TFC - Annual Report 2016 | FinancialReports.eu

Stock Code:1722 Printed on APRIL 30, 2017

培元•固本•創新•永續

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2016 Annual Report

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http://mops.twse.com.tw http://www.taifer.com.tw

I. Spokesman of TFC:

	Spokesperson	ActingSpokesman
Name	Luo,Shihjih	Wang,Guanghua
Title	Vice President	Assistant Vice President
TEL	+886 2 25422231 ext.706	+886 2 25422231 ext. 681
E-mail	[email protected]	[email protected]

II. Address and Telephone Number of Headquarter and All Plants:

Headquarter

Address: 6F, No.88, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 10457 Tel: +886 2 25422231 Fax: +886 2 25634597

Keelung Plant

Address: No.171, Zhonghua Rd., Zhongshan Dist., Keelung City 20345 Tel: +886 2 24222151 Fax: +886 2 24223414

Kaohsiung Plant

Address: No.3, Chenggong 2nd Rd., Qianzhen Dist., Kaohsiung City 80661 Tel: +886 7 8314 1419 Fax: +886 7 8415491

Hsinchu Plant

Address: No.188, Sec. 3, Gongdao 5th Rd., East Dist., Hsinchu City 30069 Tel: +886 35 7131719 Fax: +886 35 712014

Hualien Plant

Address: No.15, Huadong, Hualien City, Hualien County 97064 Tel: +886 38 2231816 Fax: +886 38 221854

Miaoli Plant

Address: No.210, Fuxing, Miaoli City, Miaoli County 36053 Tel: +886 37 2606015 Fax: +886 37 267170

Taichung Plant

Address: No.100, Sec. 2, Nanti Rd., Wuqi Dist., Taichung City 43550 Tel: +886 4 26392358 Fax: +886 4 26304295

III. Stock Transfer Office :

Name: Stock Affairs Team of TFC Website: www.taifer.com.tw Address: 6F, No.88, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 10457 Tel: +886 2 25422231 Fax: +886 2 25317679

IV. Certified Accountants for the Financial Statements of the Recent Year:

Name of Accountants: Tseng Kuoyang, Lin Hengsheng Name of Accounting Firm: KPMG Address: 68F, Taipei 101 Tower, No.7, Sec.5, Xinyi Road, Xinyi Dist., Taipei City 11049 Tel: +886 2 81016666 Fax: +886 2 81016667

Website: https://home.kpmg.com/tw/zh/home.html

V. Name of the Overseas Exchange for the Listing and Trading of Securities and the Way to Inquire the Information About Such Overseas Securities: None.

VI. Website of Taiwan Fertilizer Co., Ltd.: www.taifer.com.tw

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Annual Report for 2016

Part One: A Report to the Shareholders ································································· 1

Part	Two:	Company Profile
I.	Incorporation Date .................................................................................................................... 3
II.	Company History ..................................................................................................................... 3
Part	Three: Corporate Governance Report
I.	Organization System ···················································································· 7
II.	Information on Directors, Supervisors, President, Vice Presidents, and Management
	Team ······································································································ 10
	(I)	Information on Directors and Supervisors ····················································· 10
	(II)	Information on the President, Vice Presidents and Management Team ··················· 13
	(III)	Remuneration Paid to Directors, Supervisors, President and Vice Presidents for
		the Recent Years ··················································································· 14
III.	Corporate Governance Conditions ···································································· 20
	(I)	Operation of the Board of Directors ·························································· 20
	(II)	Operation of the Audit Committee or the Participation in the Board of
		Directors by Supervisors ······································································· 21
	(III)	Conditions for Corporate Governance and Operation and Difference and
		Causes of Governance Practice Rules on Listed Companies ······························ 22
	(IV)	The Company Should Disclose the Composition, Function, and Operation
		Circumstances of Compensation Committee, if Any ······································· 26
	(V)	Performance of Social Responsibilities ······················································ 28
	(VI)	Conditions for Performing Good Faith Management and Measurement by the
		Company ························································································· 33
	(VII)	Disclosure of Inquiry Ways in Case of Any Formulation of Corporate
		Governance Rules and Relevant Regulations by the Company ··························· 36
	(VIII) Other Important Information Enough to Enhance the Understanding of the
		Operation of Corporate Governance ·························································· 36
	(IX)	Status of the Execution of the Internal Control System ···································· 37
	(X)	Punishment to the Company and Its Personnel by Law and Punishment to Its
		Personnel in Breach of Internal Control Systems by the Company as well as
		Major Shortcomings and Improvements over the Recent Years and up to the
		Date of Publication of Annual Reports ······················································· 38
	(XI)	Important Resolutions of Meeting of Shareholders and the Board of Directors
		over the Recent Years and up to the Date of the Publication of Annual
		Reports ···························································································· 38
	(XII)	Major Contents of Different Opinions of Directors or Supervisors on
		Important Resolutions with Records or Written Statements as Adopted by the
		Board of Directors over the Recent Years and up to the Date of the

Table Of Contents

	Publication of Annual Reports ································································ 42
	(XIII) Summary of Conditions for Resignation and Dismissal of the Chairman,
	President, Accounting Supervisors, Financial Supervisors, Internal Audit
	Supervisors and Research and Development Supervisors of the Company for
	the Recent Years and up to the Date of Publication of the Annual Report ·············· 42
IV.	Information on CPA Professional Fees··························································· 43
	(I) Information of Professional Fees to CPA by Fee Range ······································· 43
	(II) When Non-Audit Fees Paid to the Certified Public Accountant, to the
	Accounting Firm of the Certified Public Accountant, and/or to Any Affiliated
	Enterprise of Such Accounting Firm Are One Quarter or More of the Audit Fees
	Paid Thereto, the Amounts of Both Audit and Non-Audit Fees as well as Details
	of Non-Audit Services Shall Be Disclosed······················································ 43
	(III) When the Company Changes Its Accounting Firm and the Audit Fees Paid for
	the Fiscal Year in Which Such Change Took Place Are Lower than Those for the
	Previous Fiscal Year, the Amounts of the Audit Fees Before and After the
	Change and the Reasons Shall Be Disclosed ··················································· 43
	(IV) When the Audit Fees Paid for the Current Fiscal Year Are Lower than Those for
	the Previous Fiscal Year by 15 Percent or More, the Reduction in the Amount of
	Audit Fees, Reduction Percentage, and Reason(s) Therefor Shall Be Disclosed ·········· 43
V.	Information on Replacement of Certified Public Accountant ····································· 43
	(I) Regarding the Former Certified Public Accountant ············································ 43
	(II) Regarding the Successor Certified Public Accountant ········································ 43
	(III) Former CPA’s Reply to the Matter Stated in Items 1 and 2, Paragraph 5, Article
	10 of This Code ·························································································· 45
VI.	Where the Company's Chairperson, General Manager, or Any Managerial Officer in
	Charge of Finance or Accounting Matters Has in the Most Recent Year Held a
	Position at the Accounting Firm of Its Certified Public Accountant or at an Affiliated
	Enterprise of Such Accounting Firm ·································································· 42
VII	Any Transfer of Equity Interests and/or Pledge of or Change in Equity Interests
	(During the Most Recent Fiscal Year or During the Current Fiscal Year up to the
	Date of Printing of the Annual Report) by a Director, Supervisor, Managerial Officer,
	or Shareholder with a Stake of More than 10 Percent During the Most Recent Fiscal
	Year or During the Current Fiscal Year up to the Date of Printing of the Annual
	Report. ···································································································· 45
	(I) Information on Transfer of Shares ································································ 45
	(II) Information About Stock Pledge ································································· 45
VIII	Relationship Information, if Among the Company's 10 Largest Shareholders Any
	One Is a Related Party or a Relative Within the Second Degree of Kinship of
	Another ··································································································· 46
IX.	Percentage Number of Shares and Consolidate Percentage of the Company,
	Directors, Supervisor, Managers and the Businesses That Are Controlled by the
	Company Directly or Indirectly on the Invested Company ········································ 47

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Part	Four: Capital Overview ··············································································· 48	Four: Capital Overview ··············································································· 48
I.	Capital and Shares ······················································································· 48
	(I)	Source of Capital Stock ········································································ 48
	(II)	Structure of Shareholders ······································································ 48
	(III)	Shareholding Distribution Status······························································ 49
	(IV)	List of Major Shareholders ···································································· 49
	(V)	Market Price, Net Value, Earnings, Dividends Per Share of the Latest Fiscal
		Years, and Related Information ······························································· 50
	(VI)	Dividend Policy and Implementation ························································ 51
	(VII)	Effect of the Uncompensated Rationed Shares Deliberated at This Meeting of
		Shareholders on the Company’s Business Performance and Earnings per
		Share ······························································································ 51
	(VIII) Remuneration for Employees, Directors and Supervisors ································· 52
	(IX)	Buyback of the Shares of the Company ······················································ 53
II.	Corporate Bonds ························································································· 53
III.	Preferred Stocks ························································································· 53
IV.	Overseas Depositary Receipts ········································································· 53
V.	Employee Stock Options ··············································································· 53
VI.	Status of New Shares Issuance in Connection with Mergers and Acquisitions ················· 53
VII.	Financing Plans and Implementation ·································································· 53
Part	Five: Operation Highlights ··········································································· 54
I.	Business Content ························································································ 54
	(I)	Scope of Business ··············································································· 54
	(II)	Real Estate Development and Investment ··················································· 54
	(III)	Industry Overview ·············································································· 55
	(IV)	Technology and R&D Overview ······························································ 61
	(V)	Development Plan of Medium and Long-Term and Short-Term Business ·············· 65
II.	Overview of Market and Production & Sales ······················································· 68
	(I)	Market Analysis ················································································· 68
	(II)	Important Use and Manufacture Process of Main Products ······························· 77
	(III)	Supply Conditions of Major Raw Materials ················································· 79
	(IV)	In the Following Table, the Names of Clients Whose Purchase (Selling)
		Amount Is 10% or More than 10% of Total Amount in Either Year of Last
		Two Years, List of Main Purchase or Selling Clients and Purchase (Selling)
		Amount, Proportion Are Listed. Besides, the Reason for Increase or Decrease
		Is Illustrated ······················································································ 81
	(V)	List of Yield for Last Two Years ······························································ 81
	(VI)	List of Sales Volume for Last Two Years ···················································· 83
III.	Employees ································································································ 83
	(I)	Data of Employees for Last Two Years till Latest Annual Press ·························· 83
	(II)	Productivity of Employees ····································································· 83
IV.	Distributed Information of Environmental Protection········································ 84
	(I)	Loss and Punishment for Environmental Pollution ········································· 84

Table Of Contents

	(II) Countermeasures and Potential Distribution in the Future ································ 84
V.	Labor-Capital Relationship········································································· 85
	(I) Important Labor-Capital Agreements ························································ 86
	(II) Employees’ Actions or Moral Principles ····················································· 86
	(III) Employees’ Further Education and Training ················································ 86
	(IV) Labor-Capital Dispute and Loss ······························································ 86
VI.	Important Contracts: ·················································································· 87
	(I) Supply and Marketing Contract ······························································· 87
	(II) Cooperative Contract ··········································································· 87
	(III) Project and Other Contracts ··································································· 89
	(IV) Contract for Land Development ······························································ 90
Part	Six: Financial Summary ·············································································· 91
I.	Brief Financial Statements and Comprehensive Profit and Loss Statements for the
	Recent Five Years ······················································································· 91
	(I) Information on Brief Financial Statements and Comprehensive Profit and
	Loss Statements ················································································· 91
	(II) Information on Brief Balance Sheet and Profit and Loss Statement –
	Financial Accounting Standards in Our Country ··········································· 95
	(III) Certified Public Accountants and Audit Opinions ·········································· 98
II.	Financial Analysis over the Recent Five Years ······················································ 99
III.	Auditing Report by Supervisors on Financial Statements over the Recent Years ·············· 105
IV.	Financial Reports for Recent Years ··································································· 106
V.	Individual Financial Reports for Recent Years Audited and Certified by Public
	Accountants ······························································································ 179
VI.	Matters on Difficulty in Financial Turnover in the Company and Its Affiliated
	Entities for the Current Year and up to the Date of the Publication of the Annual
	Report ····································································································· 246
Part	Seven: Matters on Financial Standing and Operation Result Review and
	Analysis and Risks ··········································································· 247
I.	Financial Standing······················································································· 247
II.	Operation Results························································································ 248
III.	Cash Flows ······························································································· 249
IV.	Effects of Significant Capital Expenses on Financial Affairs over the Recent Years ·········· 250
V.	An Overview of Conversion into Capital Investment ·············································· 250
VI.	Risk Management Organization ······································································· 252
VII.	Risk Matters and Evaluation ··········································································· 253
	(I) Effects of Changes in Interest Rates and Exchange Rates as well as Inflation
	on the Company’s Profits and Losses and Future Solutions ······························ 253
	(II) Policies on High Risk and High Leverage Investments, Capital Loan to
	Others, Endorsement Guarantee and Derivative Instrument Trading, Major
	Causes for Profit Making or Deficits and Future Solutions ······························· 254

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	(III) Future Research and Development Plans and Estimated Investment in
	Research and Development ···································································· 254
	(IV) Effects of Changes in Significant Domestic and Foreign Policies and Laws on
	the Company’s Financial Affairs and Solutions Thereto ··································· 257
	(V) Effects of Technical Changes and Industrial Changes on the Company’s
	Financial Affairs and Solutions Thereto ····················································· 258
	(VI) Effects of Changes in Corporate Images on Business Risk Management and
	Solutions Thereto················································································ 259
	(VII) Prospective Benefits from Acquisition, Possible Risks and Solutions ··················· 259
	(VIII) Prospective Benefits from Expansion of Plants, Possible Risks and Solutions
	Thereto ···························································································· 259
	(IX) Risks in Concentrated Purchasing or Selling and Solutions Thereto ···················· 260
	(X) Effects of Directors, Supervisors or Majority Shareholders with Shareholding
	Exceeding Ten Percent, Great Transfer of or Changes in Equity on the
	Company, Risks and Solutions Thereto ······················································ 261
	(XI) Effects of Changes in Operating Rights on the Company, Risks and Solutions ········ 261
	(XII) Litigation or Non-Litigation Events ·························································· 261
VIII.	Other Significant Matters ·············································································· 265
Part	Eight: Specially Recorded Events ··································································· 266
I.	Information on Affiliated Companies ································································· 266
	(I) Consolidated Operation Report from Affiliates ············································· 266
	(II) Consolidated Financial Statements of Related Enterprises ································ 273
	(III) Relationship Report ············································································· 339
II.	Conditions for Fulfilling Private Placement Negotiable Securities for Recent Years
	and up to the Date of Publication of the Annual Report ··········································· 339
III.	Conditions for Holding or Disposition of the Company’s Shares by Subsidiaries for
	the Recent Years and up to the Date of Publication of the Annual Report ······················ 339
IV.	Other Necessary Supplementary Statements ························································ 339
Part	Nine: Matters for Significant Effects on Shareholders’ Equity or Securities
	Prices as Set out in Paragraph 2, Clause 2 of Article 36 of Securities
	Trading Law for the Current Years and up to the Publication of the
	Annual Report ················································································· 340

A report to the Shareholders

Part one ： A report to the Shareholders

Operation overview in 2016:

Regarding to the international economic situation: In 2016, global economic recovery was weak because the low international price of crude oil, slow recovery of advanced economy, weak growth of emerging economy, frequent terror attacks, unsolved geopolitics, UK leaving Europe, etc. interfered with growth prospect. But in the second half of the year, global economy was gradually improved because US economy turned better and international good prices bottomed out. Among others, recent consumption and employment growths of US were steady, conducive to economic recovery. Eurozone benefited from steady oil price and euro depreciation, and economic data of commodity prices, exportation, and manufacturing got better. Japan maintained easy monetary policy and expanded fiscal expenditure, conducive to boosting economy. Economy of China mainland showed recovery, stimulated by sustainable fiscal and monetary policies.

In the year 2016, global economic growth slowed to a history low since 2008 financial tsunami, and the international market of raw materials was weak in pessimistic atmosphere. In spite of unfriendly external environment, the Company’s fertilizer, chemical, and leasing incomes increased substantially with conscientious efforts of the management team but real estate income declined sharply, causing that the consolidated operating revenue, consolidated gross profit, and consolidated operating benefit of the Company decreased by 30.00%, 48.23%, and 74.60% than those in 2015. Besides, the loss on long-term investment in Jubail Fertilizer Co., Ltd. and Taiwan Deep Sea Water Co., Ltd. recognized with equity method constituted the Company’s consolidated non-operating loss. Finally, the consolidated net loss of the Company in current period is NTS129,503,000.00, 105.34% less than the net profit in 2015.

The actual production of fertilizer products in 2016 was 600,037 tonnes, a decrease of 1.13% compared to 2015, 156,144 tonnes of chemical products, an increase of 6.57% compared to 2015. The actual sales of fertilizer products was 814,489 tonnes, a decrease of 5.63% compared to 2015, 180,345 tonnes of chemical products, an increase of 12.84% compared with 2015.

Regarding to the revenue and profit, the consolidated financial statements show that the income of 2016 was NT$12,240,920,000, a decrease of 30.00% compared with that of NT$17,487,077,000 in 2015, operating profit of NT$595,694,000, a decrease of 74.60% over 2015. The non-operating loss was NT$616,713,000, representing a decrease of 452.98% over 2015, and the net loss after taxes was NT$129,503,000, a decrease of 105.34% compared to 2015. The non-operating loss was mainly asset impairment loss NT$ 361,395,000.00, and the net loss of recognition and re-investment with equity method was NT$ 255,534,000.00.

Regarding to the financial structure, the consolidated financial statements show that the Company's financial structure is sound, including the total assets of NT$76,717,802,000, liabilities of NT$26,113,376,000, the liabilities ratio of 34.03%, the current ratio of 910.75%, shareholders' equity of NT$50,604,426,000, net worth per share NT$51.64 as of December 31, 2016.

In terms of chemical fertilizer industry, Taichung plant will continue to make phosphate fertilizer workshop relocation, nitrate concentration plan, and ten factories construction planning in the west

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area of Taichung plant. Moreover, in order to continue to develop electronic grade chemicals business, after the electronic grade ammonia aquatic line construction program is completed, it will carry out the construction of sulfuric acid workshop and sulfanilic workshop.

In real estate development, the vacant house sales and handover of Nangang Trade Park R5 residence development program continue. Nangang Trade Park C2 development program will be licensed in 2017 before intended design change, continuous wall construction, engineering contracting, etc. Regarding the development plan of Hsinchu technology commercial park D7-A, beam locating ceremony was held in January 2016. It is scheduled to get the license and to start business invitation in 2017. The first and second phases of Hsinchu have been ongoing.

Operation plan in 2016:

In addition to stably grasping and controlling all the operation risks and strengthening the operation performance of all the businesses, in order to make to make transformation gradually and improve the integral competitiveness the Company will continue to extend the current competitive advantages in future, keep promoting the ten factories construction planning in the west area of Taichung plant, the production and sales of Heiwang and Baoxiao compound fertilizer, as well as the electronic-grade chemicals and other goods of Miaoli plant.

By looking into 2017, with the gradual recovery of the domestic and foreign economy, the company is expected to win the stable and fruitful operation results in the second half of the year.

Future development strategy:

Looking into the year 2016, in face of rapid changes in domestic and overseas industrial conditions, we will continue to uphold the business philosophy of foundation consolidation, innovation and sustainable development to carry out restructuring and upgrading, and continue to targets at profit growth, competitiveness optimization and sustainable development to draw the development blueprint of two major businesses, namely, "fertilizer chemicals business", “real estate investment business”, by the use of diverse business development and multi-perspective modes of operation., to achieve the Company’s goal of sustainable operation and development. Special thanks will go to all the shareholders for your supports and encouragement and I also wish you good health and good luck!

Chairman:

Kang Hsinhong

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Company Profile

Part Two: Company Profile

I. Incorporation Date: May 1st, 1946

II. Company History:

Taiwan Fertilizer Company, TFC, established on May 1st, 1946, was originally a state-owned enterprise. In the period when it operated as a state-owned enterprise to cooperate with the agricultural policy of the government, it mainly produced fertilizer products for domestic market. With the operation and development of more than 70 years, it has been a largest modern fertilizer manufacturer in Taiwan and ensures the sufficient supply of all the fertilizers necessary for the agricultural development on every stage. It has made a great contribution to the development of the agricultural economy of Taiwan. Under the policy of transforming state-owned enterprises into non-governmental ones actively promoted by the government, it was privatized on September 1st, 1999, and is now a listed private corporation.

TFC, as the largest fertilizer manufacturer in Taiwan, annually supplies about 700,000 tons of products, accounting for above 70% of the total demand of Taiwan. TFC produces products such as ammonium sulphate, SSP, NPK fertilizer, organic fertilizer and so on and also imports urea, potassium chloride, calcium ammonium nitrate for direct sale. In addition, it produces and imports chemical products and electronic chemicals for the markets domestically and abroad. After its privatization, in order to cope with the changes in the internal and external circumstances, work with the industry development trend, promote diverse operation, besides the operation of fine fertilizers and chemicals, it has actively explored such businesses as deep ocean water, real estate development, biotechnology, healthcare products and leisure business, etc.

Looking into 2017, facing the rapid changes in the economic conditions of domestic and foreign industries, not only is the Company to establish sales outlets for agricultural produces in the land of ASEAN members in line with the New Southern Policy of the government, but also it is to continue to undertake the transformation and upgrade of the Company being in accordance with the management philosophy of rejuvenation, solidarity, innovation, and sustainability. In addition, the comprehensive strategic objective of the Company remains to lie in profitable growth, optimized competition and sustainable development while theming on the development direction of constructing two major business groups, namely “chemical fertilizer” and “real estate development and investment”. It is aimed that with the leverage of diversified business development and multi-angled management approach, as well as the strategic focus on consolidated niche, stable earnings, sustainable development, and the establishment of core operational competencies, the Company is to outgrow itself from the base of Taiwan into a global brand of excellence among the ever-sustainable enterprises.

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The history of the major developments of TFC until now are outlined as follows:

May 1946 Incorporated jointly by the former Resources Commission and Taiwan Provincial Government;
Dec. 1979 Authorized by Taiwan Provincial Government, TFC entered into an agreement with Saudi Arabis to establish Al-Jubail in the Kingdom of Saudi Arabia;
May 1989 The land in the Nangang Plant Area of TFC was ordered to be laid out for Nangang Economic and Trading Park;
Mar. 1995 The Executive Yuan passed the privatization of TFC; Mar. 1998 Had the first release of stocks after privatization; with public placement by means of drawing lots, released 24.93% public stocks and smoothly completed listing;
Jul. 1998 In order to work with the overall planning and development of Nangang Economic and Trading Park of the government, Nangang Plant was formally closed;
Sept.1999 Formally transformed into a private company; Feb. 2002 Via Hsinchu Plant, worked with Hsinchu Municipal Government for the planning and development of Hsinchu Science and Commerce New Metropolis Center Special Zone Program;
Nov. 2004 Via Hualien Plant, participated in the feasibility study report and Phase I investment plan of Deep Ocean Water Science and Technology Park;
Jan. 2005 Ministry of Economy released 200 million shares of TFC through after-hour auction and thus the shareholding ratio decreased to 24.07%;
Mar. 2005 The shares held by the government shifted to be managed by Ministry of Finance;
May 2005 The shares held by the government shifted to be managed by Commission of Agriculture (COA);
Oct. 2005 Passed the resolution for the Plan of All Plants of TFC Relocated to Taichung Port ;
Nov. 2005 The deep ocean water Phase 1 water taking facilities project of TFC in Hualien commenced;
Dec. 2005 In accordance with the regulations of Taipei Municipal Government regarding urban renewal, R13 land was invested in with the adjacent lands for the construction of congregate housing;
May 2006 By means of setting 50-year surface right, the land lots C6/C7/C8/C9 of TFC in Nangang Economic and Trading Park were to be developed by entrepreneurs; through public tender, Chinatrust Commercial Bank won the bid;
Aug. 2006 Signed the cooperative investment contract with Brand Food Company to establish Taiwan Deep Ocean Water Co., Ltd and jointly ran the business of deep ocean water producing and selling packed drinkable water/drink, etc.;
Sept. 2006 Taiwan Deep Ocean Water Company in which TFC and Brand Food Company respectively held 50% shares held the initiator meeting, had initial capital NT$650 million and completed the incorporation registration;

Company Profile

May 2007 The water taking engineering of TFC for deep ocean water completed the pipeline arrangement and the depth was -662m; May 2007 The fish scale collagen protein workshop of TFC was put into operation formally; Nov. 2007 Established TFC Foundation formally; Nov. 2007 The miss SHARK cosmetics of TFC were formally launched; Jun. 2009 In order to take social responsibilities, the general meeting of shareholders passed the resolution that TFC donated NT$50 million for the Ministry of Agriculture of Saudi Arab to establish an agricultural center; Sept. 2009 David J. C. Chung, chairman of TFC, and Mr. Al-Sheaibi, executive vice president of the Fertilizer Department of SABIC, jointly signed on the resolution of shareholders of Al-Jubail Fertilizer Company on the amendment to the articles of association of Al-Jubail Fertilizer Company, changing the existence of Al-Jubail Fertilizer Company from 33 years into 53 years; May 2010 Invested NT$1.41 billion in the land for Hsinchu Plant of TFC for the development of Hsinchu Science and Business Park Phase 1; Jan. 2011 Invested in and established Hsuchang Chemical Technology Company in Kunshan of Mainland China; Nov. 2011 Invested NT$100 million to establish TFC Biotech Products Marketing Subsidiary in which TFC held 100% shares; Dec. 2011 Established the Salary and Remuneration Committee and appointed Huifang Zhou, Yongqing Chen and Shengfeng You as the members of such committee; Dec. 2012 Acquisition of 50% shares of Taiwan Deep Ocean Water Co., Ltd held by Brand Food Co., Ltd; July 2013 Taichung Complex was formally launched; Oct. 2013 Planned to build the “Bioorganic Fertilizer Field”; Dec. 2013 Passed the “lease for leisure tourist hotel in Nangang Economic and Trading Park Land Lot C2” and signed “agreement on cooperative planning” with awarded companies “Grand Hi-Lai Hotel” and “Caesar Park Hotel”; Feb. 2014 Passed the agreement with Jing Chun Co. to jointly provide endorsement guarantee to Hsuchang Chemical Technology (Cayman) Co. The extension of endorsement guarantee with Shanghai Commercial Bank was managed to the extent of limit set forth in the Company’s “Procedures for Fund Lending and Endorsement Guarantee”; Feb. 2015 Passed the bidding scheme of Nangang C2 Office Building; Feb. 2015 Invested and established the TAIFER (CAMBODIA) CO., LTD. in Cambodia Mar. 2015 Signed the Letter of Intent on Entrustment for Management of Parkview Hotel Hualien with The Grand Hi Lai Hotel, Inc.; Apr. 2015 The “Sea mineral 1400” produced by our invested enterprise “Taiwan Yes Deep Ocean Water Co., Ltd.” Has obtained the healthy food certification from Ministry of Health and Welfare;

Jun. 2015 Passed the resolution in the Shareholders’ Meeting in 2015 that two independent directors added to the board;

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Aug. 2015 ChinaTrust Life Insurance Co., Ltd. and Taiwan Life Insurance Co., Ltd. jointly won the bid of Nangang C3 superficies case; Sept. 2015 C3 superficies case signing ceremony with ChinaTrust Life Insurance Co., Ltd. and Taiwan Life Insurance Co., Ltd.; Dec. 2015 Ground breaking ceremony of Nangang C2 office building and tourism hotel Dec. 2015 Grounding breaking ceremony of Parkview Hotel Hualien; Dec. 2015 First publication of 2014 CSR report; Jan. 2016 Roof beam setting ceremony of Hsinchu D7-A office building; Feb. 2016 The launch of a new product “ ＃ 43 Organic Compound Fertilizer (Nitrophosphate Route); May 2016 The completion of the inspection of greenhouse gas in all plants; Aug. 2016 The undergoing of the procedure for the dissolution of Hsuchang Chemical Technology Co. invested by the Company; Aug. 2016 The rename of “Taiwan Fertilizer Biotechnology Co., Ltd.”, a subsidiary of Taiwan Fertilizer Co., to "Taiwan International Agricultural Development Co., Ltd."; Oct. 2016 The postponement of the investment project on “Parkview Hotel in Hualian”; Oct. 2016 The pass of the resolution by the Board of Directors about the investment of NTD 2.367 billion on the “Construction of No. 10 West Pier at Taizhong Harbor” project; Nov. 2016 The investment of NTD 80 million on “Taiwan International Agricultural Development Co., Ltd.” by the Company; Nov. 2016 The launch of a new product “ ＃ 4 Biotec Organic Compound Fertilizer”;

Corporate Governance Report

Part Three: Corporate Governance Report

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

I. Organization System
(I) Corporation Organization
General Meeting of
Shareholders
Board of Supervisor
Directors
Chairman
Audit Office Office of Board of Directors
President
Vice President
(II)Affairs in charge for each major department
Name Duties
1. Evaluation and introduction of new products and new technology.
2. R&D of new products and technology and related business.
R&D Dept. 3. Improvement of existing products and technology.
4. Intellectual property management.
5. Other relevant R&D and related business.
1. Purchase and supply of the domestic and foreign raw materials.
2. Dispatching and inventory control of raw materials.
3. Storage and transportation management of products and materials and
treatment of dull and waste materials.
Trading Dept. 4. Planning and execution of unloading and storage services.
5. Work and labor bidding.
6. Import & export and marketing and planning management of the bio-tech
chemical products.
7. Other relevant purchase and marketing of bio-tech chemical products.
Keelung Plant Kaohsiung Plant Hsinchu Plan Hualien Plant Miaoli Plant Taichung Plant R&D Dept. Marketing Dept. Trading Dept. Investment Dept. Enterprise Planning Dept. Information Dept. Financial Dept. Administrative Dept.
Industry Safety & Health Dept. Property Management Dept. Real Estate Development Dept.
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Name	Duties
Marketing Dept.	1. To market, import, export, plan and manage various fertilizers.
	2. To handle customer complaints regarding fertilizer products and bio-tech chemical products.
	3. To compile information regarding business conditions in fertilizer and bio-tech chemical products markets.
	4. To demonstrate and promote ideas of safe agriculture and fertilizer domestically and overseas.
	5. Other business about the promotions of fertilizers and bio-tech chemical products.
Investment Dept.	1. To seek for, assess, select and study investment opportunities.
	2. To research and execute domestic and overseas investment, cooperation, share participation, merger, venture capital, etc.
	3. To research and execute the technology introduction or cooperation and technical investment.
	4. To research and execute the investment business and its feasibility.
	5. To trace and review investment and reinvestment performance.
	6. To deal with other investment related businesses
Real Estate Development Dept.	1. Overall design of environment, building, landscape and interior decoration of the Company’s land and construction-related business.
	2. Environmental impact assessment and deliberation of urban design.
	3. Study and preparation of the construction demand of the development case, project budget, structural system and equipment system.
	4. Acquisition of all development permissions.
	5. Preparation of the project bidding price, construction specification and construction, supervision and completion acceptance.
	6. Warranty and repairing after the completion of the project.
	7. Planning of real estate construction and relevant engineering business.
Property Management Dept.	1. Study, preparation and management of the overall land development strategy, annual plan and the individual business planning.
	2. Land development such as change of the urban planning, re-planning of the municipal land and the city upgrade.
	3. Planning estimation, sales and after-sales service of the residential building development.
	4. Planning estimate of commercial real estate development.
	5. Utilization of the unused land and land management.
	6. Investment attraction, maintenance and management of real estate assets.
	7. Other related management and operation business of real estate and land.
Enterprise Planning Dept.	1. To research and execute operation policy, operation strategy, mid-term and long-term project plan and annual operation plan.
	2. To plan and carry forward operation and management systems; manage and evaluate operation performance;
	3. To trace and evaluate operation meeting minutes, resolutions and project affairs.
	4. To deal with authorization by levels and compile rules and regulations.
	5. To deal with other matters in relation to enterprise planning.
Information Dept.	1. To deal with the business of information system.
	2. To deal with information network.
	3. To deal with the other relevant business.

Corporate Governance Report

Name	Duties
Financial Dept.	1. To develop service plan, and to dispatch and control funds.
	2. To research and develop financial strategies and conduct financial analysis and prediction.
	3. To plan and execute financial and wealth management matters.
	4. To research and develop accounting system.
	5. To conduct budget and final settlement and control cost and expense.
	6. Business related to investor relationship (IR).
	7. To deal with other matters in relation to finance, accounting and statistics.
Administrative Dept.	1. To plan and execute the HR system, plan and execute organization and HR matters.
	2. To deal with labor and capital relationship.
	3. To manage instruments and transact general affairs.
	4. To distribute and keep cash, securities, notes and deeds.
	5. To compile publications.
	6. To deal with other matters out of the duties of the other departments and offices.
Office of Board of Directors	1. Relevant administrative affairs of the Board.
	2. Preparation of annual financial reports and the minutes of shareholders’ meeting.
	3. Preparation of CSR report and thepublications of the Company.
	4. Promotion of corporate social responsibility as well as integrity policies.
	5. To deal with stock matters.
Audit Office	To master and manage internal control and internal audit matters.
Industry Safety & Health Dept.	1. To create the corporate culture of addressing security and build up the common sense of respecting life and caring security.
	2. To carry forward the work security management system, assist the plants in setting up ESH (environment, security and health) management system.
	3. To carryout work securitystatus audit and direction andprevent accidents.
	4. To carry out energy-saving and carbon emission reduction, improve environment and keep natural ecology.
	5. To transact or assist the work security and environment appraisal for the incorporation of subsidiaries or new businesses.
	6. Toplan,integrate and manage theproductionplan.
	7. To manage the production technique, quality and efficiency and promote the maintenance system of the production equipment.
	8. Toplan,integrate and manage the workplan and capital expenditure.
	9. To manage the fixed assets as well as the unused assets other than land.
	10. Other matters in relation to industrial security, health, environmental protection, and production.
Production Plants	Manufacturingandproduction management.

II. Information on Directors, Supervisors, President, Vice Presidents, and Management Team

(I)Information on Directors and Supervisors

Information on Directors and Supervisors (I)

																	April 16,2017	April 16,2017	April 16,2017
Title	Nationality	Name	Gender	Election (Accession) Date	Terms	Date First Elected	Shareholding When Elected		Current Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience (Education)	Other Positions in TFC and/or Other Companies	Executives, Directors or Supervisors Who Are Spouses or within Two Degrees of Kinship
							Shares	%	Shares	%	Shares	%	Shares	%			Title	Name	Shares
Chairman	R.O.C	COA		07/01/2015	3yrs	05/20/2005	235,886,376	24.07	235,886,376	24.07							-	-	-
	R.O.C	Rep : KANG Hsinhong	Male	11/24/2016	3yrs	11/24/2016	0	‐	0	‐					PhD in Economics, University of California - Santa Barbara President of Graduate School of Business Administration, Chairman of Dept. of Business Administration, National Cheng KungUniversity	Director of the Board, Jubail Fertilizer Company	-	-	-
Director	R.O.C	COA		07/01/2015	3yrs	05/20/2005	235,886,376	24.07	235,886,376	24.07							-	-	-
	R.O.C	Rep : CHEN Chichung	Male	06/07/2016	3yrs	06/07/2016	0	‐	0	‐		‐	‐	‐	PhD in Agriculture, Texas A&M University Chairman, Rural Economics Society of Taiwan Chief Secretary,National Chung Hsing University	Deputy Minister, Council of Agriculture, Executive Yuan	-	-	-
Director	R.O.C	COA		07/01/2015	3yrs	05/20/2005	235,886,376	24.07	235,886,376	24.07		‐	‐	‐			-	-	-
	R.O.C	Rep : HUANG Hsuhung	Male	10/13/2016	3yrs	10/13/2016	0	‐	0	‐		‐	‐	‐	PhD, School of Humanities and Social Sciences, Tsinghua University in Beijing Chairman, Sunnet Inc. Chairman,ChungYingConsulingInc.	Chairman, Sunnet Inc. Chairman, Chung Ying Consuling Inc.	-	-	-
Director	R.O.C	COA		07/01/2015	3yrs	05/20/2005	235,886,376	24.07	235,886,376	24.07		‐	‐	‐			-	-	-
	R.O.C	Rep : HSU Shengming	Male	07/01/2015	3yrs	06/24/2015	0	‐	0	‐		‐	‐	‐	Taiwan Provincial Da Jia Agricultural and Industrial Vocational High School Senior technician, Production Section, Miaoli Plant,TFC	Chairman, United Workers Union of Taiwan Fertilizer Industries	-	-	-
Director	R.O.C	TSAI Changhai	Male	07/01/2015	3yrs	07/01/2009	356,000	0.03	356,000	0.03		‐	‐	‐	PhD in Medicine, Teikyo University Chairman, China Medical University Hospital Chairman of Asia University	Chairman, China Medical University Hospital Chairman of Asia University	-	-	-
Director	R.O.C	HSU Chinlien	Male	07/01/2015	3yrs	06/25/2013	100,000	0.01	100,000	0.01		‐	‐	‐	Department of Law, National Chung Hsing University Judge of Taiwan Pingtung District Court Judge of Taiwan KaohsiungDistrict Court	Chairman of HSU Chinglien Law Office	‐	‐	‐
Independent Director	R.O.C	HSU Mingtsai	Male	07/01/2015	3yrs	06/24/2015	0	‐	0	‐		‐	‐	‐	Doctoral Program, Graduate Institute of Management of Technology, Chung Hua University Mayer of Hsinchu City	Chairman, Wan Chu Education Foundation, Director, Taiwan Blood Services Foundation	‐	‐	‐
Independent Director	R.O.C	SHEN Huiya	Female	07/01/2015	3yrs	06/24/2015	0	‐	0	‐		‐	‐	‐	Graduate School of National Chung Hsing University Supervisor, Central Broadcasting System	Consultant, Public Service Pension Fund Management Board, Ministry of Civil Service, Examination Yuan, Independent director, First Financial Holding, Independent director, Formosa Advanced Technology Co., Ltd., Solicitor,ChangChun Law Office	‐	‐	‐

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Title	Nationality	Name	Gender	Election (Accession) Date	Terms	Date First Elected	Shareholding When Elected	Shareholding When Elected	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Experience (Education)	Other Positions in TFC and/or Other Companies	Executives, Directors or Supervisors Who Are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who Are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who Are Spouses or within Two Degrees of Kinship
							Shares	%	Shares	%	Shares	%	Shares	%			Title	Name	Shares
Supervisor	R.O.C	Chunghwa Post		07/01/2015	3yrs	07/01/2009	24,422,000	2.49	36,085,000	3.68	-	‐	‐	‐			‐	‐	‐
	R.O.C	WU Yuanjen	Male	07/01/2015	3yrs	01/16/2014	0	‐	0	‐	2,000	‐	‐	‐	Master, Department of Business Management, Tatung University Director, Department of Capital Operations, ChungHwa Post Co.,Ltd	VP of Chung Hwa Post Co., Ltd.	‐	‐	‐
Supervisor	R.O.C	CHEN Chailai	Male	07/01/2015	3yrs	07/01/2009	100,000	0.01	100,000	0.01		‐	‐	‐	Chairman of Taiwan Machinery Company Professor of National Cheng Kung University PhD in Business Administration, University of California,USA	Professor of National Cheng Kung University	‐	‐	‐
Supervisor	R.O.C	TSAI Linglan	Female	07/01/2015	3yrs	06/27/2012	135,000	0.01	135,000	0.01		‐	‐	‐	American United University Chairperson of Lan Sin Cultural and Educational Foundation Legislator of Legislative Yuan	Chairperson of Lan Sin Cultural and Educational Foundation	‐	‐	‐

Note 1: CHEN Wende, representative of the Council of Agriculture, Executive Yuan, was dismissed on May 20, 2016.
Note 2: The representatives of Council of Agriculture, Executive Yuan were changed from LEE Fuhsing, LEE Tsanglang, LIAO Chenhsien to CHEN Chichung, CHEN Chienbin, CHANG Chichang, and YANG Chenmin on June 3, 2016. CHEN Chichung was elected as Chairman on June 7. Then, on November 23, he resigned from the post of Chairman and held his position as a government share representative director.
Note 3: The representative of Council of Agriculture, Executive Yuan was changed from CHANG Chichang to HUANG Yucheng on Aug. 1, 2016.
Note 4: The representative of Council of Agriculture, Executive Yuan was changed from HUANG Yucheng to HUANG Hsuhong on Oct. 13, 2016.
Note 5: The representative of Council of Agriculture, Executive Yuan was changed from CHEN Chienbin to KANG Hsinhong on Oct. 21, 2016. KANG Hsinhong was elected as Chairman on Nov. 24. Note 6: YANG Chenmin, representative of the Council of Agriculture, Executive Yuan, was dismissed on March 31, 2017.

Form 1: Key Shareholders of Corporate Shareholders

April 16, 2017

hareholders of Corporate Shareholders	April 16,2017
Name of Institutional Shareholder (Note 1)	Major Shareholders of Institutional Shareholder (Note 2)
Council of Agriculture, Executive Yuan	N/A
Chung Hwa Post Co., Ltd.	N/A

Form 2: Key Shareholders as Corporations: None

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Information on Directors and Supervisors (II)

March 31, 2017

Conditions Name (Note 1)	Above 5-year Work Experience and Professional Qualifications as Below	Above 5-year Work Experience and Professional Qualifications as Below	Above 5-year Work Experience and Professional Qualifications as Below	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Number of other public companies in which the Individual is concurrently serving as an independent director
	An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private College	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Approved a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10
KANG Hsinhong														‐
CHEN, Chichung														‐
HUANG Hsuhong														‐
HSU Shengming														‐
TSAI Changhai														‐
HSU Chinlien														‐
HSU Mingtsai														‐
SHEN Huiya														2
WU Yuanjen														‐
CHEN Chailai														‐
TSAI Linglan														‐

Note:Please check “  ” at the beginning of the following conditions that various directors and supervisors match in two years before appointment and during their tenure.
(1) Not an employee of the Company or any of its affiliates.
(2) Not a director or a supervisor of the Company or its affiliated company (However, the independent director that the Company or its parent company or subsidiary sets according to this law or local law is not subject to this limit).
(3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the fifth degree of kinship, of any of the persons in the preceding three subparagraphs.
(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares ranking in the top 5 in holdings.
(6) Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business relationship with the Company.
(7) Not a professional person who provides business, legal, financial, and accounting services for the Company or its affiliated company, an owner, a partner, a director, a supervisor, a manager of wholly-owned or partnership company/institution, or its spouse. However, the compensation committee member stated in Article 7 Fulfillment of Authority, Methods for Compensation Committee Setting Up and Authority Exercising of Stock Exchange Listing Company or Company Traded at Securities Dealer Business Office is not subject to this limit.
(8) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.
(9) Not a person of any conditions defined in Article 30 of the Company Law.
(10) Not a governmental body, juridical person or its representative as defined in Article 27 of the Company Law.

(II) Information on the President, Vice Presidents and Management Team

													April 16,2017	April 16,2017	April 16,2017
Title	Nationality	Name	Gende r	Election (Accession) Date	Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience (Education)	Other Positions in other Companies	Managers as Spouse or within 2-Degree Kinship
					Shares	%	Shares	%	Shares	%			Title	Name	Shares
President	R.O.C	HUANG Yaohsing	Male	09/01/2016	0	-	-	-	-	-	Ph.D., Graduate School of Material Science, National Chung Shan University Assistant VP,Taiwan FertilizerCo.,Ltd.,	Chairman, Taifer(Cambodia)Co.,Ltd Director of the Board, Jubail Fertilizer Company	-	-	-
Vice President	R.O.C	LUO Shihjih	Male	02/01/2013	2,381	-	-	-	-	-	Department of Business Management, Fu Jen Catholic University Head, Enterprise Planning Department, Taiwan FertilizerCo.,Ltd.	Director of the Board, Taiwan Yes Deep Ocean Water Company Director, Hasbro Biotech Inc Director,Taifer(Cambodia)Co.,Ltd	-	-	-
Vice President	R.O.C	CHANG Tsanglang	Male	10/01/2015	0	-	-	-	-	-	NTU Graduate Institute of Building and Planning Assistant VP,Taiwan FertilizerCo.,Ltd.,	Director of the Board, Tai Zhuang Asset Management and Development Co.,Ltd.	-	-	-
Vice President	R.O.C	CHEN Hsinchang	Male	10/01/2016	423	-	-	-	-	-	Department of Economy, Chinese Culture University, Vicehead,TaichungPlant	President, Taifer (Cambodia) Co.,Ltd Head, Taichung Plant	-	-	-
Financial Dept. Head	R.O.C	CHIEN Chaojen	Male	01/01/2015	628	-	-	-	-	-	Department of Accounting, Feng Chia University; Head, Hualien Plant	Supervisor, TR Electronic Chemical (Cayman) Ltd. Supervisor, TR Electronic Chemical (Kunshan) Ltd. Director, VISGENEER INC.	-	-	-
. Taichung Plant Head	R.O.C	CHEN Hsinchang	Male	10/01/2016	423	-	-	-	-	-	Department of Economy, Chinese Culture University, Vicehead,TaichungPlant of TFC	President, Taifer (Cambodia) Co.,Ltd Vice President, Taiwan Fertilizer Co., Ltd	-	-	-
Keelung Plant Head	R.O.C	LIN Chinsheng	Male	10/01/2016	1,000	-	-	-	-	-	Department of Economy, Chinese Culture University, Leader of Management Team, Keelung Plant of TFC	Vice head, Taichung Plant	-	-	-
Kaohsiun g Plant Head	R.O.C	TSENG Chienhsiung	Male	09/01/2015	0	-	-	-	-	-	Graduate Institute of Mechanical Engineering, Natioanl Taiwan University Head,Industry Safety &Health Department	Vice head, Taichung Plant	-	-	-
Hsinchu Plan Head	R.O.C	HUANG Juichen	Male	11/16/2015	0	-	-	-	-	-	Graduate Institute of Architecture, National Cheng Kung University, Head, Real Estate Developmnent Department	Head, Property Management Department	-	-	-
Hualien Plant Head	R.O.C	PENG Shenglung	Male	03/01/2016	266	-	-	-	-	-	Graduate School of Chemistry, National Tsing Hua University Chiefengineer,TaichungPlant	None	-	-	-
Miaoli Plant Head	R.O.C	HSIEH Wenhsiung	Male	04/01/2013	540	-	-	-	-	-	Department of Chemical Engineering, Tung Hai University, Director of FactoryAffairs Office,TFC	Assistant VP, Taiwan Fertilizer Co., Ltd.,	-	-	-

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(III)Remuneration paid to directors, supervisors, president and vice presidents for the recent years

(1)Remuneration for directors of the board (including independent directors) (Summary of ways for coordinative disclosure of names)

Unit: NT$ K

Title	Name	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Ratio of Total Remuneration (A+B+C+D) to After-Tax Net Income (%)	Ratio of Total Remuneration (A+B+C+D) to After-Tax Net Income (%)	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Ratio of Total Remuneration (A+B+C+D+E+F+G)Aft er-Tax Net Income(%)	Ratio of Total Remuneration (A+B+C+D+E+F+G)Aft er-Tax Net Income(%)	Get Any Remuneration from the Invested Businesses Other than Subsidiaries
		Salary (A)		Severance Pay (B)		Remuneration to Directors (C)		Business Execution Expense (D)				Salary, Bonus & Allowance etc. (E)		Severance Pay (F)		Remuneration to employee (G) (Note 6)				Exercisable Employee Stock options (H)
		The Company	All Companies in the Financial Report	The Company	All Companies in the Financial Report	The Company	Companies in the Consolidate Financial Statements	The Company	All Companie s in the Financial Report	The Company	All Companies in the Financial Report	The Company	All Companies in the Financial Report	The Compa ny	All Companies in the Financial Report	The Company		All Companies in the Financial Report		The Company	Companies in the Consolidate Financial Statements	The Company	Companies in the Consolidate Financial Statements
																cashca	stock	cash	stock
COA
Chairman	Representative KANG Hsinhong	384	384	0	0	0	0	133	133	-0.400%	-0.400%	0	0	0	0	0	0	0	0	0	0	-0.400%	-0.400%	None
Chairman	Representative CHEN Chichung （Resigned on 11/23/2016）	0	0	0	0	0	0	139	139	-0.107%	-0.107%	0	0	0	0	0	0	0	0	0	0	-0.107%	-0.107%	None
Chairman	Representative LEE Fuhsing （Resigned on 06/03/2016）	2,005	2,005	0	0	0	0	776	776	-3.923%	-3.923%	0	0	0	0	0	0	0	0	0	0	-3.923%	-3.923%	None
Director	Representative CHEN Chichung	0	0	0	0	0	0	139	139	-0.107%	-0.107%	0	0	0	0	0	0	0	0	0	0	-0.107%	-0.107%	None
Director	Representative HUANG Hsuhong	0	0	0	0	0	0	52	52	-0.040%	-0.040%	0	0	0	0	0	0	0	0	0	0	-0.040%	-0.040%	None
Director	Representative HSU Shengming	0	0	0	0	0	0	240	240	-0.185%	-0.185%	1,162	1,162	0	0	0	0	0	0	0	0	-1.082%	-1.082%	None
Director	Representative CHEN Wende （Dismissed on 05/20/2016）	0	0	0	0	0	0	93	93	-0.072%	-0.072%	0	0	0	0	0	0	0	0	0	0	-0.072%	-0.072%	None
Director	Representative LEE Tsanglang （Dismissed on 06/03/2016）	0	0	0	0	0	0	101	101	-0.078%	-0.078%	0	0	0	0	0	0	0	0	0	0	-0.078%	-0.078%	None
Director	Representative LIAO Chenhsien （Dismissed on 06/03/2016）	0	0	0	0	0	0	101	101	-0.078%	-0.078%	0	0	0	0	0	0	0	0	0	0	-0.078%	-0.078%	None

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Title	Name	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Ratio of Total Remuneration (A+B+C+D) to After-Tax Net Income (%)	Ratio of Total Remuneration (A+B+C+D) to After-Tax Net Income (%)	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Remuneration to Concurrent Employees	Ratio of Total Remuneration (A+B+C+D+E+F+G)Aft er-Tax Net Income(%)	Ratio of Total Remuneration (A+B+C+D+E+F+G)Aft er-Tax Net Income(%)	Get Any Remuneration from the Invested Businesses Other than Subsidiaries
		Salary (A)		Severance Pay (B)		Remuneration to Directors (C)		Business Execution Expense (D)				Salary, Bonus & Allowance etc. (E)		Severance Pay (F)		Remuneration to employee (G) (Note 6)				Exercisable Employee Stock options (H)
		The Company	All Companies in the Financial Report	The Company	All Companies in the Financial Report	The Company	Companies in the Consolidate Financial Statements	The Company	All Companie s in the Financial Report	The Company	All Companies in the Financial Report	The Company	All Companies in the Financial Report	The Compa ny	All Companies in the Financial Report	The Company		All Companies in the Financial Report		The Company	Companies in the Consolidate Financial Statements	The Company	Companies in the Consolidate Financial Statements
																cashca	stock	cash	stock
Director	Representative CHANG Chichang （Dismissed on 08/01/2016）	0	0	0	0	0	0	39	39	-0.030%	-0.030%	0	0	0	0	0	0	0	0	0	0	-0.030%	-0.030%	None
Director	Representative HUANG Yucheng （Dismissed on 10/13/2016）	0	0	0	0	0	0	48	48	-0.037%	-0.037%	0	0	0	0	0	0	0	0	0	0	-0.037%	-0.037%	None
Director	Representative CHEN Chienbin （Dismissed on 10//21/2016）	0	0	0	0	0	0	92	92	-0.071%	-0.071%	0	0	0	0	0	0	0	0	0	0	-0.071%	-0.071%	None
Director	Representative YANG Chenmin （Dismissed on 03/31/2017）	0	0	0	0	0	0	139	139	-0.107%	-0.107%	0	0	0	0	0	0	0	0	0	0	-0.107%	-0.107%	None
Natural Person
Director	TSAI Changhai	0	0	0	0	0	0	240	240	-0.185%	-0.185%	0	0	0	0	0	0	0	0	0	0	-0.185%	-0.185%	None
Director	HSU Chinlien	0	0	0	0	0	0	240	240	-0.185%	-0.185%	0	0	0	0	0	0	0	0	0	0	-0.185%	-0.185%	None
Independent Director	HSU Mingtsai	0	0	0	0	0	0	720	720	-0.556%	-0.556%	0	0	0	0	0	0	0	0	0	0	-0.556%	-0.556%	None
Independent Director	SHEN Huiya	0	0	0	0	0	0	720	720	-0.556%	-0.556%	0	0	0	0	0	0	0	0	0	0	-0.556%	-0.556%	None

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Remuneration Scale Table

	Remuneration Scale Table	Remuneration Scale Table	Remuneration Scale Table	Remuneration Scale Table
Bracket	Names of Directors
	Total of(A+B+C+D)		Total of(A+B+C+D+E+F+G)
	The Company	Companies in the Consolidated Financial Statements(I)	The Company	Companies in the Consolidated Financial Statements(J)
Below 2,000,000	CHEN Wende, LEE Tsanglang, LIAO Chenhsien, CHEN Chichung, YANG Chenmin , CHEN Chienbin, KANG Hsinhong, CHANG Chichang, HUANG Yucheng, HUANG Hsuhong, TSAI Changhai, HSU Shengming, HSU Chinlien, SHEN Huiya, HSU Mingtsai	CHEN Wende, LEE Tsanglang, LIAO Chenhsien, CHEN Chichung, YANG Chenmin, CHEN Chienbin, KANG Hsinhong, CHANG Chichang, HUANG Yucheng, HUANG Hsuhong, TSAI Changhai, HSU Shengming, HSU Chinlien, SHEN Huiya, HSU Mingtsai	CHEN Wende, LEE Tsanglang, LIAO Chenhsien, CHEN Chichung, YANG Chenmin, CHEN Chienbin, KANG Hsinhong, CHANG Chichang, HUANG Yucheng, HUANG Hsuhong, TSAI Changhai, HSU Shengming, HSU Chinlien, SHEN Huiya, HSU Mingtsai	CHEN Wende, LEE Tsanglang, LIAO Chenhsien, CHEN Chichung, YANG Chenmin, CHEN Chienbin, KANG Hsinhong, CHANG Chichang, HUANG Yucheng, HUANG Hsuhong, TSAI Changhai, HSU Shengming, HSU Chinlien, SHEN Huiya, HSU Mingtsai
2,000,000(inclusive)~ 5,000,000(exclusive)	LEE Fuhsing	LEE Fuhsing	LEE Fuhsing	LEE Fuhsing
5,000,000(inclusive)~ 10,000,000(exclusive)	-	-	-	-
10,000,000(inclusive)~ 15,000,000(exclusive)
15,000,000(inclusive)~ 30,000,000(exclusive)	-	-	-	-
30,000,000(inclusive)~ 50,000,000(exclusive)	-	-	-	-
50,000,000(inclusive)~ 100,000,000(exclusive)	-	-	-	-
Above 100,000,000	-	-	-	-
Total	16	16	16	16

Note 1: The names of directors of the board are listed respectively and the remuneration amounts are disclosed in summary manner.
Note 2: The amount of remuneration for directors by surplus distribution is paid by the amount of allotment adopted by the Board of Directors for Surplus Distribution for 2016.
Note 3: The amount of remuneration for the legal representative includes the remuneration by surplus distribution acquired by the corporation, and the remuneration for surplus distribution for the representatives like KANG Hsinhong, CHEN Chichung, HUANG Hsuhong, YANG Chenmin, CHEN Chienbin, HUANG Yucheng, CHANG Chichang, LEE Fuhsing, CHEN Wende, LEE Tsanglang, LIAO Chenhsien, and HSU Shengming directors of public shares allotted by Council of Agriculture, should all be acquired by Council of Agriculture and paid to the national treasury.
Note 4: The portion of non-fixed income for president exceeding fixed income (salary for 12 months) is paid to the treasury as specified.
Note 5: The retirement pension actually paid to directors for 2016 is NT$2,300K, with the provision for new system retirement pension for directors accounting for NT$0K, and provision for old system retirement pension for directors accounting for NT$0K.

==> picture [80 x 596] intentionally omitted <==

(2) Remuneration for Supervisors (Summary of ways for coordinative disclosure of names)

Unit: NT$ K

										Unit: NT$ K
Title	Name	Remuneration to Supervisors						Ratio of Total Remuneration (A+B+C) to After-Tax Net Income (%)		Get Any Remuneration from the Invested Businesses Other than Subsidiaries
		Salary (A)		Remuneration(B)		Business Execution Expense (D)
		The Company	All Companies in the Financial Report	The Company	Companies in the Consolidate Financial Statements	The Company	Companies in the Consolidate Financial Statements	The Company	Companies in the Consolidate Financial Statements
ChungHwa Post Co.,Ltd.		0	0	0	0	240	240	-0.185%	-0.185%	None
Supervisor	Representative WU Yuanjen
Naturalperson		0	0	0	0	240	240	-0.185%	-0.185%	None
Supervisor	TSAI Linglan
Naturalperson										None
Supervisor	CHEN Chailai	0	0	0	0	240	240	-0.185%	-0.185%

Remuneration Scale Table

	Remuneration Scale Table	Remuneration Scale Table
Bracket	Supervisor
	Total of(A+B+C)
	The Company	Companies in the Consolidate Financial Statements D
Below 2,000,000	TSAI Linglan, CHEN Chailai, WU Yuanjen	TSAI Linglan, CHEN Chailai, WU Yuanjen
2,000,000(inclusive)~ 5,000,000(exclusive)	-	-
5,000,000(inclusive)~ 10,000,000(exclusive)	-	-
10,000,000(inclusive)~ 15,000,000(exclusive)	-	-
15,000,000(inclusive)~ 30,000,000(exclusive)	-	-
30,000,000(inclusive)~ 50,000,000(exclusive)	-	-
50,000,000(inclusive)~ 100,000,000(exclusive)	-	-
Above 100,000,000	-	-
Total	3	3

Note 1: The names of supervisors are listed respectively and the remuneration amounts are disclosed in summary manner.

Note 2: The surplus bonus to supervisors is recognized with the amount to be distributed approved at the surplus distribution meeting of the board of Directors of 2016.

Note 3: The salary amount for the legal representative includes the surplus bonus to the juridical person;

Note 4: For FY2016, the actual severance pay to supervisors is NT$0k the new system severance pay to supervisors provided is NT$0K and the old system severance pay to supervisors provided is NT$0k.

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(3) Remuneration for the President and Vice Presidents (Summary of ways for coordinative disclosure of names)

								Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K
Title	Name	Wage (A)		Severance Pay (B)		Bonus and Special Expense (C)		Profit Sharing-Employee Bonus (D)				Ratio of Total Remuneration (A+B+C+D) to After- tax NetIncome (%)		Exercisable Employee Stock Options		Number of New Shares for Acquisition of Employee’ Rights		Get Any Remuneration from the Invested Businesses Other than Subsidiaries
		The Company	Companies in the Consolidate Financial Statements	The Company	Companies in the Consolidate Financial Statements	The Company	Companies in the Consolidate Financial Statements	The Company		Companies in the Consolidate Financial Statements		The Company	Companies in the Consolidate Financial Statements	The Company	Companies in the Consolidate Financial Statements	The Company	Companies in the Consolidate Financial Statements
								Cash	Stock	Cash	Stock
President	HUANG Liai （Dismissed on 08/31/2016）	9,530	9,530	5,371	5,371	8,518	8,518	-	-	-	-	-18.08%	-18.08%	-	-	None	None	None
President	HUANG Yaohsing （Promoted on 09/01/2016）
Vice President	LUO Shihjih
Vice President	CHOU Weihsin （Retired on 06/30/2016）
Vice President	HUANG Yaohsing （Dismisssed on 08/31/2016）
Vice President	CHANG Tsanglang
Vice President	CHEN Hsinchang （Promoted on 10/01/2016）

Remuneration Scale Table

	Remuneration Scale Table	Remuneration Scale Table
Bracket	President and Vice President`s Name
	The Company	All Companies in the Financial Report E
Below 2,000,000	CHEN Hsinchang	CHEN Hsinchang
2,000,000(inclusive) ~ 5,000,000(exclusive)	HUANG Liai, HUANG Yaohsing, LUO Shihjih, CHANG Tsanglang	HUANG Liai, HUANG Yaohsing, LUO Shihjih, CHANG Tsanglang
5,000,000(inclusive)~ 10,000,000(exclusive)	CHOU Weihsin	CHOU Weihsin
10,000,000(inclusive)~ 15,000,000(exclusive)	-	-
15,000,000(inclusive)~ 30,000,000(exclusive)	-	-
30,000,000(inclusive)~ 50,000,000(exclusive)	-	-
50,000,000(inclusive)~ 100,000,000(exclusive)	-	-
Above 100,000,000	-	-
Total	6	6

Note 1: The names of president and vice presidents are listed respectively and the remuneration amounts are disclosed in summary manner.

Note 2: The surplus bonus to directors is recognized with the amount to be distributed approved at the surplus distribution meeting of the Board of Directors of 2016.

Note 3: The portion of non-fixed income for president exceeding fixed income (salary for 12 months) is paid to the treasury as specified.

Note 4: The retirement pension of General Manager and Deputy General Manager paid in 2016 was NT$5,371K. The new-system pension payable to General Manager and Deputy General Manager was NT$91K; the old-system pension payable to General Manager and Deputy General Manager was NT$785,197K.

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Corporate Governance Report

(4) Names of Management Team for the Allotment of Employee Remuneration, and Allotment Conditions

==> picture [458 x 198] intentionally omitted <==

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

March 31, 2017
Unit: NT$ K
Raito of Total Amount to
Title Name Bonus in Stock Bonus in Cash Total
After-Tax Net Income (%)
HUANG Liai
President
(Retired on 08/31/2016)
HUANG Yaohsing
President
（Promoted on 09/01/2016）
Vice President LUO Shihjih
CHOU Weihsin
Vice President
（Retied on 06/30/2016）
- - - 0.00%
HUANG Yaohsing
Vice President
(Retired on 08/31/2016)
Vice President CHANG Tsanglang
CHEN Hsinchang
Vice President
（Promoted on 10/01/2016）
Finance Dept.
CHIEN Chaojen
Head
Managerial Officers
----- End of picture text -----

(5) Comparison and explanation of percentage of the total remuneration for directors, supervisors, Presidents and Vice Presidents of this Company paid over the past two years by this Company and all companies in the consolidated financial statements in the net income of individuals or individual financial reports after tax, the policy of remuneration payment, the combination of standard varieties, procedure for remuneration decision, and the relevant between operation performance and future risks:

Year	After-tax Net Income (NT$K)	Director	Supervisor	Managerial Officers
2015	2,427,083	1.71%	0.55%	0.84%
2016	-129,503	-7.85%	-0.56%	-18.08%

Note 1 : According to the articles of association of the Company, the salary of the chairman is 1.25 X the income of the president, and the other directors of the board and supervisors might get NT$20,000 traffic fee per month as compensation.
Note 2 : According to the articles of association of the Company, after the provision of reserves, the after-tax net income will be put aside 1.6% as the compensation for Directors and Supervisors, and 2.4% as bonus to employees.

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III. Corporate Governance Conditions

(I) Operation of the Board of Directors

There have been 14 (A) meetings of directors for the recent years, with the information on Directors and Supervisors attending the meeting as follows:

Title	Name	Attendance in Person B	Actual Attendance in Person	Attendance by Proxy [B / A]	Remarks
Chairman	COA Representative: LEE Fuhsing	4	0	100%	Dismissed on 06/03/2016
Chairman	COA Representative: CHEN Chichung	10	0	100%	Appoined on 06/03/2016; resigned from the post of Chairman on 11/23/2016; held the position as a government share representative director
Chairman	COA Representative: KANG Hsinhong	3	1	75%	Appoined on 140/21/2016; elected as Chairman on 11/24/2016
Director	COA Representative: CHEN Wende	3	1	75%	Dismissed on 06/03/2016
Director	COA Representative: LEE Tsanglang	4	0	100%	Dismissed on 06/03/2016
Director	COA Representative: LIAO Chenhsien	3	1	75%	Dismissed on 06/03/2016
Director	COA Representative: CHEN Chienbin	4	2	67%	Appoined on 06/03/2016; dismissed on 10/21/2016
Director	COA Representative: CHANG Chichang	2	1	67%	Appoined on 06/03/2016; dismissed on 08/01/2016
Director	COA Representative: HUANG Yucheng	2	0	100%	Appoined on 08/01/2016; dismissed on 10/13/2016
Director	COA Representative: HUANG Hsuhung	4	1	80%	Appoined on 10/13/2016
Director	COA Representative: YANG Chenmin	10	0	100%	Appoined on 06/03/2016
Director	COA Representative: HSU Shengming	14	0	100%
Director	TSAI Changhai	7	7	50%
Director	HSU Chinlien	12	2	86%
Independent Director	HSU Mingtsai	12	2	86%
Independent Director	SHEN Huiya	14	0	100%
Supervisor	Chunghwa Post Representative: WU Yuanjen	14	14	100%
Supervisor	CHEN Chailai	12	2	86%
Supervisor	TSAI Linglan	13	1	93%
Other matters to be recorded: 1.If the operation of board of directors matches one of the following conditions, it is required to specify dates, number of meetings and content of proposals of directors, opinions of all independent directors and response to the opinions of independent directors on the Company. 2. For matters set in the Article 14-3 of SecurityExchange Act.

Corporate Governance Report

Other matters on objection or opinions reserved as well as matters on resolutions of the Board of Directors with records or written statements.
(i) For the execution of avoidance of interested proposals on directors, it is required to specify names of directors, content of proposals, reasons for avoidance of interests and conditions for presence in voting.
(ii) Evaluation of the execution of the objectives with regard to the functions of the Board of Directors for the current year and for the recent years (such as the establishment of the audit committee, promotion of information transparency, and etc).

(II) Operation of the Audit Committee or the Participation in the Board of Directors by Supervisors

1.Operation of the audit committee: N/A

2.Attendance of supervisors for board meeting

A total of 14 (A) meetings of the Board of Directors were held in the latest period with the attendance of the supervisors as follows:

Title	Name	Actual Attendance (B)	Attendance Rate (%) (B/A)
Supervisor	Chunghwa Post Representative: WU Yuanjen	14	100%
Supervisor	CHEN Chailai	12	86%
Supervisor	TSAI Linglan	13	93%
Other matters to be recorded: 1. Composition and responsibilities of supervisors: (1) Communication of the supervisors with the employees and shareholders of the Company (such as communication channels and ways, etc) (2) Communication of the supervisors with the internal audit officer and accountants: (such as status, ways and results of communication with the Company’s finance, business, and etc). 2. If there is any opinion made by supervisors attending the Board of Directors, it is required to specify dates and number of meetings of the Board of Directors, content of proposals, results of the meetings of directors as well as the response to the opinions of supervisors on the Company.

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(III) Conditions for Corporate Governance and Operation and Difference and Causes of Governance Practice Rules on Listed Companies

Items assessed	Operation circumstances	Operation circumstances	Operation circumstances	Difference from the code on the governance of listed companies and OTC companies and cause
	Yes	No	Abstracts
I. Does the Company prepare and disclose the code on the governance of the Company according to the Code of Governance of the Listed Companies and OTC Companies?	V		The Company has prepared and disclosed the code on the governance of the Company according to the Code of Governance of the Listed Companies and OTC Companies.	No difference
II. Shareholding structure and shareholders’ rights of the Company (i) Does the Company prepare the internal operation procedures to deal with the shareholder’s suggestions, doubts, dispute and lawsuit, and execute such procedures indeed? (ii) Does the Company grasp the main shareholders that control the Company and the name list of final controllers of the main shareholders? (iii) Does the Company establish and perform the risk control and firewall mechanism with the affiliates? (iv) Does the Company prepare the internal regulations to prevent its personnel from trading the securities in virtue of the information that is not open to the public?	V		(i)The Company prepared the internal regulations to prevent its personnel from trading the securities in virtue of the information that is not open to the public of proposals, and results of the meetings. (ii)The Company has designated special unit to track the main shareholders and name list of final controllers of main shareholders, and also to apply any change information according to the relevant provisions, if any. (iii)The Company shall also prepare the Operation Procedure of Capital Loan and the Endorsement Guarantee in order to establish the proper risk control mechanism and firewall with the affiliates. The business contact between the Company and all of the affiliates should be handled after the signature of the contract and submission to the board of directors for deliberation. (iv)The Operation Procedure on the Treatment of Major Information inside Taiwan Fertilizer Co., Ltd. has been drafted to regulate the directors, supervisors, managers, employees and the personnel who are in other identities, occupations or controlling relationship but acquire the major internal information of the Company. Those who are prohibited to do any inside trades.	No difference
III. Composition and responsibilities of board of directors (i)Does the board of directors require the members to prepare the diversified policies and then implement these policies? (ii)In addition to the salary and welfare committee and the audit committee,is the Companywilling	V		(i) The Company has prepared the diversified policies and guidelines of the board of directors according to the Article 20 of the governance of the Company. The board members are specialized in finance, laws, agriculture, fertilizer, operation and risk management, who can strengthen the structure and functions of the board. In terms of diversified gender, the Company’s 33rd board of directors contains a female (independent director) for the purpose of improving female decision-making management and implementing diversified poliies. (ii) In addition to the salary and welfare committee, the Company has set up a corporate social responsibilities promotion committee,and will set upan audit	No difference

Corporate Governance Report

Items assessed	Operation circumstances	Operation circumstances	Operation circumstances	Difference from the code on the governance of listed companies and OTC companies and cause
	Yes	No	Abstracts
to set up other committees with similar functions? (iii) Does the Company prepare the performance appraisal method of the board of directors as well as the mode of appraisal, and conduct a regular performance appraisal on a yearly basis? (iv) Does the Company appraise the independence of the certified public accountants on a regular basis?			committee in 2018. (iii)The operation performance appraisal standard of the board of directors of the Company means appraising the indexes such as if the annual settlement and operation interests reach those of the previous year, the control rate of the annual settlement and operation interests, growth rate of the operation interests or if exceeding the target. What is more, according to the provisions of the organization of the Company’s salary and welfare committee, the committee will appraise the performance target of the directors, supervisors and managers of the Company on a regular basis each year and conclude the performance appraisal based on the contents and amount of the individual salary standard. (iv) The Company does regular assessments of accountant independence each year. On December 27, 2016, an appraisal for the independence of CPAs was approved by its Board of Directors. Based on Article 47 of Law on Certified Public Accountant and No. 10 Bulletin of Code of Ethics for Professional Accountants, the Company prepares Independent Evaluation Form for CPAs, evaluates all conditions that may affect the independency of CPAs, and also asked CPAs to issue Absolute Declaration of Independence.
IV.Does a listed company or an OTC company have a corporate governance full-time (or part-time) organization or person who takes charge of the corporate governance related affairs (including but not limited to providing data as required by directors or supervisors executing business, handling matters related to board of directors and shareholders meeting, handling company registration and change of registration, taking minutes of the board of directors and shareholding meeting,etc.)?	V		The Company takes the board office as its corporate governance full-time organization. This office is responsible for corporate governance related affairs, including promoting the corporate governance rules, providing data as required by directors or supervisors executing business, handling matters related to board of directors and shareholders meeting, handling company registration and change of registration, taking minutes of the board of directors and shareholding meeting, etc.	No difference
V. Does the Company have a channel to communicate with interested parties, as well as a special zone for the interested parties on the website of the Company, and properly respond to the critical issues regarding the social responsibilities of the Company as concerned by the interestedparties?	V		The Company has a spokesman. If required by the interested parties, they can communicate with its spokesman or its business unit(s) at any time. The communication channel is smooth. The special zone for the interested parties is set in the website of the Company to respond the issues concerned by the interested parties properly.	No difference

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Items assessed	Operation circumstances	Operation circumstances	Operation circumstances	Difference from the code on the governance of listed companies and OTC companies and cause
	Yes	No	Abstracts
VI. Does the Company entrust a professional stock agency?		V	The Company has issued stocks in public by itself and deals with the stock matters according to the criteria of stock treatment and the internal control system.	Difference: the Company handles stock matters solely.
VII. Information disclosure (i) Does the Company establish the website and disclose the information about finance and governance of Company? (ii) Does the Company implement other ways to disclose information (such as English website, a designated person to collect and disclose the Company’s information, implementing the spokesman system and putting the process of legal person forum on the Company’s website)?	V		(i) The Company has set the special column for serving the investors in its website in both Chinese and English versions, disclosing the information about finance and governance of Company and providing it to the investors for reference on a regular basis. (ii) 1)The Company provides its English version of the critical news such as the annual reports, a handbook for shareholders’ meeting, and a notice of shareholders’ meeting, which the Company’s operation information is fully disclosed in its website. 2) A staff of the Company is designed to issue the news of the Company, and also collect and contact all of media information. 3) The data of the legal person forum will be shown on the Company’s website. And, a specially-assigned staff of the Company will disclose the major information of the Company on the website,too.	No difference
VIII. Does the Company have the major information that can help understand how the Company operates its governance (including but not limited to the rights and interests of employees, employee care, relationship of investors, relationship of suppliers, rights of the interested parties, further study of directors and supervisors, implementation of risk management policies, risk balance standard and client’s policies and the liability insurance purchased for the Company’s directors and supervisors)?	V		(i) Rights and interests of employees as well as employee care: Adhering to the principle that Taiwan Fertilizer is a family, the Company has established the Welfare Committee of Employees to provide employees excellent and considerate welfare activities and caring projects. (ii) Relationship of investors: The Company aims at ensuring the rights and interests of the shareholders and treats all of them equally. According to the relevant provisions of the competent securities authority, the Company issues the major news such as the finance, business and change of the shareholders at Observation Website for News Disclosure. (iii) Relations with suppliers: The Company reviews the supplier’s quality capacity, delivery capacity, service team capacity, etc. on a regular basis according to supplier management methods of the Company, to stabilize material quality and to ensure material source safety. In regard to suppliers, the Company not only emphasizes the supplier’s quality, price, delivery time, etc. but also concerns human rights, labor welfare, workplace safety, etc., so as to establish a sustainable supply chain system that develops stably. Now, supplier CSR management is gradually introduced. First, the Company promotes supplier self-assessment to know the supplier operating risks, providing the basis for promotion of supplier CSR management and leading suppliers to develop a production and sales model that is better to environment.	No difference

Corporate Governance Report

Items assessed	Operation circumstances	Operation circumstances	Operation circumstances
	Yes	No	Abstracts
			(iv) Rights of the interested parties: The Company always abides by the principle of integrity in maintaining and safeguarding the rights of the interested parties. The Company also provides a smooth communication channel for different kinds of interested parties to express their opinions at all times. (v) Further study of directors and supervisors: Subject to the provisions of Key Points on the Promotion of Further Study of the Directors and Supervisors of Listed Companies and OTC Companies of Taiwan Stock Exchange Co., Ltd., please refer to Name List of Directors and Supervisors for Further Study at the Observation Website or visit the official website of the Company. (vi) Implementation of risk management policies and risk balance standard: Subject to the Criteria on the Treatment of Internal Control System of the Company, the risk management policy and the risk evaluation standard of the Company are prepared according to the suitability of the Company objective and the units at different levels of the Company. The goals and the result of risk evaluation are set to help the Company to design, modify and implement the control required on a timely basis. (vii) Implementation of client policies: The Company has prepared Details on the Management of Customer Relationship. Its business departments have set up the customer service center to communicate with customers. (viii) Insurance purchased for the directors and supervisors: The Company has purchased liability insurance which remains valid from April 1, 2016 to April 1, 2017 for the directors and supervisors from Taiwan Life Insurance Co., Ltd. according to the regulations.
IX. Please state the situation of improved suppliers according to the corporate appraisal results released by the corporate governance center of Taiwan Stock Exchange Corporation in the most recent year, and put forward the priorities to be strengthened and measures for unimproved suppliers. (Those who are not listed in appraised companies need not be stated) 1. The Company has set up a compensation committee, and more than half of the members of compensation committee after 2018 will be independent directors in the planning. 2. The Company plans to set up an auditing committee conforming to rules in 2018. This committee should consist of 3 or more independent directors, and at least one person shall be talent accounting or finance. 3. The Companyhasgraduallybuilt a complete official website in English for investor information.

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(IV) The Company should disclose the composition, function, and operation circumstances of compensation committee, if any.

Information of compensation committee members

Status (Note 1)	Conditions Name	Above 5-year Work Experience and ProfessionalQualifications as Below	Above 5-year Work Experience and ProfessionalQualifications as Below	Above 5-year Work Experience and ProfessionalQualifications as Below	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Independence Criteria (Note 2)	Number of companies which the Company’s committee members also hold positions in the compensation committee of other public company	Remarks (Note 3)
		An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private College	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Approved a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company	Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8
Independent Director	HSU Mingtsai												0	Assigned on 07/01/2015
Other	WANG Mingting												0
Other	WANG Jihchun												1

Note 1: The status is director, independent director, or other.

Note 2: Note: Please check “  ” at the beginning of the following conditions that various directors and supervisors match in two years before appointment and during their tenure.

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

(2)Not a director or supervisor of the Company or its affiliated company. However, the independent director that the Company or its parent company or subsidiary sets according to this law or local law is not subject to this limit.

(3)Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.

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

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

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

(7)Not a professional person who provides business, legal, financial, and accounting services for the Company or its affiliated company, an owner, a partner, a director, a supervisor, a manager of wholly-owned or partnership company/institution, or its spouse.

(8)Not a person of any conditions defined in Article 30 of the Company Law.

Note 3: If the member’s status is director, please state whether it complies with Item 5, Article 6 of Methods for Compensation Committee Setting Up and Authority Exercising of Stock Exchange Listing Company or Company Traded at Securities Dealer Business Office.

Corporate Governance Report

Information on compensation committee operation circumstances

I. The Company’s compensation committee consists of 3 members.

II. Current tenure: July 1, 2015–June 30, 2018. In the most recent year, the compensation committee held 3 meetings (A). Members’ qualification and attendance are listed below:

Title	Name	Attendance in Person B	Attendance on commission	Actual attendance rate (%) (Ｂ/Ａ) (Note)
Convener	HSU Mingtsai	3		100
Member	WANG Mingting	2	1	66.67
Member	WANG Jihchun	3		100
Other matters to be recorded: On January 18th, 2017 at the 18th session of the 30th Meeting of the Board of Directors, amended was the resolutions about the year-end bonuses and operating performance bonuses for the Vice General Managers of the Company and above, described as follows: (I) Regarding Item 2.1, the year-end bonuses for the Chairman and the General Manager shall be allocated proportional to the number of days employed by the Company. (II) Regarding Item 2.3, the individual bonuses for Vice General Managers shall be capped at 85% of that for the General Manager, while being fluctuated according to the average months calculated for bonuses allocated to the whole staff (i.e. the subject parties for the allocation) under Proposal Six in the discussion. (III) 1. Regarding Item 3, the operating performance bonus NT$ 576,400 for Huang Yaoxing, the General Manager shall stay, whereas the other bonuses shall be removed. If it should ignore or amend the recommendations made by the Remuneration Committee, the Board of Directors shall state the date, the session, the contents of the proposals, the outcome of the resolutions of the Board of Directors, and the way the Company is to handle the opinions of the Remuneration Committee (also, if the remunerations determined by the Board of Director should be better than the that recommended by the Remuneration Committee, illustrated clearly shall be the particulars and causes for the discrepancy.). 2. In terms of matters for the resolution by the Remuneration Committee, if any members should have objections or reservations against them along with records or written statements, then what shall be clearly stated shall include the date, the session, the contents of the proposals, the opinions of all members, and the waythese opinions is to be handled.

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(V)Performance of Social Responsibilities:

Items assessed	Operation circumstances	Operation circumstances	Operation circumstances	Difference from code of practice on corporate social responsibility of listed companies or OTC companies and cause
	Yes	No	Abstracts
I. Implementation of Company governance (i) Does the Company prepare the policies or systems on corporate social responsibility and the way to evaluate the performance? (ii) Does the Company hold the training on the corporate social responsibility regularly? (iii) Does the Company set the full-time (part-time) unit to promote the corporate social responsibility, ask the high-level management team authorized by the board of directors to handle it and report the actual situation to the board of directors? (iv) Does the Company prepare reasonable salary and welfare policies, combine the employee’s performance appraisal system with the corporate social responsibility and set up the effective award & punishmentsystem?	V		(i) The Company has prepared_Code of Conduct_ on Corporate Social Responsibility of Taiwan _Fertilizer Co., Ltd._and implemented corporate social responsibility in the Company’s sustainable development directions “completing corporate governance system”, “creating corporate value chain”, “carrying out green sustainable strategy’, “implementing energy-saving and waste reduction”, “creating a healthy and happy workplace”, “implementing social responsibility care”. This responsibility promotes the committee to prepare CSR report. Every year, the Company checks performance and regularly reviews the implementation result. (ii)The Company held the training on the corporate social responsibility regularly.On November 29, 2016, TCGA Lawyer Hsieh Xianjie was invited to give the credit management course to directors, supervisors, executives, and colleagues. (iii) 1)The Company planed and integrated the promotion of CSR relevant matters with CSR Secretariat of Board of Directors Office as its execution unit. 2)The Company set up the CSR Promotion Committee to act as its internal highest CSR promotion organization to promote all of CSR tasks according to the policies approved by Board of Directors. The chairman of the Company acts as a steering member of this committee, the president acts as the chairman of committee and vice presidents review the CSR promotion strategies and relevant detailed plans through regular meetings and communication with interested parties. 3)The president of the Company reports the implementation of CSR in monthly board meetings. (iv) The Company’s performance appraisal system is consolidated with the policies on the corporate social responsibility (such as energy-saving and emission reduction, achievement of corporate governance, management and training of human resources) and the relevant objective-reaching incentive award is also set.	No difference

Corporate Governance Report

Items assessed	Operation circumstances	Operation circumstances	Operation circumstances	Difference from code of practice on corporate social responsibility of listed companies or OTC companies and cause
	Yes	No	Abstracts
II. Development of sustainable development (i) Does the Company endeavor to improve the utilization rate of all resources and use the renewable materials that exert less influence on the environment? (ii) Does the Company establish the proper environment management system based on the industrial features? (iii) Does the Company pay attention to the influence of climate change on operation, execute the room temperature gas check and the policies on energy-saving, emission reduction and reduction of gas?	V		(i) The Company promotes production value chain integration policy, plans the most helpful production mode at Taichung plant, and constructs the best energy operation mode, greatly enhancing the resources utilization efficiency. Aiming at the UN sustainable development goal, the Company uses industrial core technology to adjust the process without influencing production quality and food safety, and replace common raw materials by alternative recycling materials for the purpose of environmental protection and energy saving, gradually achieving the Company’s goal of promoting circular economy. (ii) Taichung Plant and Miaoli Plant have established ISO 14001 environment management system, and have carried out regular internal audit and implemented executions continuously. (iii) In order to acquire the Company’s greenhouse gases emission conditions at different plants, the Company successfully introduced ISO 14064-1 greenhouse gases detection system in 2016. It starts detection and entrusts a third party to finish verification, so that it can establish a reduction target benchmark and puts forward an energy-saving and greenhouse gases reduction plan and improvement measures.	No difference
III. Maintenance of public welfare (i) Does the Company prepare the relevant management policies and procedures according to the relevant regulations and the international human rights conventions? (ii) Does the Company establish a mechanism and channel for any employee’s appeal, and deal with such appeal properly as well? (iii) Does the Company providethe employees	V		(i) The Company has prepared the Working Principle for the Working Staffs of Taiwan Fertilizer Co., Ltd. and the Measures on the Retirement, Care and Severance of the Working Staffs of Taiwan Fertilizer Co., Ltd. according to the spirit of international human rights conventions, labor standard law and the regulations on the retirement fees of the workers, and has published it on its internal website besides notifying all the employees via letter so that the employees can inquire it at all times. (ii) The Company has set up and improved its grievance mechanism and channel by holding labor relation symposium, and by establishing a labor union and an exclusive complaint mailbox for employees. Thus, employees can file complaints through these channels. (iii) Taichung Plant and Miaoli Plant have been certified by OHSAS18001 and CNS1556	No difference

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Items assessed	Operation circumstances	Operation circumstances	Operation circumstances	Difference from code of practice on corporate social responsibility of listed companies or OTC companies and cause
	Yes	No	Abstracts
with safe and healthy working environment and carry out regular safety and health education to them? (iv) Does the Company establish the regular communication mechanism and notify the employees of the operation changes that may exert significant influence through a reasonable way? (v) Does the Company establish any effective training plans on the development of professional skills for its employees? (vi) In order to protect the customers’ rights and interests, does the Company prepare the relevant policies and appeal procedures in R&D, purchasing, production, operation, and services?			OHSMS. Moreover, the Company has developed health promotion plan and has held various health activities and education forums. All of this aims to provide a safe, healthy workplace for employees. (iv) The Company holds labor and capital meetings in the head office and all plants according to labor standard law and discussions and communications at all plants according to the Company’s Key Points for the Implementation of Labor and Capital Forum on a yearly basis. If the Company has major changes in operation, each employee can get a chance for fully communication through the above mechanism. Simultaneously, the Company does an importance assessment and holds an explanation session additionally to strengthen policy advocacy and employee communication. (v) In 2016, the Company arranged training courses in aspects of risk assessment and management, corporate operation and growth, time management, presentation design, employee physical and mental health, AED and CPR operations, knowledge management, and building elevator service safety, to establish effective career skill development. (vi) The Article 23 in the Company’s Code of Conduct on Corporate Social Responsibility reveals that the Company prepares policies related to consumer rights and interests in development, purchasing, production, operation, and service procedures, and implement these policies as follows: 1. According to the Company’s Details on the Management of Customer Relationship, the operating departments shall establish a service center as a communication channel with customers. Also, a complete Operation Procedure on the Management of Customer Complaint is employed to ensure the customer’s rights and interests. As soon as receiving any customer’s complaint, the operating departments shall deal with it as soon as possible, and trace whether the complained condition is improved or not. Also, there is a service line for customer to express his/her opinion. 2. The regulations on the response to the customer’s complaint against production and operation of the Company have been explicitly specified in the Company’s Criteria on Production Management. 3. The discussion and improvement of product or service by the relevant R&D units have been specified in

Corporate Governance Report

Items assessed	Operation circumstances	Operation circumstances	Operation circumstances	Difference from code of practice on corporate social responsibility of listed companies or OTC companies and cause
	Yes	No	Abstracts
(vii) Does the Company abide by the relevant regulations and international criteria for the marketing and labeling of product and service? (viii) Does the Company evaluate if the supplier has records that affect the environment and society before establishing a business relationship with the supplier? (ix) Does the agreement entered by and between the Company and its main supplier contain the terms that the agreement will be terminated or rescinded as long as the supplier goes against the policies on the corporate social responsibility and exert great influence on the environment and society?			the Critical Points on the Implementation of R & D Operation. The Company would conduct regular performance reviews for the products and service once they were launched in the market. In order to satisfy the customer’s requirement, improvement would be made continuously. (vii) According to Article 24 of the Company’s Code of Conduct on Corporate Social Responsibility, the marketing and labeling of the Company's products and service shall meet the relevant regulations and international criteria and be implemented as follows: 1.The Company’s fertilizer bag labels and description comply with relevant regulations of fertilizer management law in Taiwan. 2. The real estates developed by the Company are designed, established and managed according to the national architecture law. Therefore, the Company’s marketing of the sales or lease of the real estates above and the product data labeling are told to the customers honestly, which meets the requirements. (viii) The Company has revealed the principle of this article according to Article 25 of Code of Conduct on Corporate Social Responsibility. When entering an agreement with a supplier, the Company will collect the credit of the supplier preliminary, including their performance capacity, and if containing the unfavorable records such as pollution of the environment or raw materials. If such events are added in the commercial terms, the supplier should undertake the liabilities. (ix)The agreement between the Company and the suppliers specifies the Company shall terminate the agreement whenever the suppliers have behaviors influencing the environment or society or violating government laws.
IV. Strengthening of information disclosure (i) Does the Company disclose the critical and authentic information about the corporate social	V		(i) The Company discloses its critical and authentic information about the corporate social responsibility as follows : 1. The Company finishes preparation and release ofCSR reportof lastyearbythe end	No difference

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Items assessed	Operation circumstances	Operation circumstances	Operation circumstances
	Yes	No	Abstracts
responsibility at its website and Observation Website for News Disclosure?			of every June, and exhibited the contents on the official website and the Observation Website for News Disclosure so that all the interested parties can inquire it. 2. Special zone for the corporate social responsibility has been set in the Company’s official website so that the relevant interested parties can inquire them. 3. The regulations such as Code of Conduct on Corporate Social Responsibility, Code on the Governance of the Company and Integrity Operation Criteria are disclosed on the official website and the Observation Website for News Disclosure of the Company for the relevant interested parties to refer.
V. If the Company has prepared the code of conduct on the corporate social responsibility according to the Code of Conduct on the Corporate Social Responsibility of Listed Companies and OTC Companies, please state the difference between the operation and the code prepared: The Company prepares Code of Conduct on Corporate Social Responsibility as the basis for fulfillment of corporate social responsibilities. The Company has constructed three CSR aspects including treatment, environment and society, shaped CSR policies, promoted plans and executed management guidelines. The Company also demonstrates and reports the annual CSR implementation situation to all interested parties by preparing and publishing CSR reports.
VI. Critical information that helps understand the operation of corporate social responsibility: The annual CSR operation situation of the Company is compiled in the CSR report published each year. All interested parties can read the report on the Observation Website for News Disclosure or download it from the Company’s official website.
VII. Please make statement here if the Company’s corporate social responsibility report has been certified by a relevant verification agency: The SGS, an independent and credible inspection company, was authorized by the Company to inspect and verify the content and data of its CSR report (2016) in accordance with AA1000AS2008 assurance standard released by AA organization. After inspection and verification, a Category I and medium level third party assurance was issued to the Company by SGS. All CSR reports published by the Company in future will be assured bya third partyinspection and verification institution.

Corporate Governance Report

(VI) Conditions for performing good faith management and measurement by the Company

Items assessed	Operation circumstances	Operation circumstances	Operation circumstances	Difference with the integrity operation criteria of listed companies and OTC companies and the cause
	Yes	No	Abstracts
I. Conclusion of integrity operation policies and schemes (i) Does the Company specify the policies and actions of integrity operation in the rules and external documents, and implement the commitment of operation policies by the board of directors and its management team actively? (ii) Does the Company conclude the action scheme against the non-integrity, define and implement the operation procedure, guide to action, punishment against violations and appeal system in the schemes? (iii) Does the Company take any preventive measures for the operation activities with high dishonesty level in the Article 7-2 of Integrity Operation Criteria of Listed Companies and OTC Companies or within other scope of business?	V		(i) The Company specifies its policies and actions of integrity operation in the rules and external documents as follows: 1. The Company prepared Integrity Operation Criteria in order to establish the enterprise culture of integrity operation, a good risk control mechanism, as well as a sound substantial operation and development. 2. The Company prepares CSR report each year to explain its integrity operation commitment and execution performance. (ii) Code of conduct of integrity operation of Taiwan Fertilizer Co., Ltd. is the highest guiding principle and code of conduct for Taiwan Fertilizer and its subsidiaries, sub-subsidiaries and re-invested companies with substance control rights for their operation and integrity operation. For the purpose of implementing integrity operation guidelines, Taifer also developed and issued Code of Ethics for Directors, Supervisors and Personnel Higher than First-level Directors, Code of Conduct for Employees of Taiwan Fertilizer Co., Ltd. and Personnel Assessment Method of Employees of Taiwan Fertilizer Co., Ltd. to make personnel of all levels implement integrity code of conduct in detail in their operation activities or business implementation. (iii) The preventive measures taken by the Company against the operation activities with high non-integrity risks in the Article 7-2 of Integrity Operation Criteria of Listed Companies and OTC Companies and other scope of business are described as follows: 1. The Company deems integrity and anti-corruption education and training as important, and arranges relevant trainings or meetings regularly each year, in order to publicize integrity operation principles to all employees and eradicate corruption events completely. 2. Regarding credit and anti-corruption educational training as an important task, the Company regularly arranges related educational trainingor meetings every	No difference

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Items assessed	Operation circumstances	Operation circumstances	Operation circumstances	Difference with the integrity operation criteria of listed companies and OTC companies and the cause
	Yes	No	Abstracts
			year, to communicate the credit management concept to all the colleagues and to completely eradicate corruption events.
II. Implementation of integrity operation (i) Does the Company evaluate the integrity records of the transaction object and conclude the terms regarding the integrity behavior in the agreement signed with them? (ii) Does the Company set up the full-time (part-time) unit under the board of directors and in charge of promoting the enterprise integrity operation and report the execution to the board of directors regularly? (iii) Does the Company prepare the policies against interest conflict and provide and implement the proper statement channel? (iv) Does the Company establish effective accounting system and internal control system for the integrity operation and carry out regular audit by the internal audit unit or by the appointed CAPs? (v) Does the Company hold regular internal and external education trainings on integrity operation regularly?	V		(i) Prior to the purchase, the Company evaluates the integrity records of the transaction object and specifies in the purchase agreement, trading agreement, etc. that the object shall, prior to the execution of the agreement or during the terms of this agreement, never give present to Party A’s employee in any form. Should Party B go against the regulations, Party A can terminate this agreement immediately as long as it is discovered and cancels Party B’s rights of trading with Party A or contracting Party A’s projects. (ii) The Company’s board office is responsible to push forward the enterprise’s credit management policy and related enforcement and regularly report the enforcement circumstances to Board of Directors. (iii) According to the Integrity Operation Criteria of Listed Companies and OTC Companies, and the Code of Moral Conduct of Directors, Supervisors and Personnel Above Level 1 Managers of the Company, the directors, supervisors and management team members above Level 1 shall avoid involving in the interest conflict with the personal interests or the integral interests of the Company. In case of involving in the actions above, the personnel shall report to the inspectors, managers, executive of internal audit or other proper personnel so that it can be handled in a confidential manner. (iv) The Company shall establish its accounting system according to laws and the internal control system, and according to the treatment criteria of internal control system. The audit office shall prepare the annual audit plan for check, and the internal audit shall be reported in written at each board meeting. (v) The Company regularly holds credit management trainings every year. On November 29, 2016, the Company invited Mr. XIE Xianjie, TCGA Lawyer, to give a lecture of credit management to directors,	No difference

Corporate Governance Report

Items assessed	Operation circumstances	Operation circumstances	Operation circumstances	Difference with the integrity operation criteria of listed companies and OTC companies and the cause
	Yes	No	Abstracts
			supervisors, executives, and colleagues.
III. Operation of the Company’s whistle-blowing system (i) Does the Company prepare the specific whistle-blowing and award & punishment system, establish the convenient whistle-blowing channel and designate a person to deal with the accused? (ii) Does the Company conclude the operation procedures for the investigation of the whistle-blowing event and the relevant confidentiality mechanism? (iii) Does the Company take measures for protecting the whistle-blower from being punished improperly?	V		(i) The Company encourages the whistle-blowing of any behavior that is either illegal or goes against moral behavior. If an employee doubts or discovers that any director, supervisor or the person above Level 1 goes against the laws and rules or this Integrity Operation Criteria, he/she can report to any supervisor, manager, internal audit executive or other proper person. Upon the investigation of the case reported, the Company will award the whistle-blower according to the relevant regulations. (ii) The Company deals with the whistle-blowing in a confidential manner and tries to protect the personal information and safety of the whistle-blower so that the whistle-blower can be free from any revenge or threats in any form. (iii) The Company keeps the reported information confidential and never punishes the whistle-blower improperly.	No difference
IV. Strengthening of information disclosure (i) Does the Company specify the contents of Ethical Corporate Management Best Practice Principles for Taiwan Fertilizer Co., Ltd. and the promotion effect on the website as well as the Observation Website for News Disclosure?	V		(i) The relevant specifications, information advocated and promotion effect of the Ethical Corporate Management Best Practice Principles for Taiwan Fertilizer Co., Ltd. are revealed on the official website of the Company. The Integrity Operation Criteria and Code of Moral Conduct of Directors, Supervisors and Personnel Above Level 1 are revealed on the Observation Website for News Disclosure. The effectiveness of integrity management of the Company is recorded in the annual CSR report issued each year.	No difference
V. If the Company concludes the Ethical Corporate Management Best Practice Principles according to the "Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies", please state the difference of the operation with the criteria concluded: The Company prepared Ethical Corporate Management Best Practice Principles as the basis to put integrity operation into practice. Prior to these principles, the Company still abided by the spirit of integrity operation in promoting all of its businesses. The Company will implement the integrity operation in terms of operation and corporate governance by abiding by the items stated herein in order to realize sustainable development.
VI. Other critical information that helps understand the operation of the Company’s integrity operation : The operation situation and effectiveness of integrity management of the Company are recorded in the annual CSR report issued eachyear,availableforpublicreference.

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(VII) Disclosure of Inquiry Ways in Case of any Formulation of Corporate Governance Rules and Relevant Regulations by the Company:

For TFC Integrity Operation Criteria, please visit the official website at : http://www.taifer.com.tw/taifer/tw/2014-09-01-01-37-40/2014-12-25-02-49-45.html

(VIII) Other Important Information Enough to Enhance the Understanding of the Operation of Corporate Governance

The Company set up the second-term Salary and Remuneration Committee on September 25, 2012, with members as WANG Mingting, WANG Richun and YU Zhongzhe with the tenure ending on June 30, 2015. The third-term Salary and Remuneration Committee is composed of HSU Mingtsai, WANG Mingting, WANG Richun with the tenure beginning from July 1, 2015.
The “Procedures for Handling Material Inside Information of TFC” were approved by the 31st meeting of 30th BOD session on May 26, 2009. Please visit the official website of TFC.
The TFC Integrity Operation Criteria was approved by the 34th meeting of 32nd BOD session on April 24, 2015. Please visit the official website of TFC.
The TFC Ethical Corporate Management Best Practice Principles were approved by the 13th meeting of 33rd BOD session on August 23, 2016. Please visit the official website of TFC.
The TFC Integrity Operation Criteria was approved by the 16st meeting of 33rd BOD session on November 29, 2016. Please visit the official website of TFC.
For TFC 2014 2015 CSR report, please visit the official website.

Corporate Governance Report

(IX) Status of the Execution of the Internal Control System

Company to the Public Declaration for Internal Control System

Showing the effectiveness in design and implementation (The part following rules and regulations in the Declaration is applicable when all of the rules and regulations are adopted)

Taiwan Fertilizer Co., Ltd. Public Declaration for Internal Control System Date : March 24, 2017

With respect to the internal control system for 2016, based on the self inspection result, we hereby represent as follows:

Ⅰ The Company acknowledges that it is the responsibility of the Board of Directors and the managers of the Company to establish implement and maintain the internal control system, and the Company has established the system for the purpose of providing reasonable assurance of the achievement of such targets as the operating result and efficiency (including profits, performance and safeguarding assets safety, etc.), the financial report reliability and the compliance with relevant statues.
Ⅱ The internal control system has its congenital limitation; notwithstanding a perfect design, the effective internal control system can only provide reasonable assurance of the achievement of the above three targets; furthermore, the internal control system effectiveness may vary according to the change of the environment and conditions, provided that internal control system of this Company is equipped with the self supervision mechanism and the Company can take any corrective action in case of any deficiency identified.
Ⅲ The Company shall judge the design of the internal control system and the effectiveness of the implementation thereof based on the judgment items of the effectiveness of the internal control system as provided in the Regulations Governing the Establishment of internal Control Systems by Public Companies (hereinafter referred to as “the Regulations”). The internal control system judgment adopted in the Regulations refers to the management based control process and divides the internal control system into five elements: 1. control environment; 2. risk evaluation; 3. Control job; 4. information and communication; and 5.supervision. Each element contains a number of items. For the above items, refer to the Regulations.
Ⅳ The Company has adopted the above-mentioned internal control system judgment items to examine the design of the internal control system and the effectiveness of the implementation thereof.

Ⅴ Based on the preceding examination result, the Company deems that, the internal control system of the Company on December 31, 2016 (including the supervision and management of its subsidiary), including knowing about the operating result and the achievement of the efficiency and targets, financial whistle-blowing reliability and the design of and the implementation effectiveness of the internal control system regarding the compliance with relevant statues, is effective, and it can reasonably ensure the achievement of the above targets.

Ⅵ This Declaration shall be the main content of the annual report and prospectus of the Company and be disclosed to the public. In case of any false or hidden illegal matters, the above content disclosed shall involve the legal responsibilities in Article 20, Article 32, Article 171 and Article 174 in the Securities Exchange Act.

VII. It is hereby declared that this Declaration has been adopted by the Meeting of Directors of the Company on March 24, 2017. Among 8 directors present, there was 0 person holding the counter views, and the others all agreed upon the content in this Declaration.

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Taiwan Fertilizer Co., Ltd Chairman: Signature & seal President: Signature & seal

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If a CPA is appointed to review the internal control system, the CPA’s audit report shall be disclosed: none.

(X) Punishment to the Company and its Personnel by Law and Punishment to its Personnel in Breach of Internal Control Systems by the Company as well as Major Shortcomings and Improvements over the Recent Years and up to the Date of Publication of Annual Reports: N/A

(XI) Important Resolutions of Meeting of Shareholders and the Board of Directors over the Recent Years and up to the Date of the Publication of Annual Reports

1.General meeting of shareholders in 2016 (June 29, 2016)

No.	Contents	Resultofexecution
1	The financial statements and recognition of final statements of the Company in 2015 were approved. No shareholders proposed disagreement after the inquiry of the chairman.	All shareholders have been mailed for inquiry
2	The proposal for distribution of FY2015 profits was approved. No shareholders proposed disagreement after the inquiry of the chairman.	1. All shareholders have been mailed. Dividends to shareholders, salary to directors and supervisors, and bonus to employees will be on the basis of it. 2. It was approved in the 12thBoard Meeting of the 33rdBoard of Directors that the Company distributed cash dividends of NT$ 2.1 per share to shareholders in 2015. It was proposed that August 23, 2016 was the base day of dividend distribution. 3. It was approved in the 13thBoard Meeting of the 33rdBoard of Directors that the Company’s 2015 issuance of director, supervisor, and employee rewards was approved.
3	Amendment of TFC’s Articles of Association was approved. No shareholders proposed disagreement after theinquiry of the chairman.	Announced and implemented
4	Amendment of TFC’s Operation Procedure of Capital Loan and the Endorsement Guaranteewas approved. No shareholders proposed disagreement after theinquiry of the chairman.	Announced and implemented
5	Amendment of TFC’s Asset Acquisition or Disposal Procedures was approved. No shareholders proposed disagreement after the inquiryof the chairman.	Announced and implemented

Corporate Governance Report

2.Major resolutions of the Board of Directors for 2016 and as at the publication date hereof

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Jan. 2016	(1) It was approved to sign the second supplementary agreement, which stated the adjustment of rent payout ratio, with China Trust Commercial Bank Co., Ltd. regarding to the surface right setting of land piece held by the Company in Nangang Trade Park. (2) It was approved to set up a “small fertilizer pilot workshop”, whose estimated investment amount was about NT$76,000,000.00 at Taichung Plant in order to strengthen the fertilizer industrial R&D capacity. (3) It was approved to pay the year-end bonus of 2015 to TFC’s employees. (4) It was approved to appoint the 7thdirectors/supervisor legal representative of the Taichuang Assets Management and Development Co., Ltd. (5) It was approved that Hsieh Wenhsiung, TFC’s plant head, instead of Director Ku Detien, was appointed to be a director of Jubail Fertilizer Company. This resolution came into force on March 1,2016.
Feb. 2016	(1) It was approved to revise some of provisions of “TFC Articles of Associaiton”. (2) It was approved to apply for scrapping of pilling tower lighting system project not exceeding the service life in land development phase 2 re-adjustment after Hsinchu plant stops production. (3) It was approved that Miaoli Plant three-in-one workshops slowed implementation down due to market considerations.
Mar. 2016	(1) It was approved that Hsuchang Chemical Science & Technology Co., Ltd. borrowed USD 2,130,000.00 from Shanghai Commercial & Savings Bank with the joint guarantee of the Company and Jinqun International Co., Ltd., and that TFC paid off USD 2,130,000.00 plus interest payable for Hsuchang (Cayman) Company, beneficial to TFC’s good credit records. (2) It was approved to intend to revise the articles of incorporation of Taiwan Fertilizer Biotechnology Co., Ltd., Taichuang Assets Management and Development Co., Ltd., Taiwan Yes Deep Ocean Water Co., Ltd. and its Hasbo Biotechnology Co., Ltd. (3) It was approved to intend to revise feasibility report (including risk analysis) related to TFC (Cambodia) Company investment proposal (former Cambodia Investment proposal of Relocating and Exporting Gaoxiong Plant Nitrate 3 and nitrate-phosphorus 3 workshop) . (4) It was approved that TFC’s business report of 2014 would be reviewed by the Board of Directors, given to the supervisors to check and then submitted to the shareholders’ meeting. (5) It was approved that TFC’s individual financial statement of 2014 and its branches and the consolidated financial statement of 2015 of its affiliated companies would be reported in the shareholders meeting. (6) It was approved the profit distribution of after-tax profits of TFC in 2015. The allocation of NT$ 2,427,083,466 was subject to the Company Law and TFC’s articles of association. (7) It was approved that since the 1stquarter of 2016, TFC’s CPAs were changed from WANG Yiwen and FAN Youwei to WANG Yiwen and GUO Wenji. (8) It was approved that TFC held the regular meeting of shareholders at the Armed Forces Cultural Center (No. 69, Section I, Zhonghua Road, Taibei City) on June 29, 2016. (Wednesday). (9) It was approved that a shareholder with more than 1% of stocks had the right for proposals. (10) It was approved that TFC bought the insurance plan of TLG Insurance Co., Ltd for its director, supervisors, and important employees. The insurance amount was USD 3,000,000.00; annual premium was USD 3,300. The term was one year from April 1, 2016 at 00:00 to April 1, 2017 at 00:00. (11) It was approved that TFC’s system design and enforcement are effective according to self-assessment of 2015 internal control system. A copy of 2015 internal control statement is displayed. (12) TFC’spaymentof director,supervisor,and employee rewards in 2015 was approved.

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Apr. 2016	(1) TFC’s land reserve policy for land optimization was approved. It is also approved to purchases a parcel of land in Taichung to accommodate TFC's employees in Taichung plant. (2) It was approved to revise some articles of_Long-Term Investment Methods of Taiwan_ Fertilizer Co., Ltd._and_Investment Plan Editing Methods of Taiwan Fertilizer Co., Ltd. (3) It was approved that_Taiwan Fertilizer (Cambodia) Company_revised some articles of Cambodia Land Long-Term Leasehold in Kampong Som Bay Economic Zone. (4) It was approved that_Taiwan Fertilizer (Cambodia) Company_revised some provisions of Operation Procedure of Capital Loan and the Endorsement Guarantee. (5) It was approved that_Taiwan Fertilizer (Cambodia) Company_revised some provisions of Asset Acquisition or Disposal Procedures. (6) It was approved that_Taiwan Fertilizer (Cambodia) Company_handled cash injection, with total amount of USD 3,250,000.00.
Jul. 2016	(1) It was approved to revise_Taiwan Fertilizer Group Three-Year (2017-2019) Operation_ Strategic Report. (2) It was approved to revise the Company’s_Service Organization Inernal Control System_. (3) It was approved to revise TFC’s empolyee compensation methods. (4) Passed the proposal of purchasing from a subsidiary a parcel of land located at No. 310, Subsection 4, Nangang Section, Nangang District, Taipei City, and six parcels of land located at No. 152-3, 152-4, 153, 162-9, and 162-10, Xingbang Section, Qianzhen District, Kaohsiung City due to the adjustment of land development plan. (5) It was approved to auction the lands which couldn’t be developed for long and whose benefit had obviously effected by land value tax due to base development restrictions, in order to maintain TFC’s benefit and rights, and to improve the benefit from land asset allocation. (6) It was approved that TFC distributed cash dividends of NT$ 2.1 per share to shareholders in 2015. It wasproposed that August 23,2016 was the base dayof dividend distribution.
Aug. 2016	(1) It was approved to initiate Hsu_chang Dissolution Procedure_since the net value of reinvestment business Hsuchang Chemical Science & Technology Co., Ltd. (hereinafter referred to as “Hsuchang”) in June 2016 was RMB -15,240,000.00 and the Company’s investment balance is zero. (2) Through land assessment screening, it was approved to auction some scattered lands in greater Taipei area in order to maintain TFC’s rights and interests. (3) It was approved that the allocation of TFC’s director and supervisor rewards of 2015 would be reported in the shareholders meeting of 2016. (4) It was approved that HUANG LiAi, TFC President, would be appointed to be Chairman of Taiwan Yes Deep Ocean Water Co., Ltd., who was dismissed from all concurrent positions at the same time. HUANG Yaoxing, Vice-President of TFC, would be appointed to be President of TFC. Both of these two resolutions came into effect on September 1,2016.
Sept. 2016	(1) It was approved to revise TFC’s three-year operation strategic report. (2) It was approved to revise some articles of_Trading Suspension Application and Recovery_ Procedure of Taiwan Fertilizer Co., Ltd. (3) It was approved that TFC’s planning of investment in Parkview Hotel Hualien slowed down because its benefit was not as predted. (4) It was approved to revise the articles of association of TFC’s subsidiary. (5) It was approved to revise some provisions of_Long-Term Investment Methods of Taiwan_ Fertilizer Co., Ltd.,Investment Plan Editing Methods of Taiwan Fertilizer Co., Ltd.,_and _Board of Directors also Manager Authority-Responsibility Division Table of Taiwan Fertilizer Co., Ltd. (6) It was approved that Chen Xinchang, former vice head of Taichung Plant, was promoted to be TFC’s Vice-President and Taichung Plant Head. Lin Jinsheng, former nitrate-phosphorus workshopmanager of TaichungPlant,waspromoted to be the head of TaichungPant and

Corporate Governance Report

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	Keelung Plant. Both of these two resolutions came into effect on October 1, 2016. (7) It was approved that Chen Yuran acted as Chairman of the Taiwan International Agriculture Development Co., Ltd. (8) It was approved to auction the land with surface right on C8 land, Nangang Trade Park, Taipei City in order to stabilize TFC’s overall benefit of this year. (9) It was approved to revise some provisions of TFC’s Regulations for Sale, Purchase and/or Change_Land_in order to match the actual transaction conditions on present real estate market. (10) Passed the investment plan of Taiwan International Agriculture Development Corporation, a subsidiary of TFC. (11) It was approved to revise the provisions related to land development division and asset management division in the TFC’s Articles of Association. The revision came into effect on November 1, 2016. (12) It was approved to adjust salaries of Level 1 staff and below Leve 1 staff by 3% in order to match governmental economic policies and TFC’s operating conditions. The adjustment came into effect on January 1, 2017. (13) The feasibility report of Investment Plan about Tenth Terminal of Taichung Port in western area.
Nov. 2016	(1) It was approved to revise TFC’s_Code of Corporate Governance Practices_. (2) It was approved to make investment of NT$80,000,000 in Taiwan International Agriculture Development Corporation. (3) It was approved to revise the articles of association of Taiwan International Agriculture Development Corporation and to increase the cash investment of NT$168,259,800. (4) It was approved to auction in public the land with surface right on C8 Street, Nangang Trade Park, Taipei City and to prepare the follow-up plan in order to match actual bidding conditions. (5) It was approved Chen Yuran to be Chairman and President of Taiwan International Agriculture Development Corporation.
Dec. 2016	(1) Passed the independence and competency assessment of CPAs of 2016. (2) Passed TFC’s auditing plan of 2017. (3) It was approved to revise TFC’s annual businessplan of 2017.
Jan. 2017	(1) It was approved to revise some provisions of TFC’s_Accountant Firm Open Selection_ Methods. (2) It was approved that TFC held CPA firm selection according to_Accountant Firm Open_ _Selection Methods_to audit the annual financial statements of 2017 and 2018. (3) It was approved to pay the year-end bonus of 2016 to TFC’s employees. (4) It was approved to pay the year-end bonus and operating performance bonus of 2016 to TFC’s vice-president and higher-levelpersonnel.
Feb. 2017	(1) It was approved to revise the auding and certification provisions about TFC’s financial reports and profit-seeking business income tax declaration of 2017, as well as the undistributed profit declaration of 2016. KPMG will be authorized for such auditing and certification, and TFC’s authorized management department will enter a service contract with KPMG. (2) It was approved that Huang Yongda, TFC former head of safety & health division, would be vice-president of Al-Jubail Fertilizer Company. This relocation came into effect on May 1, 2017.
Mar. 2017	(1) It was approved the statement of the internal control system of the Company in 2016. (2) Passed TFC’s individual financial statement, consolidated financial statement, and affiliated enterprise’s consolidated financial statement of 2016. (3) Passed TFC’s business report of 2016.

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	(4) Passed the compensation of TFC’s director, supervisor, and employee of 2016. (5) Passed TFC’s profit & loss appropriation and earning distribution of 2016. (6) It was approved to revise some provisions of TFC’s_Asset Acquisition or Disposa_ Procedures. (7) It was approved to revise some provisions of TFC’s_Articles of Association. (8) It was approved that a shareholder with more than 1% of stocks has the right for proposals. (9) It was approved that the Company would hold the regular meeting of shareholders in 2017 at the Armed Forces Cultural Center (No. 69, Section I, Zhonghua Road, Taibei City) on June 14, 2017. (10) It was approved to revise TFC’s_Internal Control System of Stock Affairs Organization. (11) It was approved to revise_Director and Supervisor Electing Methods of Taiwan Fertilize_ Co., Ltd. (12) It was approved to insure directors, supervisors, and managers against liability at Chung Kuo Insurance Company, Limited. (13) Passed investmentplan of_Sailing Participating in Joint Venture Company_.

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Contents

(4)
Passed the compensation of TFC’s director, supervisor, and employee of 2016.
(5)
Passed TFC’s profit & loss appropriation and earning distribution of 2016.
(6)
It was approved to revise some provisions of TFC’s_Asset Acquisition or Disposa_
Procedures.
(7)
It was approved to revise some provisions of TFC’s_Articles of Association.
(8)
It was approved that a shareholder with more than 1% of stocks has the right for proposals.
(9)
It was approved that the Company would hold the regular meeting of shareholders in 2017
at the Armed Forces Cultural Center (No. 69, Section I, Zhonghua Road, Taibei City) on
June 14, 2017.
(10) It was approved to revise TFC’s_Internal Control System of Stock Affairs Organization.
(11) It was approved to revise_Director and Supervisor Electing Methods of Taiwan Fertilize_
Co., Ltd.
(12) It was approved to insure directors, supervisors, and managers against liability at Chung
Kuo Insurance Company, Limited.
(13) Passed investmentplan of_Sailing Participating in Joint Venture Company_.

(XII) Major Contents of Different Opinions of Directors or Supervisors on Important Resolutions with Records or Written Statements as Adopted by the Board of Directors over the Recent Years and up to the Date of the Publication of Annual Reports: N/A.

(XIII) Summary of conditions for resignation and dismissal of the chairman, President, accounting supervisors, financial supervisors, internal audit supervisors and research and development supervisors of the Company for the recent years and up to the date of publication of the annual report:

Title	Name	Date of Resignation（Dismissal）
Chairman	LEE Fuhsing	06/02/2016
Chairman	CHEN Chichung	11/23/2016
President	HUANG Liai	08/31/2016

Corporate Governance Report

IV. Information on CPA Professional Fees

(I) Information of Professional Fees to CPA By Fee Range

Name of CAP firm	Name of CPA	Name of CPA	Duration of audit	Remarks
Deloitte Touche Tohmatsu Limited	WANG Yiwen	KUO Wenji	01/01/2016~ 12/31/2016	In order to maintain the independence of CPAs, Deloitte relocated its accountants, and this resolution was passed on the 9thmeeting of the 33rd board of directors on March 29, 2016.

Unit : NT$ K

Fee category Range of amount	Fee category Range of amount	Audit fee	Non-audit fee	Total
1	Below 2,000,000		
2	2,000,000(inclusive)～4,000,000
3	4,000,000(inclusive)～6,000,000			
4	6,000,000(inclusive)～8,000,000
5	8,000,000(inclusive)～10,000,000
6	Above 10,000,000(inclusive)

(II) When non-audit fees paid to the certified public accountant, to the accounting firm of the certified public accountant, and/or to any affiliated enterprise of such accounting firm are one quarter or more of the audit fees paid thereto, the amounts of both audit and non-audit fees as well as details of non-audit services shall be disclosed : N/A
(III) When the company changes its accounting firm and the audit fees paid for the fiscal year in which such change took place are lower than those for the previous fiscal year, the amounts of the audit fees before and after the change and the reasons shall be disclosed : N/A
(IV) When the audit fees paid for the current fiscal year are lower than those for the previous fiscal year by 15 percent or more, the reduction in the amount of audit fees, reduction percentage, and reason(s) therefor shall be disclosed : N/A

V. Information on replacement of certified public accountant:

In order to maintain the independence of CPAs, Deloitte relocated its accountants, and this resolution was passed on the 9th meeting of the 33rd board of directors on March 29, 2016. Kuo Wenji was instead of Fan Yuwei.

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(I) Regarding the former certified public accountant:

Date of Replacement				Feb 17,2017	Feb 17,2017
Reason	To meet the business developm			ent and operationplanning.
Whether it was the certified public accountant that voluntarily ended the engagement or declined further engagement	Party Conditions			CPA	Company
	Voluntarily ended the engagement				
	Declined further engagement
If the former certified public accountant issued an audit report expressing other than an unqualified opinion during the 2 most recent years, furnish the opinion and reason.	The unqualified opinion was issued in 2015 and 2016 because the financial statement of invested company had been audited by other accountant.
Any disagreement between the Company and the former certified public accountant	Yes		Accounting principle orpractice
			Financial report disclosure
			Auditingscope orprocedure
			Other

	None	
	Reason	: None
Other matters shall be disclosed (Matters as specified in the Point 4, Item 1, Paragraph 5, Article 10 of this code should be disclosed.)		None

( II) Regarding the successor certified public accountant:

Name of CPAs firm	KPMG
Name of CPA	TSENG Kuoyang, CPA LIN Hengsheng,CPA
Date of engagement	March 03,2017
Prior to the formal engagement of the successor certified public accountant, the Company consulted the newly engaged accountant regarding the accounting treatment of or application of accounting principles to a specified transaction, or the type of audit opinion that might be rendered on the Company's financial report, the company shall state and identify the subjects discussed during those consultations and the consultation results.	None
The Company shall consult and obtain written views from the successor certified public accountant regarding the matters on which the company did not agree with the former certified public accountant, and shall make disclosure thereof.	None

Corporate Governance Report

(III) Former CPA’s reply to the matter stated in Items 1 and 2, Paragraph 5, Article 10 of this code : None.
VI. Where the company's chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its certified public accountant or at an affiliated enterprise of such accounting firm : N/A
VII. Any transfer of equity interests and/or pledge of or change in equity interests (during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report) by a director, supervisor, managerial officer, or shareholder with a stake of more than 10 percent during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report.

(I) Information on transfer of shares:

Title	Name	2016	2016	As of April 16,2017	As of April 16,2017
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairman	COA	0	0	0	0
	Representative: KANG Hsinhong	0	0	0	0
Director	COA	0	0	0	0
	Representative: CHEN Chichung	0	0	0	0
Director	COA	0	0	0	0
	Representative: HUANG Hsuhong	0	0	0	0
Director	COA	0	0	0	0
	Representative: HSU Shengming	0	0	0	0
Director	TSAI Changhai	0	0	0	0
Director	HSU Chinglien	0	0	0	0
Independent Director	HSU Mingtsai	0	0	0	0
Independent Director	SHEN Huiya	0	0	0	0
Supervisor	Chunghwa Post	1,967,000	0	(24,000)	0
	Representative: WU Yuanren	0	0	0	0
Supervisor	CHEN Tsailai	0	0	0	0
Supervisor	TSAI Linglan	0	0	0	0
President	HUANG Yaohsing	0	0	0	0
Vice President	LUO Shihjih	0	0	0	0
Vice President	CHANG Tsanglang	0	0	0	0
Vice President	CHEN Hsinchang	0	0	0	0
Financial Director	CHIEN Chaojen	0	0	0	0

(II) Information on pledge of equity interests:

The counterparty in any such transfer or pledge of equity interests is a related party : None

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VIII. Relationship information, if among the company's 10 largest shareholders any one is a related party or a relative within the second degree of kinship of another

Name（Note 1）	Shareholding	Shareholding	Spouse & minor shareholding	Spouse & minor shareholding	Shareholding by nominee arrangement	Shareholding by nominee arrangement	Relationship information, if among the company's 10 largest shareholders any one is a related party or a relative within the second degree of kinship of another as stated in No. 6 of SFAS(Note 3)	Relationship information, if among the company's 10 largest shareholders any one is a related party or a relative within the second degree of kinship of another as stated in No. 6 of SFAS(Note 3)
	Shares	%	Shares	%	Shares	%	Name	Shares
Council of Agriculture, Executive Yuan Representatives: KANG Hsinhong CHEN Chichung HUANG Hsuhong HSU Shengming	235,886,376	24.07	-	-	-	-	None	None
	0	-	-	-	-	-	None	None
	0	-	-	-	-	-	None	None
	0	-	-	-	-	-	None	None
	0	-	-	-	-	-	None	None
Chung Hwa Post Co., Ltd. Representative: WU Yuanren	36,085,000	3.68	-	-	-	-	None	None
	0	-	2,000	-	-	-	None	None
Nan Shan Life Insurance Co., Ltd. Representative: TU Yingtsung	33,773,000	3.45	-	-	-	-	None	None
	0	-	-	-	-	-	None	None
China Life Insurance Company Limited Representative: WANG Mingyang	23,954,000	2.44	-	-	-	-	None	None
	0	-	-	-	-	-	None	None
Shin Kong Life Insurance Co., Ltd. Representative: WU Tongchin	15,444,000	1.58	-	-	-	-	None	None
	0	-	-	-	-	-	None	None
Emerging market account of Taiwan Bank CustodyFuda Investment Trust Fuda Series	15,211,000	1.55	-	-	-	-	None	None
Special account of Vanguard emerging market stock index fund in the custody of the Standard Chartered Bank under consignment	14,106,100	1.44	-	-	-	-	None	None
Labor Insurance Fund	12,281,000	1.25	-	-	-	-	None	None
Taiwan Life Insurance Co., Ltd. Representative: HUANG Szeguo	10,657,000	1.09	-	-	-	-	None	None
	0	-	-	-	-	-	None	None
Citibank investment account managed by Norges Bank	10,279,000	1.05	-	-	-	-	None	None

Note 1: The Top 10 shareholders shall be listed completely; if the shareholder is a juridical person, its name and the name of its representative shall be listed respectively. Note 2: The percentage of shares is calculated respectively based on the rate of the shares held in the name of the shareholder, his/her spouse, minority children or others. Note 3: If the disclosed shareholders above include juridical persons and natural persons, their relationship shall be disclosed.

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Capital Overview

IX. Percentage number of shares and consolidate percentage of the company, directors, supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company

supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company	supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company	supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company	supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company	supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company	supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company	supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company
Dec 31, 2016 Unit : Share(dollar);%
Reinvested entities （Note）	Investment by the Company		Investments by directors, supervisors, managerial officers and directly or indirectly controlled enterprises		Total investment
	Shares	%	Shares	%	Shares	%
Taiwan Int’l Agriculture Development Co., Ltd. (former name : Taifer Biotechnology Co., Ltd.)	7,174,020	100.00	0.00	0.00	7,174,020	100.00
Taiwan Yes Deep Ocean Water Co., Ltd.	95,000,000	100.00	0.00	0.00	95,000,000	100.00
TFC Biotech Marketing Co., Ltd	0	0.00	24,000,000	100.00	24,000,000	100.00
Taichuang Assets Management and Development Co., Ltd.	5,500,000	100.00	0.00	0.00	5,500,000	100.00
TAIFER INTERNATIONAL (SAMOA) GROUP CO., LTD.	0	0.00	1,414,989	100.00	1,414,989	100.00
TAIFER CHEMICAL INTERNATIONAL CO., LTD.	0	0.00	USD 1,333,494	100.00	USD 1,333,494	100.00
TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.	10,965	100.00	0.00	0.00	10,965	100.00
TR ELECTRONIC CHEMICAL CO., LTD.	0.00	0.00	10,965,000	51.00	10,965,000	51.00
TR Electronic Chemical (Kunshan) Ltd.	0.00	0.00	USD 10,965,000	51.00	USD 10,965,000	51.00
TAIFER INTERNATIONAL (SAMOA) CO., LTD.	300	100.00	0.00	0.00	300	100.00
Taifer Biotech (Xiamen) Import & Export Co.,Ltd.	0.00	0.00	No capital injection	100.00	No capital injection	100.00
TAIFER (CAMBODIA) CO., LTD.	1,000	100.00	0.00	0.00	1,000	100.00
Al-Jubail Fertilizer Company	6,715	50.00	0.00	0.00	6,715	50.00
Bion Tech Inc.	4,167,000	17.89	0.00	0.00	4,167,000	17.89
TaiAn Technologies Corp.	741,351	16.67	0.00	0.00	741,351	16.67
Visgeneer Inc.	3,147,086	10.31	0.00	0.00	3,147,086	10.31
Phalanx Biotech	403,826	0.76	0.00	0.00	403,826	0.76
Ting Tang Energy Technology Co., Ltd.	1,500,000	6.71	0.00	0.00	1,500,000	6.71
Taiwan Stock Exchange Corporation	13,533,879	2.00	0.00	0.00	13,533,879	2.00
China Petrochemical Development Corporation	9,202,205	0.40	0.00	0.00	9,202,205	0.40
Sheng Yuan Joint Venture Co., Ltd.	3,360,000	19.75	0.00	0.00	3,360,000	19.75
Chi Hang 2 Joint Venture Co., Ltd.	20,000,000	18.50	0.00	0.00	20,000,000	18.50
Chi Hang Joint Venture Co., Ltd.	10,000,000	10.00	0.00	0.00	10,000,000	10.00
Fu Ding Joint Venture Co., Ltd.	3,219,512	9.76	0.00	0.00	3,219,512	9.76

Note : Long-investment of the Company

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Part Four: Capital Overview

I. Capital and Shares

(I) Source of Capital Stock

Date	Issue price	Authorized capital	Authorized capital	Paid-in capital	Paid-in capital	Remark	Remark	Remark
		Shares (K)	Amount (NT$1K)	Shares (K)	Amount (NT$1K)	Source of capital	Property other than cash is paid bysubscribers	Amount (NT$1K)
August 2000	NT$10	980,000	9,800,000	980,000	9,800,000	NT$2.8 billion capital reserves converted to increase capital(Note)	None	None

Note: Refer to the Letter of Authorization (2000) Tai-Tsai-Zheng (1) 60387 by Securities & Futures Institute on July 12, 2000.

Shareholding Category	Authorized capital	Authorized capital	Authorized capital	Remark
	Issued shares (k shares)	Un-issued shares (k shares)	Total
Common stock	980,000	0	980,000	Listed stocks

Information for shelf registration: N/A

(II) Structure of Shareholders

(II) Structure of Shareholders	(II) Structure of Shareholders	(II) Structure of Shareholders	(II) Structure of Shareholders
					April 16,2017 Foreign institutions & foreigners Total 517 68,540 232,624,251 980,000,000 23.74 100.00
Structure Amount	Government bodies	Financial institutions	Other juridical persons	Individuals	Foreign institutions & foreigners	Total
Members	6	17	167	67,833	517	68,540
Shares held	269,888,490	149,852,410	16,043,837	311,591,012	232,624,251	980,000,000
Percentage(%)	27.54	15.30	1.64	31.78	23.74	100.00

Capital Overview

(III) Shareholding Distribution Status

1. Common stocks

1. Common stocks	1. Common stocks	1. Common stocks	1. Common stocks
April 16,2017
Range of shares held	Number of shareholders	Shares held	Percentage(%)
1 - 999	20,796	1,085,714	0.11
1,000 - 5,000	36,248	78,180,849	7.97
5,001 - 10,000	5,810	47,481,225	4.85
10,001 - 15,000	1,678	21,924,641	2.24
15,001 - 20,000	1,275	23,975,145	2.45
20,001 - 30,000	937	24,715,431	2.52
30,001 - 50,000	766	31,157,322	3.18
50,001 - 100,000	514	37,864,973	3.86
100,001 - 200,000	255	36,228,435	3.70
200,001 - 400,000	118	32,120,140	3.28
400,001 - 600,000	44	21,310,340	2.17
600,001 - 800,000	19	13,615,875	1.39
800,001 - 1,000,000	12	10,741,338	1.10
Above 1,000,001	68	599,598,572	61.18
Total	68,540	980,000,000	100.00

2. Preferred stocks: None.

(IV) List of Major Shareholders

(IV) List of Major Shareholders	(IV) List of Major Shareholders	(IV) List of Major Shareholders
April 16,2017
Shareholding Major Shareholders	Shares held	Percentage (%)
COA of Executive Yuan	235,886,376	24.07
ChungHwa Post Co.,Ltd.	36,085,000	3.68
Nan Shan Life Insurance Co.,Ltd.	33,773,000	3.45
China Life Insurance CompanyLimited	23,954,000	2.44
Shin KongLife Insurance Co.,Ltd	15,444,000	1.58
Emerging market account of Taiwan Bank Custody Fuda Investment Trust Fuda Series	15,211,000	1.55
Special account of Vanguard emerging market stock index fund in the custody of the Standard Chartered Bank under consignment	14,106,100	1.44
Labor Insurance Fund	12,281,000	1.25
Taiwan Life Insurance Co.,Ltd.	10,657,000	1.09
Citibank investment account managed byNorges Bank	10,279,000	1.05

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(V) Market Price, Net Value, Earnings, Dividends Per Share of the Latest Two Fiscal Years, and Related Information

Year Items	Year Items	Year Items	2016	2015	As of March 31, 2017 (Note 5)
Market price per share (Note 1)	Max.		NT$48.9	NT$58.2	NT$43.90
	Min.		NT$39.8	NT$35.7	NT$40.05
	Average		NT$43.50	NT$47.94	NT$41.93
Net value per share	Before distribution		NT$51.64	NT$54.05	NT$51.21
	After distribution		Not distributed	NT$51.95	Not distributed
Earnings per share	Weighted average shares(1K)		980,000	980,000	980,000
	Earningsper share		-NT$0.13	NT$2.48	NT$0.52
Dividends per share	Cash dividend		Not distributed	NT$2.1	Not distributed
	Free placement	Surplus distribution	－	－
		Distribution by capital reserve	－	－
	Accumulated undistributed dividends		－	－	－
Return on investment	Price-earnings ratio (Note 2)		-330.92	19.39	－
	Price-dividend ratio (Note 3)		－	22.90	－
	Cash dividend yield rate % (Note 4)		－	4.37	－

Note 1: The highest and the lowest market value per share. The average market value was annually calculated according to the stock index and the turnover.

Note 2: Price-earnings (P/E) ratio = Average closing price per share that year/ Earnings per share. Note 3: Price-dividend (P/D) ratio = Average closing price per share / Cash dividends per share. Note 4: Cash dividend yield rate = Cash dividend per share / Average closing price per share that year. Note 5: Market price per share in 2017 is the information up to March 31st, 2017, and net value per share and earnings per share are information on consolidated financial statements for the first quarter audited by certified public accountants.

Capital Overview

(VI) Dividend Policy and Implementation

TFC’s Dividend Policy
(1) The Dividend Policy is set forth in TFC’s Articles of Incorporation:
- Articles 27-3 and 27-4:

Any earning after final accounting by this Company each year shall be made good for deficit for previous years after payment of taxes by law, and if there are still earnings, there shall be provision for 10 percent of statutory surplus reserve, and there shall also be provision for or transfer of special surplus reserve by law, and then the balance and total retained earnings for the previous year shall serve as the distributable earnings, but they shall be retained by discretion as business requires or there shall be provision for special surplus reserve by discretion before they will be distributed at the percentage below. For the foregoing matters, the Board of Directors shall provide the proposal for surplus distribution on a yearly basis, and present the same to the executive meeting of shareholders for resolution.

The shareholders’ dividends of TFC shall refer to diversified operation of business and characteristics of changes in economic boom with consideration taken to the demand of life cycles of products or services on future funds as well as business development and shareholders’ equity. For the payment of shareholders’ dividends, except substantial investment plans, significant changes in financial standing, substantial changes in operation and productivity expansion or other substantial capital expenditure and other capital demands for that year, the cash dividend distribution ratio shall be on the whole not be lower than 10 percent of the total dividends for that year, and shall be submitted to the meeting of shareholders for consent before the same is handled.

(2) The distribution of bonus for TFC’s shareholders will be based on the following factors; that is, TFC’s financial condition in future, and the need for a stable dividend condition as well as for the transformation of the Company. In principle, at least 50% of earnings can be distributed after statutory surplus reserve and special surplus reserve by law are deducted.
Dividend distribution to be proposed at this meeting of shareholders:

According to TFC’s appropriation of profit & loss and distribution of earnings of 2016 to be proposed in the Board Meeting, the cash dividend to be distributed is NT$2.1 per share and total NT$2,058,000,000 will be distributed.

Estimation of substantial change in the dividend policy of the company: None
(VII) Effect of the uncompensated rationed shares deliberated at this meeting of shareholders on the Company’s business performance and earnings per share: N/A

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(VIII) Remuneration for Employees, Directors and Supervisors

Percentage or scope of remuneration for employees, directors and supervisors set forth in TFC’s Articles of Incorporation:

In accordance with Articles 27-1 and 27-2 of TFC’s Articles of Incorporation:

If TFC has any profits, the profits will be distributed at the percentage below: remuneration for employees at 2.4%, and for directors and supervisors at within 1.6%. However, if TFC has any losses, the profits shall be made good for deficit for previous years.

The resolutions made in the TFC’s Board Meeting regarding the remuneration for employees, directors and supervisors must have more than one half of directors present with consent of more than one half of the directors present, and must be reported in TFC’s general meeting of shareholders.

The basis for the estimate and recognition of the employee bonus as well as directors’ and supervisors’ remuneration, the basis for the calculation of the placed and issued shares for dividends and the accounting handling in case of difference between actual distribution amount and estimated amount for this period:

The estimated employees’ dividends for the current period accounting for NT$0K and the amount of remuneration for TFC’s directors and supervisors accounting for NT$0K are estimated at 2.4% and 1.6% of profits in 2016 on the basis of Article 27-1 of TFC’s Articles of Incorporation without distribution of share dividends. If actual amount of allotment is different from the estimated amounts, such will be deemed as changes in accounting estimates, which will be recognized as the profit and loss for 2017.

Information about the remuneration for employees, directors and supervisors to be distributed by the Board of Directors of this year:
(1) Remuneration for employees, directors and supervisors to be distributed at cash or stocks
(2) The proposed amount of allotment adopted in the Board Meeting (as shown in the table below) is calculated at 2.4% and 1.6% of profits in 2016 on the basis of Article 27-1 of TFC’s Articles of Incorporation. If actual amount of allotment is different from the estimated amounts, such will be deemed as changes in accounting estimates, which will be adjusted in 2017.

Unit: NT$K

	Unit: NT$K
Item	Proposed distribution amount passed by the board of directors
Stock remuneration to employees	0
Stock remuneration to employees	None
Remuneration for directors and supervisors	0

It is required to deliberate the amounts of employees’ remuneration and the percentage in the net income after tax and total amounts of employees’ dividends in the individual financial reports: N/A

Capital Overview

Conditions for actual distribution and payment of remuneration for employees, Directors and Supervisors for the previous year (including number of allotted shares, amounts and prices of shares). If there is any difference in the recognized remuneration for employees, Directors and Supervisors , it is required to specify number of difference, reasons and treatment conditions：

The actually distributed remuneration for employees, directors and supervisors for 2015 has been recognized as expense in 2015, and are the same as the proposed conditions of allotment as adopted by the former meeting of directors.

The actually distributed remuneration for employees, directors and supervisors for 2015 has been recognized as expense in 2015, and are the same as the proposed conditions of allotment as adopted by the former meeting of directors.	The actually distributed remuneration for employees, directors and supervisors for 2015 has been recognized as expense in 2015, and are the same as the proposed conditions of allotment as adopted by the former meeting of directors.	The actually distributed remuneration for employees, directors and supervisors for 2015 has been recognized as expense in 2015, and are the same as the proposed conditions of allotment as adopted by the former meeting of directors.
Unit: NT$K
Item	Estimated amount to be distributed bythe board of directors	Actually distributed amount
Employees’ remuneration	63,542	63,542
Remuneration for directors and supervisors	42,362	42,362

(IX) Buyback of the Shares of the Company

For FY2016 and FY2017 as at the publication date hereof, no buyback of the shares of the Company.

II. Corporate Bonds: None.

III. Preferred Stocks: None.

IV. Overseas Depositary Receipts: None.

V. Employee Stock Options: None.

VI. Status of New Shares Issuance in Connection with Mergers and Acquisitions: None

VII. Financing Plans and Implementation: N/A

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Part Five: Operation Highlights

I. Business Content

(I) Scope of Business

Taiwan Fertilizer Co., Ltd. has been developing mainly under two major business groups, namely "fertilizer chemical" and "real estate development and investment". Meanwhile, the internal supporting management of the Company has been structured into six sections according to functions. Descriptions are as follows:

(1)Fertilizers:

In addition to the archetypal fertilizer products, efforts have been made in line with the development trend of agriculture and the policy of the government in promoting exquisite agriculture – including efforts to expand the green agricultural industry, invest in the development of new agricultural biotechnology new products, and promote niche fertilizer products such as fertilizer, organic fertilizer, bio-fertilizer, controlled-release fertilizer (CRF), biological pesticides, etc. It is aimed that with the advantageous conditions such as the experience of experts in fertilizers, the brand value of the Nongyou series and the leading position in the industry, further efforts will be devoted to evaluate the appropriate cooperative opportunities or investment plans overseas as well as to build fertilizer plants overseas to extend production, sales, and market. In view of the rise of regional economy, so far a sales outlet has been established in Cambodia, a member of ASEAN while work is being undertaken to actively strategize for the target market so as to seek new opportunities driven from the archetypal fertilizer business.

(2)Chemical products:

Based on the original business in chemical and electrochemical products, the sales, market, and business in chemical products have been expanded by way of integration of upstream and downstream products as well as upgrade to electrochemical products. In the oversea market, the focus has been on the investment in electrochemical products and the penetration of international electrochemical market, both in production and in sales, so that the technology, knowhow, and market shares of our electrochemical products can be enhanced.

(3)Trading logistics:

Incorporating the existing procurement business in raw materials, taking advantage of the edge of the special piers at Taichung Harbor along with the planning of free trade zone therein, the Company has constructed a number of chemical storage tanks to further expand the business of import procurement, unloading warehousing, transit trade, while actively transforming into the role of a provider for product integration services and a supplier for relevant raw materials

(II) Real estate development and investment:

(1) Development of residential buildings:

Based on existing lands, cooperative residential development projects have been undergone through self-construction or joint-construction, such as the R13-1 residential

Operation Highlights

development project in Nangang Economic and Trade Park, the land development project on Dongming Road in Keelung. While accumulating the relevant experience, the Company is to pursue the land acquisition program, evaluate lands that might be suitable for purchase, act as a professional builder, construct cooperative residential buildings for sales and profits, and aim to establish its own brand name.

(2) Operation of real estate:

Some of the lands that the old plants sit on have been gradually rezoned to non-industrial land as per the urban planning of local municipality; and over time, these lands have become preciously in demand as the development of the city – among which the most valuable one is Nangang Economic and Trade Park with a commercial zoning, followed by Hsinchu Science and Business Park and Kaohsiung Special Trade Park – all can be developed for commercial purposes such as hotels, shopping centers, offices, etc. In the future, depending on the conditions of each land, commercial real estate is to be developed in stages by areas under the models of leasing, self-construction and self-management, etc. so that increasing value-added benefits can be realized throughout the real estate development.

(3) Investment:

Health business is the key in this area, including three scopes, namely bio-organic agriculture, health and nutrition, leisure and wellness. In the future, business is to lie in firstly, the production and marketing of nutrients, microbial agents for fish and aquatic beings, and organic produces, as well as the development of bio-organic agriculture and fishery; secondly, the development of health and nutrition products, i.e. the production and marketing of products rich in natural minerals from deep sea, including packed drinking water, deep sea salt, concentrated liquid, cosmetics and skin care products, health and nutrition foods, etc. that are driven by the resources in the deep ocean; and thirdly, the opening of a new chapter in the leisure and wellness industry by leveraging the land resources at hand, e.g. the construction of a marine deep water park at Hualian Plant.

(III) Industry Overview

(1) General Economic Environment

In 2017, the global economy is recovering gradually, yet its growth is somewhat on the weak side while the marginal efficiency of the long-term monetary easing policy has been lowered. In many countries, fiscal policy is to become the main vehicle to stimulate economic growth, replacing the monetary policy. According to a forecast released by Global Insight in January, the global economy is to grow 2.8% this year, a 2.5% improvement in comparison with 2016 last year, whereas it will be 3.1% next year. According to a report on the “Update of World Economic Outlook” issued on January 16th, 2017 by International Monetary Fund (IMF), global economic activity is to accelerate this year to a total growth of 3.4%, a 3.1% improvement in comparison with 2016. The outlook for the advanced economies has improved slightly – 1.9% growth is expected this year, a 1.6% improvement in comparison with 2016. It is mainly due to the increased economic activity in the second half of last year as well as the fiscal policy adopted by the United States for economic stimulation. As for the

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financial environment in emerging markets and in developing economies, it is unanimously showing a tightening phenomenon with growth slightly level around 4.5% this year.

At present, current international economy is still facing tremendous risk factors, worthy of constant attention - including the direction of the economic and trade policy and the path of interest climbing taken by the new government in the US; the dynamics of the economy growing in mainland China and some emerging economies; the turns of the Brexit negotiation gearing in the UK; the election waves stirred in the Europe; as well as the factors affecting the economic outlook in four corners of the world, such as the risk associated with geopolitics, pricing turmoil on international crude oil and commodity, the volatility in global financial and stock markets, the protectionism against trades, etc.

Adversely affected by the slow pace of global economic growth, the demand from the external has been weakened. The only booming seen in the domestic market lies in Internet of Things (IoT), automotive electronics, and other emerging smart applications. It is foreseen that investment in high-end capacity in the semiconductor industry shall continue to increase, thanks to the government’s efforts in actively improvement of the investment environments and the implementation of the Five plus Two Innovative Industry Development Plan which has helped maintain the momentum of investment growth. According to Directorate General of Budget, Accounting and Statistics of Executive Yuan, it is summarized that in 2016 economic growth was 1.50%; whereas in 2017 it will be 1.92% with the gradual pick-up of global economy.

According to the data indicated in the agricultural statistics yearbook of the Council of Agriculture, the market scale of organic agriculture market continues to grow as domestic economic and industrial structure changes and countrymen put more demands on healthy and safe food, based on the year-by-year decrease of total application amount of fertilizers of the country. For the purpose of integrating original profession of chemical fertilizers, the Company has completed the transformation plan to combine Keelung Plant, Hsinchu Plant and Hualien Plant with Taichung Plant and integrate the human resources, energy and production value chain, which not only reduces cost, reasonably adjusts the pricing, and develops niche products, but also improves terminal storage capacity through transshipment, warehousing and trade serviced in the free trade zone.

Looking into 2017, aside from controlling various management risks and improving the overall competitiveness, the Company will focus on improving operation and management efficiency and extending current competitive advantages and integrating niche synergy, benefiting from the efforts made by the nation to promote growth, stabilization of domestic economy growth and rebound of production, investment, consumption and import & export. By strengthening the operation performance of 2 business units, the Company will achieve the continuous growth of Chemical fertilizers, the sustainable operation of real estate and the strategic goal of core competence construction of health undertaking, and accomplish rich operation results.

Operation Highlights

(2) Recent Status and Development of the Industry
A. Overview, Development Tendency and Race Condition of Fertilizer Industry:

As a mature and fundamental industry, the fertilizer industry is closely tied to people’s livelihood throughout a long history. In recent years, the Government has been prompting the organic fertilizer policy, and in the future, the compound fertilizer will gradually and comprehensively march towards the organic-oriented trend.

Furthermore, free fertilizer import makes market competition fierce. Especially, almost all raw materials for fertilizer production are imported from overseas because of the shortage in the country, making fertilizer production cost increase along with the price change of international fertilizer raw materials. For the purpose of lightening burdens of farmers and stabilizing domestic fertilizer price, the government started to provide subsidy for terminal price difference since May 2008, and established Fertilizer Price Review Panel to determine and adjust the benchmark ex-factory price of domestic fertilizers on the basis of international fertilizer raw material price and valuation formula, which made domestic fertilize price restricted by the government for a long term.

Due to lack of labor and pay rise in villages, power farming is replacing labor power gradually, and the demand of compound fertilizers is increasing and the demand of single fertilizers is decreasing year by year. Therefore, enterprises in fertilizer industry are striving for capturing domestic compound fertilizer market, and compound fertilizer is becoming the most competitive product. In recent years, major national projects including control release fertilizers, biological fertilizers, organic compound fertilizers and functional fertilizers have been developed, and the new type fertilizers that can improve crop quality and fertilizer absorption efficiency have become the focus of research and development.

B. Overview, Development Tendency and Race Condition of Chemical Industry:

In recent years, Taiwan has been witnessing an outflow and brain drain in chemical industry as a result of scarcity of natural resources and lack of competitiveness therein. At present, all products of the company, except for nitric acid, sulphanilic acid and fuming sulfuric acid, which are subject to transportation and storage restricts on them or their by-products, are still produced in Taiwan. Imported goods have outgrown as the dominant sources for items such as liquid ammonia, industrial urea, etc.; products in downstream market are all supplied to Taiwan to meet internal demand, except for sulphanilic acid that is sold to Europe and America. In the relatively mature and saturated market, it is saturated yet relatively stable.

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Relationship diagram of upstream, midstream and downstream of domestic fertilizer and chemical industry:

==> picture [443 x 459] intentionally omitted <==

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

Upstream Midstream Downstream
(Agricultural
Nitrate phosphate
Liquid
Nitric acid compound fertilizer
i user)
Council of
Urea
Agriculture
Potassium Zinc phosphate Fertilizer seller
(Industrial user)
Calcium
Phosphate Ammonium sulfate Plywood
superphosphat industry
Fertilizer
Melting sulfur Sulfuric acid industry
Electronics
Sulfamic Acid
industry
Food industry
Power
Melamine
generating
----- End of picture text -----

C.Overview, Development Tendency and Race Condition of Electric-grade Chemical Industry:

Electric-grade chemicals are generally referred to various chemicals that can be used in the process of electronics industry or facility end, the product items include single organic solvents of simple substance, alkaline acid solution of simple substance to formulas of different proportions. At present, the products are used in the processes such as yellow developer, peeling, itching, polishing and cleaning in semiconductor, panel, solar energy and LED industries.

The value of output of domestic semiconductor industry has broken through NT$ 2 trillion and more than 200,000 people are employed by this industry. The value-added rate of this

Operation Highlights

industry has exceeded 50% and it contributes at least NT$ 1.1 trillion to the GDP of Taiwan each year. As for panel industry, the investment of AUO and Innolux was improved by 8.5- generation plant capacity; while the market demand of LED industry was not as good as expected and the average prices of chips and packages decreased to a large extent. Looking into the future, the compound annual growth rate of LED industry will not achieve a growth of more than 10% as it has reached in the past; however, there is still room for it to develop. Speaking of solar industry, the huge solar cell capacity of Taiwan will focus on integrating its large plants in China vertically and the cooperative OEMs in a third place such as Vietnam and Malaysia. Generally speaking, the demand of electric-grade chemicals will grow positively based on the innovative application and continuous capacity expansion in various electronic industries, which proves that there is still space for development in electric-grade chemicals market.

Electric-grade chemicals are of fully-open competitive pattern, and the Company devotes to meeting the quality requirements of different industries and different customers and also deepening its production control, quality assurance, technical support and assistance and completing after-sales service based on customers’ needs on quality and supply stability. Apart from the existing panel industry, the Company will improve its technical capacity and develop products of semiconductor industry upwards and spread and seek for prospecting niche products of solar and LED industry downwards, in order to expand product items and provide one-stop solutions for customers by combining the distillation, blending, split charging and waste liquid recycling capacity of Miaoli Plant.

D. Overview and Development Tendency of DOW Industry:

DOW (Deep Ocean Water) is generally referred to the seawater 200m below deep ocean. Contacting with no light all year round, DOW is featured with low temperature, cleanliness, maturity and rich minerals. As a kind of emerging water resource for multi-purpose development and application, DOW can be used in a wide scope. Currently, only Japan, Hawaii of the U.S., Korea and Taiwan has formed efficient DOW development of certain scale worldwide.

In view of the arrival of aged society and awareness of health, health care food industry is attaching more and more importance on minerals. Hualien Plant of the Company is the DOW production base that produces DOW products with the deep ocean water drawn from the sea 662m below Western Pacific in the east coast of Hualien Harbor. The company entrusts its subsidiaries to research and develop relevant products after high quality deep-sea mineral concentrates are extracted with high-tech concentrate production equipment by Hualien Plant.

E.Overview, Development Tendency and Race Condition of Land Development Industry:

1)Residence

2016 marked the year of the official implementation of a reform of real estate taxation where the land tax and property tax became two-in-one; meanwhile, the land tax and property tax were both soaring. Hence, the overall market was on the down turns. In 2016, the cases of property transfer totaled in 245,000, marking the record low since

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2001, whereas the dynamics of overall transaction was stripped down. Among the markets, high-end luxurious residential properties have been affected the most whilst the residential market has been mainly served the first-time home buyers. Predominantly, the popular sales of future-occupant properties have been those cases targeting small- to medium-sized properties to suit home owners’ demands. Pricewise, the closing prices have been 10 ~ 15% drop in comparison with that in the last year. For the most parts, constructors have learned to get properties off the list sooner by swallowing some price cut.

As per a statistics concluded by “My Housing” Magazine in 2016, the closing ratio for new property project in Northern Taiwan had dropped 30%, a record low since the statistical history of the Magazine. Also, as per a notice made by Ministry of the Interior Affairs, the land price indexes for six metropolitans had all become weaker where Taipei City showed a 1.8% decline – echo well with the inactive real estate market. In early 2017, although new subway outlets were scheduled to open, which was supposed to stimulate the surrounding real estate market, yet applications for new construction projects to supply more new properties remained on the low side. Considering the huge inventory of properties left over from the last year, the future of the real estate market is yet to be observed about whether the buyer and the seller may bridge the gap somewhere in between.

2)Commercial Real Estate

The soaring of both the land tax and property tax in 2016 was adversely affecting the most the investment in and holding of commercial real estate. Consequently, many new real estate projects organized by the Government started to hit the brick wall, from which many enterprises/business had tried to withdraw themselves, especially many business in the hotel industry were seeking to let go their shares seeing that tourists from China has been declining while the operating costs of taxation increasing. Furthermore, the closing price of sales of office buildings in Taipei City was also dropping in line with the overall weakening real estate market. Nevertheless, the leasing of and demands for office spaces was by no means pessimistic where the office rent remained at NT$ 2,118 per Ping, making the rate of return up to 2.43% on investment in office spaces. The vacancy rate of office spaces was about 6.78% this year, a steady decline from 9.61% since last year. During 2016, for example, the Cathay Plaza, a future office building, located in Xinyi District has successfully pre-leased out 15,000 Ping of spaces out of the total 25,000 Pings since over a year ago. Also, the leasing rent averages about over NT$ 3,000 per Ping. Another example goes to the Nanshan Plaza, a future office building of size 32,000 Pings soon to wrap up construction in Xinyi District, which has also attracted an overwhelming number of tenants during the pre-leasing.

In term of real estate investment market, properties surrounding Neihu Technology Park, Nangang Software Park, and Xizhi Technology Park have been traded here and there. Most significantly, the transaction price and the leasing rent for properties in Ximending business district continues to rise, thanks to the traffic of people flow and the embracement of international brands therein. In addition, commercial real estate market in Hsinchu City has been explicitly influenced by the Hsinchu Science Park whose scale

Operation Highlights

and throughput have not been expanding; hence, the demand on commercial properties has received no obvious boost. Nevertheless, the land the Company owns in Hsinchu is still advantageous in terms of its easy access to transportation system and its adjacency to the amenity around Hsinchu downtown. It seems to be appropriate to design and construct an office park abreast of time in the local area with emphasis on technological industry along with the industrial upgrade guided by the Government.

(IV)Technology and R&D overview

(1)R&D expenditure

R&D expenditure
Year Item	2015	2016
R&D expenditure(NT$K)	66,094	65,291
Proportion in business volume (%)	0.38%	0.53%

(2) Achievements in recent 2 years

The company strengthens cooperation with foreign research institutions, introduces new technology and shortens the R&D period by following the innovative strategies and transformation of scientific technology to enter the high-tech market. We will keep improving our microbiologic fermentation technology, establish enzyme hydrolysis extraction technology, DOW highly economic aquaculture technology, inorganic and organic fertilizer formula, and development of core technologies such as process technology and purification technology for electrochemical products, etc.

1) Development of biotech fertilizer

◆Application of agricultural microbial strain - development of biotech fertilizer

To strengthen the core technology on microbial fermentation of the Company, a platform was deployed for the operation of the organic microbial bacteria of fertilizers. With priority set on screening the appropriate combination of compost bacteria, work has been done to assess and introduce those bacteria of industrialization potential such as organic dissolvent bacteria, deodorant bacteria, and antagonistic bacteria against disease in soil. Also, the technology on breeding various functional bacteria has been formulated to be applied to sorts of organic microbial fertilizers and other related products. In July 2015, the plant with 6,000 metric ton of capacity for manufacturing biotechnological organic fertilizers was completed construction in Miaoli, developing many organic fertilizers with value-added functions. In particular, two new products, the Nongyou series - TFC No. 5 bio-organic fertilizer (marked under Fei-Zhi-(Zhi)-Zi-No. 0465021) and the - TFC Biotechnology No. 11 organic fertilizer (marked under Fei-Zhi-(Zhi)-Zi-No. 0465020), have been honored with the "Preferred domestic brand for the organic fertilizers" and the "Preferred brand for the commercialization of organic agricultural materials", respectively. In 2016, more importantly, a new product of high potassium, TFC No. 7 bio-organic fertilizer (marked under Fei-Zhi-(Zhi)-Zi-No. 0465022) with ingredient N-P2O5-K2O 3-2-5 was successfully developed, newly granted with a fertilizer registration certificate, ready for the application for honor of the

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"Preferred domestic brand for the organic fertilizers" and the "Preferred brand for the commercialization of organic agricultural materials", and was expected to launch in 2017 for marketing.

◆Development of biological pesticides

In response to the rise of safe organic agriculture and the increasing maturity of the farmers’ concept on simultaneously applying both microbial fertilizers and biological pesticides for the prevention of incest pest on plants, the Company had been working with “Taiwan Agricultural Chemicals and Toxic Substances Research Institute” for three years since 2009 on the implementation of the industry-academia cooperative project "The development and commercialization of the biological fertilizer and biological pesticide products using Bacillus thuringiensis". Afterwards, the products had also been through process testing for mass production; and the microbial fertilizers had been developed for control of disease for plants, inhibition of pathogens, and improvement of crop yield.

The bacterial strains to be patented, amyloliquefaciens was the technology from TACTRI. In October 2013, a product named Biopower Phosphate was launched (i.e. Item: 8-03 Fertilizer of dissolving phosphorus microorganism - marked under Fei-Zhi(Sheng)-Zi-No.0465015), and launched to market in 2015 officially in the name of Nongyou Biopower Phosphate. In 2016, based on the abovementioned technology, a biological pesticide has been derived onto a different plant sapling for prevention of Botrytis Cinerea (an infection with gray mold of strawberry). So far, field efficacy and phyto-toxicity test has been conducted in three rounds where the test results have shown a promising effect on controlling the Botrytis Cinerea.

◆Field validation of organic materials and establishment of cultivation technique

Attaching great importance to the deep cultivation and rise of the organic agriculture in Taiwan, the Company has been actively engaged in the development of organic materials and fertilizers. In order to provide farmers with high quality and easy-to-use organic agricultural materials, the "TFC Organic Demonstration Farm" was established in 2014, which had obtained in September 2015 an MOA certificate (i.e. MOA 1520029) granted by “MOA International” for its transiting organic products which is expected to be officially validated for the production of organic agricultural products in April 2017. In 2016, the Company continued to recommend the “Nongyou vitality series of nutrients” under the brand of the “Preferred brand for the commercialization of organic agricultural materials": along with the "TFC Bio-organic fertilizer", the recommend products had been cultivated and tested in greenhouse, netted room, and in the field on seasonable vegetables, melons, and fruit crops (without application of chemical fertilizer or chemical pesticides"; along with biological control for management of plant diseases and insect pests , they had been verified about the product efficacy for the enhancement of product competiveness; and along with the establishment of technology on cultivation and management of various organic materials, they were to be served as organic materials of high quality materials to farmers.

Operation Highlights

2) R&D of micronutrients fertilizer

During the cultivation period of the economic crops, in order to meet the needs for plants to grow better, bear more fruits, and enhance stronger sweetness with the application of fertilizers, practice has been conducted based on the concept of prevention-&-cure-two-in-one to reduce the occurrence of physiological disorders on crops, to supplement the trace minerals lacking, and to develop comprehensive products of trace minerals. Using mineral microcrystals (i.e. Mine-treasure), a material of high concentration of minerals existent in the deep sea, as a fundamental ingredient for the formulation of products, the Company entered into a cooperation with “Gaoxiong District Agricultural Research and Extension Station” on a two-year project “Development of New Trace-Mineral Fertilizer” for the commercialization of agricultural technology. In 2016, preliminary formulation of products was completed, which can be applied on small tomatoes, cabbage, wax apples, lychee in the field test of which the result showed significant improvement of efficacy about the soluble solids on fruits.

3) R&D of biotech aquaculture technology
Trial production of white shrimp, Platax orbicularis, and Lateolabrax japonicas (seabass), and research on value-adding to products

Following the cultivation of high-yielding species of fish and mid-breeding incubation experiments in 2015, the Company built a 4-spot outdoor breeding pool in Hualian Plant in 2016 as a module for mass production where white shrimp, Platax orbicularis, and Lateolabrax japonicas (seabass) were selected for the trial production through which the technology for modular mass production of aquaculture (fish and shrimps) based on deep ocean water was completed. Under this test, Professor Sun Bao-nian of the Department of Food Science at National Taiwan Ocean University was entrusted to carry out the project "the impact of deep ocean water aquaculture fish (Platax orbicularis) on its meat and flavor" based on Platax orbicularis. This study suggested that the key to improve the meat quality of aquaculture (fish and shrimps) in the deep ocean water lied in that, in comparison with regular ocean water of the same concentration of salinity, the deep ocean water comes with higher osmotic pressure which can alter the amino acid composition in the meat. Also, the characteristics of the low water temperature of the deep ocean water can enhance the content of fat and fatty acid in the body of the fish after they were cultivated/ bred. In conclusion, the two key factors: high osmotic pressure and low water temperature, of the deep ocean water can enhance the delicacy of the aquaculture (fish and shrimp) in the deep ocean water. Meanwhile, the Company has established the technology of incorporating HDPE breeding pool for cultivation of aquaculture (fish and shrimp) along with microbial nutrients into the supporting applications in aquaculture cultivation technology. The aquaculture of the mass production of Platax orbicularis, Lateolabrax japonicas (seabass), and white shrimp under this project has been well received during the trial sales before New Year.

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◆Research on the cultivation and trial production of algae species of high economic value

Taking advantage of three major characteristics of the deep ocean water (DOW): low temperature, purity, and abundant saline nutrient, two large outdoor algae production modules were built in the east and the west of the site, where mass production of large algae of edibleness value and of rich nutrients, such as Ulva lactuca (sea lettuce), sea fungus, and red algae, was under the way using the aquaculture technology of mass breeding. To establish a comprehensive modular production technology and to further develop the technology of gamogenesis (sexual reproduction), the specie preservation technology suitable for the breeding of series of sea lettuce in DOW has been established in 2016. Subsequently, Taiwan Yes Deep Ocean Water Co., Ltd, a subsidiary of TFC, was entrusted to carry out the "Development plan for creative products of sea algae" which has been gradually developing the products of algae beer, algae salt, algae biscuits, algae noodles, and algae sauce, all scheduled for trial production and marketing in 2017. In addition, the Company has also tested the preliminary cultivation of kelp which had been selected as the new algae specie of potential. At present, multi-stage production models for various kinds of algae in low temperature and room temperature have continually been establishment so as to enhance the efficiency of DOW use and to reduce the watering costs.

◆Preliminary research, development, and application plan on applying mine-treasure as aquaculture material

Mine-treasure constitutes the unique derivative in the deep ocean water during the production and started to be used in cultivation industry in early 2016. It is suitable to be used as an additive of trace mineral to artificial ocean water and can be used in aquaculture of large algae and micro-algae. In the application of clam (Meretrix lusoria) breeding, the use of algae in the fermentation tank can successfully breed out Dietziamaris, bacteria with boosting effect on the growth of clam. After the adoption of this bacteria material in the aquaculture industry, it was assessed that this product is suitable to be used as an additive of trace mineral to fertilizers; hence, the purpose of the material was so determined for the development and applications.

4)R&D of key and core technologies for inorganic and organic compound fertilizer processing

◆Development of special fertilizer for orchid

The Company positively develops special fertilizers for high cash crops. Flower market evaluation in 2015 indicates that orchid is one of the high cash value crops in Taiwan, and its sales ranks the 3rd and its output per unit area ranks top among export farm products. Since fertilizer materials are used in its professional production management, special fertilizers for orchid has market potential and instant water soluble compound fertilizer for protected cultivation is taken as the main appeal point, to finish developing the formula of orchid fertilizer. On May 18, 2015, registration certificate of #1 Taifer Biotec orchid fertilizer of Nongyou brand was obtained. (F. Z. (F.) Zi. No. 0465016). After two-year entrusted experiment on the efficacy of the fertilizer

Operation Highlights

conducted at the Orchid Garden of National Chung Hsing University, it had concluded that, under proper application, there was no obvious discrepancy on the efficacy of the fertilizer between the TFC special fertilizer for orchids and Peters GP fertilizer available in the market; yet, the former fertilizer performed better during the early stage of the growth of orchids.

5) The development of the purification technology for electrochemical products

In line with the demand on electrochemical products arising from the development of domestic high-tech industries, new technologies are to be introduced into the existing process for the production of acid/alkali chemical products. Among them, N-methyl pyrrolidone (NMP) is a polar aprotic solvent, widely used in agriculture, medicine, chemical, and other fields mainly used as a solvent. Therefore, upgrading existing products to electrochemical ones can create a higher profit for the Company. Purification technology is to solve problems in achieving high purity, total amine content, discoloration, etc. for the electrochemical NMP products. In order to materialize the purification technology in the short term, the Company has sought the cooperation with and entered into a contract with the Materials and Chemical Research Institute under the Industrial Technology Research Institute (ITRI) in November 2016 to jointly carry out the research project on the purification process making the industrial NMP purified to the highest level of UPS class.

(V) Development plan of medium and long-term and short-term business

Category	Short-term business	Medium and Long-term business
Fertilizer industry	(1) To stabilize the existing industry, strength after-sales service, continuously improve fertilizer quality so as to satisfy quality requirements of customers. (2) To separate the market, develop and introduce niche products and keep promoting fertilizers with high additive values so as to increase sales income. (3) To improve packaging quality, strengthen advocacy of new fertilizers, establish test, demonstration and explanation sessions in highly economic crops area of entire province in order to increase the additive value of products. (4) In line with the Southward Policy of the Government along with the global deployment through the construction of ten Plants in the West, work has been undertaken to integrate the industry need of the domestic market,as well as to	(1) To continuously develop high-technology organic fertilizers in coordination with development of organic agriculture. (2) To refine the agriculture development in order to promote high-component and high-quality fertilizers.

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Category	Short-term business	Medium and Long-term business
	redirect the excess of fertilizer capacity from domestic market outwards via exporting so as to lay out a foundation for the target oversea markets.
Chemical industry	(1) Anhydrous Ammonia: the downstream demands for supply source shall be stabilized based on the advantages of storage tank. (2) Industry urea: Packing and delivery shall be finished in Taichung Plant to reduce secondary transportation risks on the way to Miaoli Plant and market share shall be expanded flexibly. (3) Nitric acid: the output of nitric acid is increased after operation of Taichung Plant, which can help expand domestic and overseas market. (4) Melamine: the delivery-to-shop service shall be promoted to increase the market share with good quality and service. (5) Sulfamic Acid: the quality and service shall be improved to stabilize supply and delivery time and increase the market share in Europe and American market. (6) Sulfuric acid and Oleum: the marketing shall be promoted based on competitive price and acid recovery capability in coordination with the remaining capacity of fertilizer.	(1) Anhydrous Ammonia: A complete supply chain has been established at Taizhong Plant to satisfy customers’ needs. (2) Nitric acid: Taichung Plant can now stably supply its domestic customers with what they need. It is estimated that foreign customers can be expanded after concentration plan is completed in 2017 and expand market scale. (3) Sulfaric acid: Currently, the business model is through outsourcing to reduce production costs; meanwhile, customer relations will continue to flourish while European market (e.g. Spain /France /UK) is to be actively explored.
		(4) Fuming sulfuric acid: Currently, the
		business model is through
		outsourcing to reduce production
		costs, and the yearly sales is targeted
		at 14,400 tons.
		(5) Melamine, industrial urea: It shall be moved to Port of Taichung in coordination with warehousing to improve product quality, quantity and concentration, and continues to serve its customers, so as to expand themarket.
Electronic grade chemical products	With the aim to take full advantage of the maximum synergy of Miaoli Plant, semiconductor industry will be entered proactively to expand sales of electric-grade chemicals in addition to activating existing production equipment, developing solvent product recovery and regeneration and purification business and increasing capacity utilization.	With 3 acids and 1 alkali as the development focus, number of self-produced items will be increased and processing quality assurance ability will be improved; R&D technology class will be strengthened and after-sales service and customer relation management will be deepened; technical capacity will be improved upwards to serve IC industry customer base and product scope will be spread downwards to solar and LED industries; and competitive niche products will be produced, in order to enhance the overallprofitability.

Operation Highlights

Category	Short-term business	Medium and Long-term business
DOW	Regarding the development of DOW Experience Park, The existing Japanese style historical buildings have been renovated and are serving as D Park now.	Taiwan Yes Deep Ocean Water Co., Ltd. keeps researching and developing deep ocean minerals and setting up its domestic and foreign marketing network.Depending on the conditions of Taiwan tourism market, other field planning is to be determined later.
Land development	(1) The C2 Development Project at Nangang Economic and Trade Park: It is estimated that a building permit can be obtained in 2017. And consequently, it is planned to make design change, continuous wall construction, and outsourcing of the construction projects, etc. (2) The D7-A Development Project of Hsinchu Science and Business Park: The Beam-raising ceremony for the commercial office building was held on January 11, 2016, and it is scheduled to obtain the usage permit in 2017. At time same time, pre-leasing is to take place. (3)Stage 12 urban land planning of Hsinchu : Regarding Phase I re-planning, the administration of land registration had been finishes in December 2017. (4) The project of urban planning change on Dongming Road in Keelung: It is hoped that discussion with the potential customers in demand on cooperative terms can be finalized in 2017.	(1)Land development plan of 7C in special trade area of Kaohsiung : The Kaohsiung Plant of the company was closed in 2014 and the related procedures are being handled. The city government is currently undertaking the re-planning of the public city lands before the lands can be proceeded for development. (2)R13-1 residential development plan in Nangang Economic & Trade Park : FTC will be entrusted to renew the urban planning and carry out land development. After the completion of the auditing on the business plan and rights conversion plan, the development and sale of residential units will follow. (3) Hsinchu Phase II City re-planning: The work of engineering drawing plan and drainage planning has been reviewed where the plans are to be completed in 2020. (4) Hualien land: It is planned to
		continue towards the development of the deep ocean aquaculture park, and to introduce the relevant industries, so as to enhance the efficiency of land use in the park to a higher degree.
	(5) D7 development Project for Hsinchu
	Technology and Business Park: Later on, in accordance with the comprehensive planning of D7, another new development plan, D7A,is to follow afterwards.

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II. Overview of market and production & sales

(I) Market analysis

1. Sales area

Sales area
Category	Product name	Sales area
Fertilizer product	Ammonium sulfate, Urea , Potassium chloride Calcium superphosphate, Compound fertilizer, Organic fertilizer	Taiwan
Chemical products	Industrial urea	Taiwan
	Anhydrous Ammonia	Taiwan
	Nitric acid	Taiwan area,Southeast Asia
	Melamine	Taiwan
	Sulfamic Acid	Europe,USA
	Sulfuric Acid and Fumingsulfuric acid	Taiwan
Electronic grade chemical products	Stripper, ablution, etchants, organic solution, acid and alkali liquor of simple substance	Taiwan area, Southeast Asia,, China
Land development	Residency, commercial real estate	Taipei, Hsinchu, Kaohsiung, Keelung,Hualien and etc.

2. Market share, future supply and demand and growth

(1) Fertilizers

Regarding fertilizers required in the domestic market, apart from urea and potassium chloride which are totally reliant on imports from abroad as none is produced here at home, the rest of the fertilizers can all be produced here at home by domestic fertilizer manufacturers once raw materials from are imported from abroad.

The company has the rich experience, largest output and most complete production equipment of fertilizer in Taiwan with the quality of all products is better than others, making our products more competitive and enjoys a market share of about 70%.

(2) Chemical products
1) Industrial urea: Since the discontinue of the production of urea, the existing key accounts of the Company then started to imported the products for their own use or resale, becoming the main competitors against the Company. In recent years, as the downstream industries are outflowing abroad, the demand in the domestic market has gradually been shrinking where agricultural urea has become a substitute; hence, selling Industrial-grade urea is becoming increasingly difficult and challenging.The market share of urea of the company is about 40%.
2) Liquid ammonia: the three major importers of liquid ammonia in Taiwan are TFC, Sinopec, and Formosa Plastics. However, Sinopec is not equipped with its own storage tank; Formosa Plastics is unable to sell domestically due to its location at the Mailiao Industrial Harbor. Hence, the Company has become the exclusive supplier of liquid ammonia in Taiwan, and the sales and market has been relatively stable. The electronics

Operation Highlights

industry constituted the largest business dealing in the current downstream pipelines. If the global economy continues to develop stably, there shall be more room for growth. Noticeably, some downstream industries are facing competition against China, it is seen that production is unstable or may tend to be migrated elsewhere.

3) Nitric acid:65% of nitric acid produced by the company is compound fertilizer. The company may have a sales volume of about 65,000mt except for the 10,000mt nitric acid required by production and recently, we face fierce competitions in importing and domestic industries and we also have difficulty in promoting the nitric acid since the concentration of 65% is not well accepted by the market.It will be promoted in 2017 after concentration plan is completed.
4) Melamine: Since the production cease of Melamine, customers or importers can freely import for their own use or resale, becoming the main competitors of the Company. The downstream processing industry has gradually migrated elsewhere, which has led to the shrinking demand; thus far, the price war on Melamine has already been fiercely fought where the market share has dropped to about 40%.
5) Sulfamic Acid: The major export market is Europe and America with annual sales volume of about 12,000mt. The production of Sulfuric acid worldwide is about 190,000 metric tons, and demand on it is about 150,000 metric tons. The production is obviously exceeding the demand. The competition has been seen among Taiwanese, Chinese, and Indonesian manufacturers which are not slow on trading at competitive prices and squeezing their profit margins.
6) Sulfuric acid and Oleum: The products supplied by the company face the competitions from other domestic manufacturers and the market competition is fierce.
(3)Electric grade chemicals

So far, the company has low market share in electric grade chemicals. With regard to future strategy, products relevant to ammonia and the core industries, acid-alkaline series, will be focused on. In addition to mastering raw material advantages and enhancing competitiveness and serving as an upstream supplier, the Company will also integrate its existing resources, improve its equipment utilization ratio, reduce production cost and strengthen its R&D ability and produce products of niche formulas. At the same time, it will compete with peers in order to supply customers directly and thus achieve higher benefits.

3. Expected sales value

In 2016, it is predicated to sell 639,759 mt fertilizers, 140,500 mt chemical products, and 10,956 mt electronic chemical products.

4. Niche for competition:

(1) Fertilizers

1) As the largest fertilizer manufacturer and supplier, it has a long history and owns the leading brand in market.
2) The quality is reliable, which has passed CNS Mark and ISO 9001 certification, and the

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products are trusted by farmers.

3) The products are various and own the unique equipment for producing nitro phosphates compound fertilizers, the quality and effect of which are superior to those in the same industry all over Taiwan.
4) With completed, various products, it can meet clients’ demand for one stop shopping by self-producing or importing.
5) The after-sales service spreads this province and competed, real time after-sales service is provided by setting business offices in north, middle, south district and providing service specialists in each county.
6) The business conditions are mastered exactly and purchase conditions for raw materials are superior to those in same industry.
7) The teams for R&D, advertising progressively can provide high-tech products creatively, continuously and deal with tests for fertilizer efficiency and explanation session for new products all over this province so that the capacity of product development, advertising is superior to that in same industry.
(2) Chemical products
1) Nitric acid: 65% of our nitric acid has large production capacity but low lower cost; the domestic market channel of which is stable.
2) Liquid ammonia: A dedicated storage tank is available through the Company which is the only supplier of this kind in the domestic market.
3) Sulfamic Acid: With certain popularities and stable market share, the Company has operated chancels of European and American markets for a long time.
4) Melamine: With stable supply and good quality, the Company owns basic domestic clients.
5) Industrial urea: As the sole manufacturer previously, the Company has established good brand reputation and keeps favorable interactive relationship with upstream clients and downstream clients. At present, the imported products can supply domestic markets with sufficient supply of goods, which can meet clients’ demand for goods without stock-out.
6) Sulfuric acid and Oleum: The supply of goods in our company is stable and the quality is reliable.

(3)Electric grade chemicals

1) Based on core of the Company and relevant products in this industry (such as ammonia, 3-acid 1-alkali, etc.), the Company can reinforce competitive force by using, mastering niche of raw materials and reducing costs of production.
2) Equipped with the distillation, blending, and split charging OEM capacity of solvent products, and various technical capability and permits to recover and reuse waste liquids.

Operation Highlights

5. Favorable, unfavorable factors and countermeasures for development:

Category	Category	Favorable factors	Unfavorable factors	Countermeasures
Fertilizer product		A. The domestic fertilizer market was freed from January 2003 and all owners compete for competitive conditions. The Company is more excellent that those in same industry at the aspect of quality, costs of production, marketing channels, advertising and after-sales service. B. With improvement of knowledge, the farmers require creation and change, especially in great demand of new fertilizers with special functions and the advanced R&D teams in our company can promote new products in order to meet farmers’ demand appropriately. C. By setting “fertilize price review team”, Council of Agriculture evaluates domestic ex-factory price of chemical fertilizers to get rid of the predicament that prices of domestic fertilizers are frozen for a long time and costs of raw materials cannot be reflected properly.	A. Since the domestic fertilizers are scarce and all raw materials depend on importation, the costs of production are quite high and easily affected by international price and fluctuation of ocean freight so that the costs of fertilizers cannot be reflected without allowance of government. B. In order to keep the supply and demand of domestic chemical fertilizers, the government noticed that export sales of fertilizers should be approved by Council of Agriculture previously from May 2008 to restrict exportation of fertilizers. C. The products of the Company are mainly chemical fertilizers. With the improvement of people’s living standard, the demand for organic agricultural products is increased year by year. Organic compound fertilizers are to gradually replace the traditional compoundfertilizers.	A. Adjust combination of products, improve sales profits, continuously improve quality of products, reduce costs of production and increase competitive power of products. B. Develop basic, multifunctional and excellent products (such as including beneficial microbial fertilizer, organic compound fertilizer, etc.) to keep difference of products, improve added value and meet clients’ demand. C. Promote excellent organic fertilizers to meet strong demand of consumers for organic agricultural products. D. Improve service for clients, including demonstrational popularization, field trial, result review and emulation, initiation and education for fertilizers, rapid treatment for clients’ complaints, explanation session for new products, sample presentation for trial, plant visit, etc.
Chemical products	Industrial urea	A. As the unique domestic manufacturer, the Company has established good brand reputation and leading position. B. The supply of goods is sufficient, which can meet clients’ demand and get rid of anxiety for stock-out.	A. Since the Company stopped producing urea and the government approved free importation, some bigger clients of the Company started to import freely for self-use and sales and competed for urea market. Besides, they owns equipment for self-storage and packages to reduce costs, which is quite unfavorable to the Company. B. Many Taiwan’s manufacturers have relocated to the mainland - resulting in the reduced demand on the industrial urea in the domestic market. C. Since the urea is approved to import freely, the quality and price compete strongly or “agricultural” urea may be used for replacing “industrial” urea, the market order is affected.	A. Master international urea market for cheap, excellent and sufficient goods. B. Regulate favorable price, compete for clients or provide differentiated service by delivering goods to stores. C. Compete for large, medium or small manufacturers which use raw materials

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Category	Favorable factors	Unfavorable factors	Countermeasures
Anhydrous Ammonia	A. Though Anhydrous Ammonia is allowed to import freely, yet specialized wharf, large capacity storage tank and unloading, storage equipment is needed specially for importing Anhydrous Ammonia. At present, only the Company and Formosa Plastics Sixth Naphtha Cracking Plant own the equipment. Because the Mai-liao Harbor of Formosa Plastics is an industrial port where liquid ammonia cannot be sold, downstream users usually purchase products from the Company. B. Since Anhydrous Ammonia belongs to high dangerous chemicals and experienced professionals are required for unloading, storage working, only the Company and Formosa Plastics have relevant technologies atpresent.	A. Since the Miaoli Plant of our Company stops production, Anhydrous Ammonia required domestically largely depends on export and the selling price is affected by international price. The cost structure controlled by our Company is reduced relatively, and its price is unstable. B. Provided that the Anhydrous Ammonia that imported by Formosa Plastics can be used for selling or the storage tank of Sinopec is constructed, the competitive power of the Company for selling Anhydrous Ammonia is weaken.	A. Master business condition exactly and purchase low price, spot Anhydrous Ammonia appropriately. B. Consider the competitive power of downstream clients, make price flexibly and appropriately in order to stimulate demand.
Nitric acid	A. The Company can deal with self-importation of Anhydrous Ammonia which can be used for producing nitric acid as raw materials. Besides, the unloading, storage equipment for importing Anhydrous Ammonia are set in Taichung Plant and the Company keeps leading position for mastering costs of raw materials ,so the cost of production is lower. But the competitive power is high. B. The equipment for production in Taichung Plant is new, of which the yield is large and the cost ofproduction is lower.	Taichung Plant can manufacture 65% of nitric acid and never produce 68 ~ 98% of concentrated nitric acid. At present, it cannot provide diversified service.	Promoting clients to accept 65% of nitric acid and efficient induced-conversion gradually. Export sales will be promoted after concentration plan is completed in 2017. At early stage, the sales prices will be strategically guided by the
			creation of marginal contribution,
			and are subject to adjustment as the market changes

Operation Highlights

Category	Favorable factors	Unfavorable factors	Countermeasures
Melamine	A. As the unique domestic manufacturer previously, the Company owns basic clients and good market reputation. B. To import products of high quality and stability for high degree of customer satisfaction. C. Import largely and build safe retail inventory so that clients can pick up goods smoothly, without anxiety for stock-out. Import good-quality, stable products so the acceptability of clients is high.	After the Company stops producing melamine, some large clients start to import initiatively in order to disperse risks, which can impact domestic market of melamine for the Company.	Ensure quality of products, master quotations in international market and import price and adjust selling price flexibly to keep competitive advantages.
Sulfamic Acid	A. The quality is stable and the Company can cooperate with ammonium sulfate plants in order to make the best use of recycled and avoid environmental protection problems. B. Since operating main channels of European and American markets for quite a long time, the Company has certain reputations and stable market shares.	A. Our Sulfamic Acid products are sold totally, the selling price of which is affected by internationally market deeply. B. Since Indonesia and China Mainland have put into production and cause supply is greater than demand, all manufacturers compete for prices in out-sales market in order to keep market shares. C. The isomorphism type of Sulfamic Acid products is quite high and technologies of production are low. Besides, they can be replaced by developing countries with sufficient raw materials easily.	A. Ensure stable quality and safety, quickness during transportation. B. Make quotation differently based on different competitive conditions of out-sales market.
Sulfuric acid	The self-storage and imported smelt sulfuric acid own equipment advantages for sales, which can adjust retail inventory and gain profits.	A. Since the opponents are of great quantity, the isomorphism type is high and recycled acid can flow easily. B.The storage tank is located in Taichung which is far away from the sulfuric acid market, mostly likely losing its competitiveness.	A. Keep the costs of purchased materials stable in order to pursuit appropriate profits. B. Keep current channels smooth and clients’ honesty and ensure market shares.
Fuming sulfuric acid	On account of producing calcium superphosphate, the Company has capacity to assist clients to recycle byproduct acid and clients’ dependency is quite high.	Since the downstream clients are simplex, sales conditions are affected by industrial environment and starting time greatly. With addition of lacking self-production capacity, the profits are compressed.	Accelerate to demolish or construct calcium superphosphate plants in Taichung Plant and improve capacity of recycling acid.

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Category	Favorable factors	Unfavorable factors	Countermeasures
Electronic grade chemical products	A. The relevant electronic industries are still considered as important domestic ones; though they are impacted by red supply chain in recent years, resulting in the slow growth speed of all industries, the scale of newly set industries, such as semiconductor, panel, solar energy and LED plants still have growth trend and the market future is expectable. B. The production and quality control technologies of our electronic products are from HPC, which is the brand accepted in domestic TFT-LCD industry. In the future, the technical layer should be improved and the products and service should be provided for relevant industries, such as, semiconductor, solar energy and LED industry positively. C. For our electric grade chemicals in future, Miaoli Plant will be the center for production and supply, which is the center of Taoyuan County, Hsinchu County, Miaoli County and Taichung County in concentrated area of domestic electronic industries and can provide Just in Time Service needed by this industry urgently. D. With our core industry, 3-acid 1-alkali, the cheap raw materials can be gained in order to reduce costs and get competitive advantages of products in the first stage. E. As a large domestic acid user, the Company can recycle electronic spent acid solution from clients to transform them into industrial products and to solve clients’ anxieties for treatment of spent solution.	A. As the Company enters into this industry quite late, the market is occupied by favorable brands, the supply chain in market is quite stable and the certification for quality of materials in photo-electricity industries, it is quite hard to develop market. B. Since the business cycle of electronic industries is quite short, manufacturers reduce costs or raw materials and chemicals and control price of electric grade chemicals, which can affect space of profits. C. In order to occupy product share rapidly, some new suppliers consider reducing price as principal axis of strategies and clients used to choosing supply chain by prices. Thus, the prices are slumped. D. As the variation of self-made products is not diversified enough, it cannot assist customers’ comprehensive supply and it is quite difficult for the products to enter current market.	A. Provide low costs products by plants of the Company or outsourcing plants as quickly as possible. B. Improve quality assurance capacity of processing, reinforce R&D technology grade, build complete logistics system, improve after-sales service of products and management capacity for customer relationship and manufacture products with good profitability formula in order to improve profitability. C. Reinforce sales team’s technical service capacity and improve brand reputation and customer trust. D. Reinforce the response capacity of manufacturers for production mode of a few diversified products in order to improve chances to get orders.

Operation Highlights

Category	Category	Favorablefactors	Unfavorablefactors	Countermeasures
Land development	residential market	Taipei residential market: 1. The residential land of the Company is located in R13 Street block in Nangang Economic and Trade Park, near Nangang Software Park. Green belts along the roads in the surrounding have been constructed. Also, there are many newly built buildings, together giving a very presentable image for the entire area. 2. CTBC headquarters has been opened while the large-scale development project on the land of C3 project has also been launched – all these have brought about incentives to customers along with the life functions that can be offered. 3. Over the years, the many projects that TFC has proposed have well established the brand of the Company and its reputation in the region. Hsinchu residential market : 1. The Hsinchu Science & Commerce Park of the Company is adjacent to Wulu Interchange of Zhongshangao Road and center of Hsinchu City, the transportation of which is convenient and the plots of which are completed. Also, incorporating the vision of the overall planning of the science and business park, a living area of recognizable and comfortable can be created. 2. The Company’s D7-A office has been completed. At present, soliciting customers to move in here is actively in progress. Nearby, there are many residential areas surrounding Aimai business circle, offering a well-round living functions.	Taipei residential market: 1.At present, the housing market is like a bearish market. Considering the price in Nangang Economic and Trade Park has gone well over in the past years and now the housing price is still on the high side, most buyers are looking around, expecting that builders may further cut their prices; therefore, the market is still quiet and may take some time to adjust itself. 2. In this case, the base area 300 Ping is relatively small. One side of the base is adjacent to a public temple and some old apartments; this may make the lower floors of the building more resistant by customers Hsinchu residential market :	Taipei residential market
				1. The project is positioning itself
				for 2- and 3- bedrooms units at reasonable price, mainly designed for home owners. As per schedule, a building permit is to be obtained. If market situation goes upturns, sales on these units are to kick off. 2. It is planned to build high-quality residential units which are expected to complete in 3 to 4 years after which the environmental quality in this region is to be promoted. Hsinchu residential market : 1.Actively soliciting business to shape up the atmosphere in the district, and introducing job seekers and business commercial activities. 2. The Company’s residence products should be designed based on the practical demand for self-living and house change. Also, projects are to be promoted continually by year by period systematically as planned, so as to strengthen the faith of property buyers and shape up the overall environment.
			1. Residents of Hsinchu have still
			regarded this area as industrial area. Due to improper operation, the Tiandeng Hall has been closed. Oil tanks can also be seen in the surrounding area. Over all, this area does not come across as a good living neighborhood from the traditional point of view. 2. After re-planning, the number
			of residential units on the huge land developed by the Company is quite a many; on top of that, Hsinchu Technology Park has not been actively expanding; therefore, the demand on new residential units is limited, not to mention trying to sell the units.

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Category	Favorablefactors	Unfavorablefactors	Countermeasures
commercial real estate	Leasing market of commercial real estate in Taipei City: The land of the Company is located in the Nangang Economic and Trade Park, with the advantages of thorough traffic infrastructure and convenient transportation network, near Xinyi Planning District and Neihu Technology Park; so far, Phases I, II and III project in Nangang Software Park has reached a full pre-leasing result where the buildings are to be fully occupied. The CTBC Bank headquarters building in Nangang has also completed construction and started to function. Industrial clusters in this area are getting increasingly mature. Leasing market of commercial real estate in Hsinchu : 1. The Hsinchu Science & Commerce Park of the Company is adjacent to Wulu Interchange of Zhongshangao Road and center of Hsinchu City, the transportation of which is convenient. 2. The land block is complete and operable. 3. Planning-to-suit, i.e. it is to be tailor-made for the entire office building; since it is close to Hsinchu Technology Park, there is still potential need in the market of whole building project.	Leasing market of commercial real estate in Taipei City: 1. The practical condition in Taiwan is fatigue and the demand of international enterprises for increasing commercial offices is quite slow. In Xinyi Planning District, new buildings continue to be supplied; and foreign investors may prefer Xinyi and Dunbei business circles which are of better location and better quality. This may bring about tremendous competitive pressure to the office market in the Nangang Economic and Trade Park. 2. Recently, the land tax at Nangang area is increased greatly and it is predicated that the house tax of office building will be increased in the future; since the part transferred to the Lessee with rent is limited, the gross margin of rent for office building may be compressed. Leasing market of commercial real estate in Hsinchu : 1.Tai Yuen Hi-Tech Industrial Park near Hsinchu Science & Commerce Park has formed IC design industrial group, and the seven stages of development should be completed continuously. In addition, many office buildings near national Wulu Road are completed. All of them are powerful potential opponents of development for Hsinchu commercial office buildings in Hsinchu. 2. Limited to the business plan of the science and business park, the business types to be introduced in this park may not fully reflect the needs of the customers.	Leasing market of commercial real estate in Taipei City: 1. The commercial real estate of the Company in Taipei City is adopting models such as the overall planning and design, the whole building leasing, or the building for sales, so that risks can be transferred and stable income/profit can be obtained. 2. Work with the professional team to collect market information is undertaken where cooperative MOUs are to be entered into with potential residents moving in, so as to have control over renters and reduce vacancy rate. It is also possible to dispose of certain offices in response to market situation, so as to reduce the risks associated with development. Leasing market of commercial real estate in Hsinchu : 1. The market of office building in Hsinchu is affected by Hsinchu Science Park seriously. According to science industry and demand for industrial updating of industries promoted by the government, the complete office functions should be provided and life convenience or other completed panning, which creates an office park abreast of time.
			2. Adjust the planning and design
			to attract customers that are a match to the provisions of the science and business park, and to actively solicit business to shape up the business atmosphere of this area.

Operation Highlights

(II) Important use and manufacture process of main products

1. Usage of main products

(1) Fertilizers

Fertilizers
Name of fertilizers	Nitrogen- phosphoric anhydride- potassium oxide	Usage
Ammonium sulfate	21-0-0	Base fertilizers and top dressing of allplants
Urea	46-0-0	Base fertilizers and top dressing of allplants
Potassium chloride	0-0-60	Base fertilizers and top dressing of allplants
Calcium superphosphate	0-18-0	Base fertilizers
Compound fertilizer	Multiple formula	Base fertilizers and top dressing of allplants
Organic fertilizer	Multiple formula	Base fertilizers
phosphorus-solubilizing bacteria	Multiple formula	Base fertilizers and top dressing of allplants

(2) Chemical products

Product Name	Specification	Usage
Industrial urea	Including 46% of nitrogen	Resin, melamine, dyeing and finishing, composites plate, dyeing and finishing, green algae, chemicals, environmentalprotection.
Anhydrous Ammonia	99.50 % purity	Monosodium glutamate, refrigeration, electronics, steel, chemicals, etc.
Nitric acid	65~68 % concentration	Mental treatment, electroplate, pigment, chemicals, common industrialusage, etc.
Melamine	99.8 % purity	Resign, molding powder, composites plate, dyeing, finishing, etc.
Sulfamic Acid	99.5 % purity	Flame retardant, softener, metal detergent, pigment, saccharin,foodadditives,analytical reagent, etc.
Sulfuric acid	98 % purity	Mental treatment, electroplate, chemicals, reagent, detergent and common industrialusage.
Fuming	Including 25% SO3	Common industrial usage
sulfuric acid

(3)Electric grade chemicals

Name	Specification	Usage
Stripper	Electronicgrade	Photoresist
Ablution	Electronicgrade	Clean the faceplate afterphotoresist is stripped.
Etchants	Electronicgrade	Wires of faceplate are etched.
Organic Solution	Electronic grade	Clean and re-clean all sections of processing faceplates
Inorganic acids and alkali	Electronic grade	Etched developing of semiconductor, panel, solar energyand LED

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2. Manufacturing process of main products

(1)Association graph of Anhydrous Ammonia and downstream products

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

Materials Based Chemical material Chemical fertilizers Chemical Engineering Products
Melamine
Urea
Sulfamic
Ammonium
sulphate
Anhydrous Ammonia
All Compound Fertilizer
OrgCalcium
Nitric Acid
----- End of picture text -----

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

Rock Phosphate
Molten Sulfur
Calcium
Superphospha
Sulfuric Acid
Potassium chloride／Potassium
Nitric Acid Nitrophosphate
Sulfate
compound
fertilizer
Anhydrous Ammonia
Ammoposphate
Urea
d Phosphoric acid Ammonium
Dihydrogen Phosphate
Organic fertilizer
Organic matter
/Organic compound fertilizer
----- End of picture text -----

Operation Highlights

(3) Manufacturing process of electronic grade chemicals

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

Raw material Electronic-grade Products
Raw material A Formulated
Distillation, blending and
products
filtration
Raw material B
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(4)Process of manufacturing of Microbial fertilizer

phosphorus-solubilizin

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

Mixture of raw Sterilization, inoculation, Packaging
materials fermentation
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(III) Supply conditions of main raw materials

Raw material Supply Condition

Urea It is mainly purchased outside, most of which is from China Mainland. Besides, the Company gains urea from transferred-investment company-Al-Jubail Fertilizer Company by buy-back. Anhydrous It is mainly purchased from Sabic Asia Pacific Pte. Ltd by long-term agreements. Ammonia

Sulfuric acid It is mainly purchased from Japan through long term agreement, the supply of which is stable.

Rock It is mainly purchased from Jordan, Israel and Morocco while the minority is purchased Phosphate from China Mainland. Potassium Most of it is imported from Canada, Jordan, Israel and Russia. chloride Melting sulfur It is purchased by ordering contracts with CPC Corporation and Formosa Petrochemical Corporation.

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(IV) In the following table, the names of clients whose purchase (selling) amount is 10% or more than 10% of total amount in either year of last two years, list of main purchase or selling clients and purchase (selling) amount, proportion are listed. Besides, the reason for increase or decrease is illustrated.

List of main stock manufacturers:

	2015	2015	2015	2015	2016	2016	2016	2016	As of the firstquarter in 2017	As of the firstquarter in 2017	As of the firstquarter in 2017	As of the firstquarter in 2017
Item	Name	Amount (NT$ K)	Proportion of net purchases for the whole year (%)	Relationship with distributor	Name	Amount (NT$ K)	Proportion of net purchases for the whole year (%)	Relationship with distributor	Name	Amount (NT$ K)	Net purchase ratio (%)	Relationship with distributor
1	Sabic Asia Co. Ltd.	3,184,962	24%	Supplier of Anhydrous Ammonia	Sabic Asia Co. Ltd.	2,180,213	21%	Supplier of Anhydrous Ammonia	Sabic Asia Co. Ltd.	470,293	19%	Supplier of Anhydrous Ammonia
2.	Al-Jubail Fertilizer Company	2,243,935	16%	The Company invests more than 50% of transferred-invest ment enterprises and delivers urea according to agreements.	Al-Jubail Fertilizer Company	1,026,900	10%	The Company invests more than 50% of transferred-invest ment enterprises and delivers urea according to agreements.	Al-Jubail Fertilizer Company	208,837	8%	The Company invests more than 50% of transferred-invest ment enterprises and delivers urea according to agreements.
	Others	8,183,180	60%		Others	7,027,553	69%	-	Others	1,858,938	73%	-
	Net purchases	13,612,077	100%		Net purchases	10,234,666	100%	-	Net purchases	2,538,068	100%	-

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Operation Highlights

2. List of main selling clients:

In the past two years, customers that representing more than 10% of the total sales of the Company are listed as follows:

(1)Fertilizer product

2015	Name of client	Amount	Proportion for thisyear(%)
01 ~ 12 of 2015	Yunlin Farmers' Association	661,402,000	10.88%

2016	Name of client	Amount	Proportion for thisyear(%)
01 ~ 12 of 2016	Yunlin Farmers' Association	739,056,000	12.74%

(V) List of yield for last two years

Unit : mt / NT$ K

				Unit : mt / NT$ K	Unit : mt / NT$ K	Unit : mt / NT$ K
Year Yield Main commodities	2016			2015
	Capacity	Yield	Output value	Capacity	Yield	Output value
Ammonium sulfate	150,000	70,000	428,658	150,000	69,500	423,815
Calcium superphosphate	120,000	45,490	206,948	120,000	59,155	270,663
Compound fertilizer	543,700	484,547	4,773,920	528,000	478,261	5,176,202
Nitric acid	165,000	145,091	1,775,851	150,000	135,362	1,574,535
Total	978,700	745,128	7,185,377	948,000	742,278	7,445,215

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(VI) List of sales volume for last two years

Unit : mt / NT$ K

(VI) List of	sales volume for last two years	sales volume for last two years	sales volume for last two years	sales volume for last two years	Unit : mt / NT$ K	Unit : mt / NT$ K	Unit : mt / NT$ K	Unit : mt / NT$ K
Year Sales Volume Main commodities	2016				2015
	Domestic sale		Export		Domestic sale		Export
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Ammonium sulfate	63,158	386,759	–	–	69,490	423,756	–	–
Calcium superphosphate	25,743	117,112	–	–	30,556	139,809	–	–
Compound fertilizer	509,967	5,020,097	628	10,450	482,096	5,217,311	204	2,613
Agricultural urea	38,602	399,938	16,121	109,418	40,854	423,098	6,150	55,969
Potassium chloride	15,407	163,237	2,200	17,240	15,388	186,736	270	4,915
Resell Urea from Al- Jubail	–	–	157,720	1,031,528	–	–	221,446	2,240,138
Melamine	2,761	108,532	–	–	2,542	101,730	–	–
Sulfamic Acid	281	6,288	11,555	206,649	180	4,143	10,010	208,936
Nitric acid	36,291	444,182	–	–	30,339	352,900	–	–
Industrial urea	2,234	26,985	–	–	2,657	32,974	–	–
Anhydrous Ammonia	84,571	1,674,928	–	–	87,217	1,976,155	–	–
Renewable Phosphoric acid	1,133	23,582	–	–	2,511	58,340	–	–
Sulfuric acid	1,601	1,798	–	–	1,480	2,076	–	–
Fuming sulfuric	10,470	28,148	–	–	7,278	21,845	–	–
acid
Otherproducts	101,383	39,272	–	–	88,975	25,645	–	–
Other operating income	–	1,871,189	–	–	–	1,202,131	–	–
Electronic grade chemical products(mt)	11,451	249,870	–	–	11,706	297,211	–	–
Housing	–	303,718	–	–	–	4,508,646	–	–
Total		10,865,635		1,375,285		14,974,506		2,512,571

Operation Highlights

III. Employees

(I) Data of employees for last two years till latest annual press

March 31, 2017

				March 31,2017
Year		2015	2016	As of Mar. 31,2017
Number of employees		671	681	678
Average age		43.22	42.98	43.16
Average working years		13.29	14.00	14.36
Education	PhD	0.45	1.17	1.18
	Master	21.61	21.29	21.53
	Bachelor	37.56	51.98	51.77
	High School	39.94	25.11	25.07
	Below High School	0.45	0.44	0.44

Note: The number of TFC’s employees here refers to the total sum of regular staff and contracted staff.

(II) Productivity of employees

Unit : NT$ K

Year	2015	2016	As of March 31,2017
Revenue	17,120,807	11,893,266	3,170,168
Revenueperperson	25,515	17,464	4,676
Annual operating profit	2,401,993	675,215	392,637
Annual operating profit perperson	3,580	992	579

Note: The number of TFC’s employees here refers to the total sum of regular staff and contracted staff.

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IV. Distributed information of environmental protection

(I) Loss and punishment for environmental pollution

Year Item	2016	As of March 31, 2017
Polluted condition (category, degree)	1. The pollution control measures did not comply with the regulations as required, which violates air pollution and prevention act. 2. The waste water disposal facility is not in compliance with the approved record, which violates water pollution and prevention act.	None
Punished unit	Environmental Protection Bureau	None
Penalty	260,000	None
Other losses	None	None

(II) Countermeasures and potential distribution in the future

1.Predicated capital distribution for environmental protection in next 2 years:

Year Item	2017	2018
Pre-purchased equipment for preventing pollution and contents of distribution	1. Anti-air pollution control facilities. 2. Improve equipment of waste water treatment. 3. Clean, treat and recycle wastes; 4. Improve the manufacturing procedures to prevent pollution in main production plants.	1. Anti-air pollution control facilities. 2. Improve equipment of waste water treatment. 3. Clean, treat and recycle wastes; 4. Improve the manufacturing procedures to prevent pollution in main production plants.
Predicated conditions after improvement	1. Improve and reduce discharge of pollutants, make sure that treatment for discharged water, air pollutants and wastes can meet regulations relevant to environmental protection in order to avoid contamination accidents. 2. Meet regulations of environmental affection instruction for new plants.	1. Improve and reduce discharge of pollutants, make sure that treatment for discharged water, air pollutants and wastes can meet regulations relevant to environmental protection in order to avoid contamination accidents. 2. Meet regulations of environmental affection instruction for new plants.
Amount	125,000,000	120,000,000

Operation Highlights

2.Influence after improvement:

(1) Improve and reduce discharge of pollutants, make sure that treatment for discharged water, air pollutants and wastes can meet regulations relevant to environmental protection in order to reduce influence on ecological environment.
(2) The operation of plants should meet regulations of specification for environmental instruction evaluation and prevent from polluting environment.
(3) Reduce environmental impact on the public living in the communities near the plants and improve enterprise image. Labor-capital relationship

V.Labor-capital relationship

(I) Important labor-capital agreements

Conditions of labor-capital agreements

The Company has formulated “Implementing Essentials of Labor-management Relation Symposium”, and holds labor-management relation symposium regularly each year. The symposium is hosted by the General Manager or the Deputy General Manager specified by General Manager, who leads HR and first-level staffs to discuss with labor representatives and representatives of all labor unions of TFC o unblock communication channels, publicize business principles of the Company and enhance the interaction between labor and management. In addition, suggestions and advices of workers can happen by means of the Membership Representative Conference, Meetings of Board of Directors and Supervisors and Joint Meeting of Team Leaders regularly held by the Enterprise Union of TFC,. The Company will reply employees’ suggestions and advices in written form and improve based on those suggestions and advices.

Communication method	Frequency
Labor Relations Symposium	Once/year
Labor-management Conference	Once/quarter
Trade Union Congress	Once/quarter
Meetings of Board of Directors and Supervisors of Trade Union	Once/quarter
Joint Meeting of Team Leaders of Trade Union	Once/quarter

Measures for employees welfares

Establish “employee welfare committee” to deal with all welfare matters.

(1) Allocate bonus according to the provisions.

(2) Set up nursing room to provide a space for female employees to solve nursing problems.
(3) Set up a clinic to treat medical matters and organize health check regularly.
(4) Set up and operate 13 associations of various types in the Company to make employees able to develop interests and cultivate their moral character.
(5) Give souvenirs to retiring colleagues and issue retirement certificate.

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(6) Congratulate marriage or hold memorial ceremonies for the dead.
(7) Give solatium, death compensation and funeral subsidiary to the bereaved family of the employee who dies for some reason, according to the retirement and compensation measure and death cause.
(8) Deal with labor insurance, national health insurance, group accident insurance and hospitalization medical insurance.
(9) Distribute awards for New Year and festivals and distribute year-end award and bonus for employees based on annual operation profits and surplus control rate of the Company.
(10) Provide childbirth subsidy.
Retirement system
(1) The Company has set “retirements, pension and lay-off method of fertilizer companies in Taiwan for labors” in accordance with regulations of labor standard law and provisions of retirement allowance for labors.
(2) The retirement allowance of employees should be calculated in accordance with “retirements, pension and lay-off method of fertilizer companies in Taiwan for labors”, regulations of labor standard law and provisions of retirement allowance for labors.
(3) The provisions for labors’ retirement were implemented on July 1, 2005, based on which relevant matters should be dealt.

(II) Employees’ actions or moral principles

The Company has prepared “working principles for FTC worker” in accordance with regulations of labor standard law and publishes it on website of the Company for employees to read except noticing employees by mailing. Besides, “moral principle for FTC directors, supervisors and first-class administrators” has been established, promoted in report of shareholders’ meeting in 2009 and reported in website of the Company, which should be followed by directors, supervisors and first-class administrators (including the general manager, vice general manager, and vice supervisors of all units) for actions and morality when dealing with operation activities of the Company. Thus, interested parties of the Company can know about moral principles of the Company.

(III) Employees’ further education and training

Year	2015	2016	As of March 31,2017
Number of classes for training	163	224	47
Person-time for training	2,131	1,783	664
Man-hour for training	12,960.5	9,501	2,567.5
Per capita traininghours	19.61	13.95	3.79
Costs for training (Yuan)	3,330,000	2,798,000	218,180
Per capita costs for training (Yuan)	4,200	4,109	321.80

(IV) Labor-capital dispute and loss: None.

Operation Highlights

VI. Important contracts

(I) Supply and marketing contract

The Party	Beginning and end of contract	Main contents
Marubeni Corp.	01/01/2015 ~12/31/2017	Supply contract for sulfuric acid
Sabic Asia Pacific Pte. Ltd.	01/01/2017 ~12/31/2017	Supply contract for Anhydrous Ammonia
Jordan Phosphate Mines Company	01/01/2017 ~12/31/2017	Supply contract for phosphorite
Farmers’ associations in cities or counties, and fertilizer distributors	01/01/2016 ~12/31/2016	Sales contract for fertilizers
Taiwan Sugar Corp.	07/01/2016 ~12/31/2016	Sales contract for fertilizers

(II) Cooperative contract

The Party	Beginning and end of contract	Main contents
Saudi Basic Industries Corp.	02/08/1980~07/12/2031	Cooperate to invest in Al-Jubail Fertilizer Company,and eachpartyholds 50% equities.
Jinqun International Co., Ltd.	04/18/2011~04/18/2031	Cooperate to invest TR Electronic Chemical Co., Ltd. in Cayman, and TFCholds 51% equities and Jinqun holds 49% equipties.
National Chung Hsing University	10/01/2012~ 10/01/2019	The technologies of “preparations and manufacture method of streptomyces components for protecting plants” are authorized.
Industrial Technology Research Institute	12/28/2012~ 12/28/2017	The technologies of “liquefied depolymerization of bionts in ion solution” are authorized
Institute for Biotechnology and Medicine Industry	01/01/2016 ~12/31/2016	The raw materials of “fish scale collagen peptid” has passed users’ license for national quality standard
Agricultural Chemicals and Toxic Substances Research Institute, Council of Agriculture,Executive Yuan	01/01/2013 ~01/01/2020	The technologies of “fermentation, mass production and application for microbial fertilizer and liquefied bacillus thermoamylovorans strain Ba-BPD1” are authorized
Agricultural Chemicals and Toxic Substances Research Institute, Council of Agriculture,Executive Yuan	01/01/2013 ~01/01/2020	The patent of “new liquefied bacillus thermoamylovorans strain Ba-BPD1 and application” is authorized.
Agricultural Chemicals and Toxic Substances Research Institute, Council of Agriculture,Executive Yuan	01/01/2016 ~01/01/2020	Without the exclusive rights on the
		"Fermentation, production, and application
		technology of Bacillus thuringiensis Strain
		Ba-BPD1 for biologicalpesticides".

==> picture [596 x 86] intentionally omitted <==

The Party	Beginning and end of contract	Main contents
Agricultural Chemicals and Toxic Substances Research Institute, Council of Agriculture,Executive Yuan	05/01/2016 ~05/01/2021	With the authority on "Bacillus thuringiensis Strain
		Ba-BPD1 for aquaculture and related cultivation technology"
Agricultural Chemicals and Toxic Substances Research Institute, Council of Agriculture,Executive Yuan	03/30/2016~09/30/2016	An entrusted test in the field done by “Taiwan Agricultural Chemicals and Toxic Substances Research Institute”
Taipei Medical Unv. (Prof. WU Chiehhsin)	01/01/2016 ~12/31/2016	An industry-academia cooperative
		program on the research and consultation
		of the enhancement of TFC’s industrial
		knowhow.
The commonalty Taiwan Halal Integrity Development Association	03/26/2015~03/25/2016	Islamic HALAL FOOD Product Validation Certificate No.: CP26201010315
National Chung Hsing University (Dr. Wu Zhengzong)	03/01/2015 ~09/30/2016	orchid fertilizer commissioned test cooperation program
Food Science Department of National Taiwan Ocean University (Professor Sun Baonian)	07/01/2015 ~12/31/2016	“Effect of DOW on the texture and flavor of platax orbicularis farmed with DOW” A test was entrusted on the effect of DOW on the texture and flavor of the XXX
Taiwan Yes Deep Ocean Water Co.,Ltd.	11/01/2015 ~10/31/2016	Development of creative algae foods.
Hui Hsiang Organic Enterprise Co.,Ltd.	11/30/2015~11/30/2016	Cooperative testing on fertilizers with organic materials in the field.
Kaohsiung District Agricultural Research and Extension Station,OCA,Executive Yuan	01/01/2016 ~12/31/2017	Plan on commercialization of enterprises’ knowhow, and development of new fertilizers with sub- and micro- elements.
Yuanpei University of Medical Technology	09/01/2016 ~12/31/2016	Development of beer based on deep ocean water.
Industrial Technology Research Institute	10/17/2016~01/16/2018	Research and development of process technology on the purification of industrial NMP into that of UPS class.

Operation Highlights

(III) Project and other contracts

(III) Project and	other contracts
The Party	Beginningand end of contract	Main contents	Restriction
HO HSIUNG MACHINERY INDUSTRIAL CO., LTD.	09/04/2014 ~ 11/29/2016	Removal project of mechanical equipment for calcium superphosphate workshop	None
Cheng Da Construction Corp.	03/17/2015~08/08/2016 01/31/2016 Acceptance for payment has been completed.	workshop, warehouse and other civil work for calcium superphosphate	None
Apex Science & Engineering Corp	05/29/2014~12/30/2016	Manufacture and package project of I&C equipment for calcium superphosphate workshop	None
Yuan-Shan Science	04/01/2015 ~12/08/2016	Manufacture and package project of motors in calcium superphosphate workshop	None
Shang De Fu EngineeringCo.,Ltd.	02/13/2014 ~ now	Design and construction project of the ammonia waterplant of electronicgrade	None
Chang Feng Engineering Consulting Co., Ltd.	05/31/2010 till the date when municipal plan is published and implemented by competent authority	Technical service of “land development and land use change on Dongming Road in Keelung City”	None
JDC, Taiwan Branch	Starting on October 1st, 2011 until the expiry of the engineering warrantee period and all warrantee responsibilityhas been fulfilled.	Entrusting new projects of collective residential building Block R5 of Nangang Economic &Trade Park in Taipei.	None
United Steel Engineering & Construction Corp.	From April 1, 2014 to the date when all tasks stipulated in this contract are completed, without anymatter under disposal.	Construction of D7-A new Business office building in Hsinchu science and business area.	None
Wei Da Construction Co., Ltd.	From Jun 9, 2016 to the date when all tasks stipulated in this contract are completed, without any matter under disposal.	The continuous wall project of the Company for the C2 Hotel and office building in Nangang.	None
Hung Ching Architects Office	12/31/2007 ~ Initial Registration of Ownership is completed	Construction, planning and design of residential scheme for Plot 66-1, 66-2, 68-2 and 68-3 in Nangang Economic & Trade Park	None
Silkart Co., Ltd.	From Feb 26, 2011 to the date when all tasks stipulated in this contract are completed, without any matter under disposal of Party B.	Kitchen ware project of residential scheme for Plot 66-1, 66-2, 68-2 and 68-3 in Nangang Economic & Trade Park	None
HCCH &Associates Architects Planners &Engineers	From the date of signature (October 31, 2011) to the date when business license is gained, the term of which is about one year.	Technical service of “integrated plan of C2C3C4 in Nangang Economic &Trade Park and construction, design and monitoring for C2 of Stage I”	None

==> picture [596 x 86] intentionally omitted <==

The Party	Beginningand end of contract	Main contents	Restriction
HCCH &Associates Architects Planners &Engineers	From date of signature (February 1, 2013) to the time when all tasks are completed, without any matters under treatment of Party B.	Technical service for “construction, design and monitoring for Block D7 in Hsinchu Science and Business Area”.	None

(IV) Contract for Land Development

The Party	Beginning and end of contract	Main contents	Restriction
CHEN KU-CHI et al. total 7 persons	Tentative four years upon signature of the contract on March 18, 2008, till completeness of new buildings and settlement of relevant costs	Owners of Plot 66-1 and Plot 68-2 in Nangang Economic &Trade Park of TFC and owners of Plot 66-2, and 68-3 together invest and discuss construction, sales of superior residential buildings.	The Party agrees matters relevant to land development, which should be guided, applied and built by FTC buildings with maximum total floor area, based on the principle of good faith and relevant regulations.
Shinera Construction Co., Ltd.	Commencement was dealt with 5 years from as of the signature date, June 10, 2015, and ownership registration and house delivery should be completed before December 31, 2024.	Urban renewal business of 4 lands of Plot 607, Section 1, Taipei City owned by TFC should be included in the urban renewal business of 25 lands in the same section. The co-construction agreement signed is on the sales of superior residential buildings to be constructed.	The implementer contained in “Urban Renewal Rules” of the agreement is Shinera, who should handle urban renewal procedures. TFC should provide co-construction land as the building land, and Shinera is responsible for integrating the adjacent lands with the co-constructing land, providing all capital needed to execute this project and implementingconstruction.

Financial Summary

Part Six: Financial Summary

I. Brief financial statements and comprehensive profit and loss statements for the recent five years

(I) Information on brief financial statements and comprehensive profit and loss statements
Concise Balance Sheet

1. Concise Balance Sheet	1. Concise Balance Sheet	1. Concise Balance Sheet	1. Concise Balance Sheet	1. Concise Balance Sheet	1. Concise Balance Sheet	1. Concise Balance Sheet	1. Concise Balance Sheet
Unit: NT$ K
Year Description		(Financial information for recent fiveyears)					The year ended March 31st, 2017 Financial information(note 2)
		2016	2015	2014	2013	2012 (Note 1)
Current assets		15,301,306	18,900,345	10,533,836	8,300,217	10,027,252	15,391,314
Real estate, plant and equipment		26,753,401	27,232,915	33,573,437	38,410,112	38,256,127	26,637,885
Intangible assets		257,986	471,995	484,830	496,880	52,443	255,306
Other assets		34,405,109	33,898,550	25,904,834	19,321,391	18,105,987	34,020,562
Total assets		76,717,802	80,503,805	70,496,937	66,528,600	66,441,809	76,305,068
Current liabilities	Before distribution	1,680,062	2,248,724	5,881,372	3,470,815	3,515,042	2,004,909
	After distribution	Not distributed	4,306,724	8,037,372	5,430,815	6,161,042	Not distributed
Non-current liabilities		24,433,314	25,287,221	12,222,950	12,283,413	12,152,308	24,199,396
Total liabilities	Before distribution	26,113,376	27,535,945	18,104,322	15,754,228	15,667,350	26,123,951
	After distribution	Not distributed	29,593,945	20,260,322	17,714,228	18,313,350	Not distributed
Owners’ equity due to parent company		50,604,426	52,967,860	52,392,615	50,774,372	50,774,459	50,187,117
Share capital		9,800,000	9,800,000	9,800,000	9,800,000	9,800,000	9,800,000
Capital reserve		2,232,791	2,237,678	2,234,334	2,234,334	2,232,791	2,232,791
Retained earnings	Before distribution	37,976,750	40,177,405	39,927,485	38,820,842	38,920,383	38,066,485
	After distribution	Not distributed	38,119,405	37,771,485	36,860,842	36,274,383	Not distributed
Other equity		594,885	752,777	430,796	(80,804)	(178,715)	81,841
Treasurystocks		－	－	－	－	－	－
Non-controlled equity		－	－	－	－	－	－
Total equity	Before distribution	50,604,426	52,967,860	52,392,615	50,774,372	50,774,459	50,181,117
	After distribution	Not distributed	50,909,860	50,236,615	48,814,372	48,128,459	Not distributed

Note 1: 2012 data are consolidated financial report converted according to IFRSs.

Note 2: The consolidated financial report in 2017 and ended in March 31 was examined by the accountant.

Note 3: The figures listed above are based on the resolution made by the shareholder meeting of the next year, but those in 2016 and 2017 are not resolved yet.

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2. Brief Comprehensive Profit and Loss Statement

Unit: NT$ K

						Unit: NT$ K
Year Items	(Financial information for recent five years)					The year ended March 31st, 2016 Financial information (note 2)
	2016	2015	2014	2013	2012 (Note 1)
Operatingincome	12,240,920	17,487,077	17,510,273	16,018,546	18,801,967	3,248,934
Operating grossprofits	2,006,254	3,875,000	2,912,631	2,247,197	3,281,539	710,866
Operating profit and loss	595,694	2,345,012	1,659,950	788,172	2,011,434	378,966
Non-operating income and expenses	(616,713)	174,718	1,187,303	1,843,570	2,650,524	239,395
Netprofits before tax	(21,019)	2,519,730	2,847,253	2,631,742	4,661,958	618,361
Continued operation units Netprofits for theperiod	(129,503)	2,427,083	3,068,346	2,538,071	4,226,412	507,052
Loss out of business suspension units	－	－	－	－	－	－
Net profits (loss) for current period	(129,503)	2,427,083	3,068,346	2,538,071	4,226,412	507,052
Other comprehensive profit and loss for current period (Net values after tax)	(171,044)	300,818	509,897	106,299	(270,128)	(513,213)
Total comprehensive profit and loss for currentperiod	(300,547)	2,727,901	3,578,243	2,644,370	3,956,284	(6,161)
Net profits attributable to owner ofparent company	(129,503)	2,427,083	3,068,346	2,538,071	4,226,412	507,052
Net profits attributable to non-controlling rights and interests	－	－	－	－	－	－
Total integrated profit and loss attributable to owners of parent company	(300,547)	2,727,901	3,578,243	2,644,370	3,956,284	(6,166)
Total integrated profit and loss attributable to non-controlling rights and interests	－	－	－	－	－	－
Earning per share(NT$)	(0.13)	2.48	3.13	2.59	4.31	0.52

Note 1: 2012 data are consolidated financial report converted according to IFRSs.

Note 2: The consolidated financial report in 2017 and ended in March 31 was examined by the accountant. Note 3: Note 3: Loss from discontinued business is to be used to reduce the listed net profit after tax of the Company.

Financial Summary

3. Concise Balance Sheet (Individual)

Unit: NT$K

							Unit: NT$K
Year Description		(Financial information for recent five years)					The year ended March 31st, 2016 Financial information (note 2)
		2016	2015	2014	2013	2012 (Note 1)
Current assets		15,035,072	18,645,302	10,293,965	8,034,798	9,888,377	─
Real estate, plant and equipment		26,619,098	26,918,099	33,231,463	38,088,566	38,221,604	─
Intangible assets		20,567	28,311	40,945	52,956	52,327	─
Other assets		34,946,418	34,865,330	26,873,209	20,119,565	18,257,836	─
Total assets		76,621,155	80,457,042	70,439,582	66,295,885	66,420,144	─
Current liabilities	Before distribution	1,582,350	2,201,043	5,826,145	3,238,116	3,493,959	─
	After distribution	Not distributed	4,259,043	7,982,145	5,198,116	6,139,959	─
Non-current liabilities		24,434,379	25,288,139	12,220,822	12,283,397	12,151,726	─
Total liabilities	Before distribution	26,016,729	27,489,182	18,046,967	15,521,513	15,645,685	─
	After distribution	Not distributed	29,547,182	20,202,967	17,481,513	18,291,685	─
Owners’ equity due to parent company		－	－	－	－	－	─
Share capital		9,800,000	9,800,000	9,800,000	9,800,000	9,800,000	─
Capital reserve		2,232,791	2,237,678	2,234,334	2,234,334	2,232,791	─
Retained earnings	Before distribution	37,976,750	40,177,405	39,927,485	38,820,842	38,920,383	─
	After distribution	Not distributed	38,119,405	37,771,485	36,860,842	36,274,383	─
Other equity		594,885	752,777	430,796	(80,804)	(178,715)	─
Treasurystocks		－	－	－	－	－	─
Non-controlled equity		－	－	－	－	－	─
Total equity	Before distribution	50,604,426	52,967,860	52,392,615	50,774,372	50,774,459	─
	After distribution	Not distributed	50,909,860	50,236,615	48,812,372	48,128,459	─

Note 1: 2012 data are consolidated financial report converted according to IFRSs.

Note 2: The individual financial report in 2017 and ended in March 31 was not examined by the accountant.

Note 3: The figures listed above are based on the resolution made by the shareholder meeting of the next year, but those in 2016 are not resolved yet.

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4. Brief Comprehensive Profit and Loss Statement (Individual)

Unit: NT$K

						Unit: NT$K
Year Items	(Financial information for recent five years)					The year ended March 31st, 2017 Financial information (note 2)
	2016	2015	2014	2013	2012 (Note 1)
Operatingincome	11,893,266	17,120,807	17,093,170	15,706,163	18,769,395	─
Operating grossprofits	1,975,732	3,816,860	2,808,453	2,169,267	3,265,181	─
Operating profit and loss	675,215	2,401,993	1,710,820	918,773	2,027,509	─
Non-operating income and expenses	(741,654)	139,706	1,149,072	1,772,179	2,634,929	─
Netprofits before tax	(66,439)	2,541,699	2,859,892	2,690,952	4,662,438	─
Continued operation units Netprofits for theperiod	(129,503)	2,427,083	3,068,346	2,538,071	4,226,412	─
Loss out of business suspension units	－	－	－	－	－	─
Netprofits(loss)for currentperiod	(129,503)	2,427,083	3,068,346	2,538,071	4,226,412	─
Other comprehensive profit and loss for current period (Net values after tax)	(171,044)	300,818	509,897	106,299	(270,128)	─
Total comprehensive profit and loss for currentperiod	(300,547)	2,727,901	3,578,243	2,644,370	3,956,284	─
Net profits attributable to Owner ofparent company	－	－	－	－	－	─
Net profits attributable to non-controllingrights and interests	－	－	－	－	－	─
Total integrated profit and loss attributable to owners of parent company	－	－	－	－	－	─
Total integrated profit and loss attributable to non-controlling rights and interests	－	－	－	－	－	─
Earning per share(NT$)	(0.13)	2.48	3.13	2.59	4.31	─

Note 1: 2012 data are consolidated financial report converted according to IFRSs.

Note 2: The individual financial report in 2017 and ended on March 31 was not examined by the accountant. Note 3: Loss from discontinued business is to be used to reduce the listed net profit after tax of the Company.

Financial Summary

(II) Information on Brief Balance Sheet and Profit and Loss Statement – Financial Accounting Standards in Our Country

1.Brief Balance Sheet (Individual) – Financial Accounting Standards in Our CountryUnit:

NT$ K

		NT$ K	NT$ K	NT$ K	NT$ K	NT$ K
Year Description		(Financial information for recent five years)
		2012	2011	2010	2009	2008
Current assets		9,317,984	9,885,014	13,629,867	15,912,266	15,446,438
Funds and investment		15,003,465	15,590,263	14,354,853	13,303,247	16,730,387
Fixed assets		36,578,063	34,951,524	31,583,315	28,493,824	26,995,592
Intangible assets		105,793	57,769	53,456	38,097	38,517
Other assets		5,419,609	5,521,285	4,677,140	4,362,347	4,156,264
Total assets		66,424,914	66,005,855	64,298,631	62,109,781	63,367,198
Current liabilities	Before distribution	2,107,523	1,727,784	2,037,410	1,306,757	2,767,208
	After distribution	4,753,523	3,981,784	4,193,410	2,678,757	4,531,208
Long-term liabilities		－	－	3,873	3,873	－
Provisions		6,440,757	6,440,823	6,474,078	6,478,985	6,481,528
Other liabilities		5,445,038	6,023,097	6,008,775	4,178,260	4,728,805
Total liabilities	Before distribution	13,993,318	14,191,704	14,524,136	11,967,875	13,977,541
	After distribution	16,639,318	16,445,704	16,680,136	13,339,875	15,741,541
Share capital		9,800,000	9,800,000	9,800,000	9,800,000	9,800,000
Capital reserve		2,232,791	2,232,791	2,232,791	2,232,791	2,232,791
Retained earnings	Before distribution	8,807,938	7,722,970	6,867,825	6,516,217	7,013,329
	After distribution	6,161,938	5,468,970	4,711,825	5,144,217	5,249,329
Unrealized profit and loss out of financial commodities		124,230	58,774	101,376	(84,751)	(1,465,232)
Total adjustment to translation		(398,772)	(95,827)	(391,198)	447,249	548,894
Unrealized revaluation value		31,919,848	32,114,341	31,163,701	31,235,647	31,259,875
Net loss of cost not recognized as retirement pension		(54,439)	(18,898)	－	(5,247)	－
Total shareholders’ equity	Before distribution	52,431,596	51,814,151	49,774,495	50,141,906	49,389,657
	After distribution	49,785,596	49,560,151	47,618,495	48,769,906	47,625,657

Note 1: If asset re-evaluation is made for the current year, it is required to specify the date of handling and amounts of added value after re-evaluation.

Note 2: The abovementioned figures after distribution are recognized based on the resolutions of the meeting of shareholders for the next year, but those for 2012 have not been subject to the resolutions.

Note 3: Upon notice by competent authorities, if financial information shall be corrected or prepared once again, it is required to recognize the figures after such correction or re-preparation, and to specify the conditions and reasons.

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2.Brief Profit and Loss Statement (Individual) – Financial Accounting Standards in Our Country

Unit: NT$ K

	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K
Year Items	(Financial information for recent five years)
	2012	2011	2010	2009	2008
Operating income	17,795,361	16,970,822	14,428,778	17,150,285	17,019,764
Operating gross profits	2,416,725	1,735,369	1,983,006	2,832,520	1,301,805
Operating profit and loss	1,114,681	446,973	845,999	1,770,821	384,342
Non-operating income and profits	2,954,976	3,297,445	1,249,409	2,285,166	4,498,066
Non-operating expenses and loss	320,046	458,220	250,076	1,811,726	1,343,490
Profit and loss before tax of continued business departments	3,749,611	3,286,198	1,845,332	2,244,261	3,538,918
Profit and loss of continued business departments	3,338,968	3,011,145	1,723,608	1,266,888	2,191,718
profit and loss from business suspension units	-	-	-	-	-
Extraordinary profit and loss	-	-	-	-	-
Total affected amount of changes in accounting principles	-	-	-	-	-
Profit and loss for current period	3,338,968	3,011,145	1,723,608	1,266,888	2,191,718
Earning per share (NT$)	3.41	3.07	1.76	1.29	2.24

Note 1: Total affected amounts of profit and loss from business suspension units, extraordinary profit and loss and change in accounting principles are recognized on the basis of deduction of net amounts after income tax.

Note 2: Upon notice by competent authorities, if financial information shall be corrected or prepared once again, it is required to recognize the figures after such correction or re-preparation, and to specify the conditions and reasons.

Financial Summary

3.Brief Balance Sheet (Consolidated ) – Financial Accounting Standards in Our Country

Unit: NT$ K

			Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K
Year Description			(Financial information for recent five years)
			2012	2011	2010	2009	2008
Current assets			9,457,381	10,023,742	13,664,224	15,943,801	15,473,111
Funds and investment			14,847,366	15,418,290	14,285,860	13,235,955	16,664,496
Fixed assets			36,612,451	34,986,247	31,618,953	28,530,286	27,032,097
Intangible assets			105,909	57,769	53,456	38,097	38,517
Other assets			5,419,370	5,521,285	4,677,140	4,362,347	4,156,264
Total assets			66,442,837	66,007,333	64,299,633	62,110,486	63,364,485
Current liabilities	Before distribution		2,128,606	1,728,753	2,037,997	1,371,389	2,765,186
	After distribution		4,774,606	3,982,753	4,193,997	2,743,389	4,529,186
Long-term liabilities			－	－	3,873	3,873	3,190
Provisions			6,440,757	6,440,823	6,474,078	6,478,985	6,481,528
Other liabilities			5,441,878	6,023,606	6,009,190	4,114,333	4,724,924
Total liabilities	Before distribution		14,011,241	14,193,182	14,525,138	11,968,580	13,974,828
	After distribution		16,657,241	16,447,182	16,681,138	13,340,580	15,738,828
Share capital			9,800,000	9,800,000	9,800,000	9,800,000	9,800,000
Capital reserve			2,232,791	2,232,791	2,232,791	2,232,791	2,232,791
Retained earnings	Before distribution		8,807,938	7,722,970	6,867,825	6,516,217	7,013,329
	After distribution		6,161,938	5,468,970	4,711,825	5,144,217	5,249,329
Unrealized profit and loss out of financial commodities			124,230	58,774	101,376	(84,751)	(1,465,232)
Total adjustment to translation			(398,772)	(95,827)	(391,198)	447,249	548,894
Unrealized revaluation value			31,919,848	32,114,341	31,163,701	31,235,647	31,259,875
Net loss of cost not recognized as retirement pension			(54,439)	(18,898)	－	(5,247)	－
Total shareholders’ equity		Before distribution	52,431,596	51,814,151	49,774,495	50,141,906	49,389,657
		After distribution	49,785,596	49,560,151	47,618,495	48,769,906	47,625,657

Note 1: If asset re-evaluation is made for the current year, it is required to specify the date of handling and amounts of added value after re-evaluation.

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4.Brief Profit and Loss Statement (Consolidated) – Financial Accounting Standards in Our Country

Unit: NT$K

	Unit: NT$K	Unit: NT$K	Unit: NT$K	Unit: NT$K	Unit: NT$K
Year Items	(Financial information for recent five years)
	2012	2011	2010	2009	2008
Operatingincome	17,827,933	16,978,276	14,436,123	17,124,755	17,026,071
Operating grossprofits	2,433,085	1,738,226	1,984,969	2,805,259	1,304,323
Operating profit and loss	1,098,608	449,335	847,338	1,879,993	386,127
Non-operatingincome andprofits	2,970,583	3,295,538	1,248,526	2,316,430	4,497,091
Non-operatingexpenses and loss	320,059	458,220	250,076	1,951,078	1,343,311
Profit and loss before tax of continued business departments	3,749,132	3,286,653	1,845,788	2,245,345	3,539,907
Profit and loss of continued business departments	3,338,968	3,011,145	1,723,608	1,266,888	2,191,718
profit and loss from business suspension units	-	-	-	-	-
Extraordinary profit and loss	-	-	-	-	-
Total affected amount of changes in accounting principles	-	-	-	-	-
Profit and loss for currentperiod	3,338,968	3,011,145	1,723,608	1,266,888	2,191,718
Earning per share(NT$)	3.41	3.07	1.76	1.29	2.24

(III) Certified public accountants and audit opinions

Year	Certifiedpublic accountants	Names of certifiedpublic accountants	Audit opinions
2001	Baker TillyClock & Co	Xu Suqin and DingHongxun	Revised without reservation
2002	Baker TillyClock & Co	Xu Suqin and DingHongxun	Revised without reservation
2003	Baker TillyClock & Co	HuangGuoshi and Lai Yongji	Revised without reservation
2004	Baker TillyClock & Co	DingHongxun and HuangGuoshi	Revised without reservation
2005	Baker TillyClock & Co	DingHongxun and HuangGuoshi	Revised without reservation
2006	Baker TillyClock & Co	DingHongxun and HuangGuoshi	Revised without reservation
2007	Baker TillyClock & Co	DingHongxun and Lai Yongji	Revised without reservation
2008	Baker TillyClock & Co	Lai Yongji and Wu Xinliang	Revised without reservation
2009	Baker TillyClock & Co	DingHongxun and Wu Xinliang	Revised without reservation
2010	Deloitte & Touche	Fan Youwei and WangYiwen	Revised without reservation
2011	Deloitte & Touche	WangYiwen and Fan Youwei	Revised without reservation
2012	Deloitte & Touche	WangYiwen and Fan Youwei	Revised without reservation
2013	Deloitte & Touche	WangYiwen and Fan Youwei	Revised without reservation
2014	Deloitte & Touche	WangYiwen and Fan Youwei	Revised without reservation
2015	Deloitte & Touche	WangYiwen and Fan Youwei	Revised without reservation
2016	Deloitte & Touche	WangYiwen and Kuo Wenji	Without reservation

Financial Summary

II. Financial Analysis over the Recent Five Years

(I) Financial analysis:

Financial analysis (consolidated)

Year Analysis items(Note 3)	Year Analysis items(Note 3)	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	The year ended March 31st, 2017(Note 2)
		2016	2015	2014	2013	2012 (Note 1)
Financial structure (%)	Liabilities to assets ratio	34.03	34.20	25.68	23.68	23.58	34.23
	long-term capital fixed assets ratio	280.47	287.35	192.46	164.17	164.49	278.92
Debt paying ability (%)	Current ratio	910.75	840.49	179.10	239.14	285.27	767.68
	Quick ratio	789.23	721.56	104.83	126.52	143.01	673.45
	Interests coverage ratio	-199.03	4,945.48	24,512.24	47,776.49	901,832.69	423,634.93
Operation capability	Receivables turnover rate (times)	6.48	5.83	5.64	5.62	6.03	1.90
	Average number of days of cash receipt	56	63	65	65	61	191
	Inventory turnover rate (times)	5.15	4.66	4.17	3.7	4.23	1.59
	Payables turnover rate (times)	9.73	12.29	18.31	28.83	36.52	2.89
	Average number of days of goods sale	71	78	88	99	86	229
	Turnover rate (times) of real estate, plant and equipment	0.45	0.57	0.49	0.42	0.50	0.12
	Total asset turnover rate (times)	0.15	0.23	0.26	0.24	0.28	0.04
Profitability	Asset return rate(%)	-0.15	3.23	4.53	3.82	6.39	0.66
	Shareholders’ equity return rate(%)	-0.25	4.60	5.94	5	8.47	1.00
	Paid-up capital ratio (%) : Net income before tax	-0.21	25.71	29.05	26.85	47.57	6.30
	Net income rate(%)	-1.05	13.87	17.52	15.84	22.48	15.60
	Earning per share(NT$)	-0.13	2.48	3.13	2.59	4.31	0.52
Cash flow	Cash flow ratio(%)	97.43	876.81	(10.27)	129.73	76.77	37.78
	Cash flow fair ratio(%)	134.18	137.21	45.80	71.38	42.73	157.22
	Cash re-investment ratio(%)	-0.53	21.73	(3.82)	2.83	0.68	0.97
Leverage	Operation leverage	7.52	3.14	3.70	5.05	2.53	4.30
	Financial leverage	1	1	1	1	1	1
Please specify reasons for changes in financial ratios over the past two years. (There will be no necessary analysis if changes in increase or decrease fail to reach 20%)
1. That the multiplication factor for interest guarantee has been reduced was mainly because of the sharp drop in real estate income and the
non-operating net loss leading to the overall net loss in 2016.
2. The turnover rate for account payables has decreased mainly because the real estate costs in 2016 sharply dropped.
3. The turnover rate for real estate, plant, and equipment has decreased mainly because of the sharp decline in real estate income in 2016.
4. The total asset turnover rate decreased, mainly due to the sharp decline in real estate income in 2016.
5. The decrease in return on assets was mainly due to the sharp decline in real estate income and non-operating net loss leading to the
overall net loss in 2016.
6. The decrease in the rate of return was mainly due to the sharp decline in real estate income and non-operating net loss leading to the
overall net loss in 2016.
7. The ratio of netprofit before tax to the amount ofpaid-upcapital decreased mainlydue to the sharpdropin real estate revenue and

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non-operating net loss leading to the overall net loss in 2016. 8. The net profit margin decreased, mainly due to the sharp decline in real estate income and non-operating net loss leading to the overall net loss in 2016. 9. The net earnings per share decreased, mainly due to the sharp drop in real estate revenue and non-profit net loss attributable to the overall net loss in 2016. 10. The decrease in the cash flow ratio was mainly due to the injection of the operating capital into the various stages of development of the C3 land project in Nangang in 2015. 11. The ratio of cash reinvestment reduced, mainly due to the injection of the operating capital into the various stages of development of the C3 land project in Nangang in 2015. 12. The operating leverage increased, mainly due to the sharp decline in real estate income leading to the loss in operating income in 2016.

2. Financial analysis (individual)

Year Analysis items (Note 3)	Year Analysis items (Note 3)	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	The year ended March 31st, 2017 (Note 2)
		2016	2015	2014	2013	2012 (Note 1)
Financial structure (%)	Liabilities to assets ratio	33.95	34.16	25.62	23.41	23.56	─
	long-term capital fixed assets ratio	281.89	290.71	194.43	165.56	164.64	─
Debt paying ability (%)	Current ratio	950.17	847.11	176.69	248.13	283.01	─
	Quick ratio	826.30	729.53	103.53	129.86	140.48	─
	Interests coverage ratio	-890.00	5,003.19	25,685.98	No interest expenses	8,447.36	─
Operation capability	Receivables turnover rate(times)	6.34	5.73	5.55	5.55	6.03	─
	Average number of days of cash receipt	58	64	66	66	61	─
	Inventoryturnover rate(times)	5.18	4.69	4.17	3.68	4.23	─
	Payables turnover rate(times)	9.57	12.21	18.48	29.70	37.22	─
	Average number of days of goods sale	70	78	88	99	86	─
	Turnover rate (times) of real estate, plant and equipment	0.44	0.56	0.48	0.41	0.49	─
	Total asset turnover rate(times)	0.15	0.22	0.25	0.24	0.28	─
Profitability	Asset return rate(%)	-0.15	3.23	4.55	3.82	6.39	─
	Shareholders’ equity return rate (%)	-0.25	4.60	5.95	5	8.47	─
	Paid-up capital ratio (%) : Net income before tax	-0.67	25.93	29.18	27.46	47.58	─
	Net income rate(%)	-1.08	14.17	17.95	16.16	22.52	─
	Earning per share(NT$)	-0.13	2.48	3.13	2.59	4.31	─
Cash flow	Cash flow ratio(%)	104.01	895.47	(9.94)	140.50	78.25	─
	Cash flow fair ratio(%)	134.37	137.27	46.08	71.18	46.64	─
	Cash re-investment ratio(%)	-0.53	21.73	(3.79)	2.90	0.73	─
Leverage	Operation leverage	6.12	2.91	3.35	4.00	2.50	─
	Financial leverage	1	1	1	1	1	─
Please specify reasons for changes in financial ratios over the past two years. (There will be no necessary analysis if changes in increase or decrease fail to reach 20%)
1. That the multiplication factor for interest guarantee has been reduced was mainly because of the sharp drop in real estate income and the
non-operating net loss leading to the overall net loss in 2016.
2. The turnover rate for account payables has decreased mainly because the real estate costs in 2016 sharply dropped.
3. The turnover rate for real estate, plant,and equipment has decreased mainlybecause of the sharpdecline in real estate income in 2016.

100

Financial Summary

The total asset turnover rate decreased, mainly due to the sharp decline in real estate income in 2016. 5. The decrease in return on assets was mainly due to the sharp decline in real estate income and non-operating net loss leading to the overall net loss in 2016.
The decrease in the rate of return was mainly due to the sharp decline in real estate income and non-operating net loss leading to the overall net loss in 2016.
The ratio of net profit before tax to the amount of paid-up capital decreased mainly due to the sharp drop in real estate revenue and non-operating net loss leading to the overall net loss in 2016.
The net profit margin decreased, mainly due to the sharp decline in real estate income and non-operating net loss leading to the overall net loss in 2016.
The net earnings per share decreased, mainly due to the sharp drop in real estate revenue and non-profit net loss attributable to the overall net loss in 2016.
The decrease in the cash flow ratio was mainly due to the injection of the operating capital into the various stages of development of the C3 land project in Nangang in 2015.
The ratio of cash reinvestment reduced, mainly due to the injection of the operating capital into the various stages of development of the C3 land project in Nangang in 2015.
The operating leverage increased, mainly due to the sharp decline in real estate income leading to the loss in operating income in 2016.

Note 1: 2012 data are consolidated and individual financial reports converted according to IFRSs. Note 2: The financial information for 2017 ended March 31st has been audited by certified public accountants. Note 3: Calculation formula for analysis items:

Financial structure
(1) Liabilities to assets ratio＝total liabilities/total assets.
(2) Long-term capital to fixed assets ratio, plant to equipment ratio＝ (total equity ＋non-current liabilities) /net value of real estate, plant and equipment.
Debt paying ability
(1) Current ratio＝current assets /current liabilities.
(2) Quick ratio -(Current assets－inventory－prepaid expenses)/current liabilities. (including inventory and construction work in progress).
(3) Interest coverage＝Net income before income tax and interests expenses/interest expenses for the current period.
1. Operation capability
(1) Receivable (including accounts receivable and bills receivable arising from business operation) turnover rate＝Net sales of goods/Average receivables for different periods (including balance of accounts receivable and bills receivable arising from business operation).
(2) Average number of days of cash receipt＝365/Receivables turnover rate.
(3) Inventory turnover rate＝goods sale costs/average inventory (including inventory and construction work in progress).
(4) Payable (including accounts payable and bills payable arising from business operation) turnover rate＝balance of goods sale costs/average payables for different period (including accounts payable and bills payable arising from business operation).
(5) Average number of days of goods sale＝365/inventory turnover rate.
(6) Turnover rate of real estate, plant and equipment＝Net sales of good/net values of average real estate, plant and equipment.
(7) Total asset turnover rate＝Net sales of goods/total average assets.
1. Profitability
(1) Asset return rate = (Profit and loss after tax＋interests expenses×(1－tax rate))/average total assets.
(2) shareholders’ equity return rate＝Profit and loss after tax/net average shareholders’ equity.
(3) Net income rate＝Profit and loss after tax/Net sales of goods.
(4) Earning per share＝(Net profit after tax－special share dividends)/Weighted average number of shares issued.
Cash flow
(1) Cash flow ratio＝net cash flow due to operating activities/current liabilities.
(2) Net cash flow fair ratio＝Net cash flow from operating activities over the current five years/increase in (capital expenses + increase in inventory＋cash dividends) for the current five years＋cash dividends).
(3) Cash re-investment ratio＝(net cash flow due to operating activities－cash dividends)/(Gross fixed assets ＋long－term investment＋other assets＋Operating capital).
Leverage :
(1) Operation leverage＝(Net operating income－variable operating costs and expenses)/operating interest.
(2) Financial leverage＝operating interest/(operating interest－interests expenses).

101

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(II) Financial analysis – Financial accounting standards in our country

1. Financial analysis (individual)

Year Analysis items(Note 1)	Year Analysis items(Note 1)	Year Analysis items(Note 1)	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years
			2012	2011	2010	2009	2008
Financial structure (%)	Liabilities to assets ratio		21.07	21.50	22.59	19.27	22.06
	Ratio of long-term capital to fixed assets		143.34	148.25	157.61	175.99	182.95
Debt paying ability (%)	Current ratio		442.13	572.12	668.98	1,217.69	558.20
	Quick ratio		234.92	376.46	415.28	918.73	335.02
	Interests coverage ratio		No interest expenses	No interest expenses	No interest expenses	62,341.58	No interest expenses
Operation capability	Receivables turnover rate(times)		5.71	7.02	8.09	10.38	11.70
	Average number of days of cash receipt		63.92	51.99	45.12	35.16	31
	Inventoryturnover rate(times)		5	4.05	3.02	3.36	5.76
	Payables turnover rate(times)		36.92	30.90	37.65	26.68	17.33
	Average number of days of goods sale		73	90.12	120.86	109	63
	Fixed assets turnover rate(times)		0.49	0.49	0.46	0.60	0.63
	Total asset turnover rate(times)		0.27	0.26	0.22	0.28	0.27
Profitability	Asset return rate(%)		5.04	4.62	2.73	2.02	3.43
	Shareholders’ equityreturn rate(%)		6.41	5.93	3.45	2.55	4.32
	Ratio in paid-up capital (%)	Operatinginterest	11.37	4.56	8.63	18.07	3.92
		Net income before tax	38.26	33.53	18.83	22.90	36.11
	Net income rate(%)		18.76	17.74	11.95	7.39	12.88
	Earning per share(NT$)		3.41	3.07	1.76	1.29	2.24
Cash flow	Cash flow ratio(%)		129.59	186.18	46.54	421.38	(24.91)
	Cash flow fair ratio(%)		51.22	56.24	54.87	66.51	47.61
	Cash re-investment ratio(%)		0.71	1.59	(0.64)	5.76	(6.44)
Leverage	Operation leverage		3.67	5.74	4.25	1.88	2.28
	Financial leverage		1	1	1	1	1
Please specify reasons for changes in financial ratios over the past two years. (There will be no necessary analysis if changes in increase or decrease fail to reach 20%) 1. Drop in current ratio and quick ratio mainly because of increase in income tax payable and decrease in cash. 2. Average number of cash receipt days rise, mainly because of failure to receive cash receipt out of accounts receivable as scheduled. 3. Increase in inventory turnover rate is mainly because decrease in gradual delivery of housing under construction work in process. 4. Increase in operating interest to paid-up capital, mainly caused by income out of construction works of high gross profits more than that of the previous period. 5. Lower cash flow ratio, mainly caused by increase in income tax payable and dividends and decrease in cash. 6. Cash re-investment ratio drops, mainly caused by decrease in net cash flow in out of operating activities for the current period and increase in cash dividend expenses. 7. Lower operating leverage, mainly caused by higher income out of housing under joint construction and distribution for the current period leadingto increase in operatinginterests.

102

Financial Summary

(II) Financial analysis – Financial accounting standards in our country

Year Analysis items (Note 1)	Year Analysis items (Note 1)	Year Analysis items (Note 1)	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years	Financial Analysis over the Recent Five Years
			2012	2011	2010	2009	2008
Financial structure (%)	Liabilities to assets ratio		21.09	21.50	22.59	19.27	22.05
	Ratio of long-term capital to fixed assets		143.21	148.1	157.43	175.76	182.71
Debt paying ability (%)	Current ratio		444.30	579.82	670.47	1,219.53	559.57
	Quick ratio		238.17	384.07	416.84	920.69	292.81
	Interests coverage ratio		No interest expenses	No interest expenses	No interest expenses	62,371.69	No interest expenses
Operation capability	Receivables turnover rate(times)		5.72	7.03	8.09	10.39	11.72
	Average number of days of cash receipt		64	52	45	35	31
	Inventoryturnover rate(times)		4.99	4.05	3.03	3.36	4.18
	Payables turnover rate(times)		36.23	30.91	37.66	26.68	17.32
	Average number of days of goods sale		73	90	120	109	87
	Fixed assets turnover rate(times)		0.49	0.49	0.46	0.60	0.63
	Total asset turnover rate(times)		0.27	0.26	0.22	0.28	0.27
Profitability	Asset return rate(%)		5.04	4.62	2.73	2.02	3.43
	Shareholders’ equity return rate (%)		6.41	5.93	3.45	2.55	4.32
	Ratio in paid-up capital (%)	Operating interest	11.21	4.59	8.65	18.09	3.94
		Net income before tax	38.26	33.54	18.83	22.91	36.12
	Net income rate(%)		18.73	17.74	11.94	7.38	12.87
	Earning per share(NT$)		3.41	3.07	1.76	1.29	2.24
Cash flow	Cash flow ratio (%)		127.35	186.37	46.61	421.68	-37.01
	Cash flow fair ratio (%)		50.31	51.8	49.71	58.63	35.73
	Cash re-investment ratio(%)		0.68	1.60	-0.66	5.96	-6.97
Leverage	Operation leverage		3.75	5.72	4.25	1.88	2.28
	Financial leverage		1.00	1.00	1.00	1.00	1.00
Please specify reasons for changes in financial ratios over the past two years. (There will be no necessary analysis if changes in increase or decrease fail to reach 20%) 1. Drop in current ratio and quick ratio mainly because of increase in income tax payable and decrease in cash. 2. Average number of cash receipt days rise, mainly because of failure to receive cash receipt out of accounts receivable as scheduled. 3. Increase in inventory turnover rate is mainly because decrease in gradual delivery of housing under construction work in process. 4. Increase in operating interest to paid-up capital, mainly caused by income out of construction works of high gross profits more than that of the previous period. 5. Lower cash flow ratio, mainly caused by increase in income tax payable and dividends and decrease in cash. 6. Cash re-investment ratio drops, mainly caused by decrease in net cash flow in out of operating activities for the current period and increase in cash dividend expenses. 7. Lower operating leverage, mainly caused by higher income out of housing under joint construction and distribution for the current period leadingto increase in operatinginterests.

103

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Note 1: Calculation formula for analysis items:

Financial structure
(1) Liabilities to assets ratio ＝ total liabilities/total assets.
(2) Long-term capital to fixed assets ratio ＝ (net shareholders’ equity ＋ long － term liabilities)/net fixed assets.
1. Debt paying ability
(1) Current ratio ＝ current assets /current liabilities.
(2) Quick ratio -(Current assets － inventory － prepaid expenses)/current liabilities. (including inventory and construction work in progress).
(3) Interest coverage ＝ Net income before income tax and interests expenses/interest expenses for the current period.
1. Operation capability
(1) Receivable (including accounts receivable and bills receivable arising from business operation) turnover rate ＝ Net sales of goods/Average receivables for different periods (including balance of accounts receivable and bills receivable arising from business operation).
(2) Average number of days of cash receipt ＝ 365/Receivables turnover rate. (3) Inventory turnover rate ＝ goods sale costs/average inventory (including inventory and construction work in progress). (4) Payable (including accounts payable and bills payable arising from business operation) turnover rate ＝ balance of goods sale costs/average payables for different period (including accounts payable and bills payable arising from business operation).
(5) Average number of days of goods sale ＝ 365/inventory turnover rate. (6) Fixed assets turnover rate ＝ Net sales of goods/net fixed assets. (7) Total asset turnover rate ＝ Net sales of goods/total assets.
1. Profitability (1) Asset return rate = (Profit and loss after tax ＋ interests expenses×(1 － tax rate))/average total assets.
(2) Shareholders’ equity return rate ＝ Profit and loss after tax/net average shareholders’ equity. (3) Net income rate ＝ Profit and loss after tax/Net sales of goods. (4) Earning per share ＝ (Net profit after tax － special share dividends)/Weighted average number of shares issued.
1. Cash flow
(1) Cash flow ratio ＝ net cash flow due to operating activities/current liabilities.
(2) Net cash flow fair ratio ＝ Net cash flow from operating activities over the current five years/increase in (capital expenses + increase in inventory ＋ cash dividends) for the current five years ＋ cash dividends).
(3) Cash re-investment ratio ＝ (net cash flow due to operating activities － cash dividends)/(Gross fixed assets + long － term investment + other assets + Operating capital).
1. Leverage :

(1) Operation leverage ＝ (Net operating income － variable operating costs and expenses)/operating interest.

(2) Financial leverage ＝ operating interest/(operating interest － interests expenses).

104

Financial Summary

III. Auditing Report by Supervisors on Financial Statements over the Recent Years

Auditing Report by Supervisors of Taiwan Fertilizer Co., Ltd

The Board of Directors has prepared the Business Report, Financial Statement and Retained Earning Distribution Proposal, etc of the Company for 2016. The financial statement has been reviewed and audited by Wang Yiwen and Kuo Wenji from Deloitte & Touche, who have already provided auditing reports.

The foregoing Business Report, Financial Statement and Retained Earning Distribution Proposal have been reviewed and audited by the supervisors. It is believed that they comply with relevant regulations of the Company Act and they were reported above subject to the provisions set out in Article 219 of the Company Act.

General Meeting of Shareholders for 2017 of the Company

Supervisors: Chung Hwa Post Co., Ltd. Representative: Wu Yuanren Chen Chailai Tsai Linglan

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31 March 2017

105

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IV. Financial reports for recent years

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Taiwan Fertilizer Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Taiwan Fertilizer Co., Ltd. and subsidiaries (the “Group”), which comprise the consolidated balance sheets as of December 31, 2016 and 2015, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors (refer to the Other Matters paragraph), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2016 and 2015, and its consolidated financial performance and the cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2016. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters for the Group’s consolidated financial statements for the year ended December 31, 2016 are stated as follows:

Impairment Assessment of Property, Plant and Equipment

As described in Note 5 of the accompanying consolidated financial statements, the impairment assessment of property, plant and equipment is significant for the Group. The balance of property, plant and equipment amounted to NT$26,753,401 thousand (35% of the consolidated total assets) as of December 31, 2016. For disclosures of property, plant and equipment, refer to Note 14 of the

106

Financial Summary

consolidated financial statements.

In accordance with IAS 36 “Impairment of Assets”, management will regularly assess whether there is any indication that property, plant and equipment may be impaired. If there is an indication that an asset may be impaired, management must rely on subjective judgment as well as the asset’s usage and industry conditions to estimate the recoverable amount of the cash-generating unit of the aforementioned asset. Since management’s evaluation of the impairment indication and the decision of the recoverable amount are subject to management’s judgment and assumptions, such impairment assessment has been identified as a key audit matter.

Our main audit procedures performed in response to this key audit matter included reviewing the evaluation report compiled by management of assets’ indications of impairment and evaluating one-by-one the internal and external information which management took into consideration in order to assess the rationality of the evaluation executed by management of the impairment indicators. In addition, we obtained the management-appointed appraiser’s impairment appraisal report and understood and evaluated the rationality of the pricing model used for computing the recoverable amount, the assumptions used for the pricing model, such as the discount rate, growth rate and weighted average cost of capital (including the risk-free return rate and the volatility and risk premium remuneration). And we considered whether the appraiser considered the past operating performance, industry overview, and future trend of the Group. In conclusion, our audit team comprehensively assess the rationality of the impairment evaluation of the Group’s assets.

Impairment Assessment of Intangible Assets

As described in Note 16 of the consolidated financial statements, the Group acquired control of Taiwan Yes Deep Ocean Water Co., Ltd. (“Taiwan Yes”) on January 7, 2013 and recognized the goodwill and trademark with indefinite useful lives from such acquisition. In accordance with IAS 36 “Impairment of Assets”, goodwill and intangible assets with indefinite useful lives should be tested for impairment annually, and based on the estimated future cash flows of Taiwan Yes (the cash-generating unit), the recoverable amount was evaluated in order to determine whether there is any impairment of the aforementioned goodwill and trademark. Since the estimated future cash flows requires management’s forecasting of the industry overview and the future operating performance of Taiwan Yes, should the situation change, the recoverable amount will be affected and an impairment loss will be incurred. Therefore, the impairment assessment of intangible assets has been identified as a key audit matter.

Our main audit procedures performed in response to this key audit matter included obtaining the management-appointed appraiser’s impairment appraisal report of goodwill and trademark, understanding and evaluating the rationality of the pricing model used for computing the relevant recoverable amount, evaluating the assumptions of the pricing model, such as the discount rate, growth rate and weighted average cost of capital (including the risk-free return rate and the volatility and risk premium remuneration), and considering the past operating performance, industry overview, and future trend of the Group. In conclusion, our audit team comprehensively assessed the rationality of the impairment evaluation of goodwill and trademark.

Other Matters

As described in Note 13 of the Group’s consolidated financial statements, we did not audit the financial statements as of and for the years ended December 31, 2016 and 2015 of certain investees, but such financial statements had been audited by other auditors, whose reports have been furnished to us. Our opinion, insofar as it relates to the amounts included and the information shown in Note 32 of the accompanying consolidated financial statements for these investees, is based solely on the reports of the other auditors. As of December 31, 2016 and 2015, the investments in the aforementioned investees were NT$10,896,351 thousand and NT$11,352,927 thousand, respectively.

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For the years ended December 31, 2016 and 2015, the investment (loss) income on the above said investees were NT$(255,534) thousand and NT$1,029,740 thousand, respectively.

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

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

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 supervisor) are responsible for overseeing the Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

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.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up

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Financial Summary

to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2016 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Yi-Wen Wang and Wen-Chi Kuo.

Deloitte & Touche Taipei, Taiwan Republic of China

March 28, 2017

Notice to Readers

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

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

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Available-for-sale financial assets - current (Notes 4 and 7) Notes receivable (Notes 4 and 8) Accounts receivable (Notes 4, 8 and 8) Other receivables (Note 28) Inventories (Notes 4 and 10) Buildings and land held for sale (Notes 4 and 11) Other financial assets - current (Note 6) Other current assets Total current assets NONCURRENT ASSETS Financial assets carried at cost - noncurrent (Notes 4 and 9) Investments accounted for using equity method (Notes 4 and 13) Property, plant and equipment (Notes 4 and 14) Investment properties (Notes 4 and 15) Intangible assets (Notes 4 and 16) Deferred tax assets (Notes 4 and 23) Long-term receivables (Note 8) Other financial assets - noncurrent (Note 29) Long-term prepayments for leases (Note 17) Other noncurrent assets Total noncurrent assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term loan borrowings (Note 18) Notes payable Accounts payable (Note 28) Other payables Current tax liabilities (Notes 4 and 23) Receipts in advance (Note 11) Other current liabilities Total current liabilities NONCURRENT LIABILITIES Provisions - noncurrent (Note 4) Deferred tax liabilities (Notes 4 and 23) Deferred revenue - noncurrent (Note 15) Accrued pension liabilities (Notes 4 and 19) Guarantee deposits received Total noncurrent liabilities Total liabilities EQUITY (Note 20) Share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity TOTAL		2016 Amount % $ 1,084,835 1 3,246,512 4 366,324 1 1,305,881 2 11,925 - 1,451,224 2 350,375 1 7,237,898 9 246,332 - 15,301,306 20 449,582 1 10,896,351 14 26,753,401 35 21,157,600 28 257,986 - 209,113 - 385,490 - 65,800 - 1,215,950 2 25,223 - 61,416,496 80 $ 76,717,802 100 $ 46,000 - 6,924 - 897,834 1 504,629 1 7,975 - 180,763 - 35,937 - 1,680,062 2 223,648 - 7,214,538 9 16,584,651 22 94,353 - 316,124 1 24,433,314 32 26,113,376 34 9,800,000 13 2,232,791 3 3,683,109 5 33,590,309 43 703,332 1 37,976,750 49 594,885 1 50,604,426 66 $ 76,717,802 100		2015
				Amount % $ 2,474,406 3 8,729,292 11 432,891 1 1,671,883 2 1,673 - 1,903,509 2 271,198 - 2,628,202 3 787,291 1 18,900,345 23 495,041 1 11,352,927 14 27,232,915 34 19,773,984 24 471,995 1 358,990 - 540,884 1 65,800 - 1,286,561 2 24,363 - 61,603,460 77 $ 80,503,805 100 $ 10,000 - 2,214 - 1,196,312 2 758,177 1 16,339 - 203,781 - 61,901 - 2,248,724 3 327,750 - 7,293,298 9 16,977,124 21 468,040 1 221,009 - 25,287,221 31 27,535,945 34 9,800,000 12 2,237,678 3 3,440,401 4 33,590,944 42 3,146,060 4 40,177,405 50 752,777 1 52,967,860 66 $ 80,503,805 100

The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche audit report dated March 28, 2017)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except (Loss) Earnings Per Share)

OPERATING REVENUE (Notes 4, 15, and 21) OPERATING COSTS (Notes 21, 22,and 28) GROSS PROFIT OPERATING EXPENSES (Note 22) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other gains and losses (Note 22) Finance costs Share of (loss) profit of associates and joint ventures (Notes 4 and 13) Other income (Note 22) Total non-operating income and expenses (LOSS) PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 23) NET (LOSS) PROFIT FOR THE YEAR OTHER COMPREHENSIVE (LOSS) INCOME Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Income tax relating to items that will not be reclassified subsequently to profit or loss (Notes 4 and 23)		2016 Amount % $ 12,240,920 100 10,234,666 84 2,006,254 16 338,576 3 1,006,693 8 65,291 - 1,410,560 11 595,694 5 (522,467) (4) (7,029) - (255,534) (2) 168,317 1 (616,713 ) (5 ) (21,019) - 108,484 1 (129,503 ) (1 ) (15,845) - 2,693 - (13,152 ) -		2015
				Amount % $ 17,487,077 100 13,612,077 78 3,875,000 22 357,113 2 1,106,781 6 66,094 1 1,529,988 9 2,345,012 13 (845,721) (5) (14,285) - 962,031 6 72,693 - 174,718 1 2,519,730 14 92,647 - 2,427,083 14 (25,498) - 4,335 - (21,163 ) - (Continued)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except (Loss) Earnings Per Share)

Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Unrealized gain (loss) on available-for-sale financial assets Share of the other comprehensive (loss) income of associates and joint ventures Income tax relating to items that may be reclassified subsequently to profit or loss (Notes 4 and 23) Other comprehensive (loss) income for the year, net of income tax TOTAL COMPREHENSIVE (LOSS) INCOME FOR THE YEAR NET (LOSS) INCOME ATTRIBUTABLE TO: Owners of the Corporation TOTAL COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO: Owners of the Corporation (LOSS) EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 24) Basic Diluted		2016 Amount % $ (13,653) - 20,580 - (198,711) (1) 33,892 - (157,892 ) (1 ) (171,044 ) (1 ) $ (300,547 ) (2 ) $ (129,503 ) (1 ) $ (300,547 ) (2 ) $(0.13 ) $(0.13 )		2015
				Amount % $ (891) - (20,353) - 413,487 2 (70,262 ) - 321,981 2 300,818 2 $ 2,727,901 16 $ 2,427,083 14 $ 2,727,901 16 $2.48 $2.47

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

(With Deloitte & Touche audit report dated March 28, 2017)

(Concluded)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Amounts Per Share)

BALANCE AT JANUARY 1, 2015 Appropriation of the 2014 earnings Legal reserve Cash dividends - NT$2.2 per share Net profit in 2015 Other comprehensive (loss) income in 2015, net of income tax Total comprehensive income (loss) in 2015 Adjustment to capital surplus due to non-proportional investment in an investee's shares issued for a capital increase BALANCE AT DECEMBER 31, 2015 Appropriation of the 2015 earnings Legal reserve Cash dividends - NT$2.1 per share Net loss in 2016 Other comprehensive (loss) income in 2016, net of income tax Total comprehensive (loss) income in 2016 Reversal of special reserve due to sale of land Loss of significant influence as disposal of investment BALANCE AT DECEMBER 31, 2016			Equity Attributable to Owners of the Corporation	Equity Attributable to Owners of the Corporation	Equity Attributable to Owners of the Corporation		Total $ 430,796 - - - 321,981 321,981 - 752,777 - - - (157,892 ) (157,892 ) - - $ 594,885	Total Equity $ 52,392,615 - (2,156,000 ) 2,427,083 300,818 2,727,901 3,344 52,967,860 - (2,058,000 ) (129,503 ) (171,044 ) (300,547 ) - (4,887 ) $ 50,604,426
	S	hare Capital Capital Surplus $ 9,800,000 $ 2,234,334 - - - - - - - - - - - 3,344 9,800,000 2,237,678 - - - - - - - - - - - - - (4,887 ) $ 9,800,000 $ 2,232,791	Retained Earnings Unappropriated Legal Reserve Special Reserve Earnings $ 3,133,567 $ 33,590,944 $ 3,202,974 306,834 - (306,834 ) - - (2,156,000 ) - - 2,427,083 - - (21,163 ) - - 2,405,920 - - - 3,440,401 33,590,944 3,146,060 242,708 - (242,708 ) - - (2,058,000 ) - - (129,503 ) - - (13,152 ) - - (142,655 ) - (635 ) 635 - - - $ 3,683,109 $ 33,590,309 $ 703,332			Other Equity
					Exchange Differences on Translating Foreign Operations $ 368,104 - - - 342,334 342,334 - 710,438 - - - (178,472 ) (178,472 ) - - $ 531,966	Unrealized Gain (Loss) on Available-for- sale Financial Assets $ 62,692 - - - (20,353 ) (20,353 ) - 42,339 - - - 20,580 20,580 - - $ 62,919

The accompanying notes are an integral part of the consolidated financial statements. (With Deloitte & Touche audit report dated March 28, 2017)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES (Loss) profit before income tax Adjustments for: Depreciation expenses Share of loss (profit) of associates and joint ventures Impairment loss recognized on intangible assets Impairment loss recognized on property, plant and equipment Amortization expenses Interest income Dividend income Gain on disposal of investments Impairment loss recognized on financial assets Unrealized net (gain) loss on foreign currency exchange Finance costs (Reversal of) write-down of inventories Impairment loss recognized on other receivables (Gain) loss on disposal of property, plant and equipment Donation expenses Recognition of provisions Gain on disposal of investment properties Changes in operating assets and liabilities Notes receivable Accounts receivable Other receivables Inventories Buildings and land held for sale Other current assets Long-term receivables Notes payable Accounts payable Other payables Provisions Receipts in advance Other current liabilities Accrued pension liabilities Deferred revenue Cash generated from operations Interest received Dividends received Interest paid Return of income tax Income tax paid Net cash generated from operating activities	2016 $ (21,019) 709,759 255,534 206,000 136,101 83,990 (62,445) (41,782) (23,381) 15,000 (13,570) 7,029 (6,157) 4,294 (3,584) - - - 66,567 361,582 (78,752) 458,442 124,204 175,338 155,394 4,710 (490,616) 140,889 (38,370) (23,018) (25,964) (389,532) (392,473 ) 1,294,170 61,193 41,782 (7,029) 246,935 - 1,637,051	2015 $ 2,519,730 670,370 (962,031) - 279,387 86,900 (19,995) (42,868) (1,018) - 35,334 14,285 10,900 247,251 70,554 223,650 65,732 (8,291) (48,766) 1,823,681 (97,936) 289,476 1,449,579 217,797 (162,634) (7,863) (95,106) (88,540) - (1,444,172) (25,914) 23,581 14,196,118
		19,219,191 20,017 1,137,048 (51,239) - (607,788 )
		19,717,229
		(Continued)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds of the sale of available-for-sale financial assets Increase in other financial assets Increase of investment properties Payments for property, plant and equipment Purchase of available-for-sale financial assets Return of capital on financial assets carried at cost Proceeds of the disposal of property, plant and equipment Purchase of intangible assets (Increase) decrease in refundable deposits Proceeds of the disposal of investment properties Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Cash dividends paid Increase in guarantee deposits received Proceeds from (repayments of) short-term borrowings Repayment of long-term borrowings Repayment of long-term borrowings, net of current portion Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS, END OF YEAR	2016 5,606,626 (4,609,696) (1,291,949) (752,620) (84,772) 32,790 9,959 (5,558) (860) - (1,096,080 ) (2,058,000) 95,115 36,000 - - (1,926,885 ) (3,657 ) (1,389,571) 2,474,406 $ 1,084,835	2015 1,306,275 (2,595,209) (1,045,989) (968,937) (9,948,617) 63,415 54,722 (3,454) 2,883 8,481 (13,126,430 ) (2,156,000) 50,050 (1,700,000) (790,000) (140,000 ) (4,735,950 ) 8,997 1,863,846 610,560 $ 2,474,406

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

(With Deloitte & Touche audit report dated March 28, 2017)

(Concluded)

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TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

Taiwan Fertilizer Co., Ltd. (the “Corporation”) was incorporated in May 1946. It manufactures and sells inorganic and organic fertilizers and other chemical products. The Corporation also constructs and leases real estate.

The Corporation’s shares has been listed on the Taiwan Stock Exchange since March 24, 1998.

The functional currency of the Corporation is the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements of the Corporation and its subsidiaries (collectively the “Group”) were approved and authorized for issue by the Corporation’s board of directors on March 24, 2017.

3. APPLICATION OF NEW, AMENDED, REVISED STANDARDS AND INTERPRETATIONS

a. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC for application starting from 2017

Rule No. 1050050021 and Rule No. 1050026834 issued by the FSC stipulated that starting January 1, 2017, the Group should apply the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) issued by the IASB and endorsed by the FSC for application starting from 2017.

New, Amended or Revised Standards and

Interpretations
(the“New IFRSs”)
Annual Improvements to IFRSs 2010-2012 Cycle
Annual Improvements to IFRSs 2011-2013 Cycle
Annual Improvements to IFRSs 2012-2014 Cycle
Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment
Entities: Applying the Consolidation Exception”
Amendment to IFRS 11 “Accounting for Acquisitions of
Interests in Joint Operations”
IFRS 14 “Regulatory Deferral Accounts”

Effective Date
Announced by IASB (Note 1)
July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 3)
January 1, 2016
January 1, 2016
January 1, 2016
(Continued)

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Financial Summary

New, Amended or Revised Standards and
Interpretations
(the“New IFRSs”)
Amendment to IAS 1 “Disclosure Initiative”
Amendments to IAS 16 and IAS 38 “Clarification of
Acceptable Methods of Depreciation and Amortization”
Amendments to IAS 16 and IAS 41 “Agriculture: Bearer
Plants”
Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”
Amendment to IAS 36 “Impairment of Assets:
Recoverable Amount Disclosures for Non-financial
Assets”
Amendment to IAS 39 “Novation of Derivatives and
Continuation of Hedge Accounting”
IFRIC 21 “Levies”

Effective Date
Announced by IASB (Note 1)

January 1, 2016
January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2014
January 1, 2014
January 1, 2014
(Concluded)

Note 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

The initial application in 2017 of the above IFRSs and related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers would not have any material impact on the Group’s accounting policies, except for the following:

1) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

The amendment clarifies that the recoverable amount of an asset or a cash-generating unit is disclosed only when an impairment loss on the asset has been recognized or reversed during the period. Furthermore, if the recoverable amount of an item of property, plant and equipment for which impairment loss has been recognized or reversed is fair value less costs of disposal, the Group is required to disclose the fair value hierarchy. If the fair value measurements are categorized within Level 2 or Level 3, the valuation technique and key assumptions used to measure the fair value are disclosed. The discount rate used is disclosed if such fair value less costs of disposal is measured by using present value technique. The amendment will be applied retrospectively.

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2) Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments include additions of several accounting items and requirements for disclosures of impairment of non-financial assets as a consequence of the IFRSs endorsed by the FSC for application starting from 2017. In addition, as a result of the post implementation review of IFRSs in Taiwan, the amendments also include emphasis on certain recognition and measurement considerations and add requirements for disclosures of related party transactions and goodwill.

The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Group are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationship with whom the Group has significant transaction. If the transaction or balance with a specific related party is 10% or more of the Group’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

The amendments also require additional disclosure if there is a significant difference between the actual operation after business combination and the expected benefit on acquisition date.

The disclosures of related party transactions and impairment of goodwill will be enhanced when the above amendments are retrospectively applied in 2017.

Except for the above impacts, as of the date the consolidated financial statements were authorized for issue, the Group continues assessing other possible impacts that application of the aforementioned amendments and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Group’s financial position and financial performance, and will disclose these other impacts when the assessment is completed.

b. New IFRSs in issue but not yet endorsed by the FSC

The Group has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC.

The FSC announced that IFRS 9 and IFRS 15 will take effect starting January 1, 2018. As of the date the consolidated financial statements were authorized for issue, the FSC has not announced the effective dates of other new IFRSs.

New IFRSs Annual Improvements to IFRSs 2014-2016 Cycle Amendment to IFRS 2 “Classification and Measurement of Share-based Payment Transactions” IFRS 9 “Financial Instruments”	Effective Date Announced by IASB (Note 1)
	Note 2 January 1, 2018 January 1, 2018

(Continued)

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Financial Summary

New IFRSs

Effective Date Announced by IASB (Note 1)

Amendments to IFRS 9 and IFRS 7 “Mandatory Effective January 1, 2018 Date of IFRS 9 and Transition Disclosures” Amendments to IFRS 10 and IAS 28 “Sale or Contribution To be determined by IASB of Assets between an Investor and its Associate or Joint Venture” IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 Amendments to IFRS 15 “Clarifications to IFRS 15 January 1, 2018 Revenue from Contracts with Customers” IFRS 16 “Leases” January 1, 2019 Amendment to IAS 7 “Disclosure Initiative” January 1, 2017 Amendments to IAS 12 “Recognition of Deferred Tax January 1, 2017 Assets for Unrealized Losses” Amendments to IAS 40 “Transfers of investment property” January 1, 2018 IFRIC 22 “Foreign Currency Transactions and Advance January 1, 2018 Consideration”

(Concluded)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

IFRS 9 “Financial Instruments”

1) Recognition and measurement of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Group’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;
b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or

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reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

2) Impairment of financial assets

IFRS 9 requires that impairment loss on financial assets is recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

For purchased or originated credit-impaired financial assets, the Group takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

Transition

Financial instruments that have been derecognized prior to the effective date of IFRS 9 cannot be reversed to apply IFRS 9 when it becomes effective. Under IFRS 9, the requirements for classification, measurement and impairment of financial assets are applied retrospectively with the difference between the previous carrying amount and the carrying amount at the date of initial application recognized in the current period and restatement of prior periods is not required. The requirements for general hedge accounting shall be applied prospectively and the accounting for hedging options shall be applied retrospectively.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

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Financial Summary

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, other regulations and IFRSs as endorsed and issued into effect by the FSC.

Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values.

The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c. Level 3 inputs are unobservable inputs for the asset or liability.

Classification of Current and Non-current Assets and Liabilities

Current assets include:

a. Assets held primarily for the purpose of trading;
b. Assets expected to be realized within twelve months after the reporting period; and
c. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

a. Liabilities held primarily for the purpose of trading;
b. Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and
c. Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period. 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.

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Assets and liabilities that are not classified as current are classified as non-current.

Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Corporation and the entities controlled by the Corporation (its subsidiaries). When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Corporation. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. For subsidiaries’ details, percentage of ownership, and main businesses and products, see Note 12 and Table 7 to the consolidated financial statements.

Foreign Currencies

In preparing the financial statements of each individual Group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise except for:

Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investments.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including subsidiaries, associates and joint ventures in other countries that use currency different from the currency of the Group) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income.

Inventories

Inventories consist of raw materials, supplies, finished goods, merchandise and buildings and land held for sale are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost.

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Financial Summary

Investments in associates and joint ventures

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. A joint venture is a joint arrangement whereby the Group and other parties that have joint control of the arrangement have rights to the net assets of the arrangement.

The Group uses the equity method to account for its investments in associates and joint ventures. Under the equity method, investments in an associate and a joint venture are initially recognized at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate and joint venture. The Group also recognizes the changes in the Group’s share of the equity of associates and joint venture attributable to the Group.

When the Group’s share of losses of an associate and a joint venture equals or exceeds its interest in that associate and joint venture (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate and joint venture), the Group discontinues recognizing its share of further losses.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate and a joint venture. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate and the joint venture attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate and the joint venture. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate and joint venture on the same basis as would be required if that associate had directly disposed of the related assets or liabilities.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss. Major additions and improvements to properties are capitalized, while costs of repairs and maintenance are expensed currently.

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Depreciation on property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in estimates accounted for on a prospective basis.

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On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

Investment Properties

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties also include land held for a currently undetermined future use.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

Investment properties under construction are stated at cost less accumulated depreciation and accumulated impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Depreciation of these assets commences when the assets are ready for their intended use.

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.

Goodwill

Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units that is expected to benefit from the synergies of the combination. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

Impairment of Tangible and Intangible Assets Other than Goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

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Financial Summary

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

Financial Instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

a. Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

1) Measurement category

Financial assets are classified into the following categories: Available-for-sale financial assets, and loans and receivables.

a) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

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measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

b) Loans and receivables

Loans and receivables (including trade receivables, cash and cash equivalent, and other financial assets) are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

2) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For financial assets carried at amortized cost, such as trade receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is 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.

For financial assets measured at amortized cost, 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 was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

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Financial Summary

available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When trade receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables that are written off against the allowance account.

3) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss.

b. Financial liabilities
1) Subsequent measurement

All financial liabilities of the Group are subsequently measured at amortized cost using the effective interest method.

2) Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

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Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowance for sales returns and liability for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

a. Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

1) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
2) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
3) The amount of revenue can be measured reliably;
4) It is probable that the economic benefits associated with the transaction will flow to the Group; and
5) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from the sale of property in the course of ordinary activities is recognized when the construction is completed and the property is transferred to the buyer. Until such revenue is recognized, deposits and installment payments received from sales of properties are carried in the consolidated balance sheets under current liabilities.

b. Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the applicable effective interest rate.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

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Financial Summary

Employee Benefits

a. Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

b. Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost) and net interest on the net defined benefit liability are recognized as employee benefit expenses in the period they occur. Remeasurement, comprising actuarial gains and losses, and the return on plan assets, is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability represents the actual deficit in the Corporation’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

c. Other long-term employee benefits

Other long-term employee benefits are accounted for in the same way as the accounting required for defined benefit plan except that remeasurement is recognized in profit or loss.

d. Termination benefits

A liability for a termination benefit is recognized at the earlier of when the Group can no longer withdraw the offer of the termination benefit and when the Group recognizes any related restructuring costs.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

a. Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

b. Deferred tax

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Deferred tax assets are generally recognized for all deductible temporary differences and unused loss carry forward to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

c. Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future years.

Impairment Assessment of Tangible and Intangible Assets Other than Goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets other than goodwill to determine whether there is any indication that those assets

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Financial Summary

have suffered an impairment loss. In the process of evaluating the potential impairment, the Group is required to make subjective judgments in determining the independent cash flows, useful lives, expected future revenue and expenses related to the specific asset groups with the consideration of the nature of the Group’s industry. Any changes in these estimates based on changed economic conditions or business strategies could result in significant impairment charges in future years.

Impairment Assessment of Goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The calculation of the value in use requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

6. CASH AND CASH EQUIVALENTS

Cash on hand Demand deposits and checking accounts Time deposits with original maturities less than 3 months		December 31	December 31
		2016 $ 4,252 1,080,583 - $ 1,084,835	2015 $ 4,627 1,169,779 1,300,000 $ 2,474,406

Time deposits with original maturity of more than 3 months are recorded as other financial assets, and are classified as non-current if their maturities exceed one year.

The market rate intervals of cash and cash equivalents and other financial assets at the end of the reporting period were as follows:

Bank balance Time deposits with original maturities less than 3 months Time deposits with original maturity of more than 3 months	December 31
	2016 2015 0.01%-0.08% 0.02%-0.33% - 0.75% 0.13%-17.1% 0.45%-17.1%

7. AVAILABLE-FOR-SALE FINANCIAL ASSETS - CURRENT

Domestic listed shares Mutual funds		December 31	December 31
		2016 $ 91,102 3,155,410 $ 3,246,512	2015 $ 76,315 8,652,977 $ 8,729,292

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8. NOTES AND ACCOUNTS RECEIVABLE

Notes receivable Notes receivable - sale of goods Real estate notes receivable Notes receivable Long-term notes receivable Accounts receivable Accounts receivable - sales of goods Real estate receivable Less: Unrealized interest income Accounts receivable Long-term receivable		December 31	December 31
		2016 $ 339,767 107,935 $ 447,702 $ 366,324 81,378 $ 447,702 $ 1,216,297 468,166 (74,470 ) $ 1,609,993 $ 1,305,881 304,112 $ 1,609,993	2015 $ 142,637 455,579 $ 598,216 $ 432,891 165,325 $ 598,216 $ 1,322,203 815,858 (90,619 ) $ 2,047,442 $ 1,671,883 375,559 $ 2,047,442

The average credit period of sales of goods was 90 to 120 days. The recognition of allowance for impairment loss was based on aging of receivables, historical experience and an analysis of customers’ financial positions.

Except for those impaired, for the trade receivables balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss, because there was no significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements for these balances.

The aging of accounts receivable (inclusive of long-term receivable) was as follows:

Not past due Up to 30 days 31-60 days Over 60 days		December 31	December 31
		2016 $ 1,501,466 29,889 57,132 21,506 $ 1,609,993	2015 $ 1,971,672 27,673 15,631 32,466 $ 2,047,442

The above aging schedule was based on the past due date.

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Financial Summary

The aging of accounts receivable in the above part that were past due but not impaired was as follows:

Up to 30 days 31-60 days Over 60 days		December 31	December 31
		2016 $ 29,889 57,132 21,506 $ 108,527	2015 $ 27,673 15,631 32,466 $ 75,770

As of December 31, 2016, the receivables that were past due but not impaired increased because the subsidy for price difference applied for by fertilizer dealers had not been approved and distributed by the Council of Agriculture.

As of December 31, 2016, real estate receivables amounted to $576,101 thousand, including the long-term receivable from sales on installment, amounting to $378,582 thousand and long-term notes receivable from sales on installment, amount to $81,378 thousand. Expected recovery of these long-term receivables is at these amounts: $93,322 thousand in 2017; and $366,638 thousand in 2018.

The Group holds the sold real estate and checks as collateral for the real estate accounts receivables amounted to $564,925 thousand.

9. FINANCIAL ASSETS CARRIED AT COST

Noncurrent Domestic unlisted shares Eminent II VC Corp. Eminent Venture Capital Corporation Taiwan Stock Exchange Corporation TSCBio Ventures Capital Co. Top Taiwan V Venture Capital Co., Ltd. Visgeneer Inc. TaiAn Technologies Corporation Bion tech Inc. Green Cellulosity Corporation Classified according to financial asset measurement categories Available-for-sale financial assets		December 31	December 31
		2016 $ 200,000 100,000 52,800 33,600 32,195 20,989 7,667 2,331 - $ 449,582 $ 449,582	2015 $ 200,000 100,000 52,800 42,000 56,585 20,989 7,667 - 15,000 $ 495,041 $ 495,041

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Management believed that the above unlisted equity investments held by the Group had fair values that could not be reliably measured due to the range of reasonable fair value estimates being so significant; therefore they were measured at cost less impairment at the end of reporting period.

In October 2016, TSCBio Ventures Capital Co. (“TSCBio”) reduced its capital, and the Group received $8,400 thousand as capital return; the percentage of the Group’s ownership of TSCBio remained the same despite this capital reduction.

IIn June 2016 and 2015, Top Taiwan V Venture Capital Co., Ltd. reduced its capital, and the Group received $24,390 and $63,415 thousand as capital returns, respectively; the percentage of the Group’s ownership of this investee remained the same.

Because Green Cellulosity Corporation had a continued loss, the Group recognized an impairment loss of $15,000 thousand for the year ended December 31, 2016.

10. INVENTORIES

Raw materials Finished goods Merchandise		December 31	December 31
		2016 $ 1,015,913 429,916 5,395 $ 1,451,224	2015 $ 1,194,654 701,383 7,472 $ 1,903,509

The costs of inventories recognized as cost of goods sold were $9,615,137 thousand for 2016 and $11,855,302 thousand for 2015.

The cost of goods sold for the years ended December 31, 2016 and 2015 included reversal of inventory write-downs of $6,157 thousand and inventory write-downs of $10,900 thousand, respectively.

11. BUILDINGS AND LAND HELD FOR SALE/RECEIPTS IN ADVANCE

Buildings and land held for sale Nangang R5 Residential Project Others Receipts in Advance Nangang R5 Residential Project		December 31	December 31
		2016 $ 350,345 30 $ 350,375 $ 50,759	2015 $ 271,168 30 $ 271,198 $ 135,070

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12. SUBSIDIARIES

a. Entities included in consolidated financial statements

Investor
Investee
Main Business
The Corporation
Taifer Chemicals International
Inc.
International trade, wholesale of
fertilizer, real estate rental or
leasing and gas station
Taiwan Agricultural Global
Marketing Co., Ltd. (Note)
Wholesale and retail sale of
cosmetics and biotechnology
services
Taifer (Cayman) International
Group Co., Ltd.
Investment and holding
Taiwan Yes Deep Ocean Water
Co., Ltd.
Wholesale of drinks, food and
grocery
Taifer (Cambodia) Co., Ltd.
International trade and wholesale
of fertilizer
Taifer International (Samoa) Co.,
Ltd.
Investment and holding
Taiwan Yes Deep
Ocean Water Co.,
Ltd.
Hasbo Biotech Co., Ltd.
Wholesale of Nonalcoholic
Beverages and Cosmetics
Taifer Chemicals
International Inc.
Taifer International (Samoa)
Group Co., Ltd.
Investment and holding
Taifer International
(Samoa) Group Co.,
Ltd.
Taifer Chemical International Co.,
Ltd.
Real estate rental and leasing

% of Ownership

December 31

2016
2015
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Note: In August 2016, Taifer Biotech Co., Ltd. was renamed as Taiwan Agricultural Global Marketing Co., Ltd.
b. Subsidiaries not included in the consolidated financial statements: None.
c. Subsidiaries have material non-controlling interest: None.

13. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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December 31
2016 2015
Investments in associates $ 10,896,351 $ 11,352,927
a. Investment in associates
December 31
2016 2015
Material associates
Al-Jubail Fertilizer Company (“Al-Jubail”) $ 10,896,351 $ 11,349,635
Associates that are not individually material
Bion Tech Inc. - 3,292
$ 10,896,351 $ 11,352,927
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1) Material associates

Name of Associate Al-Jubail	Proportion of Ownership and Voting Rights
	December 31
	2016 2015 50.00% 50.00%

Refer to Table 7 “Information on Investees” for the nature of activities, principal place of business and country of incorporation of the associates.

Summarized financial information in respect of each of Al-Jubail is set out below:

Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to the Group Equity attributable to other controlling interest Operating revenue Net (loss) profit for the year Total comprehensive (loss) income for the year Dividends declared by Al-Jubail		December 31	December 31
	2016 2015 $ 7,261,936 $ 8,504,811 18,790,106 18,375,602 (1,926,461) (1,975,749) (1,944,743 ) (1,953,177 ) $ 22,180,838 $ 22,951,487 $ 11,074,803 $ 11,531,256 11,106,035 11,420,231 $ 22,180,838 $ 22,951,487 For the Year Ended December 31
		2016 $ 7,833,956 $ (454,470 ) $ (454,470 ) $ -	2015 $ 11,198,361 $ 2,198,673 $ 2,198,673 $ 649,000

2) Information of associates that are not individually material

In February 2016, associates (Bion Tech Inc.) of the Group issued ordinary shares for cash, but the Group didn’t involve in the issuance. Therefore, the Group’s proportion of ownership changed from 20.62% to 17.89%. Because the Group had ceased to have significant influence, the investment was reclassified to financial assets carried at cost by fair value. Also, the Group recognized a disposal gain of $4,887 thousand.

136

Financial Summary

b. Investments in joint ventures

Joint Ventures that are not individually material TR Electronic Chemical Co., Ltd.

	December	31
	2016 $ -	2015 $ -

The summarized financial information of the joint ventures that are not individually material.

The Group’s share of loss Total comprehensive loss for the year	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ - $ -	2015 $ (67,709 ) $ (67,709 )

On March 31, 2011, under the authorization of the Investment Commission of the Ministry of Economic Affairs of the Republic of China, the Group established TR Electronic Chemical Co., Ltd. (“TREC”) in the Cayman Islands through its subsidiary, Taifer (Cayman) International Group Co., Ltd. TREC then invested in TR Electronic Chemical (Kunshan) Co., Ltd. (“TREC-K”), which enabled the Group to have a 51% indirect interest in TREC-K. TREC-K manufactures and sells electronic chemicals. Later, under a joint venture agreement between the Group and Shiung-Shing Chemical International Trade Corp. (“Shiung-Shing”), another TREC shareholder, Shiung-Shing assigned a manager to handle TREC’s daily business and management. Thus, the Group had no control over TREC and TREC-K. In June 2015, the carrying amount of the Group’s investment in TREC was zero.

14. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2015 Additions Disposals Transfer to investment properties Effect of foreign currency exchange differences Transfer from completion Balance at December 31, 2015 Accumulated depreciation and impairment Balance at January 1, 2015 Disposals Transfer to investment properties Depreciation expense Impairment losses Effect of foreign currency exchange differences Transfer from completion Balance at December 31, 2015 Carrying amounts at December 31, 2015	Land $ 22,013,942 - (336 ) (5,810,532 ) - - 16,203,074 - - - - - - - - $ 16,203,074	Buildings $ 3,890,829 19,880 (444,264 ) (123,306 ) (426 ) 29,851 3,372,564 (823,478 ) 337,245 15,436 (97,372 ) (136,166 ) 120 - (704,215 ) $ 2,668,349	Machinery and Equipment Transportation Equipment $ 9,444,566 $ 69,426 110,564 5,557 (478,272 ) (11,156 ) - - (12 ) 3 36,735 1,461 9,113,581 65,291 (1,976,683 ) (47,483 ) 461,554 10,763 - - (534,914 ) (5,447 ) (59,239 ) (645 ) 12 - 607 - (2,108,663 ) (42,812 ) $ 7,004,918 $ 22,479	Other Equipment $ 380,951 2,848 (8,326 ) - (33 ) 1,773 377,213 (69,107 ) 7,516 - (25,987 ) (517 ) 23 (607 ) (88,679 ) $ 288,534	Construction in Progress Total $ 690,474 $ 36,490,188 507,161 646,010 - (942,354 ) - (5,933,838 ) - (468 ) (69,254 ) 566 1,128,381 30,260,104 - (2,916,751 ) - 817,078 - 15,436 - (663,720 ) (82,820 ) (279,387 ) - 155 - - (82,820 ) (3,027,189 ) $ 1,045,561 $ 27,232,915 (Continued)

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Cost Balance at January 1, 2016 Additions Disposals Transfer to investment properties Effect of foreign currency exchange differences Transfer from completion Balance at December 31, 2016 Accumulated depreciation and impairment Balance at January 1, 2016 Disposals Transfer to investment properties Depreciation expense Impairment losses Effect of foreign currency exchange difference Transfer from completion Balance at December 31, 2016 Carrying amounts at December 31, 2016	Land $ 16,203,074 - (636 ) (10,057 ) - - 16,192,381 - - - - - - - - $ 16,192,381	Buildings $ 3,372,564 232 (200,280 ) (89,318 ) (4,793 ) 150,398 3,228,803 (704,215 ) 200,254 7,249 (103,737 ) (927 ) 1,672 5,360 (594,344 ) $ 2,634,459	Machinery and Equipment Transportation Equipment $ 9,113,581 $ 65,291 97,752 5,094 (345,956 ) (5,387 ) (17,994 ) - (127 ) (2 ) 178,365 1,631 9,025,621 66,627 (2,108,663 ) (42,812 ) 338,727 5,203 1,279 - (548,973 ) (6,119 ) (134,914 ) - 112 4 (10,773 ) 82 (2,463,205 ) (43,642 ) $ 6,562,416 $ 22,985	Other Equipment $ 377,213 3,860 (4,578 ) (6,149 ) (332 ) 17,382 387,396 (88,679 ) 6,192 605 (28,212 ) (260 ) 217 1,083 (109,054 ) $ 278,342	Construction in Progress Total $ 1,128,381 $ 30,260,104 530,246 637,184 - (556,837 ) - (123,518 ) - (5,254 ) (512,989 ) (165,213 ) 1,145,638 30,046,466 (82,820 ) (3,027,189 ) - 550,376 - 9,133 - (687,041 ) - (136,101 ) - 2,005 - (4,248 ) (82,820 ) (3,293,065 ) $ 1,062,818 $ 26,753,401 (Concluded)

For the year ended December 31, 2016, as the result of the declining sale of the related products of Taiwan Yes Deep Ocean Water Co, Ltd. in the market, the estimated future cash flows expected to arise from the related equipment was decreased. The Group carried out a review of the recoverable amount of that related equipment and determined that the carrying amount exceeded the recoverable amount. The review led to the recognition of an impairment loss of $136,101 thousand, which was recognized in other gains and losses. The Group determined the recoverable amount of the relevant assets on the basis of their value in use. The discount rate used in measuring value in use was 14% per annum.

In May 2015, the Group determined after the demolition or disposal of some of the buildings and machinery in the Hsinchu and Kaohsiung factories, an impairment loss of $279,387 thousand and a disposal loss of $70,575 thousand were recognized in 2015.

The following property, plant and equipment were depreciated on a straight-line basis over their useful lives:

Buildings: Leasehold improvements and others	3-15 years
Buildings: Buildings, warehouses, storage sheds	16-60 years
Machinery and equipment: Production equipment	3-15 years
Machinery and equipment: Storage tanks, power transmission
systems, etc.	16-40 years
Transportation equipment	3-15 years
Other equipment	3-15 years

138

Financial Summary

15. INVESTMENT PROPERTIES

Cost Balance at January 1, 2015 Additions Disposals Transfer from property, plant and equipment Reclassification Balance at December 31, 2015 Accumulated depreciation and impairment Balance at January 1, 2015 Disposals Depreciation expense Transfer from property, plant and equipment Balance at December 31, 2015 Carrying amounts at December 31, 2015 Cost Balance at January 1, 2016 Additions Transfer from property, plant and equipment Balance at December 31, 2016 Accumulated depreciation and impairment Balance at January 1, 2016 Depreciation expense Transfer from property, plant and equipment Balance at December 31, 2016 Carrying amounts at December 31, 2016	Completed Investment Property Investment Property Under Construction $ 4,201,795 $ 5,052,599 - 485,286 - - 635,314 145,435 3,510,328 - 8,347,437 5,683,320 - - - - (5,943) (703) (15,436 ) - (21,379 ) (703 ) $ 8,326,058 $ 5,682,617 $ 8,347,437 $ 5,683,320 - 619,368 - 123,518 8,347,437 6,426,206 (21,379) (703) (9,045) (13,673) - (9,133 ) (30,424 ) (23,509 ) $ 8,317,013 $ 6,402,697	Undeveloped Investment Property $ 4,172,241 560,703 (2,750) 5,153,089 (3,510,328 ) 6,372,955 (610,202) 2,560 (4) - (607,646 ) $ 5,765,309 $ 6,372,955 672,581 - 7,045,536 (607,646) - - (607,646 ) $ 6,437,890	Total $ 13,426,635 1,045,989 (2,750) 5,933,838 - 20,403,712 (610,202) 2,560 (6,650) (15,436 ) (629,728 ) $ 19,773,984 $ 20,403,712 1,291,949 123,518 21,819,179 (627,728) (22,718) (9,133 ) (661,579 ) $ 21,157,600

Completed investment property are located in C3/C6/C7/C8/C9 in the Nangang Economic and Trade Park, and the Corporation leased land use right to others.

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a. The main provisions of the C6/C7/C8/C9 contract on the pledging of land use rights were as follows:
1) Land use rights are for 50 years from the date of registration of these rights. When these rights expire or the contract is terminated, the lessee should cancel its registration for the land use rights and transfer to the Group all the land improvements (including the main building, attached building, parking space and all other attached facilities and improvements such as air-conditioning, and utility fixtures).
2) The land use rights (accounted for as deferred income-noncurrent) amounted to $3,200,889 thousand, which has been treated as royalty revenue (accounted for as operating revenue) amortizable over 50 years from June 13, 2006. As of December 31, 2016 and 2015, the unamortized balances of the land used rights under above mentioned contract were $2,526,035 thousand and $2,590,053 thousand, respectively.
3) In addition to the land use right, the annual rental payable by the lessee is 8% of the reference land price announced by the local government, with the calculation starting from the contract date. When the reference land price is adjusted, the annual rental will be revised at the percentage the same as that set on the date of the reference price adjustment. The annual rentals in 2016 and 2015 were $345,132 thousand and $216,781 thousand, respectively.
4) The lessee should not transfer the land use rights or the ownership of leasehold improvements to a third party. Also prohibited are the placing of the land rights under a trust and the use of the rights as collateral.
5) The lessee should not pledge liabilities on land use rights and improvements to a third party.
b. On September 15, 2015, the Group signed with CTBC Life Insurance Co., Ltd. and Taiwan Life Insurance Co., Ltd. (together, the “lessees”) separate contracts for these two insurance companies to have the rights to use land located in C3 in the Nangang Economic and Trade Park. The main provisions of these contracts are as follows:
1) Land use rights (LURs) are valid for 45 years from the date of the registration of these rights. When these rights expire or the contracts are terminated by the Group or the lessees, the lessees should maintained all the land improvements (including the main building, attached building, parking space and all other attached facilities and improvements) at usable condition and cancel their registration for the LURs and transfer to the Group or a third party designated by the Group. But if the Group wants to demolish the land improvements, it should accordingly inform the lessees in writing within at least five years before the contract expires.
2) The LURs (accounted for as deferred income - noncurrent) amounted to $14,288,705 thousand, which has been treated as royalty revenue (under operating revenue) amortizable over 45 years from December 10, 2015. As of December 31, 2016, the unamortized balance of the LURs was $13,953,538 thousand.
3) In addition to the LURs, the annual rental payable by the lessees is 0.8% of the reference land price announced by the local government, with the calculation starting from the registration date. When the reference land price is adjusted, the annual rental will be revised at the same percentage as the rate of the reference price adjustment. The lessees’ annual rental in 2016 was $48,149 thousand.

140

Financial Summary

4) The LURs should not be transferred to a third party. Also, the placing of the LURs under a trust and the use of the rights as collaterals are prohibited without the Group’s prior written consent.
5) After nine years and six months from the registration date, the lessees have within six months to extend the validity period for the land use rights to another 40 years by giving a written notice to the Group. With this extension, the entire validity period of the LURs will be 85 years, and the lessees should pay an additional one-time royalty of $15,000,000 thousand.
6) Under the contract, the lessees provided the Taiwan Government Bond A02105 and A03114 as collaterals; as of December 31, 2016, the fair values of these bonds were $1,078,335 thousand and $1,666,091, respectively.
c. Investment properties under construction are located in Hsinchu City and Hualien City and included land for the “C2 Tourist Hotel Project” and “Commercial Building Project” in the Nangang Economic and Trade Park.

The C2 Tourist Hotel Project was won by the Grand Hi-Lai Hotel Co., Ltd. and the Caesar Park Hotel Co., Ltd., which both signed a front-end agreement (FEA) on December 31, 2013; both parties (the “Hotels”) will sign a lease agreement under this FEA.

The main terms of the FEA were as follows:

1) The Group is responsible for the construction of the lease premises (the “Premises”), and the Hotels should assist the Group in construction-related matters. The Group will shoulder the construction cost. Both parties are responsible for the completion of the premises in six years after signing the FEA.
2) The lease contract is for 20 years from the start of the lease contract, and the lessee has the first option to extend the lease for another 10 years. Upon expiry or termination of this lease agreement, the lessee should turn over the Premises as is to the Group.
3) The lessee should pay monthly rentals, calculated at the higher of the guaranteed rentals or revenue-based rentals payable to the Group from the Premises opening date. The guaranteed rental will be increased 1% each year, and the revenue-based rentals are 16% of the gross revenue of the hotel each month.
4) Under this FEA and lease agreement, the lessee should not assign and transfer any of its rights or obligation to a third party.

The project was approved by the Executive Committee of Urban Design and Land Use on February 15, 2016, and the miscellaneous licenses from the Department of Architecture for the construction of a diaphragm wall and the Approval of Performance-based Design of Fire Safety and Evacuation were acquired subsequently; however, as of March 28, 2017, the building permit has not been approved yet.

The bid for the C2 Commercial Building Project was won by Dung Jeng Investment Co., Ltd. (“Dung Jeng”), for which the Group will construct a building and parking space for Dung Jeng’s lease. The lease contract was signed on January 30, 2015. The lease period is 20 years from the completion of the construction of the building and parking space.

141

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The fair values of investment properties were assessed as follows:

December 31 2016 2015 C6/C7/C8/C9 Fair value $24,139,596 $24,696,664 Measurement The fair values were based on the The fair values were based on the valuations carried out at March valuations carried out at April 15, 11, 2016 by independent 2015 by independent qualified qualified professional valuer. professional valuer. C2 Fair value $19,743,214 $20,659,864 Measurement The fair values were based on the The fair values were based on the valuations carried out at March valuations carried out at April 15, 11, 2016 by independent 2015 by independent qualified qualified professional valuer. professional valuer. C3 Fair value $34,427,661 $38,322,761 Measurement The fair values were based on the The fair values were based on the valuations carried out at March valuations carried out at March 11, 2016 by independent 30, 2015 by independent qualified professional valuer. qualified professional valuer.

The other investment properties held by the Group are mainly located in different industrial zones. They have no quoted prices in an active market and there was no alternative basis for estimating their fair values. Thus, the fair values of the investment properties were not reliably determinable.

16. INTANGIBLE ASSETS

Cost Balance at January 1, 2015 Additions Balance at December 31, 2015 Accumulated amortization and impairment Balance at January 1, 2015 Amortization expense Balance at December 31, 2015 Carrying amounts at December 31, 2015	Patents Computer Software Trademark $ 29,010 $ 112,471 $ 84,900 - 3,454 - 29,010 115,925 84,900 (25,242) (74,796) - (3,047 ) (13,242 ) - (28,289 ) (88,038 ) - $ 721 $ 27,887 $ 84,900 Patents Computer Trademark	Goodwill Total $ 358,487 $ 584,868 - 3,454 358,487 588,322 - (100,038) - (16,289 ) - (116,327 ) $ 358,487 $ 471,995 (Continued) Goodwill Total

142

Financial Summary

Software

Cost Balance at January 1, 2016 Additions Disposals Balance at December 31, 2016 Accumulated amortization and impairment Balance at January 1, 2016 Amortization expense Disposals Impairment loss Balance at December 31, 2016 Carrying amounts at December 31, 2016	$ 29,010 - - 29,010 (28,289) (285) - - (28,574 ) $ 436	$ 115,925 5,558 (554 ) 120,929 (88,038) (13,094) 366 - (100,766 ) $ 20,163	$ 84,900 - - 84,900 - - - (49,000 ) (49,000 ) $ 35,900	$ 358,487 $ 588,322 - 5,558 - (554 ) 358,487 593,326 - (116,327) - (13,379) - 366 (157,000 ) (206,000 ) (157,000 ) (335,340 ) $ 201,487 $ 257,986 (Concluded)

The Group acquired trademark and goodwill through the acquisition of an additional 50% equity in Taiwan Yes Deep Ocean Water Co., Ltd. (“Taiwan Yes”) on January 7, 2013. For the year ended December 31, 2016, the Group evaluated the recoverable amount of trademark and goodwill and recognized an impairment loss of $206,000 thousand. The recoverable amount of Taiwan Yes was determined based on the value in use calculation with a discount rate of 14%. This impairment was mainly due to the fact that the future operating performance of Taiwan Yes was not as expected.

The above items of intangible assets with finite useful lives were depreciated on a straight-line basis over the estimated useful life of the asset:

Patents 5-10 years Computer software 1-5 years

17. LONG-TERM PREPAYMENT FOR LEASE

Land in a special petrochemical industry zone in Taichung		December 31	December 31
		2016 $ 1,215,950	2015 $ 1,286,561

On October 31, 2006, the Corporation leased from the Taichung Harbor Bureau, Ministry of Transportation and Communications (“THB”) a 247.298-square meter lot in a special petrochemical industry zone in Taichung to develop wharf areas, called wests 8 and 9, and construct warehouse facilities and public roads. In April 2007, the Corporation informed THB that an inspection showed the area of the land as stated in the lease contract was the same as that to be actually used by the Corporation; thus, the Corporation signed the contract. The main provisions of the lease agreement were as follows:

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a. The lease term for the land in a special industrial zone is 20 years, and the agreement is renewable until the total lease reaches 50 years. The ownership of the real estate and its improvements constructed with the Corporation’s capital belongs to the Corporation. In principle, the Corporation will return the land to the government on the agreement expiry or upon early termination of the lease agreement.
b. As mentioned above, the Corporation has leased land, developed wests 8 and 9 of the wharf area and constructed warehouse facilities and public roads on behalf of THB. The Corporation used its capital expenses for the construction as rentals in advance. However, once the lease term ends or the agreement is early terminated, all the titles to the facilities and improvements on the leased land should be transferred to THB.

The Corporation uses its expenditures of $1,500,481 thousand for the construction of wests 8 and 9 of Taichung Harbor as rentals until March 20, 2034. The long-term prepayments for lease should be amortized over its rent-free periods.

18. BORROWINGS

a. Short-term borrowings

Unsecured borrowings Fixed rate bank loans Annual interest rate (%)		December	31
	2016 $ 46,000 1.32%-1.35%		2015 $ 10,000 1.50%

19. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Corporation, Taifer Chemicals International Inc., Taiwan Agricultural Global Marketing Co., Ltd., Taiwan Yes Deep Ocean Water Co., Ltd. and Hasbo Biotech Co., Ltd. of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

Accordingly, the Group recognized expenses of $20,555 thousand and $21,417 thousand in the consolidated statements of comprehensive income for the years ended December 31, 2016 and 2015, respectively.

b. Defined benefit plans

144

Financial Summary

balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability		December 31	December 31
		2016 $ 542,182 (447,829 ) $ 94,353	2015 $ 557,548 (89,508 ) $ 468,040

Movements in net defined benefit liability (asset) were as follows:

	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of	Benefit
	Obligation	the Plan Assets	Liability (Asset)
Balance at January 1, 2015	$ 640,962	$ (222,001 )	$ 418,961
Service cost
Current service cost	23,662	-	23,662
Past service cost	100,479	-	100,479
Net interest expense	7,732	-	7,732
Net interest income	-	(1,762 )	(1,762 )
Recognized in profit or loss	131,873	(1,762 )	130,111
Remeasurement
Return on plan assets
(excluding amounts included
in net interest)	-	(5,545)	(5,545)
Actuarial loss - changes in
demographic assumptions	68	-	68
Actuarial loss - changes in
financial assumptions	19,770	-	19,770
Actuarial loss - experience
adjustments	11,205	-	11,205
Recognized in other
comprehensive income (loss)	31,043	(5,545 )	25,498
Contributions from the employer	-	(16,688)	(16,688)
Benefits paid	(26,803)	26,803	-
Liabilities extinguished on
settlement	(219,527 )	129,685	(89,842 )
Balance at December 31, 2015	557,548	(89,508 )	468,040

(Continued)

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	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of		Benefit
	Obligation	the Plan Assets	Liability (Asset)
Service cost
Current service cost	19,748	-		19,748
Past service cost	10,809	-		10,809
Net interest expense	5,275	-		5,275
Net interest income	-	(702 )		(702 )
Recognized in profit or loss	35,832	(702 )		35,130
Remeasurement
Return on plan assets
(excluding amounts included
in net interest)	-	(1,913)		(1,913)
Actuarial loss - changes in
demographic assumptions	2	-		2
Actuarial loss - changes in
financial assumptions	7,182	-		7,182
Actuarial loss - experience
adjustments	10,574	-		10,574
Recognized in other
comprehensive income (loss)	17,758	(1,913 )		15,845
Contributions from the employer	-	(405,581)		(405,581)
Benefits paid	(44,834)	36,305		(8,529)
Liabilities extinguished on
settlement	(24,122 )	13,570		(10,552 )
Balance at December 31, 2016	$ 542,182	$ (447,829 )	$	94,353

(Concluded)

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans was as follows:

Operating costs Operation expenses	For the Year Ended	For the Year Ended	December 31
		2016 $ 9,510 25,620 $ 35,130	2015 $ 67,947 62,164 $ 130,111

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

146

Financial Summary

2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate(s) Expected rate(s) of salary increase	December 31
	2016 2015 1.00% 1.00% 1.20% 1.00%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would (decrease/increase) as follows:

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December 31	December 31
		2016 $ (8,850 ) $ 9,138 $ 9,097 $ (8,854 )	2015 $ (9,282 ) $ 9,588 $ 9,564 $ (9,305 )

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The expected contributions to the plan for the next year The average duration of the defined benefit obligation		December	31
		2016 $ 20,030 6 years	2015 $ 21,447 7 years

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20. EQUITY

a. Share capital

Number of shares authorized and issued (in thousands) Capital authorized and issued Capital surplus May be used to offset a deficit, distributed as cash dividends, or transferred to share capital Donations Treasury share transactions May not be used Arising from share of changes in capital surplus of associates		December 31	December 31
		2016 2015 980,000 980,000 $ 9,800,000 $ 9,800,000 December 31
		2016 $ 44,803 2,187,988 - $ 2,232,791	2015 $ 44,803 2,187,988 4,887 $ 2,237,678

b. Capital surplus

c. Retained earnings and dividend policy

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The shareholders held their regular meeting on June 29, 2016 and, in that meeting, had resolved amendments to the Corporation’s Articles of Incorporation (the “Articles”), particularly the amendment to the policy on dividend distribution and the addition of the policy on distribution of employees’ compensation.

Under the dividend policy as set forth in the amended Articles, where the Corporation made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Corporation’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders. For the policies on distribution of employees’ compensation and remuneration of directors and supervisors before and after amendment, please refer to (d) Employee benefits expense in Note 22.

148

Financial Summary

to essential investment plan, change in financial position, business operation, extension of capacity or any other capital expenditure and should be approved in the shareholders’ meetings.

Appropriation of earnings to the legal reserve shall be made until the legal reserve equals the Corporation’s paid-in capital. The legal reserve may be used to offset deficits. If the Corporation has no deficit and the legal reserve has exceeded 25% of the Corporation’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Items referred to under Rule No. 1010012865, and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Corporation.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Corporation.

The appropriations from the 2015 and 2014 earnings were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2015 2014 $ 242,708 $ 306,834 2,058,000 2,156,000	Dividends Per Share (NT$)
		For the Year Ended December 31
		2015 2014 $2.1 $2.2

The appropriation of earnings for 2016 was proposed by the Corporation’s board of directors on March 24, 2017. The appropriations and dividends per share were as follows:

The net loss for the year, which amounted to $129,503 thousand, will be made up by unappropriated earnings. By combining the adjusted unappropriated earnings amounting to $832,835 thousand with the reversed appropriated special reserve amounting to $2,030,304 thousand, the Corporation will distribute cash dividends amounting to $2,058,000 thousand ($2.1 per share).

The appropriation of earnings for 2016 are subject to resolution in the shareholders’ meeting to be held on June 14, 2017.

d. Special reserves

On the first-time adoption of IFRSs, the Corporation appropriated a special reserve amounted to $32,114,341 thousand, of which the amount was the same as the unrealized revaluation increment transferred to retained earnings. The special reserve can be reversed on the disposal or reclassification of the related assets.

The Corporation’s special reserve relating to land reversed on disposal was $635 thousand in 2016.

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21. OPERATING REVENUES AND COSTS

Operating revenues Sales revenue Property revenue Rental revenue Other revenue Less: Sales returns and allowances Net operating revenues Operating costs Cost of goods sold Property selling cost Rental cost Total operating costs Gross profit	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 10,457,717 303,718 1,453,864 50,285 (24,664 ) 12,240,920 9,441,818 117,767 675,081 10,234,666 $ 2,006,254	2015 $ 12,183,880 4,508,646 713,812 99,928 (19,189 ) 17,487,077 11,855,302 1,228,053 528,722 13,612,077 $ 3,875,000

22. ADDITIONAL INFORMATION ON NET (LOSS) PROFIT FOR THE YEAR

a. Other gains and losses

Impairment loss on intangible assets (Note 16) Withholding tax of donation (Note 30) Impairment loss on property, plant and equipment (Note 14) Gain on disposal of investments Loss on impairment of financial assets (Note 9) Net foreign exchange gain Impairment loss of other receivables (Note 28) Gain (loss) on disposal of property, plant and equipment (Note 14) Donation expenses (Note 30) Guarantee provisions Gain on disposal of investment property Others	For the Year Ended	For the Year Ended	December 31
		2016 $ (206,000) (149,475) (136,101) 23,381 (15,000) 12,719 (4,294) 3,584 - - - (51,281 ) $ (522,467 )	2015 $ - - (279,387) 1,018 - 34,038 (247,251) (70,554) (223,650) (65,732) 8,291 (2,494 ) $ (845,721 )

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Financial Summary

b. Other income

Interest income - bank deposits Subsidies of land improvement demolition Dividends Others	For the Year Ended	For the Year Ended	December 31
		2016 $ 62,445 46,870 41,782 17,220 $ 168,317	2015 $ 19,995 - 42,868 9,830 $ 72,693

c. Depreciation and amortization

Property, plant and equipment Long-term prepayment for lease Intangible assets Investment property Summarized by function Operating costs Operating expenses Nonoperating expenses Employee benefit expense Short-term employee benefits Salary Labor and health insurance Others Retirement benefits (Note 19) Defined contribution plans Defined benefit plans Termination benefits Other employee benefits	For the Year Ended	December 31
	2016 2015 $ 687,041 $ 663,720 70,611 70,611 13,379 16,289 22,718 6,650 $ 793,749 $ 757,270 $ 716,201 $ 680,701 63,875 75,862 13,673 707 $ 793,749 $ 757,270 For the Year Ended December 31 2016 2015 $ 906,241 $ 952,532 56,369 55,900 32,149 44,968 994,759 1,053,400 20,555 21,417 35,130 130,111 55,685 151,528 3,398 1,347 706 2,916 $ 1,054,548 $ 1,209,191 (Concluded) For the Year Ended December 31 2016 2015

d. Employee benefit expense

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Summarized by function Operating costs Operating expenses	$ 489,711 564,837 $ 1,054,548	$ 549,008 660,183 $ 1,209,191 (Concluded)

1) Employees’ compensation and remuneration of directors and supervisors for 2016 and 2015

In compliance with the Company Act as amended in May 2015 and the amended Articles of Incorporation of the Corporation approved by the shareholders in their meeting on June 29, 2016, the Corporation accrued employees’ compensation and remuneration of directors and supervisors at the rates 2.4% and no higher than 1.6%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors and supervisors. Due to the loss before income tax in 2016, the Corporation didn’t accrue employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2016.

The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2015 was as follows:

Employee’s compensation Remuneration of directors and supervisors	For the Year Ended December 31, 2014
	Amount Estimated Rate (%) $ 63,542 2.4 42,362 1.6

If there is a change in the amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.

There was no difference between the actual amounts of employees’ compensation and remuneration of directors and supervisors paid and the amounts recognized in the parent company only financial statements for the year ended December 31, 2015.

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the Corporation’s board of directors in 2017 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

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Financial Summary

2) Bonus to employees and remuneration of directors and supervisors for 2014

The bonus to employees and remuneration of directors and supervisors for 2014 which have been approved in the shareholders’ meeting on June 24, 2015 was as follows:

Bonus to employees Remuneration of directors and supervisors	For the Year Ended December 31, 2014
	Cash $ 68,084 45,390

There was no difference between the amounts of the bonus to employees and the remuneration of directors and supervisors approved in the shareholders’ meeting on June 24, 2015 and the amounts recognized in the consolidated financial statements for the year ended December 31, 2014.

23. INCOME TAX

a. Income tax recognized in profit or loss
1) The major components of tax expense were as follows:

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior years Deferred tax In respect of the current year Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2016 $ 807 10,940 (10,965 ) 782 107,702 $ 108,484	2015 $ 33,247 60,478 (33,073 ) 60,652 31,995 $ 92,647

2) A reconciliation of accounting profit and income tax expenses is as follows:

(Loss) profit before income tax Income tax expense calculated at the statutory rate Adjustment items in determining taxable profit Tax-exempt income Income tax on unappropriated earnings	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ (21,019 ) $ (23,241) 75,811 (10,247) 10,940	2015 $ 2,519,730 $ 427,875 88,622 (514,685) 60,478

(Continued)

For the Year Ended December 31

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Unrecognized temporary differences Adjustments for prior years’ tax Nondeductible foreign dividend income tax Others Income tax expense recognized in profit or loss	2016 65,898 (10,965) - 288 $ 108,484	2015 30,727 (33,073) 32,450 253 $ 92,647 (Concluded)

The applicable tax rate used by the Corporation and subsidiaries in Taiwan was the corporate tax rate of 17%, and the applicable tax rate used by the subsidiaries in Mongolia was 10%.

b. Income tax recognized in other comprehensive income

Deferred tax In respect of the current year: Translation of foreign operations Remeasurement of the defined benefit plan Total income tax recognized in other comprehensive income	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 33,892 2,693 $ 36,585	2015 $ (70,262) 4,335 $ (65,927 )

c. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2016

Deferred Tax Assets Unamortized manufacturing costs Tax losses Defined benefit obligation Impairment loss on assets Others Deferred Tax Liabilities	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehen- sive Income $ 60,880 $ (23,046) $ - 119,232 (51,467) - 79,567 (66,220) 2,693 81,638 (10,907) - 17,673 (930 ) - $ 358,990 $ (152,570 ) $ 2,693 Opening Balance Recognized in Profit or Loss Recognized in Other Comprehen- sive Income	Closing Balance $ 37,834 67,765 16,040 70,731 16,743
		$ 209,113
		Closing Balance

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Financial Summary

For the year ended December 31, 2015 Deferred Tax Assets Opening Balance Recognized in Profit or Loss Recognized in Other Comprehen- sive Income Unamortized manufacturing costs $ 76,469 $ (15,589) $ - Tax losses 75,700 43,532 - Defined benefit obligation 71,223 4,009 4,335 Impairment loss on assets 56,218 25,420 - Others 35,052 (17,379 ) - $ 314,662 $ 39,993 $ 4,335 Deferred Tax Liabilities Opening Balance Recognized in Profit or Loss Recognized in Other Comprehen- sive Income Land value increment tax $ 6,420,466 $ (76) $ - Investment income recognized under the equity method 588,867 73,375 - Exchange difference on the translation of foreign operations 140,357 - 70,262 Others 1,358 (1,311 ) - $ 7,151,048 $ 71,988 $ 70,262 Land value increment tax $ 6,420,390 $ (157) $ - Investment income recognized under the equity method 662,242 (44,747) - Exchange difference on the translation of foreign operations 210,619 - (33,892) Others 47 36 - $ 7,293,298 $ (44,868 ) $ (33,892 )	$ 6,420,233 617,495 176,727 83
	$ 7,214,538
	Closing Balance $ 60,880 119,232 79,567 81,638 17,673
	$ 358,990
	Closing Balance $ 6,420,390 662,242 210,619 47
	$ 7,293,298

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d. Deductible temporary differences, and unused loss carryforwards for which no deferred tax assets have been recognized in the consolidated balance sheets

Loss carryforwards Expire in 2017 Expire in 2018 Expire in 2019 Expire in 2020 Expire in 2021 Expire in 2022 Expire in 2023 Expire in 2024 Expire in 2025 Expire in 2026 Deductible temporary differences Property, plant and equipment Allowance for inventory valuation losses		December 31	December 31
		2016 $ 81,678 258,059 119,159 87,639 123,888 62,797 42,061 18,791 15,463 9,753 $ 819,288 $ 43,306 6,838 $ 50,144	2015 $ 87,895 148,250 33,919 47,714 63,679 63,309 43,696 18,791 15,532 - $ 522,785 $ 6,598 13,330 $ 19,928

e. Information about unused loss carryforwards

Expire in 2017 Expire in 2018 Expire in 2019 Expire in 2020 Expire in 2021 Expire in 2022 Expire in 2023 Expire in 2024 Expire in 2025 Expire in 2026		December 31	December 31
		2016 $ 87,895 264,838 139,630 143,625 190,069 133,661 81,635 18,791 35,932 37,439 $ 1,133,515	2015 $ 87,895 264,838 139,630 143,625 190,069 134,172 83,269 18,791 38,732 - $ 1,101,021

f. Integrated income tax

Unappropriated earnings generated on and after January 1, 1998 Shareholder-imputed credit account		December 31	December 31
		2016 $ 703,332 $ 192,221	2015 $ 3,146,060 $ 945,082

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Financial Summary

The creditable ratios for the distribution of the 2016 and 2015 earnings were 28.39% (expected ratio) and 22.18%, respectively.

g. Income tax assessments

The tax returns through 2014 have been assessed by the tax authorities.

24. (LOSS) EARNINGS PER SHARE

Unit: NT$ Per Share

Basic (loss) earnings per share Diluted (loss) earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ (0.13 ) $ (0.13 )	2015 $ 2.48 $ 2.47

The (loss) earnings and weighted average number of ordinary shares outstanding in the computation of (loss) earnings per share were as follows:

Net (Loss) Profit for The Year

(Loss) profit used in the computation of basic (loss) earnings per share (Loss) profit used in the computation of diluted (loss) earnings per share Number of Shares Weighted average number of ordinary shares used in the computation of basic (loss) earnings per share Effect of potentially dilutive ordinary shares Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted (loss) earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2016 2015 $ (129,503 ) $ 2,427,083 $ (129,503 ) $ 2,427,083 Unit: Thousand Shares For the Year Ended December 31
		2016 980,000 - 980,000	2015 980,000 2,125 982,125

If the Group offered to settle compensation in cash or shares, the Group assumed the entire amount of the compensation will be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

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25. OPERATING LEASE AGREEMENTS

Operating leases relate to the investment property owned by the Group with lease terms between 1 to 50 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have a bargain purchase option to acquire the property at the expiry of the lease period.

The future minimum lease payments of non-cancellable operating lease were as follows (not include the royalty the Group received for the land use right):

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years		December 31	December 31
		2016 $ 551,500 2,068,792 14,061,550 $ 16,681,842	2015 $ 358,208 1,324,892 8,235,274 $ 9,918,374

26. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity of the Group (comprising issued capital, reserves, retained earnings and other equity).

The Group is not subject to any externally imposed capital requirements.

Key management personnel of the Group review the capital structure on an annual basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the amount of dividends paid to shareholders or the amount of new debt issued or existing debt redeemed.

27. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

The Group’s management believes the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values or their fair values cannot be reliably measured.

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Financial Summary

b. Fair value of financial instruments that are measured at fair value on a recurring basis

Fair value hierarchy

December 31, 2016

Available-for-sale financial assets Domestic quoted shares Mutual funds December 31, 2015 Available-for-sale financial assets Domestic quoted shares Mutual funds	Level 1 $ 91,102 3,155,410 $ 3,246,512 Level 1 $ 76,315 8,652,977 $ 8,729,292	Level 2 $ - - $ - Level 2 $ - - $ -	Level 3 $ - - $ - Level 3 $ - - $ -	Total $ 91,102 3,155,410
				$ 3,246,512
				Total $ 76,315 8,652,977
				$ 8,729,292

There were no transfers between Levels 1 and 2 in the current and prior periods.

c. Categories of financial instruments

Financial assets Loans and receivables (1) Available-for-sale financial assets (2) Financial liabilities Amortized cost (3)	December 31
	2016 2015 $ 10,458,153 $ 7,815,739 3,696,094 9,224,333 1,455,387 1,966,703

1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, accounts receivable, other receivables, other financial assets, and long-term receivable.
2) The balances included the carrying amount of available-for-sale financial assets and financial assets measured at cost.
3) The balances included financial liabilities measured at amortized cost, which comprised notes payable, accounts payable, other payables, and short-term borrowings.

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d. Financial risk management objectives and policies

The Group’s Corporate Treasury function is responsible for the preparation of financial plans, capital allocation and risk management, and coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (mainly including currency risk and interest rate risk), credit risk and liquidity risk.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

a) Foreign currency risk

The Group had foreign currency sales and purchases, which exposed the Group to foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period. Refer to Note 31 for related disclosures.

Sensitivity analysis

The Group was mainly exposed to USD.

The following are the details of the Group’s sensitivity to a 10% increase and decrease in New Taiwan dollars against USD. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items, and adjusts their translation at the end of the reporting period for a 10% change in foreign currency rates. For the years ended December 31, 2016 and 2015, for a 10% strengthening/weakening of New Taiwan dollars against USD, there would be a decrease/increase of $19,069 thousand and increase/decrease of $16,971 thousand on pre-tax profit, respectively. The effect of exchange rate changes was mainly attributable to the exposure outstanding on USD receivables and payables, which were not hedged at the end of the reporting period.

b) Interest rate risk

The Group was exposed to interest rate risk because entities in the Group borrowed funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings, and using interest rate swap contracts and forward interest rate contracts.

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Financial Summary

The carrying amount of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Sensitivity analysis	December 31
	2016 2015 $ 7,665,188 $ 4,572,692 46,000 10,000 980,175 1,389,936

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period.

If interest rates had been 100 basis point higher/lower and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2016 and 2015 would increase/decrease by $9,802 thousand and $13,899 thousand, respectively.

c) Other price risk

The Group was exposed to equity price risk through its investments in listed equity securities and mutual funds. The Group manages this exposure by maintaining a portfolio of investments with different risks. The Group’s equity price risk was mainly concentrated on equity instruments listed on the Taiwan Stock Exchange. In addition, the Group has appointed a special team to monitor price risks and will consider hedging the risk exposure should the need arise.

Sensitivity analysis

The sensitivity analyses below was based on the exposure to equity price risks at the end of the reporting period.

Had equity prices been 5% higher/lower, pretax other comprehensive income for the years ended December 31, 2016 and 2015 would have increased/decreased by $162,326 thousand and $436,465 thousand, respectively, as a result of the changes in fair value of available-for-sale investments.

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure of counterparties to discharge an obligation and financial guarantees provided by the Group could arise from the carrying amount of the respective recognized financial assets as stated in the consolidated balance sheets; and the amount of contingent liabilities in relation to financial guarantee issued by the Group.

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The Group adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group only transacts with entities that are rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available and, if not available, the Group uses other publicly available financial information and its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually.

Credit risk represents the potential loss that would be incurred by the Group if the counter-parties breach contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The counter-parties to the foregoing financial instruments are reputable financial institutions and business organizations. Management does not expect the Group’s exposure to default by those parties to be material.

On some properties sold in installments, the Group had the mortgage rights to ensure the protection of the Group’s interests.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

Liquidity and interest risk rate tables

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables included both interest and principal cash flows. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

To the extent that interest flows are floating rate, the undiscounted amount was derived from the interest rate curve at the end of the reporting period.

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Financial Summary

December 31, 2016

On Demand or Less than 1 Month Non-derivative financial liabilities Noninterest bearing $ 57,055 Fixed interest rate liabilities 52 $ 57,107 December 31, 2015 On Demand or Less than 1 Month Non-derivative financial liabilities Noninterest bearing $ 83,806 Fixed interest rate liabilities 7 $ 83,813	1-3 Months $ 991,770 46,089 $ 1,037,859 1-3 Months $ 1,148,558 10,025 $ 1,158,583	3 Months to 1 Year $ 360,562 - $ 360,562 3 Months to 1 Year $ 724,339 28 $ 724,367	1-5 Years $ - -
			$ -
			1-5 Years $ - -
			$ -

The amounts included above for floating interest rate instruments for both non-derivative financial assets and liabilities was subject to change if changes in floating interest rates differ from those estimates of interest rates determined at the end of the reporting period.

Financing facilities

Unsecured bank facility Amount used Amount unused Unsecured bank overdraft facility Amount used Amount unused		December 31	December 31
		2016 $ 46,000 11,624,100 $ 11,670,100 $ - 390,000 $ 390,000	2015 $ 10,000 10,259,100 $ 10,269,100 $ - 540,000 $ 540,000

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28. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Corporation and its subsidiaries, which are related parties of the Corporation, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

a. Operating transactions

Associates	Purchase of Goods	Purchase of Goods	Purchase of Goods
	For the Year Ended December 31
		2016 $ 1,026,900	2015 $ 2,243,935

The transaction terms with related parties were not significantly different from those with third parties.

Associates		Payables to Related Parties	Payables to Related Parties
		December 31
		2016 $ 318,490	2015 $ 655,755

TR Electronic Chemical Co., Ltd. (TR), a jointly controlled entity of the Corporation, obtained a financing of US$10,000 thousand from a bank, and both the Corporation and Jing Chin International Limited Corporation, a shareholder of TR, guaranteed the repayment of this financing. When TR failed to make a repayment, the bank then requested the guarantors to partially repay the loan. Because the Corporation could only provide TR, in compliance with the “Regulations Governing the Granting of Loans and Endorsements and Guarantees by Public Companies”, with a limited amount of endorsement, the Corporation’s board of directors approved the repayment of TR’s loan in the following manner:

Due Date	Date of Repayment	Amount in USD	Amount in USD	Amount in NTD
March 27, 2014	June 27, 2014	$	4,570	$ 144,641
April 26, 2015	April 24, 2015		3,300	102,610
March 27, 2016	March 31, 2016		2,147	70,026

Considering the weakening operating and repayment capability of TR, the Group recognized an impairment loss of $312,983 thousand and $4,294 thousand on receivables for the years ended December 31, 2016 and 2015, respectively.

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Financial Summary

b. Compensation of key management personnel

The compensation to directors and other key management personnel was as follows:

Short-term employee benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 48,876 8,906 $ 57,782	2015 $ 78,100 1,213 $ 79,313

29. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets have been pledged or mortgaged as collaterals for bank loans.

Pledge deposits		December	31
		2016 $ 19,800	2015 $ 19,800

30. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

a. As of December 31, 2016, the Corporation had unused letters of credits of US$10,059 thousand and EUR454 thousand.
b. As of December 31, 2016, the Corporation had guarantee notes payable for its debt of $11,995,100 thousand, which was not reflected in the financial statements.
c. Huaku Development Co., Ltd. (“Huaku”) filed an appeal with the Taipei District Civil Court (the “Court”) for the Corporation to pay a co-building trade business tax of $38,370 thousand. The Court ruled that the Corporation should make this payment in June 2014. The Corporation brought this case to a High Court in August 2014; however, the High Court ruled denying in June 2015. Therefore, the Corporation lodged an appeal against the High Court judgment in July 2015, but the Supreme Court decided against the Corporation, so the conviction has been affirmed by the Supreme Court. The Corporation accrued a possible loss of $38,370 thousand for this case in 2012 financial statements.
d. On June 25, 2013, the shareholders resolved that, in order to enhance the long-term business relationship with Saudi Arabian Basic Industries Corporation as well as to maintain the relationship with the Kingdom of Saudi Arabia (“Saudi Arabia”), the Corporation shall donate its share of Al-Jubail’s profit, with US$50,000 thousand as the donation limit, to the government or organizations in Saudi Arabia.

In October 2013, the Corporation and Al-Jubail signed a Memorandum of Understanding (MOU); the main contents of the MOU are summarized as follows:

1) The Corporation agreed to donate US$42,000 thousand by way of six equal semiannual installments of US$7,000 thousand to the government or a nonprofit organization in Saudi Arabia. The first donation should be made by October 31, 2013.

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2) The donation will be funded from the dividends of Al-Jubail that have been declared and are to be distributed to the Corporation. Al-Jubail will keep the above funds in a separate account in its name in a local bank. As administrator of the donations, Al-Jubail should designate the recipient of the donation.

The Corporation’s donation was as follows:

Period	Date of Donations	Amount in USD	Amount in USD	Amount in NTD
1st	October 2013	$	7,000	$ 209,440
2nd	June 2014		7,000	208,635
3rd	December 2014		7,000	212,940
4th	March 2015		7,000	223,650

e. On May 22, 2015, the Corporation’s board of directors approved the issuance by Taifer (Cayman) International Group Co., Ltd. (“Corporation Cayman”), a 100% subsidiary, of a letter endorsing the request of TR Electronic Chemical (Kunshan) Ltd. (TR) for a bank financing of US$3,000 thousand; the main contents of the letter are as follows:
1) Taifer Cayman will inform the bank once its equity interest in TR becomes less than 51%.
2) Taifer Cayman will maintain its management of and control over TR.
3) Taifer Cayman will provide TR with appropriate resources (including financial, employee and technology support) to help TR carry out its obligations.
4) If TR significantly breaches the contract, Taifer Cayman will take lawful measures to assist TR in fully repaying, or monitor the way TR repays, its loan, or in providing other collaterals to the bank.
f. On October 14, 2016, the Corporation received a letter from the National Taxation Bureau of Taipei, Ministry of Finance, which notified the Corporation that it had not declared withholding tax in relation to donations to the government and non-profit organizations of Saudi Arabia from 2014 to 2016. According to Paragraph 1 of Article 114 of the Income Tax Act, the amount of withholding tax payable was $140,065 thousand, and the Corporation paid it on October 28, 2016. The Corporation also accrued fines for this case in 2016.

31. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The following information was aggregated by the foreign currencies other than functional currencies of the group entities and the exchange rates between foreign currencies and respective functional currencies were disclosed.

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Financial Summary

The significant financial assets and liabilities denominated in foreign currencies were as follows:

December 31, 2016

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 11,305 32.25 (USD:NTD) USD 1,242 2,489.53 (USD:MNT) Non-monetary items Investments accounted for using equity SAR 1,267,136 8.60 (SAR:NTD) Financial liabilities Monetary items USD 6,634 32.50 (USD:NTD) December 31, 2015 Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 13,604 32.825 (USD:NTD) USD 1,078 1,995.51 (USD:MNT) Non-monetary items Investments accounted for using equity SAR 1,296,728 8.75 (SAR:NTD) Financial liabilities Monetary items USD 19,852 32.825 (USD:NTD)	Carrying Amount $ 364,586 40,055
	$ 404,641
	$ 10,896,351
	$ 213,947
	Carrying Amount $ 446,551 35,385
	$ 481,936
	$ 11,349,635
	$ 651,642

167

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The significant (realized and unrealized) foreign exchange gains (losses) were as follows:

Foreign Currencies USD	For the Year Ended December 31	For the Year Ended December 31
	2016 Exchange Rate Net Foreign Exchange Gain 32.263 (USD:NTD) $ 12,719	2015
		Exchange Rate Net Foreign Exchange Gain 31.739 (USD:NTD) $ 34,038

32. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees:
1) Financing provided to others: None
2) Endorsements/guarantees provided: Table 1
3) Marketable securities held (excluding investment in subsidiaries, associates and joint ventures): Table 2
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Table 3
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 4
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 5
9) Trading in derivative instruments: None
10) Intercompany relationships and significant intercompany transactions: Table 6
11) Information on investees: Table 7
b. Information on investments in mainland China ：
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: Table 8

168

Financial Summary

2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses: None
a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.
c) The amount of property transactions and the amount of the resultant gains or losses.
d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.
f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

33. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. Specifically, the Group’s reportable segments under IFRS 8 “Operating Segments” were fertilizer and chemical and construction (rental is included).

a. Segment revenues and results

The following was an analysis of the Group’s revenue and results from operations by reportable segment.

Fertilizer and chemical Construction Others Share of the profits of associates and joint ventures Other gains and losses Other income Finance costs (Loss) profit before income tax		Segment Revenues Year Ended December 31 2016 2015 $ 10,021,634 $ 11,719,776 1,757,582 5,222,458 461,704 544,843 $ 12,240,920 $ 17,487,077		Segment Income	Segment Income
				Year Ended December 31
		2016 $ 10,021,634 1,757,582 461,704 $ 12,240,920		2016 $ 336,716 413,224 (154,246 ) 595,694 (255,534) (522,467) 168,317 (7,029 ) $ (21,019 )	2015 $ (512,510) 2,862,312 (4,790 ) 2,345,012 962,031 (845,721) 72,693 (14,285 ) $ 2,519,730

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Segment revenue reported was generated from external customers. There were no intersegment sales in 2016 and 2015.

b. Segment total assets

Segment assets Fertilizer and chemical Construction Others Consolidated total assets		December 31	December 31
		2016 $ 54,045,627 22,062,931 609,244 $ 76,717,802	2015 $ 58,522,768 21,279,277 701,760 $ 80,503,805

c. Segment total liabilities

Segment liabilities Fertilizer and chemical Construction Others Consolidated total liabilities		December 31	December 31
		2016 $ 8,564,584 17,308,490 240,302 $ 26,113,376	2015 $ 9,682,747 17,660,429 192,769 $ 27,535,945

d. Geographical information

The revenue-generating units of the Group were mainly in Republic of China. Thus, the disclosure of geographical information was not required.

e. Information about major customers

The Corporation and its subsidiaries had no sales to a single customer that were at least 10% of total sales in 2016 and 2015.

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TABLE 1

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

ENDORSEMENT/GUARANTEE PROVIDED YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars/Foreign Currency)

No.	Endorser/ Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Each Guaranteed Party’s Endorsement/ Guarantee Amounts (Note 1)	Maximum Balance for the Period	Ending Balance	Ending Used Balance	Value of Collaterals Property, Plant, or Equipment	Ratio of Accumulated Amount of Collateral to Net Equity of the Latest Financial Statement	Maximum Collateral/ Guarantee Amounts Allowable (Note 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Nature of Relationship
0	Taiwan Fertilizer Co., Ltd. (the “Corporation”)	TR Electronic Chemical Co., Ltd. (TR) Taifer Chemicals International Inc. (“Taifer”)	Indirect equity-method investee in which the Corporation provided endorsement and guarantee according to the percentage of ownership Subsidiary	$ - 40,806	$ 66,626 (US$ 2,130) 23,500	$ - (Note 3) 13,500	$ - 13,500	$ - -	- 0.03	$ - 25,302,213	No Yes	No No	No No

Note 1: The total amount of the guarantee provided by the Corporation to any individual entity should not exceed 20% of the Corporation’s net worth, or 50% of the individual net worth of TR and Taifer.

Note 2: The total amount of guarantee should not exceed 50% of the Corporation’s net worth.

Note 3: The ending balance was $0 because the Corporation had repaid the loan on behalf of TR on March 31, 2016.

TABLE 2

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Holding Company Name	Marketable Securities Type/Name and Issuer	Relationship with the Holding Company	Financial Statement Account		December	31, 2016		Note
				Units or Shares (Thousands)	Carrying Value	Percentage of Ownership	Market Value
Taiwan Fertilizer Co., Ltd.	Mutual funds Mega Diamond Money Market Fund Jih Sun Money Market Fund Common stocks Eminent II VC Corp Eminent Venture Capital Corporation Taiwan Stock Exchange Corporation Top Taiwan V Venture Capital Co., Ltd. Visgeneer Inc. TaiAn Technologies Corporation TSCBio Ventures Capital Co. Ding-Tang Phalanx Biotech Co., Ltd. Bion tech Inc. China Petrochemical Development Corporation	- - - - - - - - - - - - -	Available-for-sale financial assets - current Available-for-sale financial assets - current Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Available-for-sale financial assets - current	153,746 84,947 20,000 10,000 13,534 3,220 3,147 741 3,360 1,500 404 4,167 9,202	$1,909,265 1,246,145 200,000 100,000 52,800 32,195 20,989 7,667 33,600 - - 2,331 91,102	- - 18.50 10.00 2.00 9.76 10.31 16.67 19.75 6.71 0.76 17.89 0.40	$1,909,265 1,246,145 257,692 111,325 998,126 29,518 32,150 16,050 34,476 7,238 2,040 7,951 91,102	Note 1 Note 1 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 2

Note 1: The market value was calculated on the basis of the net asset value as of the balance sheet date.

Note 2: The market value was calculated on the basis of the closing price on the Taiwan Stock Exchange as of the balance sheet date.

Note 3: The market value was calculated on the basis of the unaudited financial statement for the same period.

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TABLE 3

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition		Disposal	Disposal	Disposal	Ending Balance	Ending Balance
					Units (Thousands)	Amount (Note)	Units (Thousands)	Amount (Note)	Units (Thousands)	Carrying Amount	Price	Gain (Loss) on Disposal	Units (Thousands)	Amount (Note)
Taiwan Fertilizer Co., Ltd.	Allianz Glbl Investors Taiwan Money Market Fund Jih Sun Money Market Fund Nomura Taiwan Money Market Fund Capital Money Market Fund Taishin 1699 Money Market Fund	Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current	- - - - -	- - - - -	72,883 112,349 64,011 91,755 116,958	$ 901,552 1,642,712 1,031,453 1,462,005 1,562,164	- - - - -	$ - - - - -	72,883 27,402 64,011 91,755 116,958	$ 900,000 400,000 1,030,000 1,460,000 1,560,000	$ 902,887 401,653 1,032,311 1,463,280 1,565,722	$ 2,887 1,653 2,311 3,280 5,722	- 84,947 - - -	$ - 1,246,145 - - -

Note : Unrealized gain and loss on financial assets were recognized.

TABLE 4

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship	Transaction Details	Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
Taiwan Fertilizer Co., Ltd.	AI-Jabail Fertilizer Company	Equity-method investee	Purchase	$ 1,026,900	10	Same as those for third parties	Determined under the considerations of international market price and production cost	30 days	$(318,490)	36	-

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TABLE 5

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Taiwan Fertilizer Co., Ltd.	TR Electronic Chemical Co., Ltd.	Jointly controlled entity	Other receivable $ 317,277	-	$ 317,277	-	$ -	$ 317,277

TABLE 6

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

BUSINESS RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Number	Company Name	Counter-party	Flow of Transaction (Note)		Transaction Details		Percentage of Transaction Amount to Consolidated Operating Revenue or Total Assets
				Account	Amount	Transaction Terms
0	Taiwan Fertilizer Co., Ltd.	Taiwan Yes Deep Ocean Water Co., Ltd. Taifer Chemicals International Inc. Taiwan Agricultural Global Marketing Co., Ltd. TAIFER (CAMBODIA) CO., LTD	1 1 1 1 1 1 1 1 1 1 1	Accounts receivable Guarantee deposits received Sales revenue Rental revenue Operating expenses Accounts payable Rental revenue Operating expenses Operating expenses Accounts receivable Sales revenue	$ 1,805 1,800 2,679 11,104 15,453 2,137 6,081 15,124 1,673 1,465 2,587	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	- - - - - - - - - - -
1	Taiwan Yes Deep Ocean Water Co., Ltd.	Hasbo Biotech Co., Ltd.	2 2	Accounts receivable Sales revenue	134,305 16,663	Based on regular terms Based on regular terms	- -

Note 1: Parent to subsidiary.

Note 2: Between subsidiaries.

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TABLE 7

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Investor	Investee	Location	Main Businesses and Products	Investmen	t Amount	Balanc	e as of December	31, 2016	Net (Loss) Income of the Investee	Investment (Loss) Income	Note
				December 31, 2016	December 31, 2015	Shares/Units (Thousands)	Percentage of Ownership	Carrying Value
Taiwan Fertilizer Co., Ltd. Taifer (Cayman) International Group Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taifer Chemicals International Inc. Taifer International (Samoa) Group Co., Ltd.	Al-Jubail Fertilizer Company Taifer Chemicals International Inc. Taiwan Yes Deep Ocean Water Co., Ltd. Taifer (Cayman) International Group Co., Ltd. Taiwan Agricultural Global Marketing Co., Ltd. Taifer (Cambodia) Co., Ltd. Taifer International (Samoa) Co., Ltd. TR Electronic Chemical Co., Ltd. Hasbo Biotech Co., Ltd. Taifer International (Samoa) Group Co., Ltd. Taifer Chemical International Co., Ltd.	Kingdom of Saudi Arabia Taiwan Taiwan Cayman Islands Taiwan Cambodia Samoa Cayman Islands Taiwan Samoa Mongolia	Manufacture of urea, 2-EH (2-ethyl hexanol), and DOP (dioctyl phthalate) International trade; wholesale of fertilizer, tobacco, liquor, beverage, forage, machinery, electrical equipment, etc.; development, operation and management of residential buildings and factory buildings; special zone development; investment in and construction of public works; development of new towns and districts; agent services on regional district requisition; land adjustment; and real estate rental or leasing a) Wholesale of drinks, food and grocery and other articles for daily use; tobacco and liquor; glass and pottery; hygiene products; fertilizers and other chemical products; and cosmetics; and b) International trade Investment and holding Wholesale and retail of products for organic agriculture International trade; wholesale of fertilizer Investment and holding Investment and holding Wholesale of Nonalcoholic Beverages and Cosmetics Investment and holding Real estate rental and leasing	$ 3,050,000 126,300 1,224,235 321,900 100,000 40,052 9,348 321,962 240,000 42,618 41,077	$ 3,050,000 126,300 1,224,235 321,900 100,000 40,052 9,348 321,962 240,000 42,618 41,077	7 5,500 95,000 11 7,174 - - - 24,000 - -	50.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00 100.00 100.00 100.00	$ 10,896,351 76,479 469,125 - 66,642 28,136 9,348 - (121,876 ) 53,038 52,773	$ (454,470 ) 15,143 (122,923 ) - (2,832 ) (8,647 ) - (93,294 ) (7,312 ) 13,180 13,180	$ (254,573 ) 15,143 (458,969 ) - (2,832 ) (8,647 ) - No applicable No applicable No applicable No applicable	Associate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Jointly controlled entity Subsidiary Subsidiary Subsidiary

Note: In August 2016, Taifer Biotech Co., Ltd. has been renamed as Taiwan Agricultural Global Marketing Co., Ltd..

TABLE 8

TAIWAN FERTILIZER CO., LTD. AND SUBSIDIARIES

INVESTMENT IN MAINLAND CHINA YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars/Foreign Currency)

Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type	Accumulated Outflow of Investment from Taiwan as of January 1, 2016	Investment Flows	Investment Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2016	Net Income (Loss) of the Investment （Note 1）	% Ownership of Direct or Indirect Investment	Investment Gain (Loss)	Carrying Value as of December 31, 2016	Accumulated Inward Remittance of Earnings as of December 31, 2016
					Outflow	Inflow
TR Electronic Chemical (Kunshan) Ltd.	Manufacture of nitric acid, hydrofluoric acid, ammonia, phosphoric acid, oxalic acid, ammonia fluoride and LCD and IC Stripper	US$ 21,500 (NT$ 693,375 ) (Note 4)	Note 3	US$ 10,965 (NT$ 353,621 ) (Note 4)	-	-	US$ 10,965 (NT$ 353,621 ) (Note 4)	US$ (2,892 ) (NT$ (93,294) ) (Note 5)	51	- - (Note 6)	- - (Note 6)	-

Accumulated Investment in Mainland China as of December 31, 2016	Investment Amounts Authorized by Investment Commission, MOEA	Limit on Investment
NT$353,621 (US$ 10,965) (Note 4)	NT$353,621 (US$ 10,965) (Note 4)	NT$30,362,656 (Note 2)

Note 1: The amount was based on the financial statements unaudited by the auditors recently.

Note 2: The limit is based on the “Regulations Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission under the Ministry of Economic Affairs; the amount is 60% of shareholders’ equity or of consolidated shareholders’ equity.

Note 3: Indirect investment in Mainland China through a subsidiary in a third place. (Investor: TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.)

Note 4: The foreign currency amounts of original investment amount and carrying value were translated into New Taiwan dollars at the exchange rate 32.25 as of December 31, 2016.

Note 5: The foreign currency amount of investment gain/loss was translated into New Taiwan dollars at an average exchange rate 32.263 for the year ended December 31, 2016.

Note 6: As of June 30, 2015, the investment accounted for using the equity method balance of the Corporation was zero, so the Corporation didn’t recognize income (loss) of the investment.

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Financial Summary

V. Individual financial reports for recent years audited and certified by public accountants

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Taiwan Fertilizer Co., Ltd.

Opinion

We have audited the accompanying financial statements of Taiwan Fertilizer Co., Ltd. (the “Corporation”), which comprise the balance sheets as of December 31, 2016 and 2015, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors (refer to the Other Matters paragraph), the accompanying financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2016 and 2015, and its financial performance and the cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Corporation in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2016. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters for the Corporation’s financial statements for the year ended December 31, 2016 are stated as follows:

Impairment Assessment of Property, Plant and Equipment

As described in Note 5 of the accompanying financial statements, the impairment assessment of property, plant and equipment is significant for the Corporation. The balance of property, plant and equipment amounted to NT$26,619,098 thousand (35% of the Corporation’s total assets) as of December 31, 2016. For disclosures of property, plant and equipment, refer to Note 13 of the Corporation’s financial statements.

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In accordance with IAS 36 “Impairment of Assets”, management will regularly assess whether there is any indication that the property, plant and equipment may be impaired. If there is an indication that an asset may be impaired, management must rely on subjective judgment as well as the asset’s usage and industry conditions to estimate the recoverable amount of the cash-generating unit of the aforementioned asset. Since management’s evaluation of the impairment indication and the decision of the recoverable amount are subject to management’s judgment and assumptions, such impairment assessment has been identified as a key audit matter.

Impairment Assessment of Investments Accounted for by the Equity Method (Including Goodwill and Intangible Assets with Indefinite Useful Lives)

As described in Note 16 of the accompanying financial statements, the Corporation acquired control of Taiwan Yes Deep Ocean Water Co., Ltd. (“Taiwan Yes”) on January 7, 2013 and accounted for the acquisition by using the equity method (including the goodwill and trademark with indefinite useful lives). In accordance with IAS 36 “Impairment of Assets”, goodwill and intangible assets with indefinite useful lives should be tested for impairment annually, and based on the estimated future cash flows of Taiwan Yes (the cash-generating unit), the recoverable amount was evaluated in order to determine whether there is any impairment of the aforementioned investment accounted for by using the equity method (including the goodwill and intangible assets with indefinite useful lives). Since the estimated future cash flows requires management’s forecasting of the industry overview and the future operating performance of Taiwan Yes, should the situation change, the recoverable amount will be affected and an impairment loss will be incurred. Therefore, the impairment assessment of equity-method investments has been identified as a key audit matter.

Our main audit procedures performed in response to this key audit matter included obtaining the management-appointed appraiser’s impairment appraisal report of goodwill and trademark, understanding and evaluating the rationality of the pricing model used for computing the relevant recoverable amount, evaluating the assumptions of the pricing model, such as the discount rate, growth rate and weighted average cost of capital (including the risk-free return rate and the volatility and risk premium remuneration), and considering the past operating performance, industry overview, and future trend of the Corporation. In conclusion, our audit team comprehensively assessed the rationality of the impairment evaluation of the investment in Taiwan Yes which was accounted for by using the equity method (including goodwill and trademark with indefinite useful lives).

Other Matters

We did not audit the financial statements as of and for the years ended December 31, 2016 and 2015 of certain investees, but such financial statements had been audited by other auditors, whose reports have been furnished to us. Our opinion, insofar as it relates to the amounts included in the Corporation’s financial statements for these investees, is based solely on the reports of the other auditors. As of December 31, 2016 and 2015, the investments in the aforementioned investees were 14.22% (NT$10,896,351 thousand) and 14.11% (NT$11,352,927 thousand), respectively, of the Corporation’s total assets. For the years ended December 31, 2016 and 2015, the investment (loss) income on the above said investees were 384.61% (NT$(255,534) thousand) and 40.51% (NT$1,029,740 thousand), respectively, of the Corporation’s (loss) income before income tax.

180

Financial Summary

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

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

In preparing the financial statements, management is responsible for assessing the Corporation’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 Corporation or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including supervisor) are responsible for overseeing the Corporation’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

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

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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 Corporation’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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 Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Corporation to cease to continue as a going concern.

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Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Corporation to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2016 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Yi-Wen Wang and Wen-Chi Kuo.

Deloitte & Touche Taipei, Taiwan Republic of China

March 28, 2017

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and financial statements shall prevail. Also, as stated in Note 4 to the financial statements, the additional footnote disclosures that are not required under generally accepted accounting principles were not translated into English.

182

Financial Summary

TAIWAN FERTILIZER CO., LTD.

BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Available-for-sale financial assets - current (Notes 4 and 7) Notes receivable (Note 8) Accounts receivable (Notes 4 and 8) Other receivables (Note 25) Inventories (Notes 4 and 10) Buildings and land held for sale (Notes 4 and 11) Other financial assets - current (Note 6) Other current assets Total current assets NONCURRENT ASSETS Financial assets carried at cost - noncurrent (Notes 4 and 9) Investments accounted for using equity method (Notes 4 and 12) Property, plant and equipment (Notes 4 and 13) Investment properties (Notes 4 and 14) Intangible assets (Note 4) Deferred tax assets (Notes 4 and 20) Long-term receivable (Note 8) Other financial assets - noncurrent (Notes 6 and 26) Long-term prepayments for leases (Note 15) Other non-current assets Total noncurrent assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Notes payable Accounts payable (Note 25) Other payables Current tax liabilities (Note 4) Receipts in advance (Note 11) Other current liabilities Total current liabilities NONCURRENT LIABILITIES Provisions - noncurrent (Note 4) Deferred tax liabilities (Notes 4 and 20) Deferred revenue - noncurrent (Note 14) Accrued pension liabilities (Notes 4 and 16) Guarantee deposits received Total noncurrent liabilities Total liabilities EQUITY (Note 17) Share capital Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Total equity TOTAL		2016 Amount % $ 947,774 1 3,246,512 4 365,123 1 1,294,561 2 10,695 - 1,375,952 2 350,375 1 7,205,000 9 239,080 - 15,035,072 20 449,582 - 11,546,081 15 26,619,098 35 21,156,703 28 20,567 - 155,695 - 385,490 - 13,800 - 1,215,950 2 23,117 - 61,586,083 80 $ 76,621,155 100 $ 6,890 - 880,304 1 473,880 1 7,465 - 179,265 - 34,546 - 1,582,350 2 223,648 - 7,214,538 10 16,584,651 22 94,353 - 317,189 - 24,434,379 32 26,016,729 34 9,800,000 13 2,232,791 3 3,683,109 4 33,590,309 44 703,332 1 37,976,750 49 594,885 1 50,604,426 66 $ 76,621,155 100		2015
				Amount % $ 2,349,622 3 8,729,292 11 432,542 1 1,657,690 2 924 - 1,828,072 2 271,198 - 2,600,000 3 775,962 1 18,645,302 23 495,041 1 12,471,615 15 26,918,099 33 19,773,087 25 28,311 - 260,690 - 540,884 1 13,800 - 1,286,561 2 23,652 - 61,811,740 77 $ 80,457,042 100 $ 2,213 - 1,182,132 2 738,336 1 16,140 - 201,490 - 60,732 - 2,201,043 3 327,750 - 7,293,298 9 16,977,124 21 468,040 1 221,927 - 25,288,139 31 27,489,182 34 9,800,000 12 2,237,678 3 3,440,401 4 33,590,944 42 3,146,060 4 40,177,405 50 752,777 1 52,967,860 66 $ 80,457,042 100

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

(With Deloitte & Touche audit report dated March 28, 2017)

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TAIWAN FERTILIZER CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except (Loss) Earnings Per Share)

OPERATING REVENUE (Notes 4, 14, 18 and 25) OPERATING COSTS (Notes 10, 16, 18, 19 and 25) GROSS PROFIT OPERATING EXPENSES (Notes 16 and 19) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES Other gains and losses (Note 19) Finance costs Share of (loss) profit of subsidiaries, associates and joint ventures (Notes 4 and 12) Other income (Note 19) Total non-operating income and expenses (LOSS) PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 20) NET (LOSS) PROFIT FOR THE YEAR OTHER COMPREHENSIVE (LOSS) INCOME Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Income tax relating to items that will not be reclassified subsequently to profit or loss (Notes 4 and 20)		2016 Amount % $ 11,893,266 100 9,917,534 84 1,975,732 16 235,361 2 999,871 8 65,285 1 1,300,517 11 675,215 5 (186,529) (1) (6,711) - (710,839) (6) 162,425 1 (741,654 ) (6 ) (66,439) (1) 63,064 - (129,503 ) (1 ) (15,845) - 2,693 - (13,152 ) -		2015
				Amount % $ 17,120,807 100 13,303,947 78 3,816,860 22 242,637 1 1,106,097 7 66,133 - 1,414,867 8 2,401,993 14 (847,596) (5) (14,131) - 932,099 6 69,334 - 139,706 1 2,541,699 15 114,616 1 2,427,083 14 (25,498) - 4,335 - (21,163 ) - (Continued)

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Financial Summary

TAIWAN FERTILIZER CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except (Loss) Earnings Per Share)

Items that may be reclassified subsequently to profit or loss: Unrealized gain (loss) on available-for-sale financial assets Share of the other comprehensive (loss) income of subsidiaries, associates and joint ventures Income tax relating to items that may be reclassified subsequently to profit or loss (Notes 4 and 20) Other comprehensive (loss) income for the year, net of income tax TOTAL COMPREHENSIVE (LOSS) INCOME FOR THE YEAR (LOSS) EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 21) Basic Diluted		2016 Amount % $ 20,580 - (212,364) (2) 33,892 - (157,892 ) (2 ) (171,044 ) (2 ) $ (300,547 ) (3 ) $ (0.13 ) $ (0.13 )		2015
				Amount % $ (20,353) - 412,596 2 (70,262 ) - 321,981 2 300,818 2 $ 2,727,901 16 $ 2.48 $ 2.47


		$		$

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

(With Deloitte & Touche audit report dated March 28, 2017)

(Concluded)

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TAIWAN FERTILIZER CO., LTD.

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Amounts Per Share)

BALANCE AT JANUARY 1, 2015 Appropriation of the 2014 earnings Legal reserve Cash dividends - NT$2.2 per share Net profit in 2015 Other comprehensive (loss) income in 2015, net of income tax Total comprehensive income (loss) in 2015 Adjustment to capital surplus due to non-proportional investment in an investee's shares issued for a capital increase BALANCE AT DECEMBER 31, 2015 Appropriation of the 2015 earnings Legal reserve Cash dividends - NT$2.1 per share Net loss in 2016 Other comprehensive (loss) income in 2016, net of income tax Total comprehensive (loss) income in 2016 Reversal of special reserve due to sale of land Loss of significant influence as disposal of investment BALANCE AT DECEMBER 31, 2016	Share Capital Capital Surplus $ 9,800,000 $ 2,234,334 - - - - - - - - - - - 3,344 9,800,000 2,237,678 - - - - - - - - - - - - - (4,887 ) $ 9,800,000 $ 2,232,791	Retained Earnings Unappropriated Legal Reserve Special Reserve Earnings $ 3,133,567 $ 33,590,944 $ 3,202,974 306,834 - (306,834 ) - - (2,156,000 ) - - 2,427,083 - - (21,163 ) - - 2,405,920 - - - 3,440,401 33,590,944 3,146,060 242,708 - (242,708 ) - - (2,058,000 ) - - (129,503 ) - - (13,152 ) - - (142,655 ) - (635 ) 635 - - - $ 3,683,109 $ 33,590,309 $ 703,332			Other Equity	Total $ 430,796 - - - 321,981 321,981 - 752,777 - - - (157,892 ) (157,892 ) - - $ 594,885	Total Equity $ 52,392,615 - (2,156,000 ) 2,427,083 300,818 2,727,901 3,344 52,967,860 - (2,058,000 ) (129,503 ) (171,044 ) (300,547 ) - (4,887 ) $ 50,604,426
				Exchange Differences on Translating Foreign Operations $ 368,104 - - - 342,334 342,334 - 710,438 - - - (178,472 ) (178,472 ) - - $ 531,966	Unrealized Gain (Loss) on Available-for- sale Financial Assets $ 62,692 - - - (20,353 ) (20,353 ) - 42,339 - - - 20,580 20,580 - - $ 62,919

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

(With Deloitte & Touche audit report dated March 28, 2017)

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Financial Summary

TAIWAN FERTILIZER CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES (Loss) profit before income tax Adjustments for: Share of loss (profit) of subsidiaries, associates and joint ventures Depreciation expenses Amortization expenses Interest income Dividend income Gain on disposal of investments Impairment loss recognized on financial assets Finance costs Impairment loss recognized on other receivables Unrealized net (gain) loss on foreign currency exchange (Gain) loss on disposal of property, plant and equipment Impairment loss recognized on property, plant and equipment Donation expenses Recognition of provisions Gain on disposal of investment properties Changes in operating assets and liabilities Notes receivable Accounts receivable Other receivables Inventories Buildings and land held for sale Other current assets Long-term receivables Notes payable Accounts payable Other payables Provisions Receipts in advance Other current liabilities Accrued pension liabilities Deferred revenue Cash generated from operations Interest received Dividends received Interest paid Return of income tax Income tax paid Net cash generated from operating activities	2016 $ (66,439) 710,839 659,673 83,913 (59,919) (41,782) (23,381) 15,000 6,711 4,294 (3,757) (3,584) - - - - 67,419 358,709 (78,510) 452,120 124,204 171,241 155,394 4,677 (493,967) 130,878 (38,370) (22,225) (26,186) (389,532) (392,473 ) 1,304,947 58,632 41,782 (6,711) 247,184 - 1,645,834	2015 $ 2,541,699 (932,099) 623,469 86,699 (17,490) (42,868) (1,018) - 14,131 247,251 37,530 70,575 279,387 223,650 65,732 (8,291) (49,213) 1,823,136 (99,793) 285,406 1,449,579 213,024 (162,634) (7,790) (88,509) (86,336) - (1,445,795) (25,459) 23,581 14,196,118 19,213,672 17,505 1,137,048 (51,084) - (607,313 ) 19,709,828 (Continued)

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TAIWAN FERTILIZER CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds of the sale of available-for-sale financial assets Increase in other financial assets Increase in investment properties Payments for property, plant and equipment Purchase of available-for-sale financial assets Return of capital on financial assets carried at cost Proceeds of the disposal of property, plant and equipment Purchase of intangible assets Decrease in refundable deposits Increase in investments accounted for using equity method Proceeds of the disposal of investment properties Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Cash dividends paid Increase in guarantee deposits received Repayment of short-term borrowings Repayment of long-term borrowings Repayment of long-term borrowings, net of current portion Net cash used in financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS, END OF YEAR	2016 $ 5,606,626 (4,605,000) (1,291,949) (744,510) (84,772) 32,790 9,959 (5,558) 535 - - (1,081,879 ) (2,058,000) 95,262 - - - (1,962,738 ) (3,066 ) (1,401,849) 2,349,622 $ 947,773	2015 $ 1,306,275 (2,590,000) (1,045,989) (949,311) (9,948,617) 63,415 54,475 (3,454) 1,640 (49,400) 8,481 (13,152,485 ) (2,156,000) 53,096 (1,700,000) (790,000) (140,000 ) (4,732,904 ) 6,445 1,830,884 518,738 $ 2,349,622

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

(With Deloitte & Touche audit report dated March 28, 2017)

(Concluded)

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Financial Summary

TAIWAN FERTILIZER CO., LTD.

NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

The Corporation’s shares has been listed on the Taiwan Stock Exchange since March 24, 1998.

The functional currency of the Corporation is the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The accompanying parent company only financial statements were approved and authorized for issue by the Corporation’s board of directors on March 24, 2017.

3. APPLICATION OF NEW, AMENDED, REVISED STANDARDS AND INTERPRETATIONS

a. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC for application starting from 2017

Rule No. 1050050021 and Rule No. 1050026834 issued by the FSC stipulated that starting January 1, 2017, the Corporation should apply the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) issued by the IASB and endorsed by the FSC for application starting from 2017.

New, Amended or Revised Standards and Interpretations Effective Date (the “New IFRSs”) Announced by IASB (Note 1) Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 (Note 3) Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment January 1, 2016 Entities: Applying the Consolidation Exception” Amendment to IFRS 11 “Accounting for Acquisitions of January 1, 2016 Interests in Joint Operations” IFRS 14 “Regulatory Deferral Accounts” January 1, 2016 Amendment to IAS 1 “Disclosure Initiative” January 1, 2016 (Continued)

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New, Amended or Revised Standards and
Interpretations
(the“New IFRSs”)
Amendments to IAS 16 and IAS 38 “Clarification of
Acceptable Methods of Depreciation and Amortization”
Amendments to IAS 16 and IAS 41 “Agriculture: Bearer
Plants”
Amendment to IAS 19 “Defined Benefit Plans: Employee
Contributions”
Amendment to IAS 27 “Equity Method in Separate
Financial Statements”
Amendment to IAS 36 “Impairment of Assets:
Recoverable Amount Disclosures for Non-financial
Assets”
Amendment to IAS 39 “Novation of Derivatives and
Continuation of Hedge Accounting”
IFRIC 21 “Levies”

Effective Date
Announced by IASB (Note 1)

January 1, 2016
January 1, 2016
July 1, 2014
January 1, 2016
January 1, 2014
January 1, 2014
January 1, 2014
(Concluded)

Note 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

The initial application in 2017 of the above IFRSs and related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers would not have any material impact on the Corporation’s accounting policies, except for the following:

1) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

The amendment clarifies that the recoverable amount of an asset or a cash-generating unit is disclosed only when an impairment loss on the asset has been recognized or reversed during the period. Furthermore, if the recoverable amount of an item of property, plant and equipment for which impairment loss has been recognized or reversed is fair value less costs of disposal, the Corporation is required to disclose the fair value hierarchy. If the fair value measurements are categorized within Level 2 or Level 3, the valuation technique and key assumptions used to measure the fair value are disclosed. The discount rate used is disclosed if such fair value less costs of disposal is measured by using present value technique. The amendment will be applied retrospectively.

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Financial Summary

2) Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Corporation are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationship with whom the Corporation has significant transaction. If the transaction or balance with a specific related party is 10% or more of the Corporation’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

The amendments also require additional disclosure if there is a significant difference between the actual operation after business combination and the expected benefit on acquisition date.

The disclosures of related party transactions and impairment of goodwill will be enhanced when the above amendments are retrospectively applied in 2017.

Except for the above impacts, as of the date the financial statements were authorized for issue, the Corporation continues assessing other possible impacts that application of the aforementioned amendments and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Corporation’s financial position and financial performance, and will disclose these other impacts when the assessment is completed.

b. New IFRSs in issue but not yet endorsed by the FSC

The Corporation has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC.

The FSC announced that IFRS 9 and IFRS 15 will take effect starting January 1, 2018. As of the date the financial statements were authorized for issue, the FSC has not announced the effective dates of other new IFRSs.

New IFRSs Annual Improvements to IFRSs 2014-2016 Cycle Amendment to IFRS 2 “Classification and Measurement of Share-based Payment Transactions” IFRS 9 “Financial Instruments”	Effective Date Announced by IASB (Note 1)
	Note 2 January 1, 2018 January 1, 2018

(Continued)

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Effective Date New IFRSs Announced by IASB (Note 1) Amendments to IFRS 9 and IFRS 7 “Mandatory Effective January 1, 2018 Date of IFRS 9 and Transition Disclosures” Amendments to IFRS 10 and IAS 28 “Sale or Contribution To be determined by IASB of Assets between an Investor and its Associate or Joint Venture” IFRS 15 “Revenue from Contracts with Customers” January 1, 2018 Amendments to IFRS 15 “Clarifications to IFRS15 Revenue January 1, 2018 from Contracts with Customers” IFRS 16 “Leases” January 1, 2019 Amendment to IAS 7 “Disclosure Initiative” January 1, 2017 Amendments to IAS 12 “Recognition of Deferred Tax January 1, 2017 Assets for Unrealized Losses” Amendments to IAS 40 “Transfers of investment property” January 1, 2018 IFRIC 22 “Foreign Currency Transactions and Advance January 1, 2018 Consideration” (Concluded)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

IFRS 9 “Financial Instruments”

1) Recognition and measurement of financial assets

For the Corporation’s debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;
b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or

192

Financial Summary

reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Corporation may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

2) Impairment of financial assets

IFRS 9 requires impairment loss on financial assets to be recognized by using the “Expected Credit Losses Model”. The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 “Revenue from Contracts with Customers”, certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

For purchased or originated credit-impaired financial assets, the Corporation takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

Transition

Except for the above impact, as of the date the financial statements were authorized for issue, the Corporation is continuously assessing the possible impact that the application of other standards and interpretations will have on the Corporation’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The parent company only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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Basis of Preparation

The accompanying financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values.

a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c. Level 3 inputs are unobservable inputs for the asset or liability.

When preparing its parent company only financial statements, the Corporation used equity method to account for its investment in subsidiaries, associates and joint ventures. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements to be the same with the amounts attributable to the owners of the Corporation in its consolidated financial statements, adjustments arising from the differences in accounting treatment between parent company only basis and consolidated basis were made to investments accounted for using equity method, share of profit or loss of subsidiaries, associates and joint ventures accounted for using equity method, and related equity items, as appropriate, in the parent company only financial statements.

Classification of Current and Non-current Assets and Liabilities

Current assets include:

a. Assets held primarily for the purpose of trading;
b. Assets expected to be realized within 12 months after the reporting period; and
c. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

a. Liabilities held primarily for the purpose of trading;
b. Liabilities due to be settled within 12 months after the reporting period; and
c. Liabilities for which the Corporation does not have an unconditional right to defer settlement for at least 12 months after the reporting period. 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.

Assets and liabilities that are not classified as current are classified as non-current.

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Financial Summary

Foreign Currencies

In preparing the Corporation’s financial statements, transactions in currencies other than the Corporation’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purposes of presenting parent company only financial statements, the assets and liabilities of the Corporation’s foreign operations (including subsidiaries, associates and joint ventures in other countries that use currency different from the currency of the Corporation) are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income.

Inventories

Investments Accounted for Using Equity Method

Investments in subsidiaries and associates are accounted for by the equity method.

a. Investment in subsidiaries

A subsidiary is an entity that is controlled by the Corporation.

Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Corporation’s share of profit or loss and other comprehensive income of the subsidiary as well as the distribution received. The Corporation also recognized its share in the changes in the equity of subsidiaries.

The acquisition cost in excess of the acquisition-date fair value of the identifiable net assets acquired is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. The acquisition-date fair value of the net identifiable assets acquired in excess of the acquisition cost is recognized immediately in profit or loss.

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When testing for impairment, the cash-generating unit is determined based on the financial statements as a whole by comparing its recoverable amount with its carrying amount. If the recoverable amount of the asset subsequently increases, the reversal of the impairment loss is recognized as a gain, but the increased carrying amount of an asset after a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized on the asset in prior years. An impairment loss recognized for goodwill shall not be reversed in a subsequent period.

Profits and losses from downstream transactions with a subsidiary are eliminated in full. Profits and losses from upstream with a subsidiary and sidestream transactions between subsidiaries are recognized in the Corporation’s financial statements only to the extent of interests in the subsidiary that are not related to the Corporation.

b. Investment in associates

An associate is an entity over which the Corporation has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The Corporation account for associates by using the equity method. Under the equity method, investments in associates are initially recognized in the statement of financial position at cost and adjusted thereafter to recognize the Corporation’s share of profit or loss and other comprehensive income of the associates as well as the distribution received. The Corporation also recognized its share in the changes in the equity of associates attributable to the Corporation.

Property, Plant and Equipment

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

Leases

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

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Financial Summary

Investment Properties

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.

Impairment of Tangible and Intangible Assets

At the end of each reporting period, the Corporation reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Corporation estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Financial Instruments

Financial assets and financial liabilities are recognized when the Corporation becomes a party to the contractual provisions of the instruments.

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or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

a. Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

1) Measurement category

Financial assets are classified into the following categories: Available-for-sale financial assets, and loans and receivables.

a) Available-for-sale financial assets

Available-for-sale financial assets are nonderivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amounts of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Corporation’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between the carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

b) Loans and receivables

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Financial Summary

2) Impairment of financial assets

For financial assets carried at amortized cost, such as trade receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

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3) Derecognition of financial assets

The Corporation derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

b. Financial liabilities
1) Measurement category

All financial liabilities of the Corporation are subsequently measured at amortized cost using the effective interest method.

2) Derecognition of financial liabilities

Provisions

Provisions are recognized when the Corporation has a present obligation (legal or constructive) as a result of a past event, it is probable that the Corporation will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Revenue Recognition

a. Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

1) The Corporation has transferred to the buyer the significant risks and rewards of ownership of the goods;
2) The Corporation retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
3) The amount of revenue can be measured reliably;

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Financial Summary

4) It is probable that the economic benefits associated with the transaction will flow to the Corporation; and
5) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue from the sale of property in the course of ordinary activities is recognized when the construction is completed and the property is transferred to the buyer. Until such revenue is recognized, deposits and installment payments received from sales of properties are carried in the parent company only balance sheets under current liabilities.

b. Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Corporation and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Corporation and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the applicable effective interest rate.

Employee Benefits

a. Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

b. Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered services entitling them to the contributions.

c. Other long-term employee benefits

Other long-term employee benefits are accounted for in the same way as the accounting required for a defined benefit plan except that remeasurement is recognized in profit or loss.

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d. Termination benefits

A liability for a termination benefit is recognized at the earlier of when the Corporation can no longer withdraw the offer of the termination benefit and when the Corporation recognizes any related restructuring costs.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

a. Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences and unused loss carry forward to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Corporation is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Corporation expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

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Financial Summary

c. Current and deferred taxes for the year

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Corporation's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

Impairment assessment of property, plant and equipment

At the end of each reporting period, the Corporation reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. In the process of evaluating the potential impairment of property, plant and equipment, the Corporation is required to make subjective judgments in determining the independent cash flows, useful lives, expected future revenue and expenses related to the specific asset groups with the consideration of the nature of the Corporation’s industry. Any changes in these estimates based on changed economic conditions or business strategies could result in significant impairment charges in future years.

Impairment assessment of carrying amount of investment in subsidiaries

Determining whether carrying amount of investment in subsidiaries is impaired requires an estimation of the recoverable amount of the cash-generating units to which subsidiaries have been allocated. The calculation of the recoverable amount requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

6. CASH AND CASH EQUIVALENTS

Cash on hand Demand deposits and checking accounts Time deposits with original maturities less than 3 months		December 31	December 31
		2016 $ 2,319 945,455 - $ 947,774	2015 $ 2,977 1,046,645 1,300,000 $ 2,349,622

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Time deposits with original maturity of more than 3 months are recorded as other financial assets, and are classified as non-current if their maturities exceed one year.

The market rate intervals of cash in bank at the end of the reporting period were as follows:

Bank balance Time deposits with original maturities less than 3 months Time deposits with original maturity of more than 3 months	December 31
	2016 2015 0.01%-0.08% 0.02%-0.33% - 0.75% 0.16%-1.16% 0.45%-1.09%

7. AVAILABLE-FOR-SALE FINANCIAL ASSETS - CURRENT

Domestic listed shares Mutual funds		December 31	December 31
		2016 $ 91,102 3,155,410 $ 3,246,512	2015 $ 76,315 8,652,977 $ 8,729,292

8. NOTES RECEIVABLE AND ACCOUNTS RECEIVABLE

Notes receivable Notes receivable - sales of goods Real estate notes receivable Notes receivable Long-term notes receivable Accounts receivable Accounts receivable - sales of goods Real estate receivable Less: Unrealized interest income		December 31	December 31
		2016 $ 338,566 107,935 $ 446,501 $ 365,123 81,378 $ 446,501 $ 1,204,977 468,166 (74,470 ) $ 1,598,673	2015 $ 142,288 455,579 $ 597,867 $ 432,542 165,325 $ 597,867 $ 1,308,010 815,858 (90,619 ) $ 2,033,249 (Continued)

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Financial Summary

Accounts receivable Long-term receivable		December 31 2016 2015 $ 1,294,561 $ 1,657,690 304,112 375,559 $ 1,598,673 $ 2,033,249 (Concluded)
		2016 $ 1,294,561 304,112 $ 1,598,673

Except for those impaired, for the trade receivables balances that were past due at the end of the reporting period, the Corporation did not recognize an allowance for impairment loss, because there was no significant change in credit quality and the amounts were still considered recoverable. The Corporation did not hold any collateral or other credit enhancements for these balances.

The aging of accounts receivable (inclusive of long-term receivable) was as follows:

Not past due Up to 30 days 31-60 days Over 60 days		December 31	December 31
		2016 $ 1,490,146 29,889 57,132 21,506 $ 1,598,673	2015 $ 1,957,479 27,673 15,631 32,466 $ 2,033,249

The above aging schedule was based on the past due date.

The aging of accounts receivable in the above part that were past due but not impaired was as follows:

Up to 30 days 31-60 days Over 60 days		December	31
		2016 $ 29,889 57,132 21,506 $ 108,527	2015 $ 27,673 15,631 32,466 $ 75,770

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these long-term receivables is at these amounts: $93,322 thousand in 2017; and $366,638 thousand in 2018.

The Corporation holds the sold real estate and checks as collateral for the real estate accounts receivables amounted to $564,925 thousand.

9. FINANCIAL ASSETS CARRIED AT COST

Noncurrent Domestic unlisted shares Eminent II VC Corp Eminent Venture Capital Corporation Taiwan Stock Exchange Corporation TSCBio Ventures Capital Co. Top Taiwan V Venture Capital Co., Ltd. Visgeneer Inc. TaiAn Technologies Corporation Bion Tech Inc. Green Cellulosity Corporation Classified according to financial asset measurement categories Available-for-sale financial assets		December 31	December 31
		2016 $ 200,000 100,000 52,800 33,600 32,195 20,989 7,667 2,331 - $ 449,582 $ 449,582	2015 $ 200,000 100,000 52,800 42,000 56,585 20,989 7,667 - 15,000 $ 495,041 $ 495,041

Management believed that the above unlisted equity investments held by the Corporation had fair values that could not be reliably measured due to the range of reasonable fair value estimates being so significant; therefore they were measured at cost less impairment at the end of reporting period.

In October 2016, TSCBio Ventures Capital Co. (“TSCBio”) reduced its capital, and the Corporation received $8,400 thousand as capital return; the percentage of the Corporation’s ownership of TSCBio remained the same despite this capital reduction.

In June 2016 and 2015, Top Taiwan V Venture Capital Co., Ltd. reduced its capital, and the Corporation received $24,390 and $63,415 thousand as capital returns, respectively; the percentage of the Corporation’s ownership of this investee remained the same.

Because Green Cellulosity Corporation had a continued loss, the Corporation recognized an impairment loss of $15,000 thousand for the year ended December 31, 2016.

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Financial Summary

10. INVENTORIES

Raw materials Finished goods Merchandise		December 31	December 31
		2016 $ 1,006,113 369,617 222 $ 1,375,952	2015 $ 1,185,578 640,527 1,967 $ 1,828,072

The costs of inventories recognized as cost of goods sold were $9,124,686 thousand for 2016 and $11,547,172 thousand for 2015.

11. BUILDINGS AND LAND HELD FOR SALE/RECEIPTS IN ADVANCE

		December 31	December 31
2016 $ 350,345 30 $ 350,375 $ 50,759 METHOD December			2015 $ 271,168 30 $ 271,198 $ 135,070 31
	2016 $ 649,730 10,896,351 $ 11,546,081	$	2015 1,118,688 11,352,927 12,471,615
		$

Taiwan Agricultural Global Marketing Co., Ltd. (Note) Taifer Chemicals International Inc. Taiwan Yes Deep Ocean Water Co., Ltd. Taifer (Cambodia) Co., Ltd. Taifer International (Samoa) Co., Ltd.		December 31	December 31
		2016 $ 66,642 76,479 469,125 28,136 9,348 $ 649,730	2015 $ 69,474 74,337 928,094 37,435 9,348 $ 1,118,688

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Note: In August 2016, Taifer Biotech Co., Ltd. was renamed as Taiwan Agricultural Global Marketing Co., Ltd.

As the end of the reporting period, the proportion of ownership and voting rights in subsidiaries held by the Corporation were as follows:

Name of Subsidiaries Taiwan Agricultural Global Marketing Co., Ltd. Taifer Chemicals International Inc. Taiwan Yes Deep Ocean Water Co., Ltd. Taifer (Cayman) International Group Co., Ltd. Taifer (Cambodia) Co., Ltd. Taifer International (Samoa) Co., Ltd.	December 31 2016 2015 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Because the actual operating performance of the Corporation’s investment in its subsidiary (Taiwan Yes Deep Ocean Water Co., Ltd.) fell short of the Corporation's expectations, the estimated future cash flows expected to arise from the related investment decreased. The Corporation recognized an impairment loss of $304,225 thousand for the year ended December 31, 2016. The impairment loss was recognized as a share of profit or loss of subsidiaries, associates and joint ventures accounted for by using the equity method in the statements of comprehensive income.

b. Investment in associates

Material associates Al-Jubail Fertilizer Company (“Al-Jubail”) Associates that are not individually material Bion Tech Inc.		December 31	December 31
		2016 $ 10,896,351 - $ 10,896,351	2015 $ 11,349,635 3,292 $ 11,352,927

1) Material associates

Name of Associate Al-Jubail	Proportion of Ownership and Voting Rights
	December 31
	2016 2015 50.00% 50.00%

Refer to Table 6 “Information on Investees” for the nature of activities, principal place of business and country of incorporation of the associates.

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Financial Summary

Summarized financial information in respect of each of Al-Jubail is set out below:

Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to the Corporation Equity attributable to other controlling interest Operating revenue Net (loss) profit for the year Total comprehensive (loss) income for the year Dividends declared by Al-Jubail		December 31	December 31
	2016 2015 $ 7,261,936 $ 8,504,811 18,790,106 18,375,602 (1,926,461) (1,975,749) (1,944,743 ) (1,953,177 ) $ 22,180,838 $ 22,951,487 $ 11,074,803 $ 11,531,256 11,106,035 11,420,231 $ 22,180,838 $ 22,951,487 For the Year Ended December 31
		2016 $ 7,833,956 $ (454,470 ) $ (454,470 ) $ -	2015 $ 11,198,361 $ 2,198,673 $ 2,198,673 $ 649,000

2) Information of associates that are not individually material

In February 2016, an associate (Bion Tech Inc.) of the Corporation issued ordinary shares for cash, but the Corporation didn’t subscribe for any shares from the issuance. Therefore, the Corporation’s proportion of ownership changed from 20.62% to 17.89%. Because the Corporation ceased to have significant influence, the investment was reclassified to financial assets carried at cost by fair value. Also, the Corporation recognized a disposal gain of $4,887 thousand.

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13. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2015 Additions Disposals Transfer to investment properties Transfer from completion Balance at December 31, 2015 Accumulated depreciation and impairment Balance at January 1, 2015 Disposals Depreciation expense Impairment losses Transfer to investment properties Transfer from completion Balance at December 31, 2015 Carrying amounts at December 31, 2015 Cost Balance at January 1, 2016 Additions Disposals Transfer to investment properties Transfer from completion Balance at December 31, 2016 Accumulated depreciation and impairment Balance at January 1, 2016 Disposals Depreciation expense Transfer to investment properties Transfer from completion Balance at December 31, 2016 Carrying amounts at December 31, 2016	Land $ 21,996,894 - (336 ) (5,810,532 ) - 16,186,026 - - - - - - - $ 16,186,026 $ 16,186,026 - (636 ) (10,057 ) - 16,175,333 - - - - - - $ 16,175,333	Buildings $ 3,840,205 19,880 (444,264 ) (123,306 ) 29,851 3,322,366 (770,504 ) 337,245 (97,536 ) (136,166 ) 15,436 - (651,525 ) $ 2,670,841 $ 3,322,366 232 (200,280 ) (89,318 ) 150,398 3,183,398 (651,525 ) 200,254 (103,937 ) 7,249 5,360 (542,599 ) $ 2,640,799	Machinery and Equipment Transportation Equipment $ 8,832,453 $ 68,501 109,523 4,912 (477,482 ) (11,156 ) - - 25,306 1,461 8,489,800 63,718 (1,612,969 ) (46,611 ) 460,986 10,763 (488,958 ) (5,350 ) (59,239 ) (645 ) - - 607 - (1,699,573 ) (41,843 ) $ 6,790,227 $ 21,875 $ 8,489,800 $ 63,718 95,511 5,094 (345,509 ) (5,387 ) (17,994 ) - 177,465 1,631 8,399,273 65,056 (1,699,573 ) (41,843 ) 338,366 5,203 (499,726 ) (6,018 ) 1,279 - (10,773 ) 82 (1,870,427 ) (42,576 ) $ 6,528,846 $ 22,480	Other Equipment $ 366,131 2,481 (7,809 ) - 1,773 362,576 (57,421 ) 7,003 (24,975 ) (517 ) - (607 ) (76,517 ) $ 286,059 $ 362,576 965 (4,325 ) (6,149 ) 17,382 370,449 (76,517 ) 5,939 (27,274 ) 605 1,083 (96,164 ) $ 274,285	Construction in Progress $ 614,784 488,932 - - (57,825 ) 1,045,891 - - - (82,820 ) - - (82,820 ) $ 963,071 $ 1,045,891 526,373 - - (512,089 ) 1,060,175 (82,820 ) - - - - (82,820 ) $ 977,355	Total $ 35,718,968 625,728 (941,047 ) (5,933,838 ) 566 29,470,377 (2,487,505 ) 815,997 (616,819 ) (279,387 ) 15,436 - (2,552,278 ) $ 26,918,099 $ 29,470,377 628,175 (556,137 ) (123,518 ) (165,213 ) 29,253,684 (2,552,278 ) 549,762 (636,955 ) 9,133 (4,248 ) (2,634,586 ) $ 26,619,098

In May 2015, the Corporation determined after the demolition or disposal of some of the buildings and machinery in the Hsinchu and Kaohsiung factories, an impairment loss of $279,387 thousand and a disposal loss of $70,575 thousand were recognized in 2015.

The following property, plant and equipment were depreciated on a straight-line basis over their useful lives:

Buildings: Leasehold improvements and others	3-15 years
Buildings: Buildings, warehouses, storage sheds	16-60 years
Machinery and equipment: Production equipment	3-15 years
Machinery and equipment: Storage tanks, power transmission systems, etc.	16-40 years
Transportation equipment	3-15 years
Other equipment	3-15 years

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Financial Summary

14. INVESTMENT PROPERTIES

Cost Balance at January 1, 2015 Additions Disposals Transferred from property, plant and equipment Reclassification Balance at December 31, 2015 Accumulated depreciation and impairment Balance at January 1, 2015 Disposals Depreciation expense Transferred from property, plant and equipment Balance at December 31, 2015 Carrying amounts at December 31, 2015 Cost Balance at January 1, 2016 Additions Transferred from property, plant and equipment Balance at December 31, 2016 Accumulated depreciation and impairment Balance at January 1, 2016 Depreciation expense Transferred from property, plant and equipment Balance at December 31, 2016 Carrying amounts at December 31, 2016	Completed Investment Property $ 4,200,898 - - 635,314 3,510,328 8,346,540 - - (5,943) (15,436 ) (21,379 ) $ 8,325,161 $ 8,346,540 - - 8,346,540 (21,379) (9,045) - (30,424 ) $ 8,316,116	Investment Property under Construction $ 5,052,599 485,286 - 145,435 - 5,683,320 - - (703) - (703 ) $ 5,682,617 $ 5,683,320 619,368 123,518 6,426,206 (703) (13,673) (9,133 ) (23,509 ) $ 6,402,697	Undeveloped Investment Property $ 4,172,241 560,703 (2,750) 5,153,089 (3,510,328 ) 6,372,955 (610,202) 2,560 (4) - (607,646 ) $ 5,765,309 $ 6,372,955 672,581 - 7,045,536 (607,646) - - (607,646 ) $ 6,437,890	Total $ 13,425,738 1,045,989 (2,750 ) 5,933,838 - 20,402,815 (610,202) 2,560 (6,650) (15,436 ) (629,728 ) $ 19,773,087 $ 20,402,815 1,291,949 123,518 21,818,282 (629,728) (22,718) (9,133 ) (661,579 ) $ 21,156,703

Completed investment property are located in C3/C6/C7/C8/C9 in the Nangang Economic and Trade Park, and the Corporation leased land use right to others.

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a. The main provisions of the C6/C7/C8/C9 contract on the pledging of land use rights were as follows:
1) Land use rights are for 50 years from the date of registration of these rights. When these rights expire or the contract is terminated, the lessee should cancel its registration for the land use rights and transfer to the Corporation all the land improvements (including the main building, attached building, parking space and all other attached facilities and improvements such as air-conditioning, and utility fixtures).
2) The land use rights (accounted for as deferred income-noncurrent) amounted to $3,200,889 thousand, which has been treated as royalty revenue (accounted for as operating revenue) amortizable over 50 years from June 13, 2006. As of December 31, 2016 and 2015, the unamortized balances of the land used rights under above mentioned contract were $2,526,035 thousand and $2,590,053 thousand, respectively.
3) In addition to the land use right, the annual rental payable by the lessee is 8% of the reference land price announced by the local government, with the calculation starting from the contract date. When the reference land price is adjusted, the annual rental will be revised at the percentage the same as that set on the date of the reference price adjustment. The annual rentals in 2016 and 2015 were $345,132 thousand and $216,781 thousand, respectively.
4) The lessee should not transfer the land use rights or the ownership of leasehold improvements to a third party. Also prohibited are the placing of the land rights under a trust and the use of the rights as collateral.
5) The lessee should not pledge liabilities on land use rights and improvements to a third party.
b. On September 15, 2015, the Corporation signed with CTBC Life Insurance Co., Ltd. and Taiwan Life Insurance Co., Ltd. (together, the “lessees”) separate contracts for these two insurance companies to have the rights to use land located in C3 in the Nangang Economic and Trade Park. The main provisions of these contracts are as follows:
1) Land use rights (LURs) are valid for 45 years from the date of the registration of these rights. When these rights expire or the contracts are terminated by the Corporation or the lessees, the lessees should maintained all the land improvements (including the main building, attached building, parking space and all other attached facilities and improvements) at usable condition and cancel their registration for the LURs and transfer to the Corporation or a third party designated by the Corporation. But if the Corporation wants to demolish the land improvements, it should accordingly inform the lessees in writing within at least five years before the contract expires.
2) The LURs (accounted for as deferred income - noncurrent) amounted to $14,288,705 thousand, which has been treated as royalty revenue (under operating revenue) amortizable over 45 years from December 10, 2015. As of December 31, 2016, the unamortized balance of the LURs was $13,953,538 thousand.
3) In addition to the LURs, the annual rental payable by the lessees is 0.8% of the reference land price announced by the local government, with the calculation starting from the registration date. When the reference land price is adjusted, the annual rental will be revised at the same percentage as the rate of the reference price adjustment. The lessees’ annual rental in 2016 was $48,149 thousand.

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Financial Summary

4) The LURs should not be transferred to a third party. Also, the placing of the LURs under a trust and the use of the rights as collaterals are prohibited without the Corporation’s prior written consent.
5) After nine years and six months from the registration date, the lessees have within six months to extend the validity period for the land use rights to another 40 years by giving a written notice to the Corporation. With this extension, the entire validity period of the LURs will be 85 years, and the lessees should pay an additional one-time royalty of $15,000,000 thousand.
6) Under the contract, the lessees provided the Taiwan Government Bond A02105 and A03114 as collaterals; as of December 31, 2016, the fair values of these bonds were $1,078,335 thousand and $1,666,091, respectively.
c. Investment properties under construction are located in Hsinchu City and Hualien City and included land for the “C2 Tourist Hotel Project” and “Commercial Building Project” in the Nangang Economic and Trade Park.

The main terms of the FEA were as follows:

1) The Corporation is responsible for the construction of the lease premises (the “Premises”), and the Hotels should assist the Corporation in construction-related matters. The Corporation will shoulder the construction cost. Both parties are responsible for the completion of the premises in six years after signing the FEA (the tentative project completion is set for October 8, 2019).
2) The lease contract is for 20 years from the start of the lease contract, and the lessee has the first option to extend the lease for another 10 years. Upon expiry or termination of this lease agreement, the lessee should turn over the Premises as is to the Corporation.
3) The lessee should pay monthly rentals, calculated at the higher of the guaranteed rentals or revenue-based rentals payable to the Corporation from the Premises opening date. The guaranteed rental will be increased 1% each year, and the revenue-based rentals are 16% of the gross revenue of the hotel each month.
4) Under this FEA and lease agreement, the lessee should not assign and transfer any of its rights or obligation to a third party.

The bid for the C2 Commercial Building Project was won by Dung Jeng Investment Co., Ltd. (“Dung Jeng”), for which the Corporation will construct a building and parking space for Dung Jeng’s lease. The lease contract was signed on January 30, 2015. The lease period is 20 years from the completion of the construction of the building and parking space.

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The fair values of investment properties were assessed as follows:

C6/C7/C8/C9
Fair value

Measurement

C2
Fair value

Measurement

C3
Fair value

Measurement

December 31

2016
2015
$24,139,596
$24,696,664
The fair values were based on the
valuations carried out at
March 11, 2016 by independent
qualified professional valuer.
The fair values were based on the
valuations carried out at April 15,
2015 by independent qualified
professional valuer.
$19,743,214
$20,659,864
The fair values were based on the
valuations carried out at
March 11, 2016 by independent
qualified professional valuer.
The fair values were based on the
valuations carried out at April 15,
2015 by independent qualified
professional valuer.
$34,427,661
$38,322,761
The fair values were based on the
valuations carried out at
March 11, 2016 by independent
qualified professional valuer.
The fair values were based on the
valuations carried out at
March 30, 2015 by independent
qualified professional valuer.

The other investment properties held by the Corporation are mainly located in different industrial zones. They have no quoted prices in an active market and there was no alternative basis for estimating their fair values. Thus, the fair values of the investment properties were not reliably determinable.

15. LONG-TERM PREPAYMENT FOR LEASE

Land in a special petrochemical industry zone in Taichung		December 31	December 31
		2016 $ 1,215,950	2015 $ 1,286,561

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Financial Summary

a. The lease term for the land in a special industrial zone is 20 years, and the agreement is renewable until the total lease reaches 50 years. The ownership of the real estate and its improvements constructed with the Corporation’s capital belongs to the Corporation. In principle, the Corporation will return the land to the government on the agreement expiry or upon early termination of the lease agreement.
b. As mentioned above, the Corporation has leased land, developed wests 8 and 9 of the wharf area and constructed warehouse facilities and public roads on behalf of THB. The Corporation used its capital expenses for the construction as rentals in advance. However, once the lease term ends or the agreement is early terminated, all the titles to the facilities and improvements on the leased land should be transferred to THB.

16. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Corporation adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. Accordingly, the Corporation recognized expenses of $16,982 thousand and $18,011 thousand in the parent company only statements of comprehensive income for the years ended December 31, 2016 and 2015, respectively.

b. Defined benefit plans

The defined benefit plan adopted by the Corporation in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the one month before retirement. The Corporation contribute amounts equal to 9% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Corporation assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Corporation is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Corporation has no right to influence the investment policy and strategy.

The amounts included in the balance sheets in respect of the Corporation’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability		December 31	December 31
		2016 $ 542,182 (447,829 ) $ 94,353	2015 $ 557,548 (89,508 ) $ 468,040

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Movements in net defined benefit liability (asset) were as follows:

	Present Value		Net	Defined
	of the Defined		Benefit
	Benefit	Fair Value of	Liability
	Obligation	the Plan Assets	(Asset)
Balance at January 1, 2015	$ 640,962	$ (222,001 )	$	418,961
Service cost
Current service cost	23,662	-		23,662
Past service cost	100,479	-		100,479
Net interest expense	7,732	-		7,732
Net interest income	-	(1,762 )		(1,762 )
Recognized in profit or loss	131,873	(1,762 )		130,111
Remeasurement
Return on plan assets (excluding
amounts included in net interest)	-	(5,545)		(5,545)
Actuarial loss - changes in
demographic assumptions	68	-		68
Actuarial loss - changes in
financial assumptions	19,770	-		19,770
Actuarial loss - experience
adjustments	11,205	-		11,205
Recognized in other comprehensive
income (loss)	31,043	(5,545 )		25,498
Contributions from the employer	-	(16,688)		(16,688)
Benefits paid	(26,803)	26,803		-
Liabilities extinguished on settlement	(219,527 )	129,685		(89,842 )
Balance at December 31, 2015	557,548	(89,508 )		468,040
Service cost
Current service cost	19,748	-		19,748
Past service cost	10,809	-		10,809
Net interest expense	5,275	-		5,275
Net interest income	-	(702 )		(702 )
Recognized in profit or loss	35,832	(702 )		35,130
Remeasurement
Return on plan assets (excluding
amounts included in net interest)	-	(1,913)		(1,913)
Actuarial loss - changes in
demographic assumptions	2	-		2
Actuarial loss - changes in
financial assumptions	7,182	-		7,182
Actuarial loss - experience
adjustments	10,574	-		10,574
Recognized in other comprehensive
income (loss)	17,758	(1,913 )		15,845
Contributions from the employer	-	(405,581)		(405,581)
Benefits paid	(44,834)	36,305		(8,529)
Liabilities extinguished on settlement	(24,122 )	13,570		(10,552 )
Balance at December 31, 2016	$ 542,182	$ (447,829 )	$	94,353

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Financial Summary

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans was as follows:

Operating costs Operation expenses	For the Year Ended	For the Year Ended	December 31
		2016 $ 9,510 25,620 $ 35,130	2015 $ 67,947 62,164 $ 130,111

Through the defined benefit plans under the Labor Standards Law, the Corporation is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

Discount rate(s) Expected rate(s) of salary increase	December 31
	2016 2015 1.00% 1.00% 1.20% 1.00%

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		December	31
		2016 $ (8,850 ) $ 9,138 $ 9,097 $ (8,854 )	2015 $ (9,282 ) $ 9,588 $ 9,564 $ (9,305 )

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The expected contributions to the plan for the next year The average duration of the defined benefit obligation		December	31
		2016 $ 20,030 6 years	2015 $ 21,447 7 years

17. EQUITY a. Share capital Number of shares authorized and issued (in thousands) Capital authorized and issued b. Capital surplus May be used to offset a deficit, distributed as cash dividends, or transferred to share capital Donations Treasury share transactions May not be used Arising from share of changes in capital surplus of associates c. Retained earnings and dividend policy		December 31	December 31
		2016 2015 980,000 980,000 $ 9,800,000 $ 9,800,000 December 31
		2016 $ 44,803 2,187,988 - $ 2,232,791	2015 $ 44,803 2,187,988 4,887 $ 2,237,678

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Financial Summary

reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Corporation’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders. For the policies on distribution of employees’ compensation and remuneration of directors and supervisors before and after amendment, please refer to (d) Employee benefits expense in Note 19.

To determine dividend amounts, the Corporation should take into account the diversity of its business, cycles of the industry, and capital demand in relation to specific products and services. To balance business development and shareholders’ welfare, the cash dividend should not be less than 10% of total annual dividends, unless there is any capital demand due to essential investment plan, change in financial position, business operation, extension of capacity or any other capital expenditure and should be approved in the shareholders’ meetings.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Corporation.

The appropriations from the 2015 and 2014 earnings were as follows:

Legal reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2015 2014 $ 242,708 $ 306,834 2,058,000 2,156,000	Dividends Per Share (NT$)
		For the Year Ended December 31
		2015 2014 $2.1 $2.2

The appropriation of earnings for 2016 was proposed by the Corporation’s board of directors on March 24, 2017. The appropriations and dividends per share were as follows:

The appropriation of earnings for 2016 are subject to resolution in the shareholders’ meeting to be held on June 14, 2017.

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d. Special reserves

The Corporation’s special reserve relating to land reversed on disposal was $635 thousand in 2016.

18. OPERATING REVENUES AND COSTS

Operating revenues Sales revenue Rental revenue Property revenue Other revenue Less: Sales returns and allowances Net operating revenues Operating costs Cost of goods sold Rental cost Property selling cost Total operating costs Gross profit	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 10,089,769 1,463,143 303,718 50,031 (13,395 ) 11,893,266 9,124,686 675,081 117,767 9,917,534 $ 1,975,732	2015 $ 11,803,832 722,364 4,508,646 99,720 (13,755 ) 17,120,807 11,547,172 528,722 1,228,053 13,303,947 $ 3,816,860

19. ADDITIONAL INFORMATION ON NET (LOSS) PROFIT FOR THE YEAR

a. Other gains and losses

Withholding tax of donation (Note 27) Gain on disposal of investments Loss on impairment of financial assets (Note 9) Net foreign exchange gain Impairment loss of other receivables (Note 25) Gain (loss) on disposal of property, plant and equipment (Note 13) Impairment loss on property, plant and equipment (Note 13) Donation expenses (Note 27) Guarantee provisions (Note 25) Gain on disposal of investment property Others	For the Year Ended	For the Year Ended	December 31
		2016 $ (149,475) 23,381 (15,000) 4,593 (4,294) 3,584 - - - - (49,318 ) $ (186,529 )	2015 $ - 1,018 - 31,721 (247,251) (70,575) (279,387) (223,650) (65,732) 8,291 (2,031 ) $ (847,596 )

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Financial Summary

b. Other income

Interest income - bank deposits Subsidies of land improvement demolition Dividends Others	For the Year Ended	For the Year Ended	December 31
		2016 $ 59,919 46,870 41,782 13,854 $ 162,425	2015 $ 17,490 - 42,868 8,976 $ 69,334

c. Depreciation and amortization

Property, plant and equipment Long term prepayment for lease Investment property Intangible assets Summarized by function: Operating costs Operating expenses Nonoperating expenses Employee benefit expense Short-term employee benefits Salary Labor and health insurance Others Retirement benefits (Note 16) Defined contribution plans Defined benefit plans Termination benefits Other employee benefits	For the Year Ended	For the Year Ended	For the Year Ended	December 31
	2016 $ 636,955 70,611 22,718 13,302 $ 743,586 $ 666,696 63,217 13,673 $ 743,586 For the Year Ended			2015 $ 616,819 70,611 6,650 16,088 $ 710,168 $ 634,359 75,102 707 $ 710,168 December 31
		2016 $ 842,135 49,340 30,581 922,056 16,982 35,130 52,112 1,804 706 $ 976,678	2015 $ 892,539 48,994 43,348 984,881 18,011 130,111 148,122 1,347 2,916 $ 1,137,266

d. Employee benefit expense

(Continued)

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Summarized by function: Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 467,450 509,228 $ 976,678	2015 $ 527,153 610,113 $ 1,137,266 (Concluded)

1) Employees’ compensation and remuneration of directors and supervisors for 2016 and 2015

The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2015 was as follows:

Employee’s compensation Remuneration of directors and supervisors	Year Ended December 31, 2014
	Amount Estimated Rate (%) $ 63,542 2.4% 42,362 1.6%

If there is a change in the amounts after the annual parent company only financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.

222

Financial Summary

2) Bonus to employees and remuneration of directors and supervisors for 2014

The bonus to employees and remuneration of directors and supervisors for 2014 which have been approved in the shareholders’ meeting on June 24, 2015 was as follows:

Bonus to employees Remuneration of directors and supervisors	For the Year Ended December 31, 2014
	Cash $ 68,084 45,390

There was no difference between the amounts of the bonus to employees and the remuneration of directors and supervisors approved in the shareholders’ meeting on June 24, 2015 and the amounts recognized in the parent company only financial statements for the year ended December 31, 2014.

20. INCOME TAX

a. Major components of tax expense recognized in profit or loss

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior years Deferred tax In respect of the current year Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2016 $ 288 10,521 (10,565 ) 244 62,820 $ 63,064	2015 $ 32,703 60,381 (33,063 ) 60,021 54,595 $ 114,616

A reconciliation of accounting profit and income tax expenses is as follows:

(Loss) profit before income tax Income tax expense calculated at the statutory rate Adjustment items in determining taxable profit Tax-exempt income Income tax on unappropriated earnings Unrecognized temporary differences Adjustments for prior years’ tax	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ (66,439 ) $ (11,294) 72,269 (10,247) 10,521 12,092 (10,565)	2015 $ 2,541,699 $ 432,089 88,622 (517,866) 60,381 51,750 (33,063)

(Continued)

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Nondeductible foreign dividend income tax Others Income tax expense recognized in profit or loss	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 - 288 $ 63,064	2015 32,450 253 $ 114,616 (Concluded)

The applicable tax rate used above is the corporate tax rate of 17%.

b. Income tax recognized in other comprehensive income

Deferred tax In respect of the current year: Translation of foreign operations Remeasurement on defined benefit plan Total income tax recognized in other comprehensive income	For the Year Ended	For the Year Ended	December 31
		2016 $ 33,892 2,693 $ 36,585	2015 $ (70,262) 4,335 $ (65,927 )

c. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2016

Deferred Tax Assets Unamortized manufacturing costs Defined benefit obligation Impairment loss on assets Tax losses Others	Opening Balance Recognized in Profit or Loss Recognized in Other Comprehensive Income Closing Balance $ 60,880 $ (23,046) $ - $ 37,834 79,567 (66,220) 2,693 16,040 81,638 (10,907) - 70,731 20,932 (6,585) - 14,347 17,673 (930 ) - 16,743 $ 260,690 $ (107,688 ) $ 2,693 $ 155,695

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Financial Summary

					Recognized	Recognized	in	in
						Other
		Opening	Recognized in		Comprehensive
Deferred Tax Liabilities		Balance	Profit or Loss			Income			Closing Balance
Land value increment tax	$	6,420,390	$	(157)	$			-	$	6,420,233
Investment income
recognized under the
equity method		662,242		(44,747)				-		617,495
Exchange difference on
the translation of
foreign operations		210,619		-		(33,892)				176,727
Others		47		36			-			83
	$	7,293,298	$	(44,868 )	$	(33,892 )			$	7,214,538
For the year ended December	31,	2015
					Recognized		in
						Other
		Opening	Recognized in		Comprehensive
Deferred Tax Assets		Balance	Profit or Loss			Income			Closing Balance
Unamortized
manufacturing costs	$	76,469	$	(15,589)	$			-	$	60,880
Defined benefit obligation		71,223		4,009		4,335				79,567
Impairment loss on assets		56,218		25,420				-		81,638
Tax losses		-		20,932				-		20,932
Others		35,052		(17,379 )				-		17,673
	$	238,962	$	17,393	$	4,335			$	260,690
					Recognized			in
						Other
		Opening	Recognized in		Comprehensive
Deferred Tax Liabilities		Balance	Profit or Loss			Income			Closing Balance
Land value increment tax	$	6,420,466	$	(76)	$			-	$	6,420,390
Investment income
recognized under the
equity method		588,867		73,375				-		662,242
Exchange difference on
the translation of
foreign operations		140,357		-		70,262				210,619
Others		1,358		(1,311 )				-		47
	$	7,151,048	$	71,988	$	70,262			$	7,293,298

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d. Integrated income tax

Unappropriated earnings generated on and after January 1, 1998 Shareholder-imputed credit account Creditable ratio for distribution of earnings		December 31
		2016 2015 $ 703,332 $ 3,146,060 $ 192,221 $ 945,082 December 31
		2016 (Expected) 2015 28.39% 22.18%

e. Income tax assessments

The tax returns through 2014 have been assessed by the tax authorities.

21. (LOSS) EARNINGS PER SHARE

Basic (loss) earnings per share Diluted (loss) earnings per share	Unit: NT$ Per Share For the Year Ended December 31	Unit: NT$ Per Share For the Year Ended December 31	Unit: NT$ Per Share For the Year Ended December 31
		2016 $ (0.13 ) $ (0.13 )	2015 $ 2.48 $ 2.47

The (loss) earnings and weighted average number of ordinary shares outstanding in the computation of (loss) earnings per share were as follows:

Net (Loss) Profit for The Year

(Loss) profit used in the computation of basic (loss) earnings per share (Loss) profit used in the computation of diluted (loss) earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ (129,503 ) $ (129,503 )	2015 $ 2,427,083 $ 2,427,083

226

Financial Summary

Number of Shares

Unit: Thousand Shares

Weighted average number of ordinary shares used in the computation of basic (loss) earnings per share Effect of potentially dilutive ordinary shares Employees’ compensation Weighted average number of ordinary shares used in the computation of diluted (loss) earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 980,000 - 980,000	2015 980,000 2,125 982,125

If the Corporation offered to settle compensation in cash or shares, the Corporation assumed the entire amount of the compensation will be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

22. OPERATING LEASE AGREEMENTS

Operating leases relate to the investment property owned by the Corporation with lease terms between 1 to 50 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have a bargain purchase option to acquire the property at the expiry of the lease period.

The future minimum lease payments of non-cancellable operating lease were as follows (not include the royalty the Corporation received for the land use right):

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years		December 31	December 31
		2016 $ 569,219 2,113,551 14,185,900 $ 16,868,670	2015 $ 370,980 1,367,572 8,370,284 $ 10,108,836

23. CAPITAL MANAGEMENT

The Corporation manages its capital to ensure that entities in the Corporation will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

The capital structure of the Corporation consists of net debt (borrowings offset by cash and cash equivalents) and equity of the Corporation (comprising issued capital, reserves, retained earnings and other equity).

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The Corporation is not subject to any externally imposed capital requirements.

Key management personnel of the Corporation review the capital structure on an annual basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Corporation may adjust the amount of dividends paid to shareholders or the amount of new debt issued or existing debt redeemed.

24. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

The Corporation’s management believes the carrying amounts of financial assets and financial liabilities recognized in the financial statements approximate their fair values or their fair values cannot be reliably measured.

b. Fair value of financial instruments that are measured at fair value on a recurring basis

Fair value hierarchy

December 31, 2016

Available-for-sale financial assets Domestic quoted shares Mutual funds December 31, 2015 Available-for-sale financial assets Domestic quoted shares Mutual funds	Level 1 $ 91,102 3,155,410 $ 3,246,512 Level 1 $ 76,315 8,652,977 $ 8,729,292	Level 2 $ - - $ - Level 2 $ - - $ -	Level 3 $ - - $ - Level 3 $ - - $ -	Total $ 91,102 3,155,410
				$ 3,246,512
				Total $ 76,315 8,652,977
				$ 8,729,292

There were no transfers between Levels 1 and 2 in the current and prior periods.

228

Financial Summary

c. Categories of financial instruments

Financial assets Loans and receivables (1) Available-for-sale financial assets (2) Financial liabilities Amortized cost (3)	December 31
	2016 2015 $ 10,222,443 $ 7,595,462 3,696,094 9,224,333 1,361,074 1,922,681

1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, accounts receivable, other receivables, other financial assets, and long-term receivable.
2) The balances included the carrying amount of available-for-sale financial assets and financial assets measured at cost.
3) The balances included financial liabilities measured at amortized cost, which comprised notes payable, accounts payable and other payables.
d. Financial risk management objectives and policies

The Corporation’s Corporate Treasury function is responsible for the preparation of financial plans, capital allocation and risk management, and coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Corporation through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (mainly including currency risk and interest rate risk), credit risk and liquidity risk.

1) Market risk

The Corporation’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

a) Foreign currency risk

The Corporation had foreign currency sales and purchases, which exposed the Corporation to foreign currency risk.

The carrying amounts of the Corporation’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period. Refer to Note 28 for related disclosures.

Sensitivity analysis

The Corporation was mainly exposed to USD.

The following are the details of the Corporation’s sensitivity to a 10% increase and decrease in New Taiwan dollars against USD. 10% is the sensitivity rate used when

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reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items, and adjusts their translation at the end of the reporting period for a 10% change in foreign currency rates. For the years ended December 31, 2016 and 2015, for a 10% strengthening/weakening of New Taiwan dollars against USD, there would be a decrease/increase of $13,874 thousand and increase/decrease of $22,269 thousand on pre-tax profit, respectively. The effect of exchange rate changes was mainly attributable to the exposure outstanding on USD receivables and payables, which were not hedged at the end of the reporting period.

b) Interest rate risk

The Corporation was exposed to interest rate risk because entities in the Corporation borrowed funds at both fixed and floating interest rates. The risk is managed by the Corporation by maintaining an appropriate mix of fixed and floating rate borrowings, and using interest rate swap contracts and forward interest rate contracts.

The carrying amount of the Corporation’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows.

Fair value interest rate risk Financial assets Cash flow interest rate risk Financial assets Sensitivity analysis	December 31
	2016 2015 $ 7,580,290 $ 4,492,490 882,323 1,313,800

The sensitivity analyses below were determined based on the Corporation’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period.

If interest rates had been 1 basis point higher/lower and all other variables were held constant, the Corporation’s pre-tax (loss) profit for the years ended December 31, 2016 and 2015 would decrease/increase by $8,823 thousand and increase/decrease $13,138 thousand, respectively.

c) Other price risk

The Corporation was exposed to equity price risk through its investments in listed equity securities and mutual funds. The Corporation manages this exposure by maintaining a portfolio of investments with different risks. The Corporation’s equity price risk was mainly concentrated on equity instruments listed on the Taiwan Stock Exchange. In addition, the Corporation has appointed a special team to monitor price risks and will consider hedging the risk exposure should the need arise.

Sensitivity analysis

The sensitivity analyses below was based on the exposure to equity price risks at the end of the reporting period.

230

Financial Summary

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Corporation. As at the end of the reporting period, the Corporation’s maximum exposure to credit risk which will cause a financial loss to the Corporation due to failure of counterparties to discharge an obligation and financial guarantees provided by the Corporation could arise from the carrying amount of the respective recognized financial assets as stated in the balance sheets; and the amount of contingent liabilities in relation to financial guarantee issued by the Corporation.

The Corporation adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Corporation only transacts with entities that are rated the equivalent of investment grade and above. This information is supplied by independent rating agencies where available and, if not available, the Corporation uses other publicly available financial information and its own trading records to rate its major customers. The Corporation’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually.

Credit risk represents the potential loss that would be incurred by the Corporation if the counter-parties breach contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The counter-parties to the foregoing financial instruments are reputable financial institutions and business organizations. Management does not expect the Corporation’s exposure to default by those parties to be material.

On some properties sold in installments, the Corporation had the mortgage rights to ensure the protection of the Corporation’s interests.

3) Liquidity risk

The Corporation manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Corporation’s operations and mitigate the effects of fluctuations in cash flows.

Liquidity and interest risk rate tables

The following table details the Corporation’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Corporation can be required to pay. The tables included both interest and principal cash flows. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

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To the extent that interest flows are floating rate, the undiscounted amount was derived from the interest rate curve at the end of the reporting period.

December 31, 2016

Non-derivative financial liabilities Noninterest bearing December 31, 2015 Non-derivative financial liabilities Noninterest bearing	On Demand or Less than 1 Month $ 47,973 On Demand or Less than 1 Month $ 75,969	1-3 Months $ 974,207 1-3 Months $ 1,134,383	3 Months to 1 Year $ 338,894 3 Months to 1 Year $ 712,329	1-5 Years $ -
				1-5 Years $ -

Financing facilities

Unsecured bank facility Amount used Amount unused Unsecured bank overdraft facility Amount used Amount unused		December 31	December 31
		2016 $ - 11,605,100 $ 11,605,100 $ - 390,000 $ 390,000	2015 $ - 10,254,100 $ 10,254,100 $ - 540,000 $ 540,000

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Financial Summary

25. TRANSACTIONS WITH RELATED PARTIES

Details of transactions between the Corporation and other related parties are disclosed below.

a. Operating transactions

Purchase of Goods	Purchase of Goods	Purchase of Goods
For the Year Ended December 31
	2016 2015 $ 1,026,900 $ 2,243,935 Rental Income
For the Year Ended December 31
	2016 $ 17,185	2015 $ 17,254

The transaction terms with related parties were not significantly different from those with third parties.

Associates		Payables to Related Parties	Payables to Related Parties
		December 31
		2016 $ 318,490	2015 $ 655,755

TR Electronic Chemical Co., Ltd. (TR), a jointly controlled entity of the Corporation, had obtained a financing of US$10,000 thousand from a bank, and the Corporation and Jing Chin International Limited Corporation, a shareholder of TR, guaranteed the repayment of this financing. When TR failed to make a repayment, the bank then requested the guarantors to repay the loan partially. Because the Corporation could only provide TR-in compliance with the “Regulations Governing the Granting of Loans and Endorsements and Guarantees by Public Companies” - with a limited amount of endorsement, the Corporation’s board approved the repayment of TR’s loan, as following.

Due Date	Date of Repayment	Amount in USD	Amount in USD	Amount in NTD
March 27, 2014	June 27, 2014	$	4,570	$ 144,641
April 26, 2015	April 24, 2015		3,300	102,610
March 27, 2016	March 31, 2016		2,147	70,026

Considering the weakening operating and repayment capability of TR, the Corporation recognized an impairment loss of $312,983 thousand and $4,294 thousand on receivables in 2016 and 2015, respectively.

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b. Compensation of key management personnel

The compensation to directors and other key management personnel were as follows:

Short-term employee benefits Post-employment benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2016 $ 40,286 8,906 $ 49,192	2015 $ 70,666 1,213 $ 71,879

26. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collaterals to a financial institution for the subsidiaries purchase of materials.

Pledge deposits		December	31
		2016 $ 13,800	2015 $ 13,800

27. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

a. As of December 31, 2016, the Corporation had unused letters of credits of US$10,059 thousand and EUR$454 thousand.
b. As of December 31, 2016, the Corporation had guarantee notes payable for its debt of $11,995,100 thousand, which was not reflected in the financial statements.
c. Huaku Development Co., Ltd. (“Huaku”) filed an appeal with the Taipei District Civil Court (the “Court”) for the Corporation to pay a co-building trade business tax of $38,370 thousand. The Court ruled that the Corporation should make this payment in June 2014. The Corporation brought this case to a High Court in August 2014; however, the High Court ruled denying in June 2015. Therefore, the Corporation lodged an appeal against the High Court judgment in July 2015, but the Supreme Court decided against the Corporation, so the conviction has been affirmed by the Supreme Court. The Corporation accrued a possible loss of $38,370 thousand for this case in 2012 financial statements.
d. On June 25, 2013, the shareholders resolved that, in order to enhance the long-term business relationship with Saudi Arabian Basic Industries Corporation as well as to maintain the relationship with the Kingdom of Saudi Arabia (“Saudi Arabia”), the Corporation shall donate its share of Al-Jubail’s profit, with US$50,000 thousand as the donation limit, to the government or organizations in Saudi Arabia.

In October 2013, the Corporation and Al-Jubail signed a Memorandum of Understanding (MOU); the main contents of the MOU are summarized as follows:

1) The Corporation agreed to donate US$42,000 thousand by way of six equal semiannual installments of US$7,000 thousand to the government or a nonprofit organization in Saudi Arabia. The first donation should be made by October 31, 2013.

234

Financial Summary

2) The donation will be funded from the dividends of Al-Jubail that have been declared and are to be distributed to the Corporation. Al-Jubail will keep the above funds in a separate account in its name in a local bank. As administrator of the donations, Al-Jubail should designate the recipient of the donation.

The Corporation’s donation was as follows:

Period	Date of Donations	Amount in USD	Amount in USD	Amount in NTD
1st	October 2013	$	7,000	$ 209,440
2nd	June, 2014		7,000	208,635
3rd	December, 2014		7,000	212,940
4th	March, 2015		7,000	223,650

e. On May 22, 2015, the Corporation’s board of directors approved the issuance by Taifer (Cayman) International Group Co., Ltd. (“Corporation Cayman”), a 100% subsidiary, of a letter endorsing the request of TR Electronic Chemical (Kunshan) Ltd. (TR) for a bank financing of US$3,000 thousand; the main contents of the letter are as follows:
1) Taifer Cayman will inform the bank once its equity interest in TR becomes less than 51%.
2) Taifer Cayman will maintain its management of and control over TR.
3) Taifer Cayman will provide TR with appropriate resources (including financial, employee and technology support) to help TR carry out its obligations.
4) If TR significantly breaches the contract, Taifer Cayman will take lawful measures to assist TR in fully repaying, or monitor the way TR repays, its loan, or in providing other collaterals to the bank.
f. On October 14, 2016, the Corporation received a letter from the National Taxation Bureau of Taipei, Ministry of Finance, which notified the Corporation that it had not declared withholding tax in relation to donations to the government and non-profit organizations of Saudi Arabia from 2014 to 2016. According to Paragraph 1 of Article 114 of the Income Tax Act, the amount of withholding tax payable was $140,065 thousand, and the Corporation paid it on October 28, 2016. The Corporation also accrued fines for this case in 2016.

28. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

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The significant financial assets and liabilities denominated in foreign currencies were as follows:

December 31, 2016

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 10,936 32.25 (USD:NTD) Non-monetary items Investments accounted for using equity SAR 1,267,136 8.60 (SAR:NTD) USD 872 32.25 (USD:NTD) Financial liabilities Monetary items USD 6,634 32.25 (USD:NTD) December 31, 2015 Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 13,068 32.825 (USD:NTD) Non-monetary items Investments accounted for using equity SAR 1,296,728 8.75 (SAR:NTD) USD 1,140 32.825 (USD:NTD) Financial liabilities Monetary items USD 19,852 32.825 (USD:NTD)	Carrying Amount $ 352,686
	$ 10,896,351 28,136
	$ 10,924,487
	$ 213,947
	Carrying Amount $ 428,957
	$ 11,349,635 37,435
	$ 11,387,070
	$ 651,642

236

Financial Summary

The significant (realized and unrealized) foreign exchange gains (losses) were as follows:

Foreign Currencies USD	For the Year Ended December 31	For the Year Ended December 31
	2016 Exchange Rate Net Foreign Exchange Gain 32.263 (USD:NTD) $ 4,593	2015
		Exchange Rate Net Foreign Exchange Gain 31.739 (USD:NTD) $ 31,721

29. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees:
1) Financing provided to others: None
2) Endorsements/guarantees provided: Table 1
3) Marketable securities held (excluding investment in subsidiaries, associates and joint ventures): Table 2
4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Table 3
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None
7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 4
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 5
9) Trading in derivative instruments: None
10) Information on investees: Table 6
b. Information on investments in mainland China:
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: Table 7
2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses: None

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a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.
c) The amount of property transactions and the amount of the resultant gains or losses.
d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.
f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

238

TABLE 1

TAIWAN FERTILIZER CO., LTD.

ENDORSEMENT/GUARANTEE PROVIDED YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars/Foreign Currency)

No.	Endorser/ Guarantor	Endorsee	/Guarantee	Limits on Each Guaranteed Party’s Endorsement/ Guarantee Amounts (Note 1)	Maximum Balance for the Period	Ending Balance	Ending Used Balance	Value of Collaterals Property, Plant, or Equipment	Ratio of Accumulated Amount of Collateral to Net Equity of the Latest Financial Statement	Maximum Collateral/ Guarantee Amounts Allowable (Note 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Nature of Relationship
0	Taiwan Fertilizer Co., Ltd. (the “Corporation”)	TR Electronic Chemical Co., Ltd. (TR) Taifer Chemicals International Inc. (“Taifer”)	Indirect equity-method investee in which the Corporation provided endorsement and guarantee according to the percentage of ownership Subsidiary	$ - 40,806	$ 66,626 (US$ 2,130) 23,500	$ - (Note 3) 13,500	$ - 13,500	$ - -	- 0.03	$ - 25,302,213	No Yes	No No	No No

Note 2: The total amount of guarantee should not exceed 50% of the Corporation’s net worth.

Note 3: The ending balance was $0 because the Corporation had repaid the loan on behalf of TR on March 31, 2016.

TABLE 2

TAIWAN FERTILIZER CO., LTD.

MARKETABLE SECURITIES HELD DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Holding Company Name	Marketable Securities Type/Name and Issuer	Relationship with the Holding Company	Financial Statement Account		Decembe	r31, 2016		Note
				Units or Shares (Thousands)	Carrying Value	Percentage of Ownership	Market Value
Taiwan Fertilizer Co., Ltd.	Mutual funds Mega Diamond Money Market Fund Jih Sun Money Market Fund Common stocks Eminent II VC Corp Eminent Venture Capital Corporation Taiwan Stock Exchange Corporation Top Taiwan V Venture Capital Co., Ltd. Visgeneer Inc. TaiAn Technologies Corporation TSCBio Ventures Capital Co. Ding-Tang Phalanx Biotech Co., Ltd. Bion tech Inc. China Petrochemical Development Corporation	- - - - - - - - - - - - -	Available-for-sale financial assets - current Available-for-sale financial assets - current Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Available-for-sale financial assets - current	153,746 84,947 20,000 10,000 13,534 3,220 3,147 741 3,360 1,500 404 4,167 9,202	$ 1,909,265 1,246,145 200,000 100,000 52,800 32,195 20,989 7,667 33,600 - - 2,331 91,102	- - 18.50 10.00 2.00 9.76 10.31 16.67 19.75 6.71 0.76 17.89 0.40	$ 1,909,265 1,246,145 257,692 111,325 998,126 29,518 32,150 16,050 34,476 7,238 2,040 7,951 91,102	Note 1 Note 1 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 2

Note 1: The market value was calculated on the basis of the net asset value as of the balance sheet date.

Note 2: The market value was calculated on the basis of the closing price on the Taiwan Stock Exchange as of the balance sheet date.

Note 3: The market value was calculated on the basis of the unaudited financial statement for the same period.

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TABLE 3

TAIWAN FERTILIZER CO., LTD.

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition	Disposal	Disposal	Disposal	Disposal	Ending Balance	Ending Balance
					Units (Thousands)	Amount (Note)	Units (Thousands)	Amount (Note)	Units (Thousands)	Carrying Amount	Price	Gain (Loss) on Disposal	Units (Thousands)	Amount (Note)
Taiwan Fertilizer Co., Ltd.	Allianz Glbl Investors Taiwan Money Market Fund Jih Sun Money Market Fund Nomura Taiwan Money Market Fund Capital Money Market Fund Taishin 1699 Money Market Fund	Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current	- - - - -	- - - - -	72,883 112,349 64,011 91,755 116,958	$ 901,552 1,642,712 1,031,453 1,462,005 1,562,164	- - - - -	$ - - - - -	72,883 27,402 64,011 91,755 116,958	$ 900,000 400,000 1,030,000 1,460,000 1,560,000	$ 902,887 401,653 1,032,311 1,463,280 1,565,722	$ 2,887 1,653 2,311 3,280 5,722	- 84,947 - - -	$ - 1,246,145 - - -

Note :Unrealized gain and loss on financial assets were recognized.

TABLE 4

TAIWAN FERTILIZER CO., LTD.

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship		Transaction	Details		Abnormal Transact	ion	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
Taiwan Fertilizer Co., Ltd.	AI-Jabail Fertilizer Company	Equity-method investee	Purchase	$ 1,026,900	10	Same as those for third parties	Determined under the considerations of international market price and production cost	30 days	$ (318,490)	36	-

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TABLE 5

TAIWAN FERTILIZER CO., LTD.

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	Overdue	Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Taiwan Fertilizer Co., Ltd.	TR Electronic Chemical Co., Ltd.	Jointly controlled entity	Other receivable $ 317,277	-	$ 317,277	-	$ -	$ 317,277

TABLE 6

TAIWAN FERTILIZER CO., LTD.

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Investor	Investee	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance as of December 31, 2016	Balance as of December 31, 2016	Balance as of December 31, 2016	Net (Loss) Income of the Investee	Investment (Loss) Income	Note
				December 31, 2016	December 31, 2015	Shares/Units (Thousands)	Percentage of Ownership	Carrying Value
Taiwan Fertilizer Co., Ltd. Taifer (Cayman) International Group Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taifer Chemicals International Inc. Taifer International (Samoa) Group Co., Ltd.	Al-Jubail Fertilizer Company Taifer Chemicals International Inc. Taiwan Yes Deep Ocean Water Co., Ltd. Taifer (Cayman) International Group Co., Ltd. Taiwan Agricultural Global Marketing Co., Ltd. Taifer (Cambodia) Co., Ltd. Taifer International (Samoa) Co., Ltd. TR Electronic Chemical Co., Ltd. Hasbo Biotech Co., Ltd. Taifer International (Samoa) Group Co., Ltd. Taifer Chemical International Co., Ltd.	Kingdom of Saudi Arabia Taiwan Taiwan Cayman Islands Taiwan Cambodia Samoa Cayman Islands Taiwan Samoa Mongolia	Manufacture of urea, 2-EH (2-ethyl hexanol), and DOP (dioctyl phthalate) International trade; wholesale of fertilizer, tobacco, liquor, beverage, forage, machinery, electrical equipment, etc.; development, operation and management of residential buildings and factory buildings; special zone development; investment in and construction of public works; development of new towns and districts; agent services on regional district requisition; land adjustment; and real estate rental or leasing a) Wholesale of drinks, food and grocery and other articles for daily use; tobacco and liquor; glass and pottery; hygiene products; fertilizers and other chemical products; and cosmetics; and b) International trade Investment and holding Wholesale and retail of products for organic agriculture International trade; wholesale of fertilizer Investment and holding Investment and holding Wholesale of Nonalcoholic Beverages and Cosmetics Investment and holding Real estate rental and leasing	$ 3,050,000 126,300 1,224,235 321,900 100,000 40,052 9,348 321,962 240,000 42,618 41,077	$ 3,050,000 126,300 1,224,235 321,900 100,000 40,052 9,348 321,962 240,000 42,618 41,077	7 5,500 95,000 11 7,174 - - - 24,000 - -	50.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00 100.00 100.00 100.00	$ 10,896,351 76,479 469,125 - 66,642 28,136 9,348 - (121,876 ) 53,038 52,773	$ (454,470 ) 15,143 (122,923 ) - (2,832 ) (8,647 ) - (93,294 ) (7,312 ) 13,180 13,180	$ (254,573 ) 15,143 (458,969 ) - (2,832 ) (8,647 ) - No applicable No applicable No applicable No applicable	Associate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Jointly controlled entity Subsidiary Subsidiary Subsidiary

Note: In August 2016, Taifer Biotech Co., Ltd. has been renamed as Taiwan Agricultural Global Marketing Co., Ltd..

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TABLE 7

TAIWAN FERTILIZER CO., LTD.

INVESTMENT IN MAINLAND CHINA YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars/Foreign Currency)

Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type	Accumulated Outflow of Investment from Taiwan as of January 1, 2016	Investme	nt Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2016	Net Income (Loss) of the Investment （Note 1）	% Ownership of Direct or Indirect Investment	Investment Gain (Loss)	Carrying Value as of December 31, 2016	Accumulated Inward Remittance of Earnings as of December 31, 2016
					Outflow	Inflow
TR Electronic Chemical (Kunshan) Ltd.	Manufacture of nitric acid, hydrofluoric acid, ammonia, phosphoric acid, oxalic acid, ammonia fluoride and LCD and IC Stripper	US$ 21,500 (NT$ 693,375 ) (Note 4)	Note 3	US$ 10,965 (NT$ 353,621 ) (Note 4)	-	-	US$ 10,965 (NT$ 353,621 ) (Note 4)	US$ (2,892 ) (NT$ (93,294) ) (Note 5)	51	- - (Note 6)	- - (Note 6)	-

Accumulated Investment in Mainland China as of December 31, 2016	Investment Amounts Authorized by Investment Commission, MOEA	Limit on Investment
NT$353,621 (US$ 10,965) (Note 4)	NT$353,621 (US$ 10,965) (Note 4)	NT$30,362,656 (Note 2)

Note 1: The amount was based on the financial statements unaudited by the auditors recently.

Note 3: Indirect investment in Mainland China through a subsidiary in a third place. (Investor: TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.)

Note 4: The foreign currency amounts of original investment amount and carrying value were translated into New Taiwan dollars at the exchange rate 32.25 as of December 31, 2016.

Note 5: The foreign currency amount of investment gain/loss was translated into New Taiwan dollars at an average exchange rate 32.263 for the year ended December 31, 2016.

Note 6: As of June 30, 2015, the investment accounted for using the equity method balance of the Corporation was zero, so the Corporation didn’t recognize income (loss) of the investment.

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VI. Matters on difficulty in financial turnover in the Company and its affiliated entities for t he current year and up to the date of the publication of the annual report: None.

246

Matters on Financial Standing and Operation Result Review and Analysis and Risks

Part Seven: Matters on Financial Standing and Operation Result Review and Analysis and Risks

I. Financial Standing

Unit: NT$ K

			Unit: NT$ K	Unit: NT$ K
Year Items	2016	2015	Difference
			Amount	％
Current assets	15,301,306	18,900,345	(3,599,039)	(34.17)
Real estate, plant and equipment	26,753,401	27,232,915	(479,514)	(1.43)
Intangible assets	257,986	471,995	(214,009)	(44.14)
Other assets	34,405,109	33,898,550	506,559	1.96
Total assets	76,717,802	80,503,805	(3,786,003)	(5.37)
Current liabilities	1,680,062	2,248,724	(568,662)	(9.67)
Non-current liabilities	24,433,314	25,287,221	(853,907)	(6.99)
Total liabilities	26,113,376	27,535,945	(1,422,569)	(7.86)
Share capital	9,800,000	9,800,000	0	0.00
Capital reserve	2,232,791	2,237,678	(4,887)	(0.22)
Retained earnings	37,976,750	40,177,405	(2,200,655)	(5.51)
Owners’ equity due to parent company	50,604,426	52,967,860	(2,363,434)	(4.51)
Remarks on the analysis of changes in percentages of increase and decrease: (with increase and decrease changes living up to more than 20%, and amounts of changes living up to NT$10,000K) 1. Current assets: The decrease in current assets was mainly attributable to the decrease in cash and available-for-sale financial assets as well as the increase of other financial assets.
2. Intangible assets: The decrease in intangible assets was mainly attributable to the impairment to the
reputation and trademark of the recognized investment cross strait.

247

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II. Operation Results

(I) Comparative analysis of operating results:

Unit: NT$ K

Year Items	2016	2015	Increased (decreased)amount	Change percentage(%)
Total operating income Less: Sales return and discounts Net operating income Operating costs Operating gross profit Operating expenses Operating interest Non-operating income and expenses Net profit (loss) before taxation Income tax expenses (gains) Net profits (loss) for current period	12,265,584 (24,664) 12,240,920 10,234,666 2,006,254 1,410,560 595,694 (616,713) (21,019) 108,484 (129,503)	17,506,266 (19,189) 17,487,077 13,612,077 3,875,000 1,529,988 2,345,012 174,718 2,519,730 92,647 2,427,083	(5,240,682) 5,475 (5,246,157) (3,377,411) (1,868,746) (119,428) (1,749,318) (791,431) (2,540,749) 15,837 (2,556,586)	(29.88) 18.15 (29.96) (23.14) (64.16) (9.53) (105.38) (66.66) (89.24) (7.16) (83.32)
Analysis of causes of change differences up to 20% or more: 1. Operating profit and interest: The decrease in operating gross profit and interest was mainly attributable to the sharp decline in current real estate income. 2. Analysis of non-operating expenses and loss: The decrease in non-operating net income was mainly attributable to the loss of recognized investment and impairment of asset. 3. Analysis of net profit for this period : The reduction of net profit was mainly attributable to the sharp decline in real estate income and non-operatingnet loss.

248

Matters on Financial Standing and Operation Result Review and Analysis and Risks

(II) Table of analysis of changes in operating gross profits:

Unit: NT$ K

		Unit: NT$ K	Unit: NT$ K	Unit: NT$ K	Unit: NT$ K
	Amount of changes in increase (decrees) in subsequent and later period	Causes for differences
		Selling price difference	Cost Difference	Quantity difference	Others
Operating gross profit	(1,868,746)	(1,553,352)	1,852,736	85,172	(2,253,302)
Remarks	Operating gross profit had decreased by NT$ 1.869 billion, which was mainly attributable to
	comprehensive effects: sharp decline in real estate income; and the favorable variance on costs was greater
	than the unfavorable variance on sales prices for fertilizer and chemical products due to energy integration
	at Taichung Plant and price drop of international raw materials.

III. Cash flows

Table of Review of Cash Flow and Analysis

Unit: NT$ K

						Unit: NT$ K
Opening cash balance	Net cash flow for the year from operatingactivities		Annual cash flow out	Remaining (shortage) amount of cash		Remedial actions for cash shortage
						Financing plan
2,474,406	1,637,051		(3,026,622)	1,084,835		－
1. Analysis of changes in cash flow for the current year: (1) Operating net income: The decrease in operating net income was mainly attributable to the decrease in real estate income and costs of raw materials. (2) Net flow out due to investment activities: mainly caused by the increase of term deposits at the bank. (3) Net flow in due to financing activities: mainly caused by the issue of cash dividends. 2. Remedial actions for cash shortage and analysis of liquidity: none. 3. Analysis of cash liquidity for the next year: Unit: NT$ K Opening cash balance Net cash flow for the year from operating activities Annual cash flow out Remaining (shortage) amount of cash Remedial actions for cash shortage Investment Plan (Note 1) 1,084,835 954,567 6,830,424 (4,791,022) 4,791,022 Note 1: Funds are to come from the early cancellation of the term of term deposits at the bank.
Opening cash balance 1,084,835	Net cash flow for the year from operating activities	Annual cash flow out		Remaining (shortage) amount of cash	Remedial actions for cash shortage
					Investment Plan (Note 1)
	954,567	6,830,424		(4,791,022)	4,791,022
Note 1: Funds are to come from the

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IV. Effects of Significant Capital Expenses on Financial Affairs over the Recent Years

(I) Utilization of significant capital expenses and sources of capital of the Company for the recent years:

(I) Utilization of significant capital expenses and sources of capital of the Company for the recent years:	(I) Utilization of significant capital expenses and sources of capital of the Company for the recent years:	(I) Utilization of significant capital expenses and sources of capital of the Company for the recent years:	(I) Utilization of significant capital expenses and sources of capital of the Company for the recent years:	(I) Utilization of significant capital expenses and sources of capital of the Company for the recent years:	(I) Utilization of significant capital expenses and sources of capital of the Company for the recent years:
Unit: NT$ K
Plan project	Actual or expected capital sources	Actual or expected completion date	Total amount of capital required	Total actual payment up to 2016	Estimated utilization for 2017
Construction plan of TaichungPlant	Self-owned capital And bank financing	06.2013-12.2016	11,815,985	11,573,639	51,663

(II) Estimated possible income: estimated production, sales, values and gross profits to be increased

Unit: NT$ K

Year	Items	Production	Sales volume	Sales value	Gross profit
2013-2016	Construction plan of Taichung Plant	The capacity of annual production of nitro-phosphorus and phosphorus-based compound fertilizer, superphosphate, ammonium sulfate, and other fertilizer products as well as nitric acid can reach upto 820,000 tons	After the operation of the whole plant, the annual sales volume of fertilizers and chemical products can reach 840,000 tons.	14.04 billion annual revenue	7.6% ROI

Note: according to the estimate of the original plan

V. An Overview of Conversion into Capital Investment

(1) Investment policies, major causes of profits or losses and improvement plans for the recent years:
Reinvestment policy
Based on the management philosophy of rejuvenation, solidarity, innovation, and sustainability, the Company is to gradually transform the well-being of itself; develop its vision of "based in Taiwan; embrace the world"; and center its development on "long-term care business", "non-nuclear power generation business", and "Southward fertilizer & chemical business" in line with the national policies. In the aspect of its founding fertilizer business, the investment experience on the Al-Jubail Fertilizer Company is to be based on to explore overseas investment opportunities, alongside with the exploration of the fertilizer market among the ASEAN members and other emerging countries, so as to create new platforms for the founding fertilizer business. In the aspect of other business, the idle assets are to be based on to launch the relevant cooperative projects along with the cooperation of professional teams

250

Matters on Financial Standing and Operation Result Review and Analysis and Risks

2. Major causes of profits or losses and improvement plans at re-investment companies

Investment	Major causes of profits or deficits for 2016	Improvement plan
Al-Jubail Fertilizer Company	Due to the fall in oil prices and factor of supply and demand, the prices of products have fallen internationally. Also, due to the yearly overhaul in early 2016, the production decreased and maintenance costs increased.	1. Cost control 2. Avoidance of emergency stop 3. Reduction of the number of days planned for overhaul this year
		4. Improvement of operational efficiency
		5. Enhancement of the efficiency of consumption of the main raw materials 6. Monitoringof the inventorylevels
Taiwan Deep Ocean Water Co., Ltd	The losses in 2016 were increased because: production rate was low; hence, the fixed costs as per apportion was high; there were impairment to the value of fixed assets; the benefit of deferred income tax was not realized and was reversed; and the MLM organization was dismantled.	1. Cost control 2. Reduction of production costs 3. Organization of refined plans 4. Development of niche products

(2) Description of types of investment plans and industries to be evaluated in the next year will be listed as follows by items:

Fertilizer chemical industry: In view of the slight change in the demand for fertilizer use, the Company intends to develop a new type of nitro-based compound fertilizer for the expansion of production capacity, which not only can meet the demand on quality and enhance the quality of domestic fertilizers, but also can expand overseas markets and extend the territory of the fertilizer chemistry business of the Company. Currently, the Company is proceeding to plan the construction of a new plant at Taichung Port Park for the production of nitro-based compound fertilizers up to a capacity of about 162,500 tones; in particular, the production of a new type of product “Heiwang” added with peat. In addition, three chemical tanks of a capacity of 3,000 kiloliters are to be built to house downstream-end derivatives from nitric acid, including MDI, TDI, PPG and other chemicals for sales, so as to fully take advantage of the production capacity on nitric acid while creating new profits for the Company.

Agricultural innovative industry: Agriculture constitutes the cornerstone for the development of Taiwan. Recently, the Government has actively promoted the industrialization of six-level agriculture and fostered the transformation of traditional agriculture into agricultural enterprises. In addition, the Taipei Exchange (TPEx) has also introduced the category of "agricultural science and technology industry" in 2016. To secure foresight, the Company has set forth plans to invest in domestic agricultural enterprises of growth potential. It is aimed to enhance the profits of the Company through the use of science and technology or unique operation model; to establish a platform enhancing the efficiency of agricultural research and development, production, and marketing as well as product value; and to seek opportunities to extend the applications of the founding business of the Company.

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VI. Risk Management Organization

Risk management organization chart

The Company has strengthened the management of corporate risks in recent years in accordance with the development of the latest internal audits as well as requirements in the standards, including risk detection, evaluation, reporting and treatment, which are very prudent but stringent. The control over risks by the Company is divided into three levels (mechanisms): organizers are “the first mechanism”, who must be responsible for initial detection, evaluation and control and prevention of initial risks. The second mechanism is the President (or Vice President), especially the approval or review or appraisal committee. In addition to the responsibility for feasibility evaluation, they also include evaluation of different risks. The third mechanism is the examination by Legal Affairs and Auditing Office and deliberation by the Board of Directors and the Board of Supervisors. In the Company, for the time being, there has been controller for risks for the purpose of control over risks by all staff members and workers in an overall manner. Level by level precaution method is used as usual other than controlled by one person. This is the most actual risk control method as shown in the table below.

Significant risk assessment matters	Direct risk control work unit (business organization unit) (as the first mechanism)	Risk deliberation and control President, VP, Financial Section (as the second mechanism)	Legal Affairs, Auditing Office and Board of Directors and Board of Supervisors (as the third mechanism)
I. Risks in interest rates, exchange rates and finance II. High risk and high leverage investment, capital loans to others, derivative instrument trading, financing investment and other risks	Financial Department Financial Department	President, VP, Financial Department	Board of Directors and Board of Supervisors: Risk evaluation and control decision making and final control Audit Office: Risk review, evaluation, supervision, improvement follow-up and reporting
III. Research and development plans IV. Changes in polices and laws V. Changes in technologies and industry VI. Changes in corporate images VII. Results from investment, re- investment and acquisition	R&D and Development Department Business Plan Department, Legal Affairs R&D Department, Business Plan Department, Investment Department Executive Department, Office of Board of Directors Marketing Department, Business Plan Department Investment Department, Real Estate Development , Property Management Department	President, VP, Business Plan Department, Financial Department, Organizer and work units concerned, Audit Office
VIII. Expansion of plants or production IX. Centralized purchase or sale	Factory Affair Department Trade Department, Business Department	Business meetings, performance meetings, production and sales meetings

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Significant risk assessment matters	Direct risk control work unit (business organization unit) (as the first mechanism)	Risk deliberation and control President, VP, Financial Section (as the second mechanism)
X. Transfer of directors’, supervisors’ and majority shareholders’ equity XI. Changes in operation rights	Share Affairs, Office of Board of Directors Share Affairs, Office of Board of Directors	Business and Legal Conference (members: General Affairs, Share Affairs, Legal Affairs, Management VP, Business Plan Department, Audit Office)
XII. Litigation and non-litigation matters XIII. Other operatingmatters	Legal Affairs Business Plan Department
XIV. Personnel’s conduct, morality and compliance	Supervisors at different levels and Executive Department	Personnel Review Committee
XV. SOP and compliance with laws and regulations	Supervisors at different levels	Business Plan Department, Audit Office
XVI. Deliberation management by the Board of Directors	Office of Board of Directors	Legal Affairs, Audit Office
XVII. Significant information management and insider trading prevention	Directors, supervisors, managers and informants	Systems on spokesmen Nondisclosure regulations

VII. Risk Matters and Evaluation

(I) Effects of Changes in Interest Rates and Exchange Rates as well as Inflation on the Company’s Profits and Losses and Future Solutions

1. Changes in interest rates

During the year of 2016 and the first quarter of 2017, the net interest income totaled in NT$ 55,416K and NT$ 18,927K, respectively; accounting for 0.45% and 0.58% of net operating income, respectively; therefore, imposing insignificant impact on the operation and the profit of the Company.

In the future, the Company will cater for the changes in the trend of interest rates to actively seek higher income and lower costs so as to minimize risks in interest rates.

2. Changes in exchange rates

During the year of 2016 and the first quarter of 2017, the net exchange gain totaled in NT$ 12,719K and net exchange loss in NT$ 6,233K, respectively; accounting for 0.10% and -0.19% of net operating income, respectively; therefore, imposing insignificant impact on the operation and the profit of the Company.

In the future, the Company will cater for the changes in trends of exchange rates to actively work out polices for risk avoidance so as to reduce risks in exchange.

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(II) Policies on High Risk and High Leverage Investments, Capital Loan to Others, Endorsement Guarantee and Derivative Instrument Trading, Major Causes for Profit Making or Deficits and Future Solutions:
High risk and high leverage investment, capital loan to others and trading of derivative instruments: N/A, and the Company has never been engaged in such business.
Endorsed guarantee: As of March 31 of 2016 and 2017, the balance of endorsed guarantee is NT$13,500K.
(III) Future Research and Development Plans and Estimated Investment in Research and Development.

The research and development in the next two years will be focused on

(1) Biotech fertilizer, biological pesticides research and development
(2) research and development of biotech organic fertilizer,
(3)R&D on the extraction technology on algae polysaccharide,
(4) deep sea water application research and development,
(5) development of purification technologies for electronic chemical products.

In order to achieve a sustainable growth, the Company will continue to strengthen its research and development. It is predicted that the annual total capital investment will be about NT$50 or 60 million , with the summary of research and development plans for the next two years as follows:

(1)Biotech fertilizer, biological pesticides research and development:

By means of cooperation with outside industries and transfer technologies, and in combination of the core technologies of the Company in internal mirrobe fermentation, organic and fertilizer development materials, development of biotechnological fertilizers and biological pesticides equipped with the efficacy of fertilizer and the ability to prevent pests and diseases. The other existing "vitality biotech nutrition agent products" will be continued to deep, sophisticated improved microbes metabolites of output, products values and connotation upgrade. The research and development expense in ***2015-2016 biotech fertilizer, biological pesticides is expected to invest about NT$10,000,000.

(2)Research and development of biotech organic fertilizer :

Long-term intensive cultivation for the farmland of Taiwan has caused serious deterioration of the soil; furthermore, farmers habitually use cheap and convenient chemical fertilizer. With the change of agricultural structure and more and more attention paid to environmental protection, Taiwan Fertilizer Co. Ltd. plans to produce organic fertilizer and build the image of Nongyou organic fertilizer to enter both domestic and overseas market of organic fertilizer, combined with the advantaged material supply system and fermentation technology. For the purpose of circular economy development and environmental protection, approaches are to be

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taken to utilize renewable energy, venous industry, geographical production & sales, the innovation and recycling of various types of wastes and resources, so that reusable resources and products are produced.

To improve the quality of organic fertilizer products and acquire effective certification, the formula of process R&D will be continuously improved; various beneficial microorganisms will be introduced and advanced fermentation process will be guided into. TFC has been honored with he "Preferred domestic brand for the organic fertilizers" and the "Preferred brand for the commercialization of organic agricultural materials",

In order to maximize the effectiveness and the optimal supporting fertilization model for the application and combination of various self-produced organic biotechnological products, we will continue to establish the cultivation technology of applying organic materials to organic agricultural products in our organic demonstration farm. In particular, various cooperative development will take place at research institutes, such as Taiwan Agricultural Research Institute, Agricultural Research and Extension Station, and agricultural university, to introduce beneficial microbes and fermentation technology along with organic materials, so as to strength the development of bio-technological and organic fertilizer products. Meanwhile, through trials, cooperation, and operation conducted at the external organic farm in the field, organic materials are to be actively promoted to expand the market of organic fertilizer under the many activities run by the business sector. It is estimated that, in the next two years, the investment in R&D on biotechnological organic fertilizer will be around NT$ 10 million.

(3)R&D on the extraction technology on algae polysaccharide

In 2015, the Company commissioned Taiwan Ocean University to conduct the analysis on the composition of the large algae cultivated in the deep ocean water, as well as the assessment on the antioxidant, immune regulation, and physiological viability of the algae polysaccharide. The results showed that the algae polysaccharide extracted from Ulva lactuca (sea lettuce) was much higher than that extracted from wild Ulva lactuca and that it served as a valuable nutrient supplement with optimal antioxidant effect against the DPPH free radicals. In addition, the sea fungus polysaccharide extracted by the Company showed that it offered excellent effect on the inhibition of the production of macrophages nitric oxide (showing an inhibition rate of 85.49%) and on the promotion of phagocytosis of macrophage (showing a promotion rate of 58%). showing that the sea fungus polysaccharide offered an excellent immune regulation. The Company is to utilize the existing enzyme hydrolysis equipment for the R&D on the extraction technology on algae polysaccharide. Through the cooperation among industry-academia-research, new technology have been introduced for the development of new materials and their derivative products containing functional algae polysaccharide. It is expected to invest NT$ 20 million in this regard in the next two years.

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(4) Research and development of utilization of low temperatures of deep sea water and acquatic culture:

In order to play the advantages of DOW cultivation, the Company is to focus on breeding fish, shrimp, shellfish and large algae where the fish and shrimp are to be incorporated into the upper and lower reaches of Pingtung cultivation area. The approach taken is to procure semi-adult fish or adult fish, to undertake short-term cultivation or breeding using the characteristics of deep ocean water, so as to improve texture quality and increase overall yield. In addition, the existing modular breeding pool for mass production can be used to produce region-specific white shrimp, Platax orbicularis, and Lateolabrax japonicas (seabass) mainly that are suitable for cultivation in the Hualien region while a standard operating procedure (SOP) can be established for managing the aquaculture technology. In particular, the integrated cultivation technology on white shrimp and Lateolabrax japonicas (seabass) constitutes the focus of our development, using the Lateolabrax japonicas (seabass) breeding pool to stabilize the algae and facilitate the breeding of the shrimp. To breed shellfish, the organic substances left over from feeding the fish, such as diatom, bait, debris, etc. can be used as fertilized foods for the shellfish. Through the purification of deep ocean water, the health standards can be raised to a level allowing the aquatic produces eatable raw, hence adding values to the aquatic products.

In addition, to pursue the value-added application of deep ocean water, its cleanliness and character of rich nutrients will be serial-connected and applied to large-scale algae cultivation to present the specific diversified utilization of the cold energy of deep ocean water further. The common edible algae in Taiwan such as sea fungus, Ulva lactuca (sea lettuce), and Gracilaria rubra are selected for the short term. Besides researching and developing the sexual reproduction technology of algae by deep tillage, complete production module of cultivation and production system of preliminary processing materials will also be built to develop derivatives with algae as raw material, add feature to deep ocean water park and provide safety and healthy food materials. In the future, we will introduce cold water-based algae species – e.g. agar, making full use of the cooling characteristics of deep water to serially place the low-temperature water in series with the room-temperature water, has returned to temperature two kinds of temperature sea water to produce algae of high economic value. Through the academia-research cooperation, the effective ingredients are to be extracted and separated as the management indicator for our production technology. Within one year, it is expected to invest about NT$ 10 million on R & D.

(5) Development of purification technologies for electronic chemical products:

N-methyl pyrrolidone (NMP) has the advantages of low viscosity, strong polarity, excellent dissolving power, low volatility, good stability, low toxicity, and low corrosiveness. It is mainly used as a solvent because of its characteristics of low corrosiveness, widely applied in manufacturing of lithium batteries and in electronics industry. At present, the volume of NMP processed under the industrial-grade NMP project at the Miaoli Plant is about 300 tons per month and the selling price of NMP is about NT$ 60,000 per ton. The price of the

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electronic-grade NMP is up to NT$ 120,000 per ton, making the discrepancy on prices NT$ 200 million a year ahead of selling the other kind, hence the higher-priced NMP is a high-margin product. However, the requirements on the specifications of electronic-grade NMP product are often very strict; e.g. the UPS-grade NMP requires a purity of no less than 99.9%, a total amine content of no greater than 1ppm, a moisture content of 300ppm, its chroma less than 10 APHA – all making the electronic-grade NMP of the highest level of specifications among all NMPs. The Company is now working with the Material and Chemical Research Laboratories of ITRI on a process research project to make the industrial-grade NMP further purified to the highest level of UPS-grade NMP.

This cooperative project is to explore ways to reduce the amount of amine in the industrial-grade NMP provided by the Company from 40 ~ 60ppm down to below 1ppm; to enhance the purity from 99.5 ~ 99.6% up to above 99.9%; to reduce the chroma from 100APHA down to below 10 APHA with chroma unchanged for three days. Also, under this project, it is to complete the design of the master equipment "removal of amine" (including the system for the renewal of adsorption materials), to provide detailed design drawings for direct outsourcing, and to adjust the operation variables online to obtain the standard operating parameters along with test run. The project is scheduled to be completed on January 16, 2018, entailing entrustment research and improvement of existing equipment in the plant, with a total investment budgeted at approximately NT$ 23.5 million.

Leading factors that may affect future success in research and development:

(1) Advanced technologies

(2) Integration of internal resources
(3) Commercial marketing ability and market feedback mechanism

(IV) Effects of Changes in Significant Domestic and Foreign Policies and Laws on the Company’s Financial Affairs and Solutions thereto

(1)In order to take care of farmers and to reduce burden of farmers by fertilizer costs, the Government issued subsidy polices on fertilizer, and moreover, Council of Agriculture set up “Fertilizer Price Review Group” to review and deliberate the prices of domestic fertilizer on a monthly basis according to prices of international fertilizer raw materials to standardize ex-work prices of fertilizer manufacturers and suppliers, thus having broken away the long-frozen situation unable to be reasonably presented in respect of the past domestic fertilizer prices, which has positive effects on the Company.
(2)On June 24th, 2015, the Income Tax Act was published via a Presidential Notice where it stated that as of January 1st, 2016, the tax levied for the transaction of a property, a property plus the land it sits on, or a land qualified for a building permit (hereinafter jointly referred to as the property and land) shall be based on the provisions of Articles 14.4 to 14.8 and 24.5 of the Act. Since vast majority of the lands owned by the Company was acquired prior to January 1st, 2014, the new land-property-2-in-1 system impose little impact to the existing land

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development of the Company.

(3)The amendment made to "Regulations for Cadastral Survey" this time by Department of Land Administration of the Ministry of Interior was mainly to specifically address the concerns of the public, namely: the dealing of the problem of pseudo area of buildings; the deletion of the provision where surveys and measurements were taken along the attached structures, such as eaves and rain awning, of the building; and that the boundary of a underground floor should now be based on the center of the exterior walls shown on the final version of the floor plan instead. For those buildings which will have already applied for a building permit prior to January 1st, 2018 when the new law shall take effect, the old law shall prevail. For those buildings which will be planned in the future or already under the way, the Company shall ensure that they will conform to the new law as adjustment on size of building area is to be made.
(4)In the House Tax promulgated by the Ministry of Finance, it states: "the standard price of a house is to be reassessed once every three years." In 2014 in Taipei City, the provision was applied to a higher ratio of road coverage and the assessment value of newly built houses was raised, which is to raise the costs for the Company to hold buildings to be completed construction later down the road. In 2016, Hsinchu County and Hsinchu City also re-assessed the reference table for the standard house values, which is to be applied to all houses completed construction, addition, and renovation on or after July 1st, 2016. Furthermore, in accordance with "Autonomous Regulations for Levy Rate of House Tax of Hsinchu City", house tax has been increased from 1.5%, the previous universal tax ratio, up to 3%, if the house is for business purpose – a change with heavier house tax that surely will impact the market adversely.
(V) Effects of Technical Changes and Industrial Changes on the Company’s Financial Affairs and Solutions thereto
(1)With the change of agriculture structure and people's concern about environmental protection and health, the Company has planned to establish organic fertilizer pilot plant to produce organic fertilizers. By working with good material supply system and fermentation techniques, the Company reestablishes the image of Farmer's Organic Fertilizer with the Company's good brand image to expand the market to local and international organic fertilizer. The Company will keep improving formula and introducing various good microbes. Post-fermentation process will also be introduced to promote the quality of organic fertilizer.
(2)Under the great influence of the price change in international materials and energy on the Company's production of fertilizer and chemical engineering, the Company has reinforced the supply contract with other corporations to control material sources and the impact caused by price change. The Company continues cooperating with Al-jubail Fertilizer Company, a Saudi Basic Industry Corporation. Besides, it also actively executes downstream products integration and investment plans and energy reinvestment projects to promote operation effects of the whole Company.

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(VI) Effects of Changes in Corporate Images on Business Risk Management and Solutions thereto

The Company was formerly a state-owned business. Since it was transformed into a nongovernmental business on September 1st, 1999, it has been in the process of business transformation, diversified business operation to enhance business performance, It has changed its stereotype image of the Company in public business operation times in the eyes of the public, hence the positive promotion of the corporate image of the Company. However, when the Company is seeking reasonable profits, it still coordinates with its greatest efforts with the policies of the Government for taking care of farmers and downstream chemical industry, so that it can provide fertilizer and chemical products necessary for domestic markets at reasonable prices, work hard at various industrial pollution prevention and control work, and properly take care of employees’ benefits. In 2007, it founded Financial Corporation Taiwan Fertilizer Foundation to take care of farmers and weaker groups, and to look upon corporate social responsibility as the objective of the incorporation so as to attain the goal of “promoting the steady development of operation of the Company”, “guaranteeing the rights and interests of shareholders of the company’ and “fulfilling the corporate social responsibility” as three basic operation targets.

(VII) Prospective Benefits from Acquisition, Possible Risks and Solutions

For the current year, there was no acquisition or plan.

(VIII) Prospective Benefits from Expansion of Plants, Possible Risks and Solutions thereto

The moving of plants to Taichung Port has developed since the Company signed a contract with Port of Taichung, Taiwan International Ports Corporation, Ltd in October, 2006. The construction period of the plants is from April 2007 to the end of June 2016, and they should be developed by three phases. The first phase is earth filling and geological improvement, construction of dock unloading and storage facilities, material warehousing systems, public systems and other infrastructure as well as the construction works for nitrate and nitrate phosphorus production workshops; the second phase is sulphuric acid ammonium phosphate, ammonium production workshop of new and old nitrophosphates, the relocation project of nitric acid plant; the third phase is the new sulphuric acid, sulfamic acid and phosphate fertilizer factory the original Plant, old Plant will be gradually phased shut down to transfer the relevant production machinery and equipment, and click "new Plant, old Plant" moved treatment principle, to continue the industry overall operation, fertilizer supply business is not interrupted by the development of this program.

The Company boasts more than seventy years of experience in producing fertilizer, and is quite familiar with manufacturing process technologies for fertilizer. And operation products under this plan are currently operating items produced on production lines:

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(1) Chemical products: anhydrous ammonia, urea, phosphoric acid, nitric acid, sulfuric acid, melamine, sulfamic acid and other chemical products.
(2) Fertilizer products: potassium chloride, Single Superphosphate, nitrophosphate compound fertilizer, ammonphosphate compound fertilizer, organic compound fertilizer, biotech microbes fertilizer, instant compound fertilizer, biotech nutrition solution, ammonium sulphate and calcium ammonia nitrate, and other kinds of fertilizer.
(3)Unloading and storing products: to coordinate with terminal unloading business utilization, and to strive to become qualified unloading and storing enterprise by application for the Administration of Port of Taichung, and to undertake customs clearance services for imported goods of fertilizer industry and other industries.

It is required to coordinate with this Plan. In addition to the screening of global fine processes, it is strictly required that such international manufacturers will provide technical guarantee complying with production standards and patented technologies. Moreover, it is necessary to lay a solid foundation for subsequent success in commercialization in view of years of operating experiences with top production processes in design improvement. After different plants centralize their production at Port of Taichung, it will improve productivity, efficiency, and product portfolio as well as unloading and storing management performance and complementary utilization of raw materials to reduce costs. In particular, manufacturers’ locations are near the leading fertilizer markets such as Taichung, Nantou, Yunlin, Chiayi, and Tainan. Regardless of sale channel management, reduced transportation costs and market integration and competition in marketing have niche.

(IX) Risks in Concentrated Purchasing or Selling and Solutions thereto

(1)The major purchasers from the Company are Al-Jubail Fertilizer Company, Sabic Asia Pacific and Arab Potash Co. Ltd., in which Al-Jubail Fertilizer Company is a company with joint capital investment by the Company and Sabic of Saudi Arabia. The Company takes delivery of urea under cooperation contracts, and Sabic Asia Pacific sells anhydrous ammonia to the Company for and on behalf of companies based in Saudi Arabia. Arab Potash Co. Ltd is one of the most important potassium chloride manufacturers in the world. The abovementioned three companies have years of business relationship with the Company. In addition to emphasis on supply quality and business goodwill of all raw material suppliers, the Company performs judgment of business information, prepares safe inventory and delivery period tracing and recovery. Therefore, there is less actual risk in centralization of purchase of goods.
(2)The major selling clients for the Company are farmers associations in different cities of the province, with decentralized sale of goods, so there is no risk in centralization of sale of goods.

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(X) Effects of Directors, Supervisors or Majority Shareholders with Shareholding Exceeding Ten Percent,

Great Transfer of or Changes in Equity on the Company, Risks and Solutions thereto: N/A

(XI) Effects of Changes in Operating Rights on the Company, Risks and Solutions: N/A

(XII) Regarding litigation or non-litigation incidents, mandatorily listed shall be the Company name, and its Directors, Supervisors, General Manager, substantial person in charge, any major shareholders or affiliate companies holding more than 10% of the shares of the Company. Regarding major litigation, non-litigation, or administrative litigation incidents that have already been finalized or still under investigation and verification, if they may bring about an outcome that significantly impact the rights and interests of shareholders or the stock price of the Company, mandatorily disclosed shall be the dispute fact, the amount of the subject matter, the date of commencement of the proceedings, the main litigants, and the handling particulars as of the deadline for printing a yearly Annual Report.
(1)On June 19th, 2013, Huaku Development Co., Ltd. filed a litigation at the Civil Affairs Department of Taipei District Court against the Company, demanding a business tax of NT$ 3,837,415 under the case number (102)-Chong-Su-Zi-No.751. The Company has retained Mr. Hsiao Jia-fu, a lawyer of Hung Yu Law Firm, as the surrogate on behalf of the Company during the first trial proceedings. In order to develop No. 25 land (R4-1) in the Jingmao Section of Nangang District, Taipei City, the Company entered into the agreement on the co-establishment of houses with Huaku Development Co., Ltd. on July 14, 2008 and the co-established residential building (Tianhui Mansion) was completed on February 22, 2013. Both parties specified the transfer of the real estate. According to the invoice issued by the Company uniformly, the mutual transaction house price was NT$767.40145 million and the business tax payable was NT$ 38.374150 million, the total of which was NT$805.778723 million. It was the stance of Huaku Development Co., Ltd. that the Company shall be liable for making the payment. The Company claimed that the business tax of this project should be paid by legal taxpayers. On June 18, 2014, Taipei Court judged that the Company should pay Huaku Development Co., Ltd. NT$ 38.374150 million. The ground for the verdict lied in: “According to the regulations of Business Tax Law, the payer, i.e., the goods or labor service seller shall be obliged to transfer the lease tax to the buyer. According to the spirit of the business tax, the business tax is collected from the goods or labor service seller for the capacity of bearing land tax and other levies against consumption (refer to Shi Zi No. 668 interpretation cause documents of court of justice). According to the investigation, the agreement signed by and between both parties specified that the business tax shall be borne by the legal tax obligor. However, as for the business tax payment argued by the Plaintiff, the Plaintiff shall be liable for paying the business tax for the real estate transferred according to the aforesaid regulations. However, the Defendant (the buyer) shall be liable for the tax. The Plaintiff claimed that, according to the provisions of Article 15 of the agreement, it charged the business tax of NT$38.374150 million from the Defendant by issuing the invoice.” However, in order to safeguard the rights and interests of the Company, the Company retained

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Lawyer Wu Mao-rong to appeal to the Supreme Court on July 16th, 2014. Yet later on June 9th, 2015, the Supreme Court of Taiwan overruled the Company's appeal, determining as stated in case number (103)-Chong-Shang-Zi-No. 628 that the original verdict shall stay. The Company continued to entrust Lawyer Wu Mao-rong to submit an application for appeal on July 29th, 2015 while making a payment of NT$ 524,616 as per the judgement. On November 23rd, 2016, the Supreme Court, at its discretional evaluation, dismissed the appeal against the Company, i.e. appellant, upholding the same verdict as stated in case number (105)-Tai-Shang-Zi-No.2069 as the previous ruling.The case was a close chapter after three attempts of trial.

(2)Since January 16, 2011, 10 pieces of land on No. 272-2 Fuxing Road, Miaoli City and building No. 807, 991 on the same road have been rented to Utech Solar Co., Ltd. for warehouse and office use. Both parties signed a 20 year lease. According to article 5-3 in the lease, from 2013 on, the rent has appreciated (based on the price on No. 272-2 Fuxing Road, Miaoli City). The rent has risen from $1.374 million to $1.962896 million (i.e. $588,896 more per month). Although Utech has paid for the rent for May 2013 in the appreciated price, it failed to paid for the difference amount $4,122,272 from June to November 2013 (total 7 months). Even after many attempts of dunning by the Company, Utech still refused to pay according to the grounds stated in a reply. To ensure the Company's benefits, the Company appointed Xiao Jiafu as the attorney filed a lawsuit to Taipei Court on December 12, 2013. The Company claimed for the payment of the rent difference in June –December of year 2013 and the delayed interests. Punitive liquidated damages shall be calculated based on the rate of 0.5% per diem. The Company won the first judgment on Dec. 24th, 2014. The result of the first judgment made by Taiwan Taipei District Court, Su Zi No. 5236 case in 2013, showed that “the Defendant leased the land in order to take it as the workshop to again commercial interests instead of using it for residential purpose. There is thus no applicable land as specified in 1 of Article 97 of Land Law (the rent of the urban and local houses shall not exceed 10% of the annual interests of the total price applied of the land and the buildings). The Plaintiff requested the Defendant to increase the rent according to Article 5-3 of this agreement, which complies with the real meaning of the signature so it shall be approved. As for the too high liquidated damages paid for the failure in performing this agreement, the Court reduced the amount. The debtor has paid some and the Court reduced the amount of liquidated damages of the debtor by comparing the interests acquired by the creditor. The Court believed that the Plaintiff’s claim for the punishment liquidated damages which is 0.5% of the amount payable are too high but 0.3% would be the proper amount. Utech Solar Corporation had filed an appeal at Taiwan Supreme Court which on November 18th, 2015 announced to have the original verdict stayed, yet ordering the punitive liquidated damages shall be reduced from 0.5% to 0.1% per diem (please refer to page 13 of the verdict). Consequently, Utech filed an appeal for the third trial, and the Company continued to appoint Lawyer Hsiao Jiao-fu as the surrogate on behalf of the Company. On March 16th, 2016, the Supreme Court ruled to reject the appeal of Utech and the case was finalized. On February 12th, 2015, Utech made the rent difference NT$ 4,122,272; therefore, the Company agreed

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Matters on Financial Standing and Operation Result Review and Analysis and Risks

that interests on late payment and liquidated damage for breach of contract shall be calculated up to February 11th, 2015. As per calculation for settlement, the total amount of legal costs, liquidated damages, and interest payable came to NT$ 2,522,998 which Utech paid in full on April 30th, 2016.

(3)Pan Gao Rui-Ying and other 15 plaintiffs appealed on May 27, 2013 at Shilin District Court that they were the heirs of Gao Hong-Gan. The land owned by Gao Hong-Gan, former No. 731-4 San Chong Part, Nangang Town, Taipei County before the land was remapped, has be registered under the property of the Company on February 23, 1955 for “government owned trade. On May 2, 1960, it was registered as “expropriation” under the Company’s request. Yet Gao Hong-Gan had passed away on February 8, 1955. Both parties did not agree on the trade and transferring of land ownership. The Company acquired the land without handling inheritance registration after Gao Hong-Gan passed away, so the transferring of ownership was invalid. The appeal for the Company to eliminate the transferring of ownership registration and to return the ownership to Gao Hong-Gan is thus invalid. After the mediation failed, Shilin District Court requested the Company to submit an answer to the complaint No. 1054 2013 in 14 days. The Company appointed Chen Tien-Xin to be the attorney in September 2013. Chen Tien-Xin questioned the request by the plaintiffs because the registration as “governmental trade” or “expropriation” was not done by the defendant (the Company), and Gao Hong-Gan’s right to the land had been terminated after he was compensated by Taipei County Government for land expropriation (Land Law Article No. 235), so the plaintiffs cannot deny the validity of expropriation and land registration. Shihlin District Court rejected the Plaintiff’s Su Zi No. 1054 case in 2013 on August 29, 2015 as the Plaintiff claimed that the Defendant did not acquire the land ownership and the district organ did not enjoy the validity of the acquisition order. The Plaintiff filed a lawsuit on October 1, 2015 and the Company thus entrusted the lawyer Chen Tianxin to be liable for the second instant judgment of this case. On November 2nd, 2016 at the second trial, the Supreme Court ruled in favor of the Company, dismissing the appeal on the grounds that: "If the appellant claims that the title on the deed of the counter party should be invalid, it shall be its burden to prove so" … According to the investigation of Songshan Land Office, the deed application and supporting documents for the subject land had been destroyed … Yet since the land registration at the Land Office shall be handled according to the relevant land registration law, it shall be inferred that the registration contents to be valid. Even the land was not collected under Collection Order No. 6069, it shall not be inferred that the land title that was transferred to the state as indicated on the registration to be invalidity as claimed by the appellant. Since the appellant failed to build its case with any valid evidence, its advocacy claiming the invalidity of the title of the subject land shall be deemed not legitimate."
(4)On July 31st, 2011, Wing Tai Properties Limited purchased from the Company three pre-sale units (along with six parking spaces): namely Units A2/A3 on the 17th floor, A2 on the 14th floor, and A4 on the 11th floor of Building A of "Forever Sun-Moon Tower". It had paid up to the 8th installments as of December 19th, 2014 (upon the release of occupancy permit); however, it did not complete the registration of title transfer, ownership, and mortgage on or

263

==> picture [596 x 86] intentionally omitted <==

before April 4th, 2015. Nevertheless, the company have repeatedly urged Wing Tai Properties Limited to comply; yet, it replied with the excuse that it regarded the color and the texture of the exterior wall of the subject building to be inferior as well as the materials and design of the public facility within the building to be vulgar, among other reasons. Without many alternative options, the Company delivered a registered letter dated December 1st, 2015, requesting to cancel the agreement of pre-sale and purchase with this buyer along with the confiscation of the amount of NT$ 47,157,000 as the liquidated damages equivalent to 15% of the total property price.

Wing Tai Properties Limited argued that 15% as the rate for liquidated damages was clearly way over; therefore, on December 29th, 2015, it initiated a litigation "reduction of liquidated damages" at Taipei District Court, claiming that the rate for liquidated damages due to the breach of contract should be reduced to below 7%, demanding the Company to refund the improper confiscation of NT$ 37,939,406. In February 2016, Mr. Wu Mao-rong, the lawyer retained by the Company, submitted a defense (file number (105)-Chong-Su-Zi-No. 148) listing all costs and derived losses as a result of the cancellation of the agreement (including resale of the subject units) to be more than NT$ 100 million equivalent to 32.14% of the total purchase prices of the three units – an illustration that the Company was more than fair without charging any unreasonable punitive liquidated damages.

On July 1st, 2016, Taipei District Court repelled the pleading of the plaintiff along with its claim for preliminary injunctions against the Company (file number (105) -Chong-Su-Zi-No. 148) on the ground that: "After cancellation of the agreement, the defendant has indeed incurred the costs of NT$ 31,438,000 for the sales of the subject properties the plaintiff was planning to buy as well as NT$ 24,206,756 as a result of depreciation of the market price of the subject properties after the pre-destined closing day – making the total losses NT$ 55,644,756 which was still lower than NT$ 47,157,000 the liquidated damages deducted by the defendant. In essence, the defendant shall be entitled to the liquidated damages it deducted as lawfully permitted by the agreement signed between the two parties. The Court hereby dismisses the claim of the plaintiff that the liquidated damages were too high and should be reduced." Disagreeing the ruling of the Court, Wing Tai Properties Limited applied for an appeal on July 22nd, 2016. Accordingly, the Company had retained Mr. Chen Tian-hsin of Yangran Law Office serving as its litigation agent It was scheduled for October 22nd, 2016 for the Supreme Court to house the first preparatory proceedings .as per file number (105)-Chong-Shang-Zi-No. 778.

(5)In connection with the abovementioned dispute over the three pre-sale units, Wing Tai Properties Limited received the decision of the Taipei District Court in July 2016. On September 14th, 2016, Mr. Zheng Jian-guo, a lawyer of the International Law Firm entrusted by Wing Tai Properties Ltd., filed a litigation "Refund of Payment" with Taipei District Court based on the ground that, in July 2016, upon the acceptance of the public facility, it was found that slag was used in the construction and that the advertisement of the seller had falsely misleading the consumers. Therefore, the buyer was intent on canceling the three agreements

264

Matters on Financial Standing and Operation Result Review and Analysis and Risks

of purchase and sales, demanding to reduce the liquidated damages of NT$ 47,157,000 according to Article 359 of the Civil Code. However, pursuant to Paragraph 3, Article 20 of the terms of the mutual agreement, Party A shall not delay payment on the ground of non-acceptance of the public facilities. The Company had retained Mr. Chen Tian-hsin as the solicitor on its behalf to attend the mediation session at Taipei District Court on October 11th, 2016. The two parties failed to reach an agreement via mediation; hence, Taipei District Court was proceeding to trial as per case number (105)-Xiao-Zi-No. 35.

(6)On March, 18th, 2011, PCuSER Press Co ., Ltd ., Vip.arch-world Co., Ltd., and Daxun Ltd. jointly purchased Unit A3 on the 9th floor of "Forever Sun-Moon Tower" along with two parking spaces (i.e. Shuang-Lian Construction Project) on March 18th, 2011 for a total price of NT$ 79.5 million. According to the agreement, within six months after receiving the occupancy permit (i.e. on or before June 4th, 2015), the Company informed the three companies on June 2nd, 2015 of completing the procedures of closing the deal. However, the buyers requested the delay of installing the ceiling and the change of kitchen cabinets, thus causing the delay of interior installation and verification of drawings. On March 3rd, 2016, the Company re-sent the closing request along with the detailed accounting; hence, the Company shall be free from the liability of late notice of closing. However, at the end of August, 2016, the three companies filed a complaint with the Taipei District Court, demanding the Company to pay NT$ 10,669,810 as the interest for late notice as well as NT$ 11,554,098 as losses on the mortgage – totaling in NT$ 11,554,098. Note that, prior to the first notice of closing, the mortgage for the buyer had yet to be released; hence, no interests had incurred as yet. In response to the irrational request of the three companies, the Company has entrusted Mr. Chen Tian-Hsin of Yangran Law Office to act as the legal representative on its behalf. The Civil Court of the Taipei District Court set November 1st, 2016 as the date for first session for verbal debate as per the case number (105)-Chong-Su-Zi-No. 1060.

(VIII)Other Significant Matters: None

265

==> picture [596 x 86] intentionally omitted <==

Part Eight: Other Items Deserving Special Mention

I. Information on Affiliated Companies

(I) Consolidated Operation Report from Affiliates

1. Organization chart of affiliated companies

==> picture [467 x 216] intentionally omitted <==

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

Taiwan Fertilizer Co., Ltd
Taiwan Int’l Taiwan Deep Taichuang Asset Taifer (Cayman) Taif TAIFER
Agriculture Ocean Water Co., Management and International Group (CAMBODIA)
Development Co., Ltd. 100% Development Co., Co., Ltd. 100% SulMRock CO., LTD.
Ltd. (Note1) Ltd 100% 100%
100%
Hasbo Biotech Taifer TR ELECTRONIC Taifer Biotech
Co., Ltd. International (Xiamen) Import &
CHEMICAL CO., LTD.
100% (Samoa) Group Co., Export Co., Ltd.
Ltd. 100% 51% 100%
Taifer Chemical TR Electronic
International Co., Chemical (Kunshan)
Ltd. 100% Ltd.
----- End of picture text -----

Note : Taifer Biotechnology Co., Ltd. was changed its name to Taiwan Int’l Agriculture Development Co., Ltd. on Aug. 16, 2016.

266

Other Items Deserving Special Mention

2.Basic information on affiliated companies

Name of company	Date of incorporation	Address	Paid-up capital	Principal business or productionprojects
Taiwan Int’l Agriculture Development Co., Ltd. (former name : Taifer Biotechnology Co., Ltd.)	Dec. 19, 2011	3F, No. 87, Songjiang Rd., Taipei City	NT$71,740,000	Import/export of agricultural products, technology export, overseas investment
Taiwan Yes Deep Ocean Water Co., Ltd.	Sept. 25, 2006	No.15, Huadong, Hualien City, Hualien County	NT$950,000,000	Producing, manufacturing, and selling deep ocean water related bottle water, concentrated solution, cosmetics, and food supplementary products.
Hasbo Biotech Co., Ltd.	May 01, 2016	10/F, No. 88, Section 2, Nanking East Road, Taipei	NT$240,000,000	Wholesale and trading of health care products and cosmetics
Taichuang Assets Management and Development Co., Ltd.	Sept. 9, 1999	8/F, No. 88, Section 2, Nanking East Road, Taipei	NT$55,000,000	Land, housing, building development and leasing business
Taifer International (Samoa) Group Co., Ltd.	Feb. 25, 2013	TMF Chambers, P. O. Box, Apia, Samoa	USD1,415,000	Investment and holding
Taifer Chemical International Co., Ltd.	Oct. 19, 2001	No. 38, 3rd Community Guanguang Street, Chingeltei District, Ulaanbaatar City, Mongolia	USD1,333,000	Operation of buildings
TAIFER (CAYMAN) INTERNATIONAL GROUP CO.,LTD.	Feb. 1, 2011	P.O. Box 32052, Grand Cayman Ky1-1208, Cayman Island, British West Indies	USD10,965,000	Investment and holding
TR ELECTRONIC CHEMICAL CO., LTD.	Nov. 3, 2010	P.O. Box 2804, George Town, Grand Cayman, Cayman Island, British West Indies	USD21,500,000	Investment and holding
TR Electronic Chemical (Kunshan) Ltd.	Dec. 19, 2011	No. 66, Wenpu Middle Road, Shipu, Qiandeng Town, Kunshan City, Jiangsu Province, China	USD21,500,000	Engaging in the production and sales of nitric acid, hydrofluoric acid, aqueous ammonia, orthophosphoric acid, oxalic acid, ammonium fluoride, LCD level and IC level PR Stripper.

267

==> picture [596 x 86] intentionally omitted <==

Name of company	Date of incorporation	Address	Paid-up capital	Principal business or productionprojects
Taifer International (Samoa) Co., Ltd.	Mar. 25, 2014	6F,. No.88, Sec.2, Nanking E. Road, Jhongshan Dist., Taipei City,Taiwan	USD300,000	Investment and holding
Taifer Biotech (Xiamen) Import & Export Co., Ltd.	Mar. 23, 2016	Rm 201, F/l 2, Tower A, Commercial Building for Taiwan's Agricultural Products and Fruits, No. 1-09, Gaoqi North Road, Xiamen Area, Fujian Free Trade Zone,China	0 (No capital injection currently)	Import/export wholesale of fertilizer products, chemical products, prepackaged products, cosmetics, hygiene products and household goods
TAIFER (CAMBODIA) CO., LTD.	Dec. 22, 2011	No.11E, 3rd Street, Sangkat Teuk Laok 3, Khan Toul Kork, Phnom Penh City	USD1,255,000	Sale and production of fertilizer

Data on the same shareholders supposed to have control or affiliation: None
Industry covered by overall affiliated companies’ operation business:

The major industries covered are manufacturing, sale, import and export of all kinds of fertilizer, chemical products and their derivative products as well as development, lease and sale of housing and buildings.

Information on directors, supervisors and Presidents of all affiliated companies：

Mar. 31, 2017

Unit: NT$K; share: %

			Unit: NT$K; share: %	Unit: NT$K; share: %
Name of company	Title	Name or representative	Shares held
			Shares (Invested Amount)	%
Taichuang Assets Management and Development Co., Ltd. Taifer Biotech Co., Ltd	Chairman Director Director Supervisor President	Taiwan Fertilizer Co., Ltd Rep : CHEN Wende Taiwan Fertilizer Co., Ltd Rep : CHEN Wende Taiwan Fertilizer Co., Ltd Representative : LIU Guoying Taiwan Fertilizer Co., Ltd Representative : CHUNG Chunming CHEN Yuran	7,174,020	100.00
Taiwan Yes Deep Ocean Water Co., Ltd.	Chairman Director Director	Taiwan Fertilizer Co., Ltd Representative : HUANG LiAi Taiwan Fertilizer Co., Ltd Representative : LUO Shijih Taiwan Fertilizer Co., Ltd Representative : WANG Chunhsiung	95,000,000	100.00

268

Other Items Deserving Special Mention

Name of company	Title	Name or representative	Shares held	Shares held
			Shares (Invested Amount)	%
	Supervisor President	Taiwan Fertilizer Co., Ltd Representative : HUANG Meiling HUANG LiAi
Hasbo Biotech Co., Ltd.	Chairman Director Director Supervisor President	Taiwan Yes Deep Ocean Water Co., Ltd. Representative : LIN Yusheng Taiwan Yes Deep Ocean Water Co., Ltd. Representative : LUO Shijih Taiwan Yes Deep Ocean Water Co., Ltd. Representative : WANG Chunhsiung Taiwan Yes Deep Ocean Water Co., Ltd. Representative : CHUNG Chunming WANG Yuling	24,000,000	100.00
Taichuang Assets Management and Development Co., Ltd.	Chairman Director Director Supervisor President	Taiwan Fertilizer Co., Ltd Representative : KANG Hsinhong Taiwan Fertilizer Co., Ltd Representative : CHANG Tsanglang Taiwan Fertilizer Co., Ltd Representative : WANG Chunhsiung Taiwan Fertilizer Co., Ltd Representative : HSU Shihchang CHANG Tsanglang	5,500,000	100.00
Taifer International (Samoa) Group Co., Ltd.	Representative of legal entity as director	Taichuang Assets Management and Development Co., Ltd. Representative : WANG Chunhsiung	1,414,989	100.00
Taifer Chemical International Co., Ltd.	President	LEE Chihkai	USD1,333,494	100.00
TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.	Representative of legal entity as director	Taiwan Fertilizer Co., Ltd Representative : WANG Chunhsiung	10,965	100.00
TR ELECTRONIC CHEMICAL CO., LTD.	Chairman Director Director Director Supervisor President	TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD Representative : WANG Chunhsiung TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD Representative : HSIEH Wenhsiung Jinqun International Co., Ltd. Representative : CHAO Chienliang TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD Representative : HSU Shihchang TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD Representative : CHIEN Chaoren Chao Chienlang	10,965,000	51.00

269

==> picture [596 x 86] intentionally omitted <==

Name of company	Title	Name or representative	Shares held	Shares held
			Shares (Invested Amount)	%
TR Electronic Chemical (Kunshan) Ltd.	Chairman Director Director Director Supervisor President	TR ELECTRONIC CHEMICAL CO., LTD. Representative : WANG Chunhsiung TR ELECTRONIC CHEMICAL CO., LTD. Representative : HSIEH Wenhsiung TR ELECTRONIC CHEMICAL CO., LTD. Representative : CHAO Chienliang TR ELECTRONIC CHEMICAL CO., LTD. Representative : HSU Shihchang TR ELECTRONIC CHEMICAL CO., LTD. Representative : CHIEN Chaoren Chao Chienlang	USD10,965,000	51.00
Taifer International (Samoa) Group Co., Ltd.	Representative of legal entity as director	Taiwan Fertilizer Co., Ltd Representative : WANG Chunhsiung	9,348	100.00
Taifer Biotech (Xiamen) Import & Export Co., Ltd.	Managing Director President Supervisor	TAIFER INTERNATIONAL (SAMOA) CO., LTD. Representative : WANG Chunhsiung TAIFER INTERNATIONAL (SAMOA) CO., LTD. Representative : HUANG Meiling	(No capital injection currently)	100.00
TAIFER (CAMBODIA) CO., LTD.	Chairman Director Director President	Taiwan Fertilizer Co., Ltd Representative : HUANG Yaohsing Taiwan Fertilizer Co., Ltd Representative : LUO Shijih Taiwan Fertilizer Co., Ltd Representative : CHUANG Chiying HUANG Yaohsing	1,000	100.00

270

Other Items Deserving Special Mention

6.An overview of operation by all affiliated companies

(This table is completed according to the individual data of 2016 audited financial statements of various subsidiaries.)

As of December 31, 2016

Unit: NT$ K

Name of company	Capital	Total assets	Total liabilities	Net value	Operating income	Operating interest	Profit & loss for current period	Earning per share (NT$)
Taiwan Int’l Agriculture Development Co., Ltd. (former name : Taifer Biotechnology Co., Ltd.)	71,740	69,434	525	68,909	4,732	(3,195)	(2,832)	(0.39)
Taiwan Yes Deep Ocean Water Co., Ltd.	950,000	345,397	87,765	257,632	182,766	(33,564)	(122,923)	(1.30)
Hasbo Biotech Co., Ltd.	240,000	15,279	137,154	(121,875)	42,202	(7,372)	(7,312)	(0.30)
Taichuang Assets Management and Development Co., Ltd.	55,000	96,252	14,640	81,612	183,753	1,964	15,143	2.75
Taifer International (Samoa) Group Co., Ltd.	42,797	53,071	33	53,038	0	0	13,180	-
Taifer Chemical International Co., Ltd.	45,630	53,325	552	52,773	8,261	3,071	13,180	-
TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.	321,900	25,718	62	25,656	0	0	0	-
Taifer International (Samoa) Co., Ltd.	9,348	9,348	0	9,348	0	0	0	-
TAIFER (CAMBODIA) CO., LTD.	40,052	28,255	120	28,135	944	(8,631)	(8,647)	-

Notes: 1. Taifer Biotechnology (Xiamen) Import & Export Co., Ltd. has not run yet.

Tr Electronic Chemical Co., Ltd. has actually stopped its operation and is being dissolved.

271

==> picture [596 x 86] intentionally omitted <==

7.Endorsed guarantee of all affiliated entities, capital lent to others and derivative commodity trading: (as of Dec 31, 2016)
(1) Regarding the case that this Company and Jinqun International Co., Ltd. (hereinafter referred to as “Jinqun”) guarantee Tr Electronic Chemical Co., Ltd (hereinafter referred to as “TREC”) getting the loan USD 10,000,000.00 from the bank, the Company had repaid USD 2,147,065.65 for TREC on March 31, 2016, paying off the endorsed loan of USD 10,000,000.00 in full.

Date	Resolutions in the Board Meeting
Dec. 27, 2011	The Company and Jinqun guaranteed the bank loan USD 10,000,000.00 for TREC for 1 year.
Jan. 28, 2013	The Company and Jinqun guaranteed the bank loan USD 10,000,000.00 for TREC for about 1 year.
Feb. 25, 2014	The guarantee amount was changed to USD 5,430,000.00 and the guarantee period was 1 year.
Jun. 23, 2014	Repaid USD 4,570,000.00 for TREC.
Mar. 27, 2015	1. Repaid USD 3,300,000.00 for TREC. 2.The guarantee amount was changed to USD 2,130,000.00 and the guarantee period was 1 year.
Mar. 29, 2016	Repaid a sum of bank loan and interest about USD 2,147,000.00 for TREC.

(2) It was approved by Board of Directors on June 23, 2015: (1) that the Company endorses NTD 13,500,000.00 for oils purchasing of Taichuang Assets Management and Development Co., Ltd. (hereinafter referred to as “Taichuang”); (2) that the Company endorses the short-term loan NTD 10,000,000.00 for Taichuang from Hua Nan Bank Co., Ltd. (hereinafter referred to as “Hua Nan Bank”), which will extend for another year. “The case that the Company endorses the loan NTD 10,000,000.00 Taichuang from Hua Nan Bank” will expire on May 25, 2016, without further extending. The Company still endorses NTD 13,500,000.00 for oils purchasing of Taichuang.

272

Other Items Deserving Special Mention

(II) Consolidated financial statements of related enterprises

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The combined financial statements of Taiwan Fertilizer Co., Ltd. (TFC) and its affiliates for the year ended December 31, 2016 have been prepared in conformity with the “Criteria Governing Preparation of Affiliation Reports, Combined Business Reports and Combined Financial Statements of Affiliated Enterprises,” the Regulations Governing the Preparation of Financial Reports by Securities Issuers and related regulations.

The accompanying combined financial statements referred to above are free of misrepresentations and omissions.

Very truly yours,

TAIWAN FERTILIZER CO., LTD.

By:

Chairman

March 28, 2017

273

==> picture [588 x 86] intentionally omitted <==

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Shareholders Taiwan Fertilizer Co., Ltd.

We have reviewed the accompanying combined balance sheet of Taiwan Fertilizer Co., Ltd. (the “Corporation”) and its affiliates (collectively referred to as the “Group”) as of December 31, 2016 and the related combined statement of comprehensive income for the year then ended. We conducted our review in accordance with the Guidelines for the Review of the Combined Financial Statements of Affiliates. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the combined financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the combined financial statements of Taiwan Fertilizer Co., Ltd. and its affiliates as of and for the year ended December 31, 2016 referred to in the first paragraph for them to be in conformity with the Criteria Governing Preparation of Affiliation Reports, Combined Business Reports and Combined Financial Statements of Affiliated Enterprises, the Regulations Governing the Preparation of Financial Reports by Securities Issuers and related regulations.

Deloitte & Touche Taipei, Taiwan Republic of China

March 28, 2017

Notice to Readers

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

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

274

Other Items Deserving Special Mention

TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

COMBINED BALANCE SHEET DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars) (Reviewed, Not Audited)

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

Available-for-sale financial assets - current (Notes 4 and 7)
Other financial assets - current (Note 6)
Notes receivable (Note 8)
Accounts receivable (Notes 4 and 8)
Other receivables
Inventories (Notes 4 and 10)
Buildings and land held for sale (Notes 4 and 11)
Other assets - current

Total current assets

NONCURRENT ASSETS
Financial assets carried at cost - noncurrent (Notes 4 and 9)
Other financial assets - noncurrent (Note 6 and 29)
Investments accounted for by the equity method (Notes 4 and 13)
Property, plant and equipment (Notes 4 and 14)
Investment properties (Notes 4 and 15)
Intangible assets (Notes 4 and 16)
Deferred tax assets (Notes 4 and 23)
Long-term receivables (Note 8)
Long-term prepayments for lease (Note 17)
Other assets - noncurrent

Total noncurrent assets

TOTAL

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Note 18)

Notes payable
Accounts payable (Note 28)
Other payables
Current tax liabilities (Notes 4)
Receipts in advance (Note 11)
Other current liabilities

Total current liabilities

NONCURRENT LIABILITIES
Provisions - noncurrent (Notes 4)
Deferred tax liabilities (Notes 4 and 23)
Deferred revenue - noncurrent (Note 15)
Accrued pension liabilities (Notes 4 and 19)
Guarantee deposits received

Total noncurrent liabilities

Total liabilities

EQUITY ATTRIBUTABLE TO OWNERS OF THE CORPORATION (Note 20)
Share capital

Capital surplus

Retained earnings
Legal reserve
Special reserve
Unappropriated earnings

Total retained earnings

Other equity

Equity attributable to owners of the Corporation
NONCONTROLLING INTERESTS

Total equity

TOTAL

Amount
%
$ 1,084,835
1
3,246,512
4
7,237,898
9
366,324
1
1,305,426
2
54,425
-
1,456,029
2
350,375
1

255,386

-

15,357,210
20
449,582
1
65,800
-
10,896,351
14
27,469,294
35
21,157,600
27
314,524
-
209,113
-
385,490
1
1,215,950
2

147,817

-

62,311,521
80
$ 77,668,731
100
$ 359,152
1
161,770
-
931,701
1
779,050
1
7,975
-
180,763
-

35,937

-

2,456,348

3
223,648
-
7,214,538
9
16,584,651
22
94,353
-

316,124

1

24,433,314
32

26,889,662
35

9,800,000
12

2,232,791

3
3,683,109
5
33,590,309
43

703,332

1

37,976,750
49

594,885

1
50,604,426
65

174,643

-

50,779,069
65
$ 77,668,731
100

The accompanying notes are an integral part of the combined financial statements. (With Deloitte & Touche review report dated March 28, 2017)

275

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TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

COMBINED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

OPERATING REVENUE (Notes 4, 15 and 21)

OPERATING COSTS (Notes 19, 21, 22 and 28)

GROSS PROFIT

OPERATING EXPENSES (Notes 19 and 22)
Marketing
General and administrative
Research and development

Total operating expenses

OPERATING INCOME

NON-OPERATING INCOME AND EXPENSES
Other losses (Note 22)
Finance costs
Share of losses of associates (Notes 4 and 13)
Other income (Note 22)

Total nonoperating expenses

LOSS BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 4 and 23)

NET LOSS FOR THE YEAR

OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit plans
Income tax relating to items that will not be reclassified subsequently to
profit or loss (Notes 4 and 23)
Items that may be reclassified subsequently to profit or loss:
Share of other comprehensive loss of associates
Exchange differences arising on translation of foreign operations
Unrealized gain on available-for-sale financial assets
Income tax relating to components of other comprehensive income (Notes 4
and 23)

Other comprehensive loss for the year, net of income tax

TOTAL COMPREHENSIVE LOSS FOR THE YEAR

Amount
%
$ 12,240,920
100

10,234,666
84

2,006,254
16
338,862
3
1,100,109
9

65,291

-

1,504,262
12

501,992

4
(518,387)
(4)
(7,029)
-
(255,534)
(2)

164,645

1

(616,305
)

(5
)
(114,313)
(1)

(108,484
)

(1
)

(222,797
)

(2
)
(15,845)
-
2,693
-
(168,434)
(1)
(13,653)
-
20,580
-

33,892

-

(140,767
)

(1
)
$ (363,564
)

(3
)

(Continued)

276

Other Items Deserving Special Mention

TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

COMBINED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) (Reviewed, Not Audited)

NET LOSS ATTRIBUTABLE TO: Owners of the Corporation Noncontrolling interests TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO: Owners of the Corporation Noncontrolling interests LOSSES PER SHARE (NEW TAIWAN DOLLARS; Note 24) Basic Diluted	Amount % $ (129,503 ) (1 ) $ (93,294 ) (1 ) $ (300,547 ) (2 ) $ (63,017 ) (1 ) $(0.13 ) $(0.13 )
	$

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

(With Deloitte & Touche review report dated March 28, 2017)

(Concluded)

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TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise) (Reviewed, Not Audited)

1. GENERAL INFORMATION

The Corporation’s shares has been listed on the Taiwan Stock Exchange since March 24, 1998.

The functional currency of the Corporation is the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The accompanying combined financial statements were approved and authorized for issue by the Corporation’s board of directors on March 28, 2017.

3. APPLICATION OF NEW, AMENDED, REVISED STANDARDS AND INTERPRETATIONS

a. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC for application starting from 2017

Rule No. 1050050021 and Rule No. 1050026834 issued by the FSC stipulated that starting January 1, 2017, the Group (i.e., the Corporation and its affiliates) should apply the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC (collectively, the “IFRSs”) issued by the IASB and endorsed by the FSC for application starting from 2017.

New, Amended or Revised Standards and

Effective Date
Announced by IASB (Note 1)
July 1, 2014 (Note 2)
July 1, 2014
January 1, 2016 (Note 3)
January 1, 2016
January 1, 2016
January 1, 2016
(Continued)

278

Other Items Deserving Special Mention

New, Amended or Revised Standards and Interpretations Effective Date (the “New IFRSs”) Announced by IASB (Note 1) Amendment to IAS 1 “Disclosure Initiative” January 1, 2016 Amendments to IAS 16 and IAS 38 “Clarification of January 1, 2016 Acceptable Methods of Depreciation and Amortization” Amendments to IAS 16 and IAS 41 “Agriculture: Bearer January 1, 2016 Plants” Amendment to IAS 19 “Defined Benefit Plans: Employee July 1, 2014 Contributions” Amendment to IAS 36 “Impairment of Assets: Recoverable January 1, 2014 Amount Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and January 1, 2014 Continuation of Hedge Accounting” IFRIC 21 “Levies” January 1, 2014 (Concluded)

Note 1: Unless stated otherwise, the above New or amended IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.
Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

1) Amendment to IAS 36 “Recoverable Amount Disclosures for Non-financial Assets”

The amendment clarifies that the recoverable amount of an asset or a cash-generating unit is disclosed only when an impairment loss on the asset has been recognized or reversed during the period. Furthermore, if the recoverable amount of an item of property, plant and equipment for which impairment loss has been recognized or reversed is fair value less costs of disposal, the Group is required to disclose the fair value hierarchy. If the fair value measurements are categorized within (Level 2/Level 3), the valuation technique and key assumptions used to measure the fair value are disclosed. The discount rate used is disclosed if such fair value less costs of disposal is measured by using present value technique. The amendment will be applied retrospectively.

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2) Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments also require additional disclosure if there is a significant difference between the actual operation after business combination and the expected benefit on acquisition date.

The disclosures of related party transactions and impairment of goodwill will be enhanced when the above amendments are retrospectively applied in 2017.

b. New IFRSs in issue but not yet endorsed by the FSC

The Group has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC.

New IFRSs Annual Improvements to IFRSs 2014-2016 Cycle Amendment to IFRS 2 “Classification and Measurement of Share-based Payment Transactions” IFRS 9 “Financial Instruments”	Effective Date Announced by IASB (Note 1)
	Note 2 January 1, 2018 January 1, 2018

(Continued)

280

Other Items Deserving Special Mention

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.
Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

IFRS 9 “Financial Instruments”

1) Recognition and measurement of financial assets

a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;
b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or

281

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reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for above, all other financial assets are measured at fair value through profit or loss. However, the Group may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

2) Impairment of financial assets

Transition

Except for the above impact, as of the date the combined financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

282

Other Items Deserving Special Mention

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

Statement of Compliance

The combined financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and IFRSs as endorsed by the FSC.

Basis of Preparation

The combined financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values.

a. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
b. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c. Level 3 inputs are unobservable inputs for the asset or liability.

Classification of Current and Non-current Assets and Liabilities

Current assets include:

a. Assets held primarily for the purpose of trading;
b. Assets expected to be realized within twelve months after the reporting period; and
c. Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

a. Liabilities held primarily for the purpose of trading;
b. Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and
c. Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period. 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.

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Assets and liabilities that are not classified as current are classified as non-current.

Basis of Consolidation

The combined financial statements as of and for the year ended December 31, 2016 have included the financial statements of the Corporation, its direct and indirect subsidiaries, and other investees in which the Corporation and its affiliates have combined interests of more than 50%. All significant transactions among the combined entities were eliminated in the combined financial statements.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Corporation.

All intra-group transactions, balances, income and expenses are eliminated in full upon combination.

See Note 12 and Table 7 for the detailed information of affiliates (including the percentage of ownership and main business).

Foreign Currencies

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purposes of presenting combined financial statements, the assets and liabilities of the Group’s foreign (including subsidiaries, associates and joint ventures in other countries that use currency different from the currency of the Group) operations are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income.

284

Other Items Deserving Special Mention

Inventories

Investments in Associates and Joint Ventures

Property, Plant and Equipment

285

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use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

Investment Properties

Investment properties under construction are stated at cost less accumulated depreciation and accumulated impairment loss. Cost includes professional fees and, borrowing costs eligible for capitalization. Depreciation of these assets commences when the assets are ready for their intended use.

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.

Goodwill

Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

Impairment of Tangible and Intangible Assets Other than Goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets other than goodwill to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

286

Other Items Deserving Special Mention

When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

Financial Instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

a. Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

1) Measurement category

Financial assets are classified into the following categories: Available-for-sale financial assets, and loans and receivables.

a) Available-for-sale financial assets

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Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

b) Loans and receivables

2) Impairment of financial assets

For financial assets carried at amortized cost, such as trade receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

288

Other Items Deserving Special Mention

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables that are written off against the allowance account.

3) Derecognition of financial assets

b. Financial liabilities
1) Subsequent measurement

All financial liabilities of the Group are subsequently measured at amortized cost using the effective interest method.

2) Derecognition of financial liabilities

Provisions

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Revenue Recognition

a. Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

1) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
2) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
3) The amount of revenue can be measured reliably;
4) It is probable that the economic benefits associated with the transaction will flow to the Group; and
5) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

b. Dividend and interest income

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Leasing

290

Other Items Deserving Special Mention

The Group is a Lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease

Employee Benefits

a. Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

b. Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Net defined benefit liability represents the actual deficit in the Group’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

c. Other long-term employee benefits

Other long-term employee benefits are accounted for in the same way as the accounting required for defined benefit plan except that remeasurement is recognized in profit or loss.

d. Termination benefits

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

a. Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

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b. Deferred tax

c. Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, the directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

292

Other Items Deserving Special Mention

Impairment of Tangible and Intangible Assets Other than Goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets other than goodwill to determine whether there is any indication that those assets have suffered an impairment loss. In the process of evaluating the potential impairment, the Group is required to make subjective judgments in determining the independent cash flows, useful lives, expected future revenue and expenses related to the specific asset groups with the consideration of the nature of the Group’s industry. Any changes in these estimates based on changed economic conditions or business strategies could result in significant impairment charges or reversal in future years.

Impairment of Goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

6. CASH AND CASH EQUIVALENTS

	December 31,	December 31,
		2016
Cash on hand	$	4,252
Checking accounts and demand deposits		1,080,583
	$	1,084,835

Time deposits with original maturities of more than 3 months are recorded as other financial assets, and are classified as non-current if their maturities exceed one year.

The market rate intervals of cash and cash equivalents and other financial assets at the end of the reporting period were as follows:

	December 31,
	2016
Bank balance	0.01%-0.08%
Time deposit with original maturities more than three months	0.13%-17.1%

7. AVAILABLE-FOR-SALE FINANCIAL ASSETS - CURRENT

	December 31,	December 31,
		2016
Domestic listed shares	$	91,102
Mutual funds		3,155,410
	$	3,246,512

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8. NOTES AND RECEIVABLE

	December 31,	December 31,
		2016
Notes receivable
Notes receivable - sale of goods	$	339,767
Real estate notes receivable		107,935
	$	447,702
Notes receivable	$	366,324
Long-term notes receivable		81,378
	$	447,702
Accounts receivable
Accounts receivable - sales of goods	$	1,215,842
Real estate receivable		468,166
Less: Unrealized interest income		(74,470)
	$	1,609,538
Accounts receivable	$	1,305,426
Long-term receivable		304,112
	$	1,609,538

Except for those impaired, for the accounts receivable balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss, because there was not a significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements for these balances.

The aging of accounts receivables (inclusive of long-term receivable) was as follows:

	December 31,
	2016
Not over due	$ 1,501,466
Up to 30 days	29,889
31-60 days	57,132
Over 60 days	21,051
	$ 1,609,538

The above aging schedule was based on the past due date.

294

Other Items Deserving Special Mention

The aging of accounts receivable in the above part that were past due but not impaired was as follows:

	December 31,
	2016
Up to 30 days	$ 29,889
31-60 days	57,132
Over 60 days	21,051
	$ 108,072

The Group hold the sold real estate and checks as collateral for the real estate accounts receivables amounted to $564,925thousand.

9. FINANCI A L ASSETS CARRIED AT COST

	December 31,
	2016
Noncurrent
Domestic unlisted shares
Eminent II VC Corp.	$ 200,000
Eminent Venture Capital Corporation	100,000
Taiwan Stock Exchange Corporation	52,800
TSCBio Ventures Capital Co.	33,600
Top Taiwan V Venture Capital Co., Ltd.	32,195
Visgeneer Inc.	20,989
TaiAn Technologies Corporation	7,667
Bion tech Inc.	2,331
Green Cellulosity Corporation	-
	$ 449,582
Classified according to financial asset measurement categories:
Available-for-sale financial assets	$ 449,582

Management believed that the above unlisted equity investments held by the Group had fair values that could not be reliably measured due to the range of reasonable fair value estimates

295

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being so significant; therefore they were measured at cost less impairment at the end of reporting period.

In June 2016 and 2015, Top Taiwan V Venture Capital Co., Ltd. reduced its capital, and the Group received $24,390 and $63,415 thousand as capital returns, respectively; nevertheless, the percentage of the Group’s ownership of this investee remained the same.

Because Green Cellulosity Corporation had a continued loss, the Group recognized an impairment loss of $15,000 thousand for the year ended December 31, 2016.

10. INVENTORIES

	December 31,
	2016
Raw materials	$ 1,019,335
Finished goods	430,127
Merchandise	6,567
	$ 1,456,029

The costs of inventories recognized as cost of goods sold was $9,615,137 thousand for 2016.

The cost of goods sold for the year ended December 31, 2016 included a reversal of inventory write-downs of $6,157 thousand.

11. BUILDINGS AND LAND HELD FOR SALE/RECEIPTS IN ADVANCE

	December 31,	December 31,
		2016
Buildings and land held for sale
Nangang R5 Residential Project	$	350,345
Others		30
	$	350,375
Receipts in advance
Nangang R5 Residential Project	$	50,759

296

Other Items Deserving Special Mention

12. AFFILIATES

a. Affiliates included in combined financial statements

Investor
Investee
Main Business
The Corporation
Taifer Chemicals
International Inc.
International trade, wholesale of
fertilizer, real estate rental or leasing
and gas station
Taiwan Agricultural Global
Marketing Co., Ltd.
Wholesale and retail sale of cosmetics
and biotechnology services
Taifer (Cayman)
International Group Co.,
Ltd.
Investment and holding
Taiwan Yes Deep Ocean
Water Co., Ltd.
Wholesale of drinks, food and grocery
Taifer (Cambodia) Co., Ltd.
International trade and wholesale of
fertilizer
Taifer International (Samoa)
Co., Ltd.
Investment and holding
Taiwan Yes Deep
Ocean Water Co.,
Ltd.
Hasbo Biotech Co., Ltd.
Wholesale of Nonalcoholic Beverages
and Cosmetics
Taifer Chemicals
International Inc.
Taifer International (Samoa)
Group Co., Ltd.
Investment and holding
Taifer International
(Samoa) Group
Co., Ltd.
Taifer Chemical
International Co., Ltd.
Real estate rental and leasing
Taifer (Cayman)
International
Group Co., Ltd.
TR Electronic Chemical Co.,
Ltd.
Investment and holding
TR Electronic
Chemical Co., Ltd.
TR Electronic Chemical
(Kunshan) Co., Ltd.
Manufacture of nitric acid, hydrofluoric
acid, ammonia, phosphoric acid,
oxalic acid, and ammonia fluoride as
well as LCDs (liquid crystal displays)
and IC (integrated circuit) strippers

% of
Ownership

December 31,
2016
100
100
100
100
100
100
100
100
100
51
100

Note: In August 2016, Taifer Biotech Co., Ltd. was renamed as Taiwan Agricultural Global Marketing Co., Ltd.

On March 31, 2011, under the authorization of the Investment Commission of the Ministry of Economic Affairs, the Group established TR Electronic Chemical Co., Ltd. (TREC) in the Cayman Islands through a subsidiary, Taifer (Cayman) International Group Co., Ltd. TREC then invested in TR Electronic Chemical (Kunshan) Co., Ltd. (TREC-K), which enabled the Group to have a 51% indirect interest in TREC-K. TREC-K manufactures and sells electronic chemicals. Later, under a joint venture agreement between the Group and Shiung-Shing Chemical International Trade Corp. (“Shiung-Shing”), another TREC shareholder, Shiung-Shing assigned a manager to handle TREC’s daily business and management. Since the Corporation had no control over TREC and TREC-K, TREC and TREC-K aren't included in the combined financial statements in 2016. However, the Coporation holds more than half of the amount of capital contribution of TREC and TREC-K, so they are included in the combined financial statements in 2016.

b. Affiliates not included in the combined financial statements: None.
c. Affiliates have material non-controlling interest: None.

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13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in associates Material associates Material associates Al-Jubail Fertilizer Company (“Al-Jubail”) Name of Associate Al-Jubail	December 31, 2016 $ 10,896,351 December 31, 2016 $ 10,896,351 Proportion of Ownership and Voting Rights
	December 31, 2016 50.00%

Refer to Table 7 “Information on Investees” for the nature of activities, principal place of business and country of incorporation of the associates.

Summarized financial information in respect of each of Al-Jubail is set out below:

Current assets Non-current assets Current liabilities Non-current liabilities Equity Equity attributable to the Group Equity attributable to other controlling interest	December 31, 2016 $ 7,261,936 18,790,106 (1,926,461) (1,944,743 ) $ 22,180,838 $ 11,074,803 11,106,035 $ 22,180,838

298

Other Items Deserving Special Mention

Operating revenue Net loss for the year Total comprehensive loss for the year Dividends declared by Al-Jubail	For the Year Ended December 31, 2016 $ 7833,956 (454,470 ) (454,470 ) $ -

14. PROPERTY, PLANT AND EQUIPMENT

Carrying amounts Land Buildings Machinery and Equipment Transportation equipment Other equipment Construction in Progress	December 31, 2016 $ 16,192,381 2,821,661 7,009,396 25,468 354,239 1,066,149 $ 27,469,294

For the year ended December 31, 2016, as the result of the declining sale of certain products of Taiwan Yes Deep Ocean Water Co, Ltd. in the market, the estimated future cash flows expected to arise from the related equipment decreased. The Group carried out a review of the recoverable amount of that related equipment and determined that the carrying amount exceeded the recoverable amount. The review led to the recognition of an impairment loss of $136,101 thousand, which was recognized in other gains and losses. The Group determined the recoverable amount of the relevant assets on the basis of their value in use. The discount rate used in measuring the value in use was 14% per annum.

The following property, plant and equipment were depreciated on a straight-line basis over their useful lives:

Buildings: Leasehold improvements and others	3-15 years
Buildings: Buildings, warehouses, storage sheds	16-60 years
Machinery and equipment: Production equipment	3-15 years
Machinery and equipment: Storage tanks, power transmission
systems, etc.	16-40 years
Transportation equipment	3-15 years
Other equipment	3-15 years

299

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15. INVESTMENT PROPERTIES

Cost Balance at January 1, 2016 Additions Transfer from property, plant and equipment Balance at December 31, 2016 Accumulated depreciation and impairment Balance at January 1, 2016 Depreciation expense Transfer from property, plant and equipment Balance at December 31, 2016 Carrying amounts at December 31, 2016	Completed Investment Property $ 8,347,437 - - 8,347,437 (21,379) (9,045) - (30,424 ) $ 8,317,013	Investment Property under Construction $ 5,683,320 619,368 123,518 6,426,206 (703) (13,673) (9,133 ) (23,509 ) $ 6,402,697	Undeveloped Investment Property $ 6,372,955 672,581 - 7,045,536 (607,646) - - (607,646 ) $ 6,437,890	Total $ 20,403,712 1,291,949 123,518 21,819,179 (629,728) (22,718) (9,133 ) (661,579 ) $ 21,157,600

Completed investment property are located in C3/C6/C7/C8/C9 in the Nangang Economic and Trade Park, and the Corporation leased land use right to others.

a. The main provisions of the C6/C7/C8/C9 contract on the pledging of land use rights were as follows:
1) Land use rights are for 50 years from the date of registration of these rights. When these rights expire or the contract is terminated, the lessee should cancel its registration for the land use rights and transfer to the Group all the land improvements (including the main building, attached building, parking space and all other attached facilities and improvements such as air-conditioning, and utility fixtures).
2) The land use rights (accounted for as deferred income-noncurrent) amounted to $3,200,889 thousand, which has been treated as royalty revenue (accounted for as operating revenue) amortizable over 50 years from June 13, 2006. As of December 31, 2016, the unamortized balances of the land used rights under above mentioned contract was $2,526,035 thousand.
3) In addition to the land use right, the annual rental payable by the lessee is 8% of the reference land price announced by the local government, with the calculation starting from the contract date. When the reference land price is adjusted, the annual rental will be revised at the percentage the same as that set on the date of the reference price adjustment. The annual rentals in 2016 was $345,132 thousand.

300

Other Items Deserving Special Mention

4) The lessee should not transfer the land use rights or the ownership of leasehold improvements to a third party. Also prohibited are the placing of the land rights under a trust and the use of the rights as collateral.
5) The lessee should not pledge liabilities on land use rights and improvements to a third party.
b. On September 15, 2015, the Group signed with CTBC Life Insurance Co., Ltd. and Taiwan Life Insurance Co., Ltd. (together, the “lessees”) separate contracts for these two insurance companies to have the rights to use land located in C3 in the Nangang Economic and Trade Park. The main provisions of these contracts are as follows:
1) Land use rights (LURs) are valid for 45 years from the date of the registration of these rights. When these rights expire or the contracts are terminated by the Group or the lessees, the lessees should maintained all the land improvements (including the main building, attached building, parking space and all other attached facilities and improvements) at usable condition and cancel their registration for the LURs and transfer to the Group or a third party designated by the Group. But if the Group wants to demolish the land improvements, it should accordingly inform the lessees in writing within at least five years before the contract expires.
2) The LURs (accounted for as deferred income - noncurrent) amounted to $14,288,705 thousand, which has been treated as royalty revenue (under operating revenue) amortizable over 45 years from December 10, 2015. As of December 31, 2016, the unamortized balance of the LURs was $13,953,538 thousand.
3) In addition to the LURs, the annual rental payable by the lessees is 0.8% of the reference land price announced by the local government, with the calculation starting from the registration date. When the reference land price is adjusted, the annual rental will be revised at the same percentage as the rate of the reference price adjustment. The lessees’ annual rental in 2016 was $48,149 thousand.
4) The LURs should not be transferred to a third party. Also, the placing of the LURs under a trust and the use of the rights as collaterals are prohibited without the Group’s prior written consent.
5) After nine years and six months from the registration date, the lessees have within six months to extend the validity period for the land use rights to another 40 years by giving a written notice to the Group. With this extension, the entire validity period of the LURs will be 85 years, and the lessees should pay an additional one-time royalty of $15,000,000 thousand.
6) Under the contract, the lessees provided the Taiwan Government Bond A02105 and A03114 as collaterals; as of December 31, 2016, the fair values of these bonds were $1,078,335 thousand and $1,666,091, respectively.
c. Investment properties under construction are located in Hsinchu City and Hualien City and included land for the “C2 Tourist Hotel Project” and “Commercial Building Project” in the Nangang Economic and Trade Park.

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The main terms of the FEA were as follows:

1) The Group is responsible for the construction of the lease premises (the “Premises”), and the Hotels should assist the Group in construction-related matters. The Group will shoulder the construction cost. Both parties are responsible for the completion of the premises in six years after signing the FEA.
2) The leasing contract is for 20 years from the start of the lease contract, and the lessee has the first option to extend the lease for another 10 years. Upon expiry or termination of this lease agreement, the lessee should turn over the Premises as is to the Corporation.
3) The lessee should pay monthly rentals, calculated at the higher of the guaranteed rentals or revenue-based rentals payable to the Group from the Premises opening date. The guaranteed rental will be increased 1% each year, and the revenue-based rentals are 16% of the gross revenue of the hotel each month.
4) Under this FEA and lease agreement, the lessee should not assign and transfer any of its rights or obligation to a third party.

The fair values of investment properties were assessed as follows:

December 31, 2016

C6/C7/C8/C9 Fair value: $24,139,596

Measurement: The fair values were based on the valuations carried out at March 11, 2016 by independent qualified professional valuer.

Fair value: $19,743,214

Measurement: The fair values were based on the valuations carried out at March 11, 2016 by independent qualified professional valuer.

302

Other Items Deserving Special Mention

C3

Fair value: $34,427,661

Measurement: The fair values were based on the valuations carried out at March 11, 2016 by independent qualified professional valuer.

16. INTANGIBLE ASSETS

December 31, 2016

Carrying amounts Patents Computer software Trademark Goodwill	$ 436 76,701 35,900 201,487 $ 314,524

The above items of intangible assets with finite useful lives were depreciated on a straight-line basis over the estimated useful life of the asset:

Patents	5-10	years
Computer software	1-5	years

17. LONG-TERM PREPAYMENTS FOR LEASE

				December 31,
				2016
Land in a special	petrochemical	industry	zone in Taichung	$ 1,215,950

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that an inspection showed the area of the land as stated in the lease contract was the same as that to be actually used by the Corporation; thus, the Corporation signed the contract. The main provisions of the lease agreement were as follows:

a. The lease term for the land in a special industrial zone is 20 years, and the agreement is renewable until the total lease reaches 50 years. The ownership of the real estate and its improvements constructed with the Corporation’s capital belongs to the Corporation. In principle, the Corporation will return the land to the government on the agreement expiry or upon early termination of the lease agreement.
b. As mentioned above, the Corporation has leased land, developed wests 8 and 9 of the wharf area and constructed warehouse facilities and public roads on behalf of THB. The Corporation used its capital expenses for the construction as rentals in advance. However, once the lease term ends or the agreement is early terminated, all the titles to the facilities and improvements on the leased land should be transferred to THB.

18. BORROWINGS

Short-term Borrowings

	December 31,	December 31,
		2016
Secured borrowings
Fixed rate bank loans	$	76,181
Floating rate bank loans		151,675
Unsecured loans
Fixed rate bank loans		46,000
Floating rate bank loans		85,296
	$	359,152
Annual interest rate (%)	1.32%-3.61%

19. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The employees of the Group’s subsidiary in China are members of a state-managed retirement benefit plan operated by the government of China. The subsidiary is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits.

304

Other Items Deserving Special Mention

The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

Accordingly, the Group recognized expenses of $20,555 thousand in the combined statements of comprehensive income for the year ended December 31, 2016.

b. Defined benefit plans

The defined benefit plan adopted by the Corporation of the Group in accordance with the Labor Standards Law is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Corporation contribute amounts equal to 9% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:

	December 31,	December 31,
		2016
Present value of defined benefit obligation	$	542,182
Fair value of plan assets		(447,829 )
Net defined benefit liability	$	94,353

Movements in net defined benefit liability (asset) were as follows:

	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of	Benefit
	Obligation	the Plan Assets	Liability (Asset)
Balance at January 1, 2016	$ 557,548	$ (89,508 )	$ 468,040
Service cost
Current service cost	19,748	-	19,748
Past service cost	10,809	-	10,809
Net interest expense	5,275	-	5,275
Net interest income	-	(702 )	(702 )
Recognized in profit or loss	35,832	(702 )	35,130
Remeasurement
Return on plan assets (excluding
amounts included in net
interest)	-	(1,913)	(1,913)
			(Continued)

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	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of		Benefit
	Obligation	the Plan Assets	Liability (Asset)
Actuarial loss - changes in
demographic assumptions	2	-		2
Actuarial loss - changes in
financial assumptions	7,182	-		7,182
Actuarial loss - experience
adjustments	10,574	-		10,574
Recognized in other comprehensive
income (loss)	17,758	(1,913 )		15,845
Contributions from plan
participants	-	(405,581)		(405,581)
Benefits paid	(44,834)	36,305		(8,529)
Liabilities extinguished on
settlement	(24,122 )	13,570		(10,552 )
Balance at December 31, 2016	$ 542,182	$ (447,829 )	$	94,353

(Concluded)

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plans is as follows:

		For the Year	For the Year
			Ended
		December 31,
			2016
Operating	costs	$	9,510
Operation	expenses		25,620
		$	35,130

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic/and foreign/equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the government/corporate bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

306

Other Items Deserving Special Mention

	December 31,
	2016
Discount rate(s)	1.00%
Expected rate(s) of salary increase	1.20%

	December 31,	December 31,
		2016
Discount rate(s)
0.25% increase	$	(8,850 )
0.25% decrease	$	9,138
Expected rate(s) of salary increase
0.25% increase	$	9,097
0.25% decrease	$	(8,854 )

	December 31,
	2016
The expected contributions to the plan for the next year	$ 20,030
The average duration of the defined benefit obligation	6 years

20.	EQUITY
	a. Share capital
		December 31,
		2016
	Number of shares authorized and issued (in thousands) Capital authorized and issued	980,000 $ 9,800,000

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b. Capital surplus

	December	December	31,
		2016
May be used to offset a deficit, distributed as cash
dividends, or transferred to share capital
Donations	$	44,803
Treasury share transactions		2,187,988
May not be used
Arising from share of changes in capital surplus of associates			-
	$	2,232,791

c. Retained earnings and dividend policy

Items referred to under Rule No. 1010012865, and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following

308

Other Items Deserving Special Mention

Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Corporation.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Corporation.

The appropriations from the 2015 earnings were as follows:

Legal reserve Cash dividends	For the Year Ended December 31
	Appropriation of Earnings Dividends Per Share (NT$) $ 242,708 2,058,000 $2.1

The appropriation of earnings for 2016 was proposed by the Corporation’s board of directors on March 24, 2017. The appropriations and dividends per share were as follows:

The appropriation of earnings for 2016 are subject to resolution in the shareholders’ meeting to be held on June 14, 2017.

d. Special reserves

The Corporation’s special reserve relating to land reversed on disposal was $635 thousand in 2016.

21. OPERATING REVENUES AND COSTS

	For the Year
	Ended
	December 31,
	2016
Operating revenues
Sales revenue	$ 10,457,717
Rental revenue	1,453,864
Property sales	303,718
	(Continued)

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Other revenue Less: Sales returns and allowances Net operating revenues Operating costs Cost of goods sold Property selling cost Rental cost Total operating costs Gross profit	For the Year Ended December 31, 2016 50,285 (24,664 ) 12,240,920 9,441,818 117,767 675,081 10,234,666 $ 2,006,254 (Concluded)

22. ADDITIONAL INFORMATION ON NET (LOSS) PROFIT FOR THE YEAR

a. Other gains and losses

	For the Year
	Ended
	December 31,
	2016
Impairment loss of intangible assets (Note 16)	$ (206,000)
Withholding tax of donation (Note 30)	(149,475)
Impairment loss of property, plant and equipment (Note 14)	(136,101)
Gain on disposal of investment	23,381
Loss on impairment of financial assets (Note 9)	(15,000)
Net foreign exchange gain	12,719
Gain on disposal of property, plant and equipment (Note 14)	3,584
Others	(51,495 )
	$ (518,387 )

b. Other income

	For the Year	For the Year
		Ended
	December 31,
		2016
Interest income - bank deposits	$	62,445
Subsidies of land improvement demolition		46,870
Dividends		41,782
Others		13,548
	$	164,645

310

Other Items Deserving Special Mention

c. Depreciation and amortization

	For the Year	For the Year
		Ended
	December 31,
		2016
Property, plant and equipment	$	722,695
Long-term prepayment for lease		70,611
Intangible assets		34,197
Investment property		22,718
	$	850,221
Summarized by function
Operating costs	$	716,201
Operating expenses		120,347
Nonoperating expenses		13,673
	$	850,221
Employee benefit expense
	For the Year
		Ended
	December 31,
		2016
Short-term employee benefits
Salary	$	920,432
Labor and health insurance		56,369
Others		32,149
		1,008,950
Retirement benefits (Note 19)
Defined contribution plans		20,555
Defined benefit plans		35,130
		55,685
Termination benefits		3,398
Other employee benefits		706
	$	1,068,739
Summarized by function
Operating costs	$	489,711
Operating expenses		579,028
	$	1,068,739

d. Employee benefit expense

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The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2015 were as follows:

Employee’s compensation Remuneration of directors and supervisors	Year Ended December 31
	2015
	Amount Estimated Rate (%) $ 63,542 2.4% 42,362 1.6%

If there is a change in the amounts after the annual combined financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.

23. INCOME TAX

a. Income tax recognized in profit or loss
1) The major components of tax expense were as follows:

	For the Year	For the Year
		Ended
	December 31,
		2016
Current tax
In respect of the current year	$	807
Income tax on unappropriated earnings		10,940
Adjustments for prior years		(10,965 )
		782
Deferred tax
In respect of the current year		107,702
Income tax expense recognized in profit or loss	$	108,484

312

Other Items Deserving Special Mention

2) A reconciliation of accounting profit and income tax expenses is as follows:

Loss before income tax Income tax expense calculated at the statutory rate Adjustment items in determining taxable profit Tax-exempt income Income tax on unappropriated earnings Unrecognized temporary difference Adjustments for prior years’ tax Other Income tax expense recognized in profit or loss	For the Year Ended December 31, 2016 $ (114,313 ) (23,241) 75,811 (10,247) 10,940 65,898 (10,965) 288 $ 108,484

The applicable tax rate used by the Corporation and subsidiaries in Taiwan was the corporate tax rate of 17%, the applicable tax rate used by the subsidiaries in Mongolia was 10%, and the applicable tax rate used by the subsidiaries in China is 25%.

b. Income tax recognized in other comprehensive income

	For the Year
	Ended
	December 31,
	2016
Deferred tax
In respect of the current year:
Translation of foreign operations	$ 33,892
Remeasurement of the defined benefit plan	2,693
Total income tax recognized in other comprehensive income	$ 36,585

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c. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2016

Deferred Tax Assets Unamortized manufacturing costs Tax losses Defined benefit obligation Impairment loss on assets Other Deferred Tax Liabilities Land value increment tax Investment income recognized under the equity method Exchange difference on the translation of foreign operations Other	Opening Balance $ 60,880 119,232 79,567 81,638 17,673 $ 358,990 Opening Balance $ 6,420,390 662,242 210,619 47 $ 7,293,298	Recognized in Profit or Loss $ (23,046) (51,467) (66,220) (10,907) (930 ) $ (152,570 ) Recognized in Profit or Loss $ (157) (44,747) - 36 $ (44,868 )	Recognized in Other Comprehen- sive Income $ - - 2,693 - - $ 2,693 Recognized in Other Comprehen- sive Income $ - - (33,892) - $ (33,892 )	Closing Balance $ 37,834 67,765 16,040 70,731 16,743
				$ 209,113
				Closing Balance $ 6,420,233 617,495 176,727 83
				$ 7,214,538

d. Deductible temporary differences, unused loss carryforwards for which no deferred tax assets have been recognized in the consolidated balance sheets

	December 31,	December 31,
		2016
Loss carryforwards
Expire in 2017	$	81,678
Expire in 2018		258,059
Expire in 2019		119,159
Expire in 2020		87,639
Expire in 2021		123,888
Expire in 2022		62,797
Expire in 2023		42,061
Expire in 2024		18,791
Expire in 2025		15,463
Expire in 2026		9,753
	$	819,288

(Continued)

314

Other Items Deserving Special Mention

	December 31,	December 31,
		2016
Deductible temporary differences	$	43,306
Property, plant and equipment		6,838
Allowance for inventory valuation and obsolescence loss	$	50,144
		(Concluded)

e. Information about unused loss carryforwards

		December 31,	December 31,
			2016
Expire in	2017	$	87,895
Expire in	2018		264,838
Expire in	2019		139,630
Expire in	2020		143,625
Expire in	2021		190,069
Expire in	2022		133,661
Expire in	2023		81,635
Expire in	2024		18,791
Expire in	2025		35,932
Expire in	2026		37,439
		$	1,133,515

f. Integrated income tax

Unappropriated earnings generated on and after January 1, 1998 Shareholder-imputed credit account	December 31	December 31
		2016 $ 703,332 $ 192,221

The creditable ratios for the distribution of the 2016 earnings were 28.39% (expected ratio).

g. Income tax assessments

Income tax returns of through 2014 have been assessed by the tax authorities.

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24. LOSSES PER SHARE

The losses and weighted average number of common shares outstanding in the computation of loss per share were as follows:

Net Loss for This Year

		For the Year	For the Year
			Ended
		December 31,
			2016
losses used in the computation	of basic losses per share	$	(129,503 )
losses used in the computation	of diluted losses per share	$	(129,503 )

Number of Shares

Unit:	In Thousands	In Thousands
	For the Year
	Ended
	December	31,
	2016
Weighted average number of common shares used in the computation of basic
losses per share	980,000
Effect of potentially dilutive common shares
Employees’ compensation		-
Weighted average number of common shares used in the computation of
diluted losses per share	980,000

25. OPERATING LEASE AGREEMENTS

The future minimum lease payments of non-cancellable operating lease were as follows (not include the royalty the Group received for the land use right):

316

Other Items Deserving Special Mention

	December 31,	December 31,
		2016
Not later than 1 year	$	551,500
Later than 1 year and not later than 5 years		2,068,792
later than 5 years		14,061,550
	$	16,681,842

26. CAPITAL MANAGEMENT

The Group is not subject to any externally imposed capital requirements.

27. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

The Group’s management believes the carrying amounts of financial assets and financial liabilities recognized in the combined financial statements approximate their fair values or their fair values cannot be reliably measured.

b. Fair value of financial instruments that are measured at fair value on a recurring basis

Fair value hierarchy

December 31, 2016

Available-for-sale financial assets Domestic quoted shares Mutual funds	Level 1 $ 91,102 3,155,410 $ 3,246,512	Level 2 $ - - $ -	Level 3 $ - - $ -	Total $ 91,102 3,155,410
				$ 3,246,512

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There were no transfers between Level 1 and 2 in the current and prior periods.

c. Categories of financial instruments

	December 31,
	2016
Financial assets
Loans and receivables (1)	$ 10,361,828
Available-for-sale financial assets (2)	3,696,094
Financial liabilities
Amortized cost (3)	2,093,303

1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, notes receivable, accounts receivable, other receivables, other financial assets, and long-term receivable.
2) The balances included the carrying amount of available-for-sale financial assets and financial assets measured at cost.
3) The balances included financial liabilities measured at amortized cost, which comprised notes payable, accounts payable, other payables, and short-term borrowings.
d. Financial risk management objectives and policies

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

a) Foreign currency risk

The Group had foreign currency sales and purchases, which exposed the Group to foreign currency risk.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period. Refer to Note 31 for related disclosures.

Sensitivity analysis

The Group was mainly exposed to USD.

318

Other Items Deserving Special Mention

The following are the details of the Group’s sensitivity to a 10% increase and decrease in New Taiwan dollars (the functional currency) against USD. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items, and adjusts their translation at the end of the reporting period for a 10% change in foreign currency rates. For the year ended December 31, 2016, for a 10% strengthening/weakening of New Taiwan dollars against USD, there would be an/a increase/decrease of $12,200 thousand on pre-tax profit. The effect of exchange rate changes was mainly attributable to the exposure outstanding on USD receivables and payables, which were not hedged at the end of the reporting period.

b) Interest rate risk

The carrying amount of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows.

	December 31,
	2016
Fair value interest rate risk
Financial assets	$ 7,665,188
Financial liabilities	122,181
Cash flow interest rate risk
Financial assets	985,240
Financial liabilities	236,971

Sensitivity analysis

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period.

If interest rates had been 100 basis point higher/lower and all other variables were held constant, the Group’s pre-tax profit for the year ended December 31, 2016 would increase/decrease by $7,483 thousand.

c) Other price risk

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Sensitivity analysis

The sensitivity analysis below was determined based on the exposure to equity price risks at the end of the reporting period.

Had equity prices been 5% higher/lower, pretax other comprehensive income for the year ended December 31, 2016 would have increased/decreased by $162,326 thousand as a result of the changes in fair value of available-for-sale investments.

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure of counterparties to discharge an obligation and financial guarantees provided by the Group could arise from the carrying amount of the respective recognized financial assets as stated in the combined balance sheets; and the amount of contingent liabilities in relation to financial guarantee issued by the Group.

Credit risk represents the potential loss that would be incurred by the Group if the counter-parties breach contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The counter-parties to the foregoing financial instruments are reputable financial institutions and business organizations. Management does not expect the Corporation’s exposure to default by those parties to be material.

On some properties sold in installments, the Group had the mortgage rights to ensure the protection of the Group’s interests.

3) Liquidity risk

Liquidity and interest risk rate tables

320

Other Items Deserving Special Mention

principal cash flows. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

To the extent that interest flows are floating rate, the undiscounted amount was derived from the interest rate curve at the end of the reporting period.

December 31, 2016

On Demand or Less than 1 Month Non-derivative financial liabilities Noninterest bearing $ 520,191 Fixed interest rate liabilities 76,233 Floating interest rate liabilities 236,971 $ 833,395	1-3 Months $ 991,770 46,089 - $ 1,037,859	Over 3 Months- 1 Year Over 1 Year- 5 Years $ 360,562 $ - - - - - $ 360,562 $ -

Financing facilities

Unsecured bank facility Amount used Amount unused Secured bank facility Amount used Amount unused Unsecured bank overdraft facility Amount used Amount unused	December 31, 2016 $ 131,296 11,624,100 $ 11,755,396 $ 227,856 - $ 227,856 $ - 390,000 $ 390,000

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28. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Corporation and its affiliates, which are related parties of the Corporation, have been eliminated on combination and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

a. Purchases of goods

Associates	Purchase of Goods
	For the Year Ended December 31 2016 $ 1,026,900

The transaction terms with related parties were not significantly different from those with third parties.

Associates	Payables to Related Parties
	For the Year Ended December 31 2016 $ 318,490

b. Compensation of key management personnel

The compensation to directors and other key management personnel was as follows:

	For the Year	For the Year
		Ended
	December 31,
		2016
Short-term employee benefits	$	48,876
Post-employment benefits		8,906
	$	57,782

322

Other Items Deserving Special Mention

29. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets have been pledged or mortgaged as collaterals for bank loans.

	December 31,	December 31,
		2016
Pledge deposits	$	19,800
Property, plant and equipment		715,892
	$	735,692

30. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

a. As of December 31, 2016, the Group had unused letters of credits of US$10,059 thousand and EUR $454 thousand.
b. As of December 31, 2016, the Group had guarantee notes payable for its debt of $11,995,100 thousand, which was not reflected in the combined financial statements.
c. Huaku Development Co., Ltd. (“Huaku”) filed an appeal with the Taipei District Civil Court (the “Court”) for the Corporation to pay a co-building trade business tax of $38,370 thousand. The Court ruled that the Corporation should make this payment in June 2014. The Corporation brought this case to a high court in August 2014 ； however, the High Court ruled denying in June 2015. Therefore, the Corporation lodged an appeal against the High Court judgment in July 2015, but the Supreme Court decided against the Corporation, so the conviction has been affirmed by the Supreme Court. The Corporation accrued a possible loss of $38,370 thousand for this case in 2012 financial statements.
d. On June 25, 2013, the shareholders resolved that, in order to enhance the long-term business relationship with Saudi Arabian Basic Industries Corporation as well as to maintain the relationship with the Kingdom of Saudi Arabia (“Saudi Arabia”), the Corporation shall donate its share of Al-Jubail’s profit, with US$50,000 thousand as the donation limit, to the government or organizations in Saudi Arabia.

In October 2013, the Corporation and Al-Jubail signed a Memorandum of Understanding (MOU); the main contents of the MOU are summarized as follows:

1) The Corporation agreed to donate US$42,000 thousand by way of six equal semiannual installments of US$7,000 thousand each, to the government or a nonprofit organization in Saudi Arabia. The first donation should be made by October 31, 2013.
2) The donation will be funded from the dividends of Al-Jubail that have been declared and are to be distributed to the Corporation. Al-Jubail will keep the above funds in a separate account in its name in a local bank. As administrator of the donations, Al-Jubail should designate the recipient of the donation.

323

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The Corporation’s donation was as follows:

Period	Date of Donations	Amount in US$	Amount in US$	Amount in NT$
1st	October 2013	$	7,000	$ 209,440
2nd	June 2014		7,000	208,635
3rd	December 2014		7,000	212,940
4th	March 2015		7,000	223,650

e. On October 14, 2016, the Corporation received a letter from the National Taxation Bureau of Taipei, Ministry of Finance, which notified the Corporation that it had not declared withholding tax in relation to donations to the government and non-profit organizations of Saudi Arabia from 2014 to 2016. According to Paragraph 1 of Article 114 of the Income Tax Act, the amount of withholding tax payable was $140,065 thousand, and the Corporation paid it on October 28, 2016. The Corporation also accrued fines for this case in 2016.

31. EXCHANGE RATE OF FINANCIAL ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The significant financial assets and liabilities denominated in foreign currencies were as follows:

December 31, 2016

Foreign Currencies Exchange Rate Financial assets Monetary items USD $ 11,305 32.25 (USD:NTD) USD 1,242 2,489.53(USD:MNT) Non-monetary items Investments accounted for using equity SAR 1,267,136 8.6 (SAR:NTD) Financial liabilities Monetary items USD 8,764 32.25 (USD:NTD)	Carrying Amount $ 364,586 40,055
	$ 404,641
	$ 10,896,351
	$ 282,640

32. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees:

324

Other Items Deserving Special Mention

1) Financings provided to others: None
2) Endorsements/guarantees provided: Table 1
3) Marketable securities held (excluding investment in subsidiaries, associates and joint ventures): Table 2
4) Marketable securities acquired or disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Table 3
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None
7) Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Table 4
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Table 5
9) Trading in derivative instruments: None
10) Intercompany relationships and significant intercompany transactions: Table 6
11) Information on investees: Table 7
b. Investments in Mainland China:
1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: Table 8
2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses: None
- a) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
- b) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.
- c) The amount of property transactions and the amount of the resultant gains or losses.
- d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
- e) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.

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f) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

33. SEGMENT INFORMATION

a. Segment revenues and results

The following was an analysis of the Group’s revenue and results from continuing operations by reportable segment.

Fertilizer and chemical Construction Others Share of the profits of associates and joint ventures Other gains and losses Other income Finance costs Loss before tax (continuing operations)		For the Year Ended December 31, 2016	For the Year Ended December 31, 2016
		Segment Revenues $ 10,021,634 1,757,582 461,704 $ 12,240,920	Segment Income $ 243,014 413,224 (154,246 ) 501,992 (255,534) (518,387) 164,645 (7,029 ) $ (114,313 )

Segment revenue reported was generated from external customers. There were no intersegment sales in 2016.

b. Segment total assets

Segment assets Fertilizer and chemical Construction Others Combined total assets	December 31, 2016 $ 54,858,186 22,062,931 609,244 $ 77,530,361

326

Other Items Deserving Special Mention

c. Segment total liabilities

Segment liabilities Fertilizer and chemical Construction Others Comined total liabilities	December 31, 2016 $ 9,202,500 17,308,490 240,302 $ 26,751,292

d. Geographical information

The Group operates in two principal geographical areas - Taiwan and China.

The Group’s revenue from continuing operations from external customers by location of operations and information about its non-current assets by location of assets are detailed below:

Taiwan China		Revenue from External Customers For the Year Ended December 31, 2016 $ 12,240,920 - $ 12,240,920		Non-current Assets

				December 31, 2016 $ 49,384,937 772,431 $ 50,157,368

Non-current assets exclude non-current assets classified as financial instruments, deferred tax assets and post-employment benefit assets.

e. Information about major customers

The Group had no sales to a single customer that were at least 10% of total sales in 2016.

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34. AFFILIATES

a. Information on affiliates is as follows:

Name of Affiliate	Relationship with the Corporation	Nature of Business	Shareholding or Capital Contribution Ratio
Taifer Chemicals International Inc. Taifer (Cayman) International Group Co., Ltd. Taiwan Agricultural Global Marketing Co., Ltd. TR Electronic Chemical Co., Ltd. TR Electronic Chemical (Kunshan) Co., Ltd. Taifer (Cambodia) Co., Ltd. Taifer International (Samoa) Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Hasbo Biotech Co., Ltd.	Direct subsidiary Direct subsidiary Direct subsidiary Indirect equity-method investee through Taifer (Cayman) International Group Co., Ltd. Indirect equity-method investee in which the Corporation has an investment through Taifer (Cayman) International Group Co., Ltd. and TR Electronic Chemical Co., Ltd. Direct subsidiary Direct subsidiary Direct subsidiary Indirect equity-method investee through Taiwan Yes Deep Ocean Water Co.,Ltd.	International trade; wholesale of fertilizer, tobacco, liquor, beverage, forage, machinery, electrical equipment, etc.; development, operation and management of residential and factory buildings; special zone development; investment in and construction of public works, development of new towns and districts; agent services on regional district requisition and land adjustment; real estate rental or leasing, and gas station Investment and holding Wholesale and retail of products for organic agriculture Investment and holding Manufacture of nitric acid, hydrofluoric acid, ammonia, phosphoric acid, oxalic acid, ammonia fluoride as well as LCDs (liquid crystal displays) and IC (integrated circuit) strippers International trade; wholesale of fertilizer Investment and holding 1) Wholesale of drinks, food and grocery and other articles for daily use; tobacco and liquor; glass and pottery; hygiene products; fertilizers and other chemical products; and cosmetics; and 2) International trade Wholesale of drinks and cosmetics	100% 100% 100% 51% 51% 100% 100% 100% 100%

(Continued)

328

Other Items Deserving Special Mention

Name of Affiliate	Relationship with the Corporation	Nature of Business	Shareholding or Capital Contribution Ratio
Taifer International (Samoa) Group Co., Ltd. Taifer Chemical International Co., Ltd. Hasbo Biotech Co., Ltd. Taifer International (Samoa) Group Co., Ltd. Taifer Chemical International Co., Ltd.	Indirect equity-method investee through Taifer Chemicals International Inc. Indirect equity-method investee in which the Corporation has an investment through Taifer Chemicals International Inc. and Taifer International (Samoa) Group Co., Ltd. Indirect equity-method investee through Taiwan Yes Deep Ocean Water Co., Ltd. Indirect equity-method investee through Taifer Chemicals International Inc. Indirect equity-method investee in which the Corporation has an investment through Taifer Chemicals International Inc. and Taifer International (Samoa) GroupCo.,Ltd.	Investment and holding Real estate rental or leasing Wholesale of drinks and cosmetics Investment and holding Real estate rental or leasing	100% 100% 100% 100% 100%

(Concluded)

Note: Since August 16, 2016, the Company changed its name to Taiwan Agricultural Global Marketing Co., Ltd. which was formerly known as Taifer Biotech Co., Ltd.

b. Increases, decreases, or changes in the affiliates included in the current combined financial statements: Refer to Note 12.
c. The names and shareholding or capital contribution ratios of affiliates not listed in the current combined financial statements and the reasons they are not included in the combined statements: None.
d. The adjustment method and treatment adopted if the opening and closing dates of the affiliates’ accounting year are different from those of the Corporation: None.
e. An explanation of any differences in accounting policies between the affiliates and the Corporation. The method and substance of adjustments adopted in the event of any non-conformity with the Generally Accepted Accounting Principles of the Republic of China: None.
f. Special operational risks of overseas affiliates: None.

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g. Statutory or contractual restrictions on distribution of earnings by the various affiliates: None.
h. Amortization methods and period for combined borrowings (loans): None.
i. Marketable securities issued by the Corporation and held by the affiliates: None.
j. Other matters of significance or explanations that would contribute to the fair presentation of the combined financial statements of the affiliates: None.

330

TABLE 1

TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

ENDORSEMENT/GUARANTEE PROVIDED YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars/ Foreign Currency)

No.	Endorser/ Guarantor	Endorse	e/Guarantee	Limits on Each Guaranteed Party’s Endorsement/ Guarantee Amounts (Note 1)	Maximum Balance for the Period	Ending Balance	Ending Used Balance	Value of Collaterals Property, Plant, or Equipment	Ratio of Accumulated Amount of Collateral to Net Equity of the Latest Financial Statement	Maximum Collateral/ Guarantee Amounts Allowable (Note 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China
		Name	Nature of Relationship
0	Taiwan Fertilizer Co., Ltd. (the “Corporation”)	TR Electronic Chemical Co., Ltd. (TR) Taifer Chemicals International Inc. (“Taifer”)	Indirect equity-method investee in which the Corporation provided endorsement and guarantee according to the percentage of ownership Subsidiary	$ - 40,806	$ 66,626 (US$ 2,130 thousand) 23,500	$ - (Note 3) 13,500	$ - 13,500	$ - -	- 0.03	$ - 25,302,213	No Yes	No No	No No

Note 2: The total amount of guarantee should not exceed 50% of the Corporation’s net worth.

Note 3: The ending balance was $0 because the Corporation had repaid the loan on behalf of TR on March 31, 2016.

TABLE 2

TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

MARKETABLE SECURITIES HELD DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Holding Company Name	Marketable Securities Type/ Name and Issuer	Relationship with the Holding Company	Financial Statement Account		Decem	ber 31, 2016		Note
				Shares or Units (Thousands)	Carrying Value	Percentage of Ownership	Market Value or Net Asset Value
Taiwan Fertilizer Co., Ltd.	Mutual funds Mega Diamond Money Market Fund Jih Sun Money Market Fund Common stocks Eminent II VC Corp Eminent Venture Capital Corporation Taiwan Stock Exchange Corporation Top Taiwan V Venture Capital Co., Ltd. Visgeneer Inc. TaiAn Technologies Corporation TSCBio Ventures Capital Co. Ding-Tang Phalanx Biotech Co., Ltd. Bion tech Inc. China Petrochemical Development Corporation	- - - - - - - - - - - - -	Available-for-sale financial assets - current Available-for-sale financial assets - current Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Financial assets carried at cost - noncurrent Available-for-sale financial assets - current	153,746 84,947 20,000 10,000 13,534 3,220 3,147 741 3,360 1,500 404 4,167 9,202	$ 1,909,265 1,246,145 200,000 100,000 52,800 32,195 20,989 7,667 33,600 - - 2,331 91,102	- - 18.50 10.00 2.00 9.76 10.31 16.67 19.75 6.71 0.76 17.89 0.40	$ 1,909,265 1,246,145 257,692 111,325 998,126 29,518 32,150 16,050 34,476 7,238 2,040 7,951 91,102	Note 1 Note 1 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 3 Note 2

Note 1: The market value was calculated on the basis of the net asset value as of the balance sheet date.

Note 2: The market value was calculated on the basis of the closing price on the Taiwan Stock Exchange as of the balance sheet date.

Note 3: The market value was calculated on the basis of the unaudited financial statement for the same period.

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TABLE 3

TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

MARKETABLE SECURITIES ACQUIRED AND DISPOSED AT COSTS OR PRICES OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Type and Name of Marketable Securities	Financial Statement Account	Counterparty	Relationship	Beginning Balance	Beginning Balance	Acquisition	Acquisition	Disposal	Disposal	Disposal	Disposal	Ending Balance	Ending Balance
					Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount
Taiwan Fertilizer Co., Ltd.	Allianz Glbl Investors Taiwan Money Mkt Fund Jih Sun Money Market Fund Nomura Taiwan Money Market Fund Capital Money Market Fund Taishin 1699 Money Market Fund	Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current Available-for-sale financial assets - current	- - - - -	- - - - -	72,883 112,349 64,011 91,755 116,958	$ 901,552 1,642,712 1,031,453 1,462,005 1,562,164	- - - - -	$ - - - - -	72,883 27,402 64,011 91,755 116,958	$ 900,000 400,000 1,030,000 1,460,000 1,560,000	$ 902,887 401,653 1,032,311 1,463,280 1,565,722	$ 2,887 1,653 2,311 3,280 5,722	- 84,947 - - -	$ - 1,246,145 - - -

Note : Unrealized gain and loss on financial assets were recognized.

TABLE 4

TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship	Transaction Details	Transaction Details	Transaction Details	Transaction Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase (Sale)	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
Taiwan Fertilizer Co., Ltd.	AI-Jabail Fertilizer Company	Equity-method investee	Purchase	$ 1,026,900	10	Same as those for third parties	Determined under the considerations of international market price and production cost	30 days	$ (318,490)	36	-

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TABLE 5

TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate	O	verdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
Taiwan Fertilizer Co., Ltd.	TR Electronic Chemical Co., Ltd.	Jointly controlled entity	Other receivable $ 317,277	-	$ 317,277	-	$ -	$ 317,277

TABLE 6

TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

BUSINESS RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars)

Number	Company Name	Counter-party	Flow of Transaction (Note)	Transaction Details	Transaction Details	Transaction Details	Percentage of Transaction Amount to Consolidated Operating Revenue or Total Assets
				Account	Amount	Transaction Terms
0	Taiwan Fertilizer Co., Ltd.	Taiwan Yes Deep Ocean Water Co., Ltd. Taifer Chemicals International Inc. Taiwan Agricultural Global Marketing Co., Ltd. TAIFER (CAMBODIA) CO., LTD	1 1 1 1 1 1 1 1 1 1 1	Accounts receivable Guarantee deposits received Sales revenue Rental revenue Operating expenses Accounts payable Rental revenue Operating expenses Operating expenses Accounts receivable Sales revenue	$ 1,805 1,800 2,679 11,104 15,453 2,137 6,081 15,124 1,673 1,465 2,587	Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms Based on regular terms	- - - - - - - - - - -
1	Taiwan Yes Deep Ocean Water Co., Ltd.	Hasbo Biotech Co., Ltd.	2 2	Accounts receivable Sales revenue	134,305 16,663	Based on regular terms Based on regular terms	- -

Note 1: Parent to subsidiary.

Note 2: Between subsidiaries.

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TABLE 7

TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

NAMES, LOCATIONS, AND OTHER INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE FOR THE YEAR ENDED DECEMBER 31, 2016

(In Thousands of New Taiwan Dollars)

Investor	Investee	Location	Main Businesses and Products	Investm	ent Amount	Balance	as of Decembe	r 31, 2016	Net (Loss) Income of the Investee	Investment (Loss) Income	Note
				December 31, 2016	December 31, 2015	Shares/Units (Thousands)	Percentage of Ownership	Carrying Value
Taiwan Fertilizer Co., Ltd. Taifer (Cayman) International Group Co., Ltd. Taiwan Yes Deep Ocean Water Co., Ltd. Taifer Chemicals International Inc. Taifer International (Samoa) Group Co., Ltd.	Al-Jubail Fertilizer Company Taifer Chemicals International Inc. Taiwan Yes Deep Ocean Water Co., Ltd. Taifer (Cayman) International Group Co., Ltd. Taiwan Agricultural Global Marketing Co., Ltd. Taifer (Cambodia) Co., Ltd. Taifer International (Samoa) Co., Ltd. TR Electronic Chemical Co., Ltd. Hasbo Biotech Co., Ltd. Taifer International (Samoa) Group Co., Ltd. Taifer Chemical International Co., Ltd.	Kingdom of Saudi Arabia Taiwan Taiwan Cayman Islands Taiwan Cambodia Samoa Cayman Islands Taiwan Samoa Mongolia	Manufacture of urea, 2-EH (2-ethyl hexanol), and DOP (dioctyl phthalate) International trade; wholesale of fertilizer, tobacco, liquor, beverage, forage, machinery, electrical equipment, etc.; development, operation and management of residential buildings and factory buildings; special zone development; investment in and construction of public works; development of new towns and districts; agent services on regional district requisition; land adjustment; and real estate rental or leasing a) Wholesale of drinks, food and grocery and other articles for daily use; tobacco and liquor; glass and pottery; hygiene products; fertilizers and other chemical products; and cosmetics; and b) International trade Investment and holding Wholesale and retail of products for organic agriculture International trade; wholesale of fertilizer Investment and holding Investment and holding Wholesale of Nonalcoholic Beverages and Cosmetics Investment and holding Real estate rental and leasing	$ 3,050,000 126,300 1,224,235 321,900 100,000 40,052 9,348 321,962 240,000 42,618 41,077	$ 3,050,000 126,300 1,224,235 321,900 100,000 40,052 9,348 321,962 240,000 42,618 41,077	7 5,500 95,000 11 7,174 - - - 24,000 - -	50.00 100.00 100.00 100.00 100.00 100.00 100.00 51.00 100.00 100.00 100.00	$ 10,896,351 76,479 469,125 - 66,642 28,136 9,348 - (121,876) 53,038 52,773	$ (454,470 ) 15,143 (122,923 ) - (2,832 ) (8,647 ) - (93,294 ) (7,312 ) 13,180 13,180	$ (254,573 ) 15,143 (458,969 ) - (2,832 ) (8,647 ) - No applicable No applicable No applicable	Associate Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Jointly controlled entity Subsidiary Subsidiary Subsidiary

Note: In August 2016, Taifer Biotech Co., Ltd. has been renamed as Taiwan Agricultural Global Marketing Co., Ltd..

TABLE 8

TAIWAN FERTILIZER CO., LTD. AND AFFILIATES

INVESTMENT IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2016 (In Thousands of New Taiwan Dollars, Foreign Currency)

Investee Company Name	Main Businesses and Products	Total Amount of Paid-in Capital	Investment Type	Accumulated Outflow of Investment from Taiwan as of January 1, 2016	Investme	nt Flows	Accumulated Outflow of Investment from Taiwan as of December 31, 2016	Net Income (Loss) of the Investment	% Ownership of Direct or Indirect Investment	Investment Gain (Loss)	Carrying Value as of December 31, 2016
					Outflow	Inflow
TR Electronic Chemical (Kunshan) Ltd.	Manufacture of nitric acid, hydrofluoric acid, ammonia, phosphoric acid, oxalic acid, ammonia fluoride and LCD and IC Stripper	US$ 21,500 (NT$ 693,375 ) (Note 4)	Note 3	US$ 10,965 (NT$ 353,621 ) (Note 4)	US$ -	US$ -	US$ 10,965 (NT$ 353,621 ) (Note 4)	US$ (2,892 ) (NT$ (93,294) ) (Note 1&5)	51%	- (Note 6)	- (Note 6)

Accumulated Inve	stment in Mainland China a 2016	s of December 31,	Investment	Amounts Authorize MO	d by Investm EA	ent Commission,		Limit on	Investment
	NT$353,621 (US$ 10,965) (Note 4)			NT$353,621 (US$ 10,965) (Note 4)				NT$30,362,656 (Note 2)

Note 1: The amount was based on the latest financial statements unaudited by the auditors recently.

Note 3: Indirect investment in Mainland China through a subsidiary in a third place. (Investor: TAIFER (CAYMAN) INTERNATIONAL GROUP CO., LTD.)

Note 4: The foreign currency amounts of original investment amount and carrying value were translated into New Taiwan dollars at the exchange rate 32.25 as of December 31, 2016.

Note 5: The foreign currency amount of investment gain/loss was translated into New Taiwan dollars at an average exchange rate 32.263 for the year ended December 31, 2016.

Note 6: As of June 30, 2015, the investment accounted for using the equity method balance of Group was zero, so the Corporation didn’t recognize income (loss) of the investment.

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Other Items Deserving Special Mention

(III) Relationship Report: None

II. Conditions for Fulfilling Private Placement Negotiable Securities for recent years and up to the date of publication of the annual report: None
III. Conditions for holding or disposition of the Company’s shares by subsidiaries for the recent years and up to the date of publication of the annual report: None
IV. Other Necessary Supplementary Statements: None

339

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Part Nine:Matters having great influence on the rights or security price in accordance with Clause 2, Item 2, Article 36 of Securities Exchange Act in the recent year and by the end of the publication day of the annual report: None

340

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Taiwan Fertilizer Co., Ltd

Chairman: Kang Hsinhong

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使用環保再生紙與大豆油墨印製，致力於珍惜資源與環境保護。

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AI assistant

TFC — Annual Report 2016

51902_rns_2017-07-04_a9e612be-0896-45bd-a711-9d906219f154.pdf

培元•固本•創新•永續

I. Spokesman of TFC:

II. Address and Telephone Number of Headquarter and All Plants:

Headquarter

Keelung Plant

Kaohsiung Plant

Hsinchu Plant

Hualien Plant

Miaoli Plant

Taichung Plant

III. Stock Transfer Office :

IV. Certified Accountants for the Financial Statements of the Recent Year:

V. Name of the Overseas Exchange for the Listing and Trading of Securities and the Way to Inquire the Information About Such Overseas Securities: None.

VI. Website of Taiwan Fertilizer Co., Ltd.: www.taifer.com.tw

Annual Report for 2016

Table of Contents

Part one ： A report to the Shareholders

Operation overview in 2016:

Operation plan in 2016:

Future development strategy:

Chairman:

Part Two: Company Profile

I. Incorporation Date: May 1st, 1946

II. Company History:

Part Three: Corporate Governance Report

II. Information on Directors, Supervisors, President, Vice Presidents, and Management Team

(I)Information on Directors and Supervisors

Information on Directors and Supervisors (I)

Form 1: Key Shareholders of Corporate Shareholders

Form 2: Key Shareholders as Corporations: None

Information on Directors and Supervisors (II)

(II) Information on the President, Vice Presidents and Management Team

(III)Remuneration paid to directors, supervisors, president and vice presidents for the recent years

Remuneration Scale Table

(2) Remuneration for Supervisors (Summary of ways for coordinative disclosure of names)

(3) Remuneration for the President and Vice Presidents (Summary of ways for coordinative disclosure of names)

Remuneration Scale Table

III. Corporate Governance Conditions

(I) Operation of the Board of Directors

(II) Operation of the Audit Committee or the Participation in the Board of Directors by Supervisors

(III) Conditions for Corporate Governance and Operation and Difference and Causes of Governance Practice Rules on Listed Companies

(IV) The Company should disclose the composition, function, and operation circumstances of compensation committee, if any.

(V)Performance of Social Responsibilities:

(VI) Conditions for performing good faith management and measurement by the Company

(VII) Disclosure of Inquiry Ways in Case of any Formulation of Corporate Governance Rules and Relevant Regulations by the Company:

(VIII) Other Important Information Enough to Enhance the Understanding of the Operation of Corporate Governance

(IX) Status of the Execution of the Internal Control System

(X) Punishment to the Company and its Personnel by Law and Punishment to its Personnel in Breach of Internal Control Systems by the Company as well as Major Shortcomings and Improvements over the Recent Years and up to the Date of Publication of Annual Reports: N/A

(XI) Important Resolutions of Meeting of Shareholders and the Board of Directors over the Recent Years and up to the Date of the Publication of Annual Reports

IV. Information on CPA Professional Fees

(I) Information of Professional Fees to CPA By Fee Range

V. Information on replacement of certified public accountant:

(I) Regarding the former certified public accountant:

( II) Regarding the successor certified public accountant:

(I) Information on transfer of shares:

(II) Information on pledge of equity interests:

VIII. Relationship information, if among the company's 10 largest shareholders any one is a related party or a relative within the second degree of kinship of another

IX. Percentage number of shares and consolidate percentage of the company, directors, supervisor, managers and the businesses that are controlled by the company directly or indirectly on the invested company

Part Four: Capital Overview

I. Capital and Shares

(I) Source of Capital Stock

Information for shelf registration: N/A

(II) Structure of Shareholders

(III) Shareholding Distribution Status

1. Common stocks

2. Preferred stocks: None.

(IV) List of Major Shareholders

(V) Market Price, Net Value, Earnings, Dividends Per Share of the Latest Two Fiscal Years, and Related Information

(VI) Dividend Policy and Implementation

(VIII) Remuneration for Employees, Directors and Supervisors

(IX) Buyback of the Shares of the Company

II. Corporate Bonds: None.

III. Preferred Stocks: None.

IV. Overseas Depositary Receipts: None.

V. Employee Stock Options: None.

VI. Status of New Shares Issuance in Connection with Mergers and Acquisitions: None

VII. Financing Plans and Implementation: N/A

TFC Annual Report 2016