CSBC — Audit Report / Information 2016

Nov 9, 2016

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2016 AND 2015

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

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES

Declaration of Consolidated Financial Statements of Affiliated Enterprises

Year ended December 31, 2016, 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 22, 2017

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REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR 16003198

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, 2016 and 2015, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparations of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

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

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Key audit matters

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

Key audit matter – Accounting estimates and assumptions for total cost of construction contract

Description

Please refer to Note 4(13) for description of accounting policy on construction contracts. Please refer to Note 5 for critical accounting estimates and assumptions for total cost of construction contracts.

The Group is engaged in in the business of designing and building of various ships and cruisers. Assumptions for estimated construction cost include cost for equipment, material, labor and etc. Data used for assumptions involves subjective judgement and accounting estimates 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 relevance 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. Obtaining and assessing the effectiveness of CSBC Group’s internal control regarding the estimation process of total cost of construction contract. This includes:

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

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

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

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

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

Key audit matter – Assessment of construction loss

Description

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

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

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

How our audit addressed the matter

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

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

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

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

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• (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 unmodified opinion on the parent company only financial statements of CSBC CORPORATION TAIWAN, as at and for the years ended December 31, 2016 and 2015.

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

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

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

Those charged with governance, including 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.

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

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

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

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

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

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

6.

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

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

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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.

Liu, Tzu-Meng[Lin, Tzu-Shu ] For and on behalf of PricewaterhouseCoopers, Taiwan March 22, 2017

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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.

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CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(3)(22) 6(22) and 7 6(4)(22) 6(4)(22) and 7 7 6(5)(22) 6(6) and 7 6(8) 6(9) and 10 6(10) 6(11) 6(29) 7	December31,2016 AMOUNT % $ 191,133 1 - - - - 745,273 3 3,764 - 7,743,504 28 1,793,119 6 66,608 - 42,040 - 3,852,866 14 1,118,929 4 573 - 15,557,809 56 166,616 1 10,709,596 39 234,382 1 28,847 - 888,560 3 85,132 - 12,113,133 44 $ 27,670,942 100	December31,2015	December31,2015
		AMOUNT $ 191,133 - - 745,273 3,764 7,743,504 1,793,119 66,608 42,040 3,852,866 1,118,929 573 15,557,809 166,616 10,709,596 234,382 28,847 888,560 85,132 12,113,133 $ 27,670,942	AMOUNT $ 723,724 99,000 2,400 290,071 21,950 6,485,113 - 93,854 63,411 2,383,606 1,581,190 714 11,745,033 3,051 10,999,508 234,757 36,945 640,312 79,960 11,994,533 $ 23,739,566	%
Current assets 1100 Cash and cash equivalents 1130 Held-to-maturity financial assets - current 1150 Notes receivable, net 1170 Accounts receivable, net 1180 Accounts receivable - related parties 1190 Receivables from customers on construction contracts 1195 Receivables from customers on construction contracts - related parties 1200 Other receivables 1210 Other receivables - related parties 130X Inventory 1410 Prepayments 1479 Other current assets, others 11XX Total current Assets Non-current assets 1550 Investments accounted for using equity method 1600 Property, plant and equipment, net 1760 Investment property, net 1780 Intangible assets, net 1840 Deferred income tax assets 1920 Refundable deposits 15XX Total non-current assets 1XXX Total assets				3 1 - 1 - 27 - - - 10 7 -
				49
				- 46 1 - 3 1
				51
				100

(Continued)

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CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	Notes 6(12) 6(13) 6(22) and 7 6(22) and 7 6(4)(22) 6(4)(22) and 7 6(14) 6(18)(22) 6(16) 6(29) 6(16) 6(15)(16) 6(17) 6(19) 6(20) 6(21)(29) 6(31), 7 and 9 10	December31,2016 AMOUNT % $ 6,395,125 23 999,735 4 324,457 1 1,080,044 4 2,612,399 9 - - 1,412,155 5 3,586 - 139,687 1 150,000 1 10,302 - 13,127,490 48 1,324,910 5 564,603 2 26,897 - 180,514 - 203,717 1 13,153 - 2,313,794 8 15,441,284 56 7,435,652 27 1,965 - 1,065,297 4 3,190,349 11 489,400 2 12,182,663 44 46,995 - 12,229,658 44 $ 27,670,942 100	December31,2015	December31,2015
		AMOUNT $ 6,395,125 999,735 324,457 1,080,044 2,612,399 - 1,412,155 3,586 139,687 150,000 10,302 13,127,490 1,324,910 564,603 26,897 180,514 203,717 13,153 2,313,794 15,441,284 7,435,652 1,965 1,065,297 3,190,349 489,400 12,182,663 46,995 12,229,658 $ 27,670,942	AMOUNT $ 516,596 - 198,399 1,003,059 3,264,848 362,765 1,363,999 6,394 167,391 40,000 5,344 6,928,795 1,324,910 808,917 415,629 180,699 204,120 12,124 2,946,399 9,875,194 7,435,652 1,965 1,018,481 3,190,349 2,166,890 13,813,337 51,035 13,864,372 $ 23,739,566	%
Current liabilities 2100 Short-term borrowings 2110 Short-term notes and bills payable 2160 Notes payable - related parties 2170 Accounts payable 2190 Payables to customers on construction contracts 2195 Payables to customers on construction contracts - related parties 2200 Other payables 2230 Current income tax liabilities 2250 Provisions for liabilities - current 2305 Other current financial liabilities - current 2310 Unearned receipts 21XX Total current Liabilities Non-current liabilities 2570 Deferred income tax liabilities 2610 Long-term notes, accounts and overdue payable 2630 Long-term deferred revenue 2640 Net defined benefit liability, non- current 2645 Guarantee deposits received 2670 Other non-current liabilities 25XX Total non-current liabilities 2XXX Total Liabilities Equity attributable to owners of parent Share capital 3110 Common stock Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings 31XX Total equity attributable to owners of the parent 36XX Non-controlling interest 3XXX Total equity Significant contingent liabilities and unrecognized contract commitments Significant disaster loss 3X2X Total liabilities and equity				2 - 1 4 14 1 6 - 1 - -
				29
				6 3 2 1 1 -
				13
				42
				31 - 4 14 9
				58
				-
				58
				100

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

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CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2016 AND 2015

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

Items

2016 2015 Notes AMOUNT % AMOUNT % 6(23) and 7 $ 15,747,699 100 $ 21,457,696 100 6(5)(11)(26)(27) and 7 ( 16,807,927 ) ( 107) ( 20,463,252) ( 95) ( 1,060,228 ) ( 7) 994,444 5 6(11)(26)(27) ( 92,352 ) - ( 77,537) - ( 310,254 ) ( 2) ( 324,607) ( 2) ( 102,196 ) ( 1) ( 155,666) ( 1) ( 504,802 ) ( 3) ( 557,810) ( 3) ( 1,565,030 ) ( 10) 436,634 2 6(2)(10)(16)(24) and 10 49,984 - 106,717 1 6(25) and 10 49,475 - 50,187 - 6(16)(28) ( 36,052 ) - ( 13,657) - 6(8) ( 33,779 ) - ( 856) - 29,628 - 142,391 1 ( 1,535,402 ) ( 10) 579,025 3 6(29) 248,593 2 ( 106,241) ( 1) ($ 1,286,809 ) ( 8) $ 472,784 2 6(17) $ 33,986 - $ 10,921 - 6(29) ( 5,778 ) - ( 1,856) - $ 28,208 - $ 9,065 - ($ 1,258,601 ) ( 8) $ 481,849 2 ($ 1,287,100 ) ( 8) $ 468,154 2 291 - 4,630 - ($ 1,286,809 ) ( 8) $ 472,784 2 ($ 1,258,892 ) ( 8) $ 477,219 2 291 - 4,630 - ($ 1,258,601 ) ( 8) $ 481,849 2 6(30) ($ 1.73) $ 0.63 6(30) ($ 1.73) $ 0.63

4000 Operating revenue 5000 Operating costs 5900 Net operating (loss) profit Operating expenses 6100 Selling expenses 6200 General and administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Operating (loss) profit Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7060 Share of loss (profit) of associates and joint ventures accounted for under equity method 7000 Total non-operating income and expenses 7900 (Loss) profit before income tax 7950 Income tax benefit (expense) 8200 (Loss) profit for the year Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss 8311 Gains on remeasurements of defined benefit plans 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss 8300 Other comprehensive income 8500 Total comprehensive income for the year (Loss) profit, attributable to: 8610 Equity holders of the company 8620 Non-controlling interest Total Comprehensive income attributable to: 8710 Equity holders of the company 8720 Non-controlling interest Total (Loss) earnings per share 9750 Basic (loss) earnings per share 9850 Diluted (loss) earnings per share

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

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CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY YEARS ENDED DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars)

2015 Balance at January 1, 2015 Distribution of 2014 earnings: Legal reserve Cash dividends Net profit for 2015 Other comprehensive income for 2015 Cash dividends distributed to non- controlling interests Balance at December 31, 2015 2016 Balance at January 1, 2016 Distribution of 2015 earnings: Legal reserve Cash dividends Net loss for 2016 Other comprehensive income for 2016 Cash dividends distributed to non- controlling interests Balance at December 31, 2016	Notes				Equity attributable to owners of the parent	Equity attributable to owners of the parent	Equity attributable to owners of the parent	Equity attributable to owners of the parent	Equity attributable to owners of the parent	Equity attributable to owners of the parent			Non- controlling interest	Totalequity
			Share capital - commonstock		Undistributed earnings			Retained Earnings			Total
							Legal reserve		Special reserve	Unappropriated retained earnings
	6(21) 6(21)		$ 7,435,652 - - - - - $ 7,435,652 $ 7,435,652 - - - - - $ 7,435,652		$ 1,965 - - - - - $ 1,965 $ 1,965 - - - - - $ 1,965		$ 973,403 45,078 - - - - $ 1,018,481 $ 1,018,481 46,816 - - - - $ 1,065,297		$ 3,190,349 - - - - - $ 3,190,349 $ 3,190,349 - - - - - $ 3,190,349	$ 2,106,532 ( 45,078) ( 371,783) 468,154 9,065 - $ 2,166,890 $ 2,166,890 ( 46,816) ( 371,782) ( 1,287,100) 28,208 - $ 489,400	$ 13,707,901 - ( 371,783) 468,154 9,065 - $ 13,813,337 $ 13,813,337 - ( 371,782) ( 1,287,100) 28,208 - $ 12,182,663	( (	$ 50,183 - - 4,630 - 3,778) $ 51,035 $ 51,035 - - 291 - 4,331) $ 46,995	$ 13,758,084 - ( 371,783) 472,784 9,065 ( 3,778) $ 13,864,372 $ 13,864,372 - ( 371,782) ( 1,286,809) 28,208 ( 4,331) $ 12,229,658

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

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CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars)

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

Notes 2016 2015 ( $ 1,535,402 ) $ 579,025 6(9)(26) 561,389 588,870 6(10)(26) 375 375 6(11)(26) 13,348 14,969 6(3) 2,611 ( 6,387 ) 6(8) 33,779 856 6(25) ( 824 ) 3,273 6(24) ( 1,972 ) ( 5,918 ) 6(28) 51,730 10,576 6(25) and 10 17,379 - 6(25) 2,369 286 2,400 ( 2,190 ) ( 457,813 ) 117,956 18,186 ( 1,965 ) ( 1,258,391 ) 5,774,751 ( 1,793,119 ) - 55,402 30,133 21,371 ( 28,035 ) ( 1,469,260 ) 5,739 462,261 343,584 141 277 824 ( 38,022 ) 126,058 38,990 76,985 ( 441,683 ) ( 1,025,495 ) ( 1,784,437 ) ( 362,765 ) ( 212,749 ) ( 27,262 ) 183,999 ( 27,704 ) ( 1,128 ) 4,958 ( 2,491 ) - 373,046 33,801 26,556 ( 6,474,640 ) 5,568,256 2,616 5,918 ( 41,392 ) ( 10,576 ) ( 8,241 ) ( 372,372 ) ( 6,521,657 ) 5,191,226

(Continued)

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CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2016 AND 2015

(Expressed in thousands of New Taiwan dollars)

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

Notes 2016 2015 $ 99,000 $ - 6(32) ( 178,156 ) - 6(32) ( 279,326 ) ( 516,328 ) 5,193 17,769 6(11) ( 5,250 ) ( 13,004 ) ( 612,781 ) ( 628,391 ) 607,609 618,649 ( 363,711 ) ( 521,305 ) 5,878,529 ( 2,889,770 ) 999,735 ( 999,599 ) ( 150,000 ) ( 45,000 ) 152,317 178,830 ( 152,720 ) ( 159,582 ) 1,029 143 ( 4,331 ) ( 3,778 ) 6(21) ( 371,782 ) ( 371,783 ) 6,352,777 ( 4,290,539 ) ( 532,591 ) 379,382 6(1) 723,724 344,342 6(1) $ 191,133 $ 723,724

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

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CSBC CORPORATION, TAIWAN AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

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

1. HISTORY AND ORGANIZATION

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

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

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

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

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the management on March 22, 2017.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

• None.

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

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

New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Investment entities: applying the consolidation exception (amendments to IFRS 10, IFRS 12 and IAS 28) Accounting for acquisition of interests in joint operations (amendments to IFRS 11)	January 1, 2016 January 1, 2016

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New Standards,Interpretations and Amendments

Effective date by International Accounting Standards Board

IFRS 14,‘Regulatory deferral accounts’ Disclosure initiative (amendments to IAS 1) Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38) Agriculture: bearer plants (amendments to IAS 16 and IAS 41) Defined benefit plans: employee contributions (amendments to IAS 19R) Equity method in separate financial statements (amendments to IAS 27) Recoverable amount disclosures for non-financial assets (amendments to IAS 36) Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) IFRIC 21, ‘Levies’ Improvements to IFRSs 2010-2012 Improvements to IFRSs 2011-2013 Improvements to IFRSs 2012-2014

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

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

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

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs endorsed by the FSC effective from 2017 are as follows:

endorsed by the FSC effective from 2017 are as follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Classification and measurement of share-based payment transactions (amendments to IFRS 2) Applying IFRS 9 ‘Financial instruments’ with IFRS 4 ‘Insurance contracts’ (amendments to IFRS 4) IFRS 9, ‘Financial instruments’ Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28) IFRS 15, ‘Revenue from contracts with customers’ Clarifications to IFRS 15, ‘Revenue from contracts with customers’ (amendments to IFRS 15)	January 1, 2018 January 1, 2018 January 1, 2018 To be determined by International Accounting Standards Board January 1, 2018 January 1, 2018

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New Standards,Interpretations and Amendments

Effective date by International Accounting Standards Board

IFRS 16, ‘Leases’ Disclosure initiative (amendments to IAS 7) Recognition of deferred tax assets for unrealised losses (amendments to IAS 12) Transfers of investment property (amendments to IAS 40) IFRIC 22, ‘Foreign currency transactions and advance consideration’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28, ‘Investments in associates and joint ventures’

January 1, 2019 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 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. The quantitative impact will be disclosed when the assessment is complete.

• A. IFRS 9, ‘Financial instruments’

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

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

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

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

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

Step 1: Identify contracts with customer.

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

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price.

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

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

• C. 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.

• D. 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.

• E. IFRIC 22, ‘Foreign currency transactions and advance consideration’

The Interpretation states that the date of the transaction for a foreign currency-denominated contract should be the date of initial recognition of the non-monetary asset or non-monetary liability arising from the receipt or payment of the advance consideration.

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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 judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

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

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

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

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

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

• B. Subsidiaries included in the consolidated financial statements:

Name of Investor Name of Subsidiary CSBC CORPORATION, TAIWAN CSBC Coating Solutions Co., Ltd. CSBC Coating Solutions Co., Ltd. Blue Ocean Wind Power Engineering (Hong Kong) Limited CSBC Coating Solutions Co., Ltd. BLUE ACE CORPORATION	Main business activities Marine coating, steel structure painting works, surface treatment, and high- tech anti-corrosion Marine works services Marine coating, steel structure painting works, surface treatment, and high-tech anti-corrosion	2016 2015 70 70 100 100 100 - % of shares held as of December 31,	Note
		2016 70 100 100
			Note

Note: The subsidiary was established in July 2016.

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

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

• E. Significant restrictions: None.

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

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

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(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.

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

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

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

• ii. Assets held mainly for trading purposes;

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

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

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

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

• ii. Liabilities arising mainly from trading activities;

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

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

(6) Cash equivalents

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

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

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

• a) Hybrid (combined) contracts; or

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

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

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

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

(8) Held-to-maturity financial assets

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

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

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

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

(9) Accounts receivable

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

(10) Impairment of financial assets

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

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

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

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

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

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

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

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

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

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

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

• (a) Financial assets measured at amortised cost

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

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(b) Financial assets measured at cost

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

(11) Derecognition of financial assets

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

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

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

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

(12) Inventories

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

(13) Construction contracts

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

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

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

• (14) Investments accounted for under the equity method / associates

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

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

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

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

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

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(15) Property, plant and equipment

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

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

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

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

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

(16) Leased assets/ leases (lessee)

• A. Based on the terms of a lease contract, a lease is classified as a finance lease if the Group assumes substantially all the risks and rewards incidental to ownership of the leased asset.

• (a) A finance lease is recognised as an asset and a liability at the lease’s commencement at the lower of the fair value of the leased asset or the present value of the minimum lease payments.

• (b) The minimum lease payments are apportioned between the finance charges and the reduction of the outstanding liability. The finance charges are allocated to each period over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

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• (c) Property, plant and equipment held under finance leases are depreciated over their estimated useful lives. If there is no reasonable certainty that the Group will obtain ownership at the end of the lease, the asset shall be depreciated over the shorter of the lease term and its useful life.

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

(17) Investment property

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

(18) Intangible assets

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

(19) Impairment of non-financial assets

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

(20) Borrowings

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

(21) Notes and accounts payable

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

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

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

• (a)Hybrid (combined) contracts; or

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

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

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

(23) Derecognition of financial liabilities

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

(24) Offsetting financial instruments

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

(25) Derivative financial instruments

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

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(26) Provisions

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

(27) Employee benefits

• A. Short-term employee benefits

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

B. Pensions

• (a) Defined contribution plans

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

• (b) Defined benefit plans

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

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

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

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C. Termination benefits

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

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

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

(28) Income tax

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

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

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

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

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

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

(29) Dividends

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

(30) Revenue recognition

• A. The Company’s revenue recognition:

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

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

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

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

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

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(31) Government grants

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

(32) Operating segments

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

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

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

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

None.

(2) Critical accounting estimates and assumptions

Construction contracts

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

Assumptions for estimated construction cost include cost for equipment, material, labor and etc. Data used for assumptions involves subjective judgement and accounting estimates 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, 2016 would have decreased by $363,997 or increased by $363,997 (the construction profit for the year ended December 31, 2015 would have decreased by $534,420 or would have increased by $480,444).

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6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash on hand and revolving funds Checking accounts and demand deposits Time deposits	December 31,2016 320 $ 118,962 71,851 191,133 $	December 31,2015
		452 $ 265,453 457,819
		723,724 $

• 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) Held-to-maturity financial assets - non-current

Corporate bonds	December31,2016 - $	December31,2015
		99,000 $

• A. The counterparties of the Group’s investments have good credit quality.

• B. The Group recognised interest income of $369 and $1,851 for amortised cost in profit or loss for the years ended December 31, 2016 and 2015, respectively.

• C. The Group classified the financial assets with maturity within 1 year as current items.

• D. As of December 31, 2016 and 2015, no held-to-maturity financial assets held by the Group were pledged to others.

(3) Accounts receivable, net

			December 31,2016			December 31,2015
Construction receivables		$	673,406		$	129,300
Repair receivables			80,043			166,336
Less: Allowance for doubtful
accounts	(		8,176)	(		5,565)
	$		745,273		$	290,071

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

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

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

At January 1 Provision for impairment At December 31 At January 1 Reversal for impairment At December 31		2016
	Individualprovision - $ - - $	Group provision 5,565 $ 2,611 8,176 $ 2015

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

• (4) Construction contract

		December 31,2016		December 31,2015
Aggregate costs incurred plus	$	16,291,984	$	11,605,726
recognised profits (less
recognised losses)
Less: progress billings	(	9,367,760)	(	8,748,226)
Net balance sheet position for
construction in progress	$	6,924,224	$	2,857,500
Presented as:
Receivables from customers on
construction	$	7,743,504	$	6,485,113
Receivables from customers on
construction-related parties		1,793,119		-
Payables to customers on
construction	(	2,612,399)	(	3,264,848)
Payables to customers on
construction-related parties		-	(	362,765)
	$	6,924,224	$	2,857,500

• A. As of December 31, 2016 and 2015, there has been no construction retentions related to construction contracts.

• B. The Group has collected the down payment in accordance with the terms of the shipbuilding construction related service contract. The construction is estimated to begin one year later; please refer to Note 6(15) ‘Long-term deferred revenue‘ for more details.

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• C. Please refer to Note 6(23) ‘Operating revenue’ for the information about construction contract revenue for the years ended December 31, 2016 and 2015.

• D. Information for the Group’s capitalisation of interest from the financing of construction-inprogress is as follows:

Amount capitalised (including in construction in progress) Interest rate	Years ended December31,	Years ended December31,
	2016 30,130 $ 0.24%~0.98%	2015
		11,667 $
		0.14%~1.28%

(5) Inventories

Raw materials Work in process and repair of goods Raw materials Work in process and repair of goods		December 31,2016
	Cost 2,730,873 $ 2,017,900 4,748,773 $	Allowance for valuation loss 31,005) ($ 864,902) ( 895,907) ($ December 31,2015	Book value
			2,699,868 $ 1,152,998
			3,852,866 $
	Cost 1,846,653 $ 568,332 2,414,985 $		Book value
			1,815,274 $ 568,332
			2,383,606 $

The amount of inventories recognised as expense for the years ended December 31, 2016 and 2015 is as follows:

Raw materials costs Loss on obsolete (gain from reversal of) inventories	Years ended December31,	Years ended December31,
	2016 2015 11,468,666 $ 13,101,613 $ 864,528 600) ( 12,333,194 $ 13,101,013 $	2015
		13,101,013 $

The Group reversed a previous inventory write-down and accounted this transaction as a reduction of expenses because the related inventory items were scrapped or sold in 2015.

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(6) Prepayments

Prepayments
Prepayments of suppliers Excess VAT paid Other prepayments	December31,2016 870,419 $ 237,397 11,113 1,118,929 $	December31,2015
		1,520,990 $ 34,693 25,507
		1,581,190 $

(7) Financial assets measured at cost

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

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

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

(8) Investments accounted for under equity method

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

			2016				2015
At January 1	$			3,051	$			3,907
Additional investments accounted for
using the equity method				197,344				-
Share of profit or loss of investments
accounted for using the equity method	(			33,779)	(			856)
At December 31	$			166,616	$			3,051
			December 31,	2016			December 31,	2015
Fuhai Wind Farm Corporation	$			164,238	$			-
Taiwan Offshore Wind Farm Services				2,378				3,051
Corporation (Note)
Yi Zhuyin Transocean Co., Ltd.				-				-
		$		166,616		$		3,051

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

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

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

below:
		Years ended	December	31,
		2016		2015
Profit or loss for the year from
continuing operations	($	130,477)	($		1,740)
Other comprehensive income-
net of tax		-			-
Total comprehensive loss	($	130,477)	($		1,740)

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

(9) Property, plant and equipment

Property, plant and equipment
Book value Land Land improvements Buildings and structures Machinery and equipment Transportation equipment Leasehold improvements Other equipment Construction in progress	December 31,2016 6,096,033 $ 347,971 946,784 2,011,752 454,755 438,816 55,113 358,372 10,709,596 $	December 31,2015
		6,096,033 $ 360,065 1,068,610 2,117,602 497,744 487,438 69,585 302,431
		10,999,508 $

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Year ended December 31, 2016

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

~38~

Year ended December 31, 2015

Cost		Opening net book amount		Additions	Disposals	Reclassifications		Closing net book amount
Land Land improvements Buildings and structures Machinery and equipment Transportation equipment Leasehold improvements Other equipment Construction in progress Total Accumulated depreciation and impairment	$ 6,096,033 765,464 7,397,513 9,533,848 720,381 740,555 177,376 854,126 26,285,296 ( 598,173) ( 6,156,710) ( 7,330,102) ( 430,364) 544,339) ( 98,855) ( 15,158,543) ( 11,126,753 $		$ - - - 350 - - - 479,330 479,680 $ ($ 23,153) 180,947) ( 288,415) ( 43,175) ( 40,854) ( 12,326) ( 588,870) ($		- $ - 3,377) ( 128,921) ( 19,314) ( - 44,572) ( - 196,184) ($ - $ 3,377 125,722 19,294 - 29,736 178,129 $	- $ 215,927 8,754 205,120 250,922 332,076 18,226 1,031,025) ( - $ - $ - - - - - - $	6,096,033 $ 981,391 7,402,890 9,610,397 951,989 1,072,631 151,030 302,431 26,568,792 621,326) ( 6,334,280) ( 7,492,795) ( 454,245) ( 585,193) ( 81,445) ( 15,569,284) ( 10,999,508 $
Land improvements Buildings and structures Machinery and equipment Transportation equipment Leasehold improvements Other equipment Total Book value

• A. Amount of borrowing costs capitalised as part of property, plant and equipment and the range of the interest rates for such capitalisation are as follows:

Amount capitalised Interest rate	Years ended December 31,	Years ended December 31,
	2016 - $ -	2015
		195 $
		0.14%~1.28%

• 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.

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• (c) The significant components of machinery equipment include hoisting machine, crane and substation, carriers and 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.

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

(10) Investment property, net

Investment property, net	Investment property, net	Investment property, net	Investment property, net	Investment property, net	Investment property, net	Investment property, net	Investment property, net	Investment property, net
Carryingamounts of each category December31,2016 December31,2015 Land 226,918 $ 226,918 $ Buildings 7,464 7,839 234,382 $ 234,757 $ Cost At January1 Additions Disposals Reclassifications At December 31 Land $ 226,918 $ - $ - - $ 226,918 $ Buildings 22,811 - - - 22,811 Total 249,729 - $ - $ - $ 249,729 Accumulated depreciation and impairment Buildings 14,972) ( 375) ($ - $ - $ 15,347) ( Book value 234,757 $ 234,382 $ Cost At January1 Additions Disposals Reclassifications At December 31 Land $ 226,918 $ - $ - - $ 226,918 $ Buildings 22,811 - - - 22,811 Total 249,729 - $ - $ - $ 249,729 Accumulated depreciation and impairment Buildings 14,597) ( 375) ($ - $ - $ 14,972) ( Book value 235,132 $ 234,757 $ Year ended December 31,2016 Year ended December 31,2015									December31,2015
Land Buildings Cost									$	226,918 7,839
									$	234,757
										At December 31
		At January1		Additions		Disposals		Reclassifications
Land Buildings Total Accumulated depreciation and impairment	$ 226,918 22,811 249,729 14,972) ( 234,757 $ At January1									226,918 $ 22,811 249,729 15,347) ( 234,382 $ At December 31
Buildings Book value Cost
		At January1		Additions		Disposals		Reclassifications
Land Buildings Total Accumulated depreciation and impairment	$ 226,918 22,811 249,729 14,597) ( 235,132 $		$ - - - $ 375) ($			$ - - - $ - $		- $ - - $ - $		226,918 $ 22,811 249,729 14,972) ( 234,757 $
Buildings Book value

~40~

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

Rental income from the lease of the investment property Direct operating expenses arising from the investment property that generate rental income in the period Direct operating expenses arising from the investment property that did not generate rental income in the period	Years ended December 31,	Years ended December 31,
	2016 7,844 $ 1,410 $ - $	2015
		7,534 $
		930 $
		- $

The fair value of the investment property held by the Group as at December 31, 2016 and 2015 were $665,979 and $528,291, respectively, which was revalued by independent valuers. Valuations were made using the comparison method, cost method for land development analysis and the income approach.

(11) Intangible assets

Cost				Year ended December 31,2016	Year ended December 31,2016	Year ended December 31,2016	Closing net book amount
		Opening net book amount		Additions- acquired separately	Amortisation charge	Disposals
Software Accumulated amortisation and impairment	64,375 $ 27,430) ( 36,945 $ Opening net book amount						59,483 $ 30,636) ( 28,847 $ Closing net book amount
Software Book value Cost
		Opening net book amount		Additions- acquired separately	Amortisation charge	Disposals
Software Accumulated amortisation and impairment	69,312 $ 30,402) ( 38,910 $			13,004 $ - 13,004 $	- $ 14,969) ( 14,969) ($	17,941) ($ 17,941 - $	64,375 $ 27,430) ( 36,945 $
Software Book value

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Details of amortisation on intangible assets are as follows:

Details of amortisation on intangible assets	are as follows:	are as follows:
Operating costs Research and development expenses	Years ended December 31,
	2016 13,342 $ 6 13,348 $	2015
		13,980 $ 989
		14,969 $

(12) Short-term loans

Type of loans Unsecured loans Unsecured loans Type of loans Unsecured loans Unsecured loans	December 31,2016 6,345,358 $ 49,767 6,395,125 $ December 31,2015 458,066 $ 58,530 516,596 $	Interest rate range 0.77%～1.40% 0.39%～2.14% Interest rate range 0.98%～1.50% 0.21%～1.50%	Collateral
			None None Collateral
			None None

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

(13) Short-term notes and bills payable

Short-term notes and bills payable
December 31,2016 Commercial papers payable 1,000,000 $ Less: Unamortized discount 265) ( 999,735 $ Annual interest rates 0.57%～0.65%	December 31,2015
	- $ -
	- $
	-

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

(14) Other payables

Accrued expenses Payables on equipment Construction payment refund Others	December 31,2016 1,043,508 $ 235,625 110,485 22,537 1,412,155 $	December 31,2015
		1,276,271 $ - 64,593 23,135
		1,363,999 $

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(15) Long-term deferred revenue

Advance construction receipts Deferred revenue	December 31,2016 - $ 26,897 26,897 $	December 31,2015
		373,046 $ 42,583
		415,629 $

• A. Long-term advance construction receipts represent the down payment for the construction contracts that began after 2013, and are listed under “Advance Construction Receipts.”

• B. Please refer to Note 6(16) for details of deferred revenue.

(16) Government grants

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

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

Other financial liabilities-current Long-term notes and accounts receivable Long-term deferred revenue - deferred revenue	December 31,2016 150,000 $ 564,603 26,897 741,500 $	December 31,2015
		40,000 $ 808,917 42,583
		891,500 $

• B. Government grants and interest expenses that should be amortised are recognised under ‘other revenue’ and ‘finance costs’, respectively, for the years 2016 and 2015. For more information, please refer to Notes 6(24) and (28).

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(17) Pension

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

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

		December31,2016		December31,2015
Present value of funded	($	1,396,332)	($	1,258,771)
obligations
Fair value of plan assets		1,215,818		1,078,072
Net defined benefit	($	180,514)	($	180,699)
liability

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

Year ended December 31, 2016 Balance at January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets Experience adjustments Pension fund contribution Paid pension Balance at December 31	Present value of defined benefit obligations		Fair value of plan assets	Net defined benefit liability
	1,258,771) ($ 179,147) ( 21,882) ( 1,459,800) ( - 45,903 45,903 - 17,565 1,396,332) ($	1,078,072 $ - 20,028 1,098,100 11,917) ( - 11,917) ( 147,200 17,565) ( 1,215,818 $		180,699) ($ 179,147) ( 1,854) ( 361,700) ( 11,917) ( 45,903 33,986 147,200 - 180,514) ($

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Year ended December 31, 2015 Balance at January 1 Current service cost Interest (expense) income Remeasurements: Return on plan assets Experience adjustments Pension fund contribution Paid pension Balance at December 31	Present value of defined benefit obligations		Fair value of plan assets	Net defined benefit liability
	1,069,075) ($ 178,503) ( 18,667) ( 1,266,245) ( - 1,913 1,913 - 5,561 1,258,771) ($	904,011 $ - 14,614 918,625 9,008 - 9,008 156,000 5,561) ( 1,078,072 $		165,064) ($ 178,503) ( 4,053) ( 347,620) ( 9,008 1,913 10,921 156,000 - 180,699) ($

• (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, 2016 and 2015 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

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

Discount rate Future salary increases	Years ended December 31,	Years ended December 31,
	2016 1.75% 3.5%	2015
		1.75%
		3.5%

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory.

~45~

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

Increase 0.25% Decrease 0.25% December 31, 2016 Effect on present value of defined benefit obligation 41,649) ($ 36,948 $ December 31, 2015 Effect on present value of defined benefit obligation 37,059) ($ 38,544 $ Discount rate	Increase 0.25% Decrease 0.25% 32,918 $ 38,023) ($ 34,872 $ 33,778) ($ Future salaryincreases

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, 2017 amounts to $144,222.

• (g) As of December 31, 2016 the weighted average duration of that retirement plan is 12 years. The analysis of timing of the future pension payment was as follows:

Within 1 year	$	43,440
1-2 year(s)		57,226
2-5 years		62,905
Over 5 years		1,811,953

• 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, 2016 and 2015 were $105,228 and $100,174, respectively.

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(18) Provisions

The analysis of change in warranty liabilities are as follows:

The analysis of provisions is as follows: AtJanuary1,2016 Additions 167,391 $ 43,745 $ ($ Realised in one year Realised after one year		Unused amounts Used reversed 63,340) 8,109) ($ December 31,2016 41,568 $ $ 98,119 139,687 $ $	Unused amounts Used reversed 63,340) 8,109) ($ December 31,2016 41,568 $ $ 98,119 139,687 $ $	At December31,2016
				139,687 $
				December 31,2015
			$	55,702 111,689
			$	167,391

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

(19) Common stock

As of December 31, 2016, the Company’s authorized capital was $11,138,997 and the paid-in capital was $7,435,652, consisting of 743,565 thousand shares of ordinary stock with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

The number of the Company’s ordinary shares outstanding at January 1 and December 31, 2016 and 2015 was the same.

(20) Capital reserve

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

(21) Retained earnings

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

~47~

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

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

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

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

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

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

• E. On June 23, 2016 and June 29, 2015, the stockholders resolved that total dividends for the distribution of earnings for the years 2015 and 2014 were $371,782 and $371,783 at $0.5 (in dollars) per share, respectively.

On March 22, 2017, the Board of Directors has proposed the deficit compensation for year 2016.

(22) Analysis of assets and liabilities

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

~48~

December 31,2016 Assets Accounts receivable, net (including related parties) Receivables from customers on construction contracts (including related parties) Inventories, net Liabilities Notes payable (including related parties) Accounts payable (including related parties) Payables to customers on construction contracts (including related parties) Provision for liabilities December 31,2015 Assets Accounts receivable, net (including related parties) Receivables from customers on construction contracts (including related parties) Inventories, net Liabilities Notes payable (including related parties) Accounts payable (including related parties) Payables to customers on construction contracts (including related parties) Provision for liabilities	Less than 12 months 743,704 $ 9,326,840 3,852,866 13,923,410 $ 324,457 $ 1,003,061 1,330,525 41,568 2,699,611 $ Less than 12 months 261,384 $ 6,267,992 2,383,606 8,912,982 $ 198,399 $ 905,563 770,030 55,702 1,929,694 $	More than 12 months - $ 209,783 - 209,783 $ - $ - 1,281,874 98,119 1,379,993 $ More than 12 months - $ 217,121 - 217,121 $ - $ - 2,857,583 111,689 2,969,272 $	Total
			743,704 $ 9,536,623 3,852,866
			14,133,193 $
			324,457 $ 1,003,061 2,612,399 139,687
			4,079,604 $
			Total
			261,384 $ 6,485,113 2,383,606
			9,130,103 $
			198,399 $ 905,563 3,627,613 167,391
			4,898,966 $

~49~

(23) Operating revenue

Operating revenue
Other income Construction contract revenue Service revenue Others Rental revenue Interest income: Interest income from bank deposits Other interest income Government grant revenue Indemnity revenue Others	Years ended December31,
	2016 2015 15,173,151 $ 20,427,751 $ 533,079 810,145 41,469 219,800 15,747,699 $ 21,457,696 $ Years ended December 31,	2015
		20,427,751 $ 810,145 219,800
		21,457,696 $
	2016 7,844 $ 1,603 369 14,452 4,706 21,010 49,984 $	2015
		7,534 $ 3,309 2,609 14,943 52,078 26,244
		106,717 $

(24) Other income

(25) Other gains and losses

Other gains and losses
				Years ended		December	31,
			2016				2015
Net gains (losses) on financial assets		$		824	($			3,273)
and liabilities at fair value through
profit or loss
Net currency exchange gains				70,418				56,858
Disaster loss (Note)	(			17,379)				-
Losses on disposal of	(			2,369)	(			286)
property, plant and equipment
Other losses	(			2,019)	(			3,112)
	$			49,475		$		50,187

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

~50~

(26) Expenses by nature

Expenses by nature
		Years ended December		31,
		2016		2015
Change in inventory of finished goods	($	2,986,899)	($	1,346,476)
and work in process
Direct materials		11,468,666		13,101,613
Employee benefit expense		3,986,375		4,107,529
Depreciation and amortisation charges		575,112		604,214
Outsourcing fees		2,690,225		3,063,062
Other expenses		1,579,250		1,491,120
Operating costs and expenses	$	17,312,729	$	21,021,062
Employee benefit expense
		Years ended December		31,
		2016		2015
Wages and salaries	$	3,369,775	$	3,472,494
Labor and health insurance fees		269,104		259,446
Pension cost		286,229		282,730
Other personnel expenses		61,267		92,859
	$	3,986,375	$	4,107,529

(27) Employee benefit expense

• 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. For the years ended December 31, 2016 and 2015, employees’ compensation was accrued at $0 and $28,562, respectively; directors’ and supervisors’ remuneration was accrued at $0 and $2,856, respectively. The aforementioned amounts were recognised in salary expenses.

• Due to the operating loss incurred in 2016, the Board of Directors resolved not to distribute employees’ compensation and directors’ remuneration.

• Employees’ compensation and directors’ and supervisors’ remuneration of 2015 as resolved by the meeting of Board of Directors were $24,107 and $2,411 in agreement with those amounts recognised in the 2015 financial statements. For 2015, the employees’ compensation and directors’ and supervisors’ remuneration resolved by the meeting of Board of Directors amounted $28,562 and $2,856, respectively. The difference of $4,900 between the amounts resolved by the Board meeting and the amounts recognised in the 2015 financial statements, mainly resulted from calculation difference, had been adjusted in the profit or loss of 2016.

~51~

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

(28) Finance costs

Finance costs
			Years ended December		31,
		2016			2015
Interest expense:
Bank loans	$		30,076	$		10,576
Others			21,654	$		-
Expenses amortised from government			14,452			14,943
grants payable
Less: capitalisation of qualifying assets	(		30,130)	(		11,862)
	$		36,052	$		13,657

(29) Income tax expense

• A. Income tax (benefit) expense

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

		Years ended	December	31,
		2016		2015
Current tax:
Current tax on profits for the
period	$	369	$		3,124
Additional 10% tax on
undistributed earnings		-			5,116
Under provision of income tax in
prior year		5,064			9,213
Total current tax		5,433			17,453
Net change of deferred tax asset	(	254,026)			88,788
Income tax (benefit) expense	($	248,593)	$		106,241

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

follows:
Remeasurement of defined benefit obligations	Years ended December31,
	2016 5,778 $	2015
		1,856 $

~52~

B. Reconciliation between income tax (benefit) expense and accounting profit:

					Years ended December	Years ended December	Years ended December	Years ended December		31,	31,
				2016					2015
Tax calculated based on profit (loss)
before tax and statutory tax rate		($			261,018)			$				98,968
Effects from items disallowed by tax
regulation					7,361			(				7,056)
Additional 10% tax on undistributed
earnings							-					5,116
Under provision of income tax
in prior year					5,064							9,213
Income tax (benefit) expense		($			248,593)			$				106,241
Amounts of deferred tax assets	or	liabilities as		a	result of	temporary difference and loss
carryforward are as follows:
			Year ended December 31,2016
							Recognised
			Recognised					in other
				in	profit or	comprehensive
	January1				loss			income			December 31
Deferred tax assets:
Temporary differences:
Estimation of construction loss	$	411,479	($		96,496)	$		-		$		314,983
Unused compensated absences
payable		52,353	(		27)			-				52,326
Unrealized warranty liability		28,301	(		4,555)			-				23,746
Accrued pension liabilities		30,717			5,748	(		5,778)				30,687
Unrealised investments gains		-	(		50)			-		(		50)
Unrealised exchange (gains) loss	(	332)			363			-				31
Provision for loss on slow-
moving inventories		2,861			146,970			-				149,831
Allowance for doubtful
accounts		492			-			-				492
Loss carryforward		114,441			202,073			-				316,514
	$	640,312	$		254,026	($		5,778)		$		888,560
Deferred tax liabilities:
Unrealised land value
incremental reserve	($	1,324,910)	$		-	$		-		($		1,324,910)

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

~53~

Recognised in Recognised other in profit or comprehensive January1 loss income December 31 Deferred tax assets: Temporary differences: Estimation of construction loss 610,635 $ 199,156) ($ - $ 411,479 $ Unused compensated absences payable 53,152 799) ( - 52,353 Unrealized warranty liability 28,616 315) ( - 28,301 Accrued pension liabilities 28,059 4,514 1,856) ( 30,717 Unrealised exchange loss (gains) 6,143 6,475) ( - 332) ( Provision for loss on slow- moving inventories 2,861 - - 2,861 Allowance for doubtful accounts 1,490 998) ( 492 Loss carryforward - 114,441 - 114,441 730,956 $ 88,788) ($ 1,856) ($ 640,312 $ Deferred tax liabilities: Unrealised land value incremental reserve 1,324,910) ($ - $ - $ 1,324,910) ($ Year ended December 31,2015		Year ended December 31,2015
			December 31

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

December 31, 2016

December 31,2016	December 31,2016
Year incurred Amount filed/ assessed Unused amount 2015 Amount filed 671,021 $ 2016 Estimated filing amount 1,190,829 December 31,2015		Unrecognised deferred tax assets $ - -	Expiry year
			2025 2026
Year incurred Amount filed/ assessed 2015 Estimated filing amount	Unused amount 673,184 $	Unrecognised deferred tax assets $ -	Expiry year
			2025

• E. The Company’s income tax returns through 2014 have been assessed and approved by the Tax Authority. As of March 22, 2017, there was no administrative remedies.

~54~

F. Unappropriated retained earnings:

December 31, 2016 December 31, 2015 Earnings generated in and after 1998 $ 489,400 $ 2,166,890

• G. As of December 31, 2016 and 2015, the balance of the imputation tax credit account was $759,208 and $898,877, respectively. The creditable tax rate was 35.47% for 2015 and is estimated to be 48.15% for 2016.

(30) (Losses) earnings per share

estimated to be 48.15% for 2016. (Losses) earnings per share
		Year ended December 31,		2016
			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	($	1,287,100)	743,565	($	1.73)
Diluted losses per share
Loss attributable to ordinary shareholders	($	1,287,100)	743,565
Assumed conversion of all dilutive
potential ordinary shares
Employees' compensation		-	-
Loss attributable to ordinary
shareholders plus assumed
conversion of all dilutive
potential ordinary shares	($	1,287,100)	743,565	($	1.73)
		Year ended December 31,		2015
			Weigthted average
			number of ordinary	Earnings per
		Amount	shares outstanding		share
		after tax	(shares in thousands)		(in dollars)
Basic earnings per share
Profit attributable to ordinary shareholders	$	468,154	743,565	$	0.63
Diluted earnings per share
Profit attributable to ordinary shareholders	$	468,154	743,565
Assumed conversion of all dilutive
potential ordinary shares
Employees' compensation		-	2,062
Profit attributable to ordinary
shareholders plus assumed
conversion of all dilutive
potential ordinary shares	$	468,154	745,627	$	0.63

~55~

(31) Operating leases

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

Not later than one year Later than one year but not later than five years Later than five years	December 31,2016 7,704 $ 17,121 - 24,825 $	December 31,2015
		7,829 $ 24,880 -
		32,709 $

• B. The Group leases in assets for places of business under non-cancellable operating lease agreements. The lease terms are between 1996 and 2027 years, and all these lease agreements are renewable at the end of the lease period. Certain leases are charged extra rents following the changes in local price indexes. The Group recognised rental expenses of $262,892 and $182,555 in profit or loss for the years ended December 31, 2016 and 2015, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Not later than one year Later than one year but not later than five years Later than five years	December 31,2016 263,423 $ 899,745 1,021,058 2,184,226 $	December 31,2015
		200,360 $ 645,790 956,031
		1,802,181 $

~56~

(32) Supplemental cash flow information

A. Investing activities with partial cash payments:

		Years ended	December	December	31,
		2016			2015
Acquisition of investments	$	197,344	$			-
accounted for using equity
method
Less：ending balance of
other payables	(	19,188)				-
Cash paid on acquisition
of investments accounted
for using equity method during
the year	$	178,156	$			-
Purchase of property, plant and	$	325,218	$			479,680
equipment
Add: beginning balance of payable
on equipment		64,593				101,241
Less: ending balance of payable
on equipment	(	110,485)	(			64,593)
Cash paid on purchase of
property, plant and
equipment during the year	$	279,326		$		516,328

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

Long-term receivables－current portion being transferred to accounts receivable Long-term notes and accounts payable being transferred to other financial liabilities-current Interest expense amortised from government grants	Years ended December 31,	Years ended December 31,
	2016 - $ 150,000 $ 14,452 $	2015
		85,320 $
		20,000 $
		14,943 $

~57~

7. RELATED PARTY TRANSACTIONS

(1) Significant related party transactions and balances

A. Operating revenue

Operating revenue
Key management: Corporate Director Other related parties: Subsidiaries of the Corporate Director Stockholders with 30% of shares in the Company's subsidiaries Investee accounted for using equity method (Note)	2016 2015 2,524,409 $ 80,489 $ 5,770 47,082 - 2,039 787 - 2,530,966 $ 129,610 $ Years ended December 31,
		2015
		80,489 $ 47,082 2,039 -
		129,610 $

Note: The investment accounted under equity method starts from the end of August, 2016. Thus,

the related party transaction is from September 1 to December 31, 2016 which applies to all the related party transactions for this fiscal year.

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. Purchases of goods

Key management: Corporate Director Other related parties: Stockholders with 30% of shares in the Company's subsidiaries	Years ended December 31,	Years ended December 31,
	2016 2,400,867 $ 135 2,401,002 $	2015
		2,253,761 $ 3,025
		2,256,786 $

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

~58~

C. Accounts receivable

D. E. F.	Receivables from customers on construction contracts Other receivables Prepaid accounts December 31,2016 Key management: Corporate Director - $ Other related parties: Investee accounted for using equity method (Note) 2,143 Stockholders with 30% of shares in the Company's subsidiaries 1,621 3,764 $ December 31,2016 Key management: Corporate Director 1,593,109 $ Investee accounted for using equity method (Note) 200,010 1,793,119 $ December 31,2016 Key management: Corporate Director 41,849 $ Other related parties: Stockholders with 30% of shares in the Company's subsidiaries 191 42,040 $ December 31,2016 Key management: Corporate Director 155,970 $	December 31,2015 20,329 $ - 1,621 21,950 $ December 31,2015 - $ - - $ December 31,2015 63,221 $ 190 63,411 $ December 31,2015 125,698 $

~59~

G.Refundable deposits H.Notes payable I.Accounts payable J. Payables to customers on construction contracts K.Endorsements and guarantees provided to related parties December 31,2016 Key management: Corporate Director 1,512 $ Other related parties: Stockholders with 30% of shares in the Company's subsidiaries 3,921 5,433 $ December 31,2016 Key management: Corporate Director 324,457 $ December 31,2016 Other related parties: Stockholders with 30% of shares in the Company's subsidiaries 466 $ December 31,2016 Other related parties: Corporate Director - $ December 31,2016 Other related parties: Investee accounted for using equity method (Note) 886,000 $	December 31,2015
	- $ -
	- $
	December 31,2015
	198,399 $
	December 31,2015
	- $
	December 31,2015
	362,765 $
	December 31,2015
	- $

As of December 31, 2016 and 2015, endorsement / guarantees provided by the Group and used amounted to $75,000 and $0, respectively.

~60~

(2) Key management compensation

Key management compensation
Salaries and other short-term employee benefits Post-employment benefits	Years ended December 31,
	2016 22,766 $ 3,943 26,709 $	2015
		29,517 $ 647
		30,164 $

8. PLEDGED ASSETS

None.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

(1) (2) (3) (4)	The balance of the Group’s unused letters of credit for import of materials is as follows: The balance of the Group’s contracted ship/vessel construction projects to be completed is as follows: December31,2016 December31,2015 Balance of unused letters of credit 2,149,195 $ 1,738,887 $	The balance of the Group’s unused letters of credit for import of materials is as follows: The balance of the Group’s contracted ship/vessel construction projects to be completed is as follows: December31,2016 December31,2015 Balance of unused letters of credit 2,149,195 $ 1,738,887 $	The balance of the Group’s unused letters of credit for import of materials is as follows: The balance of the Group’s contracted ship/vessel construction projects to be completed is as follows: December31,2016 December31,2015 Balance of unused letters of credit 2,149,195 $ 1,738,887 $
	The balance of the Group’s contracted ship/vessel construction projects to December31,2016 Balance of unused letters of credit 2,149,195 $
			1,738,887 $
			be completed is as follows:
	The amount of the contracted services to be delivered by the Group’s subsidiary is as follows: The guaranteed credit by banks for the Group’s construction projects is as follows: December31,2016 December31,2015 Contracted projects to be completed 25,038,652 $ 37,951,100 $ December31,2016 December31,2015 Contracted services to be delivered 3,348 $ 21,399 $ December 31,2016 December 31,2015 Guaranteed credit by banks 8,048,499 $ 7,869,360 $		December31,2015
			37,951,100 $
	Guaranteed credit by banks	December 31,2016 8,048,499 $
			7,869,360 $

~61~

(5) (6)	The amount of the Group’s purchase contracts and outsourcing construction contracts to be paid is as follows: The amount of construction performance promissory note issued by the Group for contracted construction is as follows: December 31,2016 December 31,2015 Purchase contracts to be paid 8,467,209 $ 15,697,792 $ Outsourcing construction contracts to be paid 1,439,039 1,934,201 9,906,248 $ 17,631,993 $ December 31,2016 December 31,2015 Construction performance promissory note 99,850 $ 99,850 $	The amount of the Group’s purchase contracts and outsourcing construction contracts to be paid is as follows: The amount of construction performance promissory note issued by the Group for contracted construction is as follows: December 31,2016 December 31,2015 Purchase contracts to be paid 8,467,209 $ 15,697,792 $ Outsourcing construction contracts to be paid 1,439,039 1,934,201 9,906,248 $ 17,631,993 $ December 31,2016 December 31,2015 Construction performance promissory note 99,850 $ 99,850 $
	follows: The amount of construction performance Purchase contracts to be paid Outsourcing construction contracts to be paid	promissory note issued by December 31,2016 8,467,209 $ 1,439,039 9,906,248 $
	construction is as follows: Construction performance promissory note	December 31,2016 99,850 $

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

• (8) The Group, Century Iron and Steel Industrial Co., Ltd. and Taiwan Generations Corp. are the jointoriginators for Fuhai Wind Farm Corporation (Fuhai Corporation). The joint-originators entered into “the Incentive Program of Offshore Wind Power Demonstration System” (“the Government Grant Scheme”), which was granted by the Ministry of Economic Affairs, and committed to be jointly responsible for Fuhai Corporation. The total amount of endorsement/guarantee provided by the Company amounted to NT$886 million. As of December 31, 2016 and 2015, the amount used is $75,000 and $0, respectively. Please refer to Note 7 for details.

• (9) The ships under construction have all been insured with shipbuilding insurance. On September 14, 2016, Typoon Meranti caused some damaged to third party property and claimed for compensation. The case is still ongoing and compensation amount is uncertain. However, according to Group’s designated lawyer, the damage loss is covered by the insurance; thus, no material impact is expected.

10. SIGNIFICANT DISASTER LOSS

The Group’s property, plant and equipment has been insured under typoon insurance. On September 14, 2016, Typoon Meranti caused some damage loss amounting to $40,572 and insurance compensation amounted to $28,800. The remaining amount of $11,772 has been recognised as ‘other losses’.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

~62~

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:

Total liabilities Total assets Gearing ratio	December31,2016 15,441,284 $ 27,670,942 $ 56%	December31,2015
		9,875,194 $
		23,739,566 $
		42%

(2) Financial instruments

A. Fair value information of financial instruments

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

B. Financial risk management policies

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

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

~63~

C. Significant financial risks and degrees of financial risks

(a) Market risk

Foreign exchange risk

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

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

Financial assets Monetaryitems USD:NTD Financial liabilities Monetaryitems USD:NTD JPY:NTD Financial assets Monetaryitems USD:NTD Financial liabilities Monetaryitems USD:NTD JPY:NTD		December 31,2016	December 31,2016
		Foreign Currency (in thousands) Exchange Rate 21,471 $ 32.200 8,908 32.300 47,719 0.2776 December 31,2015		Book Value(NTD)
				691,366 $ 287,728 13,247
		Foreign Currency (in thousands) 13,000 $ 1,588 12,480	Exchange Rate 32.775 32.875 0.2747	Book Value(NTD)
				426,075 $ 52,206 3,428

~64~

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

If NTD had appreciated/ depreciated by1% against tax Increase (decrease) in net profit (loss) after tax	Years ended December 31,	Years ended December 31,
	2016 3,240 $	2015
		3,075 $

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, 2016 and 2015, amounted to $70,418 and $56,858, respectively.

Price risk

The Group is not exposed to significant commodity price risk.

Interest rate risk

The interest rate impact on the Group is insignificant.

(b)Credit risk

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

Cash and cash equivalents and derivative financial instruments

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

Accounts receivable and other receivables

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

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

• iii.Credit information of accounts receivable is stated in Note 6 (3). When the Group enters into ship building contracts, the Group entrusts external agencies to verify customers’ credit and was informed that the possibility that the customers will default is low. Therefore, the credit risk of accounts receivable on ship building is low.

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• iv.The ageing and impairment analysis of accounts receivable that were past due but not impaired is stated in Note 6 (3).

Held-to-maturity financial assets - current

For held-to-maturity financial assets, the Group only trades with counterparties with good credit, in accordance with the Group’s transaction policies. Please refer to Note 6 (2) for more information.

(c)Liquidity risk

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

Non-derivative financial liabilities

December 31,2016 Bank borrowings Short-term notes and bills payable Payables December 31,2015 Bank Borrowings Payables		Less than 1 year		Between 1 and 2years		Between 2 and 5years		Over 5 Years
		6,396,856 $ 999,735 3,185,846 10,582,437 $ Less than 1 year		- $ - 418,811 418,811 $ Between 1 and 2years		- $ - 308,324 308,324 $ Between 2 and 5years		- $ - - - $ Over 5 Years
		516,914 $ 2,831,337 3,348,251 $		- $ 449,436 449,436 $		- $ 610,285 610,285 $		- $ - - $

Derivative financial liabilities

As of December 31, 2016 and 2015: None.

• ii.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.

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(3) Fair value estimation

• A. Details of the fair value of the Group’s financial assets and financial liabilities not measured at fair value are provided in Note 12(2)A. Details of the fair value of the Group’s investment property measured at cost are provided in Note 6(10).

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

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

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

• Level 3: Unobservable inputs for the asset or liability.

As of December 31, 2016 and 2015, the Group had no financial assets and liabilities measured at fair value.

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: Please refer to table 3.

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• I. Trading in derivative instruments undertaken during the reporting periods: None.

• J. Significant inter-company transactions during the reporting periods: Please refer to table 4.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 5.

(3) Information on investments in Mainland China

• A. Basic information: None.

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

14. SEGMENT INFORMATION

(1) General information

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

(2) Measurement of segment information

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

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

The segment information provided to the Chief Operating Decision-Maker for the reportable segments for the years ended December 31, 2016 and 2015 is as follows:

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Year ended December 31, 2016

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

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Year ended December 31, 2015

Revenue from external customers Inter-segment revenue Total segment revenue Segment profit Undistributed amount: Operating expenses Depreciation and amortization Interest income Interest expense Income tax expense Loss on investments accounted for using equity method Total undistributed amount Segment assets (Note 2) Investments accounted for under equity method Increase in non-current assets Segment liabilities (Note 2)	Construction of ships and vessels	Construction of ships and vessels		All other segments	Adjustments and eliminations (Note 1) Total - $ 21,457,696 $ 676,839) ( - 676,839) ($ 21,457,696 $ - $ 994,444 $ 544,986) ($ 12,824) ( 5,918 10,576) ( 106,241) ( 856) ( 669,565) ($ 23,739,566 $ 3,051 $ 492,684 $ 9,875,194 $
		20,261,321 $ - 20,261,321 $ 903,630 $		1,196,375 $ 676,839 1,873,214 $ 90,814 $

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.

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(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 profit before tax and discontinued operations is provided as follows:

		Years ended	December	31,
		2016		2015
Segment (loss) profit	($	1,116,874)	$		903,630
Other segment profit		56,646			90,814
Total segments	(	1,060,228)			994,444
Operating expenses	(	504,802)	(		557,810)
Non-operating income and expenses		29,628			142,391
(Loss) profit before tax and discontinued
operations	($	1,535,402)	$		579,025

(5) Information on products and services

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

Construction contract revenue Revenue from construction of ships and vessels Revenues from machine manufacturing Service revenue Other revenue Total	Years ended December 31,	Years ended December 31,
	2016 15,085,251 $ 87,900 533,079 41,469 15,747,699 $	2015
		20,261,321 $ 166,430 810,145 219,800
		21,457,696 $

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(6) Geographical information

Revenue information by geographic area:

Revenue information by geographic area:
Revenue Non-current assets Hong Kong 6,856,132 $ - $ Taiwan 4,057,003 10,972,825 Marshall 3,739,045 - Singapore 1,179,619 - Panama 32,602 - Japan 2,867 - Britain - - Greece 175,539) ( - Others 55,970 - Total 15,747,699 $ 10,972,825 $ Year ended and as of December 31,2016	Year ended and as of December 31,2015
	Revenue 15,414,848 $ 2,102,621 40,577 1,787,758 35,751 57,383 1,773,074 175,381 70,303 21,457,696 $	Non-current assets
		- $ 11,271,210 - - - - - - -
		11,271,210 $

(7) Major customer information

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

Year ended December 31, 2016

Clients Client H Client G Client J	Sales amount 6,673,401 $ 3,739,045 2,524,409 $12,936,855	Department Construction of ships and vessels Construction of ships and vessels Construction of ships and vessels

Year ended December 31, 2015

Clients Client H Client F Client B	Sales amount Department 9,726,600 $ Construction of ships and vessels 5,367,863 Construction of ships and vessels 2,988,009 Construction of ships and vessels $18,082,472

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CSBC CORPORATION TAIWAN

Table 1

Provision of endorsements and guarantees to others Year ended December 31, 2016 Party being endorsed/guaranteed

Expressed in thousands of NTD (Except as otherwise indicated)

Number	Endorser/ guarantor	Companyname	Relationship with the endorser/ guarantor	Limit on endorsements/ guarantees provided for a singleparty	Maximum outstanding endorsement/ guarantee amount as of December 31, 2016	Outstanding endorsement/ guarantee amount at December 31, 2016	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided	Provision of endorsements /guarantees by parent company to subsidiary	Provision of endorsements/ guarantees by subsidiary to parent company	Provision of endorsements/ guarantees to the party in Mainland China	Footnote
0 0	CSBC Corporation, Taiwan CSBC Corporation, Taiwan	Blue Ocean Wind Power Engineering (Hong Kong) Limited Fuhai Wind Farm Corporation	Note 1 Note 2	1,218,266 $ 1,218,266	476,708 $ 886,000	437,938 $ 886,000	- $ 75,000	- $ -	3.59 7.27	6,091,332 $ 6,091,332	Y N	N N	N N	Note 3 Note 3

Note 1:The endorser/guarantor parent company and its subsidiaries jointly own more than 50% voting shares of the endorsed/guaranteed company. Note 2: Having business relationship.

Note 3: The ceiling on total amount of endorsements/guarantees and limit on endorsements/guarantees provided for a single party shall not be more than 50% and 10% of the Company’s net asset, respectively, as prescribed in the Company’s “Procedures for Provision of Endorsements and Guarantees”.

Table 1, Page 1

Table 2

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, 2016

Expressed in thousands of NTD (Except as otherwise indicated)

Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third partytransactions	Differences in transaction terms compared to third partytransactions	Notes/accounts receivable (payable)	Notes/accounts receivable (payable)	Footnote
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable (payable)
CSBC Corporation, Taiwan CSBC Corporation, Taiwan CSBC Corporation, Taiwan CSBC Coating Solutions Co., Ltd.	CPC Corporation, Taiwan China Steel Corporation CSBC Coating Solutions Co., Ltd. CSBC Corporation, Taiwan	Corporate Director Corporate Director Parent company Parent company	Sale Purchases Outsourcing expenses Sale	2,524,409) ($ 2,288,282 $ 530,926 530,926) (	16) ( 19 Note 3 99) (	Note 1 Note 1 Note 1 Note 1	Note 1 Note 1 Note 1 Note 1	Note 1 Note 1 Note 1 Note 1	1,593,109 $ 324,457) ( 72,595) ( 72,595	15 30) ( 7) ( 94	Note 2

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

Note 2 ： The prepayments for purchases from CS Corporation, Taiwan amounts to $146,862. Prices are determined in accordance with mutual agreements; payment terms are no different from third parties. Note 3 ： Accounting for 20% of the Company's outsourcing overheads.

Table 2, Page 1

CSBC CORPORATION TAIWAN

• Receivables from related parties reaching NT$100 million or 20% of paid in capital or more Year ended December 31, 2016

Table 3

Expressed in thousands of NTD (Except as otherwise indicated)

Overdue receivables

Purchaser/seller	Counterparty	Relationship with the counterparty	Balance as at December 31, 2016	Turnover rate	Amount	Action taken	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
CSBC Corporation, Taiwan CSBC Corporation, Taiwan	CSBC Corporation, Taiwan Fuhai Wind Farm Corporation	Corporate Director Investee accounted for using equity method	1,593,109 $ 202,153	Note Note	- $ -	- -	1,593,109 $ -	- $ -

Note: Not applied to the shipbuilding indsutry.

Table 3, Page 1

CSBC CORPORATION TAIWAN

- Significant inter company transactions during the reporting periods

Year ended December 31, 2016

Number (Note 1) Table 4	Companyname	Counterparty	Relationship (Note 2)		Transaction	Transaction	(Except as otherwise indicated) Expressed in thousands of NTD
				General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets (Note 3)
0 0	CSBC Corporation, Taiwan CSBC Corporation, Taiwan	CSBC Coating Solutions Co., Ltd. CSBC Coating Solutions Co., Ltd.	Parent company to subsidiary Parent company to subsidiary	Outsourcing expenses Accounts payable	530,926 $ 72,595	Note 4 Note 4	Note 3 -

Note 1:The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

• (1)Parent company is ‘0’.

• (2)The subsidiaries are numbered in order starting from ‘1’.

• Note 2:If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice.

• For example, if the parent company has already disclosed its transaction with a subsidiary, then the subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.

Note 3:Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts, based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Note 4:Based on the contract, the payment terms is the same as in general transactions.

Table 4, Page 1

CSBC CORPORATION TAIWAN

Information on investees

					Information on investees	Information on investees	Information on investees	Information on investees	Information on investees
Table 5 Investor	Investee	Location	Main business activities		Year ended December 31, 2016 Initial investment amount Shares held as at December31,2016					Net profit (loss) of the investee for the year ended December 31, 2016	Expressed in thousands of NTD (Except as otherwise indicated) Investment income(loss) recognised by the Company for the year ended December31,2016 Footnote
					Initial investment amount
				as	Balance at December 31,2016	Balance as at December 31,2015	Number of shares	Ownership (%)	Bookvalue
CSBC Corporation, Taiwan CSBC Corporation, Taiwan CSBC Corporation, Taiwan CSBC Coating Solutions Co., Ltd CSBC Coating Solutions Co., Ltd.	Fuhai Wind Farm Corporation CSBC Coating Solutions Co., Ltd. Taiwan Generations Corporation BLUE ACE CORPORATION Blue Ocean Wind Power Engineering (Hong Kong) Limited	Taiwan Taiwan Taiwan Taiwan Hong Kong	Wind power industry Marine coating, steel structure painting works, surface treatment, and high-tech anti- corrosion etc. Manufacturing of metal structure, building component, power generation and others Marine coating, steel structure painting works, surface treatment, and high-tech anti- corrosion etc. Marine works services	$	197,344 87,500 4,000 30,000 304	- 87,500 40,000 - 304	15,000,000 8,750,000 400,000 - 100	37.97 $ 70 40 100 100	164,238 $ 109,656 2,378 29,332 2,085	128,795) ($ 907 1,682) ( 668) ( 1,273	33,106) ($ 679 673) ( 668) ( 1,273	Note Note

Note: 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 5, Page 1