
Export	64.60	49.64
Total	130.12	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 1.00% of the total global delivery volume (in terms of CGT).

Year	2014	2015	2016	2017	2018
Cont.CGT	43.90	39.50	13.00	25.20	28.60
Csbc CGT	339,187.00		354,339.00 238,834.00 282,638.00 282,638.00
market share	0.77%	0.90%	1.84%	1.21%	0.99%

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

▓If the container wheel statistics, the company's container wheel holding orders in 2018 ranked 18th in the world.

C. Market Analysis of Major Product Categories

Looking at the overview of the shipping and shipbuilding market in 2018, although the overall situation of the global shipping market is still not improving, the global container shipping volume continues to maintain a slight increase. The supply and demand relationship in the global container shipping market has improved, and the market conditions will generally stabilize. situation. In addition, due to factors such as environmental factors, the expansion of the Panama Canal and the aging of small and medium-sized container ships, it will be beneficial to the new shipbuilding market of container ships to a certain extent. The "polarization" characteristics of the new ship demand in the global container ship market will become more prominent in the future. Among them, feeder container ships, new Panamax container ships and super large container ships will continue to be the main demand in the future market.

As for the basic supply and demand of the bulk cargo ship market, there is no obvious imbalance, which makes the new ship cost support. However, the BDI index is weak in recent years. Unless there is a clear lease or a very attractive ship price, most shipowners are still interested in new shipbuilding

With the tightening of the financing environment, the US-China trade war,

and the UK's "hard Brexit" risks continue to ferment, according to analysts, the shipping market in 2019 is still in a weak state, risks and uncertainties will continue to increase, the world still Looking at how Sino-US trade will develop, the industry is very cautious in deploying ships, and it also makes it difficult for the industry to make forward-looking analysis of supply and demand in the face of fluctuating shipping market.

According to the forecast and analysis of Alphaliner, Clarksons and Drewry, the global container shipping market demand growth rate is 3.8%, 4.1% and 4.1% in 2019, and the capacity growth rate is 3.5%, 2.9% and 2.6%. The demand growth will be higher than the capacity growth. Market demand is expected to gradually increase, and ships with high eco-efficiency are expected to gain more favor. The development of green fleet will promote the increase in the number of shipbreaking.

• 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 Coast Guard patrol operations, logistics ships and the official mission of the ship.

f. Naval ships: the Navy operations, logistics ships and the mission of the ship.

g. Offshore wind power:wind power.

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、MITSUI、
	HITACHI、KHI、STX、CMD、MITSUBISHI、
	YUCHI、HSD、MAN、MTU
generator	YANMAR、STX ENGINE、DAIHATSU、
	HYUNDAI、WARTSILA、HSD、CUMMINS、
	ACD、CATERPILLAR
Steel plate	CSC, POSCO

5.2.4 Major Suppliers and Clients

A. Major Suppliers in the Last Two Calendar Years 莊玥嬛

Unit: NT\$ thousands

	2017				2018					2019(As of March 31)
Company			Relation	Company			Relation	Company			Relation
Name	Amount	Percent	with	Name	Amount	Percent	with	Name	Amount	Percent	with
			Issuer				Issuer				Issuer
HITACHI				China				China
ZOSEN		18.99		Steel		29.15	Corporate	Steel		35.90	Corporate
CORPORA	1,964,957		-	Corporati	2,165,572		director -	Corporati	567,596		director
TION				on				on
China
Steel	1,240,118	11.98	Corporate	Others	5,264,509	70.85		Others	1,013,531	64.10
Corporati			director -				-				-
on
Others	7,144,498	69.03	-								-
Total Net	10,349,573	100.00		Total Net	7,430,081	100.00		Total Net	1,581,127	100.00
Supplies				Supplies				Supplies

Note: Major suppliers refer to those commanding 10%-plus share of annual order volume.

		Relation Issuer with	Subsidiary Corporate director of	-	-		-
Unit: NT\$ thousands	2019(As of March 31)	Percent	45.91	13.83	12.61	10.47	17.18
		Amount	1,456,144	438,606	399,750	322,101	544,876
		Company Name	Corporatio Express China Steel n	MITED GRACE GPO LI	Defense, National Ministry R.O.C of	PREVALENCE HOLDING LIMITED	Others
		Relation Issuer with	-	Subsidiary Corporate director of	-	-	-
		Percen t	37.49	16.50	16.02	11.67	18.32
	2018	Amount	4,877,783	2,147,665	2,084,899	1,518,452	2,383,527
		Company Name	EMERALD MITED GPO LI	Steel Corporation Express China	EVERGREEN WAN) MARINE CORP. LTD. (TAI	of Defense, National Ministry R.O.C	Others
		Relatio Issuer with n	-	-	-	-
		Percent	51.97	16.00	13.56	18.47
	2017	Amount	8,525,296	2,624,566	2,225,076	3,029,406
		Name Company	EVERGREEN WAN) MARINE CORP. LTD. (TAI	GRACE MITED GPO LI	T.S. Lines Co., LTD.	Others
		Item	1	2	3	4	5

B. Major Clients in the Last Two Calendar Years

Note: Major clients refer to those commanding 10%-plus share of annual order volume.

Net Sales 16,404,344 100.00 Net Sales 13,012,326 100.00 Net Sales 3,171,477 100.00

5.2.5 Production in the Last Two Years 莊玥嬛

Unit: NT\$ thousands

			2017		2018
Year Major Products Output	Unit	Quantity	Amount	Quantity	Amount
Revenues from construction of ships and vessels	CGT	282,638	20,665,971	200,278	13,375,089
Revenues from construction of naval ships	DISP	-	243,005	838	1,513,329
Revenues from machine manufacturing	MT	732	186,407	47,708	-70,711
Service revenue			989,881		659,280
Other revenue			40,968		129,203
Total			22,126,232		15,606,190

5.2.6 Shipments and Sales in the Last Two Years 莊玥嬛

Unit: NT\$ thousands

			2017		2018
Year Major Products & Sales Shipments	Unit	Quantity	Amount	Quantity	Amount
Revenues from construction of ships and vessels	CGT	282,638	15,036,967	200,278	10,355,714
Revenues from construction of naval ships	DISP	-	222,148	838	1,465,670
Revenues from machine manufacturing	MT	732	31,482	47,708	85,605
Service revenue			1,075,447		976,476
Other revenue			38,300		128,861
Total			15,747,699		13,012,326

5.3 Human Resources

	Year	2017	2018	February 28, 2019
	Management personnel	168	171	171
Numb er of	Engineering personnel	580	704	693
Emplo	Technical personnel	2,235	2,138	2,113
yees	Service personnel	4	4	4
	Total	2,987	3,017	2,981
Average	Age	47.8	47.1	47
	Average Years of Service	7.3(note)	7.8(note)	7.8(note)
	Ph.D.	12	12	12
	Masters	267	329	330
Educat	Bachelor's Degree	738	852	850
ion	Senior High School	500	500	486
	Below Senior High School	1,470	1,324	1,303
	Total	2,987	3,017	2,981

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 six thousand NTD after violating the Art. 31.1.(2) of Waste Disposal Act and 2.4 thousand NTD after violating the Art. 27.2 of Waste Disposal 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

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 119 of the Chinese annual report.

5.6 Important Contracts

Counterparty	Period	Major Contents	Restrictions
	Properties: merchant shipbuilding contract
YANGMING MARINE TRANSPORT CORP.	2018.08.15~2021.05.15	2,800TEU Container Vessel (N6122)	None
YANGMING MARINE TRANSPORT CORP.	2018.08.15~2021.02.15	2,800TEU Container Vessel (N6121)	None
YANGMING MARINE TRANSPORT CORP.	2018.08.15~2021.01.15	2,800TEU Container Vessel (N6120)	None
YANGMING MARINE TRANSPORT CORP.	2018.08.15~2020.12.15	2,800TEU Container Vessel (N6119)	None
YANGMING MARINE TRANSPORT CORP.	2018.08.15~2020.11.15	2,800TEU Container Vessel (N6118)	None
YANGMING MARINE TRANSPORT CORP.	2018.08.15~2020.09.15	2,800TEU Container Vessel (N6117)	None
YANGMING MARINE TRANSPORT CORP.	2018.08.15~2020.08.15	2,800TEU Container Vessel (N6116)	None
YANGMING MARINE TRANSPORT CORP.	2018.08.15~2020.07.15	2,800TEU Container Vessel (N6115)	None
YANGMING MARINE TRANSPORT CORP.	2018.08.15~2020.06.15	2,800TEU Container Vessel (N6114)	None
YANGMING MARINE TRANSPORT CORP.	2018.08.15~2020.05.15	2,800TEU Container Vessel (N6113)	None
PREVALENCE HOLDING LIMITED	2018.03.26~2019.12.15	1,800TEU Container Vessel (N6112)	None
PREVALENCE HOLDING LIMITED	2018.03.26~2019.10.15	1,800TEU Container Vessel (N6111)	None
GREENCOMPASS 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
GREENCOMPASS MARINE S. A.	2015.08.10~2018.02.28	2,800TEU Class Container Vessel (N6073)	None
EVERGREEN MARINE CORP. (TAIWAN) LTD.	2015.08.10~2018.03.31	2,800TEU Class Container Vessel (N6074)	None
China Steel Express Corporation	2018.01.16~2020.01.31	208,000 DWT Bulk Carrier(N6108)	None
China Steel Express	2018.01.16~2020.03.31	208,000 DWT Bulk Carrier(N6109)	None

Corporation
China Steel	2017.08.17~2019.07.31	208,000 DWT Bulk	None
Express		Carrier(N6099)
Corporation
China Steel	2017.08.17~2019.09.30	208,000 DWT Bulk	None
Express		Carrier(N6100)
Corporation
		65,000 DWT	None
GPO Sapphire		Semi-submersible Deck Cargo
Limited	2014.10.06~2019.05.15	Carrier/Heavy Lift Carrier
		(N6059)
		65,000 DWT	None
GPO Emerald	2014.10.06~2019.08.15	Semi-submersible Deck Cargo
Limited		Carrier/Heavy Lift Carrier
		(N6060)
	Properties: official vessels and naval construction contract
Ministry of Science and Technology,	2016.11.02-2019.02.15	500 gross tonnage class	None
ROC		research vessel(N2088)
Ministry of Science
and Technology,	2016.11.02-2019.03.29	500 gross tonnage class	None
ROC		research vessel(N2089)
Ministry of Science		1000 gross tonnage class
and Technology,	2016.11.02-2019.06.14	research vessel(N2090)	None
ROC Ministry of		Indigenous Defense
National	2016.12.22-2019.12.23	Submarine Planning and	None
Defence,ROC		Design(N6098)
Ministry of		New Type Amphibious
National	2018.04.14-2022.04.13	Landing Platform Dock	None
Defence,ROC		(N6103)
Fleet Branch,
Coast Guard		100 Tonnage Class Patrol And
Administration,	2018.07.14~2020.04.30	Rescue Boat(N2139)	None
Ocean Affairs Council
Fleet Branch,
Coast Guard
Administration,	2018.07.14~2020.07.31	100 Tonnage Class Patrol And Rescue Boat(N2140)	None
Ocean Affairs
Council
Fleet Branch,
Coast Guard		100 Tonnage Class Patrol And
Administration, Ocean Affairs	2018.07.14~2020.10.31	Rescue Boat(N2141)	None
Council
Fleet Branch,
Coast Guard
Administration,	2018.07.14~2021.01.31	100 Tonnage Class Patrol And	None
Ocean Affairs		Rescue Boat(N2142)
Council
Fleet Branch,		100 Tonnage Class Patrol And
Coast Guard	2018.07.14~2021.04.30	Rescue Boat(N2143)	None
Administration,

Ocean Affairs Council
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.14~2021.07.31	100 Tonnage Class Patrol And Rescue Boat(N2144)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.14~2021.10.31	100 Tonnage Class Patrol And Rescue Boat(N2145)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.14~2022.01.31	100 Tonnage Class Patrol And Rescue Boat(N2146)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.14~2022.04.30	100 Tonnage Class Patrol And Rescue Boat(N2147)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.14~2022.07.31	100 Tonnage Class Patrol And Rescue Boat(N2148)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.14~2022.10.31	100 Tonnage Class Patrol And Rescue Boat(N2149)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.14~2023.01.31	100 Tonnage Class Patrol And Rescue Boat(N2150)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.14~2023.04.30	100 Tonnage Class Patrol And Rescue Boat(N2151)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.14~2023.07.31	100 Tonnage Class Patrol And Rescue Boat(N2152)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.14~2023.10.31	100 Tonnage Class Patrol And Rescue Boat(N2153)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.18~2020.12.31	4000 Tonnage Class Frigate (N6154)	None
Fleet Branch, Coast Guard	2018.07.18~2021.11.30	4000 Tonnage Class Frigate (N6155)	None

Administration, Ocean Affairs Council
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.18~2023.10.31	4000 Tonnage Class Frigate (N6156)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2018.07.18~2025.09.30	4000 Tonnage Class Frigate (N6157)	None
Ministry of National Defence,ROC	2019.05.03-2025.11.03	Indigenous Defanse Submarine prototype vessel (N6168)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2019.05.03~2021.12.31	1000 Tonnage Class Frigate (N2169)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2019.05.03~2023.10.31	1000 Tonnage Class Frigate (N2170)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2019.05.03~2024.10.31	1000 Tonnage Class Frigate (N2171)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2019.05.03~2025.10.31	1000 Tonnage Class Frigate (N2172)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2019.05.03~2026.10.31	1000 Tonnage Class Frigate (N2173)	None
Fleet Branch, Coast Guard Administration, Ocean Affairs Council	2019.05.03~2027.10.31	1000 Tonnage Class Frigate (N2174)	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
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 Corporation, Ltd. Kaohsiung Branch	2006.01.01-2025.12.31	Land leasing	None
Taiwan International Port Corporation, Ltd. Kaohsiung Branch	2017.01.01-2021.12.31	90/91 wharf leasing	None
National Property Administration	2011.10.01-2019.12.31	Land leasing×6	None
Taiwan International Port Corporation, Ltd. Keelung Branch	2008.01.01-2027.12.31	Land leasing×5;Building leasing×23	None
Long-term Borrowing
Bank of Taiwan	2017.06.22-2022.06.22	Long-term borrowing NTD 2 billion.	None
Taiwan Business Bank	2018.03.12-2023.03.12	Long-term borrowing NTD 700 million.	The grace period is 2.5 years. After expiration of the grace period, the principal is divided into 5 install -ments ( 6 months per installment)
JihSun Bank	2017.07.20-2020.07.20	Long-term borrowing NTD 200 million.	None
Taishin International Bank	2017.06.22-2020.06.22	FRCP NTD 500 million.	None
International Bills Finance Corp.	2017.06.22-2021.06.22	FRCP NTD 500 million.	Daily minimum amount of credit must reach more than 70% in the first 3 years.

China Bills Finance Corp.	2017.09.26-2021.09.26	FRCP NTD 500 million.	Daily minimum amount of credit must reach more than 70% in the first 3 years.
Mega Bills Finance Corp., Ltd.	2017.09.26-2021.09.26	FRCP NTD 500 million.	Daily minimum amount of credit must reach more than 350 million in the first 3 years.
China Bills Finance Corp.	2017.10.27-2021.10.27	FRCP NTD 500 million.	Daily minimum amount of credit must reach more than 70% in the first 3 years.
Taishin International Bank	2017.12.15-2020.12.15	FRCP NTD 300 million.	None
Mega Bills Finance Corp., Ltd.	2017.12.15-2021.12.15	FRCP NTD 200 million.	Daily minimum amount of credit must reach more than 140 million in the first 3 years.
Mega Bills Finance Corp., Ltd.	2017.12.15-2021.12.15	FRCP NTD 300 million.	Daily minimum amount of credit must reach more 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 莊玥嬛

Unit: NT\$ thousands

	Year		Financial Summary for The Last Five	Years			As of
Item		2014	2015	2016	2017	2018	March 31, 2019
Current assets		17,420,313	11,745,033	15,557,809	10,088,688	10,416,166	12,448,973
Held-to-maturity financial assets-noncurrent		99,000	-	-	-	-	-
Investments accounted for using equity method		3,907	3,051	166,616	1,645	10,992	60,373
Property, Plant and Equipment		11,126,753	10,999,508	10,709,596	10,563,764	10,581,323	10,695,261
Intangible assets		38,910	36,945	28,847	23,010	14,611	14,913
Other assets		1,116,507	955,029	1,208,074	1,606,286	1,803,339	5,777,100
Total assets		29,805,390	23,739,566	27,670,942	22,283,393	22,826,431	28,996,620
Current	Before distribution	13,443,979	6,928,795	13,127,490	7,982,566	8,783,614	9,276,385
liabilities	After distribution	13,819,540	7,304,908	13,127,490	7,982,566	-	-
Non-current liabilities		2,603,327	2,946,399	2,313,794	7,921,743	8,057,263	11,775,154
Total liabilities	Before distribution	16,047,306	9,875,194	15,441,284	15,904,309	16,840,877	21,051,539
	After distribution	16,422,867	10,251,307	15,441,284	15,904,309	-	-
Equity attributable to shareholders of the parent		13,707,901	13,813,337	12,182,663	6,335,415	5,941,758	7,900,882
Capital stock		7,435,652	7,435,652	7,435,652	7,435,652	3,729,918	4,729,918
Capital surplus		1,965	1,965	1,965	1,965	2,005,515	3,257,515
Retained	Before distribution	6,270,284	6,375,720	4,745,046	-1,102,202	206,325	-86,551
earnings	After distribution	5,898,501	6,003,938	4,745,046	-1,102,202	-	-
Other equity interest		-	-	-	-	-	-
Treasury stock		-	-	-	-	-	-
Non-controlling interest		50,183	51,035	46,995	43,669	43,796	44,199
	Before distribution	13,758,084	13,864,372	12,229,658	6,379,084	5,985,554	7,945,081
Total equity	After distribution	13,382,523	13,488,259	12,229,658	6,379,084	-	-

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

Unit: NT\$ thousands

	Year				Financial Summary for The Last Five Years
Item		2014	2015	2016	2017	2018
Current assets		17,217,134	11,512,244	15,385,437	9,944,905	10,230,698
Held-to-maturity financial assets-noncurrent		99,000	-	-	-	-
Investments accounted for using equity method		121,001	122,133	276,272	103,540	113,184
Property, Plant and Equipment		11,103,343	10,992,866	10,707,945	10,562,578	10,578,045
Intangible assets		38,519	36,783	28,761	22,968	14,583
Other assets		1,130,558	949,532	1,203,651	1,601,626	1,800,294
Total assets		29,709,555	23,613,558	27,602,066	22,235,617	22,736,804
Current	Before distribution	13,424,860	6,872,565	13,116,484	7,982,400	8,742,822
liabilities	After distribution	13,796,643	7,244,347	13,116,484	7,982,400	-
Non-current liabilities		3,321,237	2,576,794	2,927,656	2,302,919	8,052,224
Total liabilities	Before distribution	16,001,654	9,800,221	15,419,403	15,900,202	16,795,046
	After distribution	16,373,437	10,172,003	15,419,403	15,900,202	-
Capital stock		7,435,652	7,435,652	7,435,652	7,435,652	3,729,918
Capital surplus		1,965	1,965	1,965	1,965	2,005,515
Retained	Before distribution	6,270,284	6,375,720	4,745,046	-1,102,202	206,325
earnings	After distribution	5,898,501	6,003,938	4,745,046	-1,102,202	-
Other equity interest		-	-	-	-	-
Treasury stock		-	-	-	-	-
Total equity	Before distribution	13,707,901	13,813,337	12,182,663	6,335,415	5,941,758
	After distribution	13,336,118	13,441,555	12,182,663	6,335,415	-

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

Year			Financial Summary for The Last Five Years
						As of March
	2014	2015	2016	2017	2018	31, 2019
Item
Operating revenue	25,497,653	21,457,696	15,747,699	16,404,344	13,012,326	3,171,477
Gross profit(loss)	1,017,057	994,444	-1,060,228	-5,721,888	-2,593,864	-162,461
Income(loss) from operations	506,354	436,634	-1,565,030	-6,228,965	-3,417,597	-278,976
Non-operating income and	23,161	142,391	29,628	-124,077	78,656	-13,431
expenses
Income(loss) before tax	529,515	579,025	-1,535,402	-6,353,042	-3,338,941	-292,407
Net income (Loss)	454,378	472,784	-1,286,809	-5,883,199	-3,100,084	-292,473
Other comprehensive income	17,237	9,065	28,208	32,870	103,004	-
(income after tax)
Total comprehensive	471,615	481,849	-1,258,601	-5,850,329	-2,997,080	-292,473
income(loss)
Net income(loss) attributable	450,782	468,154	-1,287,100	-5,880,118	-3,100,211	-292,876
to shareholders of the parent
Net income attributable to	3,596	4,630	291	-3,081	127	403
non-controlling interest
Comprehensive income(loss)	468,019	477,219	-1,258,892	-5,847,248	-2,997,207	-292,876
attributable to Shareholders
of the parent
Comprehensive income	3,596	4,630	291	-3,081	127	403
attributable to
non-controlling interest
Earnings per share (Note)	1.44	1.50	-4.11	-18.79	-8.87	-0.67

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.

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

莊玥嬛

Year Financial Summary for The Last Five Years
Item	2014	2015	2016	2017	2018
Operating revenue	25,377,982	21,398,829	15,739,331	16,381,651	12,891,628
Gross profit(loss)	994,765	967,014	-1,071,215	-5,725,052	-2,607,221
Income(loss) from operations	493,996	426,248	-1,5674,067	-6,219,268	-3,416,643
Non-operating income and	29,588	144,997	27,943	-128,797	78,072
expenses
Income(loss) before tax	523,584	571,245	-1,536,124	-6,348,065	-3,338,571
Net income (Loss)	450,782	468,154	-1,287,100	-5,880,118	-3,100,211
Other comprehensive income	17,237	9,065	28,208	32,870	103,004
(income after tax)
Total comprehensive	468,019	477,219	-1,258,892	-5,847,248	-2,997,207
income(loss)
Earnings per share(Note)	1.44	1.50	-4.11	-18.79	- 8.87

Unit: NT\$ thousands

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.

6.1.3 Auditors' Opinions from 2012 to 2016

Year	Accounting Firm	Auditors' Opinion
2014	Pricewaterhouse Coopers	Unqualified
2015	Pricewaterhouse Coopers	Unqualified
2016	Pricewaterhouse Coopers	Unqualified
2017	Pricewaterhouse Coopers	Unqualified
2018	Pricewaterhouse Coopers	Unqualified

6.2 Five-Year Financial Analysis 莊玥嬛

				Financial Analysis for the Last Five Years		As of
Item	2014	2015	2016	2017	2018	March 31, 2019
	Debt Ratio	53.84	41.60	55.80	71.37	73.78	72.60
Financial structure (%)	Ratio of long-term capital to property, plant and	147.05	152.83	135.80	135.38	132.71	184.38
	equipment
	Current ratio	129.58	169.51	118.51	126.38	118.59	134.20
Solvency (%)	Quick ratio	6.30	18.69	7.99	22.73	13.04	11.91
	Interest earned ratio (times)	18.56	23.69	-22.20	-73.06	-39.81	-8.33
	Accounts receivable turnover (times)	90.43	64.20	29.24	15.14	9.89	10.59
	Average collection period	4.04	5.69	12.48	24.11	36.91	34.47
	Inventory turnover (times)	10.04	8.46	4.69	6.23	8.37	8.47
Operating performance	Accounts payable turnover (times)	15.32	14.59	12.90	15.81	12.31	11.82
	Average days in sales	36.35	43.14	77.83	58.59	43.61	43.09
	Property, plant and equipment turnover (times)	2.37	1.94	1.45	1.54	1.23	1.19
	Total assets turnover (times)	0.91	0.80	0.61	0.66	0.58	0.49
	Return on total assets (%)	1.71	1.85	-4.79	-23.27	-13.45	-1.03
	Return on stockholders' equity (%)	3.31	3.42	-9.86	-63.23	-50.14	-4.20
Profitability	Pre-tax income to paid-in capital (%)	7.12	7.79	-20.65	-85.44	-89.52	-6.18
	Profit ratio (%)	1.78	2.20	-8.17	-35.86	-23.82	-9.22
	Earnings per share (NT\$)(Note)	1.44	1.50	-4.11	-18.79	-8.87	-0.67
	Cash flow ratio (%)	─	74.92	─	─	─	─
Cash flow	Cash flow adequacy ratio (%)	─	─	138.25	80.01	89.19	110.33
	Cash reinvestment ratio (%)	-1.20	14.85	-1.27	─	─	─
Leverage	Operating leverage	8.32	5.67	─	─	─	─
	Financial leverage	1.06	1.06	0.96	0.99	0.98	0.90

A. Consolidated Financial Analysis – Based on IFRS 莊玥嬛

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.

	Year	Financial Analysis for the Past Five Years
Item		2014	2015	2016	2017	2018
	Debt Ratio	53.86	41.50	55.86	71.51	73.87
Financial structure (%)	Ratio of long-term capital to
	fixed assets	146.66	152.29	135.28	134.94	132.29
	Current ratio	128.25	167.51	117.30	124.59	117.02
Solvency (%)	Quick ratio	4.89	15.46	6.70	20.96	11.72
	Interest earned ratio (times)	18.36	23.39	-22.21	-73.01	-39.81
	Accounts receivable turnover (times)	120.41	85.54	30.90	15.29	9.91
	Average collection period	3.03	4.27	11.81	23.87	36.83
	Inventory turnover (times)	10.00	8.45	4.69	6.22	8.32
Operating performance	Accounts payable turnover (times)	15.45	14.87	13.16	15.80	12.37
	Average days in sales	36.50	43.20	77.83	58.68	43.87
	Fixed assets turnover
	(times)	2.37	1.94	1.45	1.54	1.22
	Total assets turnover (times)	0.91	0.80	0.61	0.66	0.57
	Return on total assets (%)	1.70	1.84	-4.81	-23.31	-13.50
	Return on stockholders' equity (%)	3.30	3.40	-9.90	-63.51	-50.50
Profitability	Pre-tax income to paid-in capital (%)	7.04	7.68	-20.66	-85.37	-89.51
	Profit ratio (%)	1.78	2.19	-8.18	-35.89	-24.05
	Earnings per share (NT\$)(Note)	1.44	1.50	-4.11	-18.79	-8.87
	Cash flow ratio (%)	─	73.80	─	─	─
Cash flow	Cash flow adequacy ratio (%)	─	─	137.29	78.61	87.73
	Cash reinvestment ratio (%)	-1.18	14.55	-1.22	─	─
	Operating leverage	8.44	5.72	─	─	─
Leverage	Financial leverage	1.07	1.06	0.96	0.99	0.98

B. Non-consolidated Financial Analysis – Based on IFRS 莊玥嬛

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.

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 2018 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 14-5 of Securities and Exchange Act and Article 219 of the Company Act, we hereby submit this report. To:

2019 General Shareholders' Meeting of CSBC Corporation.

CSBC CORPORATION,TAIWAN

Audit Committee Convenor: LIEU, DER-MING

March 15, 2019

6.4 Financial Statements for the Years Ended December 31, 2018 and 2017, 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, 2018 and 2017.

As Appendix 1.

VII. Review of Financial Conditions, Financial Performance, and Risk Management.

7.1 Analysis of Financial Status 莊玥嬛

Unit: NT\$ thousands

Year	2018	2017		Difference
Item			Amount	%
Current Assets	10,416,166	10,088,688	327,478	3.25
Funds & Long-term investments	10,992	1,645	9,347	568.21
Fixed Assets	10,581,323	10,563,764	17,559	0.17
Intangible assets	14,611	23,010	-8,399	-36.50
Other Assets	1,803,339	1,606,286	197,053	12.27
Total Assets	22,826,431	22,283,393	543,038	2.44
Current Liabilities	8,783,614	7,982,566	801,048	10.03
Long-term Liabilities	8,057,263	7,921,743	135,520	1.71
Total Liabilities	16,840,877	15,904,309	936,568	5.89
Capital stock	3,729,918	7,435,652	-3,705,734	-49.84
Capital surplus	2,005,515	1,965	2,003,550	101961.83
Retained Earnings	206,325	-1,102,202	1,308,527	-118.72
Non-controlling interest	43,796	43,669	127	0.29
Total Stockholders' Equity	5,985,554	6,379,084	-393,530	-6.17

7.2 Analysis of Operation Results

Unit: NT\$ thousands

Year	2018	2017	Difference
Item			Amount	%
Gross Sales	13,012,326	16,404,344	-3,392,018	-20.68
Cost of Sales	15,606,190	22,126,232	-6,520,042	-29.47
Gross Profit(loss)	-2,593,864	-5,721,888	3,128,024	-54.67
Operating Expenses	823,733	507,077	316,656	62.45
Operating Income(loss)	-3,417,597	-6,228,965	2,811,368	-45.13
Non-operating Income and Expenses	78,656	-124,077	202,733	-163.39
Income(loss) Before Tax	-3,338,941	-6,353,042	3,014,101	-47.44
Tax Benefit (Expense)	-238,857	-469,843	230,986	-49.16
Net income(loss)	-3,100,084	-5,883,199	2,783,115	-47.31
Other comprehensive income (income after tax)	103,004	32,870	70,134	213.37
Total comprehensive income(loss)	-2,997,080	-5,850,329	2,853,249	-48.77

7.3 Analysis of Cash Flow

7.3.1 Cash Flow Analysis for the Current Year

Unit: NT\$ thousands

Cash and Cash Equivalents, Beginning of	Net Cash Flow from Operating	Cash Outflow	Cash Surplus (Deficit)	Leverage of Cash Deficit
Year (1)	Activities (2)	(3)	(1)+(2)-(3)	Investment Plans Financing	Plans
137,942	4,992,543	5,040,099	90,386	0	0
Analysis of change in cash flow in the current year:
				The main change is about the operating activities, depreciation, fixed assets

improvements, and long-term loan.

7.3.2 Remedy for Cash Deficit and Liquidity Analysis 莊玥嬛/翁季筠

Year Item	2018	2017	Variance (%)
Cash Flow Ratio (%)	-	-	-
Cash Flow Adequacy Ratio (%)	89.19	80.01	11.47
- - Cash Reinvestment Ratio (%)
Analysis of financial ratio change:
Increase in Cash Flow Adequacy Ratio (%) is mainly due to decrease in Cash dividends.

7.3.3 Cash Flow Analysis for the Coming Year:None 莊玥嬛/翁季筠

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

In 2018, the budget of Real estate, plant and equipment was NT\$846,577 thousands, the actual investment was NT\$566,916 thousands,the annual budget implementation rate of 66.97%.

			Unit: NT\$ thousands
Plan	Investment	Investment	Investment
name	project of	project of	project of
	replacing two	newbuilding	upgrading
	Goliath cranes	LLC-50 tons	loading
	in Kaohsiung	level luffing	capability of
	Plant	crane in	RS31 area in # 2
		Kaohsiung Plant	pier in
			Kaohsiung Plant
property	New investment:	New investment:	New investment:
	Enhance	Enhance	Upgrade the
	Shipbuilding	shipbuilding	loading
	capability and	capability and	capability of
	Efficiency of efficiency of		RS31 area of
	Kaohsiung Plant	Hull Work of	Kaohsiung Plant
		Kaohsiung Plant	in # 2 pier to 30
			tons / m2
Plan	March 2017 ~	March 2017 ~	November 2017
period	September 2020	April 2019	~ December
			2020
Investment	2,500 million	215 million	137 million
	yuan	yuan	yuan
Plan	Investment	Investment
name	project of	project of
	muti-purpose	newbuilding of
	steel structure	140 meter
	production line	Barge
	in Kaohsiung
	Plant
property	New investment:	New investment:
	Settling up the	Settling up the
	capability of	capability of
	steel structure	Oceanographic
	for	engineering
	Oceanographic
	engineering in
	Kaohsiung Plant
Plan period	July 2018 ~ September 2019	May 2018 ~ March 2019

7.4.1 Real estate, plant and equipment of project investment plan

7.4.2 General investment plans for real estate, plant and equipment in 2018 Major Items:

1.The new building of Contractor Tool Room building(Qun-ying Building).

yuan

2.HPE computing Servers *3 sets

yuan

1. SHINSHO SEGARC automatic vertical welding machine(left and right) *2sets.

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

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

7.6 Analysis of Risk Management

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 2018 was an amount equivalent to 0.48% 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 2018 was an amount equivalent to 0.44% 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, 2018, the forward foreign exchange contract amount is NT\$0 million and unrecognized net gain is NT\$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, 2018, the balance of endorsement is NT\$0 dollars.

7.6.3 Future Research & Development Projects and Corresponding Budget

	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 automation procedures.
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.
	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 manufacture method.
	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.
	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 ship design.

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.

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.

▓The company proposes the following response measures for the risks of communications security:

(a) Personnel confidentiality control: The company has relevant operational benchmarks for information operations, and

The joint-level capital security audit operation, capital security drills and training strengthen the concept of security protection for all employees.

(b) Computer room control; access control system and monitoring system in important fields and computer rooms in the company

System, and with the regular inspection of security personnel to reduce important information equipment and facilities

The risk of being destroyed.

(c) Data protection: relevant server, personal computer, file and data inventory in the company

All have account and permission control mechanisms, and DRM copyright for confidential files.

Management systems enhance data protection against unauthorized access and

leakage of confidential information;

Regular data backup operations to strengthen data protection to prevent natural disasters and man-made disasters

The data was destroyed.

(d) Information operation control: PCs are equipped with asset management systems to control computer peripherals.

Access, a firewall in the network part is divided into different areas according to the operation function

Domain, in the hacker virus defense against computer network endpoints, gateways and mail account management

Other applications have anti-virus systems to monitor and block malicious programs and attacks.

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

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

VIII. Special Disclosure

8.1 Summary of Affiliated Companies

A.Subsidiaries Relationship

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
Blue Ace Corporation	2016.07.28	No.224, He 1st Rd., Zhongzheng Dist., Keelung City 202, Taiwan (R.O.C.)	NT\$30,000 thousand	Metal processing, painting engineering & manpower dispatch

C.Operation Performance of Subsidiaries

	2018.12.31, NT\$ thousand
Name of Subsidiary	paid-in capital	Total Assets	Total Liabilities	Net Worth	Revenu e	Operatio n Profit	Net income	EPS
CCSC	125,000	191,973	45,922	146,051	120,361	(3,491)	487	0.04
Blue Ocean Wind Power Engineering (H.K.) Ltd.	300	1,424	1,130	294	0	(112)	164	5.47
Blue Ace Corporation	25,000	31,128	5, 605	25,524	66,559	1,473	1,224	0.49

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. In the year of 2018, net income of CCSC after the year is NT\$424 thousands. In that, CSBC recognizes NT\$297 thousands of investment interest 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 2018, net income of TOWSC after the year is NT\$ -5,566thousands. In that, CSBC recognizes NT\$ -1,645 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.

Fuhai was established on June 30, 2015, and CSBC holds 37.97% of Fuhai shares. The main business is from power generation which was caused by offshore wind. In the year of 2018, net income of Fuhai after the year is NT\$ -41,163 thousands. The negative profit was caused by the delay of Fuhai offshore wind farm construction.

Taiwan International Windpower Training Corporation (TIWTC) was established on May 17, 2018. In the year of 2018, net income of TIWTC after the year is NT\$-8,396 thousands. In that, CSBC recognizes NT\$-1,008 thousands of investment interest due to CSBC holds 12% of TIWTC shares.

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.

Item Private placement 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 private placement 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. 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 specific persons 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. The date of the price has been paid up in full May 25, 2018

8.2 Private Placement Securities in the Most Recent Years:

Placee
	Placee	Qualification	Shares	Relationship
				with the
				company
	National	Article 43-6,
	Development	paragraph 1,		Government
	Fund, Executive	subparagraph 2 of	30,000,000	relations
	Yuan	the Securities and
		Exchange Act
	Yao-Hwa Co.,Ltd	Article 43-6,
	Management	paragraph 1,		Government
	Commission	subparagraph 2 of	30,000,000	relations
		the Securities and
		Exchange Act
		The Board of Directors resolved the price per share for private placement of
	common share is NT\$42.10 and the number of privately placed shares is
		82,000,000 shares. At the expiration of price collection, the actual shares
	privately placed is 60,000,000 shares and the actual price collection amount
		is NTD2,526,000,000.The Board of Directors has resolved that the plan of
		private placement is still practicable and the first private placement is taken
		as completion of price collection. The deficiency of price collection is to grant a loan to meet the demand of working capital.
The actual private	NT\$42.10 per share.
placement price
The discrepancy
between actual		The actual private placement price NT\$42.10 is 80% of the reference price
private price and	NT\$52.62.
reference price
Any effect of the
private placement on		The Securities and Exchange Act regulates the qualification of placee, 3-year
shareholder equity		limit of transference, so there is certain protection on shareholder equity.
The status of		To enrich working capital and refund the short-term loan.
utilization of the funds
and the plan
implementation
progress
The realization of plan		After capital increase, it would improve the financial structure, business
benefits		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

Appendixl

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2018 AND 2017

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.

$\ddot{\phantom{a}}$

$\ddot{\phantom{a}}$

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES Declaration of Consolidated Financial Statements of Affiliated Enterprises

Year ended December 31, 2018, 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 15, 2019

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR18000429

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, 2018 and 2017, 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, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended 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 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.

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.

The most significant key audit matters in our audit of the consolidated financial statements of the current period are as follows:

Accounting estimates and assumptions for total cost of construction contract

Description

Please refer to Note 4(28) 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 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:
• (1) Whether the data used by management for estimates and assumptions is complete, relevant and accurate.
• (2) Whether accounting estimates and assumptions have been reviewed and approved by proper management level.
• (3) Whether the segregation of duties is appropriate.
• Obtaining the Estimate at Completion Reports, selecting sample reports and verifying the accuracy, $2.$ 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.
• Comparing cost at completion for the same or similar ships and then assessing the reasonableness $3₁$ of the Estimate at Completion Report.

Assessment of construction loss

Description

Please refer to Note 4(28) 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:

• $\mathbf{1}$ . Obtaining calculation table of construction in progress – construction income / loss. Checking whether it includes all the construction contracts including those contracts that have not vet been initiated.
• Testing the accuracy of calculation table by selecting samples and performing the following audit $2.$ procedures:
• (1) Reviewing construction contracts and checking the contractual price and foreign exchange rates in order to verify the accuracy of calculation.
• (2) Verifying estimated total construction cost to management's calculation in order to check the consistency of estimates and assumptions used.

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, 2018 and 2017.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management of the Company is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" and 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.

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

Identify and assess the risks of material misstatement of the consolidated financial statements, 1. 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.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting 3. estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting 4. 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.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, 5. including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or 6. business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

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

WANG, KUO-HUA

WU, CHIEN-CHIH

For and on behalf of PricewaterhouseCoopers, Taiwan March 15, 2019

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.

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)

	Assets	Notes	December 31, 2018		December 31, 2017
	Current assets
1100	Cash and cash equivalents	6(1)	\$	137,942	\$ 281,814
1140	Current contract assets	$6(17)(21)$ and 7		6,654,429
1150	Notes receivable, net	6(17)			5,790
1170	Accounts receivable, net	$6(2)(17)$ and $12(4)$		900,190	1,361,950
1180	Accounts receivable - related	$6(17)$ and 7
	parties				24,976
1190	Receivables from customers on	$6(17)$ and $12(5)$
	construction contracts				5,326,519
1200	Other receivables			19,100	114,854
1210	Other receivables - related parties 7			83,760	24,942
1220	Current income tax assets			2.532
130X	Inventories, net	6(3)(17)		1,337,814	2,321,061
1410	Prepayments	$6(4)$ and 7		1,278,330	626,292
1479	Other current assets, others			2,069	490
11XX	Total current assets			10,416,166	10,088,688
	Non-current assets
1550	Investments accounted for under	6(5)
	equity method			10,992	1,645
1600	Property, plant and equipment,	6(6)
	net			10,581,323	10,563,764
1760	Investment property, net	6(7)		208,162	234,055
1780	Intangible assets, net	6(8)		14,611	23,010
1840	Deferred income tax assets	6(27)		1,564,427	1,351,762
1920	Redundable deposits	7		30,750	20,469
15XX	Total non-current assets			12,410,265	12, 194, 705
IXXX	Total assets		\$	22,826,431	22, 283, 393 \$.

(Continued)

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)

	Liabilities and Equity Current liabilities	Notes		December 31, 2018	December 31, 2017
2100	Short-term borrowings	6(9)	\$	1,290,150	\$	2,287,784
2110	Short-term notes and bills payable 6(10)					699,769
2120	Financial liabilities at fair value	12(4)
	through profit or loss - current					280
2130	Contract liabilities - Current	$6(17)(21)$ and 7		2,751,268
2150	Notes payable					15
2160	Notes payable - related parties	$6(17)$ and 7		428,768		223,073
2170	Accounts payable	$6(17)$ and 7		713,262		1,170,559
2190	Payables to customers on	$6(17)$ and $12(5)$
	construction contracts					1,060,906
2195	Payables to customers on	$6(17)$ , 7 and $12(5)$
	construction contracts - related
	parties					1,023,847
2200	Other payables	6(11)		1,069,263		1,284,818
2230	Current income tax liabilities					222
2250	Provisions for liabilities - current $6(12)(17)$ and 7			2,527,559		140,219
2310	Unearned receipts			3,344		91,074
21XX	Total current liabilities			8,783,614		7,982,566
	Non-current liabilities
2540	Long-term borrowings	6(13)		5,698,537		5,498,057
2570	Deferred income tax liabilities	6(27)		1,324,697		1,324,910
2610	Long-term notes, accounts and	6(14)
	overdue payable			670,361		659,156
2630	Long-term deferred revenue	6(14)		71,139		82,344
2640	Net defined benefit liability, non-	6(15)
	current			94,368		171,702
2645	Guarantee deposits received			184,928		172,614
2670	Other non-current liabilities,
	others			13,233		12,960
25XX	Total non-current liabilities			8,057.263		7,921,743
2XXX	Total Liabilitics			16,840,877		15,904,309
	Equity attributable to owners of
	parent
	Share capital
3110	Common stock	6(18)		3,729,918		7,435,652
	Capital surplus	6(16)(19)
3200	Capital surplus			2,005,515		1,965
	Retained earnings	6(20)
3310	Legal reserve			1,065,297		1,065,297
3320	Special reserve			3,166,471		3,190,349
3350	Accumulated deficit			$4,025,443$ (		5,357,848)
31XX	Total equity attributable to
36XX	owners of the parent Non-controlling interest			5,941,758 43,796		6,335,415 43,669
3XXX	Total equity
				5,985,554		6,379,084
	Significant contingent liabilities	6(29), 7 and 9
	and unrecognized contract commitments
3X2X	Total liabilities and equity		\$	22,826,431	$\overline{r}$	22, 283, 393

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

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)

	Items	Notes		2018	2017
4000	Operating revenue	$\overline{6(21)}$ , 7 and 12(5)	\$	13,012,326	\$	16,404,344
5000	Operating costs	$6(3)(8)(25)(26)$ and
		7		$15,606,190$ (		22, 126, 232)
5900	Net operating loss			$2,593,864$ ) (		5,721,888)
6100	Operating expenses Selling expenses	6(8)(25)(26)
6200	General and administrative			90,533)(		78,575)
	expenses			306,829)(		301,826)
6300	Research and development
	expenses			$117,013$ (		126,676)
6450	Impairment loss (impairment gain and reversal of impairment loss) determined in accordance
6000	with IFRS 9 Total operating expenses			309,358)	$823,733$ ) (	507,077)
6900	Operating loss			$3,417,597$ ) (		6,228,965
	Non-operating income and
	expenses
7010	Other income	6(7)(14)(22)		87,430		45,615
7020	Other gains and losses	6(23)		$20,009$ (		127,543)
7050	Finance costs	6(6)(14)(24)	(	$26,130)$ (		21,281)
7060	Share of loss of associates and joint ventures accounted for	6(5)
	under equity method			$2,653$ ) (		$20,868$ )
7000	Total non-operating income			78,656 (
7900	and expenses Loss before income tax			$3,338,941$ ) (		124,077) 6,353,042
7950	Income tax benefit	6(27)		238,857		469,843
8200	Loss for the year		$\overline{3}$	$3,100,084$ ) (\$		$\overline{5,883,199}$
	Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss
8311 8349	Gains on remeasurements of defined benefit plans Income tax related to	6(15) 6(27)	\$	128,756	\$	39,602
	components of other comprehensive income that will not be reclassified to profit or loss			$25.752)$ (		6, 732)
8300	Other comprehensive income			103,004	\$	32,870
8500	Total comprehensive loss for the
	year		\$	2,997,080) (\$		5,850,329
	Profit (loss), attributable to:
8610	Equity holders of the company		$($ \$	$3,100,211)$ (\$		5,880,118)
8620	Non-controlling interest Total		$\overline{3}$	127( $3,100,084$ ) (\$		$3,081$ ) $\overline{5,883,199}$ )
	Comprehensive (loss) income
	attributable to:
8710	Equity holders of the company		$($ \$	2,997,207) (\$		5,847,248)
8720	Non-controlling interest			127		3,081
	Total		$\overline{3}$	$2,997,080$ ) (\$		$5,850,329$ )
	Basic earnings per share	6(28)
9750	Total basic earnings per share		$\overline{3}$	$8.87)$ (\$		18.79

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

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 2018 AND 2017
(Expressed in thousands of New Taiwan dollars)

Equity attributable to owners of the parent

						mand am in cranw in announced finite
				Capital surplus			Retained earnings
	Notes	Share capital - common stock	paid-in capital Additional	share options Employee	Others	Legal reserve	Special reserve	Accumulated deficit	Total	Non-controlling interest	Total equity
2017
Balance at January 1, 2017		\$7,435,652	44	49	1,965 ↮	\$1,065,297	\$3.190.349	489,400 ω,	\$12,182,663	46,995 ↔	\$12,229,658
Loss for the year, net of tax								5,880,118)	5,880,118)	$3,081$ )	(5,883,199)
Other comprehensive income								32,870	32,870		32,870
Total comprehensive income								5.847,248)	5.847.248)	$3,081$ )	5,850,329
Cash dividends distributed to non-controlling interests										$245$ )	245)
Balance at December 31, 2017		7,435,652			1,965	\$1,065,297	\$3,190,349	(5.357,848)	\$6,335,415	43,669 69	\$6,379,084
2018
Balance at January 1, 2018		\$7,435,652	tA,		1,965 ↮	\$1,065,297	\$3,190,349	(5, 5, 357, 848)	\$6.335,415	43,669 s,	\$6,379,084
Profit (loss) for the year, net of tax									3,100,211) ( 3,100,211	127	3,100,084)
Other comprehensive income								103,004	103,004		103,004
Total comprehensive income								2,997,207)	2,997,207	127	2,997,080)
Reversal of special reserve	6(20)						23,878)	23,878
Capital reduction to offset accumulated deficits	6(18)(20)	(4,305,734)						4.305,734
Cash capital increase	6(18)	600,000	1,926,000						2,526,000		2,526,000
Share-based payments	6(16)			77.550					77,550		77,550
Balance at December 31, 2018		\$3,729,918	\$1,926,000	77,550 مه	1.965	\$1,065,297	\$3.166,471	(3, 4, 025, 443)	\$ 5.941,758	43,796 ᆔ	\$3,985,554

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

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$rac{1}{l}$

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2018 AND 2017 (Expressed in thousands of New Taiwan dollars)

	Notes		2018		2017
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax		(3)	$3,338,941$ ) (\$		6,353,042)
Adjustments
Adjustments to reconcile profit (loss)
Expected credit loss/Provision for bad debt expense	12(2)(4)		309,358		7,353
Depreciation of property, plant and equipment	6(6)(25)		547,334		515.546
Depreciation of investment property	6(7)		401		375
Amortization of intangible and other assets	6(8)(25)		17,396		15,908
Loss on investments accounted for using equity method	6(5)		2,653		20,868
(Loss)profit on valuation of financial assets and liabilities	6(23)		2,838	C	$11,463$ )
Government grant income	6(22)	∢	$11,206$ ) (		$11,018$ )
Interest income	6(22)	t	$7,809$ ) (		2,368)
Share-based payments	6(16)		77,550
Interest expense Loss on disposal of property, plant and equipment	6(24)		26,130		21,281
Gain on disposal of investment properties	6(23) 6(23)		3,742		1,221
Impairment loss	6(5)(23)	€	68,570)		144,103
Changes in operating assets and liabilities
Changes in operating assets
Increase in current contract assets		t	594,182)
Decrease (increase) in notes receivable			5,790	(	5,790)
Decrease (increase) in accounts receivable			157,690	t	$624,030$ )
Decrease (increase) in accounts receivable - related parties			24,976	t	$21,212$ )
Decrease in receivables from customers on construction
contracts					2,416,985
Decrease in receivables from customers on construction contracts - related parties					1,793,119
Decrease (increase) in other receivables			93.795	(	48,280)
(Increase) decrease in other receivables - related parties		€	58,818)		17,098
Decrease in inventories			1,038,368		1,531,805
(Increase) decrease in prepayments		(	652,038)		492,637
(Increase) decrease in other current assets		$\mathfrak{c}$	$1,579$ )		83
Changes in operating liabilities (Decrease) increase in financial liabilities at fair value
through profit or loss			3,118)		11,743
Increase in current contract liabilities		(	1,873,603
(Decrase) increase in notes payable		(	15 2		15
Increase (decrase) in notes payable - related parties			205,695	$\left($	101,384)
(Decrease) increase in accounts payable		$\overline{\mathcal{L}}$	457,297)		90,515
Decrease in payables to customers on construction
contracts				$\epsilon$	1,551,493)
Increase in payables to customers on construction contracts
- related parties					1,023,847
Decrease in other payables		C	$201,470$ ) (		$5,529$ )
Increase in provisions for liabilities - current			441,236		532
(Decrease) increased in unearned receipts		t	87,730)		80,772
Increase in net defined benefit liability - non-current			51,422		30,790
Cash outflow generated from operations			$602,796$ ) (		519,013)
Interest received			7,774		2,402
Payment of interest Income tax paid			$69,215$ ) ( 533)		82,089) 3,455)
Net cash flows used in operating activities			664,770)		602, 155)

$\hat{\mathcal{A}}$

$\sim$ $\alpha$

(Continued)

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2018 AND 2017 (Expressed in thousands of New Taiwan dollars)

	Notes		2018		2017
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of investments accounted for using equity method	6(5)	(5	$12,000$ )	\$
Acquisition of property, plant and equipment	6(30)	0	583,550) (		420,965)
Cash payments for acquiring investment properties	6(7)	(	940)
Proceeds from disposal of investment properties			95,002
Acquisition of intangible assets	6(8)	€	8,997) (		10,071)
Increase in refundable deposits		€	45,711) (		317,125)
Decrease in refundable deposits			35,430		381,788
Net cash flows used in investing activities			520,766)		366,373)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings	6(31)	€	997,634) (		4,107,341)
Decrease in short-term notes and bills payable	6(31)	C	699,769) (		299,966)
Proceeds from long-term debt	6(31)		700,000		5,498,057
Repayments of long-term debt	6(31)	(	499,520)
Increase in guarantee deposit received	6(31)		135,006		102,038
Decrease in guarantee deposit received	6(31)	$\epsilon$	$122,692$ ) (		$133, 141$ )
Increase (decrease) in other non-current liabilities	6(31)		273	€	193)
Cash dividends paid to non-controlling interests					245)
Cash capital increase	6(18)		2,526,000
Net cash flows from financing activities			1,041,664		1,059,209
Net (decrease) increase in cash and cash equivalents		€	143,872)		90,681
Cash and cash equivalents at beginning of year	6(1)		281,814		191,133
Cash and cash equivalents at end of year	6(1)	\$	137,942	\$	281,814

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

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2018 AND 2017 (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.
• 1. 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 15,2019

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 the FSC effective from 2018 are as follows:

	Effective date by
	International Accounting
New Standards, Interpretations and Amendments	Standards Board
Amendments to IFRS 2, 'Classification and measurement of share-based payment transactions'	January 1, 2018
Amendments to IFRS 4, 'Applying IFRS 9, Financial instruments with IFRS 4, Insurance contracts'	January 1, 2018
IFRS 9, 'Financial instruments'	January 1, 2018
IFRS 15, 'Revenue from contracts with customers'	January 1, 2018

	Effective date by
	International Accounting
New Standards, Interpretations and Amendments	Standards Board
Amendments to IFRS 15, 'Clarifications to IFRS 15 Revenue from contracts with customers'	January 1, 2018
Amendments to IAS 7, 'Disclosure initiative'	January 1, 2017
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 IFRS 1, 'First-time adoption of International Financial Reporting Standards'	January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 12, 'Disclosure of interests in other entities'	January 1, 2017
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IAS 28, 'Investments in associates and joint ventures'	January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the 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.

• (c) The Group has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Note 12(4).

• B. IFRS 15, 'Revenue from contracts with customers' and amendments

• (a) 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.

(b) The Group has elected not to restate prior period financial statements and recognised the cumulative effect of initial application as retained earnings at January 1, 2018, using the modified retrospective approach under IFRS 15. The significant effects of adopting the modified transition as of January 1, 2018 are summarised below:

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:

i. 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 \$6,065,535, \$877,665 and \$1,946,104, respectively.

• ii. 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.
• 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.

(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 2019 are as follows:

	Effective date by
	International Accounting
New Standards, Interpretations and Amendments	Standards Board
Amendments to IFRS 9, 'Prepayment features with negative compensation'	January 1, 2019
IFRS 16, 'Leases'	January 1, 2019
Amendments to IAS 19, 'Plan amendment, curtailment or settlement	January 1, 2019
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.

The Group expects to recognise the lease contract of lessees in line with IFRS 16. However, the Group does not intend to restate the financial statements of prior period (collectively referred herein as the "modified retrospective approach"). On January 1, 2019, it is expected that 'rightof-use asset' and lease liability will be both increased by \$4,037,939.

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.

(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 as endorsed by the FSC are as follows:

	Effective date by
	International Accounting
New Standards, Interpretations and Amendments	Standards Board
Amendment to IAS 1 and IAS 8, 'Disclosure Initiative-Definition of Material'	January 1, 2020
Amendments to IFRS 3, 'Definition of a business'	January 1, 2020
Amendments to IFRS 10 and IAS 28, 'Sale or contribution of assets between an investor and its associate or joint venture'	To be determined by International Accounting Standards Board
IFRS 17, 'Insurance contracts'	January 1, 2021

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

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.
• C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Group has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognised as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 were not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 ('IAS 39'), International Accounting Standard 11 ('IAS 11'), International Accounting Standard 18 ('IAS 18') and related financial reporting interpretations. Please refer to Notes 12(4) and (5) for details of significant accounting policies and details of significant accounts.
• (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.

			% of shares held as of
				December 31.
Name of investor	Name of Subsidiary	Main business activities	2018	2017
CSBC CORPORATION, TAIWAN	CSBC Coating Solutions Co., Ltd.	Marine coating, steel structure painting works, surface treatment, and high- tech anti-corrosion	70	70
CSBC Coating Solutions Co., Ltd.	BLUE ACE CORPORATION	Marine coating, steel structure painting works, surface treatment, and high-tech anti-corrosion	100	100
CSBC Coating Solutions Co., Ltd.	Blue Ocean Wind Power Engineering (Hong Kong) Limited	Marine works services	100	100

B. Subsidiaries included in the consolidated financial statements:

• 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) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.
• B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(8) Impairment of financial assets

For debt instruments measured at fair value through other comprehensive income and financial assets at amortised cost, at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.

(9) 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.
• (10) Operating leases (lessee)

Lease income from an operating lease (net of any incentives given to the lessee) is recognised in profit or loss on a straight-line basis over the lease term.

(11) 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.

(12) 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.

(13) 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	$5 \sim 50$ years
Buildings and structures	$5 \sim 65$ years
Machinery and equipment	$3 \sim 58$ years
Transportation equipment	$3 \sim 40$ years
Leasehold improvements	$10 \sim 14$ years
Other equipment	$3 \sim 14$ years

(14) 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.

(15) 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.

(16) Intangible assets

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 5 years.

(17) 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.

(18) Borrowings

Borrowings comprise long-term and short-term bank 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.

(19) Accounts and notes payable

• A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
• B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

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

• A. 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 categorised as financial liabilities held for trading unless they are designated as hedges.
• B. At initial recognition, the Group measures the financial liabilities at fair value. All related transaction costs are recognised in profit or loss. The Group subsequently measures these financial liabilities at fair value with any gain or loss recognised in profit or loss.

(21) 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.

(22) Non-hedging derivatives

Non-hedging derivatives are initially recognised at fair value on the date a derivative contract is entered into and recorded as financial assets or financial liabilities at fair value through profit or loss. They are subsequently remeasured at fair value and the gains or losses are recognised in profit or loss.

(23) 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.

(24) 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.

(25) Employee share-based payment

For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and nonvesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

$(26)$ 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 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.

(27) 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.

(28) Revenue recognition

A. The revenues from construction contracts in relation to shipbuilding, vessel construction and machinery manufacturing are identified to be one performance obligation satisfied over time and are recognised by the percentage-of-completion as of the financial reporting date. The percentage-of-completion is measured based on the percentage of the workload completed to the total expected workload of the contracts. The customer pays at the time specified in the payment schedule. If the services rendered exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

• B. The revenues from service contract in relation to ship/vessel repairs and anti-corrosion coating are identified to be one performance obligation satisfied over time and are recognised by the percentage-of-completion as of the financial reporting date. The percentage-of-completion is measured based on the percentage of the actual cost incurred to the total expected cost of the contracts. At the beginning of the contract period, as the Group may find it difficult to estimate the result of obligation performance, it estimates the actual cost incurred for performing obligations which could be recovered. The contract revenue should be recognised only to the extent of actual costs incurred until the result of obligation performance could by measured reasonably.
• C. The Group's estimate about revenue, costs and progress towards complete satisfaction of a performance obligation is subject to a revision whenever there is a change in circumstances. Any increase or decrease in revenue or costs due to an estimate revision is reflected in profit or loss during the period when the management become aware of the changes in circumstances.
• D. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, according to the agreements, the Group does not adjust the transaction price to reflect the time value of money.
• (29) 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.

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

(1) 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, 2018 would have decreased by \$362,115 or increased by \$342,402 (the construction profit for the year ended December 31, 2017 would have decreased by \$355,480 or increased by \$333,684).

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

		December 31, 2018	December 31, 2017
Cash on hand and revolving funds	S	350	260
Checking accounts and demand deposits		101,892	219,005
Time deposits		35,700	62,549
		137,942	281,814

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

		December 31, 2018	December 31, 2017
Construction receivables	S	1,053,963	1,228,341
Repair receivables		165,826	149,138
		1,219,789	1,377,479
Less: Allowance for doubtful accounts		$319,599$ (	15,529)
		900,190	1,361,950

A. As at December 31, 2018 and 2017, with taking into account collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Group' accounts receivable was \$900,190 and \$1,361,950, respectively.

• B. As of December 31, 2018, the Group's past due construction receivables amounted to \$791,924 because a certain counterparty failed to fulfil the mutual agreements and the negotiations are still in progress.
• C. Information relating to credit risk is provided in Note 12(2).

$(3)$ Inventories

				December 31, 2018
				Allowance for
		Cost		valuation loss	Book value
Raw materials	\$	1,286,729 (\$		33,993) \$	1,252,736
Work in process and repair of goods		85,078			85,078
		1,371,807	(\$	33,993)	\$ 1,337,814
				December 31, 2017
	Allowance for
		Cost		valuation loss	Book value
Raw materials	\$	$1,975,173$ (\$		34,862) \$	1,940,311
Work in process and repair of goods		380,750			380,750
		2,355,923	(\$	34,862)	\$ 2,321,061

The amount of inventories recognised as expense for the years ended December 31, 2018 and 2017 is as follows:

	Years ended December 31,
	2018	2017
Raw materials costs	7,748,084 \$	10,756,455
Gain from reversal of obsolete inventories	869)	861,045)
	$7747215$ \,	9.895.410

The Group reversed a previous inventory write-down and accounted for this transaction as a reduction of expenses because the related inventory items were scrapped or sold in 2018 and 2017.

(4) Prepayments

	December 31, 2018	December 31, 2017
Prepayments of suppliers	1,193,643	560,661
Excess VAT paid	64,889	56,132
Other prepayments	19,798	9.499
	1,278,330	626,292

(5) Investments accounted for under equity method

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

	2018		2017
At January 1	\$ 1,645	S.	166,616
Additional investments accounted for using the equity method	12,000
Share of profit or loss of investments
accounted for using the equity method (	$2,653)$ (		20,868)
Provision for impairment			144,103)
At December 31	\$ 10,992	ς	1,645
	December 31, 2018		December 31, 2017
Taiwan International Windpower Training Corporation Ltd. (Note 1)	\$ 10,992	\$
Taiwan Offshore Wind Farm Services
Corporation (Note 2)			1,645
Fuhai Wind Farm Corporation (Note 3)
	10,992		1,645

• Note 1: On May 11, 2018, with reporting to the Board of Directors for future reference, the Group, Taiwan International Ports Corporation, Ltd. and other companies jointly established Taiwan International Windpower Training Corporation Ltd. for investment. The Group owns 12% of the investee's share capital and one seat in the Board of Directors of the investee.
• Note 2: On March 21, 2014, the Board of Directors has resolved that the Group and Taiwan Generations Corporation would jointly establish Taiwan Offshore Wind Farm Services Corporation. The Company has acquired 40% of share capital in September 2014. The Group has ceased recognising its share of losses in this company since the fourth quarter of 2018 and the unrecognised share of losses in associate for the year ended December 31, 2018 and accumulated share of losses in associate both amounted to \$581.
• Note 3: On August 9, 2016, the Board of Directors resolved to invest in Fuhai Wind Farm Corporation and obtained 37.97% of ownership shares. The Group has ceased recognising its share of losses in this company since the third quarter of 2017 and the unrecognised share of losses in associate for the year ended December 31, 2018 and accumulated share of losses in associate amounted to \$15,630 and \$37,218 respectively.

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

$\sim$

		Years ended December 31,
		2018	2017
Loss for the year from continuing operations Other comprehensive income - net of tax	(\$	$2,653)$ (\$	20,868)
Total comprehensive loss	S	2.653	20,868)

C.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, 2018.

$\hat{\mathcal{A}}$

(6) Property, plant and equipment

			Land		Buildings		Machinery		Transportation		Leasehold		Other		Construction
	$L$ and		improvements		and structures		and equipment		equipment		improvements		equipment		in progress	Total
At January 1, 2018
$\overline{c}$ ost	\$6,096,033	↔	999,776	$\leftrightarrow$	7,630,625	⊷	9,909,253	⊷	947,159	ŧ٩	1,072,631	မာ	146,569	69	104,149	\$26,906,195
Accumulated depreciation and impairment			678,873)		6,561,875)		7,791,377)		536,589)		682,437)		91,280)			16,342,431
	\$6,096,033	બ્ર∣	320,903	∥⊶	1,068,750	Θ9∣	2,117,876	æ	410,570	↮	390,194	∞	55,289	↮	104,149	\$10,563,764
2018
Opening net book amount as at January 1	\$6,096,033	↮	320,903	ی	1,068,750	49	2,117,876	⊷	410,570	۵Ą	390.194	⊷	55,289	↮	104,149	\$10,563,764
Additions							1,584				591		85		565,975	568,635
Disposals - costs			204)		2,099)		82,581)		6,373)				2,074)			93,331)
Reclassifications - costs					15,001		140,872		1,680				2,849		160,402)
Depreciation charge			$31,024$ )		108,091)		302,349)		45,668)		48,696)		11,506)			547,334)
Disposals - accumulated depreciation			204		$\frac{1}{2}$		80,644		6,364				2,066			89,589
Closing net book amount as at December 3	\$6,096,033	$\leftrightarrow$	289,879	⇔∥	973,872	69	1,956,046	↮	366,573	69	342,489	Θģ	46,709	↔	509,722	\$10,581,323
At December 31, 2018 Cost	\$6,096,033	69	999,572	Ø	7,643,527	69	9,969,128	¢۹	942,466	မာ	1,073,622	69	147,429	↔	509,722	\$27,381,499
Accumulated depreciation
and impairment			709,693)		6,669,655)		8,013,082)		575,893)		731,133)		100,720)			16,800,176
	\$6,096,033	မ⊧	289,879	မ⊮	973,872	မာူ	1,956,046		366,573	69	342,489	∥⊶	46,709	⊶ı	509.722	\$10,581,323

$-34-$

			Land		Buildings		Machinery		Transportation		Leasehold		Other	Construction
	Land		improvements		and structures		and equipment		equipment		improvements		equipment		in progress	Total
At January 1, 2017
Cost	\$6,096,033	↮	997,998	69	7,422,915	↔	9,570,491	↔	947,254	↔	1,072,631	↔	136,678	⊷	358,372	\$26,602,372
Accumulated depreciation and impairment			650,027)		6,476,131)		7,558,739)		492,499)		633,815)		81,565)			15,892,776)
	\$6,096,033	↔∣	347,971	⊷∣	946,784	49	2,011,752	⊷	454,755	↮	438,816	⊷	55,113	↔	358,372	\$10,709,596
$\frac{2017}{20}$
Opening net book amount as at January	\$6,096,033	↮	347,971	↮	946,784	چے	2,011,752	∽	454,755	∽	438,816	↮	55,113	မာ	358,372	\$10,709,596
Additions															370,983	370,983
Disposals - costs					6,572)		55,360)		1,928)				1,206)			65,066)
Reclassifications - costs (Note)			1,778		214,282		394,122		1,833				11,097		625,206)	2,094)
Depreciation charge			$28,846$ )		93,917)		287,234)		46,018)		48,622)		10,909)			515,546)
Disposals - accumulated depreciation					6,127		54,596		1,928				1,194			63,845
Reclassifications - accumulated depreciation (Note)					2,046											2,046
Closing net book amount as at December 31	\$6,096,033	↔	320,903	ا⊶	1,068,750	¢	2,117,876	₩	410,570	↔	390,194	ِ	55,289	∽ା	104,149	\$10,563,764
At December 31, 2018 Cost	\$6,096,033	↮	999,776	⊷	7,630,625	∽	9,909,253	↔	947,159	۰Ą	1,072,631	پ	146,569	မာ	104,149	\$26,906,195
Accumulated depreciation and impairment			678,873)		6,561,875)		7,791,377)		536,589)		682,437)		91,280)			16,342,431
	\$6,096,033	⇔∣	320,903	∥⊶	1,068,750	Ğ,	2,117,876	⊷	410,570	↮	390,194	اون	55,289	ومه	104,149	\$10,563,764

Note: Refer to the reclassifications to investment property and related information is provided in Note 6(7).

$~15~$

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

	Years ended December 31,
	2018	2017
Amount capitalised	563	443
Interest rate	$0.86\%$ ~2.06%	$0.68\%$ ~1.05%

• 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.

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

(7) Investment property, net

				Buildings
		Land		and structures		Total
At January 1, 2018
Cost	S	226,918	-S	24,905	-S	251,823
Accumulated depreciation and impairment				17,768)		17,768)
	\$	226,918	\$	7,137	\$	234,055
2018
Opening net book amount as at January 1	\$	226,918 \$		$7,137$ \$		234,055
Additions - from subsequent expenditures				940		940
Disposals		26,432)				26,432)
Depreciation charge				401)		401)
Closing net book amount as at December 31	\$	200,486	\$	7,676	\$	208,162
At December 31, 2018
Cost	\$	200,486 \$		25,845 \$		226,331
Accumulated depreciation and impairment				18,169)		18,169)
	\$	200,486	\$	7,676		208,162

				Buildings
		Land		and structures		Total
At January 1, 2017
Cost	S	226,918	-S	22,811	-S	249,729
Accumulated depreciation and impairment				15,347)		15,347)
	\$	226,918	\$	7,464	\$	234,382
2017
Opening net book amount as at January 1	\$	226,918	- \$	$7,464$ \$		234,382
Reclassifications - costs (Note)				2,094		2,094
Depreciation charge				$375)$ (		375)
Reclassifications - accumulated depreciation (Note)				$2,046$ )		2,046)
Closing net book amount as at December 31	S	226,918	\$	7,137		234,055
At December 31, 2017
Cost	\$	226,918	S	24,905	S	251,823
Accumulated depreciation and impairment				17,768)		17,768)
	\$	226,918	\$	7,137	\$	234,055

Note: Refer to the reclassifications from property, plant and equipment and related information is provided in Note $6(6)$ .

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

		Years ended December 31,
		2018	2017
Rental income from the lease of the investment property	-5	8.641	7,720
Direct operating expenses arising from the investment
property that generate rental income in the period		1.410	996.ا
Direct operating expenses arising from the
investment property that did not generate rental
income in the period

The fair value of the investment property held by the Group as at December 31, 2018 and 2017 were \$667,855 and \$664,261, respectively, which was revalued by independent valuers. Valuations were made using the comparison method, cost method for land development analysis and the income approach.

(8) Intangible assets

Software:			Years ended December 31,
			2018		2017
At January 1
Cost		\$	57,952	\$	59,483
Accumulated amortisation and impairment			34,942)		30,636)
		\$	23,010	S	28,847
Opening net book amount as at January 1		\$	23,010	\$	28,847
Additions - acquired separately			8,997		10,071
Disposals - costs			$17,095$ (		11,602)
Amortisation charge			$17,396$ (		15,908)
Disposals - accumulated amortisation			17,095		11,602
Closing net book amount as at December 31		\$	14,611	\$	23,010
At December 31
Cost		\$	49,854	S	57,952
Accumulated amortisation and impairment			35,243)		34,942)
		\$	14,611	\$	23,010
Details of amortisation on intangible assets are as follows:			Years ended December 31,
			2018		2017
Operating costs		\$	17,382	\$	15,894
Research and development expenses			14		14
		\$	17,396	\$	15,908
(9) Short-term loans
Type of loans	December 31, 2018		Interest rate range		Collateral
Bank overdrafts	\$	270,072	$1.01\% \sim 1.57\%$		None
Bank loans
Unsecured loans		1,000,000	$0.90\% \sim 0.98\%$		None
Unsecured loans		20,078	$0.32\% \sim 3.65\%$		None
	\$	1,290,150
Type of loans	December 31, 2017		Interest rate range		Collateral
Bank overdrafts	\$	61,689	$1.01\% \sim 1.57\%$		None
Bank loans
Unsecured loans		2,200,000	$0.84\% \sim 0.87\%$		None
Unsecured loans		26,095	$0.48\% \sim 2.89\%$		None
	\$	2,287,784

(10) Short-term notes and bills payable

	December 31, 2018		December 31, 2017
Commercial papers payable			700,000
Less: Unamortized discount		$\overline{\phantom{0}}$	231)
		$\ddot{}$	699.769
Annual interest rates			$0.51\% \sim 0.60\%$

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.

$(11)$ Other payables

		December 31, 2018	December 31, 2017
Accrued expenses	\$	1,001,758	1,201,058
Construction payment refund		45,588	60,503
Others		21,917	23,257
	S	1,069,263	1,284,818

(12) Provisions

		Warranty		Onerous contracts (Note)	Total
At January 1, 2018	\$	140,219	-S	1,946,104	2,086,323
Additional provisions		149,884		2,383,786	2,533,670
Used during the year		$62,511)$ (		$1,866,946$ (	1,929,457)
Unused amounts reversed		11,800)		$151, 177)$ (	162,977)
At December 31, 2018	S	215,792	\$	2,311,767	\$ 2,527,559

Note: Information is provided in Note 3(1).

The analysis of provisions is as follows:

	December 31, 2018	December 31, 2017
Realised in one year	547,519	61.441
Realised after one year	1,980,040	78.778
	2,527,559	140.219

A. Provision for warranty

The Group gives warranties on contracts revenue in relation to shipbuilding and vessel construction. Provision for warranty is estimated based on historical warranty data of products.

B. Provision for onerous contract

Under the irrevocable contracts of shipbuilding, vessel construction and anti-corrosion coating, the Group's estimated provision for onerous contract is the difference between the inevitable cost of existing obligations to be performed in the future and the expected economic benefits from the contracts. The estimated provision may change with the actual construction situation.

(13) Long-term borrowings

	Borrowing period and	Interest
	repayment term	rate range	Collateral	December 31, 2018
Long-term bank borrowings
Unsecured borrowings
Bank of Taiwan	Borrowing period is from Jun. 22, 2017 to Jun. 22, 2022; principal is repayable in 4 installments beginning in the 4th year.	1.36%	None	\$ 2,000,000
Taiwan Business Bank	Borrowing period is from Mar. 12, 2018 to Mar. 12, 2023; principal is repayable in 2.5 installments beginning in the 5th year.	1.30%	None	700,000
				2,700,000
Commercial papers payable
International Bills Finance Corporation	Borrowing period is from Jun 22, 2017 to Jun. 22, 2021. Details are set out below.	0.57%	None	500,000
Taishin International Bank	Borrowing period is from Jun. 22, 2017 to Dec. 15, 2020. Details are set out below.	$0.62\%$ ~ 0.63%	None	800,000
China Bills Finance Corporation	Borrowing period is from Sep. 26, 2017 to Oct. 27, 2021. Details are set out below.	$0.57\%$ ~ 0.62%	None	850,000
Mega Bills Finance Co., Ltd.	Borrowing period is from Sep. 26, 2017 to Dec. 15, 2021. Details are set out below.	$0.65%$ ~ 0.66%	None	850,000
Less: Discount on commercial papers payable				1,463)
				2,998,537
				5,698,537

l,

	Borrowing period and	Interest
	repayment term	rate range	Collateral	December 31, 2017
Long-term bank borrowings
Unsecured borrowings
Bank of Taiwan	Borrowing period is from Jun. 22, 2017 to Jun. 22, 2022; principal is repayable in 4 installments beginning in the 4th year.	1.36%	None	\$ 2,000,000
JihSun Bank	Borrowing period is from Dec. 7, 2017 to Jul. 20, 2020; principal is repayable at maturity.	1.25%	None	200,000
				2,200,000
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	500,000
Taishin International Bank	Borrowing period is from Jun. 22, 2017 to Dec. 15, 2020. Details are set out below.	0.61%	None	800,000
China Bills Finance Corporation	Borrowing period is from Sep. 26, 2017 to Sep. 26, 2020. Details are set out below.	0.45%	None	1,000,000
Mega Bills Finance Co., Ltd.	Borrowing period is from Sep. 26, 2017 to Sep. 26, 2020. Details are set out below.	0.64%	None	1,000,000
Less: Discount on commercial papers payable				1,943)
				3,298,057
				5,498,057

Note: The Group has repaid in advance at the end of January 2018.

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.

(14) 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 Group 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 extended the repayment period to 2026 as approved by the Executive Yuan. The Group uses the average longterm 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:

		December 31, 2018	December 31, 2017
Long-term notes and accounts receivable	S.	670,361	659,156
Long-term deferred revenue		71.139	82,344
		741,500	741,500

• B. Government grants and interest expenses that should be amortised are recognised under 'other revenue' and 'finance costs', respectively, for the years December 31, 2018 and 2017. For more information, please refer to Notes 6(22) and (24).
• $(15)$ 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, 2018	December 31, 2017
Present value of funded obligations (\$	$1,576,173)$ (\$	1,516,485)
Fair value of plan assets	1,481,805	1,344,783
15 Net defined benefit liability	$94,368)$ (\$)	171,702)

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

		Present value of
		defined benefit		Fair value of plan		Net defined
		obligations		assets		benefit liability
Year ended December 31, 2018
Balance at January 1	$($ \$	1,516,485)	\$	1,344,783	(	171,702)
Current service cost		169,651)				169,651)
Interest (expense) income		26,204)		24,433		1,771)
		1,712,340)		1,369,216		343,124)
Remeasurements:
Return on plan assets				28,302		28,302
Experience adjustments		100,454				100,454
		100,454		28,302		128,756
Pension fund contribution				120,000		120,000
Paid pension		35,713		35,713)
Balance at December 31	(\$	1,576,173)	\$	1,481,805	$($ \$	94,368)
		Present value of
		defined benefit		Fair value of plan		Net defined
		obligations		assets		benefit liability
Year ended December 31, 2017
Balance at January 1	$($ \$	1,396,332)	\$	1,215,818	$\left( \frac{6}{5} \right)$	180,514)
Current service cost		174,904)				174,904)
Interest (expense) income		24,178)		22,292		1,886)
		1,595,414)		1,238,110		357,304)
Remeasurements:
Return on plan assets				$10,223)$ (		10,223)
Experience adjustments		49,825				49,825
		49,825		10,223)		39,602
Pension fund contribution				146,000		146,000
Paid pension		29,104		29,104)
Balance at December 31	(\$	1,516,485)	\$	1,344,783	$\left( \text{\$} \right)$	171,702)

• (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, 2018 and 2017 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.
• (e) The principal actuarial assumptions used were as follows:

	Years ended December 31,
Discount rate	2018	2017
	1.75%	1.75%
Future salary increases	3.5%	3.5%

Future mortality rate is estimated with 70% of the 3rd Taiwan Standard Ordinary Experience Mortality Table. The disability rate is set based on 10% of mortality rate.

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

	Discount rate			Future salary increases
			Increase 0.25% Decrease 0.25%				Increase $0.25\%$ Decrease $0.25\%$
Effect on present value
of defined benefit
obligation
December 31, 2018	ſS.	38,294)	S	39,606	S	35,124	(\$	34,206)
December 31, 2017	′S	39,302)	S	40,721	S	36,375	(S	35,363)

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, 2019 amounts to \$133,465.

(g) As of December 31, 2018, the weighted average duration of the defined benefit obligations is 10 years. The distribution of the present value of expected defined benefit obligations (within 10 years) is as follows:

For the year ended December 31, 2019	\$ 73,725
For the year ended December 31, 2020	54,698
For the year ended December 31, 2021	59,476
For the year ended December 31, 2022	110,619
For the year ended December 31, 2023	1,764,397
For the year ended December 31, 2024	1,781,192
For the year ended December 31, 2025	1,780,847
For the year ended December 31, 2026	1,731,247
For the year ended December 31, 2027	1,713,170
For the year ended December 31, 2028	1,576,053

• Note: The same person who meets the retirement conditions will calculate the present value of expected defined benefit obligations in each subsequent year until he/she meets the mandatory retirement age of 65.
• 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, 2018 and 2017 were \$100,006 and \$104,750, respectively.
• (16) Share-based payment
• A. For the year ended December 31, 2018, the Group's share-based payment arrangements were as follows:

		Quantity	Contract	Vesting
Type of arrangement	Grant date	granted	period	conditions
Cash capital increase	2018.12.17	15 million shares	NA	Vested
reserved for employee				immediately
preemption

For the year ended December 31, 2017, the Group's share-based payment arrangements: None. The above share-based payment arrangements are settled by equity.

B. The fair value of stock options granted on grant date is measured using the Black-Scholes optionpricing model. Relevant information is as follows:

				Expected Expected			Risk-free	Fair
Type of		Stock	Exercise	price	option	Expected	interest	value
arrangement	Grant date	price	price	volatility	life	dividends	rate	per unit
Cash capital increase reserved for employee preemption	2018.12.17	27.60 dollars	22.52 dollars	45.79% (Note)	30days	$\qquad \qquad \blacksquare$	0.42%	5.17 dollars

• Note: The expected price volatility was calculated from the grant date by using the annual standard deviation of the Company's return on the stock from June 18, 2018 to December 17, 2018 as assumption.
• C. Expenses incurred on share-based payment transactions were settled by equity amounting to \$77,550 for the year ended December 31, 2018 and no expenses were incurred for the year ended December 31, 2017.

(17) 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:

	Less than			More than
		12 months		12 months		Total
December 31, 2018
Assets	\$	6,049,380	S	543,561	\$	6,592,941
Contract assets (including related parties)		889,299				889,299
Accounts receivable, net (including related parties)		1,337,814				1,337,814
Inventories, net		8,276,493	\$	543,561	\$	8,820,054
Liabilities
Contract liabilities (including related	\$	258,846	-\$	2,492,028	\$	2,750,874
Notes payable (including related parties)		428,768				428,768
Accounts payable		677,088				677,088
Provision for liabilities		545,558		1,980,040		2,525,598
	\$	1,910,260	S	4,472,068	\$	6,382,328

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

(18) Common stock

A. As of December 31, 2018, the Company's authorised capital was \$11,138,997, consisting of 1,113,899.7 thousand shares of ordinary stock and the paid-in capital was \$3,729,918 with a par value of NT\$10 (in dollars) per share. All proceeds from shares issued have been collected.

Movements in the number of the Company's ordinary shares outstanding are as follows:

		Years ended December 31,		Shares in thousands
		2018		2017
At January 1	S	743,565 \$		743,565
Capital reduction to offset company
losses		430,573)
Cash capital increase - private
placement		60,000
At December 31	ደ	372,992	S	743,565

B. 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 record date for capital reduction resolved by the Board of Directors at their meeting on May 4, 2018 was May 10, 2018. In addition, the record date for the first time private placement for capital increase resolved by the Board of Directors at their meeting on May 11, 2018 was May 25, 2018. The amount of capital raised through the private placement was \$2,526,000 by issuing common stock amounting to 60 million shares at premium of NT\$42.10 per share, of which the government related entity, Financing Investment Venture Capital, and the management committee of Yaohua Glass Corp., Ltd. each subscribed 30 million shares amounted to \$1,263,000.

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 Company has completed the registration of the capital decrease and capital increase by issuing new shares at Ministry of Economic Affairs (MOEA).

In addition, the term of the aforementioned capital increase through private placement resolved by the stockholders at the interim stockholders' meeting will expire soon and the remaining quota will be stopped processing in the remaining period as resolved by the Board of Directors at their meeting on November 9, 2018.

C. In order to fulfil its capital and repay the bank loans, as resolved by the Board of Directors on August 10, 2018, the Company conducted a public offering for cash capital increase by issuing common stock, which was approved by Financial Supervisory Commission pursuant to Jin-Guan-Zheng-Fa-Zi Letter No. 1070339392 dated November 19, 2018. The amount of capital raised was \$2.252 billion by issuing common stock amounting to 100 million shares at a par value of NT\$22.52 per share. In addition, the public offering completion date and record date for capital increase was January 31, 2019 and relevant registration procedures are still in process.

(19) 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.

(20) 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 2018 and 2013. Therefore, the Company reversed special reserve of \$34,894 to undistributed earnings.
• E. The proposals for deficit compensation for the nine-month period ended September 30, 2017 and for deficit compensation through capital reduction were resolved by the stockholders at the interim stockholders' meeting on December 21, 2017. Please refer to Note 6(18) for details.

The proposal for deficit compensation for the year ended December 31, 2017 was resolved by the stockholders at the regular stockholders' meeting on June 28, 2018. Dividends will not be distributed to stockholders due to the deficit compensation at the end of the year.

On March 15, 2019, the Board of Directors has proposed the deficit compensation for year 2018.

(21) Operating revenue

The Group's operating revenue is from contracts with customers.

A. Disaggregation of revenue from contracts with customers

The Group derives revenue from the transfer of goods and services over time in the following major product types:

$\sim$

$\overline{r}$

	rear ended December 31.
	2018
Construction of ships and vessels
Shipbuilding	\$	10,355,714
Vessel construction		1.465,670
		11,821,384
All other segments
Ship/vessel repair		976,476
Machinery building		85,605
Anti-corrosion coating		120,698
Others		8,163
		1,190,942
	S	13,012,326

B. Contract assets and liabilities

The Group has recognised the following revenue-related contract assets and liabilities:

		December 31, 2018		December 31, 2017
Contract assets	\$	4,464,528	- S	6,065,535
Contract assets - related parties		2,385,379		190,190
Less: Loss allowance		195,478)		190,190)
	S	6,654,429		6,065,535
Contract liabilities	\$	2,751,268	\$	590,575
Contract liabilities - related parties				287,090
		2,751,268		877,665

Please refer to Note 7 for related party transactions.

Revenue recognised that was included in the contract liability balance at the beginning of the period

The Group had a contract liability balance at the beginning of the period, of which \$877,665 was recognised as revenue for the year ended December 31, 2018.

• C. As of December 31, 2018, the total transaction price allocated to unfulfilled contract obligations was \$36,528,981 and this amount would be recognised as revenue gradually with the completion process of shipbuilding and vessel construction. The shipbuilding and vessel construction are expected to be completed during the period from March 2019 to September 2025.
• D. Related disclosures for 2017 operating revenue are provided in Note 12(5) B.

(22) Other income

	Years ended December 31,
		2018		2017
Rental revenue	\$	9,141	\$	10,008
Interest income:
Interest income from bank deposits		7.809		2,368
Government grant revenue		11,206		11,018
Indemnity revenue		37,564		9,198
Others		21,710		13,023
		87,430		45,615

(23) Other gains and losses

	Years ended December 31,
		2018	2017
Gains on disposal of investment property	-8	68,570 - S
Net (loss) gains on financial assets and liabilities at fair value through profit or loss		2,838)	11,463
Losses on disposal of property, plant and equipment		$3,742)$ (	1,221)
Net currency exchange gains		57,217	16,299
Impairment loss (Note 1)		$\blacksquare$	144,103)
Other losses (Note 2)		99,198)	9,981)
		20,009 ſS	127,543)

Note 1: Please refer to Note 6(5) Investments accounted for under equity method for details.

Note 2: Details of loss on endorsements and guarantees are provided in Notes 7 and 9(7).

(24) Finance costs

	Years ended December 31,
		2018		2017
Interest expense:
Bank loans	\$	70,608	-\$	74,239
Others		⊷		520
Expenses amortised from government grants payable		11,206		11,018
Less: Capitalisation of qualifying assets		55,684)		64,496)
		26,130		21,281

(25) Expenses by nature

		Years ended December 31,
		2018	2017
Change in inventory of finished goods and work in process	S	629,313	\$	3,537,016
Direct materials		7,748,084		10,756,455
Employee benefit expense		3,700,666		3,823,779
Depreciation and amortisation charges		564,730		531,454
Outsourcing fees		1,627,930		2,352,280
Other expenses		2,159,200		1,632,325
Operating costs and expenses	\$	16,429,923	\$	22,633,309
(26) Employee benefit expense
		Years ended December 31,
		2018		2017
Wages and salaries	\$	3,033,445	\$	3,215,090
Employee share options		77,550
Labor and health insurance fees		251,007		270,153
Pension cost		271,428		281,540
Directors' remuneration		3,550		3,158
Other personnel expenses		63,686		53,838
	\$	3,700,666	\$	3,823,779

• 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, 2018 and 2017.

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, 2018 and 2017. 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.

(27) Income tax expense

A. Income tax (benefit) expense

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

	Years ended December 31,
		2018		2017
Current tax:
Current tax on profits for the period	S	43	S
(Over) under provision of income
tax in prior year		270)		91
Total current tax		227)		91
Deferred tax:
Origination and reversal of temporary differences		$132)$ (		469,934)
Impact of change in tax rate		238,498)
Total deferred tax		238,630)		469,934)
Income tax benefit		238,857)		469,843

(b) The income tax (charge)/credit relating to components of other comprehensive income is as follows:

		Years ended December 31,
		2018	2017
Remeasurement of defined
benefit obligations	S	25,752	S

B. Reconciliation between income tax benefit and accounting profit:

	Years ended December 31,
		2018	2017
Tax calculated based on loss before tax and statutory tax rate	$($ \$	$667,460$ (\$	1,081,227)
Tax exempt income by tax regulation		13,714)
Effects from items disallowed by tax regulation		14,567	28,904
Taxable loss not recognised as deferred tax assets		666,475	582,389
Impact of change in the tax rate on temporary differences between current year and the year realised		238,498)
Over (under) provision of income tax in prior year		270)	91
Land VAT		43
Income tax benefit		238,857)	469,843

	Year ended December 31, 2018
					Recognised
			Recognised		in other
			in profit or		comprehensive
	January 1		loss		income		December 31
Deferred tax assets:
Temporary differences:
Estimation of construction loss	\$ 365,538	\$	96,815	\$		\$	462,353
Unused compensated absences payable	51,356		6,274				57,630
Unrealized warranty liability	23,837		19,097				42,934
Accrued pension liabilities	29,189		15,437 (		25,752)		18,874
Unrealised investments gains	169		38				207
Unrealised exchange losses	2,915	- (	2,667				248
Inventory valuation loss	3,454		434				3,888
Allowance for doubtful accounts	639		100,001				100,640
Tax losses	874,665		2,988				877,653
	1,351,762		238,417		25,752)		1,564,427
Deferred tax liabilities:
Unrealised land value incremental reserve	1,324,910)		213				1,324,697)
Total	26,852	\$	238,630	$\left( \frac{1}{2} \right)$	25,752)	\$	239,730

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

$\bar{\beta}$

$\ddot{\phantom{a}}$

	Year ended December 31, 2017
						Recognised
				Recognised		in other
				in profit or		comprehensive
		January 1		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	-6	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 incremental reserve		1,324,910)						1,324,910)
Total	(\$	436,350)	\$	469,934	(	6,732)	\$	26,852

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

December 31, 2018
deferred
Amount filed/ assessed		tax assets	Expiry year
\$	671,021	\$	2025
	1,190,829		2026
	6,700,185		2027
Estimated filing amount	2,576,930		2028
		deferred
Amount filed/assessed		tax assets	Expiry year
\$	671,021	\$	2025
	1,190,829		2026
Estimated filing amount	6,709,058		2027
		Unused amount December 31, 2017 Unused amount	Unrecognised 4,180,985 2,576,930 Unrecognised 3,425,820

• E. The Company's income tax returns through 2016 have been assessed and approved by the Tax Authority. As of March 15, 2019, there was no administrative remedies.
• F. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China on February 7, 2018, the Company's applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate.

(28) Losses per share

	Year ended December 31, 2018
		Weigthted average
		number of ordinary	Losses per
	Amount	shares outstanding	share
	after tax	(shares in thousands)	(in dollars)
Basic losses per share
Loss attributable to ordinary shareholders	(\$3,100,211)	349,322	$\left( \mathcal{S}\right)$ 8.87)
		Year ended December 31, 2017
		Weigthted average
		number of ordinary	Losses per
	Amount	shares outstanding	share
	after tax	(shares in thousands)	(in dollars)
Basic losses per share

Effect of deficit compensation through capital deduction was adjusted retroactively when calculating loss per share and the record date for capital reduction was May 10, 2018. Details are provided in Note 6(18).

(29) 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:

		December 31, 2018	December 31, 2017
Not later than one year		8,396 \$	6,601
Later than one year but not later than five years		9,306	10,520
	S	17,702	17,121

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 \$263,679 and \$262,900 in profit or loss for the years ended December 31, 2018 and 2017, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

	December 31, 2018	December 31, 2017
Not later than one year	\$ 264,731	S	263,423
Later than one year but not later than five years	956,987		1,001,217
Later than five years	608,572		810,169
	1,830,290	S.	2,074,809

(30) Supplemental cash flow information

l,

A. Investing activities with partial cash payments:

	Years ended December 31,
		2018	2017
Purchase of property, plant and equipment	\$	568,635	- \$	370,983
$Add:$ Beginning balance of payable on equipment		60,503		110.485
Less: Ending balance of payable on equipment		45,588) (		60,503)
Cash paid on purchase of property, plant and
equipment during the year		583,550	$\mathbb{S}^-$	420,965
B. Investment and financing activities with no cash flow effects:
	Years ended December 31,
		2018	2017

Payable on investments (shown as		19.188
other payables) (Note)	$\overline{\phantom{0}}$
Interest expense amortised from
government grants	11,206	11,018

Note: The Company reclassified the amount of \$19,188 to revenue for the year ended December 31, 2018 according to the result from Chinese Arbitration Association.

(31) Changes in liabilities from financing activities

	January 1, 2018		Cash flow		December 31, 2018
Short-term borrowings	\$ 2,287,784	- (\$	997,634) \$		1,290,150
Short-term notes and bills payable	699,769		699,769)
Long-term borrowings	5,498,057		200,480		5,698,537
Guarantee deposits received	172,614		12,314		184,928
Other non-current liabilities, others	12,960		273		13,233
	8,671,184	(\$	1,484,336)	S	7,186,848

7. RELATED PARTY TRANSACTIONS

$\bar{z}$

(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
Taiwan International windpower Training Corporation Ltd.	Investee accounted for using equity method
Taiwan Generations Corporation	Investee accounted for using equity method
Fuhai Wind Farm Corporation	Investee accounted for using equity method
Yung Chi Paint & Varnish Mfg. Co., Ltd.	Shareholder who owns 30% of the Company's subsidiary
Financing Investment Venture Capital	Government related entity
Yao Hua Glass Co., Ltd. Management Committee	Government related entity

(2) Significant related party transactions and balances

A. Operating revenue

	Years ended December 31,
		2018		2017
Other related parties:
China Steel Express Corporation	\$	2,147,665	-S
Fuhai Wind Farm Corporation				4,987
Yung Chi Paint & Varnish Mfg. Co.,				261
Ltd.
Key management:
Legal entity director
CPC Corporation, Taiwan		990)		73,893
	\$	2,146,675		79,141

(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 Group 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 end of March in 2020. The Group received \$849,451 as advance receipts of contract price in accordance with the agreements. As of December 31, 2018, the balance of estimated provision for onerous contract amounted to \$795,265.
• (c) In March 2014, the Group 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 contracts assets, please refer to item C below.

B. Purchases of goods

	Years ended December 31,
		2018	2017
Key management:
Legal entity director
China Steel Corporation	\$	2,165,572 \$		1,240,118
CPC Corporation, Taiwan		93,690		121,405
Other related parties:
Yung Chi Paint & Varnish Mfg. Co.,
Ltd.		4,170		2,353
		2,263,432		1,363,876

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. Contract assets

		December 31, 2018		December 31, 2017
Other related parties:
China Steel Express Corporation	S	2,195,189 \$
Fuhai Wind Farm Corporation (Note)		190,190		190,190
		2,385,379		190,190
Less: Loss allowance		191,946)		190,190)
		2,193,433	S

Note: The Group has recognised impairment loss amounting to \$190,190 since the contract assets may not be recovered as assessed.

Information on effects of initial application of IFRS 15 is provided in Note 3(1).

D. Accounts receivable

	December 31, 2018		December 31, 2017
Key management:
Legal entity director
CPC Corporation, Taiwan	\$	\$	22,990
Other related parties:
Yung Chi Paint & Varnish Mfg. Co.,
Ltd.			1,986
	\$	\$	24,976
E. Other receivables
	December 31, 2018		December 31, 2017
Key management:
Legal entity director
China Steel Corporation	\$ 83,760	\$	24,942
F. Prepaid accounts
	December 31, 2018		December 31, 2017
Key management:
Legal entity director China Steel Corporation	\$	\$
CPC Corporation, Taiwan	165,925 7,515		95,958 30,157
	\$ 173,440	${\bf S}$	126,115
G. Refundable deposits
	December 31, 2018		December 31, 2017
Other related parties:
Yung Chi Paint & Varnish Mfg.
Co., Ltd.	\$	\$	2,182
H. Contract liabilities
	December 31, 2018		December 31, 2017
Other related parties:
China Steel Express Corporation	\$		287,090
Information on effects of initial application of IFRS 15 is provided in Note 3(1).
I. Notes payable
	December 31, 2018		December 31, 2017
Key management:
Legal entity director
China Steel Corporation	\$ 428,768		223,073

$\sim 10^{-1}$

J. Accounts payable

	December 31, 2018	December 31, 2017
Other related parties:
Yung Chi Paint & Varnish Mfg. Co., Ltd.	S	\$ 1,947
K. Payables to customers on construction contracts
		December 31, 2017
Other related parties:
China Steel Express Corporation		1,023,847
Information on effects of initial application of IFRS 15 is provided in Note 3(1).
L. Endorsements and guarantees provided to related parties
	December 31, 2018	December 31, 2017
Other related parties:
Fuhai Wind Farm Corporation		886,000

As of December 31, 2018 and 2017, the actual amount drawn down of endorsements and guarantees provided by the Group to other related parties amounted to \$0 and \$75,000 respectively. Because Fuhai Wind Farm Corporation failed to comply with the regulation of the "Incentive Program of Offshore Wind Power Demonstration System", the Bureau of Energy exercised the right of performance bond and took back the entire government grant. Accordingly, the Group recognised losses amounting to \$75,000 in the second quarter of 2018. In addition, the Group cancelled the entire amount of endorsements and guarantees to Fuhai Wind Farm Corporation as resolved by the Board of Directors on November 9, 2018.

M. Others

Details on capital increase from the government related entities are provided in Note 6(18).

(3) Key management compensation

	Years ended December 31,
		2018		2017
Salaries and other short-term employee benefits		22,746 \$		25,311
Post-employment benefits		728		2,715
Share-based payments		314
	œ	23.788	S	28,026

8. PLEDGED ASSETS

None.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

(1) The balance of the Group's unused letters of credit for import of materials is as follows:
		December 31, 2018		December 31, 2017
Balance of unused letters of credit	\$	707,184	\$	1,224,209
(2) The amounts of unfulfilled contract obligations of the Group's contracts are as follows:
		December 31, 2018		December 31, 2017
Unfulfilled customer contract obligations	\$	36,528,989	S	15,120,420
(3) The guaranteed credit by banks for the Group's construction projects is as follows:
		December 31, 2018		December 31, 2017
Guaranteed credit by banks	Ś	5,615,049 \$		4,522,610
(4) The amount of the Group's purchase contracts and outsourcing construction contracts to be paid is
as follows:
		December 31, 2018		December 31, 2017
Purchase contracts to be paid	\$	8,849,060	S	3,698,067
Outsourcing construction contracts
to be paid		1,363,050		1,266,499
		10,212,110	\$	4,964,566
(5) The amount of construction performance promissory note issued by the Group for contracted
construction is as follows:
		December 31, 2018		December 31, 2017
Construction performance promissory		99,850	\$	99,850
note

(6) The non-cancellable operating leases with more than one-year lease term for the Group are stated in Note 6 (29).

(7) 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") on August 19, 2013, 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 Group amounted to NT\$886 million. As of December 31, 2018 and 2017, the actual amount drawn down amounted to \$0 and \$75,000 respectively. Please refer to Note 7 for details.

Because Fuhai Wind Farm Corporation failed to comply with the regulation of the "Incentive Program of Offshore Wind Power Demonstration System", the Bureau of Energy exercised the right of performance bond and took back the entire government grant. Accordingly, the Group recognised losses amounting to \$75,000 for the year ended December 31, 2018.

In addition, the Ministry of Economic Affairs claimed past due liquidated damages amounting to \$ 88.6 million from Fuhai Corporation, as a joint-originator of the Incentive Program, the Group was committed to be jointly responsible for Fuhai Corporation. Currently, the case is still ongoing. According to the Group's designated lawyer, the Ministry of Economic Affairs has not indicated its intention of claiming the liquidated damages from the Group and the Group has not reached the payment stage, therefore, the Group did not estimate the possible losses on liquidated damages.

• (8) The ships under construction have all been insured with shipbuilding insurance. On September 14, 2016, Typhoon Meranti caused damages in a third party's property and thus claimed for compensation of approximately NT\$806 million. The case is still ongoing. However, according to the Group's designated lawyer, the damage loss is covered by the insurance so no material impact on the Group's operation is expected.
• (9) The Group was commissioned by Fuhai Wind Farm Corporation for offshore wind power maritime engineering (details are provided in Note $7(2)$ A (c)) and Zhongwei Wind Farm Corporation (Zhongwei Corporation) undertook the construction of the meteorological observation tower, selfelevating lifting platform for demonstration unit and demonstration wind farm, fan lifting and other constructions of the aforementioned engineering. Zhongwei Corporation claimed that the Group did not notify them the performance date leading to their damages and informed the Group to pay US\$ 2.5 million to compensate their losses. The Group disagreed with the claim since Zhongwei Corporation did not meet the requirements of payment terms in the contract and Zhongwei Corporation filed a lawsuit in Taiwan Kaohsiung District Court. According to the Group's designated lawyer, the impact of this lawsuit depends on the litigation proceedings and the results of the judgement.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

Details of cash capital increase of the Company are provided in Note 6(18).

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.

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

	December 31, 2018	December 31, 2017
Gearing ratio	74%	71%

(2) Financial instruments

A. Financial instruments by category

	December 31, 2018	December 31, 2017
Financial assets
Financial assets at amortised cost/loans
and receivables
Cash and cash equivalents	\$ 137,942	\$ 281,814
Notes receivable		5,790
Accounts receivable (including related parties)	900,190	1,386,926
Other receivables (including related
parties)	102,860	139,796
Guarantee deposits paid	30,750	20,469
	\$ 1,171,742	\$ 1,834,795
Financial liabilities
Financial liabilities at fair value through profit or loss
Financial liabilities held for trading	\$	\$ 280
Financial liabilities at amortised cost
Short-term borrowings	1,290,150	2,287,784
Short-term notes and bills payable		699,769
Notes payable (including related
parties)	428,768	223,088
Accounts payable	713,262	1,170,559
Other payables	1,069,263	1,284,818
Long-term borrowings	5,698,537	5,498,057
Long-term notes and accounts payable	670,361	659,156
Guarantee deposits received	184,928	172,614
	\$ 10,055,269	\$ 11,996,125

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. To minimise any adverse effects on the financial performance of the Group, derivative financial instruments, such as forward foreign exchange contracts are used to hedge certain exchange rate risk. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.

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 and JPY. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The companies are required to hedge their entire foreign exchange risk exposure with the Group treasury. Exchange rate risk is measured through a forecast of highly probable USD revenues and JPY expenditures. Forward foreign exchange contracts are adopted to minimise the volatility of the exchange rate affecting forecast foreign currency income and cost of inventory purchases.
• 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:

	December 31, 2018
		Foreign Currency (in thousands)	Exchange Rate	Book Value (NTD)
Financial assets
Monetary items
USD:NTD	\$	27,197	30.665	\$ 833,996
Financial liabilities
Monetary items
JPY:NTD		37,843	0.2802	10,604
		December 31, 2017
		Foreign Currency
		(in thousands)	Exchange Rate	Book Value (NTD)
Financial assets
Monetary items
USD:NTD	\$	31,713	29.710	\$ 942,193
Financial liabilities
Monetary items
JPY:NTD		737	29,810	21,970

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:

	Years ended December 31,
If NTD had appreciated/
depreciated by 1% against tax		2018			2017
Increase (decrease) in net profit (loss) after tax	S		6.587			7,638

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, 2018 and 2017, amounted to \$57,217 and \$16,299, respectively.

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

Effective 2018

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. The main factor is that counterparties could not repay in full the accounts receivable and other receivables based on the agreed terms. 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.

Contract assets, accounts receivable and other receivables

i. The Group appointed external agency to perform proper credit investigations for customers before signing the contracts of shipbuilding, vessel construction and machinery manufacturing. The results of the credit investigations were low risk, therefore, the credit risks of relevant receivables (primarily under accounts receivable or contract assets) were low risk

• ii. The Group's contract assets and accounts receivable were due from government (including state-owned enterprises) and general business. To maintain the quality of the accounts receivable and contract assets, the Group has established credit risk management procedures for operating. The Group considered customers' financial status, historical trading record and future economic condition in accordance with types of customer, and took into account factors that may influence customers' ability to pay to assess the credit quality of customers. The Group estimated expected credit loss by individual assessment.
• iii. In line with credit risk management procedure, when the counterparty failed to fulfil the mutual agreements nor to conduct negotiation, the default has occurred.
• iv. On December 31, 2018, the expected loss rate of not past due accounts receivable and contract assets were 1% and 0.08%, respectively, when estimating loss allowance. In addition, the Group's past due receivables amounted to \$791,924, because the counterparty failed to fulfil the mutual agreements, and the Group estimated the provision for expected credit loss amounting to \$315,838 by considering customers' financial status, historical experience and other factors.

	Year ended December 31, 2018
		Accounts receivable	Contract assets
At January 1 LAS 39	S	15,529	S
Adjustments under new standards				190,190
At January 1 IFRS 9		15,529		190,190
Provision for impairment		304,070		5,288
At December 31, 2018		319,599	\$	195,478

v. Movements in relation to the Group applying the simplified approach to provide loss allowance for accounts receivable and contract assets are as follows:

The loss provision recognised for the year ended December 31, 2018, of which the impairment loss arising from accounts receivable and contract assets generated from customers' contracts amounted to \$309,358.

• vi. Information on credit risk of 2017 is provided in Note 12(4).
• (c) Liquidity risk

The table below analyses the Group's non-derivative financial liabilities and net-settled or gross-settled 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.

December 31, 2018:

		Less than		Between 1	Between 2
		l year		and 2 years	and 5 years		Over 5 Years
Non-derivative financial liabilities:
Short-term borrowings	S	1,293,864	S	- \$		- \$
Payables		2,430,550		182,186	304,074		445,471
Long-term borrowings		37,429		1,338,486	4,433,415
		3,761,843		1,520,672	4,737,489		445,471

Derivative financial liabilities: Note.

December 31, 2017:

	Less than		Between 1		Between 2
	1 year		and 2 years		and 5 years		Over 5 Years
Non-derivative financial liabilities:
Short-term borrowings	\$ 2,290,668	- \$		- \$	۰.	- \$
Short-term notes and bills payable	700,000
Payables	2,880,775		105,209		161,087		595,571
Long-term borrowings	29,772		30,829		5,552,884
	5,901,215		136,038		5,713,971		595,571
Derivative financial liabilities
Total
Forward exchange contracts
- inflow	105,840	S
- outflow	106,120

The Group has also repaid the principal of \$200,164 beforehand by the end of January, 2018, in addition to the principal of \$200,000 and interest of \$6,458 that were due within 2 to 5 years by December 31, 2017. 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.

(3) Fair value estimation

• A. 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.

• B. Fair value information of investment property at cost is provided in Note 6(7).

• C. Financial instruments not measured at fair value

The carrying amounts of cash and cash equivalents, contract assets, notes receivable, accounts receivable (including related parties), other receivables (including related parties), short-term borrowings, contract liabilities, notes payable (including related parties), accounts payable, other payables and long-term borrowings (including current portion) are approximate to their fair values.

• D. 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, 2018 and 2017 is as follows:
• (a) The related information of natures of the assets and liabilities 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	ጥ	S	S 280 $\blacksquare$	280

As of December 31, 2018: There was no related liabilities as mentioned above.

(b) 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, 2018 and 2017, there was no transfer between Level 1 and Level 2.

(4) Effects on initial application of IFRS 9 and information on application of IAS 39 in 2017

• A. Summary of significant accounting policies adopted in 2017:
• (a) Financial assets at fair value through profit or loss
  • i. They 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:

(i) Hybrid (combined) contracts; or

• (ii) They eliminate or significantly reduce a measurement or recognition inconsistency; or
• (iii) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.
• ii. 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.
• iii. Financial assets at fair value through profit or loss are initially recognised at fair value. Related transaction costs are recognised in current 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. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in 'financial assets measured at cost'.
• (b) Accounts receivable

Accounts receivable are claims resulting from undertaking construction projects or providing services. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (c) Impairment of financial assets
• i. 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.

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

  • (i) Significant financial difficulty of the issuer or debtor;
  • (ii) A breach of contract, such as a default or delinguency in interest or principal payments;
  • (iii) 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;
  • (iv) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
  • (v) The disappearance of an active market for that financial asset because of financial difficulties:

• (vi) 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;

• (vii) 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:
• (viii) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
• iii. 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:
• (i) Financial assets 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.

(ii) Financial assets 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.

(d) Derivative 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.

• (e) Financial liabilities at fair value through profit or loss
• i. Financial liabilities at fair value through profit or loss are financial liabilities held for trading or are designated as a financial liability as at fair value through profit or loss on initial recognition. Financial liabilities are classified as financial liabilities held for trading if acquired principally for the purpose of purchasing 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 at initial recognition:
  • (i) Hybrid (combined) contracts; or
  • (ii) They eliminate or significantly reduce a measurement or recognition inconsistency; or
  • (iii) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management policy.
• ii. Financial liabilities at fair value through profit or loss are initially recognised at fair value. Related transaction costs are recognised in current 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. Derivatives that are linked to unquoted equity instruments without reliably measured fair value and must be settled by delivery of such unquoted equity liabilities are presented in 'financial liabilities at cost'.
• B. There was no significant reconciliation of the Group transferred from December 31, 2017, IAS 39, to January 1, IFRS 9.
• C. The significant accounts as of December 31, 2017 are as follows:

Financial liabilities at fair value through profit or loss

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

• (a) The Group's net gains on financial assets and liabilities held for trading recognised for the year ended December 31, 2017 amounted to \$11,463.
• (b) The counterparties of the Group's investments in debt instruments have good credit quality.
• (c) The non-hedging derivative instruments transaction and contract information are as follows:

	December $31,2017$
	Contract amount
Derivative financial liabilities	(notional principal)	Contract period
Forward foreign exchange contracts IPY 400,000 thousand $2017.12.07 \sim 2018.02.09$

(d) 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.

• D. Information relating to credit risk on December 31, 2017 and for the year ended December 31, 2017 is shown as follows:
• (a) 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. 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. The Group's accounts receivable are due from government (including state-owned enterprises) and general business. To maintain the quality of the accounts receivable, the Group has established credit risk management procedures for operating.

The Group considered customers' financial status, historical trading record and present economic condition, and took into account factors that may influence customers' ability to pay to assess the credit quality of customers. The Group assessed the credit quality of customers periodically, the credit quality of accounts receivable that were neither past due nor impaired was good.

• (b) For the year ended December 31, 2017, no credit limits were exceeded during the reporting periods, and management does not expect any significant losses from non-performance by these counterparties.
• (c) The Group does not hold any individual accounts receivable that are significantly impaired.
• (d) Movement analysis of financial assets that were impaired for the year ended December 31, 2017 is as follows:

	Individual provision	Group provision	Total
At January 1	- S	8.176 \$	8,176
Provision for impairment	-	7.353	7,353
At December 31	$\overline{\phantom{0}}$	15,529	15,529

(5) Effects of initial application of IFRS 15 and information on application of IAS 11 and IAS 18 in 2017

• A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below.

• (a) Construction contracts

  • i. 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 are likely to be recoverable.

• ii 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.

• iii 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'.
• (b) Service revenue (ship-repair revenue) is recognised when owners of the ship completes inspection.
• B. The revenue recognised by using above accounting policies for the year ended December 31, 2017 are as follows:

	Year ended December 31, 2017
Construction contract revenue	S.	13,944,784
Sales revenue		1,345,813
Service revenue		1,098,141
Others		15,606
		16,404,344

C. The construction contract receivable/payable recognised by using above construction contract accounting policies on December 31, 2017 are as follows:

	Year ended December 31, 2017
Aggregate costs incurred plus recognised profits	\$ 8,900,203
(less recognised losses)
Less: Progress billings	5,658,437)
Net balance sheet position for construction in progress	3, 241, 766
Presented as:
Receivables from customers on construction contracts	\$ 5,326,519
Payables to customers on construction contracts	1,060,906)
Payables to customers on construction contracts -
related parties	1,023,847)
	3.241.766

As at December 31, 2017, there has been no construction retentions related to construction contracts.

D. There is no effect on current comprehensive income statements and the effects and description on current balance sheets if the Group continues adopting above accounting policies are as follows:

$\sim$ $\sim$ $\sim$

$\sim$ $\sim$

			December 31, 2018
		Balance	Balance by		Effects from
		by using	using previous		changes in
Balance sheet items		IFRS 15	accounting policies		accounting policy
Contract assets	S	6,654,429	\$	S	6,654,429
Receivables from customers on construction contracts			6,042,344		6,042,344)
Contract liabilities		2,751,268)			2,751,268)
Payables to customers on construction contracts			4.445,662)		4,445,662
Provisions		2,311,767)			2,311,767)
	\$	1,591,394	1.596,682	(\$	5,288

Note: IFRS 15 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.

Under IFRS 9, the Group provided expected credit loss for contract assets for the year ended December 31, 2018 amounting to \$5,288.

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: None.
• 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 Decision-Maker 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.

(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 operating segments

The segment information provided to the Chief Operating Decision-Maker for the reportable segments for the years ended December 31, 2018 and 2017 is as follows:

	Year ended December 31, 2018
						Adjustments
						and
		Construction of		All other		eliminations
		ships and vessels		segments		(Note 1)		Total
Revenue from external customers	\$	11,821,384	\$	1,190,942	\$		\$	13,012,326
Inter-segment revenue				66,086		66,086)
Total segment revenue	\$	11,821,384	\$	1,257,028	$($ \$	66,086)	\$	13,012,326
Segment (loss) profit	′\$	3,067,033)	\$	473,169	\$		(\$	2,593,864)
Undistributed amount:
Operating expenses							$($ \$	810,924)
Depreciation and amortization								12,809)
Interest income								7,809
Interest expense							€	70,608)
Income tax benefit								238,857
Loss on investments
accounted for using equity method								2,653)
Total undistributed amount							(\$	650,328)
Segment assets (Note 2)							\$	22,826,431
Investments accounted
for under equity method							\$	10,992
Increase in non-current assets							\$	593,489
Segment liabilities (Note 2)							\$	16,840,877

$\mathcal{L}^{\text{max}}{\text{max}}$ , $\mathcal{L}^{\text{max}}{\text{max}}$

$\frac{1}{2}$ , $\frac{1}{2}$

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

$\hat{\mathcal{L}}$

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.

$\Delta \phi = 0.000$

$\sim 10^{-10}$

(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,
		2018	2017
Segment loss	(\$	3,067,033) $(S$	5,649,861)
Other segment profit (loss)		473,169	72,027
Total segments		$2,593,864$ (	5,721,888)
Operating expenses		823,733) (	507,077)
Non-operating income and expenses		78,656	124,077)
Loss before tax and discontinued operations	′S	3,338,941) (S	6,353,042)

(5) Information on products and services

$\mathcal{A}^{\mathcal{A}}$

$\mathbb{R}^2$

÷.

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

	Years ended December 31,
		2018	2017
Revenue from construction of ships and vessels	\$	11,821,384	\$	13,913,302
Revenue from ship/vessel repair		976,476		1,075,447
Revenue from machinery manufacturing		85,605		31,482
Sales revenue				1,345,813
Revenue from anti-corrosion coating		120,698		22,694
Other revenue		8,163		15,606
Total		13,012,326		16,404,344

(6) Geographical information

Revenue information by geographic area:

				Year ended and as of
Revenue				Revenue		Non-current assets
\$ 6,552,438	\$	10,804,096	\$	7,537,306	S	10,820,829
1,016,660				4,304,975
4,877,783				2,624,566
				1,345,813
378,789				497,386
32,874				41,704
				$\bullet$
153,782				52,594
13,012,326	S	10,804,096	\$	16,404,344	R	10,820,829
			Year ended and as of December 31, 2018 Non-current assets			December 31, 2017

(7) Major customer information

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

		Year ended December 31, 2018
Clients		Sales amount	Department
Client G	\$		4,877,783 Construction of ships and vessels
Client C			2,128,515 Construction of ships and vessels
Client B			2,057,084 Construction of ships and vessels
Client E		1,375,937	Construction of ships and vessels
	ς	10,439,319

	Year ended December 31, 2017
Clients	Sales amount	Department
Client B	\$	8,525,296 Construction of ships and vessels
Client G		2,624,566 Construction of ships and vessels
Client I	2,220,273	Construction of ships and vessels
	\$ 13,370,135

$\ddotsc$ $01.0017$

			Footnote	Note 3, 4 Note 3 and 5
	(Except as otherwise indicated) Expressed in thousands of NTD	Mainland	China	z z
		Provision of Provision of Provision of subsidiary to the party in parent	company	z z
		endorsements endorsements/ endorsements/ company to	subsidiary	z ≻
		total amount of leparantees guarantees by guarantees to endorsements/ by parent guarantees Ceiling on	provided	\$2,970,879 2,970,879
		to net asset value guarantee amount of the endorser/ endorsement accumulated Ratio of	guarantor company
		endorsements/ secured with Amount of guarantees	collateral
Year ended December 31, 2018		Actual amount	drawn down
		December 31, endorsement amount at Outstanding guarantee	2018	₩
		outstanding endorsement amount as of December 31, guarantee Maximum	2018	437,938 886,000
		Relationship endorsements/ provided for a guarantees Limit on	single party	594,175 \$ 594,175
		with the endorser/	guarantor	Note 1 Note 2
	endorsed/guaranteed Party being		Company name	Note $1:$ The endorser/guarantor parent company and its subsidiaries ionally own more than 50% voting shares of the endorsed/guaranteed company (Hong Kong) Limited Power Engineering Fuhai Wind Farm Corporation
		Endorser	guarantor	CSBC Corporation, Blue Ocean Wind CSBC Corporation, Taiwan Taiwan
	Table (		Number	o 0

l,

Provision of endorsements and guarantees to others CSBC CORPORATION TAIWAN

s
P ļ i kumh $\frac{3}{2}$

Note 2: Having business relationship.

Note 3 : In accordance with the Company's Management Directions for Provision of Endorsements are Guaraces 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 compart 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.

In addition, the Group cancelled the entire amount of endorsements and guarantees to Fuhai Wind Farm Corporation as resolved by the Board of Directors on November 9, 2018.

Note 5: Details of loss on endorsements and guarantees are provided in Note 9(7).

Table 2

$\cdots$

$\ddot{\phantom{0}}$

CSBC CORPORATION TAIWAN

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, 2018

Expressed in thousands of NTD
(Except as otherwise indicated)

Notes/accounts receivable (payable)

Differences in transaction terms compared to third

				Footnote	Note 2	Note 3
	ercentage of total	vtes/accounts	receivable	(payable)
					428,768)
					Note 1 (\$
party transactions						Note 1
					Unit price Credit term Balance Note 1 Note 1 (\$ 428,76	Note 1
				Credit term	Note 1	Note 1
		Percentage of	otal purchases	(sales)
Transaction				Amount	2,165,752	2,147,665)
			urchases	(sales)	urchases	នី
			Relationship with the	counterparty	Corporate Director	Subsidiary of the
				Counterparty	China Steel Corporation	China Steel Express Corporation
				Purchaser/seller	CSBC Corporation, Taiwan	CSBC Corporation, Taiwan

Note 1: Based on the contract, the payment terms is the same as in general transactions.

Note 2: The prepayments to China Steel Corporation amounted to \$165,925 and other receivables amounted to \$83,760.

Note 3: The Company recognised contract assets for China Steel Express Corporation amounting to \$2,195,189.

٦
ï
ŗ
Ē
: :
i
i
î

Significant inter-company transactions during the reporting periods

Year ended December 31, 2018

Table 3

Expressed in thousands of NTD (Except as otherwise indicated)

Transaction

perating revenues or total assets Percentage of consolidated total (Note 3)
Transaction terms	Note 4	Note 4	Note 4
Amount	64.620	3,372	1466
General ledger account	Outsourcing expenses	Accounts payable	Outsourcing expenses
Relationship (Note 2)	Parent company to subsidiary	Parent company to subsidiary	Parent company to subsidiary
Counterparty	BLUE ACE CORPORATION	BLUE ACE CORPORATION	CSBC Coating Solutions Co., Ltd.
Company name	0 CSBC Corporation, Taiwan	CSBC Corporation, Taiwan	CSBC Corporation, Taiwan
Note 1) Number

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 subsidia 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 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.

Year ended December 31, 2018

(Except as otherwise indicated) Expressed in thousands of NTD

$\frac{1}{\sqrt{2}}$

									Net profit
				Initial investment amount			Shares held as at December 31, 2018		(loss)	Investment
									of the investee for the year	recognised by the income(loss)
				Balance	Balance				ended	Company for the
				as at December as at December		Number of			December 31,	year ended
Investor	Investee	Location	Main business activities	31,2018	31,2017	shares	Ovnership (%)	Book value	2018	December 31, 2018	Footnote
CSBC Corporation, Taiwan	Solutions Co., Ltd. CSBC Coating	Taiwan	Marine coating, steel structure \$ treatment, and high-tech anti- painting works, surface corrosion etc.	87,500	87,500	8,750,000	70.00 S	102,192 Ø	424 Ø	297 ŵ,
CSBC Corporation, Taiwan	Windpower Training Taiwan International Corporation Ltd.	Taiwan	Research and development, energy technology service	12,000	ı	1,200,000	12.00	10,992	(9658)	1,008)
CSBC Corporation, Taiwan	Taiwan Generations Corporation	Taiwan	component, power generation Manufacturing of metal structure, building and others	4,000	4,000	400,000	40.00	$\bar{1}$	5,566) (	1,645)	Note 1
CSBC Corporation, Taiwan	Fuhai Wind Farm Corporation	Taiwan	Wind power industry	178,156	197,344	15,000,000	37.97	$\bar{1}$	41,163)	ı	Note 1
CSBC Coating Solutions Co., $1d$	CORPORATION BLUE ACE	Taiwan	Marine coating, steel structure treatment, and high-tech anti- painting works, surface corrosion etc.	25,000	25,000		100.00	25,524	1224	$\pmb{\mathsf{I}}$	Note 2
CSBC Coating Solutions Co., $\mathbb{I}^d$	Power Engineering Blue Ocean Wind (Hong Kong) Limited		Hong Kong Marine works services	304	304	$\mathbf{S}$	100.00	294	164	$\bullet$	Note 2

Note 1: Please refer to Note 6(5) for details about investments accounted for under equity method.

Note 2: The amount has been included in the profit (loss) of the Company's investee accounted for using equity method and has been recognised as gain (loss) on investment.

Table 4, Page 1

Table 4